84S0VF8TSMH0T6D4K848-2022-03-31-T01

Investec Bank plc (IBP) is the main banking subsidiary of Investec plc.

During July 2002, Investec Group Limited (since renamed Investec Limited) implemented a dual-listed companies (DLC)

structure and listed its offshore business on the London Stock Exchange (LSE).

In terms of our DLC structure, Investec Limited is the holding company of our businesses in Southern Africa, and Investec plc is

the holding company of our non-Southern African businesses. Investec Limited is listed on the Johannesburg Stock Exchange

Limited (JSE) South Africa (since 1986) and Investec plc on the LSE (since 2002).

All references in this report to the Bank, IBP or the Group relate to Investec Bank plc and its subsidiaries, whereas references to

Investec, Investec Group or DLC relate to the combined DLC Group comprising Investec plc and Investec Limited.

While Investec Wealth & Investment Limited is a wholly-owned, FCA regulated subsidiary of IBP, it maintains an independent

governance structure.

A circular on the establishment of our DLC structure was issued on 20 June 2002 and is available on our website.

How we are structured

Non-Southern African operations

Southern African operations

Investec plc

Investec Limited

LSE primary listing

JSE primary listing

JSE secondary listing

NSX secondary listing

BSE secondary listing

Investec

Bank

Limited

Investec

Wealth and

Investment

International

(Pty) Ltd

Investec Bank plc

Investec Wealth & Investment Limited

All shareholdings in the ordinary share capital of the subsidiaries shown are 100%.

Salient features of the DLC structure

•Investec plc and Investec Limited are separate legal entities and have separate listings, but are bound together by contractual

agreements and mechanisms

•Investec operates as if it is a single unified economic enterprise

•Shareholders have common economic and voting interests as if Investec plc and Investec Limited were a single company

•Creditors, however, are ring-fenced to either Investec plc or Investec Limited as there are no cross-guarantees between

the companies.

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

OVERVIEW OF THE INVESTEC GROUP’S AND INVESTEC BANK PLC’S

ORGANISATIONAL STRUCTURE

One Investec

Our purpose

Our purpose is to create enduring worth – living in, not off, society.

Our mission

Investec is a distinctive bank and wealth manager, driven by commitment to our core philosophies and values.

We deliver exceptional service to our clients in the areas of banking and wealth management, striving to create

long-term value for all of our stakeholders and contributing meaningfully to our people, communities and planet.

Our distinction

Our strategic direction

The Investec distinction is embodied in our

entrepreneurial culture, supported by a strong risk

management discipline, client-centric approach and an

ability to be nimble, flexible and innovative. We do not

seek to be all things to all people. Our aim is to build

well-defined, value-adding businesses focused on

serving the needs of select market niches where we can

compete effectively and build scale and relevance.

The One Investec strategy is, first and foremost, a

commitment to drawing on the full breadth and depth of

relevant capabilities to meet the needs of each and every

client, regardless of specialisation or geography.

One Investec is also about improving internal operating

efficiencies; ensuring that investments in infrastructure

and technology support our differentiated service offering

across the entire Group, not just within specific operating

units or geographies.

And in our allocation of capital, the One Investec strategy

demands a disciplined approach to optimising returns, not

merely for one region or business area but for the Group

as a whole.

Our unique positioning is reflected in our iconic brand,

our high-tech and high-touch approach and our positive

contribution to society, macro-economic stability and

the environment. Ours is a culture that values innovative

thinking and stimulates extraordinary performance. We

take pride in the strength of our leadership team and we

employ passionate, talented people who are

empowered and committed to our mission and values.

Our values

Our purpose is expressed in four key values that shape the way that we work and live within society.

Distinctive performance

Dedicated partnership

•We employ talented people with passion, energy and

stamina, who exercise common sense in achieving

effective performance in a high pressure, multi-task

environment

•We promote innovation and entrepreneurial freedom to

operate within the context of risk consciousness,

sound judgement and an obligation to do things

properly

•We show concern for people, support our colleagues

and encourage growth and development.

•We believe that open and honest dialogue is the

appropriate process to test decisions, seek consensus

and accept responsibility

•We are creative individuals who co-operate and

collaborate unselfishly in pursuit of group performance

•We respect the dignity and worth of the individual

through encouraging openness and embracing

difference and by the sincere, consistent and

considerate manner in which we interact.

Client focus

Cast-iron integrity

•We break china for the client, having the tenacity and

confidence to challenge convention

•We thrive on change, continually challenging the status

quo and recognising that success depends on

flexibility, innovation and enthusiasm in meeting the

needs of our changing environment.

•We demand cast-iron integrity in all internal and

external dealings, consistently and uncompromisingly

displaying moral strength and behaviour which

promotes trust.

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

OUR BUSINESS AT A GLANCE

Driving sustainable

long-term growth

Our strategic direction

Our long-term commitment is to One Investec; a client-

focused strategy where, irrespective of specialisation or

geography, we commit to offering our clients the full breadth

and scale of our products and services.

We are focused on delivering profitable, impactful and

sustainable solutions to our clients. To deliver on One

Investec, we will focus on collaboration between the Specialist

Banking and Wealth & Investment businesses, and across

geographies, and continue to invest in and support these

franchises. This will position Investec for sustainable long-term

growth.

Our long-term strategic focus:

We are committed to delivering exceptional service to

our clients, creating long-term value for our

shareholders and contributing meaningfully to our

people, communities and the planet

All relevant Investec resources and services are on offer

in every single client transaction

We aim to sustain our distinctive, Out of the Ordinary

culture, entrepreneurial spirit and freedom to operate,

with the discipline and obligation to do things properly

for the whole of Investec.

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

OUR STRATEGIC OBJECTIVES

Framework to drive improved business performance

Growth initiatives

Cost management

Clear set of opportunities to deliver

disciplined revenue growth

Enhanced management of the cost base

through operational leverage

UNDERPINNED BY

Capital discipline

A more disciplined approach to capital allocation and

focus on capital optimisation

AND DELIVERED THROUGH

Digitalisation

Connectivity

Continued investments drive a digitally connected ecosystem to leverage efficiencies and deliver

enhanced value to clients and staff

Read more in our Divisional review section on pages 36 to 45.

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

OUR STRATEGIC OBJECTIVES

CONTINUED

Creating sustainable,

long-term value

Key highlights

Core areas

of activity

Total employees

Core loans

Customer deposits

Funds under

management

3 400+

£14.4bn

£18.6bn

£44.4bn

Our clients and offering

• Corporate • Institutional • Private Equity

• Intermediary • Government

•Private client (high net worth) /

Charities / Trusts

↓

Specialist Banking

Wealth & Investment

Lending

Discretionary wealth management

Transactional banking

Investment advisory services

Advice

Financial planning

Hedging

Cash deposits and savings

Equity placement

Our approach

We have market-leading, distinctive client franchises

We provide a high level of client service

enabled by comprehensive digital platforms

We are a people business backed by our Out of the

Ordinary culture and entrepreneurial spirit

Our stakeholders

To see a full list of

our stakeholders,

read more on pages

22 to 25.

Our clients

Our people

Our communities

Our planet

We support our

clients to grow their

businesses by

leveraging our

financial expertise

to provide bespoke

solutions that are

profitable, impactful

and sustainable.

We continue to

build a diverse and

representative

workforce,

employing people

who are passionate

and empowered to

perform

extraordinarily.

We unselfishly contribute

to communities by helping

people become active

economic participants,

focusing on education and

economic inclusion.

We aim to operate

sustainably, within

our planetary

boundaries and

funding activities

that support

biodiversity and a

zero-carbon world.

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

OUR BUSINESS MODEL

We provide our clients with a diversified, combined and integrated banking and wealth management

offering with extensive depth and breadth of product and services

Specialist Banking

Our teams are well positioned to provide solutions to meet

private, corporate and institutional clients’ needs. Each

business provides specialised products and services to

defined target markets.

What makes us distinct?

•Provision of high-touch personalised service, with ability

to execute quickly

•Ability to leverage international, cross-border platforms

•Well positioned to capture opportunities between the

developed and the emerging world

•Strong ability to originate, manufacture and distribute

•Balanced business model with good business depth

and breadth

•Provision of high-quality solutions to corporate and private

clients, with leading positions in select areas.

Focus on helping our clients create and preserve wealth

A highly valued partner and adviser to our clients

High net worth private clients

Corporate, private, intermediary, government and

institutional clients

Private client banking activities

Corporate and investment

banking activities

•Lending

•Private capital

•Transactional banking

•Savings

•Foreign exchange.

•Lending

•Treasury and risk management solutions

•Advisory

•Institutional research, sales and trading.

Channel Islands

UK and Europe

Channel Islands

USA

India

Our high-tech and high-touch private client offering

provides transactional banking, lending, private capital,

savings and foreign exchange tailored to suit our

clients’ needs.

Our target market includes high net worth (HNW)

active wealth creators (with >£300k annual income

and >£3mn NAV). Our savings offering targets primarily

UK retail savers.

Our client-centric, solution-driven offering provides

Corporate Banking and Investment Banking services to

private companies, private equity and sponsor-backed

companies and publicly listed companies.

Natural linkages between the private client and corporate business

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

OVERVIEW OF THE ACTIVITIES OF INVESTEC BANK PLC

Wealth & Investment

A leading private client investment manager in the UK

We are one of the largest investment management firms in

the UK and are committed to providing bespoke personal

service to private clients, trusts, charities, intermediaries

and pension schemes.

With 14 offices across the UK, together with

offices in the Channel Islands and Switzerland,

combined we employ over 1 300 people with

funds under management (FUM) of £44.4 bn.

What makes us distinct?

We put our clients first, providing a service suited to their

individual requirements. We aim to build long-term

relationships with our clients so they can live their lives

confident in the knowledge that their finances are being

expertly looked after.

Our client groups

•Private clients – domestic and international

•Clients of professional advisers

•Charities

•Trusts.

Distribution channels

•Direct

•Intermediaries

•Investec Private Bank

•Investec internationally.

We exist to free our clients from the burden of having to look after their financial affairs on their own. We strive

to do this every day, via the quality of our professional advice, the excellence of the service we deliver and through

the preservation and growth of our clients’ wealth.

Our offering

UK and Europe

Investment

and savings

Financial

planning

Pensions

and retirement

•Discretionary and advisory

portfolio management services

for private clients

•Specialist investment

management services for

charities, pension schemes

and trusts

•Financial planning advice

for private clients

•Specialist portfolio management

services for international clients

•Platform-based managed

portfolio service (MPS)

for advisers

•Range of specialist funds

for direct clients and advisers.

•Retirement planning

•Succession planning

•Bespoke advice and

financial reviews.

•Discretionary investment

management for company

pension and Self Invested

Personal Pensions (SIPPs)

•Advice and guidance

on pension schemes.

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

OVERVIEW OF THE ACTIVITIES OF INVESTEC BANK PLC

CONTINUED

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

OUR OPERATIONAL FOOTPRINT

Strong earnings recovery above

pre-pandemic levels

Adjusted operating profit

increased 165.6%

£287.7

million

2021: £108.3 million

Earnings attributable to

shareholder increased 265.0%

£232.9

million

2021: £63.8 million

•Pre-provision adjusted operating

profit for the financial year ended

31 March 2022 increased, supported

by continued client acquisition,

increased client activity, greater

cross-collaboration, growth in FUM

and higher average advances.

•The revenue momentum experienced

in the first half of the financial year

continued into the second half. Net

interest income benefitted from higher

average interest-earning assets and

lower funding costs. Increased client

activity, higher lending turnover and

supportive market conditions

underpinned the growth in non-

interest revenue over the year.

•Operating costs were broadly flat,

declining by 0.3% year-on-year. Fixed

operating expenditure was well

contained in line with management’s

focus on cost efficiencies. The

reduction in fixed costs was offset by

an increase in variable remuneration

reflecting improved business

momentum, and continued investment

in technology.

•Impairments were significantly lower

given limited default experience.

•The prior year results reflected the

effects of severe economic

contraction and rate cuts associated

with COVID-19 which negatively

affected client activity, net interest

margins, valuations, and impairments.

Additionally, risk management and risk

reduction costs associated with the

structured products book were

elevated in the prior year.

•The Wealth & Investment business

reported a 17.9% increase in adjusted

operating profit driven predominantly

by market recovery, continued net

inflows (of £1.2 billion), and positive

investment performance. The final

quarter of the financial year was

impacted by global market volatility,

resulting in closing FUM of

£44.4 billion (31 March 2021:

£41.7 billion). Revenue grew by 8.7%

given supportive market conditions

and net organic growth in FUM of

2.9%. Commission income returned

to normalised levels following the

exceptional transaction volumes seen

in the prior year.

•The Specialist Banking client

franchises performed strongly,

showing continued traction in our

growth strategies across

the business, and reporting loan book

growth of 17.2% (18.7% excluding

Australia). Client acquisition remained

strong, with the Private Banking

business growing its HNW clients

to 6 982, surpassing the three-year

target of 6 500 clients by

31 March 2022. Revenue was

supported by strong net interest

income growth, and lower risk

management and risk reduction

costs related to the structured

products book.

•Taken together, Investec Bank plc

reported an adjusted operating profit

of £287.7 million for the year (2021:

£108.3 million).

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

OUR PERFORMANCE AT A GLANCE

Financial performance

Adjusted operating

profit increased

165.6%

2022

£287.7mn

2021

£108.3mn

Annuity income as

a % of total

operating income

2022

75.9%

2021

74.6%

Cost to income

ratio

2022

70.8%

2021

80.9%

Credit loss ratio

2022

0.17%

2021

0.56%

Diversified business model

Contribution of adjusted operating profit

Continued growth of our key earnings drivers

customer accounts (deposits)

increased 14.6% to

£18.6 billion

Core loans

increased 17.2% to

£14.4 billion

Customer accounts (deposits) and loans

£’billion

Funds under management

increased 6.5% to

£44.4 billion

reflecting favourable market movement and positive

net inflows

Funds under management

£’billion

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

OUR PERFORMANCE AT A GLANCE

CONTINUED

Strong and improved annuity base

Total operating income

£’million

Percentage

*Where annuity income is net interest income and annuity fees.

Growth in revenue was driven by strong net interest

income growth, growth in net fees and commission

income, and lower risk management and risk

reduction costs related to the structured products

book

Expected credit loss (ECL) impairment charges

£’million

Adjusted operating profit – Wealth & Investment

£’million

Jaws ratio

£’million

Percentage

The cost to income ratio improved as revenue grew

ahead of costs. The reduction in fixed costs was

offset by an increase in variable remuneration in line

with improved business performance

Default and core loans

£’billion

Percentage

Adjusted operating profit – Specialist Banking

£’million

Statutory adjusted

operating profit

Adjusted operating profit

from the ongoing business^

^Ongoing business excludes Legacy, which comprises pre-2008 assets

held on-balance sheet, that had low/negative margins and assets

relating to businesses we are no longer undertaking.

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

OUR PERFORMANCE AT A GLANCE

CONTINUED

Maintained a sound balance sheet

The intimate involvement of executive management ensures stringent management of risk, capital and liquidity as set out below.

Capital management

Capital and leverage ratios remain sound, ahead of internal targets and regulatory requirements.

Investec Bank plc calculates capital requirements using the standardised approach under the Basel III framework, thus our

risk-weighted assets represent a large portion of our total assets.

We are comfortable with our Common Equity Tier 1 (CET1) ratio target at 10% given our solid capital light revenues, and with

our leverage ratio at 9.3%.

Capital ratios

31 March

2022^^

31 March

2021^^

Common Equity Tier 1 ratio*

12.0%

11.8%

Common Equity Tier 1 ratio (fully loaded)**

11.6%

11.3%

Tier 1 ratio*

13.6%

13.4%

Total capital ratio*

18.2%

16.4%

Leverage ratio^

9.3%

8.0%

Leverage ratio (fully loaded)^**

9.1%

7.7%

*The CET1, Tier 1 and total capital adequacy ratios are calculated applying the IFRS 9 transitional arrangements (including the changes introduced

by the ‘quick fix’ regulation adopted in June 2020).

**The CET1 ratio (fully loaded) and the leverage ratio (fully loaded) assumes full adoption of IFRS 9 (including the ‘quick fix’ regulation in the UK).

^The leverage ratios are calculated on an end-quarter basis. The 31 March 2022 leverage ratio is calculated applying the UK leverage ratio framework

which applies to all UK firms from 1 January 2022. The 31 March 2021 comparative is calculated on a CRD IV basis.

^^The capital adequacy disclosures for IBP include the deduction of foreseeable charges and dividends when calculating CET1 capital. These disclosures

are different to the capital adequacy disclosures included in Investec Group’s 2022 and 2021 integrated and strategic annual report, which follow our

normal basis of presentation and do not include this deduction when calculating CET1 capital. IBP’s CET1 ratios would be 37bps (31 March 2021: 16bps)

higher, on this basis.

Note: Refer to pages 109 and 111 for further details.

A well-established liquidity management philosophy remains in place

Continued to focus on:

•Maintaining a high level of readily available, high-quality

liquid assets targeting a minimum cash to customer

deposit ratio of 25%, with the year-end ratio at 47.7%

•Diversifying funding sources

•Maintaining an appropriate mix of term funding

•Limiting concentration risk

•Maintaining low reliance on wholesale funding

•Benefitting from a growing retail deposit franchise and

recording an increase in customer deposits.

Liquidity remains strong with cash and near cash

balances amounting to £8.9 billion (2021: £6.9 billion).

Average cash balances remained high as we maintained

a conservative position.

We exceed the minimum regulatory requirements for the

liquidity coverage ratio (LCR) and net stable funding ratio

(NSFR).

The Bank’s loan to deposit ratio was 77.5% (2021: 75.8%).

Cash and near cash trend

£’million

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

OUR PERFORMANCE AT A GLANCE

CONTINUED

Listening to and

engaging with our

stakeholders

The Board appreciates the importance of meeting the

diverse needs and expectations of all stakeholders and

building lasting relationships with them. Effective

communication and stakeholder engagement are integral

in building stakeholder value. The Board is committed to

providing meaningful, transparent, timely and accurate

financial and non-financial information to primary

stakeholders, enabling them to make meaningful

assessments and informed investment decisions.

In order to achieve these outcomes, the Board addresses

material matters of significant interest and concern,

highlighting key risks to which the business is exposed

and responses to mitigate these risks.

IBP is a wholly-owned subsidiary of Investec plc (refer to

operational structure on page 4) and as such has one

shareholder. The IBP Board communicates regularly with

the Board of Investec plc. Certain IBP engagements with

its stakeholders are performed on a Group basis such as

maintenance of its website, investor relations activity

and ESG engagement.

Section 172(1) statement

This section of the strategic report describes how

the directors have had regard to the matters set out

in Section 172(1), and forms the directors’ statement

required under the Companies Act 2006. This statement

also provides details of how the directors have

engaged with and had regard to the interests of

our key stakeholders.

Strong partnerships and understanding are

essential to the creation of enduring worth. To be

the best we can be, and to understand

stakeholders’ needs, we work hard to establish

the most effective ways of engaging with them.

Engagement is important to us because it means we can

understand stakeholder views and are able to respond

in a meaningful and impactful way.

We gather feedback through continuous dialogue with

our stakeholders throughout the year to gain an intimate

understanding of their needs. It’s only through this varied

dialogue that we can improve as a business, consider our

strategy and deliver on our purpose.

As detailed on the pages that follow, the Board’s oversight

of engagement with our stakeholders informs their principal

decisions during the year.

Clients

At IBP, we are all about partnership, striving to build deep

and long-lasting relationships with our clients.

What matters to them

•A dependable banking, wealth creation and wealth

management partner

•Innovative and creative solutions

•Financial security

•Enhanced cyber security

•Competitive pricing

•Operational resilience

•Assurance as to the security of their funds.

How we engage

•Client engagement is managed on a day-to-day basis

by senior management and client relationship

managers. The Board receives regular updates from

senior management on key client issues

•Client engagement methods have evolved during the

COVID-19 pandemic, with face-to-face meetings

becoming less frequent and a greater reliance on digital

platforms and services

•Comprehensive, user-friendly website and mobile app

•Regular telephone and email communications

•Industry relevant events and client marketing events,

both of which have moved to online platforms while

most people continue to work from home for at least

some of their working week.

FY2022 highlights

•We have further developed our ‘One Investec’

approach, which brings all of Investec that is relevant to

every client. It is a coordinated approach with the client

at the centre. In the UK mid-market, the breadth and

diversity of offering to clients is unmatched. We have

now integrated ourselves structurally around client

groupings. This has enabled us to leverage the whole of

our capability to provide solutions most relevant to

clients’ needs

•The private client franchise grew their client base by

18.0%, a large number of new clients were introduced

via referrals by existing Investec clients.

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

STAKEHOLDER ENGAGEMENT (SECTION 172 STATEMENT)

Our people*

Our people are at the heart of our business. We aim to be

an organisation that values all of its people for their

contributions and celebrates them for who they are.

What matters to them

•Learning, development and career progression

•Belonging, Inclusion and Diversity (BID). We continue to

build an inclusive environment, improving representation

with respect to gender and ethnicity, particularly at a

senior level and within decision-making bodies, as well

as enhancing opportunities for progression

•Wellbeing, especially during lockdowns and extended

periods of working from home

•Fair remuneration

•Sustainable working practices

•Flexible working conditions and expectations around

the future of work.

How we engage

•Designated non-executive director overseeing

workforce engagement

•Staff updates and discussions hosted by the CEO,

executive directors and/or senior management

conducted via video and where possible in person to

keep staff up to date with strategic priorities and

performance

•Regular CEO staff communication including email

updates, staff intranet, Microsoft Teams and other

digital channels

•Induction training for new employees including a

welcome from the CEO and senior management

•Tailored internal investor relations presentations on IBP

results, strategy updates and general feedback from

the market

•Dedicated comprehensive intranet with a wellbeing

platform offering yoga classes, community engagement,

direct access to psychologists, and a confidential

employee helpline.

FY2022 highlights

•Launched a new app-based healthcare benefit in the

UK, Peppy, providing support to employees through

some of life’s most difficult personal challenges

including menopause, fertility and early parenthood

•Launch of Allies programme to equip colleagues with the

skills to recognise and address micro-aggressions and

challenge exclusion

•Reduced gender pay gap for the fourth consecutive year

*Includes permanent employees, temporary employees and contractors.

Debt investors

We engage with debt investors who hold instruments

issued by IBP.

What matters to them

•Progress against strategic objectives

•Financial performance

•Credit ratings

•Capital and liquidity position

•Business sustainability

•Management expectations and guidance on future

business performance

•Balance sheet resilience.

How we engage

•Regular meetings with executive directors, senior

management and investor relations

•Stock exchange announcements

•Comprehensive investor relations website

•Investor roadshows and presentations

•Regular telephone and email communications

•Annual and interim reports.

FY2022 highlights

•Organised four debt roadshows in the UK/Europe which

raised over £1.3bn of debt

Engaged with

>100

debt investors / lenders throughout the year

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

STAKEHOLDER ENGAGEMENT (SECTION 172 STATEMENT)

CONTINUED

Communities

Our values of making an unselfish contribution to society,

valuing diversity and nurturing an entrepreneurial spirit

drive our commitment to support the communities

in which we exist. Our focus is on education,

entrepreneurship and the environment.

What matters to them

•Financial and non-financial support

•Time volunteered by our staff

•Education and learning opportunities

•Skills training and job creation

•Protecting the environment.

How we engage

•Regular in-person meetings, telephone/conference calls

and emails with our community partners

•Comprehensive community website and social media

platforms to encourage participation

•Staff volunteering

•Community partners and NGOs invited to collaborate

at conferences and events.

FY2022 highlights

•Provided 137 entrepreneurs with professional advice

through Bromley by Bow Centre

•18 people involved in the Beyond Business Programme

in the UK

•Delivered 120 virtual coaching sessions (60 hours) to

five – nine year olds through a new literacy programme

with Bookmark charity

•Provided £20 000 to £30 000 each of seed funding to

four new social enterprises

•Arrival Education have adapted over the past two years

to ensure that young people and volunteers could

participate in the programme remotely. We have

supported 1 995 Arrival Education learners in the UK

over the past 14 years.

£1.7mn

spent on community initiatives (2021: £2.2mn)

Further information can be found in the Group's

2022 sustainability report which will be available

on the Investec website at the end of June 2022.

Government and regulators

IBP is regulated by the UK Financial Conduct Authority

and the UK Prudential Regulation Authority. We maintain

continuous engagement with governments and regulators

in our key markets to ensure our business adapts

to evolving regulatory environments.

What matters to them

•Compliance with existing and evolving regulatory, legal

and governance requirements

•Assurance that we have robust prudential standards

and supervision in place

•Fair treatment of our clients and employees

•Financial and operational resilience in the face

of changing market conditions

•Risk framework and appetite management

•Capital and liquidity stress testing

•Group tax strategy.

How we engage

•Our Chair, CEO, executive directors and the Board hold

regular meetings with the UK Prudential Regulation

Authority

•IW&I Head of Compliance and Risk has regular and

ongoing interactions with the UK Financial Conduct

Authority

•Active participation in a number of policy forums

•Engagement with industry consultative bodies.

FY2022 highlights

•Approval for the appointment of Henrietta Baldock as

Chair of IW&I UK

•Engaged with regulators and industry bodies to ensure

our compliance with the sanctions introduced as a

result of the Russian invasion of Ukraine

•Updated our processes in accordance with the EU

Payment Services Directive 2 (PSD2)

•Supported the transition to IBOR within our businesses.

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

STAKEHOLDER ENGAGEMENT (SECTION 172 STATEMENT)

CONTINUED

ESG analysts and climate-focused

industry bodies

We are committed to supporting the transition to a clean

and energy efficient economy and regularly engage with

climate-focused industry bodies and analysts to discuss

our evolving sustainability strategy.

What matters to them

•Our climate change position statement and climate

change framework

•Managing and mitigating climate change impact within

our operations (direct impact)

•Indirect climate change impact through our loan book

and investment portfolio

•Addressing ESG risks within our business

•Our progress towards our net-zero carbon emissions

commitment

•Reporting in line with industry standards.

How we engage

•Annual Investec sustainability report

•Comprehensive Investec sustainability website

•Comprehensive ESG disclosures, including a

standalone TCFD report

•Sustainability factsheets

•The Investec Group CEO is a member of the UN Global

Investors for sustainable development alliance

•Regular and active participation in a number of ESG

and climate forums

•Commitment to industry standards including TCFDs

and PCAF

•Regular knowledge sharing on ESG industry standards.

FY2022 highlights

•Tabled a voluntary climate resolution for the second

time at the Investec Group AGM and received 99%

support

•Implemented a new framework to link executive

directors' remuneration to various ESG ratings.

Carbon neutral

Zero direct emissions, carbon neutrality in Scope 1 and

2 mainly through renewable electricity consumption

with remaining unavoidable emissions of 17% offset

through purchasing verified and high-quality carbon

credits

Suppliers

We collaborate with suppliers and sub-contractors

securely whom we expect to be resilient and to operate

and behave in an environmentally and socially

responsible manner.

What matters to them

•Compliance with applicable environmental, labour

and anti-corruption laws and regulations

•Prompt payment practices

•Fair and transparent tender and negotiation practices

•Clear guidance on policies and procedures, such

as due diligence and onboarding.

How we engage

•The procurement function is responsible for engaging

suppliers, and other business functions will be involved

as required. For example, the Investec Group

sustainability team may conduct a sustainability and

ESG review once a supplier is engaged

•Centralised negotiation process

•Procurement questionnaires requesting information on

suppliers’ environmental, social and ethical policies

•Due diligence on cyber security and business

continuity.

FY2022 highlights

•We updated our critical supplier contracts in line with

EBA regulatory guidelines

•We strengthened our Business Continuity and third

party operational resilience through supplier

assessment and engagement

•We improved our due diligence processes around

financial crime, data security and financial screening.

All of our suppliers screened against ethical supply

chain practices

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

STAKEHOLDER ENGAGEMENT (SECTION 172 STATEMENT)

CONTINUED

Principal decisions

Here we outline how Board engagement with stakeholders

has informed principal decisions during the year.

Supporting our people through the COVID-19

pandemic

Given the continued, far-reaching impact of the COVID-19

pandemic, the Board focused on the wellbeing of our people,

and being front-footed with our clients and other

stakeholders.

COVID-19 infections have continued to peak and trough in

waves across our jurisdictions throughout 2021/22 with a

variety of restrictions in place aligned with local government

guidance. The current situation does not pose a significant

risk, but there are potential psychological and burnout risks

along with the need to support employees with hybrid

working. The organisation continued to provide a range of

interventions to support employees’ needs with rapid access

to in-house psychologists (Amplify-YP), facilitated

conversations and targeted sessions around burnout and

anxiety. Regular data from people engagement processes is

utilised to identify timely interventions that are locally relevant

and globally aligned.

For the Organisation we continue to identify the right future

of work model using a hybrid approach. The Future World of

Work project is looking into providing the right leadership

capabilities to support and develop leaders.

Strategy in execution

Investec Group shareholders have a keen interest in the

strategic progress made by the Group since the 2019 Capital

Markets Day (CMD), with a particular interest in the progress

made by the UK Specialist Bank. The Investec Group and IBP

have worked diligently to simplify and focus the business to

deliver improved returns. The Bank’s performance is back to

the levels seen in 2019, pre the COVID-19 pandemic, and is

now positioned to continue capturing growth to build scale

and relevance in the UK market. The Group Board has

overseen the clear communication of strategic progress made,

to investors and staff, in the form of an Investec plc business

update presentation held in May 2021 which focused on the

UK and Other strategy, staff presentations and in one-on-one

dialogue with investors.

In line with our strategic growth plan driven by digitalisation

to deliver scale and improved customer experience and

operational efficiencies across the business, the Board

approved the decision to adopt Monese’s new BaaS platform

which will accelerate IBP’s transactional banking proposition

and underpin the launch of a new business current account for

private companies. The proposition received funding from the

capability and innovation fund and took into account the

desire to provide a cost effective and enhanced proposition

for clients.

The Board has also focused on increasing connectivity across

businesses and geographies and advancing One Investec. The

appointment of Brian Stevenson (IBP Chair) to the Group

Board, and of Henrietta Baldock (Group Non-Executive

Director) to the Wealth & Investment UK Board as Chair has

enhanced the Board’s oversight of connectivity.

The Board considered the perspective of employees, ensuring

that the evolution of the strategy has been communicated

internally, that it is well understood and embedded at all levels

of the business’s operations.

Tabling a climate risk-related resolution at the

Investec Group’s 2021 AGM

The Investec Board takes ultimate accountability for climate-

related issues, supported by a DLC Board-approved Social

and Ethics Committee (of which IBP Non-Executive director,

Moni Mannings is a member). This structure has been in place

for many years and was strengthened to include senior

executive responsibility for identifying and managing climate-

related risks. With the Investec Group’s South African business

becoming the first bank in South Africa to release a separate

report aligned with the recommendations of the Task Force on

Climate-related Financial Disclosures (TCFD), Investec has

shown that sustainability is central to strategic direction.

Members of the Investec Group and IBP Boards regularly

engage with a range of stakeholders (including shareholders,

ESG analysts and rating agencies) on a number of climate-

related and sustainability topics that are relevant for the

business.

The Investec Group and IBP Boards acknowledge that climate

change represents a material financial risk, and continue to

oversee the evaluation of our exposure to understand and

mitigate potential risks. The Boards recognise the

opportunities that climate change present within our various

business activities. All Board members have a strong

awareness around climate-related and sustainability matters

that was supplemented by presentations from internal and

external parties during various Board meetings. The aim is to

introduce targeted training to the Board over the next year.

Investec’s ambition towards net-zero has been strengthened

by Investec joining the Net-Zero Banking Alliance (NZBA) at

the end of 2021, highlighting the urgency for faster, immediate

and more ambitious climate action. Through the stewardship

of the global sustainability team, the Investec Board engaged

with a number of stakeholders regarding Investec’s net-zero

ambitions that led to tabling a second voluntary climate

resolution at the August 2021 AGM. This resolution asked

shareholders to “authorise and direct the Investec Group and

its directors to commit to disclose:

•A baseline of the Group’s scope 3 financed emissions;

•Our strategy to reduce scope 3 emissions; and

•Our short-, medium- and long-term targets to reach net-

zero emissions and align with the Paris goals, based on a

geographic approach that is guided by (but not limited to)

the net-zero trajectories of our two core jurisdictions, being

South Africa and the UK”.

Investec Group shareholders voted overwhelmingly in favour

of the resolution, which passed with a 99.9% vote, further

highlighting the importance investors are placing on climate-

related matters.

Following this resolution, through the stewardship of the

global sustainability team, the Investec Board engaged with

shareholders during roadshows to discuss and clarify any

climate-related concerns. In addition, the Investec Investor

Relations function received ad hoc requests to provide further

clarification on the resolution.

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

STAKEHOLDER ENGAGEMENT (SECTION 172 STATEMENT)

CONTINUED

The Investec sustainability team also engaged with

stakeholders to understand their views and expectations on

climate disclosures and incorporate feedback from our 2021

TCFD report.

Questions largely focused on Investec’s approach to

calculating our net-zero emissions and our short-, medium-

and long-term targets, as well as the climate-related skills of

our Boards. During these engagements a definite sense of the

increased importance of climate action was noted.

The decision to table a second climate risk-related resolution

at the 2021 Investec Group AGM demonstrates Investec’s

commitment to addressing climate issues, and aligns with our

purpose of living in, not off, society. Our delivery of this

resolution is disclosed in the Group’s 2022 climate-related

financial disclosures report.

Further information on the Investec Group’s ESG

initiatives and progress can be found in the Investec

Group's 2022 sustainability report which will be

available on the Investec website at the end of June

2022.

Belonging, Inclusion and Diversity

The Board’s commitment to Belonging, Inclusion and Diversity

(BID) at IBP continues to be a key strategic objective, with

a particular focus on appropriately balanced representation

across different groups and identities and creating a culture

and climate where a sense of belonging permeates.

Stakeholders such as our employees, debt investors, ESG

analysts, and clients remain interested in our progress.

During this year, the Board has continued to work towards our

commitments to address inequalities. Key areas of our

strategy have included increasing diversity representation in

senior ranking roles and decision-making forums, improving

leader capability and awareness, and ensuring our policies,

practices and principles entrench a level playing field. The

Board has endorsed a number of initiatives this year in support

of our strategy including:

•The launch of Peppy Health app benefit, providing

colleagues with support related to fertility, pregnancy, early

parenthood and menopause

•A neurodiversity hub has been developed and working

group set up in order to raise awareness and provide

additional support to colleagues. 164 colleagues attended a

series of events that raised awareness, facilitated

discussion and provided support related to neurodiversity

•Our data collection project which was successful with 80%

of colleagues choosing to share their ethnicity data allowing

us to determine our racial composition and track progress

•As signatories to the Race at Work Charter, we are focused

on the development of Black, Asian and Minority Ethnic

colleagues and have an active representation group

•A pilot reverse mentoring programme with particular focus

on creating a diverse cohort in terms of age, gender and

race

•The implementation of mandatory training for all employees

on Bullying, Harassment and Discrimination

•Provision of safe spaces for colleagues to participate in

informal facilitated dialogue to reflect and share the impact

of the murders of George Floyd, Sarah Everard as well as

the alarming surge in anti-Semitism incidents and violence in

the UK and many other countries

•A conversation with John Amaechi and our Executive took

place to discuss how we can empower leaders to be more

proactive and confident inclusive leaders and to increase

understanding that diversity is not a zero sum game.

•The creation of a BID Champions network of knowledgeable,

trained colleagues, committed to supporting BID and

providing a local point of contact

•The launch of an Allies programme to equip colleagues with

the skills to recognise and address micro-agressions, and

challenge exclusion

•Our CEO Ruth Leas participated in the Women’s Association

CEO Challenge - a mentoring programme designed to give

girls between the ages of 12 and 17 the opportunity to learn

about life as an Executive

•For the third year running we are participating in the 30%

Club mentoring scheme, a cross-company programme for

women

•We have enhanced our support for those on family leave

including partnering with Working Transitions to provide

coaching to all employees taking a period of extended

family leave.

This year we have also made notable progress in relation to

the appointment of women into senior positions and into

principal decision-making committees. We have exceeded the

Women in Finance Charter target of 30% female

representation at senior leadership by 2022 (33% in IBP

excluding Investec Wealth & Investment Limited, 31% at

Investec Wealth & Investment Limited as at March 2021). Of

241 external hires made during the year in IBP, 45% (FY2021:

46%) were female with 34% (FY2021: 29%) being minority

ethnic. For the first time, our 2021 Diversity Pay Gap report

included our ethnicity pay gap alongside the gender pay gap.

While ethnicity pay gap reporting is not mandatory, we

included these results following the same methodology as the

gender pay gap. As at 5 April 2021 our gender pay gap was

26.2% (2020: 27.2%) and our ethnicity gap is at 12.9%.

IBP Board has also increased both its gender and ethnicity

representation to 50% female and 40% Black, Asian and

Minority Ethnic.

The Board recognises that maintaining a strong focus on

Belonging, Inclusion and Diversity and having clear targets and

measures to track progress is critical. BID is integral to

Investec’s purpose to ‘Create enduring worth, living in society

and not off it’. The Board firmly believes that improving

representation and fostering inclusion and belonging will

better enable us to meet our clients’ needs.

Further information on our gender, diversity and

transformation initiatives and progress can be found in

the Investec Group's 2022 integrated annual report as

well as in the Investec Group’s 2022 sustainability

report which will be available on the Investec Group

website at the end of June 2022.

Operational and strategic

overview

Investec Bank plc Annual Financial Statements 2022

STAKEHOLDER ENGAGEMENT (SECTION 172 STATEMENT)

CONTINUED

IN THIS SECTION

Financial review

Divisional review

Overview

Investec Bank plc reported an adjusted operating profit of £287.7 million for the year ended 31 March 2022 (2021:

£108.3 million). The balance sheet remains strong, supported by sound capital, leverage and liquidity ratios.

Unless the context indicates otherwise, all income statement comparatives in the review below relate to the statutory results

for the year ended 31 March 2021.

Income statement analysis

The overview that follows will highlight the main reasons for the variance in the major category line items on the face

of the income statement during the year under review.

Total operating income before expected credit loss impairment charges

Total operating income before expected credit loss impairment charges of £1 073.3 million was 14.6% higher than the prior year.

The various components of total operating income are analysed below.

£’000

31 March

2022

% of total

income

31 March

2021

% of total

income

% change

Net interest income

496 308

46.2%

414 091

44.2%

19.9%

Net fee and commission income

494 232

46.0%

486 470

52.0%

1.6%

Investment income

10 579

1.0%

23 820

2.5%

(55.6%)

Share of post-taxation profit of associates and joint venture holdings

1 988

0.2%

1 768

0.2%

12.4%

Trading income/(loss) arising from

–customer flow

60 372

5.6%

(11 025)

(1.2%)

>100%

–balance sheet management and other trading activities

(1 305)

(0.1%)

11 206

1.2%

(>100%)

Other operating income

11 158

1.0%

10 002

1.1%

11.6%

Total operating income before expected credit loss

impairment charges

1 073 332

100.0%

936 332

100.0%

14.6%

The following table sets out information on total operating income before expected credit loss impairment charges on loans

and advances by division for the year under review:

£’000

31 March

2022

% of total

income

31 March

2021

% of total

income

% change

Wealth & Investment

347 182

32.3%

319 519

34.1%

8.7%

Private Banking

75 294

7.0%

36 536

3.9%

106.1%

Corporate, Investment Banking and Other

650 856

60.6%

580 277

62.0%

12.2%

Total operating income before expected credit loss

impairment charges

1 073 332

100.0%

936 332

100.0%

14.6%

% of total operating income before expected credit loss impairment charges

31 March 2022

£1 073.3 million total operating income before expected credit

loss impairment charges

31 March 2021

£936.3 million total operating income before expected credit loss

impairment charges

Net interest income

46.2%

Net interest income

44.2%

Net fee and commission income

46.1%

Net fee and commission income

52.0%

Investment income

1.0%

Investment income

2.5%

Share of post-taxation profit of associates and joint

venture holdings

0.2%

Share of post-taxation profit of associates and joint

venture holdings

0.2%

Trading income arising from customer flow

5.6%

Trading income arising from customer flow

(1.2%)

Trading income arising from balance sheet management and

other trading activities

(0.1%)

Trading income arising from balance sheet management and

other trading activities

1.2%

Other operating income

1.0%

Other operating income

1.1%

Financial review

Investec Bank plc Annual Financial Statements 2022

FINANCIAL REVIEW

Net interest income

Net interest income increased by 19.9% to £496.3 million (2021: £414.1 million), driven by higher average lending books and

lower cost of funding, partially offset by the impact of the disposal of the Australian corporate book in March 2021.

For a further analysis of interest received and interest paid refer to page 202.

Net fee and commission income

Net fee and commission income increased by 1.6% to £494.2 million (2021: £486.5 million), given supportive market conditions,

net organic growth in FUM of 2.9%, and increased fees from the Private Equity franchise due to strong origination and

distribution activities, as well as higher advisory fees relative to the prior year. This was offset by lower lending fees and

commissions due to the wind down of Australia and a reduction in equity capital markets activity off a high base. Commission

income for Wealth & Investment returned to normalised levels following the exceptional transaction volumes seen in the prior

year.

For a further analysis of net fee and commission income refer to page 202.

Investment income

Investment income of £10.6 million (2021: £23.8 million) was lower than the prior year due to non-repeat of a £13 million gain

recognised from the formation of a joint venture with State Bank of India and the profit on sale of the IAPF management

company. This was partially offset by unrealised gains in certain portfolios in the current year.

For a further analysis of investment income refer to page 203.

Trading income

Trading income from customer flow netted an income of £60.4 million (2021: loss of £11.0 million), due to significantly lower risk

management and risk reduction costs associated with the structured products book (£5.9 million in 2022 vs £93.3 million in

2021).

Trading income from balance sheet management and other trading activities decreased to a loss of £1.3 million (2021: gain of

£11.2 million) due to costs associated with the early redemption of a senior bond, MTM losses on balance sheet management

instruments and the non-repeat of MTM gains in the prior year.

Other oprating income

Other operating income mainly consists of income earned on operating lease rentals.

Expected credit loss impairment charges

Total ECL impairment charges declined to £25.4 million (2021: £71.1 million), primarily due to lower specific impairments. The

credit loss ratio reduced to 0.17% (2021: 0.56%), and the ECL coverage ratio of our Stage 1 loan book remained at 0.3%.

Stage 3 gross core loans subject to ECL decreased to £291 million (2.1% of gross core loans subject to ECL) at 31 March 2022

(31 March 2021: £332 million equating to 2.8% of gross core loans subject to ECL).

Refer to pages 72 to 78 for further information on asset quality and page 203 for a breakdown of the expected credit loss

impairment charges.

Financial review

DIVISIONAL REVIEW

Investec Bank plc Annual Financial Statements 2022

FINANCIAL REVIEW

CONTINUED

Operating costs

Operating costs were broadly flat, increasing by 0.3% to £760.3 million (2021: £757.8 million). The reduction in fixed costs was

offset by an increase in variable remuneration in line with improved business performance. The base includes one-off costs

associated with the implementation of restructures as part of the strategy to simplify and focus the business, including related

redundancies and the closure of operations in Australia. The cost to income ratio improved to 70.8% (2021: 80.9%).

The various components of operating costs are analysed below:

£’000

31 March

2022

% of

operating

costs

31 March

2021

% of

operating

costs

% change

Staff costs (including directors' remuneration)

553 767

72.8%

569 402

75.1%

(2.7%)

Premises expenses (including depreciation)

40 813

5.4%

41 060

5.4%

(0.6%)

Equipment expenses (excluding depreciation)

54 266

7.1%

49 305

6.6%

10.1%

Business expenses

90 407

11.9%

79 324

10.5%

14.0%

Marketing expenses

13 028

1.7%

8 639

1.1%

50.8%

Depreciation, amortisation and impairment of equipment and intangibles

8 005

1.1%

10 028

1.3%

(20.2%)

Operating costs

760 286

100.0%

757 758

100.0%

0.3%

The following table sets out information on operating costs by division for the year under review:

£’000

31 March

2022

% of

operating

costs

31 March

2021

% of

operating

costs

% change

Wealth & Investment

259 496

34.1%

245 175

32.4%

5.8%

Private Banking

42 034

5.5%

38 033

5.0%

10.5%

Corporate, Investment Banking and Other

458 756

60.4%

474 550

62.6%

(3.3%)

Operating costs

760 286

100.0%

757 758

100.0%

0.3%

% of Operating costs

31 March 2022

£760.3 million total operating costs

31 March 2021

£757.8 million total operating costs

Staff costs

72.8%

Staff costs

75.1%

Business expenses

11.9%

Business expenses

10.5%

Equipment expenses (excluding depreciation)

7.1%

Equipment expenses (excluding depreciation)

6.6%

Premises expenses (including depreciation)

5.4%

Premises expenses (including depreciation)

5.4%

Marketing expenses

1.7%

Marketing expenses

1.1%

Depreciation, amortisation and impairment

of equipment and intangibles

1.1%

Depreciation, amortisation and impairment

of equipment and intangibles

1.3%

Financial review

DIVISIONAL REVIEW

Investec Bank plc Annual Financial Statements 2022

FINANCIAL REVIEW

CONTINUED

Adjusted operating profit

As a result of the foregoing factors, adjusted operating profit increased by 165.6% from £108.3 million to £287.7 million.

Impairment of goodwill

Goodwill in relation to Investec Ireland was written off in the prior year as a result of the change in business following the Brexit

impact and as such there is limited linkage remaining between the business acquisition which gave rise to the goodwill and the

ongoing business in Ireland. There has been no impairment of goodwill in the current financial year.

Amortisation of acquired intangibles

Amortisation of acquired intangibles of £12.9 million largely relates to the Wealth & Investment business and mainly comprises

amortisation of amounts attributable to client relationships.

Taxation on operating profit before acquired intangibles and strategic actions

The reduction in the effective operational tax rate from 29.6% to 14.8%, was driven by higher deferred tax assets on the back of

higher enacted tax rates.

£'000

2022

2021

31 March

2022

£'000

31 March

2021

£'000

% change

Taxation on operating profit before acquired

intangibles and strategic actions

14.8%

29.6%

42 174

31 270

34.9%

Balance sheet analysis

Since 31 March 2021:

•Total equity increased by 7.7% to £2.5 billion (2021: 2.4 billion), as a result of the increase in retained income.

•Total assets increased by 13.1% to £27.6 billion (2021: £24.4 billion), largely as a result of strong loan book growth.

•Total liabilities increased by 13.7% to £25.0 billion (2021: £22.0 billion), primarily driven by growth in customer accounts

(deposits).

Financial review

DIVISIONAL REVIEW

Investec Bank plc Annual Financial Statements 2022

FINANCIAL REVIEW

CONTINUED

Business Head

Ciaran Whelan

With over £44 billion of FUM, we are

one of the UK’s largest wealth and

investment managers.

We work with individual clients to allow them

to grow, enjoy and protect their wealth, and

with charities and clients of professional

advisers to help deliver optimal returns on

their investments and to bring financial peace

of mind.

Awards

Won 'Best UK Wealth Planning Team' and 'Best Diversity and Inclusion in

Wealth Management' at the 2022 Wealth Briefing European Awards

Retained Defacto Gold rating for DFM Services

Performance highlights

•A strong financial performance has resulted in operating profit of £87.7 million (17.9% above the prior year) and an operating

margin for the UK domestic business of 27.0% (2021: 25.2%)

•Market recovery, continued net inflows and positive investment performance resulted in record FUM of £46.1 billion at

31 December 2021

•The final quarter of the financial year was impacted by global market volatility caused by the war between Russia and Ukraine,

resulting in a closing FUM of £44.4 billion at 31 March 2022.

Funds under management and net flows

£’billion

Reasons for the variance in FUM since 31 March 2021

•Favourable market movements (MSCI PIMFA Balanced Index up 10.7%), somewhat offset by investment performance in the

final quarter

•Net inflows of £1.2 billion resulting in net organic growth in funds under management of 2.9%.

Funds under management

£’million

31 March 2022

31 March 2021

% change

UK domestic (including Channel Islands)

42 894

40 474

6.0%

Discretionary

36 728

34 812

5.5%

Non-discretionary*

6 166

5 662

8.9%

Switzerland

1 525

1 210

26.0%

Discretionary

487

395

23.3%

Non-discretionary

1 038

815

27.4%

Total

44 419

41 684

6.6%

*Non-discretionary includes advisory-managed FUM of £1 627 million (2021: £1 829 million). Managed funds therefore represent 89% of the UK domestic

total FUM at 31 March 2022 (2021: 91%).

Net inflows over the year

£’million

31 March 2022

31 March 2021

Discretionary

808

959

Non-discretionary

410

150

Total

1 218

1 109

Financial review

DIVISIONAL REVIEW

Investec Bank plc Annual Financial Statements 2022

WEALTH & INVESTMENT

Income statement analysis and key income drivers

£’000

31 March

2022

31 March

2021

Variance

% change

Net interest income

2 268

2 296

(28)

(1.2%)

Net fee and commission income

344 029

316 040

27 989

8.9%

Investment (loss)/income

(2)

272

(274)

(>100.0%)

Trading income arising from

– customer flow

1 194

920

274

29.8%

– balance sheet management and other trading activities

(307)

(9)

(298)

(>100.0%)

Total operating income before expected credit loss impairment charges

347 182

319 519

27 663

8.7%

Of which: UK domestic

338 322

311 576

26 746

8.6%

Of which: Switzerland*

8 860

7 943

917

11.5%

Expected credit loss impairment charges

(5)

(4)

(1)

25.0%

Operating income

347 177

319 515

27 662

8.7%

Operating costs

(259 496)

(245 175)

(14 321)

5.8%

Of which: UK domestic

(247 729)

(233 100)

(14 629)

6.3%

Of which: Switzerland*

(11 767)

(12 075)

308

(2.6%)

Adjusted operating profit/(loss)

87 681

74 340

13 341

17.9%

Of which: UK domestic

90 593

78 476

12 117

15.4%

Of which: Switzerland*

(2 912)

(4 136)

1 224

(29.6%)

Key income drivers

Operating margin

25.3%

23.3%

Of which: UK domestic#

27.0%

25.2%

Net inflows in FUM as a % of opening FUM

2.9%

3.3%

Average income yield earned on FUM^

0.81%

0.85%

Of which: UK domestic

0.81%

0.86%

*The results of the Switzerland business have been reported separately to demonstrate the value of the UK domestic business. Following a strategic

review, our Swiss operations are being restructured to play a key role in the Group's strategic expansion of its international banking and wealth services.

#The calculation of the operating margin for the UK domestic business excludes net interest expense of £755 000 (2021: £508 000) relating to net interest

income earned on the firm's cash deposits and the IFRS 16 Leases interest expense on right-of-use assets. This presentation is consistent with wealth

managers that are not part of a banking group and are therefore not required to report in accordance with the presentation and disclosure standards for

banks. Excluding this adjustment, the operating margin for the UK domestic business would be 26.8% (2021: 25.2%).

^The average income yield on funds under management represents the total operating income for the period as a percentage of the average of opening

and closing funds under management. This calculation does not adjust for the impact of market movements and investment performance throughout the

period on funds under management or the timing of acquisitions and disposals (where applicable) during the respective periods.

Other factors driving the performance in the year under review included

•Net fee and commission income increased by £28.0 million (8.9%) as a result of higher market levels and positive net organic

growth in FUM (in the current and prior year). Commission income returned to a more normalised level following the

exceptional transaction volumes seen in the prior year, resulting in a lower average income yield.

•Operating costs were up 5.8% due to investment in technology, increased discretionary expenditure as COVID-19 related

restrictions eased, as well as higher variable remuneration in line with business performance.

Financial review

DIVISIONAL REVIEW

Investec Bank plc Annual Financial Statements 2022

FINANCIAL REVIEW

CONTINUED

Strategy execution

Belonging, Inclusion and Diversity (BID) highlights

•We launched an Inclusive Allies programme to educate

colleagues about how to be an effective ally to marginalised

groups

•Our new app-based healthcare benefit, Peppy, which was

launched in the year under review is giving colleagues

access to personalised support through life events,

including menopause, fertility and early parenthood

•We celebrated neurodiversity using employee focus groups

to shape our approach and ensuring our recruitment

processes are inclusive and supportive for neurodivergent

thinkers

•Our commitments to the Women in Finance Charter

progressed, evidenced by our over 30% representation of

women in senior leadership roles, and 50% female Board

representation in the UK.

Sustainability highlights

•We continued to focus on investing responsibly on behalf of

clients, with environmental, social and governance (ESG)

considerations integrated into our investment process and

active engagement with the businesses that we invest in

•Our executive team and Investment & Research Office are

enhancing sustainable finance knowledge through the

Cambridge Institute for Sustainability Leadership

programme

•We are sponsoring the Blue Economy Ocean Accelerator

programme, which is aimed at supporting entrepreneurial

SME businesses to make a meaningful impact on the ocean.

Overall

•In line with our One Investec objective, we seek to provide

integrated solutions to clients through access to Group-

wide products and services on offer. Successful referrals

between the Specialist Banking and the Wealth &

Investment businesses resulted in £473 million of

incremental FUM and £105 million of new lending

•We have revised our remuneration approach to improve the

alignment between performance incentives and our

strategic goals, culture and values

•Our client-facing teams and the Investment & Research

Office have been focused on ensuring our direct clients,

charities, and independent financial advisors benefitted

from the positive market movements seen in the first three

quarters, and were adequately supported through the

market volatility in the final quarter.

Growth opportunities and outlook

•Following the formation of our new Investment & Research

Office, we are improving the consistency and quality of our

investment offering, including updating our Strategic Asset

Allocation to broaden our exposure to global market

opportunities and differentiated asset classes

•Our priority is organic growth in our key channels, namely

direct clients, charities, and intermediaries; however, we

remain alive to opportunities arising from industry

consolidation

•We will continue to focus on our value proposition in relation

to advice capabilities and a coordinated banking and wealth

management offering to HNW clients.

Financial review

DIVISIONAL REVIEW

Investec Bank plc Annual Financial Statements 2022

WEALTH & INVESTMENT

CONTINUED

Business Head

Ruth Leas

Highlights

Adjusted operating profit

Net core loans

£200.0mn

(2021: £34.0mn)

£14.4bn

(2021: £12.3bn)

Awards

Recognised as the

'Best-performing

bank in the UK' by

The Banker, 2021

Won 'Best Specialist ESG

Research' at the 2022 ESG

Investing Awards

Cost to income

Credit loss ratio

69.0%

(2021: 83.0%)

0.17%

(2021: 0.56%)

Won 'Lender of the

Year' at the 2022

Private Equity

Awards

Won 'Best Leasing and

Asset Finance Provider' and

'Best Business FX Provider'

at the 2022 Business

Moneyfacts Awards

Overview of performance in the year under review

•The business delivered a commendable set of results, slightly ahead of pre-COVID levels of profitability with an enhanced

quality of earnings. Continued client acquisition supported strong loan book growth of 17.2% since 31 March 2021, or 18.7%

excluding the Australian book exit

•We are proud to have beaten our targets for HNW banking to breakeven by March 2022, having delivered increased levels of

profitability and client acquisition despite the challenging conditions brought by the COVID-19 pandemic

•Risk management and risk reduction costs associated with the UK structured products book were immaterial at c.£5.9 million,

compared to a £93 million loss incurred in the prior year

•Operating costs were broadly flat, declining by 2.3% year on year. The reduction in fixed costs was offset by an increase in

variable remuneration in line with improved business performance. The prior year included one-off costs associated with

restructures implemented in the period

•Pre-provision adjusted operating profit was up 114% to £225.4 million (2021: £105.1 million)

•ECL impairment charges of £25.4 million were materially below the prior period (2021: £71.1 million), primarily due to lower

specific impairments

•These results are underpinned by positive momentum in our client franchises and strategic cross-collaboration within the

One Investec client ecosystem. See more on this enhanced collaboration in the pages that follow.

Income statement

£’000

31 March 2022

31 March 2021

Variance

% change

Net interest income

494 040

411 795

82 245

20.0%

Net fee and commission income

150 204

170 430

(20 226)

(11.9%)

Investment income

10 581

23 548

(12 967)

(55.1%)

Share of post-taxation profit of associates and joint venture holdings

1 988

1 768

220

12.4%

Trading income/(loss) arising from

– customer flow

59 178

(11 945)

71 123

>100.0%

– balance sheet management and other trading activities

(998)

11 215

(12 213)

(>100.0%)

Other operating income

11 158

10 002

1 156

11.6%

Total operating income before expected credit loss impairment

charges

726 151

616 813

109 338

17.7%

Expected credit loss impairment charges

(25 358)

(71 130)

45 772

(64.3%)

Operating income

700 793

545 683

155 110

28.4%

Operating costs

(500 790)

(512 583)

11 793

(2.3%)

Operating profit before goodwill, acquired intangibles and strategic

actions

200 003

33 100

166 903

>100.0%

Loss attributable to non-controlling interests

—

861

(861)

(100.0%)

Adjusted operating profit

200 003

33 961

166 042

>100.0%

Financial review

DIVISIONAL REVIEW

Investec Bank plc Annual Financial Statements 2022

SPECIALIST BANKING OVERVIEW

Enhanced collaboration through integration

In FY2022

A key strategic differentiator is our client ecosystem approach,

taking our clients along both the personal and business journey.

Our approach of 'One Investec' brings all of Investec that is

relevant to each and every client. It is a coordinated approach

with the client at the centre, supporting meaningful and long-

lasting client relationships with Investec.

In the UK mid-market, we are centred on what is best for the

client, with the breadth of our capabilities differentiating us from

our competitors in terms of the diversity of offering we can bring

to our clients. One Investec allows us to provide our clients with

the focus of a boutique, backed with the power of a bank.

We have integrated ourselves structurally through organising our

business activities around target client groupings. This enables us

to leverage the whole of Investec's capability to provide solutions

most relevant to clients' needs.

Our focus on connectivity and collaboration is delivering strong

results.

•Individual franchises are growing and co-generating

new Bank value between them

•New value grown by our franchises sharing clients:

there were 661 inter-bank referrals, generating new

business predominantly through lending, advisory

fees, and trading activity

•Enhanced connectivity with UK Wealth & Investment:

Bank referred and created £473 million of

incremental funds under management (FUM) to the

UK Wealth & Investment business

•Unlocking significant client value: collaboration has

supported an increase in the average number of

products per core client

▪Notably strong loan book growth (up 17.2%),

particularly compared to our peers, as a result of our

collaborative, One Investec approach.

Diversified loan book by risk category: Core loans

£14.4 billion

Corporate and other lending

48%

Asset finance

15%

Corporate and acquisition finance

13%

Fund finance

Power and infrastructure finance

Other corporate and financial institutions and governments

Asset-based lending

Aviation finance

Lending collateralised by property

16%

Commercial real estate

11%

Residential real estate

High net worth and other private client lending

36%

Mortgages

29%

HNW and specialised lending

Highlights: Sustainability

Highlights: Belonging, Inclusion and Diversity (BID)

•Closed Investec Bank plc's first Sustainability Linked Loan for

USD600 million funding which was three-times oversubscribed

•Won 'Best Specialist ESG Research' at the 2022 ESG Investing

Awards

•Embedded an ESG framework (including diligence, internal

ratings and mappings to the SDGs, and ongoing monitoring)

into our investment process for private equity clients

•Experienced strong deal flow for Power and infrastructure

finance, sourcing financing opportunities for wind and solar

development as well as other energy transition strategies such

as electric vehicle charging stations

•Launched a Renewable Energy Funding proposition to fund

small ticket renewable energy assets to support UK SMEs and

corporates in their transition to net zero

•Founding member of 'Sustainable Trading', a non-profit

membership dedicated to transforming ESG practices within

the financial markets trading industry

•Signed up to the UN-convened Net-Zero Banking Alliance

which is committed to aligning lending and investment

portfolios with net-zero emissions by 2050.

•We have a female CEO and currently have 50% females

and 40% people of colour on the Investec Bank plc

Board. Our senior leadership has 35% female

representation and 35% ethnic minority representation

•Introduced our first reverse mentoring programme for

Black, Asian and minority ethnic employees, which aims

to facilitate reciprocal learning and enable the

organisation to harness the value of difference

•Launched our inaugural Allies programme and BID

Champion network

•Joined the Diversity Project (a cross-company initiative),

the aim of which is to create a truly diverse and inclusive

UK investment and savings industry

•Launched a new app-based healthcare benefit (Peppy

Health) for employees, providing support with fertility,

menopause, and early parenthood

•Reduced our gender pay gap, reflecting a continuous

year-on-year improvement since 2017, and, for the first

time, voluntarily included our ethnicity pay gap results.

Financial review

DIVISIONAL REVIEW

Investec Bank plc Annual Financial Statements 2022

SPECIALIST BANKING OVERVIEW

CONTINUED

Our Private Banking activities focus on providing bespoke solutions underpinned by in-depth knowledge and understanding

of our clients’ personal and business aspirations and goals, supported by a broad private banking offering. We understand

that every client is an individual, and that they are typically active wealth creators with complex financial needs. Our

proposition is aligned with a clearly defined target client base and a market opportunity to address an underserviced part of

the UK market. This segment predominantly comprises lending to HNW clients: primarily residential mortgages, as well as

flexible capital solutions for established privately owned businesses and entrepreneurs (Private Capital).

Performance in the period under review

•Our Private Banking activities delivered a strong financial performance, reporting an adjusted operating profit of £30.8 million

(compared to a net loss of £3.0 million in 2021). This level of profitability significantly exceeds our stated ambitions to

breakeven by March 2022 – a noteworthy milestone achieved during a three-year period that was marked by COVID-19

related volatility.

•Net interest income increased materially compared to the prior year (up >100%), driven by strong loan book growth of 35.1%

since 31 March 2021 and lower funding costs.

Loans and advances to customers

£’billion

Loan book growth:

•Strong loan book growth for both HNW banking and

Private Capital, up 35.5% and 28.4%, respectively, since

31 March 2021 – driven by focused execution of strategy

and continued client acquisition

•The business experienced significantly higher activity

levels this year, particularly in the month of June when

demand for residential mortgages accelerated ahead of

the deadline for the COVID-19 related Stamp Duty relief in

the UK

•The book growth was achieved without compromising

margins and underlying credit quality in an increasingly

competitive market.

Note: In addition to the loan book shown above, our Channel Islands

business had c.£500 million of mortgages as at 31 March 2022.

UK HNW client acquisition

Continued success in client acquisition:

•We acquired 1 137 new clients over the period – a number

of which were introduced via referrals by existing Investec

clients

•Aligned to our One Investec approach, this offering serves

as a valuable client acquisition tool for the wider UK Bank

and Wealth & Investment businesses: our clients have an

average income of £700 000+ and average NAV of

£11 million (well above our quantitative criteria)

•HNW mortgage lending is focused on target clients with

lending in established areas (London and the South East)

with recourse to the individual and high level of cash

equity contributions into transactions

•The majority of our HNW clients are UK resident (only a

small proportion of this client base is South African).

Note: In addition to these client figures, our Channel Islands business has

c.870 HNW clients. This brings our total number of HNW clients to 6 982 –

exceeding our three-year target of 6 500 HNW clients by March 2022.

Strategy execution

•The results reflect our continued success in executing our

HNW client acquisition strategy, translating into strong

growth in lending, profitability, and market share. This HNW

client activity also connects to the rest of the client

ecosystem, where our client-centric, One Investec approach

enables us to win mandates in other areas

•We continue to collaborate with our Wealth & Investment

business to provide an integrated HNW proposition.

In addition, the ability to provide our UK private banking

offering to South African clients seeking an international

proposition continues to be a key differentiator for the

Group

•Our growing Private Capital offering is addressing a gap in

the UK market, providing capital directly to owner-managed

businesses and their owners. These HNW clients value our

innovative, flexible approach to understanding both their

business and personal assets. Our growth has been

supported by collaboration with our HNW banking

proposition, as many of our clients are also banked by us

through their mortgages.

Financial review

DIVISIONAL REVIEW

Investec Bank plc Annual Financial Statements 2022

PRIVATE BANKING

Income statement analysis and key income drivers

£’000

31 March 2022

31 March 2021

Variance

% change

Net interest income

70 692

34 664

36 028

>100.0%

Net fee and commission income

1 556

644

912

>100.0%

Investment income

816

797

>100.0%

Trading income arising from

– customer flow

2 228

1 196

1 032

86.3%

– balance sheet management and other trading activities

(11)

(84.6%)

Total operating income before expected credit loss impairment

charges

75 294

36 536

38 758

>100.0%

Expected credit loss impairment charges

(2 432)

(1 515)

(917)

60.5%

Operating income

72 862

35 021

37 841

>100.0%

Operating costs

(42 034)

(38 033)

(4 001)

10.5%

Adjusted operating profit/(loss)

30 828

(3 012)

33 840

>100.0%

Key income drivers

Cost to income ratio

55.8%

104.1%

Growth in loans and advances to customers

35.1%

37.2%

Other factors driving the performance in the period under review included

•Adjusted operating profit of £30.8 million (compared to a net loss of £3.0 million in the prior year) reflects ongoing strategic

execution in growing the business to scale by leveraging existing infrastructure.

•Growth in net interest income (>100%) was driven by a higher average loan book and an improved net interest margin –

primarily due to higher lending activity and lower funding costs.

•ECL impairment charges for the period increased to £2.4 million (2021: £1.5 million) driven by book growth and seasoning of

the loan book. The credit loss ratio on this book is c.5bps, indicative of the quality of the underlying franchise. Refer to

page 72 for further information on IBP’s asset quality.

•Operating costs increased by £4.0 million or 10.5%, reflecting normalised discretionary expenditure post the COVID-19 related

lockdowns as well as increased variable remuneration in line with improved business performance.

Growth opportunities and outlook

•Notwithstanding our success to date in building scale and

relevance, we believe we are only beginning to capitalise on

the existing market opportunity. We are seeing growing

demand for our efficient, refreshingly human private client

offering. We have proven the concept: our journey to

profitability – particularly in turbulent times – evidences the

clear market opportunity and the strength of our proposition

to capture it. Now it is all about scale

•We have partnered with Monese, a leading pan-European

fintech, to evolve and transform our transactional banking

offering. This strategic partnership will enable us to leverage

Monese's agility, expertise, and digital capabilities to bring

accelerated efficiency and enhancements to our private

client transactional banking offering

•We are excited about the sizeable opportunity that exists to

provide our clients with an integrated banking and wealth

management offering. Over 80% of our HNW banking clients

do not currently have a relationship with our Wealth &

Investment business, with significant levels of wealth

currently sitting with other financial institutions. In addition,

there are a number of clients of the Wealth & Investment

business who are seen as potential target clients for the

Bank. We continue to enhance collaboration to provide a

holistic proposition for our HNW clients’ growth journeys

•Having established a strong presence in the market over the

last four years, our Private Capital business is in growth

mode, focused on increasing lending at pace through

deepening existing relationships and further client

acquisition

•We are focused on maintaining business momentum and

generating a stable annuity income stream for the Group,

while investing with discipline in the required technology to

support our growth to scale.

Financial review

DIVISIONAL REVIEW

Investec Bank plc Annual Financial Statements 2022

PRIVATE BANKING

CONTINUED

This segment comprises business activities that provide capital, advisory and risk management services to growth-

orientated corporate clients in the private companies, private equity and listed companies arenas, including specialist

sector-focused expertise. This segment also comprises our central treasury and liability management channels.

Performance in the period under review

•The results reflect a strong performance, with an adjusted operating profit of £169.2 million (2021: £37.0 million). The

significant improvement in performance is largely attributable to the strategic changes we implemented, improved market

conditions, and increased client activity as economies opened up and bounced back from the COVID-19 pandemic.

•Net interest income increased by £46.2 million (12.3%) to £423.3 million, driven by higher lending activity and lower funding

costs.

•Impairment charges were considerably lower (down 67.1% to £22.9 million) due to an improved macro-economic outlook and

limited specific impairments.

Loans and advances to customers

£’billion

Robust book growth

•The net core loan book grew by 10.4% since 31 March 2021

to £9.9 billion, or 12.2% excluding the Australian book exit

•Lending activity increased significantly across all portfolios,

supported by new client acquisition as we continue to build

scale and relevance in our client franchises, and repeat

business with existing clients

•We also experienced continued success with our origination

and distribution strategy, particularly in the lending areas of

Fund Solutions, Power and infrastructure finance and

Growth & Leverage finance, generating additional

ROE-accretive revenue for the Group.

Spotlight on our Private Equity franchise

•We have a fully integrated proposition spanning advisory

(M&A and IPO), capital solutions (leverage finance and

fund level finance) and risk management (currency and

interest rate hedging) for private equity funds and their

portfolio companies

•We have a broad European footprint with activity

weighted to the UK, complemented by fast-growing

continental European activity levels, aided through a

minority stake in Capitalmind, an M&A boutique

•Over the past three years, we have focused on unlocking

value by offering an integrated, multi-product solution to a

targeted group of clients. The benefit of this collaborative

client focus is delivering strong performance:

–Revenue from these clients increased by over 40% in

FY2022

–Increasingly, our clients are taking more products – two-

thirds of these particular clients now have at least two

products

•Opportunity remains to do more with these clients and to

replicate our multi-product strategy more broadly.

Product capture per client (targeted group)

100%

Winner

Savings Provider of the Year

(Moneynet Awards 2021)

Winner

Broker Champion Lessor

(Leasing World, Gold Awards 2021)

Research rank across

seven sectors

(2021 Institutional Investor's UK

Small & Mid-Cap survey)

Broker rank

(2021 Institutional Investor's UK

Small & Mid-Cap survey)

Winner

Conventional Power Lead

Arranger of the Year

(Power Finance & Risk Annual

Deals and Firms of the Year

Awards 2021)

Winner

Fund Financing Provider of

the Year

(Drawdown Awards 2022)

Winner

Best Fund Financing

Solution

(Private Equity Wire European

Awards 2022)

Winner

Mid-Market Lender of the

Year

(Real Estate Capital Europe Awards

2021)

Financial review

DIVISIONAL REVIEW

Investec Bank plc Annual Financial Statements 2022

CORPORATE, INVESTMENT BANKING AND OTHER

Income statement analysis and key income drivers

£’000

31 March 2022

31 March 2021

Variance

% change

Net interest income

423 348

377 131

46 217

12.3%

Net fee and commission income

148 648

169 786

(21 138)

(12.5%)

Investment income

9 765

23 529

(13 764)

(58.5%)

Share of post-taxation profit of associates and joint venture

holdings

1 988

1 768

220

12.4%

Trading income/(loss) arising from

– customer flow

56 950

(13 141)

70 091

>100.0%

– balance sheet management and other trading activities

(1 000)

11 202

(12 202)

(>100.0%)

Other operating income

11 158

10 002

1 156

11.6%

Total operating income before expected credit loss impairment

charges

650 857

580 277

70 580

12.2%

Expected credit loss impairment charges

(22 926)

(69 615)

46 689

(67.1%)

Operating income

627 931

510 662

117 269

23.0%

Operating costs

(458 756)

(474 550)

15 794

(3.3%)

Operating profit before goodwill, acquired intangibles and

strategic actions

169 175

36 112

133 063

>100.0%

Profit attributable to non-controlling interests

—

861

(861)

(100.0%)

Adjusted operating profit

169 175

36 973

132 202

>100.0%

Key income drivers

Cost to income ratio

70.5%

81.7%

Growth in loans and advances to customers

10.4%

(4.6%)*

*Growth in loans and advances to customers for FY2021 was negatively impacted by the sale of the c.£400 million Australian loan book in March 2021.

There was marginal book growth excluding the Australian loan book.

Other factors driving the performance in the period under review included

•The £46.2 million increase in net interest income was primarily driven by higher average loan books across a number of

portfolios, reduced funding costs as liabilities repriced, utilisation of excess liquidity and accelerated effective interest rate

(EIR) fees

•Net fee and commission income decreased by £21.1 million to £148.6 million, impacted by the wind down of the Australian

business and the restructure of operations in India (whereby earnings from the joint venture are now reflected as fair value

movements within investment income). Lower advisory fees in the listed companies space were offset by higher advisory fees

from the private equity client franchise

•Investment income of £9.8 million was £13.8 million lower than the prior year due to non-repeat of a £13 million gain

recognised from the formation of a joint venture with State Bank of India and the profit on sale of the IAPF management

company. This was partially offset by unrealised gains in certain portfolios in the current year

•Trading income from customer flow was significantly higher than the prior period as a result of immaterial risk management

and risk reduction costs associated with the UK structured products book in the current year (£5.9 million) due to risk

mitigation strategies and improving markets (2021: £93 million)

•Trading income from balance sheet management and other trading activities cost was primarily driven by costs associated

with the early redemption of a senior bond and the non-repeat of prior year gains which followed extreme COVID-19 related

volatility

•Other operating income of £11.2 million (2021: £10.0 million) primarily reflects the fair value movements of the Ninety One

shares held in the Group’s staff share scheme as a result of the demerger and separate listing of Ninety One. The impact is

reduced by a corresponding increase in personnel costs

•Expected credit loss impairment charges of £22.9 million were 67.1% lower than the prior period, primarily due to lower

specific impairments. Refer to page 72 for further information on IBP’s asset quality

•Operating costs decreased by 3.3% to £458.8 million. A reduction in fixed costs was offset by an increase in variable

remuneration in line with improved business performance. The base includes one-off costs associated with the

implementation of restructures as part of the Group’s strategy to simplify and focus the business, including related

redundancies and the closure of operations in Australia.

Financial review

DIVISIONAL REVIEW

Investec Bank plc Annual Financial Statements 2022

CORPORATE, INVESTMENT BANKING AND OTHER

CONTINUED

Strategy execution

•The business is delivering on its growth phase in the journey

to enhance shareholder returns. Our success to date in

building scale and relevance in the UK market is reflected in

solid loan book growth, increased client activity and client

acquisition across our business

•Our One Investec approach – underpinned by connected

client ecosystems – has led to an increased number of

multi-product clients and a pipeline of additional

opportunities

•The strength of our client franchises has been

independently recognised through the numerous awards we

have won

•We are focused on digitalisation to deliver scale, investing in

technology for longer-term growth and efficiency. Our

strategic partnership with fintech, Monese, has been the

catalyst for accelerating our digital transformation. We are

currently in a beta phase testing the new business current

account, and expect to launch our new private client

transactional banking offering in the latter half of this

financial year

•We continue to generate diversified, capital light earnings by

utilising third party capital to facilitate our highly successful

origination and distribution capability. In addition to

accelerated growth in our existing fundraising capabilities

for Fund Solutions and Power and infrastructure finance,

similar strategies for Growth & Leverage finance and Real

Estate lending have positioned us well to further diversify

this income stream

•In terms of funding, the transition of our retail funding to

more digital and scalable platforms has continued with pace.

Through these channels in the financial year we delivered

growth of £3.2 billion of funding through our new digital

savings platform – broadening our retail funding base and

delivering a reduction in our cost of funds. This has aided

our competitiveness in the market and contributed to an

improved net interest margin.

Growth opportunities and outlook

•We expect business momentum to continue, supporting a

future of disciplined growth on a platform of resilience

•Aligned to our organisational purpose of 'living in, not off,

society', our Belonging, Inclusion and Diversity (BID) focus is

on inclusive leadership and creating an environment where a

sense of belonging permeates

•A key strategic differentiator (our One Investec, client

ecosystem approach) will continue to drive success in

leveraging the whole of Investec's capability to provide

solutions for clients. Further collaboration with our Wealth &

Investment business and the wider Investec Group is

expected to unlock value

•With respect to sustainability, we are focused on embedding

an ESG mindset that is fully integrated in our support for

clients. We will continue to grow our sustainability offering

to support our clients with renewable energy financing and

innovative debt structuring

•Our international partnerships in Continental Europe (with

Capitalmind) and the USA (with BlackArch) continue to

facilitate an expansion of our cross-border M&A advisory

services

•We expect to grow our corporate brokerships and research

client base in the UK as a result of investing in new sectors

and improving sector capability, while recent strategic hires

in our US Equities business support our ambitions to

increase market share in North America

•The scale of the underserviced UK private companies

market represents a significant opportunity for growth:

20 000 UK private companies have been identified as

potential new clients for our comprehensive suite of banking

products. We have made good progress developing our

client proposition, including greater automation of our asset

finance business and further development of our online FX

portal

•We intend to raise additional third party capital through

funds and syndications to support a wider client offering

and to generate further capital light revenue for the Group.

Financial review

DIVISIONAL REVIEW

Investec Bank plc Annual Financial Statements 2022

CORPORATE, INVESTMENT BANKING AND OTHER

CONTINUED

Risk management

and governance

IN THIS SECTION

Risk management

Year in review from a risk perspective

Salient features

Principal risks

Risk management approach and framework

Credit and counterparty risk and asset quality

Additional policy information

Macro-economics

ESG (including climate) risk

Investment risk

Securitisation/structured credit

Market risk

Balance sheet risk and liquidity

Operational risk

103

Reputational, strategic, legal risk and compliance

105

Recovery and resolution plan

108

Capital management and allocation

109

Corporate Governance

113

Overview of disclosure

requirements

The risk disclosures provided are in line

with the requirements of International

Financial Reporting Standard 7 Financial

Instruments: Disclosures (IFRS 7) and

disclosures on capital required by

International Accounting Standard 1

Presentation of Financial Statements

(IAS 1) are included within this section of

the integrated annual report on pages

68 to 112 with further disclosures

provided within the annual financial

statements section on pages 167 to 290.

All sections, paragraphs, tables and

graphs on which an audit opinion is

expressed are marked as audited.

We supplement our IFRS figures with

alternative performance measures used

by management internally and which

provide valuable, relevant information to

readers of the financial statements.

Where applicable, definitions can be

found in the definitions section of this

report.

Information provided in this section

of the annual report is prepared on an

Investec Bank plc (IBP) consolidated

basis unless otherwise stated.

IBP also publishes a separate

Pillar III disclosure report as

required under Part 8 of the

Capital Requirements Regulation

pertaining to banks in the United

Kingdom (UK). This can be found

on the Investec Group’s website.

A summary of the year in review from a

risk perspective

The executive management is integrally

involved in ensuring stringent

management of risk, liquidity, capital and

conduct through our risk appetite

framework which is assessed with

consideration of prevailing market

conditions and overall Investec Group

strategy. The primary aim is to achieve a

suitable balance between risk and

reward in our business.

We are comfortable that we have a

strong balance sheet with high levels of

liquidity, strong capital and low leverage

as well as established risk management

processes and systems in place to

navigate through the continued

uncertainty emanating from ongoing

inflationary pressures and the economic

effects of the invasion of Ukraine. The

Bank is well positioned for growth and to

serve its carefully chosen client base.

IBP’s long-term Moody’s deposit rating is

A1 (stable outlook). IBP’s long-term Fitch

rating is BBB+ with the outlook now

improved to stable from negative,

following review by Fitch.

Activity levels increased further during

the financial year as clients were in a

position to make investment decisions

given the greater macro-economic

certainty that existed and with the

backdrop of an increased forward-

looking rate environment. Increased

client activity and higher lending

turnover resulted in an increase in the

Bank's net core loan book by 17.2% to

£14.4 billion. Growth in net core loans

was driven by the private client

residential mortgage portfolio as well as

corporate client lending portfolios across

multiple asset classes.

Credit exposures are focused on

secured lending to a select target

market, comprising high-income and

high net worth individuals, established

corporates, and medium-sized

enterprises. Our risk appetite continued

to favour lower risk, income-based

lending, with exposures well

collateralised and with credit risk taken

over a short to medium term. We remain

focused on our target market,

supporting clients with significant wealth

and experience in their chosen sectors,

as indicated by our continued growth in

the private banking space as we

execute on our strategy to target this

sector of the market. Over the past few

years we have realigned and rebalanced

our portfolios in line with our risk

appetite framework and this is reflected

in the movements in asset classes on

our balance sheet; showing an increase

in private client, mortgages and

corporate and other lending, and

maintaining lending collateralised by

property as a proportion of net core

loans.The Bank’s net core loan

exposures remain well diversified with

commercial rent producing property

loans comprising approximately 9.2% of

net core loans, other lending

collateralised by property 7.0%, high net

worth and other private client lending

35.6% and corporate and other lending

48.2% (with most industry

concentrations well below 5%).

We remain confident that we have a

well-diversified portfolio across sectors

and have no direct exposure to Russia or

Ukraine.

Although the current macro-environment

remains uncertain, the Group was able

to improve asset performance and risk

metrics throughout the year in review.

The credit loss ratio is well below

‘through-the cycle’ levels at 0.17% at

31 March 2022 down from 0.56%

reported at 31 March 2021, which is

below normalised levels due to limited

Stage 3 impairments.

Stage 3 exposures reduced to £291

million at 31 March 2022 or 2.1% of

gross core loans subject to ECL (31

March 2021: 2.8%) due to a number of

successful exits from existing Stage 3

positions offset by limited new defaults.

These exposures are adequately

provisioned. Stage 3 coverage reduced

due to certain exits (and requisite write-

offs) of previously provided for

exposures.

Stage 2 exposures reduced to £992

million or 7.1% as a proportion of gross

core loans subject to ECL at 31 March

2022 (31 March 2021: 10.3%), but still

remain elevated relative to pre-

pandemic levels reflecting the continued

uncertainty in the macro-economic

environment, particularly with respect to

inflation.

The measurement of ECL under IFRS 9

has increased complexity and reliance

on expert credit judgements. Key

judgemental areas under IFRS 9 are

highlighted in this document and are

subject to robust governance processes.

The Bank applies the IFRS 9 transitional

arrangements (including COVID-19 ECL

add-backs) to regulatory capital

calculations to absorb the impact

permissible of IFRS 9 over time.

The management ECL overlay totals

£16.8 million and seeks to capture the

significant level of judgement required in

the application of macro-economic

scenarios as well as the ongoing

uncertainty in the UK and global

operating environment that is not

currently captured completely by

modelled outputs. In line with our

previous approach Stage 3 ECLs

continued to be assessed using expert

credit judgement.

Further detail on key judgements

can be found on page 85.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

RISK MANAGEMENT

There has been significant progress

globally with respect to ESG

considerations over the period,

providing momentum to partner with our

clients and stakeholders to accelerate a

cleaner, more resilient and inclusive

world. We are committed to respecting

human rights and support internationally

recognised principles, guidelines and

voluntary standards dealing with ESG.

These considerations are integrated as

part of our credit decision-making and

we have taken steps to calculate a

baseline with respect to the Group’s

Scope 3 emissions.

Risk management and risk reduction

costs associated with the structured

products book were immaterial at c.£5.9

million, compared to a £93 million loss

incurred in the prior year underpinned by

risk mitigation strategies implemented

on the book, improving markets and a

reduction in the size of the remaining

book. The macro hedge implemented in

the prior year remains in place and has

provided downside protection in the

event of another extreme market

dislocation. At 31 March 2022, the 95%

one-day Value at Risk (VaR) measure

was £0.4 million, reduced from

£0.5 million at 31 March 2021.

We have reduced our investment

portfolio exposure in line with our

objective of optimising capital allocation,

reducing income volatility, and aligning

the business with our client franchises.

The investment portfolio on the balance

sheet reduced by 5.0% over the year

under review to £333 million at

31 March 2022.

The Bank continued to maintain a sound

balance sheet with a low gearing ratio

of 10.8 times and a core loans to equity

ratio of 5.7 times at 31 March 2022.

The Bank’s leverage ratio was 9.3%

ahead of the minimum 6% target level.

The increase in leverage ratio was

driven by the regulatory change

implemented in the UK from 1 January

2022 to exclude qualifying Central Bank

balances from the calculation of the

leverage exposure measure.

We maintain an Investec Group target

CET1 ratio in excess of 10% which is

currently considered appropriate for our

business, given our sound leverage

ratios and significant capital light

revenues. The Bank is on the

standardised approach for capital. The

CET1 ratio was 12.0% at 31 March 2022

in excess of regulatory minimums and

ahead of our Investec Group target and

well in excess of regulatory minimums.

In March 2021, the Bank of England

(BoE) re-confirmed the preferred

resolution strategy for the Bank as

‘modified insolvency’. As the resolution

strategy is ‘modified insolvency’, the BoE

has set IBP's minimum requirement for

own funds and eligible liabilities (MREL)

requirement as equal to its total

regulatory capital requirements.

The Bank is in the early stages

of a process to migrate from the

Standardised approach to the Internal

Ratings Based (IRB) approach.

Holding a high level of readily available,

high quality liquid assets remains

paramount in the management of our

balance sheet. We continued to maintain

a low reliance on interbank wholesale

funding to fund core lending asset

growth. A strong liquidity position

continued to be maintained throughout

the year primarily supported by growth

in retail customer deposits. Cash

and near cash balances amounted

to £8.9 billion at 31 March 2022

(31 March 2021: £6.9 billion). Average

cash balances remained high as we

maintained a conservative position

holding higher levels of cash balances

due to ongoing market volatility as well

as to support the ongoing digital

transition.

Customer accounts (deposits)

totalled £18.6 billion at 31 March 2022

(31 March 2021: £16.2 billion). The digital

offerings continued to be rolled out

during the year with strong uptake from

retail clients, which substantially

reduces the operational cost of deposit

raising for these product.

Loans and advances to customers as

a percentage of customer deposits

remained conservative at 77.5%. The

Bank comfortably exceeds Basel

liquidity requirements for the Liquidity

Coverage Ratio (LCR) and Net Stable

Funding Ratio (NSFR). IBP (solo basis)

reported an LCR of 476% and an NSFR

of 136% at 31 March 2022.

Looking forward, the focus remains

on having an optimised funding mix

through the retail market, in line with

the Bank’s strategic objectives as well

as selectively using wholesale funding

to lengthen the book. We have access

to the BoE Term Funding Scheme with

additional incentives for Small and

Medium Enterprises (TFSME).

We remain highly focused on managing

conduct, reputational, operational,

recovery and resolution risks across our

banking and Wealth & Investment

businesses. The operational resilience of

the Bank continued to be an area of

focus particularly as the Bank prepared

for the new Prudential Regulation

Authority (PRA) and Financial Conduct

Authority (FCA) regulation on operational

resilience.

Countering financial and cyber crime are

high priorities, particularly given the

heightened cyber risk at present due to

the Russian invasion of Ukraine. The

Bank continually aims to strengthen and

test systems and controls in order to

manage cyber risk as well as meet

regulatory obligations to combat money

laundering, fraud and corruption.

The Bank recognises potential

challenges faced in ensuring successful

delivery of digitalisation strategies and

embedding of change. This includes the

technology investments, resourcing

levels, and skills needed to operate a

digital business. Concentration risk

related to big tech and cloud platforms

is increasing. Growing reliance on

technology service providers heightens

the potential impact of third party

disruption, cyber threats, and data

breaches. Developments in the

technology landscape are closely

monitored to ensure appropriate

response and management of disruptive

effects on the Bank. The impact of

digitalisation initiatives and cloud

adoption on the Bank’s risk profile is

continually tracked, with consideration

given to key controls related to cyber

risk, technology integration, data

privacy, and vendor resiliency.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

RISK MANAGEMENT

CONTINUED

IBP focuses on building a strong, diverse

and capable workforce. The risk

associated with staff recruitment and

retention in an extremely competitive

market, with shortage of certain skills is

continuously considered and reviewed.

We are constantly considering the future

world of work, how we prioritise a safe

working environment for employees,

remain relevant and forward thinking,

with a focus on adaptability and agility in

response to a changing environment.

We are closely monitoring the

implications of flexible working

arrangements on the Bank's culture and

performance as well as consequential

impacts on talent retention.

The Bank operates in a legal and

regulatory environment that exposes it

to litigation risks. As a result, the Group

is involved in disputes and legal

proceedings which arise in the ordinary

course of business. The Bank evaluates

all facts, the probability of the outcome

of legal proceedings and advice from

internal and external legal counsel when

considering the accounting implications.

The Bank’s stress testing framework is

well embedded in its operations and is

designed to identify and regularly test

the Bank’s key vulnerabilities under

stress. A fundamental part of the stress

testing process is a full and

comprehensive analysis of the

Bank’s material business activities,

incorporating views from risk, the

business units and the executive – a

process called the ‘bottom-up’ analysis.

Resulting from the ‘bottom-up’ analysis,

the IBP-specific stress scenarios are

designed to specifically test the unique

attributes of the Bank’s portfolio. The

key is to understand the potential

threats to our sustainability and

profitability and thus a number of risk

scenarios are developed and assessed.

These IBP-specific stress scenarios form

an integral part of our capital planning

process and IFRS 9 reporting. The stress

testing process also informs the risk

appetite review process and the

management of risk appetite limits and

is a key risk management tool of the

Bank. Reverse stress tests are

conducted to stress the Bank’s business

plan to failure and consider a broad

variety of extreme and remote events.

These processes allows the Bank to

proactively identify underlying risks and

manage them accordingly. During the

year, a number of stress scenarios were

considered and incorporated into our

processes including assessing the

potential impact of climate change.

The Board, through its respective risk

and capital committees, continued to

assess the impact of its principal risks

and the above mentioned stress

scenarios on its business. The Board has

concluded that the Bank has robust

systems and processes in place to

manage these risks and that, while

under a severe stress scenario business

activity would be very subdued, the

Bank would continue to maintain

adequate liquidity and capital balances

to support the continued operation of

the Bank.

The fundamental risk performance

during the period has been strong and

management is focused on maintaining

the sound underlying balance sheet.

The risk outlook remains uncertain given

the latest market volatility, rising

inflation as well as supply chain

pressures. However, subject to market

conditions, we are comfortable that we

are well placed for growth in the next

financial year given the management

actions taken to reduce risks across the

Bank, supported by a strong capital base

and high levels of liquidity.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

RISK MANAGEMENT

CONTINUED

Salient features

A summary of the key risk indicators are provided in the table below:

31 March 2022

31 March 2021

Net core loans (£’million)

14 423

12 311

Total assets (£’million)

27 589

24 396

Total risk-weighted assets (£’million)

16 462

15 789

Total equity (£’million)

2 547

2 365

Funds under management (£’million)

44 419

41 708

Cash and near cash (£’million)

8 871

6 857

Customer accounts (deposits) (£’million)

18 616

16 241

Loans and advances to customers as a % of customer deposits

77.5%

75.8%

Structured credit as a % of total assets

1.6%

2.4%

Banking book investment and equity risk exposures as a % of total assets

1.2%

1.6%

Traded market risk: 95% one-day value at risk (£’million)

0.4

0.5

Core loans to equity ratio

5.7x

5.2x

Total gearing ratio*

10.8x

10.3x

Return on average assets#

0.88%

0.25%

Return on average risk-weighted assets#

1.42%

0.38%

Stage 3 exposures as a % of gross core loans subject to ECL

2.1%

2.8%

of which Ongoing (excluding Legacy) Stage 3##

1.7%

1.9%

Stage 3 exposure net of ECL as a % of net core loans subject to ECL

1.6%

2.0%

Credit loss ratio

0.17%

0.56%

Level 3 (fair value assets) as a % of total assets

6.5%

6.7%

Total capital ratio

18.2%

16.4%

Tier 1 ratio

13.6%

13.4%

Common Equity Tier 1 ratio

12.0%

11.8%

Leverage ratio

9.3%

8.0%

Leverage ratio (fully loaded)

9.1%

7.7%

*Total assets to total equity.

# Average balances are calculated on a straight-line average.

## Refer to definitions of page 292.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

SALIENT FEATURES

An overview of the principal risks relating

to our operations

The most material and significant risks

we face, which the Board and senior

management believe could have an

impact on our operations, financial

performance, viability and prospects are

summarised below with further

information pertaining to the

management and monitoring of these

principal risks shown in the references

provided.

The Board, through its various sub-

committees, has performed a robust

assessment of these principal risks and

regular reporting of these risks is made

to the Board.

The Board recognises that, even with

sound appetite and judgement, extreme

events can happen which are

completely outside of the Board’s

control. It is, however, necessary to

assess these events and their impact

and how they may be mitigated by

considering the risk appetite framework.

It is the Bank’s policy to regularly carry

out multiple stress testing scenarios

(including reverse stress testing) which,

in theory, test extreme but plausible

events and from that, assess and plan

what can be done to mitigate the

potential outcome.

The Bank has a strong and embedded

risk and capital management culture and

policies and processes in place to

address these principal risks. Risk

awareness, controls and compliance are

embedded in all our day-to-day

activities through a levels of defence

model.

The levels of defence model is applied

as follows:

•Level 1 – Business line management:

responsible for identifying and

managing risks inherent in the

products, activities, processes and

systems for which it is accountable

and escalating risk events where

necessary

• Level 2 – Independent risk and

compliance function: responsible

for building and embedding risk

frameworks, challenging the business

lines' inputs to, and outputs from,

the Bank’s risk management, risk

measurement and reporting activities

•Level 3 – Independent internal audit:

responsible for reviewing and testing

the application and effectiveness of

risk management procedures and

practices.

Risk appetite

The Bank has a number of Board-

approved risk appetite statements and

policy documents covering our risk

tolerance and approach to our principal

aspects of risk. The risk appetite

statement and framework set out the

Board’s mandated risk appetite. The risk

appetite framework acts as a guide to

determine the acceptable risk profile

of the Bank while keeping in line with the

Investec Group’s risk appetite

parameters. The risk appetite statement

ensures that limits/targets are applied

and monitored across all key operating

jurisdictions and legal entities.

The risk appetite framework is a function

of business strategy, budget and capital

processes, our stress testing reviews

and the regulatory and economic

environment in which the Bank is

operating. The risk appetite framework

is reviewed (in light of the above

aspects) and approved by the Board

at least annually or as business

needs dictate.

A documented process exists where

our risk profile is measured against

our risk appetite and this positioning

is presented to the IBP Board Risk

and Capital Committee (IBP BRCC)

and Board as well as the DLC BRCC

and DLC Board. In the section that

follows, the Bank's high-level summary

of overall risk tolerance and positioning

has been detailed against the respective

principal risks.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

PRINCIPAL RISKS

Credit and

counterparty

risk

Credit and counterparty risk is defined as the risk arising from an

obligor’s (typically a client or counterparty) failure to meet the terms

of any agreement thereby resulting in a loss to the Bank, arising

when funds are extended, committed, invested, or otherwise

exposed through contractual agreements, whether reflected on- or

off-balance sheet

Link to strategy

Monitoring and mitigation activities

•Independent credit committees exist which also have oversight of regions where we assume

credit risk. These committees operate under Board-approved delegated limits, policies and

procedures

•There is a high level of executive involvement in decision-making with non-executive review

and oversight

•Our credit exposures are to a select target market comprising high-income and high net worth

individuals, established corporates, small and medium-sized enterprises, financial institutions

and sovereigns

•Our risk appetite continues to favour lower risk, income-based lending, with exposures well

collateralised and credit risk taken over a short to medium term

•Investec has a limited appetite for unsecured debt, thus the credit risk mitigation technique

most commonly used is the taking of collateral, with a strong preference for tangible assets

•Portfolio reviews (including stress testing analyses) are undertaken on all material businesses,

where the portfolios are analysed to assess any migration in portfolio quality, highlight any

vulnerabilities, identify portfolio concentrations and make appropriate recommendations, such

as a reduction in risk appetite limits or specific exposures.

Further information

Read more on pages

68 to 84.

Risk appetite and tolerance metric

Positioning at 31 March 2022

We target a diversified loan portfolio, lending

to clients we know and understand. We limit

our exposure to a single/connected individual

or company to £120 million. We also have a

number of risk tolerance limits and targets for

specific asset classes.

We maintained this risk tolerance level

throughout the year.

We currently remain within all tolerance

levels given the current weakened economic

environment. The credit loss ratio was

calculated at 0.17% for 31 March 2022

(31 March 2021: 0.56%). Stage 3 net of ECL

as a % of net core loans subject to ECL was

1.4% (excluding the Legacy portfolio). Stage

3 net of ECL as a % of CET1 is 11.3%.

We target a credit loss ratio of less than 0.5%

(less than 1.5% under a weak economic

environment/stressed scenario). We target

Stage 3 net of ECL as a % of net core loans

subject to ECL to be less than 2% (excluding

the legacy portfolio; less than 4% under a

weak economic environment/stressed

scenario). We target Stage 3 net of ECL as

a % of CET1 less than 25%.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Country risk

Country risk refers to the risk of lending to a counterparty operating

in a particular country or the risk inherent in a sovereign exposure,

i.e. the risk of exposure to loss caused by events in that country.

Country risk covers all forms of lending or investment activity

whether to/with individuals, corporates, banks or governments

Link to strategy

Monitoring and mitigation activities

•Exposures are only to politically stable jurisdictions that we understand and have preferably

operated in before

•The legal environment should be tested, have legal precedent in line with the Organisation for

Economic Co-operation and Development (OECD) standards and have good corporate

governance

•In certain cases, we may make use of political risk insurance to mitigate exposure where

deemed necessary.

Further information

Read more on page

69.

Risk appetite and tolerance metric

Positioning at 31 March 2022

We have a preference for primary exposure in

the Bank’s main operating geography (i.e. the

UK). We will accept exposures where we

have a branch or local banking subsidiary and

tolerate exposures to other countries where

we have developed a local understanding

and capability or we are facilitating a

transaction for a client.

We maintained this risk tolerance level

in place throughout the year.

ESG (including

climate) risk

The risk that our lending and investment activities give rise to

unintended environmental (including climate change), social and

economic consequences

Link to strategy

Monitoring and mitigation activities

•Investec has a holistic approach to

sustainability, which runs beyond

recognising our own footprint on the

environment, includes our many

community activities and is based on a

broader responsibility to our environment

and society

•Accordingly, sustainability and climate-

related (including ESG) risk considerations

are considered by the relevant credit

committee or investment committee when

making lending or investment decisions

•There is also oversight by the Group ESG

Executive Committee and the Social and

Ethics Committee on general ESG issues,

including climate-related matters

•The Group ESG Executive Committee

coordinates general sustainability and

climate-related (including ESG) risks and

opportunities across geographies and

businesses from both a strategy and

policy perspective.

Further information

Read more on page

69 and 88, pages 94

to 105 of the

Investec Group's

2022 integrated and

strategic annual

report and the

Investec Group’s

2022 sustainability

report which will be

available on the

Investec Group’s

website at the end of

June 2022.

Risk appetite and tolerance metric

Positioning at 31 March 2022

We take a cautious approach with respect to

industries that are known to have negative

consequences to climate change or that

cause environmental damage. Financial risk

from climate change is a highly important

topic which helps to inform decisions. We

acknowledge that our approach is still work in

progress and will continue to develop this

over time.

We maintained this risk tolerance level in

place throughout the year.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Investment risk

Investment risk in the banking book arises primarily from the

Bank’s investment (private equity) and property investment

activities, where the Bank invests in largely unlisted companies

and select property investments, with risk taken directly on

the Bank’s balance sheet

Link to strategy

Monitoring and mitigation activities

•Independent credit and investment committees exist in the UK which provide oversight

of regions where we assume investment risk

•Risk appetite limits and targets are set to limit our exposure to equity and investment risk

•As a matter of course, concentration risk is avoided and investments are well spread across

geographies and industries.

Further information

Read more on page

89.

Risk appetite and tolerance metric

Positioning at 31 March 2022

We have moderate appetite for investment

risk, and set a risk tolerance of less than

27.5% of CET1 capital for our unlisted

principal investment portfolio.

Our unlisted investment portfolio amounted

to £331 million, representing 16.7% of CET1.

Market risk

in the trading

book

Traded market risk is the risk of potential value changes in the

trading book as a result of changes in market factors such as

interest rates, equity prices, commodity prices, exchange rates,

credit spreads and the underlying volatilities where derivatives are

traded. The trading book is defined as positions in financial

instruments and commodities, including derivative products and

other off-balance sheet instruments that are held within the trading

businesses

Link to strategy

Monitoring and mitigation activities

•To identify, measure, monitor and manage

market risk, we have independent market

risk management teams

•The focus of our trading activities is

primarily on supporting our clients. Our

strategic intent is that proprietary trading

should be limited and that trading should

be conducted largely to facilitate client

flow

•Within our trading activities, we act as

principal with clients or the market.

Market risk exists where we have taken

on principal positions resulting from

market making, underwriting and

facilitation of client business in the foreign

exchange, interest rate, equity, credit and

commodity markets

•Measurement techniques used to quantify

market risk arising from our trading

activities include sensitivity analysis,

Value at Risk (VaR), stressed VaR (sVaR),

expected shortfall (ES) and extreme value

theory (EVT). Stress and scenario

analyses are used to add insight to

possible outcomes under severe market

disruptions.

Further information

Read more on pages

91 to 94.

Risk appetite and tolerance metric

Positioning at 31 March 2022

Market risk arises through our trading

activities which are primarily focused on

supporting client activity. Appetite for

proprietary trading is limited. We set an

overall tolerance level of a one-day 95% VaR

of less than £4 million.

We met these internal limits; one-day 95%

VaR was £0.4 million at 31 March 2022.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Liquidity

risk

Liquidity risk refers to the possibility that, despite being solvent, we

have insufficient capacity to fund increases in assets or are unable

to meet our payment obligations as they fall due, in normal and

stressed conditions. This includes repaying depositors or maturing

wholesale debt. This risk arises from mismatches in the timing of

cash flows, and is inherent in all banking operations and can be

impacted by a range of institution-specific and market-wide events

Link to strategy

Monitoring and mitigation activities

•Our banking entity in the UK is ring-fenced

from the Investec Group's banking entity

in South Africa and is required to meet the

UK regulatory liquidity requirements

•Each geographic entity must be self-

sufficient from a funding and liquidity

standpoint

•Investec plc undertakes an annual Internal

Liquidity Adequacy Assessment Process

(ILAAP) which documents the approach to

liquidity management across the firm,

including IBP (solo basis). This document is

reviewed and approved by IBP BRCC, DLC

BRCC and by the IBP and DLC Boards

•We maintain a liquidity buffer in the form of

unencumbered cash, government or rated

securities (typically eligible for repurchase

with the central bank), and near cash well

in excess of the statutory requirements as

protection against unexpected disruptions

in cash flows

•We maintain a contingency funding plan

designed to protect depositors, creditors

and shareholders and maintain market

confidence during adverse liquidity

conditions

•The maintenance of sustainable prudent

liquidity resources takes precedence over

profitability

•We target a diversified funding base,

avoiding undue concentrations by investor

type, maturity, market source, instrument

and currency

•Our core loans must be fully funded by

stable funding

•The Bank does not rely on committed

funding lines for protection against

unforeseen interruptions to cash flow

•The balance sheet risk management team

independently monitors key daily funding

metrics and liquidity ratios to assess

potential risks to the liquidity position,

which further act as early warning

indicators of potential normal market

disruptions

•Daily liquidity stress tests are carried out in

order to help accurately measure the

liquidity profile and ensure that in the

absence of market or funding liquidity

during periods of stress, we would

continue to meet our obligations.

Further information

Read more on pages

95 to 102.

Risk appetite and tolerance metric

Positioning at 31 March 2022

We carry a high level of liquidity in all our

banking subsidiaries in order to be able to

cope with shocks to the system, targeting

a minimum cash to customer deposit ratio

of 25%.

Total cash and near cash balances amounted

to £8.9 billion at year end representing 47.7%

of customer deposits.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Non-trading

interest rate risk

Non-trading interest rate risk, otherwise known as interest rate risk

in the banking book, arises from the impact of adverse movements

in interest rates on both net interest earnings and economic value of

equity. Non-trading interest rate risk in the banking book is an

inherent consequence of conducting banking activities, and arises

from the provision of retail and wholesale (non-trading) banking

products and services

Link to strategy

Monitoring and mitigation activities

•The daily management of interest rate risk in the banking book is centralised within the Treasury

of each banking entity and is subject to local independent risk and Asset and Liability Committee

(ALCO) review

•Together with the business, the treasurer develops strategies regarding changes in the volume,

composition, pricing and interest rate characteristics of assets and liabilities to mitigate the

interest rate risk and ensure a high degree of net interest margin stability over an interest rate

cycle. These are presented, debated and challenged in the Liability Product and Pricing Forum

and the ALCO

•Each banking entity has its own Board-approved non-trading interest rate risk policy and risk

appetite, which is clearly defined in relation to both income risk and economic value risk

•The policy dictates that long-term (>one year) non-trading interest rate risk is materially

eliminated. Where natural hedges between banking book items do not suffice to reduce the

exposure within defined limits, interest rate swaps are used to transform fixed rate assets and

liabilities into variable rate items

•Non-trading interest rate risk is measured and analysed by utilising standard tools of traditional

interest rate repricing mismatch and NPV sensitivity to changes in interest rate risk factors.

Further information

Read more on

pages 99 to 105.

Risk appetite and tolerance metric

Positioning at 31 March 2022

A movement in rates can result in a

negative impact on revenues across the

banking industry. This risk is managed

within the Bank's risk appetite framework

as a proportion of capital in order to limit

volatility.

The Bank is within these tolerance metrics. The

UK regulatory framework requires banks to

assess their Pillar II requirements, including those

related to non-trading interest rate risk, as part of

systems and processes concluded their ICAAP.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Capital risk

The risk that we do not have sufficient capital to meet regulatory

requirements or that capital is inefficiently deployed across the Bank

Link to strategy

Monitoring and mitigation activities

•The Bank undertakes an approach to capital management that utilises both regulatory capital as

appropriate to the jurisdiction in which it operates and internal capital, which is an internal risk-

based assessment of capital requirements

•A detailed assessment of the regulatory and internal capital position is undertaken on an annual

basis and is documented in the Internal Capital Adequacy Assessment Process (ICAAP). The

ICAAP is prepared at the consolidated Investec plc level and incorporates the Bank (solo-

consolidation basis)*. The document is reviewed and approved by the IBP, PLC and DLC Capital

Committees (and other relevant DLC committees) and in parallel by IBP BRCC, DLC BRCC

and the IBP and DLC Boards

•The determination of target capital is driven by our risk profile, strategy and risk appetite, taking

into account the regulatory and market factors applicable to the Group

•At the most fundamental level, we seek to balance our capital consumption between prudent

capitalisation in the context of the Group’s risk profile and optimisation of shareholder returns

•Our internal capital framework is designed to manage and achieve this balance

•The framework has been approved by the Board. The IBP Capital Committee (mandated by IBP

BRCC) is responsible for the oversight and management of capital and leverage.

Further information

Read more on pages

109 to 112.

Risk appetite and tolerance metric

Positioning at 31 March 2022

We are a lowly leveraged firm and target

a leverage ratio in excess of 6% tolerance.

We intend to maintain a sufficient level of

capital to satisfy regulatory requirements and

our internal target ratios. We target a total

capital adequacy ratio range of between 14%

and 17% on a consolidated basis and we

target a minimum Tier 1 ratio of 11% and a

CET1 ratio above 10%.

The leverage ratio is 9.3%.

The Bank met all these targets. Capital

has grown over the period.

*IBP applies the provisions laid down in article 9 of the CRR (solo-consolidation waiver) and therefore includes Investec Investments (UK) Limited in the

solo-consolidation basis.

Reputational and

strategic risk

Reputational risk is damage to our reputation, name or brand.

Reputational risk is often associated with strategic decisions made

and also arises as a result of other risks manifesting and not being

appropriately mitigated or managed

Link to strategy

Monitoring and mitigation activities

•We have various policies and practices to mitigate and/or manage reputational risk, including

strong values that are regularly and proactively reinforced

•Strategic and reputational risk is mitigated and/or managed as much as possible through

detailed processes and governance/escalation procedures from business units to the Board,

and from regular, clear communication with Investec Group shareholders, customers and all

stakeholders

•The Investec Group has a disclosure and market communications policy which is reviewed and

approved annually by Group ERC and DLC BRCC.

Further information

Read more on page

105.

Risk appetite and tolerance metric

Positioning at 31 March 2022

We have a number of policies and practices

in place to mitigate and/or manage

reputational risks.

We have continued to mitigate and/or

manage these risks where possible

throughout the year.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Business risk

Business risk relates to external market factors that can create

income volatility

Link to strategy

Monitoring and mitigation activities

•The risk of loss caused by income volatility in the Specialist Bank and/or Wealth & Investment is

mitigated through diversification of income sources, reducing concentration of income from any

one type of business or geography and maintaining a flexible cost base

•Bank strategy is directed towards generating and sustaining a diversified income base for the

Bank

•In the instance where income falls we retain the flexibility to reduce costs (particularly variable

remuneration), thereby maintaining a competitive cost to income ratio.

Further information

Read more on pages

4 to 19 and pages 30

to 45.

Risk appetite and tolerance metric

Positioning at 31 March 2022

We seek to maintain an appropriate balance

between revenue earned from capital light

and balance sheet driven activities. Ideally

capital light revenue should exceed 50%

of total operating income, dependent

on prevailing market conditions.

We have a solid annuity income base

supported by diversified revenue streams,

and target an annuity income ratio in excess

of 65%.

We seek to maintain strict control over

fixed costs. Investec plc has a stated cost to

income ratio target of below 67%.

Capital light activities contributed 47.1% to

total operating income and balance sheet

driven activities contributed 52.9%.

Annuity income amounted to 75.9% of total

operating income.

The cost to income ratio for IBP amounted

to 70.8%.

Legal risks

Legal risk is the risk of loss resulting from any of our rights not being fully

enforceable or from our obligations not being properly performed. This

includes our rights and obligations under contracts entered into with

counterparties. Such risk is especially applicable where the counterparty

defaults and the relevant documentation may not support the anticipated

rights and remedies in the transaction

Link strategy

Monitoring and mitigation activities

•A Legal Risk Forum ensures we keep abreast

of developments and changes in the nature

and extent of our activities, and to benchmark

our processes against best practice

•There is a central independent in-house legal

team with embedded business unit legal

officers where business volumes or needs

dictate

•The Bank maintains adequate insurance to

cover key insurable risks

•This is supplemented by a pre-approved

panel of third party legal firms to be utilised

where necessary

•The Board may, at their discretion, constitute

dedicated committees to deal with specific

legal matters.

More information

on page 105.

Risk appetite and tolerance metric

Positioning as of 31 March 2022

The key principles of the legal risk policy

describe the overall responsibility of the legal

risk function, outline how legal risks are to be

assessed and how material legal risks should be

reported and escalated where necessary.

Legal matters were appropriately escalated,

dealt with and accounted for in the annual

financial statements where necessary.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Operational risk

Operational risk is defined as the potential or actual impact to the

Bank as a result of failures relating to internal processes, people,

systems or from external events. The impacts can be financial as

well as non-financial such as customer detriment, reputational or

regulatory consequences

Link to strategy

Monitoring and mitigation activities

•IBP manages operational risk through an embedded operational risk management framework

•Operational risk sub-types which are significant in nature are managed by dedicated specialist

teams within the Bank. These operational risk sub-types are addressed in specific, detailed risk

policies and procedures, but are included within the operational risk management framework

and are reported and monitored within the operational risk appetite. These sub-types include:

–Business disruption and operational resilience risk

–Conduct risk

–Data management risk

–Financial crime risk

–Fraud risk

–Information security and cyber risk

–Model risk

–People risk

–Processing and execution risk

–Regulatory compliance risk

–Tax risk

–Technology risk

–Third party risk.

Further information

Read more on pages

103 and 104.

Risk appetite and tolerance metric

Positioning at 31 March 2022

We maintain sound operational risk practices

to identify and manage operational risk. We

monitor the level of acceptable operational

risk exposure/loss through qualitative and

quantitative measures.

We maintained operational risk losses within

risk tolerance levels throughout the year.

Operational risk –

Business disruption

and operational

resilience risk

Risk associated with disruptive incidents which can impact

premises, staff, equipment, systems, and key business processes

Link to strategy

Monitoring and mitigation activities

•IBP maintains continuity through appropriate resilience strategies that cater for disruptions,

irrespective of the cause

•These strategies include, but are not limited to, relocating the impacted business to alternate

processing sites, enabling staff to work from home, the application of high availability

technology solutions and ensuring readiness of physical solutions for critical infrastructure

components

•Resilience testing is conducted on a periodic basis to validate continuity strategies and ensure

they remain effective and appropriate. This includes annual recovery testing for all key systems

that support critical business processes.

Further information

Read more on page

103, 104 and 106.

Operational

risk – Data

management risk

The risk associated with poor governance in acquiring, processing,

storing, and protecting data. Issues with data quality, reliability, or

corruption can adversely impact business decisions, client services

and financial reporting

Link to strategy

Monitoring and mitigation activities

•The Bank drives robust data governance principles across the business, including data

ownership, management, quality control and defined data architecture

•Consistent mechanisms are in place for data consolidation, storage and reporting

•Data flows and reconciliations are automated, and integration between systems is streamlined

to reduce the need for manual tasks, minimise data processing delays and eliminate single

points of failure

•Data quality and aggregation are monitored, reported and enhanced in line with business needs

and regulatory principles

•Predictive intelligence is obtained through data analytics to support proactive risk management

•Data retention and destruction processes are designed to meet business needs and comply

with applicable legal obligations.

Further information

Read more on pages

103 and 104.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Operational risk

– Financial crime

risk

Financial crime involves handling the proceeds of crime, financing of

terrorism, proliferation financing, sanctions breaches and bribery or

corruption, as well as any related regulatory breaches. Examples

include bribery, fraud, tax evasion, embezzlement, forgery,

counterfeiting and identity theft

Link to strategy

Monitoring and mitigation activities

•Established policies and procedures are in place to promote business with clients in such a

manner that minimises the risk of the Bank’s products being used for money laundering and

terrorist or proliferation financing

•A risk-based approach supports these objectives, while complying with the Bank’s regulatory

compliance obligations. At a high level the control framework ensures that:

–Sufficient information about clients is obtained

–All clients and prospective clients are risk rated and verification commensurate with their risk

profile is conducted

–All prospective and existing clients and relevant related parties are screened against relevant

lists (including applicable sanctions list) to identify increased financial crime risk

–Staff are appropriately trained

–Suspicious transactions and terrorist financing are recognised and reported

–Existing and prospective clients that are not within the Bank’s financial crime risk appetite

are exited or declined.

Further information

Read more on pages

103, 104 and 106.

Operational risk

– Fraud risk

The risk associated with any kind of criminal conduct arising from

fraud, corruption, theft, forgery and misconduct by staff, clients,

suppliers or any other internal or external stakeholder

Link to strategy

Monitoring and mitigation activities

•The Bank manages fraud risk through an integrated framework which includes global policies,

standards and methodologies

•Detection and prevention systems are utilised to help identify potential fraud, reaching out to

clients where appropriate to validate or discuss concerns

•An independent integrity (whistleblowing) line is in place to ensure that staff can report

regulatory breaches, allegations of fraud, bribery and corruption, and non-compliance with

policies

•Fraud risk assessments are conducted to proactively identify and map existing preventative

and detective controls to the relevant fraud risks to ensure effective mitigation

•Fraud prevention and detection controls are enhanced on an ongoing basis in response to

increased fraud losses across the industry and new fraud modus operandi

•Industry collaboration assists with fraud prevention efforts and the recovery of funds that have

been paid away

•Adherence to fraud prevention policies is proactively monitored

•Practices which comply with updated regulations, industry guidance and best practice are

embedded within the Bank

•Awareness of existing and horizon fraud threats is created through internal training and

education of clients and intermediaries on fraud prevention and detection.

Further information

Read more on pages

103 and 104.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Operational risk

– Information

security and

cyber risk

The risk associated with unauthorised access, use, disclosure,

modification or destruction of data, impacting confidentiality,

integrity or availability. These can result in data compromise,

financial loss, interruption to client services and reputational harm

Link to strategy

Monitoring and mitigation activities

•In light of the broad range of risks to which information resources are exposed, this risk is

managed by addressing both internal and external threat exposures

•Internal threats relate to data theft, improper access or confidentiality breaches by staff

–These are mitigated by implementing risk-appropriate data protection controls to safeguard

information assets in line with data sensitivity and business criticality

–Role-based access to systems and data is closely controlled and privileged IT access is

restricted and actively monitored

•External threats relate to cyberattacks such as ransomware, denial of service and cyber fraud

–This is mitigated by an adaptive cyber strategy that integrates prediction, prevention,

detection, and response capabilities

–A robust security architecture leverages defence-in-depth and advanced technologies to

protect against evolving, sophisticated attacks

–Threats are monitored 24/7 by a global cyber team and the security incident response plan is

continuously improved

–Cyber controls are stress-tested through security assessments, red team exercises and

attack simulations, run both internally and in conjunction with independent specialists

–Regular security training to all staff ensures high levels of awareness and vigilance.

Further information

Read more on pages

103 and 104.

Operational risk

– Model risk

The risk associated with the adverse consequences that arise from

decisions based on incorrect or misused model outputs (including

reports). Material sources of model risk include: credit model risk,

liquidity model risk and trading book model risk

Link to strategy

Monitoring and mitigation activities

•The Bank manages model risk through embedded, risk specific frameworks and policies

•The frameworks address roles and responsibilities, governance processes and committees and

approaches to managing and monitoring model risk

•Models are subject to regular, independent validation by specialist risk teams

•The relevant committees are mandated to oversee model risk and have delegated further

oversight and approval to appropriate sub-committees.

Further information

Read more on pages

103 and 104.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Operational risk

– People risk

The risk that we may be unable to recruit, retain and engage diverse

talent across the organisation

Link to strategy

Monitoring and mitigation activities

•We focus on building a strong, diverse and capable workforce by providing a workplace that

stimulates and rewards distinctive performance

•Investec invests significantly in opportunities for the development of all employees, and in

leadership programmes to enable current and future leaders of the Group

•There are a number of graduate programmes operating across our organisation sourcing and

developing our talent pipeline

•Internal mobility is a valued mechanism for the development and retention of people

•Our people and organisation team plays a critical role in assisting the business to achieve its

strategic objectives, which are matched to learning strategies and market trends

•The people and organisation team is mandated to enable the attraction, development and

retention of talent who can perform in a manner consistent with our culture and values

•The people and organisation team also works with leadership to strengthen the culture of the

business, ensure its values are lived, build capability and contribute to the long-term

sustainability of the organisation.

Further information

Read more on pages

96 and 97 of the

Investec Group's

2022 integrated and

strategic annual

report and the

Investec Group’s

2022 sustainability

report which will be

available on our

website at the end of

June 2022.

Operational risk –

Processing and

execution risk

The risk associated with the failure to process, manage and

execute transactions and/or other processes (such as change)

completely, accurately and timeously due to human error or

inadequate process design or implementation

Link to strategy

Monitoring and mitigation activities

•The Bank seeks to minimise process failures or human error which can disrupt operations or

impact delivery of services to clients

•Policies, processes, procedures and monitoring controls which mitigate against control

failures are implemented to protect clients, markets and the Bank from detriment

•We manage operational capacity to meet client and industry needs and continue to explore

automation to improve efficiency and reduce human error

•Key business processes are regularly reviewed and the relevant risks assessed through the

risk and control self-assessment process

•Material change is managed through dedicated projects with formalised project governance.

Further information

Read more on pages

103 to 105.

Operational risk

– Tax risk

The risk associated with inadequate tax planning, transaction

execution, tax compliance and reporting failures, resulting in

financial loss and reputational damage

Link to strategy

Monitoring and mitigation activities

•IBP’s control environment for the management and mitigation of tax risk includes a formalised

tax strategy, policy and framework

•The Bank ensures that all transactions and financial products and services are commercially

motivated

•All advisory and tax planning work is conducted in accordance with the relevant tax laws,

regulations and intentions of legislators of the country in which the Bank operates.

Further information

Read more on pages

103,104 and 106.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Operational risk –

Technology risk

The risk associated with disruption to critical applications or

infrastructure and IT system malfunction that negatively impact key

business processes or client services

Link to strategy

Risk management and key mitigating actions

•The technology environment is proactively monitored for continuous visibility of operational

performance and availability

•Mature incident management processes and continuity plans are in place to support a resilient

IT environment that is able to withstand failure and minimise service disruption

•Strategic roadmaps are in place that leverage new technologies to enhance capacity,

scalability and continuity, and reduce reliance on legacy IT systems

•IT systems are aligned to approved architectures and standards across the Bank to reduce

technical complexity, considering concentration risk, and to leverage common functions and

services

•The risk of errors in production systems is reduced through design reviews, secure

development practices and robust code review, testing and deployment processes

•Processes and controls are automated where possible, and augmented with monitoring and

exception alerting where necessary to reduce human error and enhance efficiency.

Further information

Read more on pages

103 and 104.

Operational risk –

Third party risk

The risk associated with the reliance on and use of external

providers of services to the Bank

Link to strategy

Risk management and key mitigating actions

•Third party policies and practices govern the assessment, selection, approval and oversight of

third party services

•Robust due diligence processes are in place to evaluate third party suitability and controls with

the appropriate level of rigour based on the scale, complexity and risks a particular supply

poses

•Service disruption or security risks that third parties may introduce are identified and managed

•Ongoing monitoring ensures that contractual obligations are met and required service levels are

maintained

•Consideration is given to concentration risk both within the business and across the financial

sector systemically

•Appropriate supplier business contingency plans, including exit strategies for key/critical

vendors, are established and managed to minimise customer impact following any disruption in

service.

Further information

Read more on pages

103 and 104.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Emerging and other risks

In addition to the principal risks outlined above, the risks below may have the potential to impact and/or influence

our principal risks and consequently the operations, financial performance, viability and prospects of the Bank. A number

of these risks are beyond the Bank’s control and are considered in our capital plans, stress testing analyses and budget

processes, where applicable.

These emerging risks are briefly highlighted on page 22 of the

Investec Group's 2022 risk and governance report and should

be read in the context of our approach to risk management and

our overall Group risk appetite framework

Additional risks and uncertainties not presently known to us or

that we currently deem immaterial may in the future also

negatively impact our business operations. Emerging and other

risks as factored into the Board’s viability assessment. Read

more on page 144

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Philosophy and approach to risk management

The Bank's comprehensive risk management process involves

identifying, quantifying, managing, monitoring, mitigating and

reporting the risks associated with each of the businesses to

ensure the risks remain within the stated risk appetite.

The Board ensures that there are appropriate resources to

manage the risks arising from running our businesses.

The IBP BRCC (comprising both executive and non-executive

directors) is the Board mandated committee to monitor and

oversee risk. IBP BRCC meets at least six times per annum and

recommends the overall risk appetite to the Board for

approval.

We monitor and control risk exposure through independent

credit, market, liquidity, operational, legal, internal audit,

capital and compliance teams. This approach is core to

assuming a tolerable risk and reward profile, helping us to

pursue controlled growth across our business.

Risk management operates within an integrated geographical

and divisional structure, in line with our management

approach, ensuring that the appropriate processes are used to

address all risks across the Bank. There are specialist divisions

in the UK and smaller risk divisions in other regions tasked

with promoting sound risk management practices.

Risk management units are locally responsive yet globally

aware. This helps to ensure that all initiatives and businesses

operate within our defined risk parameters and objectives. We

continually seek new ways to enhance risk management

techniques.

We believe that the risk management systems and processes

we have in place are adequate to support the Bank’s strategy

and allow the Bank to operate within its risk appetite

tolerance.

Risk management objectives are to:

•Ensure adherence to our risk management culture

•Ensure the business operates within the Board-approved

risk appetite

•Support the long-term sustainability of the Bank by

providing an established, independent framework for

identifying, evaluating, monitoring and mitigating risk with

good customer outcomes

•Set, approve and monitor adherence to risk parameters and

limits across the Bank and ensure they are implemented and

adhered to consistently

•Aggregate and monitor our exposure across risk classes

•Coordinate risk management activities across the

organisation, covering all legal entities and jurisdictions

•Give the IBP Board reasonable assurance that the risks we

are exposed to are identified and appropriately managed

and controlled

•Resource risk teams suitably and with appropriate expertise

and facilitate operating independence

•Run appropriate risk committees, as mandated by the

relevant Boards

•Maintain compliance in relation to regulatory requirements.

Risk management framework, committees and

forums

A number of committees and forums identify and manage risk

at a Bank level, as shown in the diagram below. These

committees and forums operate together with risk

management and are mandated by the IBP Board. Investec

Wealth & Investment Limited, a Financial Conduct Authority

(FCA) regulated subsidiary of the Bank, maintains an

independent governance structure, comprising an

independent Board, Audit Committee, Nomination Committee,

Remuneration Committee and Risk Committee. The

membership of the Investec Wealth & Investment Board

includes both executive and non-executive directors. The

Investec Wealth & Investment Board and the Investec Wealth

& Investment Board committees report to the DLC Board and

the DLC Board committees. Any matters relevant to IBP are

communicated to the Bank, in part, through having one or

more directors of Investec Group as members of the Board

committees of the Bank.

IBP Board of Directors

IBP Nomination

Committee

IBP

Remuneration

Committee

IBP Audit

Committee

IBP Board

Risk and

Capital

Committee

(IBP BRCC)

IBP Reward

Committee

IBP Risk and

Controls Forum

IBP Executive

Risk Committee

(IBP ERC)

IBP Credit

Committees

IBP Capital

Committee

IBP Executive

Investment

Committee

IBP

Review

Executive Risk

Review Forum

(IBP Review

ERRF)

IBP

Models Forum

IBP

Product

Governance

Forum

IBP

Market Risk

Forum

IBP

Asset and

Liability

Committee

IBP

Policies Review

Committee

IBP

Impairment

Decision

Committee

IBP

New Product

and Initiative

Forum

IBP

Operational

Risk Forum

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

RISK MANAGEMENT APPROACH AND FRAMEWORK

Credit and counterparty risk

management

Credit and counterparty risk arises

primarily from three types of

transactions:

•Lending transactions, through loans

and advances to clients and

counterparties, creating the risk that

an obligor will be unable or unwilling

to repay capital and/or interest on

loans and advances granted to them.

This category includes bank

placements, where we have placed

funds with other financial institutions

•Financial instrument transactions,

producing issuer risk where payments

due from the issuer of a financial

instrument may not be received

•Trading transactions, giving rise to

settlement and replacement risk

(collectively counterparty risk):

–Settlement risk is the risk that the

settlement of a transaction does not

take place as expected, with one

party making required settlements

as they fall due but not receiving

the performance to which they are

entitled

–Replacement risk is the risk

following default by the original

counterparty resulting in the

contract holder having to enter into

a replacement contract with a

second counterparty in order to

fulfil the transaction.

The relevant credit committees will also

consider wrong-way risk at the time of

granting credit limits to each

counterparty. In the banking book

environment, wrong-way risk occurs

where the value of collateral to secure a

transaction decreases as the probability

of default of the borrower or

counterparty increases. For

counterparty credit risk resulting from

transactions in traded products (such as

OTC derivatives), wrong-way risk is

defined as exposure to a counterparty

that is adversely correlated with the

credit quality of that counterparty. It

arises when default risk and credit

exposure increase together.

Credit and counterparty risk may also

arise in other ways and it is the role of

the risk management functions and the

various independent credit committees

to identify risks falling outside these

definitions.

Credit and counterparty risk

governance structure

To manage, measure, monitor and

mitigate credit and counterparty risk,

independent credit committees exist in

the UK. These committees also have

oversight of regions where we assume

credit risk and operate under Board-

approved delegated limits, policies and

procedures. There is a high level of

executive involvement and oversight in

the credit decision-making forums

depending on the size and complexity of

the deal. It is our policy that all credit

committees include voting members

who are independent of the originating

business unit. All decisions to enter into

a transaction are based on unanimous

consent.

In addition to the credit committees, the

following processes assist in managing,

measuring and monitoring credit and

counterparty risk:

•Day-to-day arrears management and

regular arrears reporting ensure that

individual positions and any potential

adverse trends are dealt with in a

timely manner

•Watchlist Forums review the

management of distressed loans,

potential problem loans and

exposures in arrears that require

additional attention and supervision.

These committees review ECL

impairments and staging at an asset

level as well as potential fair value

adjustments to loans and advances to

customers. They provide

recommendations for the appropriate

staging and level of ECL impairment

where required

•The Forbearance Forum reviews and

monitors counterparties who have

been granted forbearance measures

•The Impairment Decision Committee

reviews recommendations from

underlying Watchlist Forums and ADR

Forums respectively and consider and

approve the appropriate level of ECL

impairments and staging

•The Models Forum provides an

internal screening and validation

process for credit models. We have

established independent model

validation teams who review the

models and provide feedback on the

accuracy and operation of the models

and note items for further

development through the forum.

Credit committees and the processes

above have incorporated considerations

and decisions with respect to the

COVID-19 pandemic and resulting relief

measures, staging and ECL in line with

the Bank's existing governance.

Credit and counterparty risk appetite

The IBP Board has set risk appetite limit

frameworks which regulate the

maximum exposures we would be

comfortable to tolerate in order to

diversify and mitigate risk. These limit

frameworks, approved at least annually,

are monitored on an ongoing basis by,

IBP BRCC and the IBP Board. Should

there be any breaches to limits, or

where exposures are nearing limits,

these exceptions are specifically

highlighted for attention, with remedial

actions agreed.

Our assessment of our clients and

counterparties includes consideration of

their character, integrity, core

competencies, track record and financial

strength. A strong emphasis is placed on

the historic and ongoing stability of

income and cash flow streams

generated by the clients. Our primary

assessment method is therefore the

ability of the client to meet their

payment obligations.

Target clients include high net worth

individuals, active wealth creators, high-

income professionals, self-employed

entrepreneurs, owner managers in small

to mid-cap corporates, sophisticated

investors, established corporates, small

and medium-sized enterprises, financial

institutions and sovereigns. Corporates

should demonstrate scale and relevance

in their market, an experienced

management team, able Board

members, strong earnings and cash

flow.

We are client-centric in our approach

and originate loans mainly with the

intent of holding these assets to

maturity, thereby developing a ‘hands-

on’ and long-standing relationship.

Interbank lending is largely reserved for

those banks and institutions in the

Bank’s core geographies of activity,

which are systemic and highly rated.

Concentration risk

Concentration risk is when large

exposures exist to a single client or

counterparty, group of connected

counterparties, or to a particular

geography, asset class or industry. An

example of this would be where a

number of counterparties are affected

by similar economic, legal, regulatory or

other factors that could mean their

ability to meet contractual obligations

are correlated.

Credit and counterparty risk is always

assessed with reference to the

aggregate exposure to a single

counterparty or group of related parties

to manage concentration risk. In order to

manage concentration, we will consider

a sell-down of exposures to market

participants.

Concentration risk can also exist where

portfolio loan maturities are clustered to

single periods in time. Loan maturities

are monitored on a portfolio

and a transaction level.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

Country risk

Country risk refers to the risk of lending

to a counterparty operating in a

particular country or the risk inherent in

a sovereign exposure, i.e. the risk of

exposure to loss caused by events in

that country. Country risk covers all

forms of lending or investment activity

whether to/with individuals, corporates,

banks or governments. This can include

geopolitical risks, transfer and

convertibility risks, and the impact on

the borrower’s credit profile due to local

economic and political conditions.

To mitigate country risk, there is a

preference for primary exposure in the

Bank’s main operating geography. The

bank will accept exposures where we

have a branch or local banking

subsidiary, and tolerate exposures to

other countries where we are facilitating

a transaction for a client who requires

facilities in a foreign geography and

where we have developed a local

understanding and capability.

The Bank’s credit risk appetite with

regard to country risk is characterised

by the following principles:

•Preference is to have exposure only to

politically stable jurisdictions that we

understand and have preferably

operated in before

•There is little specific appetite for

exposures outside of the Bank’s pre-

existing core geographies or target

markets

•The legal environment should be

tested, have legal precedent in line

with OECD standards and have good

corporate governance

•In certain cases, country risk can be

mitigated by taking out political risk

insurance with suitable counterparties

where deemed necessary and where

considered economic.

While we do not have a separate

country risk committee, the relevant

credit committees as well as investment

committees, IBP ERC and where

necessary, Group ERC will consider,

analyse and assess the appropriate

foreign jurisdiction limits.

In the UK, following the official exit from

the European Union, it remains

necessary to avoid exposures to certain

European countries due to the resulting

legal implications. This relates

specifically to countries in which

borrowers are legally incorporated and

any deal will be thoroughly assessed on

a case by case basis to ensure

compliance with current regulations.

ESG (including climate) risk

We integrate ESG considerations into

our day-to-day operations and credit

decision-making. The greatest socio-

economic and environmental impact we

can have is to partner with our clients

and stakeholders to accelerate a

cleaner, more resilient and inclusive

world.

We are committed to respecting human

rights and support internationally

recognised principles, guidelines and

voluntary standards dealing with ESG.

We support the key provisions of the

Equator Principles (EP). All transactions

in non-designated countries are EP

monitored and compliant. We report on

these in our sustainability report on our

website. We have a number of Group

policies that also guide credit decision-

making from an ESG perspective. ESG

(including climate) risk matters are

considered by the credit committee or

investment committee when making

lending or investment decisions. Higher

risk transactions are escalated for

assessment by the Bank's ESG team.

In particular, the following ESG

(including climate) risk matters are taken

into account when assessing high-risk

transactions:

•Environmental considerations

(including animal welfare and climate-

related impacts)

•Social considerations (including

human rights)

•Macro-economic considerations

(including poverty, growth and

unemployment).

Refer to page 88 for further detail

Stress testing and portfolio

management

The Bank’s stress testing framework is

designed to identify and assess

vulnerabilities under stress. The process

comprises a bottom-up analysis of the

Bank’s material business activities,

incorporating views from risk

management teams, business and the

executive. Stress scenarios are

designed based on findings from the

bottom-up process, taking into

consideration the broader macro-

economic and political risk backdrop.

These IBP-specific stress scenarios form

an integral part of our capital planning

process and IFRS 9 reporting. The stress

testing process also informs the risk

appetite review process, and the

management of risk appetite limits and

is a key risk management tool of the

Bank. This process allows the Bank to

identify underlying risks and manage

them accordingly.

The Bank also performs ad hoc stress

tests and reverse stress testing. Ad hoc

stress tests are conducted in response

to any type of material and/or emerging

risks, with reviews undertaken of

impacted portfolios to assess any

migration in quality and highlight any

vulnerabilities, identify portfolio

concentrations and make appropriate

recommendations such as a reduction in

risk appetite limits. Reverse stress tests

are conducted to stress the Bank’s

business plan to failure and consider a

broad variety of extreme and remote

events.

Reviews are also undertaken of all

material businesses, where the

portfolios are analysed to assess any

migration in portfolio quality, highlight

any vulnerabilities, identify portfolio

concentrations and make appropriate

recommendations, such as a reduction

in risk appetite limits or specific

exposures.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

Management and measurement

of credit and counterparty risk

Fundamental principles employed in the

management of credit and counterparty

risk include:

•A clear definition of our target market

•A quantitative and qualitative

assessment of the creditworthiness of

our counterparties

•Analysis of risks, including

concentration risk (concentration risk

considerations include asset class,

industry, counterparty and

geographical concentration)

•Decisions being made with reference

to risk appetite limits

•Prudential limits

•Regular monitoring and review of

existing and potential exposures once

facilities have been approved

•A high level of executive involvement

in decision-making with non-

executive review and oversight

•Portfolio reviews and stress testing.

Within the credit approval process,

internal and external ratings are included

in the assessment of client quality.

A large proportion of the Bank’s portfolio

is not rated by external rating agencies.

We place reliance upon internal

consideration of counterparties and

borrowers and use ratings prepared

externally where available to support our

decision-making process.

Regular reporting of credit and

counterparty risk exposures within our

operating units are made to

management, the executives, IBP BRCC

and DLC BRCC. The IBP Board reviews

and approves the appetite for credit and

counterparty risk, which is documented

in risk appetite statements and policy

documents. This is implemented and

reviewed by the credit risk management

teams in each jurisdiction.

Portfolio reviews and stress testing are

undertaken on all material businesses,

where the exposures are analysed to

assess any migration in portfolio quality,

highlight any vulnerabilities, identify

portfolio concentrations and make

appropriate recommendations, such as a

reduction in risk appetite limits or

specific exposures.

Credit and counterparty risk – nature of

activities

Credit and counterparty risk is assumed

through a range of client-driven lending

activities to private and corporate clients

as well as other counterparties, such as

financial institutions and sovereigns.

These activities are diversified across a

number of business activities.

•Core loans and advances: the

majority of credit and counterparty

risk is through core loans and

advances, which account for almost

all ECL allowances across our

portfolio, which are detailed on pages

72 to 78

•Treasury function: there are also

certain exposures, outside of core

loans and advances, where we

assume credit and counterparty risk.

These arise primarily from treasury

placements where the treasury

function, as part of the daily

management of the Bank’s liquidity,

places funds with central banks and

other commercial banks and financial

institutions. These transactions are

typically short-term (less than one

month) money market placements or

secured repurchase agreements.

These market counterparties are

mainly investment grade rated entities

that occupy dominant and systemic

positions in their domestic banking

markets and internationally. These

counterparties are located mainly in

the UK, Western Europe, Asia, North

America and Australia.

In addition, credit and counterparty risk

arises through the following exposures:

•Customer trading activities to

facilitate hedging of client risk

positions: our customer trading

portfolios consist of derivative

contracts in interest rates, foreign

exchange, commodities, credit

derivatives and equities that are

entered into, to facilitate a client’s

hedging requirements. The

counterparties to such transactions

are typically corporates, in particular

where they have an exposure to

interest rates or foreign exchange due

to operating in sectors that include

imports and exports of goods and

services. These positions are marked-

to-market, typically with daily margin

calls to mitigate credit exposure in the

event of counterparty default

•Structured credit: these are bonds

secured against a pool of assets,

mainly UK residential mortgages or

European or US corporate leverage

loans. The bonds are typically highly

rated (single ‘A’ and above), which

benefit from a high level of credit

subordination and can withstand a

significant level of portfolio default

•Debt securities: from time to time we

take on exposures by means of

corporate debt securities rather than

loan exposures. These transactions

arise on the back of client

relationships or knowledge of the

corporate market and are based on

our analysis of the credit

fundamentals

•Corporate advisory and investment

banking activities: counterparty risk

in this area is modest. The business

also trades shares on an approved

basis and makes markets in shares

where we are appointed corporate

broker under pre-agreed market risk

limits. Settlement trades are largely on

a delivery versus payment basis,

through major stock exchanges.

Credit risk only occurs in the event of

counterparty failure and would be

linked to any fair value losses on the

underlying security

•Wealth & Investment: primarily an

agency business with a limited

amount of principal risk. Its core

business is discretionary investment

management services. Settlement risk

can arise due to undertaking

transactions in an agency capacity on

behalf of clients. However, the risk is

not considered to be material as most

transactions are undertaken on

recognised exchanges, with large

institutional clients, monitored daily,

with trades usually settled within two

to three days.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

Credit risk mitigation

Credit risk mitigation techniques can be

defined as all methods by which the

Bank seeks to decrease the credit risk

associated with an exposure. The Bank

considers credit risk mitigation

techniques as part of the credit

assessment of a potential client or

business proposal and not as a separate

consideration of mitigation of risk. Credit

risk mitigants can include any collateral

item over which the Bank has a charge

over assets, netting and margining

agreements, covenants, or terms and

conditions imposed on a borrower with

the aim of reducing the credit risk

inherent to that transaction.

As the Bank has limited appetite for

unsecured debt, the credit risk

mitigation technique most commonly

used is the taking of collateral, with a

strong preference for tangible assets.

Collateral is assessed with reference to

the sustainability of value and the

likelihood of realisation.

Acceptable collateral generally exhibits

characteristics that allow for it to be

easily identified and appropriately

valued and assists the Bank to recover

outstanding exposures.

Where a transaction is supported by a

mortgage or charge over property, the

primary credit risk is still taken on the

borrower. In addition, the relevant credit

committee normally requires a

suretyship or guarantee in support of a

transaction in our private client

business.

For property-backed lending we also

consider the client’s overall balance

sheet. The following characteristics of

the property are also considered: the

type of property; its location; and the

ease with which the property could be

relet and/or resold. Where the property

is secured by lease agreement, the

credit committee prefers not to lend for

a term beyond the maximum term of the

lease. Commercial real estate generally

takes the form of good quality property

often underpinned by strong third party

leases. Residential property is also

generally of a high quality and based in

desirable locations. Residential and

commercial property valuations will

continue to form part of our ongoing

focus on collateral assessment. It is our

policy to obtain a formal valuation of

every commercial property offered as

collateral for a lending facility before

advancing funds. Residential properties

are valued by desktop valuation and/or

approved valuers, where appropriate.

Other common forms of collateral in the

retail asset class are motor vehicles,

cash and share portfolios. Primary

collateral in private client lending

transactions can also include a high net

worth individual’s share/investment

portfolio. This is typically in the form of a

diversified pool of equity, fixed income,

managed funds and cash. Often these

portfolios are managed by Investec

Wealth & Investment. Lending against

investment portfolios is typically geared

at conservative loan-to-value (LTV)

ratios, after considering the quality,

diversification, risk profile and liquidity of

the portfolio.

Our corporate, government and

institutional clients provide a range of

collateral including cash, corporate

assets, debtors (accounts receivable),

trading stock, debt securities (bonds),

listed and unlisted shares and

guarantees.

The majority of credit mitigation

techniques linked to trading activity is in

the form of netting agreements and daily

margining. Primarily, the market

standard legal documents that govern

this include the International Swaps and

Derivatives Association (ISDA) Master

Agreements, Global Master Securities

Lending Agreement (GMSLA) and Global

Master Repurchase Agreement (GMRA).

In addition to having ISDA

documentation in place with market and

trading counterparties in over-the-

counter (OTC) derivatives, the credit

committee may require a Credit Support

Annex (CSA) to ensure that mark-to-

market credit exposure is mitigated daily

through the calculation and placement/

receiving of cash collateral. Where

netting agreements have been signed,

the enforceability is supported by an

external legal opinion within the legal

jurisdiction of the agreement.

Set-off is applied between assets,

subject to credit risk and related

liabilities in the annual financial

statements, where:

•A legally enforceable right to set-off

exists

•There is the intention to settle the

asset and liability on a net basis, or to

realise the asset and settle the liability

simultaneously.

In addition to the above accounting set-

off criteria, banking regulators impose

the following additional criteria:

•Debit and credit balances relate to the

same obligor/counterparty

•Debit and credit balances are

denominated in the same currency

and have identical maturities

•Exposures subject to set-off are risk-

managed on a net basis

•Market practice considerations.

For this reason, there will be instances

where credit and counterparty

exposures are displayed on a net basis

in these annual financial statements but

reported on a gross basis to regulators.

The Bank places minimal reliance on

credit derivatives in its credit risk

mitigation techniques. Periodically the

Bank will enter into Credit Default Swaps

(CDS) in order to hedge a specific asset

held or to create a more general or

macro hedge against a group of

exposures in one industry or geography.

In these instances, the Bank is deemed

to be ‘buying protection’ against the

assets. Depending on the perceived risk,

or ‘spread’, of the underlying exposure,

the CDS will fluctuate in value;

increasing in value when the asset has

become more risky and decreasing

when risk has reduced. Occasionally, the

Bank will enter into trading/investment

CDS positions where we buy protection

or sell protection without owning the

underlying asset. The total amount of

net credit derivatives outstanding at 31

March 2022 amounts to £0.5 million, of

which all is used for credit mitigation

purposes. Total protection bought

amounts to -£0.03 million and total

protection sold amounts to £0.53 million

relating to credit derivatives used in

credit mitigation.

Further information on credit

derivatives is provided on

page 244

The Bank endeavours to implement

robust processes to minimise the

possibility of legal and/or operational risk

through good quality tangible collateral.

The legal risk function ensures the

enforceability of credit risk mitigants

within the laws applicable to the

jurisdictions in which the Bank operates.

When assessing the potential

concentration risk in its credit portfolio,

consideration is given to the types of

collateral and credit protection that form

part of the portfolio.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

An analysis of gross core loans, asset quality and ECL

The tables that follow provide

information with respect to the asset

quality of our gross core loans on a

statutory basis.

The overall asset quality improved as

Stage 3 gross core loan exposure

decreased from £332 million at 31

March 2021 to £291 million or 2.1% of

gross core loans subject to ECL at 31

March 2022.

Notwithstanding the partial release in

management ECL overlay during the

second half of the year, the overall

coverage for Stage 1 and Stage 2

remains elevated at 31 March 2022

compared to pre-COVID levels,

reflecting the ongoing uncertainty and

deterioration of forward-looking macro-

economic scenarios, particularly with

respect to inflation.

Stage 2 exposures decreased to 7.1% of

gross core loans subject to ECL at 31

March 2022 from 10.3% at 31 March

2021. The Stage 2 ratio remains above

pre COVID-19 levels (5.8% at 31 March

2019) reflecting the ongoing uncertainty

in the macro-economic environment.

£’million

31 March 2022

31 March 2021

Gross core loans

14 557

12 480

Gross core loans at FVPL

609

512

Gross core loans subject to ECL*

13 948

11 968

Stage 1

12 665

10 398

Stage 2

992

1 238

of which past due greater than 30 days

Stage 3

291

332

of which Ongoing (excluding Legacy) Stage 3*

240

231

ECL

(134)

(169)

Stage 1

(32)

(27)

Stage 2

(35)

(41)

Stage 3

(67)

(101)

of which Ongoing (excluding Legacy) Stage 3*

(40)

(62)

Coverage ratio

Stage 1

0.25%

0.26%

Stage 2

3.5%

3.3%

Stage 3

23.0%

30.4%

of which Ongoing (excluding Legacy) Stage 3*

16.7%

26.8%

Credit loss ratio

0.17%

0.56%

ECL impairment charges on core loans

(22)

(65)

Average gross core loans subject to ECL

12 958

11 662

An analysis of Stage 3 gross core loans subject to ECL

Stage 3 net of ECL

224

231

of which Ongoing (excluding Legacy) Stage 3*

200

169

Aggregate collateral and other credit enhancements on Stage 3

230

235

Stage 3 as a % of gross core loans subject to ECL

2.1%

2.8%

of which Ongoing (excluding Legacy) Stage 3*

1.7%

1.9%

Stage 3 net of ECL as a % of net core loans subject to ECL

1.6%

2.0%

of which Ongoing (excluding Legacy) Stage 3*

1.4%

*Refer to definitions on page 292. Our exposure (net of ECL) to the UK Legacy portfolio has reduced from £84 million at 31 March 2021 to £43 million at

31 March 2022. These assets are predominately reported in Stage 3 and make up 17.5% of Stage 3 gross core loans. These assets have been significantly

provided for and coverage remains high at 52.9%.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

ASSET QUALITY

An analysis of staging and ECL movements for core loans subject to ECL

The table below indicates underlying movements in gross core loans subject to ECL from 31 March 2021 to 31 March 2022.

The transfers between stages of gross core loans indicate the impact of stage transfers upon the gross exposure and

associated opening ECL. The transfers into Stage 1 were almost all driven by the weighted economic outlook and underlying

macro-economic factors. There was a normalisation of transfers into Stage 3 as a proportion of the opening book, following very

limited defaults during the period to 31 March 2021, supported in part by the UK Government measures in place.

The net remeasurement of ECL arising from stage transfers represents the (increase)/decrease in ECL due to these transfers.

New lending net of repayments comprises new originations, further drawdowns, repayments and sell-downs as well as ECLs in

Stage 3 that have been written off, typically when an asset has been sold.

The ECL impact of changes to risk parameters and models during the year largely relates to the changes in the macro-economic

scenarios. The foreign exchange and other category largely comprises the impact on the closing balance as a result of

movements and translations in foreign exchange rates since 31 March 2021.

Stage 1

Stage 2

Stage 3

Total

£’million

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

At 31 March 2020

10 399

(37)

576

(31)

379

(107)

11 354

(175)

Transfer from Stage 1

(1 017)

989

(4)

—

Transfer from Stage 2

120

(2)

(220)

100

(4)

—

Transfer from Stage 3

—

(8)

—

ECL remeasurement arising from

transfer of stage

—

(10)

—

(18)

—

(26)

New lending net of repayments

(includes assets written off)

962

(9)

(89)

(162)

711

Changes to risk parameters

and models

—

(6)

—

Foreign exchange and other

(66)

—

(26)

—

(5)

(97)

At 31 March 2021

10 398

(27)

1 238

(41)

332

(101)

11 968

(169)

Transfer from Stage 1

(433)

379

(1)

—

Transfer from Stage 2

397

(6)

(473)

(2)

—

Transfer from Stage 3

—

(4)

—

ECL remeasurement arising from

transfer of stage

—

(3)

—

(9)

—

(9)

New lending net of repayments

(includes assets written off)

2 270

(3)

(159)

(167)

1 944

Changes to risk parameters

and models

—

(2)

—

(2)

Foreign exchange and other

—

At 31 March 2022

12 665

(32)

992

(35)

291

(67)

13 948

(134)

An analysis of gross core loans by country of exposure

31 March 2022

31 March 2021

£14 557 million

£12 480 million

United Kingdom

83.3%

United Kingdom

81.6%

Europe (excluding UK)

8.2%

Europe (excluding UK)

8.5%

North America

5.4%

North America

5.3%

Asia

1.5%

Asia

1.8%

Australia

0.9%

Australia

1.8%

Other

0.7%

Other

1.0%

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

ASSET QUALITY

CONTINUED

An analysis of credit quality by internal rating grade

The Bank uses a 25-grade internal rating scale which measures the risk of default to an exposure without taking into account

any credit mitigation, such as collateral. This internal rating scale allows the Bank to measure credit risk consistently across

portfolios. The internal rating scale is derived from a mapping to PDs and can also be mapped to external rating agency scales.

PD range

Investec internal rating scale

Indicative external rating scale

less than 0.538%

IB01 – IB12

AAA to BBB-

0.538% - 6.089%

IB13 – IB19

BB+ to B-

greater than 6.089%

IB20 – IB25

B- and below

Stage 3

The internal credit rating distribution below is based on the 12-month PD at 31 March 2022 for gross core loans subject to ECL

by stage. The staging classifications are not only driven by the absolute PD, but on factors that determine a significant increase

in credit risk, including relative movement in PD since origination. There is therefore no direct correlation between the credit

quality of an exposure and its stage classification as shown in the table below:

At 31 March 2022

£’million

IB01-IB12

IB13-IB19

IB20-IB25

Stage 3

Total

Gross core loans subject to ECL

7 925

5 542

190

291

13 948

Stage 1

7 643

4 934

—

12 665

Stage 2

282

608

102

—

992

Stage 3

—

291

ECL

(9)

(46)

(12)

(67)

(134)

Stage 1

(6)

(25)

(1)

—

(32)

Stage 2

(3)

(21)

(11)

—

(35)

Stage 3

—

(67)

Coverage ratio

0.1%

0.8%

6.3%

23.0%

1.0%

At 31 March 2021

£’million

IB01-IB12

IB13-IB19

IB20-IB25

Stage 3

Total

Gross core loans subject to ECL

6 603

4 854

179

332

11 968

Stage 1

6 443

3 894

—

10 398

Stage 2

160

960

118

—

1 238

Stage 3

—

332

ECL

(4)

(52)

(12)

(101)

(169)

Stage 1

(3)

(23)

(1)

—

(27)

Stage 2

(1)

(29)

(11)

—

(41)

Stage 3

—

(101)

Coverage ratio

0.1%

1.1%

6.7%

30.4%

1.4%

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

ASSET QUALITY

CONTINUED

An analysis of core loans by

risk category – Lending

collateralised by property

Client quality and expertise are at the

core of our credit philosophy. We

provide senior debt and other funding

for property transactions, with a

preference for income-producing assets,

supported by an experienced sponsor

providing a material level of cash equity

investment into the asset. Our exposure

to the property market is well diversified

with strong bias towards prime locations

for residential exposure and focus on

property fundamentals, tenant quality

and income diversity for commercial

assets. Debt service cover ratios are a

key consideration in the lending process

supported by reasonable loan-to-

security value ratios.

Year in review

Lending collateralised by property

totalled £2.3 billion or 16.2% of net core

loans at 31 March 2022, which remains

in line with the Bank’s risk appetite to

maintain a reduced proportion of net

core loan exposures in property-related

lending. New lending is largely against

income-producing commercial

properties at conservative LTVs.

The bulk of property collateralised

assets are located in the UK.

The portfolio has diverse underlying

assets, experienced sponsors behind

the exposures and limited direct

exposure to sectors more vulnerable to

cyclicality. Underwriting criteria remains

conservative and we are committed to

following a client-centric approach to

lending, only supporting counterparties

with strong balance sheets and requisite

expertise.

Gross core loans at

amortised cost and FVOCI

Gross core

loans at

FVPL

Gross core

loans

Stage 1

Stage 2

Stage 3

Total

£’million

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

At 31 March 2022

Commercial real estate

1 334

(3)

152

(6)

105

(21)

1 591

(30)

1 637

Commercial real estate –

investment

1 104

(2)

108

(4)

(18)

1 311

(24)

1 353

Commercial real estate –

development

222

(1)

—

260

(2)

264

Commercial vacant land

and planning

—

(1)

(3)

(4)

—

Residential real estate

676

(2)

—

(16)

713

(18)

742

Residential real estate –

investment

394

(1)

—

(1)

401

(2)

428

Residential real estate –

development

276

(1)

—

(3)

282

(4)

—

282

Residential vacant land

and planning

—

(12)

Total lending

collateralised by property

2 010

(5)

155

(6)

139

(37)

2 304

(48)

2 379

Coverage ratio

0.25%

3.9%

26.6%

2.1%

At 31 March 2021

Commercial real estate

1 126

—

134

(4)

137

(25)

1 397

(29)

1 416

Commercial real estate –

investment

910

—

118

(3)

130

(21)

1 158

(24)

1 173

Commercial real estate –

development

211

—

(1)

222

(1)

226

Commercial vacant land

and planning

—

(1)

(3)

(4)

—

Residential real estate

614

—

(29)

699

(29)

710

Residential real estate –

investment

315

—

(6)

337

(6)

346

Residential real estate –

development

287

—

(5)

319

(5)

—

319

Residential vacant land

and planning

—

(18)

Total lending

collateralised by property

1 740

—

146

(4)

210

(54)

2 096

(58)

2 126

Coverage ratio

0.00%

2.7%

25.7%

2.8%

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

ASSET QUALITY

CONTINUED

An analysis of core loans by risk

category – High net worth and

other private client lending

Our Private Banking activities target high

net worth individuals, active wealth

creators, high-income professionals,

self-employed entrepreneurs, owner

managers in small to mid-cap corporates

and sophisticated investors.

Lending products are tailored to meet

the requirements of our clients and

deliver solutions to enable target clients

to create and manage their wealth.

Central to our credit philosophy is

ensuring the sustainability of cash flow

and income throughout the cycle. As

such, the client base has been defined

to include high net worth clients (who,

through diversification of income

streams, should reduce income volatility)

and individuals in defined professions

which have historically supported a

sustainable income base, irrespective of

the stage in the economic cycle.

Credit risk arises from the following

activities:

•Mortgages: provides residential

mortgage loan facilities to target

market clients

•High net worth and specialised

lending: provides credit facilities to

high net worth individuals and their

controlled entities as well as portfolio

loans to high net worth clients against

their investment portfolios typically

managed by Investec Wealth &

Investment.

Year in review

High net worth and other private client

lending totalled £5.1 billion and

increased by 26.7% year-on-year, driven

by strong targeted growth in mortgages

for the Bank’s high net worth target

market clients as we further leverage

our Private Banking platform and

franchise.

Growth in this area has been achieved

with strong adherence to our lending

criteria. Weighted average LTVs on

mortgages remain conservative at 68%.

Gross core loans at

amortised cost and FVOCI

Gross core

loans at

FVPL

Gross

core

loans

Stage 1

Stage 2

Stage 3

Total

£’million

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

At 31 March 2022

Mortgages

3 995

(1)

—

(4)

4 138

(5)

4 163

High net worth and

specialised lending

938

(2)

(1)

(2)

986

(5)

989

Total high net worth and

other private client lending

4 933

(3)

128

(1)

(6)

5 124

(10)

5 152

Coverage ratio

0.06%

0.8%

9.5%

0.2%

At 31 March 2021

Mortgages

3 103

(1)

—

(2)

3 193

(3)

—

3 193

High net worth and

specialised lending

832

(1)

865

(3)

872

Total high net worth and

other private client lending

3 935

(2)

105

(1)

(3)

4 058

(6)

4 065

Coverage ratio

0.05%

1.0%

16.7%

0.1%

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

ASSET QUALITY

CONTINUED

An analysis of core loans by

risk category – Corporate and

other lending

We focus on traditional client-driven

corporate lending activities. The credit

risk management functions approve

specific credit and counterparty limits

that govern the maximum credit

exposure to each individual

counterparty. In addition, further risk

management limits exist through

industry and country limits to manage

concentration risk. The credit appetite

for each counterparty is based on the

financial strength of the principal

borrower, its business model and market

positioning, the underlying cash flow to

the transaction, the substance and track

record of management, and the security

package. Political risk insurance, and

other insurance is taken where

deemed appropriate.

The Bank has limited appetite for

unsecured credit risk and facilities are

typically secured by the assets of the

underlying borrower as well as shares in

the borrower.

A summary of the nature of the lending

and/or credit risk assumed within some

of the key areas in our corporate lending

business is provided below:

•Corporate and acquisition finance:

provides senior secured loans to

proven management teams and

sponsors running mid-cap, as well as

some large-cap companies. Credit risk

is assessed against debt serviceability

based upon robust cash generation of

the business demonstrated by both

historical and forecast information. We

typically act as a transaction lead

arranger or on a club or bi-lateral

basis, and have a close relationship

with management and sponsors

•Asset-based lending: provides

working capital and secured corporate

loans to mid-caps. These loans are

secured by the assets of the business,

for example, the accounts receivable,

inventory and plant and machinery. In

common with our corporate lending

activities, strong emphasis is placed

on supporting companies with scale

and relevance in their industry,

stability of cash flow, and experienced

management

•Fund finance: provides debt facilities

to asset managers and fund vehicles,

principally in private equity. The

geographical focus is the UK, Western

Europe and North America where the

Bank can support experienced asset

managers and their funds which show

strong, long-term value creation and

good custodianship of investors’

money. Debt facilities are typically to

fund vehicles which are secured

against undrawn limited partner

commitments and/or the funds

underlying assets

•Other corporate and financial

institutions and governments:

provides senior secured loans to mid-

large cap companies where credit risk

is typically considered with regard to

robust cash generation from an

underlying asset and supported by

performance of the overall business

based on both historical and forecast

information

•Small ticket asset finance: provides

funding to small- and medium-sized

corporates to support asset

purchases and other business

requirements. The portfolio is highly

diversified by industry and number of

clients and is secured against the

asset being financed

•Motor finance: provides specialised

motor vehicle financing originated

through Mann Island Finance Limited

(MIVF). The portfolio is composed

predominantly of private motor

vehicles to individuals attributing to a

granular book with low concentration

risk

•Aviation finance: structures, arranges

and provides financing for airlines,

leasing companies, operators and

corporates secured by aircraft at

conservative LTVs. Counterparties

include flag and commercial airline

carriers, leading aircraft lessors and

corporates/operators with strong

contracted cash flows.

•Power and infrastructure finance:

arranges and provides typically long-

term financing for power and

infrastructure assets, in particular

renewable and traditional power

projects as well as transportation

assets, typically against contracted

future cash flows of the project(s)

from well-established and financially

sound off-take counterparties. There

is a requirement for a strong upfront

equity contribution from an

experienced sponsor.

Year in review

Corporate and other lending increased

by 12.4% from £6.2 billion at 31 March

2021 to £7.0 billion at 31 March 2022.

Activity increased across nearly all asset

classes and industries including motor

finance, corporate and acquisition

finance, asset-based lending as well as

fund finance and power and

infrastructure finance. In certain areas,

new lending has been offset by

redemptions as well as strong

distribution of exposures. We continue

to remain client-focused in our

approach, with good quality corporates

exhibiting strong cash flows and balance

sheets.

As at 31 March 2022 we have exposure

to loans totalling £215 million (31 March

2021: £127 million) under the various

support schemes introduced by the UK

Government, predominantly reported

under Corporate and other lending.

Gross Stage 3 exposures total 1.3% of

total corporate and other lending,

reduced from 1.7% in the prior year

reflecting the solid asset quality of the

portfolio to date. Stage 2 exposures

have also reduced predominantly due to

the transfer of loans back to Stage 1

resulting from the updated forward-

looking macro-economic scenarios in

the first half of the year. In certain asset

classes, such as small ticket asset

finance, Stage 2 exposures remain

elevated due to the forward-looking

view on their credit performance under

current macro-economic scenarios,

particularly with respect to inflation,

rather than specific credit concerns.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

ASSET QUALITY

CONTINUED

Gross core loans at

amortised cost and FVOCI

Gross

core

loans at

FVPL

Gross

core

loans

Stage 1

Stage 2

Stage 3

Total

£’million

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

At 31 March 2022

Corporate and acquisition

finance

1 528

(7)

207

(13)

(1)

1 745

(21)

125

1 870

Asset-based lending

352

(1)

—

379

(1)

391

Fund finance

1 194

(1)

—

1 212

(1)

1 256

Other corporate and financial

institutions and governments

379

(2)

(1)

419

(5)

430

Small ticket asset finance

1 183

(8)

242

(7)

(18)

1 454

(33)

—

1 454

Motor finance

628

(2)

121

(3)

(2)

755

(7)

—

755

Other large ticket asset

finance

—

Aviation finance

(1)

—

106

(2)

244

350

Power and infrastructure

finance

362

(2)

450

(6)

520

Resource finance

—

Total corporate

and other lending

5 722

(24)

709

(28)

(24)

6 520

(76)

506

7 026

Coverage ratio

0.42%

3.9%

27.0%

1.2%

At 31 March 2021

Corporate and acquisition

finance

1 000

(7)

336

(17)

(4)

1 348

(28)

1 435

Asset-based lending

189

(2)

115

(2)

—

304

(4)

318

Fund finance

1 176

(2)

—

1 233

(2)

1 281

Other corporate and financial

institutions and governments

422

(2)

—

(1)

443

(3)

460

Small ticket asset finance

1 060

(9)

202

(10)

(16)

1 291

(35)

—

1 291

Motor finance

467

(1)

(2)

555

(4)

—

555

Other large ticket asset

finance

—

(18)

—

Aviation finance

—

(2)

131

(4)

262

393

Power and infrastructure

finance

351

(2)

(4)

(1)

458

(7)

505

Resource finance

—

Total corporate

and other lending

4 723

(25)

987

(36)

104

(44)

5 814

(105)

475

6 289

Coverage ratio

0.53%

3.6%

42.3%

1.8%

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

ASSET QUALITY

CONTINUED

The tables that follow provide further analysis of the Bank’s gross credit and counterparty exposures.

An analysis of gross credit and counterparty exposures

Gross credit and counterparty exposure totalled £27.8 billion at 31 March 2022. Cash and near cash balances amounted to

£8.9 billion and are largely reflected in the following line items in the table below: cash and balances at central banks, loans and

advances to banks and sovereign debt securities. These exposures are all Stage 1. There are immaterial Stage 2 and Stage 3

exposures outside of loans and advances to customers which are small relative to the balance sheet, where loans and advances

to customers (including committed facilities) account for greater than 95% of overall ECLs.

An analysis of gross credit and counterparty exposures

£’million

31 March 2022

31 March 2021

Cash and balances at central banks

5 380

3 043

Loans and advances to banks

1 467

1 384

Reverse repurchase agreements and cash collateral on securities borrowed

1 447

2 065

Sovereign debt securities

1 166

1 108

Bank debt securities

Other debt securities

443

682

Derivative financial instruments

669

730

Securities arising from trading activities

Loans and advances to customers

14 557

12 480

Other loans and advances

147

131

Other securitised assets

Other assets

116

451

Total on-balance sheet exposures

25 486

22 156

Guarantees

Committed facilities related to loans and advances to customers

1 957

1 805

Contingent liabilities, letters of credit and other

326

252

Total off-balance sheet exposures

2 324

2 103

Total gross credit and counterparty exposures

27 810

24 259

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

A further analysis of gross credit and counterparty exposures

The table below indicates in which class of asset (on the face of the consolidated balance sheet) credit and counterparty

exposures are reflected. Not all assets included in the balance sheet bear credit and counterparty risk.

At 31 March 2022

Total gross

credit and

counterparty

exposure

of which

FVPL

of which

amortised

cost and

FVOCI

ECL#

Assets that

we deem to

have no legal

credit

exposure

Total

assets

£’million

Cash and balances at central banks

5 380

—

5 380

—

5 380

Loans and advances to banks

1 467

—

1 467

—

1 467

Reverse repurchase agreements and cash

collateral on securities borrowed

1 447

669

778

—

1 447

Sovereign debt securities

1 166

1 132

—

1 166

Bank debt securities

—

Other debt securities

443

144

299

(5)

—

438

Derivative financial instruments

669

—

717

Securities arising from trading activities

—

137

163

Investment portfolio

—

333*

333

Loans and advances to customers

14 557

609

13 948

(134)

—

14 423

Other loans and advances

147

—

147

—

147

Other securitised assets

—

87ˆ

Interest in associated undertakings

and joint venture holdings

—

Deferred taxation assets

—

110

Current taxation assets

—

Other assets

116

—

116

—

1 046**

1 162

Property and equipment

—

155

Goodwill

—

244

Software

—

Other acquired intangible assets

—

Total on-balance sheet exposures

25 486

2 157

23 329

(139)

2 238

27 585

Guarantees

—

Committed facilities related to loans and

advances to customers

1 957

1 904

(7)

—

1 950

Contingent liabilities, letters of credit and other

326

—

326

(1)

181

506

Total off-balance sheet exposures

2 324

2 271

(8)

181

2 497

Total exposures

27 810

2 210

25 600

(147)

2 419

30 082

# ECLs include £3.3 million ECL held against financial assets held at FVOCI, which is reported on the balance sheet within the fair value reserve. This will

result in minor differences between certain balance sheet lines reported above (largely loans and advances to customers) and the statutory balance

sheet.

*Relates to exposures that are classified as investment risk in the banking book.

^While the Bank manages all risks (including credit risk) from a day-to-day operational perspective, certain assets are within special purpose vehicles

that ring-fence the assets to specific credit providers and limit security to the assets in the vehicle. This balance reflects the credit exposure to credit

providers external to the Bank. The net credit exposure that the Bank has in the vehicles is reflected in the ‘total credit and counterparty exposure’.

**Other assets include settlement debtors which we deem to have no credit risk exposure as they are settled on a delivery against payment basis.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

A further analysis of gross credit and counterparty exposures (continued)

At 31 March 2021

Total gross

credit and

counterparty

exposure

of which

FVPL

of which

amortised

cost and

FVOCI

ECL#

Assets that

we deem to

have no legal

credit

exposure

Total

assets

£’million

Cash and balances at central banks

3 043

—

3 043

—

3 043

Loans and advances to banks

1 384

—

1 384

—

1 384

Reverse repurchase agreements and cash

collateral on securities borrowed

2 065

675

1 390

—

2 065

Sovereign debt securities

1 108

1 071

—

1 108

Bank debt securities

—

Other debt securities

682

206

476

(1)

709

Derivative financial instruments

730

—

773

Securities arising from trading activities

—

254

282

Investment portfolio

—

351*

351

Loans and advances to customers

12 480

512

11 968

(169)

—

12 311

Other loans and advances

131

—

131

—

162

Other securitised assets

—

101ˆ

107

Interest in associated undertakings

and joint venture holdings

—

Deferred taxation assets

—

110

Current taxation assets

—

Other assets

451

—

451

—

945**

1 396

Property and equipment

—

186

Goodwill

—

244

Software

—

Other acquired intangible assets

—

Total on-balance sheet exposures

22 156

2 194

19 962

(170)

2 405

24 391

Guarantees

—

Committed facilities related to loans and

advances to customers

1 805

1 722

(9)

—

1 796

Contingent liabilities, letters of credit and other

252

—

252

—

213

465

Total off-balance sheet exposures

2 103

2 020

(9)

213

2 307

Total exposures

24 259

2 277

21 982

(179)

2 618

26 698

# ECLs include £5.2 million ECL held against financial assets held at FVOCI, which is reported on the balance sheet within the fair value reserve. This will

result in minor differences between certain balance sheet lines reported above (largely loans and advances to customers) and the statutory balance

sheet.

*Relates to exposures that are classified as investment risk in the banking book.

^While the Bank manages all risks (including credit risk) from a day-to-day operational perspective, certain assets are within special purpose vehicles

that ring-fence the assets to specific credit providers and limit security to the assets in the vehicle. This balance reflects the credit exposure to credit

providers external to the Bank. The net credit exposure that the Bank has in the vehicles is reflected in the ‘total credit and counterparty exposure’.

**Other assets include settlement debtors which we deem to have no credit risk exposure as they are settled on a delivery against payment basis.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

Gross credit and counterparty exposures by industry

High net

worth

and other

professional

individuals

Lending

collateralised

by property

Agriculture

Electricity,

gas and

water (utility

services)

Public

and non-

business

services

Business

services

Finance and

insurance

£’million

At 31 March 2022

Cash and balances at central

banks

—

5 380

—

Loans and advances to banks

—

1 467

Reverse repurchase agreements

and cash collateral on securities

borrowed

—

485

—

962

Sovereign debt securities

—

1 166

—

Bank debt securities

—

Other debt securities

—

249

Derivative financial instruments

—

493

Securities arising from

trading activities

—

Loans and advances to customers

5 152

2 379

619

233

1 333

1 661

Other loans and advances

—

136

Other securitised assets

—

Other assets

—

Total on-balance sheet

exposures

5 152

2 379

660

7 277

1 350

5 085

Guarantees

—

Committed facilities related to

loans and advances to customers

131

436

—

262

205

596

Contingent liabilities, letters of

credit and other

—

191

—

104

Total off-balance sheet

exposures

156

436

—

464

213

700

Total gross credit and

counterparty exposures

5 308

2 815

1 124

7 343

1 563

5 785

At 31 March 2021

Cash and balances at central

banks

—

3 043

—

Loans and advances to banks

—

1 384

Reverse repurchase agreements

and cash collateral on securities

borrowed

—

634

—

1 431

Sovereign debt securities

—

1 062

—

Bank debt securities

—

Other debt securities

—

322

Derivative financial instruments

—

458

Securities arising from

trading activities

—

Loans and advances to customers

4 065

2 126

648

272

1 048

1 306

Other loans and advances

—

113

Other securitised assets

—

Other assets

—

441

Total on-balance sheet

exposures

4 065

2 131

767

5 038

1 089

5 558

Guarantees

—

Committed facilities related to

loans and advances to customers

147

351

—

290

160

474

Contingent liabilities, letters of

credit and other

—

124

—

103

Total off-balance sheet

exposures

173

351

—

424

160

596

Total gross credit and

counterparty exposures

4 238

2 482

1 191

5 075

1 249

6 154

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

Retailers

and

wholesalers

Manufacturing

and

commerce

Construction

Other

residential

mortgages

Corporate

commercial

real estate

Mining and

resources

Leisure,

entertainment

and tourism

Transport

Motor

finance

Com-

munication

Total

—

5 380

—

1 467

—

1 447

—

1 166

—

443

—

111

—

669

—

285

797

110

—

123

656

755

259

14 557

—

147

—

116

311

809

110

121

123

207

777

755

270

25 486

—

104

—

1 957

—

326

104

—

2 324

320

913

117

121

166

243

805

755

330

27 810

—

3 043

—

1 384

—

2 065

—

1 108

—

238

—

682

—

730

—

220

761

—

156

754

555

268

12 480

—

131

—

451

254

788

264

101

179

879

555

278

22 156

—

114

—

118

1 805

—

252

115

—

118

2 103

270

903

264

106

260

906

555

396

24 259

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

Gross credit and counterparty exposures by residual contractual maturity

At 31 March 2022

to three

months

Three

to six

months

Six

months to

one year

One

to five

years

Five to 10

years

>10 years

Total

£’million

Cash and balances at central banks

5 380

—

5 380

Loans and advances to banks

1 461

—

1 467

Reverse repurchase agreements and cash

collateral on securities borrowed

674

113

570

1 447

Sovereign debt securities

528

162

172

226

1 166

Bank debt securities

—

Other debt securities

—

180

193

443

Derivative financial instruments

121

108

216

188

669

Securities arising from trading activities

—

Loans and advances to customers

1 289

1 093

1 445

7 548

1 803

1 379

14 557

Other loans and advances

—

147

Other securitised assets

—

Other assets

116

—

116

Total on-balance sheet exposures

9 580

1 406

1 872

8 232

2 164

2 232

25 486

Guarantees

—

Committed facilities related to loans

and advances to customers

130

106

201

1 152

310

1 957

Contingent liabilities, letters of credit

and other

168

—

326

Total off-balance sheet exposures

194

107

278

1 342

345

2 324

Total gross credit and counterparty

exposures

9 774

1 513

2 150

9 574

2 509

2 290

27 810

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

Additional credit and

counterparty risk information

Credit risk classification and

provisioning policy

IFRS 9 requirements have been

embedded into our Bank credit risk

classification and provisioning policy.

A framework has been established

to incorporate both quantitative and

qualitative measures.

For further detail on our credit

risk classification and provision

policy please refer to pages

192 and 193

Internal credit rating models

and ECL methodology

Internal credit rating models cover all

material asset classes. These internal

credit rating models are also used for

IFRS 9 modelling after adjusting for key

differences. Internal credit models

calculate through the economic cycle

losses whereas IFRS 9 requires 12-

month or lifetime point-in-time losses

based on conditions at the reporting

date and multiple economic scenario

forecasts of the future conditions over

the expected lives.

Further information on internal

credit ratings is provided on

page 74

Key judgements

The measurement of ECL has reliance

on expert credit judgement. Key

judgemental areas are highlighted below

and are subject to robust governance

processes. Key drivers of measurement

uncertainty include:

•The assessment of a significant

increase in credit risk

•A range of forward-looking probability

weighted macro-economic scenarios

•Estimations of probabilities of default,

loss given default and exposures at

default using models.

For further detail on our process

for determining ECL please refer

to page 193

Key judgements at 31 March 2022

At 31 March 2022, the revised macro-

economic scenarios result in an increase

of ECL on the performing book as a

result of increased weightings to

worsened downside scenarios as well as

the increased risk of inflation within all

scenarios. There remains a significant

amount of economic uncertainty and,

given the events currently taking place

that have not taken place over the

models’ history, significant model

performance uncertainty. To ensure that

the overall level of ECL was reasonable

and that the judgements applied had

been suitably tested, management

reviewed the overall output of ECLs and

considered a number of alternative

assumptions. As a result, despite the

decreasing concerns with respect to the

COVID-19 pandemic (relative to 31

March 2021), an ECL overlay is still

considered appropriate.

The management ECL overlay totals

£16.8 million at 31 March 2022 (£16

million at 31 March 2021; £21 million at

30 September 2021). This is a £4.2

million release since 30 September 2021

to reflect the increased modelled ECL

given greater downside weighting as

well as the reducing impact that the

COVID-19 pandemic has on

management’s underlying assumptions

offset by the increasing impact of

greater global uncertainty with respect

to the Russian invasion of Ukraine, as

well as wider supply chain issues. The

management ECL overlay seeks to

capture the significant level of

judgement required in the application of

the macro-economic scenarios as well

as the ongoing uncertainty in the UK and

global operating environment that is not

currently captured completely by

modelled outputs.

The combined result of the changes to

macro-economic scenarios, in-model

adjustments and management ECL

overlays over the year equate to a

neutral effect of ECL impairment charge

across Stage 1 and 2. Taken together

with specific impairments in the period

and run-rate ECL charges on the

performing books results in the UK Bank

reporting a £25 million ECL impairment

charge.

Macro-economic sensitivities

IFRS 9 may result in an increase in the

volatility of provisions going forward,

particularly for Stage 1 and Stage 2

assets as a result of macro-economic

scenario changes. Sensitivities to

macro-economic scenarios and factors

form part of our overall risk monitoring,

in particular the Bank’s potential ECLs if

each scenario were given a 100%

weighting. In these instances all non-

modelled ECLs, including credit

assessed ECLs and other management

judgements remain unchanged.

The UK Bank’s most severe 100%

scenario sensitivity was to the downside

2 global shock scenario, which would

have resulted in an increase in ECLs,

excluding credit assessed ECL and other

management judgements, of

approximately £13 million. The base

case scenario, if 100% weighted, would

result in a decrease in ECLs, holding all

else equal, of approximately £6 million

reflecting the current view of the overall

weighted average scenarios, skewed to

the downside.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

ADDITIONAL POLICY INFORMATION

Forward-looking macro-economic

scenarios

The measurement of ECL also requires the use of multiple

economic scenarios to calculate a probability weighted

forward-looking estimate. These scenarios are updated at

least twice a year, or more frequently if there is a macro-

economic shock or significant shift in expectations. The

weighting of these scenarios for IFRS 9 as well as the

scenarios themselves are discussed and presented at the

relevant BRCCs as well as the relevant capital committees for

approval, which form part of the principal governance

framework for macro-economic scenarios.

A number of forecast economic scenarios are considered for

capital planning, stress testing (including Investec-specific

stress scenarios) and IFRS 9 ECL measurement.

For IBP, four macro-economic scenarios were used in the

measurement of ECL. These scenarios incorporate a base

case, an upside case and two downside cases.

Taking into account the current macro-economic environment,

adjustments have been made to the composition of the

downside scenarios. In the first half of the financial year, an

inflation scenario was introduced to capture the emergence of

risks related to rising prices which anticipates UK CPI inflation

peaking at 11.1% in the fourth quarter of 2022. This scenario

replaced the fiscal crisis scenario which was used at 31 March

2021. Additionally, since 30 September 2021 the L-shape has

been replaced with a global shock scenario encapsulating a

synchronised worldwide economic downturn.

In addition to a reassessment of the macro-economic

scenarios, a review of the weightings also took place to take

into account the latest economic developments and the

changes to the scenarios. On this basis, the weightings stood

at 10% upside, 45% base case, 30% downside 1 - inflation and

15% downside 2 - global shock. On balance, the risks were

clearly skewed to the downside. These weights have been

calibrated to take into account the risks to the outlook as a

result of developments in the Russian invasion of Ukraine,

considering the potential impact on key economic variables

such as inflation and growth.

Underlying the base case scenario is the assumption that the

Russian invasion of Ukraine does not widen beyond Ukraine

and that ultimately a ceasefire is agreed during the second

quarter of 2022. Soaring commodity prices are a key

consequence of the current crisis and add to inflationary

pressure in the UK and elsewhere. However, such price

pressures remain temporary in nature and are expected to

dissipate over time, also helped by faster labour productivity

growth, returning inflation to the 2% target in the medium

term. Although in the interim inflation weighs on GDP growth,

the buildup of cash buffers by the household and corporate

sector helps to absorb some of the impact and prevents a

recession from taking hold. This pattern is reinforced in the UK

by distortions from the additional bank holiday for the Queen’s

Platinum Jubilee, which will be a drag on output in the second

quarter of 2022 but be followed by a rebound in the third

quarter. Where COVID-19 remains a risk, vaccination

programmes prove effective in preventing the need for

renewed social restrictions in future. This helps sustain an

economic rebound across advanced markets, with supply

chain problems resolved over time and pent-up demand

supporting spending. Monetary and fiscal tightening takes

place but is moderate – bank rate rising to 2% in the medium

term. Unemployment rates remain historically low over this

horizon, and UK economic activity returns to trend growth

levels, estimated to correspond to annual GDP growth rates of

around 1.6%. Globally, the situation is assumed to be similar to

that of the UK with economies expanding in the 2022 calendar

year and a relatively gradual removal of monetary stimulus.

Downside 1 - inflation scenario assumes that the rise in

inflation proves more sustained and protracted as wages rise

to compensate for higher prices, in turn adding to costs price

pressures for firms. Central banks respond by raising interest

rates faster and further and also reducing asset holdings at

the same time. This sharp tightening of financial conditions to

slow the economy is ultimately effective, but not without

triggering a downturn, including a period of contraction in

GDP, rising unemployment and a correction in equity and bond

markets. In time, this then leads to rate cuts. As the economy

recovers, a gradual tightening in monetary policy ensues.

Downside 2 – global shock scenario is a hypothetical scenario

designed to encapsulate a variety of tail risks. It models a

severe synchronized global economic downturn and a sharp

repricing of all asset classes, particularly the ones whose

valuations are most elevated. Although the shock is assumed

to take place early on in the forecasting horizon, lasting

headwinds mean the economic and asset price recovery that

follows is a slow one. Partly this also reflects the assumption

that fiscal support is not as substantial as it was during the

initial phase of the COVID-19 pandemic. Faced by a

deflationary shock, central banks loosen policy. The BoE does

so via asset purchases and a cut in bank rate, to a low of

-0.50%. Over time, economic recovery prompts a renewed but

slow rise in policy rates

The down case scenarios are severe but plausible scenarios

created based on IBP-specific bottom-up stress tests, whilst

also considering IFRS 9 specific sensitivities and non-linearity.

In the upside case, economic activity expands more briskly, as

renewed business confidence coupled with an easing of

COVID-19 related supply disruptions boosts business

investment. In turn that triggers an acceleration in labour

productivity, which sustains faster growth for longer as

medium-term GDP growth averages 2% per annum. Inflation

subsides because higher wages merely reflect faster labour

productivity growth rather than adding to cost pressures. Amid

a positive environment for corporates, unemployment falls

even further. This stronger than expected rebound is seen

globally, and monetary policy normalises gradually enough so

as not to subdue growth.

The graph below shows the forecasted UK GDP under each

macro-economic scenario applied at 31 March 2022.

£’billion

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

MACRO-ECONOMICS

The table that follows shows the key factors that form part of the UK and Other macro-economic scenarios and their relative

applied weightings.

At 31 March 2022

average 2022 – 2027

At 31 March 2021

average 2021 – 2026

Macro-economic scenarios

Upside

Base

case

Downside 1

inflation

Downside 2

global shock

Upside

Base

case

Downside 1

L-shape

Downside 2

fiscal crisis

GDP growth

2.6

1.9

0.8

0.3

5.4

4.2

1.3

0.9

Unemployment rate

3.3

3.7

5.4

6.4

4.3

4.7

6.9

7.8

CPI inflation

2.4

3.1

3.2

1.6

2.0

1.9

1.1

1.0

House price growth

3.5

2.9

1.5

(3.6)

3.7

1.6

0.7

(0.9)

BoE – Bank rate (end year)

1.8

1.9

2.0

(0.2)

1.0

0.6

(0.4)

(0.7)

Euro area

GDP growth

2.8

2.1

1.1

0.1

4.4

3.1

1.0

0.9

GDP growth

3.1

2.1

1.4

0.6

6.5

3.4

1.4

1.2

Scenario weightings

The following table shows annual averages of economic factors for the base case over a five-year period based on the

economic forecasts in place as at 31 March 2022.

Base case %

Financial years

2022/2023

2023/2024

2024/2025

2025/2026

2026/2027

GDP growth

2.4

2.1

1.6

Unemployment rate

3.8

3.7

CPI inflation

7.9

2.2

1.6

2.0

House price growth

5.9

1.6

2.3

2.4

BoE – Bank rate (end year)

1.5

2.0

Euro area

GDP growth

3.0

2.7

1.8

1.6

GDP growth

3.0

2.1

1.8

The following table outlines the extreme point forecast for each economic factor across the scenarios as at 31 March 2022.

Baseline represents the five-year base case average. Upside scenario values represent the best outcomes, namely the highest

quarterly level of GDP, house price growth (year-on-year), lowest level of unemployment and Bank rate. Upside scenario value

for CPI inflation is represented by the five-year average. Downside scenario values represent the worst outcomes being lowest

quarterly level of GDP, house price growth (year-on-year). For Bank rate and CPI inflation the most extreme point is listed, the

highest level reflective in downside 1 inflation scenario and the lowest level in downside 2 global shock scenario.

Five-year extreme points

At 31 March 2022

Upside

Baseline: Base

case five-year

average

Downside 1

inflation

Downside 2

global shock

GDP growth

4.5

1.9

(4.2)

(4.3)

Unemployment rate

3.2

3.7

7.0

7.4

CPI inflation

2.4

3.1

11.1

0.5

House price growth

9.0

2.9

(16.8)

(21.9)

BoE – Bank rate (end year)

0.8

1.9

4.0

(0.5)

Euro area

GDP growth

5.1

2.1

(3.5)

(4.2)

GDP growth

5.2

2.1

(3.9)

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

MACRO-ECONOMICS

CONTINUED

Climate risk and opportunities

Our position on climate change

We recognise the complexity and

urgency of climate change, and the

consequences this has on social well-

being. The Investec Group

environmental policy and climate change

statement considers the risks and

opportunities that climate change

presents to the global economy. We

believe that as a specialised financial

services organisation and given our

positioning in the developed and

emerging worlds, we can make a

meaningful impact in addressing climate

change. We support the Paris

Agreement aims of holding the increase

in global average temperature to well

below 2°C above pre-industrial levels

and continue to pursue efforts towards

limiting it to 1.5°C. We also recognise the

urgency and need to accelerate action

which has been incorporated into our

approach.

Our approach to net-zero

We embrace our responsibility to

understand and manage our own carbon

footprint. We upheld our commitment

and maintained carbon neutrality in our

direct operational carbon emissions

status for the fourth financial year by

sourcing almost 99% of our electricity

consumption from renewable energy

through the purchase of Renewable

Energy Certificates and offsetting the

remaining unavoidable emissions of 17%

through the purchase of verified and

high quality carbon credits. We

acknowledge that the widest and most

impactful influence we can have is to

manage and reduce our carbon

emissions in the business we conduct

and more specifically in our lending and

investing portfolios (Scope 3 financed

activities). As such, we are members of

the Net-Zero Banking Alliance (NZBA)

and we are working together with the

Partnership for Carbon Accounting

Financials (PCAF) to measure our

financed emissions and have

established a base line towards a net-

zero path.

We continue to build capacity within our

specialist skills in advisory, lending and

investing to support our clients and

stakeholders to move as quickly and

smoothly as possible towards a zero-

carbon economy.

Climate-related financial disclosures

(TCFD)

We publish a separate TCFD report that

aligns with the Financial Stability Board

Taskforce recommendations. The table

below illustrates a summary of progress

in terms of the TCFDs.

Refer to detailed information in

our 2022 TCFD report which will

be available on the Investec

Group’s website at the end of

June 2022.

Governance

Strategy

Risk management

Metrics

Achievements in prior years

•Established an ESG Executive

Committee to align and monitor

the Investec Group’s climate

action

•Assigned Board responsibility

and oversight for climate-

related risks and opportunities

•Assigned senior management

responsibility for climate-

related risks and opportunities

•Deepened the ESG skills of the

Group DLC SEC.

•Acknowledged the Paris

Agreement’s aim of holding the

increase in the global average

temperature to well below 2°C

compared to pre-industrial

levels and of pursuing efforts

towards limiting it to 1.5°C

•Created a sustainable finance

framework

•Launched a number of ESG and

climate specific products and

services.

•Evaluated our lending and

investment portfolios for climate-

related risks and opportunities

•Automated ESG screening

incorporated into the risk

management process.

•Achieved carbon neutral

status across our global

operations for direct

emissions and committed

to ongoing carbon neutral

emissions across all

operations

•Joined PCAF to

collaborate with peers

measuring Scope 3

financed emissions.

Achievements for the financial year ended

March 2022

•Became members of the Net-

Zero Banking Alliance (NZBA)

•W&I submitted their first UN

PRI report

•W&I joined Climate Action 100+

•Implemented a more holistic

ESG framework linked to

executive remuneration

•DLC tabled a voluntary climate

resolution at the August 2021

AGM, receiving 99.9% support.

•Assessed financed emissions in

material asset classes within

our lending and investment

portfolios

•Assessed impact of climate-

related risks and opportunities

in our businesses

•Collaborated on climate-related

disclosures with stakeholders,

for example, through PCAF

•Increased engagement within

W&I with existing companies

•W&I increased engagement on

climate-related matters with

the boards of companies.

•Followed the BoE stress test

guidelines

•Assessed climate-related risks

within our operations

•Strengthened our climate focus in

risk appetite

•Reviewed and approved IBP’s ‘no

coal’ ambition in the next three to

five years.

•Measured the carbon

intensity within material

asset classes for our

Scope 3 lending and

investment portfolios

using the PCAF and

PACTA methodologies

•Assessed net-zero

pathways according to the

SBTi and evaluated the

viability of the suggested

pathways within our

investment and lending

portfolios.

Looking forward

•Provide targeted development

to the Board, executives,

management and staff where

skills are required or where skill

gaps are identified

•Engage with stakeholders on

our disclosures to get

feedback on how we can

improve our governance and

oversight

•Stronger focus on climate-

related and sustainability

(including ESG) matters in the

IBP and DLC BRCC.

•Further engagement with our

clients to assist them in their

net-zero carbon ambitions

•Continue providing innovative

climate-related product

offerings

•Review and assess the

integration of climate-related

matters into business strategy

•Monitor the progress in terms

of the Bank’s net-zero carbon

ambition

•Continue to strengthen the

Bank’s climate-related and

sustainability disclosures.

•Continue to increase our focus on

climate-related and sustainability

(including ESG) risks

•Review developments with

regards to climate-related

disclosure guidance in specific

recommendations by the

International Sustainability

Standards Board (ISSB) and the

Financial Reporting Council (FRC)

•Enhanced focus on reporting on

climate-related risks.

•Engage with stakeholders

to get feedback on how

we can improve our

measurement and

methodologies used

•Continue to monitor

progress on the Bank’s

net-zero carbon ambitions

•Continue to assess climate

scenarios in line with

industry

recommendations.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

ESG (INCLUDING CLIMATE) RISK

Investment risk in the banking

book

Investment risk in the banking book

comprised 1.2% of total assets at

31 March 2022. We have refocused our

principal investment activities on clients

where we have and can build a broader

relationship through other areas

of activity in the Bank.

We partner with management and other

co-investors by bringing capital raising

expertise, working capital management,

merger and acquisition and investment

experience into client-driven private

equity transactions as well as leveraging

third party capital into the Investec

Group’s funds that are relevant to the

Bank’s client base. Investments are

selected based on:

•The track record and credibility of

management

•Attractiveness of the industry and the

positioning therein

•Valuation/pricing fundamentals

•Sustainability analyses

•Exit possibilities and timing thereof

•The ability to build value by

implementing an agreed strategy.

Investments in listed shares may arise

on an IPO, or sale of an investment to a

listed company. There is limited appetite

for listed investments.

Additionally, from time to time, the

manner in which certain lending

transactions are structured results

in equity, warrants or profit shares

being held, predominantly in unlisted

companies. We also source

development, investment and trading

opportunities to create value within

agreed risk parameters.

Management of investment risk

As investment risk arises from a variety

of activities conducted by the Bank, the

monitoring and measurement thereof

varies across transactions and/or type

of activity. Independent investment

committees exist in the UK which

provide oversight of the regions where

we assume investment risk.

Risk appetite limits and targets are

set to manage our exposure to equity

and investment risk.

An assessment of exposures against

limits and targets as well as stress

testing scenario analyses are performed

and reported to IBP BRCC.

As a matter of course, concentration risk

is avoided and investments are spread

across geographies and industries.

Valuation and sensitivity assumptions

and accounting methodologies

For a description of our valuation

principles and methodologies refer to

pages 191 to 196 and pages 222 to

239 for factors and sensitivities

taken into consideration in

determining fair value

An analysis of income and

revaluations of these investments

can be found in the investment

income note on page 203

Summary of investments

£’million

On-balance

sheet value of

investments

31 March 2022

On-balance

sheet value of

investments

31 March 2021

Unlisted investments

331

341

Listed equities

Total investment portfolio

333

351

Trading properties

Warrants and profit shares

Total

343

381

An analysis of investment portfolio, warrants and profit shares

31 March 2022

£339 million

Finance and insurance

47.0%

Real estate

12.7%

Manufacturing and commerce

11.2%

Retailers and wholesalers

9.4%

Transport

9.4%

Other

4.6%

Communication

2.9%

Leisure, entertainment and tourism

1.5%

Construction

1.3%

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

INVESTMENT RISK

Securitisation/structured credit

activities exposures

Overview

The Bank’s definition of securitisation/

structured credit activities is wider than

the definition applied for regulatory

capital purposes. The regulatory capital

definition focuses largely on positions

we hold in an investor capacity and

includes securitisation positions we have

retained in transactions in which the

Bank has achieved significant risk

transfer. We believe, however, that the

information provided below is

meaningful in that it groups all these

related activities in order for a reviewer

to obtain a full picture of the activities

that we have conducted in this space.

Some of the information provided below

overlaps with the Bank’s credit and

counterparty exposure information.

Since 1 January 2020, the UK has

applied the new securitisation

framework. Given risk-weightings under

this new framework are generally not

reliant on external ratings, a breakdown

by risk-weight has also been provided in

the analysis below.

Securitisation transactions provide the

Bank with a cost effective, alternative

source of financing either through sale

to the market or through use of the

notes issued as collateral for other

funding mechanisms.

We hold rated structured credit

instruments. These are UK and US

exposures and amounted to £381 million

at 31 March 2022 (31 March 2021: £557

million) with 96% being AAA and AA

rated. Of the total exposures structured

credit exposures, 99% have a risk

weighting of less than 40%.

Accounting policies

Refer to page 193

Risk management

All existing or proposed exposures to a

securitisation are analysed on a case-

by-case basis, with approval required

from credit. The analysis looks through

to the historical and expected future

performance of the underlying assets,

the position of the relevant tranche in

the capital structure as well as analysis

of the cash flow waterfall under a variety

of stress scenarios. External ratings and

risk-weightings are presented, but only

for information purposes since the Bank

principally relies on its own internal risk

assessment. Overarching these

transaction level principles is the Board-

approved risk appetite policy, which

details the Bank’s appetite for such

exposures, and each exposure is

considered relative to the Bank’s overall

risk appetite. We can use explicit credit

risk mitigation techniques where

required, however, the Bank prefers to

address and manage these risks by only

approving exposures to which the Bank

has explicit appetite through the

constant and consistent application of

the risk appetite policy.

Credit analysis

In terms of our analysis of our credit and

counterparty risk, exposures arising from

securitisation/structured credit activities

reflect only those exposures to which

we consider ourselves to be at risk.

Nature of exposure/activity

31 March 2022

£’million

31 March 2021

£’million

Balance sheet and credit risk

classification

Structured credit (gross exposure)

429

575

Other debt securities and other

loans and advances

<40% RWA

423

554

>40% RWA

Analysis of gross structured credit exposure

£’million

AAA

BBB

B and

below

Total

rated

Total

unrated

Total

US corporate loans

205

—

264

307

UK RMBS

—

117

122

Total at 31 March 2022

282

—

381

429

<40% RWA

282

—

380

423

>40% RWA

—

Total at 31 March 2021

376

173

—

557

575

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

SECURITISATION/STRUCTURED CREDIT

Market risk in the trading book

Traded market risk profile

The focus of our trading activities is

primarily on supporting our clients. Our

strategic intent is that proprietary

trading should be limited and that

trading should be conducted largely to

facilitate client flow. Within our trading

activities, we act as principal with clients

or the market. Market risk exists where

we have taken on principal positions

resulting from market making,

underwriting and facilitation of client

business in the foreign exchange,

interest rate, equity, credit and

commodity markets.

Traded market risk year in review

The financial year in review has been

characterised by two distinct market

regimes – a period of relative stability

and benign conditions, followed by a

period of increased volatility as a result

of strong inflation prints, commodity

price extremes, rapidly repricing yield

curves and more recently, geo-political

risks.

Market risk across the ongoing trading

desks remains limited, with the primary

focus continuing to be on managing and

hedging the market risk arising from

client-related activity. The UK Bank

continues to wind down its structured

products book with IBP executive

management, risk management and the

business closely monitoring the risk in

the substantially reduced remaining

book. The macro hedge implemented in

the prior year remains in place and has

provided downside protection in the

event of another extreme market

dislocation. The risk management

processes related to this book continue

to be reviewed and refined, and the

remaining risk on the book is regularly

reported to IBP and DLC BRCCs and the

respective Boards.

Utilisation of risk limits have remained

moderate and the desks have remained

prudent during the year.

Traded market risk governance

structure

Traded market risk is governed by

policies that cover the management,

identification, measurement and

monitoring of market risk. We have

independent market risk teams reporting

into risk management where limits are

approved, managed and monitored.

The market risk teams have reporting

lines that are separate from the trading

function, thereby ensuring independent

oversight. The Market Risk Forum,

mandated by the IBP ERC, manages

market risk in accordance with approved

principles, policies and risk appetite.

Trading desk risk limits are reviewed by

the Market Risk Forum and approved by

IBP ERC in accordance with the risk

appetite defined by the IBP Board. Any

significant changes in risk limits are then

taken to Group ERC for review and

approval. The appropriateness of limits

is continually reassessed, with limits

reviewed at least annually, in the event

of a significant market event or at the

discretion of senior management.

Measurement of traded market

risk

A number of quantitative measures are

used to monitor and limit exposure to

traded market risk. These measures

include:

•Value at Risk (VaR) and Expected

Shortfall (ES) as portfolio measures of

market risk exposure

•Scenario analysis, stress tests and

tools based on extreme value theory

(EVT) that measure the potential

impact on portfolio values of extreme

moves in markets

•Sensitivity analysis that measures the

impact of individual market risk factor

movements on specific instruments or

portfolios, including interest rates,

foreign exchange rates, equity prices,

credit spreads and commodity prices.

We use sensitivity measures to

monitor and limit exposure across

portfolios, products and risk types.

Stress and scenario analyses are used

to add insight into the possible

outcomes under severe market

disruptions. The stress‑testing

methodology assumes that all market

factors move adversely at the same time

and that no actions are taken during the

stress events to mitigate risk. Stress

scenarios based on historical experience

as well as hypothetical scenarios are

considered and are reviewed regularly

for relevance in the ever-changing

market environment. Stress scenarios

are run daily with analysis presented to

IBP Review ERRF weekly and IBP BRCC

when the committees meet or more

often should market conditions require

this.

Traded market risk management,

monitoring and control

Market risk limits are set according to

our risk appetite policy. Limits are set at

trading desk level with aggregate risk

across all desks also monitored against

overall market risk appetite limits.

Current market conditions as well as

stressed market conditions are taken

into account when setting and reviewing

these limits.

Market risk teams review the market

risks in the trading book with detailed

risk reports produced daily for each

trading desk and for the aggregate risk

of the trading book. The material risks

identified are summarised in daily

reports that are distributed to, and

discussed with senior management

when required. The production of risk

reports allows for the monitoring of all

positions in the trading book against

prescribed limits. Documented policies

and procedures are in place to ensure

there is a formal process for recognition

and authorisation for risk excesses

incurred.

The risk management software is fully

integrated with source trading systems,

allowing valuation in risk and trading

systems to be fully aligned. All valuation

models are subject to independent

validation by market risk ensuring

models used for valuation and risk are

validated independently of the front

office.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

MARKET RISK

Value at Risk

VaR is a technique that estimates the

potential losses as a result of

movements in market rates and prices

over a specified time horizon at a given

level of confidence. The VaR model

derives future scenarios from a historic

time series of market rates and prices,

taking into account inter-relationships

between the different markets such as

interest rates and foreign exchange

rates. The VaR model is based on a full

revaluation historical simulation and

incorporates the following features:

•Two-year historical period based on

an unweighted time series

•Daily movements in each risk factor

e.g. foreign exchange rates, interest

rates, equity prices, credit spreads

and associated volatilities are

simulated with reference to historical

market rates and prices, with proxies

only used when no or limited historical

market data is available

•Risk factor movements are based on

both absolute and relative returns as

appropriate for the different types of

risk factors.

VaR numbers using a one-day holding

period are monitored daily at the 95%

and 99% confidence intervals, with limits

set at the 95% confidence interval.

Expected shortfalls are also monitored

daily at the 95% and 99% levels, being

the average of the losses in the tail of

the VaR distribution.

The table below contains the 95% one-

day VaR figures for the trading

businesses.

31 March 2022

31 March 2021

95% one-day VaR

£’000

Year end

Average

High

Low

Year end

Average

High

Low

Equities

381

479

742

335

435

828

2 021

302

Foreign exchange

Interest rates

172

Credit

213

455

Consolidated*

370

469

699

340

456

896

2 155

289

*The consolidated VaR for each entity is lower than the sum of the individual VaRs. This arises from the correlation offset between various asset classes

(diversification).

Expected shortfall

The ES measure overcomes some of VaR’s shortcomings. ES seeks to quantify losses encountered in the tail beyond the VaR

level. The 95% one-day ES is the average loss given that the 95% one-day VaR level has been exceeded. The table below

contains the 95% one-day ES figures.

95% one-day ES

£’000

31 March 2022

31 March 2021

Equities

530

901

Foreign exchange

Interest rates

Credit

102

Consolidated*

525

941

*The consolidated ES for each entity is lower than the sum of the individual ESs. This arises from the correlation offset between various asset classes.

Stressed VaR

Stressed VaR (sVaR) is calculated using the VaR model but is based on a one-year period through which the relevant market

factors experienced stress. The information in the table below contains the 99% one-day sVaR.

£’000

31 March 2022

31 March 2021

99% one-day sVaR

858

722

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

MARKET RISK

CONTINUED

Backtesting

The performance of the VaR model is regularly monitored through backtesting. This is done by comparing daily clean profit and

loss against one-day VaR based on a 99% confidence level. Clean profit and loss excludes items such as intra-day transactions,

valuation adjustments, provisions, recoveries, commission, fees and hedge costs included in the new trade revenue. If a loss

exceeds the one-day VaR, a backtesting exception is considered to have occurred. Over time we expect the average rate of

observed backtesting exceptions to be consistent with the percentile of the VaR statistic being tested. This is conducted at an

aggregate and desk level on a daily basis.

The graph that follows shows the result of backtesting the total daily 99% one-day VaR against the clean profit and loss data for

our trading activities over the reporting period. Based on these graphs, we can gauge the accuracy of the VaR figures i.e. 99% of

the time, losses are not expected to exceed the 99% one-day VaR.

The average VaR for the year ended 31 March 2022 was lower than for the year ended 31 March 2021. Using clean profit and

loss data for backtesting resulted in no exceptions over the period at the 99% confidence level, i.e. where the loss was greater

than the 99% one-day VaR. Two to three exceptions are expected over a one year period. The absence of exceptions is

attributable to the reduced risk in the structured products book, the volatile 2020 COVID-19 data still being in the historic period

of the VaR model for much of the reporting period and the more stable equity markets experienced over much of the year.

99% one-day VaR backtesting (£)

Stress testing

The table below indicates the potential losses that could arise in the trading book portfolio per EVT at the 99% confidence level.

EVT is a methodology widely used to estimate tail-event losses beyond the 95% one-day VaR. These numbers do not assume

normality but rather rely on fitting a distribution to the tails of the VaR distribution.

99% EVT

£’000

31 March 2022

31 March 2021

Equities

1 503

5 315

Foreign exchange

Interest rates

182

134

Credit

366

Consolidated#

1 420

5 335

# The consolidated stress testing for each entity is lower than the sum of the individual stress test numbers. This arises from the correlation offset between

various asset classes.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

MARKET RISK

CONTINUED

Clean profit and loss histogram

The histogram below illustrates the distribution of clean profit and loss during the financial year for our trading businesses. The

graph shows that a clean profit was realised on 162 days out of a total of 253 days in the trading business. The average daily

clean profit and loss generated for the year to 31 March 2022 was £55 676 (year to 31 March 2021: £446).

Clean profit and loss

Frequency: Days in the year

Market risk – derivatives

The Bank enters into various derivatives contracts, largely on the back of customer flow. These are used for hedging foreign

exchange, interest rates, commodity, equity and credit exposures and to a small extent as principal for trading purposes. Traded

instruments include financial futures, options, swaps and forward rate agreements.

Information showing our derivative trading portfolio over the reporting period on the basis of the notional principal and

the fair value of all derivatives can be found on pages 244 and 245

The notional principal indicates our activity in the derivatives market and represents the aggregate size of total outstanding

contracts at year end. The fair value of a derivative financial instrument represents the present value of the positive or negative

cash flows which would have occurred had we closed out the rights and obligations arising from that instrument in an orderly

market transaction at year end. Both these amounts reflect only derivatives exposure and exclude the value of the physical

financial instruments used to hedge these positions.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

MARKET RISK

CONTINUED

Balance sheet risk management

Balance sheet risk encompasses the

financial risks relating to our asset and

liability portfolios, comprising liquidity,

funding, concentration, encumbrance

and non-trading interest rate risk.

Balance sheet risk governance

structure and risk mitigation

Investec plc (and its subsidiaries,

including IBP) are ring-fenced from

Investec Limited (and its subsidiaries),

and vice versa. Both legal entities (and

their subsidiaries) are therefore required

to be self-funded, and manage their

funding and liquidity as separate

entities.

Risk appetite limits are set at the

relevant Board level and reviewed at

least on an annual basis. The size,

materiality, complexity, maturity and

depth of the market as well as access to

stable funds are all inputs considered

when establishing the liquidity and non-

trading interest rate risk appetite for

each relevant region. Specific regulatory

requirements may further dictate

additional restrictions to be adopted in a

region.

Under delegated authority of the

respective Boards, the Investec Group

has established ALCOs within each

banking entity, using regional expertise

and local market access as appropriate.

The ALCOs are mandated to ensure

independent supervision of liquidity risk

and non-trading interest rate risk within

the risk appetite.

ALCOs meet on at least a monthly basis

to review the exposures within the

balance sheet together with market

conditions, and decide on strategies to

mitigate any undesirable liquidity and

interest rate risk. The Treasury function

within each banking entity is mandated

to holistically manage the liquidity

mismatch and non-trading interest rate

risk arising from our asset and liability

portfolios on a day-to-day basis.

The Treasury function, by banking

entity, is required to exercise tight

control of liquidity, funding,

concentration, encumbrance and non-

trading interest rate risk within the

Board-approved risk appetite limits.

Non-trading interest rate risk and asset

funding requirements are transferred

from the originating business to the

Treasury function.

The Treasury function, by banking

entity, directs pricing for all deposit

products, establishes and maintains

access to stable funds with the

appropriate tenor and pricing

characteristics, and manages liquid

securities and collateral, thus providing

prudential management and a flexible

response to volatile market conditions.

We maintain an internal funds transfer

pricing system based on prevailing

market rates. Our funds transfer pricing

system charges the businesses the price

of liquidity taking into account the

behavioural duration of the asset. The

costs and risks of liquidity are clearly

and transparently attributed to business

lines thereby ensuring that price of

liquidity is integrated into business level

decision-making and drives the

appropriate mix of sources and uses of

funds.

Balance sheet risk management is based

within Group risk management and is

responsible for identifying, quantifying

and monitoring risks; providing daily

independent governance and oversight

of the treasury activities and the

execution of the Bank’s policies.

There is a regular internal audit of the

balance sheet risk management

function, the frequency of which is

determined by internal audit.

Daily, weekly and monthly reports are

independently produced highlighting

Group activity, exposures and key

measures against thresholds and limits

and are distributed to management,

ALCO, Treasury, IBP Review ERRF, IBP

ERC and IBP BRCC as well as

summarised reports for Board meetings.

Liquidity risk

Liquidity risk is further broken down into:

•Funding liquidity risk: this relates to

the risk that the Bank will be unable to

meet current and/or future cash flows

or collateral requirements in the

normal course of business, without

adversely affecting its solvency,

financial position or its reputation

•Market liquidity risk: this relates to

the risk that the Bank may be unable

to trade in specific markets or that it

may only be able to do so with

difficulty due to market disruptions or

a lack of market liquidity.

Management and measurement of

liquidity risk

Cohesive liquidity management is vital

for protecting our depositors, preserving

market confidence, safeguarding our

reputation and ensuring sustainable

growth with established funding

sources. Through active liquidity

management, we seek to preserve

stable, reliable and cost-effective

sources of funding. As such, the Bank

considers ongoing access to appropriate

liquidity for all its operations to be of

paramount importance, and our core

liquidity philosophy is reflected in day-

to-day practices which encompass the

following robust and comprehensive set

of policies and procedures for assessing,

measuring and controlling liquidity risk:

•Our liquidity management processes

encompass requirements set out

within Basel Committee on Banking

Supervision (BCBS) guidelines and by

the regulatory authorities in each

jurisdiction, namely the PRA, EBA,

GFSC and FINMA

•The risk appetite is clearly defined by

the Board and each geographic entity

must have its own Board-approved

policies with respect to liquidity risk

management

•We maintain a liquidity buffer in the

form of unencumbered cash,

government or rated securities

(typically eligible for repurchase with

the central bank), and near cash well

in excess of the regulatory

requirements as protection against

unexpected disruptions in cash flows

•Funding is diversified with respect to

currency, term, product, client type

and counterparty to ensure a varied

overall funding mix

•We monitor and evaluate each

banking entity’s maturity ladder and

funding gap (cash flow maturity

mismatch) on a ‘liquidation’, ‘going

concern’ and ‘stress’ basis

•The balance sheet risk management

team independently monitors key daily

funding metrics and liquidity ratios to

assess potential risks to the liquidity

position, which further act as early

warning indicators of potential market

disruptions

•The maintenance of sustainable

prudent liquidity resources takes

precedence over profitability

• The Bank maintains contingency

funding plans designed to protect

depositors, creditors and shareholders

and maintain market confidence

during adverse liquidity conditions.

We measure liquidity risk by quantifying

and calculating various liquidity risk

metrics and ratios to assess potential

risks to the liquidity position. These

include:

•An internal ‘survival horizon’ metric

which models the number of days it

takes before the Bank’s cash position

is depleted under an internally defined

worst-case liquidity stress

•Regulatory metrics for liquidity

measurement:

–Liquidity Coverage Ratio (LCR)

–Net Stable Funding Ratio (NSFR)

•An array of liquidity stress tests,

based on a range of scenarios and

using historical analysis, documented

experience and prudent judgement to

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

model the impact on the Bank’s

balance sheet

•Contractual run-off based actual cash

flows with no modelling adjustments

•Additional internally defined funding

and balance sheet ratios

•Any other local regulatory

requirements.

This suite of metrics ensures the smooth

management of the day-to-day liquidity

position within conservative parameters

and further validates that we are able to

generate sufficient liquidity to withstand

a range of liquidity stresses or market

disruptions.

The parameters used in stress scenarios

are reviewed at least annually, taking

into account changes in the business

environments and input from business

units. The objective is to analyse the

possible impact of an economic event

on the Bank’s balance sheet, so as to

maintain sufficient liquidity and to

continue to operate for a minimum

period as detailed in the Board-

approved risk appetite.

We further carry out reverse stress tests

to identify business model vulnerabilities

which tests ‘tail risks’ that can be missed

in normal stress tests. The Bank has

calculated the severity of stress required

to breach the liquidity requirements.

This scenario is considered highly

unlikely given the Bank’s strong liquidity

position, as it requires an extreme

withdrawal of deposits combined with

the inability to take any management

actions to breach liquidity minima that

threatens the Bank’s liquidity position.

The Bank operates an industry-

recognised third party risk modelling

system in addition to custom-built

management information systems

designed to measure and monitor

liquidity risk on both a current and

forward-looking basis.

Funding strategy

We maintain a funding structure of

stable customer deposits and long-term

wholesale funding well in excess of

funded assets. We target a diversified

funding base, avoiding undue

concentrations by investor type,

maturity, market source, instrument and

currency. As a result, we are able to

generate funding from a broad range of

sources in each geographic location,

which ensures a varied overall funding

mix to support loan growth.

We acknowledge the importance of our

retail deposit client base as the principal

source of stable and well diversified

funding. We continue to develop

products to attract and service the

investment needs of our client base in

line with our risk appetite.

The Bank actively participates in global

financial markets and our relationship is

continuously enhanced through regular

investor presentations internationally.

Entities are only allowed to have funding

exposure to wholesale markets where

they can demonstrate that the market is

sufficiently deep and liquid, and then

only relative to the size and complexity

of their business as part of a diversified

funding mix.

The Bank’s ability to access funding at

cost-effective levels is influenced by

maintaining or improving the entity’s

credit rating. A reduction in these ratings

could have an adverse effect on the

Bank’s funding costs, and access to

wholesale term funding. Credit ratings

are dependent on multiple factors,

including operating environment,

business model, strategy, capital

adequacy levels, quality of earnings, risk

appetite and exposure, and control

framework.

We remain confident in our ability to

raise funding appropriate to our needs.

Liquidity buffer

To protect against potential shocks, we

hold a liquidity buffer in the form of

cash, unencumbered high quality liquid

assets (typically in the form of

government or rated securities eligible

for repurchase with the central bank),

and near cash, well in excess of the

regulatory requirements as protection

against disruptions in cash flows. These

portfolios are managed within Board-

approved targets, and as well as

providing a buffer under going concern

conditions, also form an integral part of

the broader liquidity generation strategy.

The Bank remains a net liquidity provider

to the interbank market, placing

significantly more funds with other

banks than our short-term interbank

borrowings. We do not rely on overnight

interbank deposits to fund term lending.

From 1 April 2021 to 31 March 2022

average cash and near cash balances

over the period amounted to £7.5 billion.

Cash and near cash trend

£’million

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

CONTINUED

An analysis of cash and near cash

at 31 March 2022

Bank and non-bank depositor

concentration by type at 31 March 2022

£8 871 million

£20 643 million

Central Bank cash placements and guaranteed liquidity

76.4%

Individuals

56.0%

Cash

20.0%

Other financial institutions and corporates

29.7%

Near cash (other ‘monetisable’ assets)

3.6%

Banks

9.8%

Small business

4.5%

Contingency planning

We maintain a contingency funding plan which details the

course of actions that can be taken in the event of a liquidity

stress. The plan helps to ensure that cash flow estimates and

commitments can be met in the event of general market

disruption or adverse bank-specific events, while minimising

detrimental long-term implications for the business. The plan

includes:

•Details on the required daily monitoring of the liquidity

position

•Description of the early warning indicators to be monitored,

and process of escalation if required

•Liquidity stress scenarios to be modelled for Contingency

Funding Plan (CFP) purposes (over and above daily stress

testing scenarios)

•Funding and management actions available for use in a

stress situation

•Roles and responsibilities

•Details of specific escalation bodies and key contacts

•Internal and external communication plans.

The plan has been tested via an externally facilitated liquidity

crisis simulation exercise which assessed the Bank’s

sustainability and ability to adequately contain a liquidity

stress.

The PRA strongly encourages firms to combine their CFP and

recovery plan into one integrated document. The integration of

the CFP into the Investec plc recovery plan was approved by

the Board during the financial year.

Further information on recovery and resolution planning

can be found on page 108

Asset encumbrance

An asset is defined as encumbered if it has been pledged as

collateral against an existing liability and, as a result, is no

longer available to the Bank to secure funding, satisfy

collateral needs or be sold to reduce the funding requirement.

Risk management monitors and manages total balance sheet

encumbrance within a Board-approved risk appetite limit.

Asset encumbrance is one of the factors considered in the

discussion of new products or new funding structures, and the

impact on risk appetite is assessed.

The Bank uses secured transactions to manage short-term

cash and collateral needs, and utilises securitisations in order

to raise external term funding as part of its diversified liability

base. Securitisation notes issued are also retained by the Bank

which are eligible for the BoE’s Single Collateral Pool to

support central bank liquidity facilities.

Encumbered assets are identified in accordance with the

definitions under European Capital Requirements Regulation

(CRR), and regular reporting is provided to the EBA and PRA.

On page 242 we disclose further details of assets that

have been received as collateral under reverse

repurchase agreements and securities borrowing

transactions where the assets are allowed to be resold

or pledged

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

CONTINUED

Liquidity mismatch

The tables that follow show the Bank’s

contractual and behavioural liquidity

mismatch.

With respect to the contractual liquidity

table that follows, we record all assets

and liabilities with the underlying

contractual maturity as determined by

the cash flow profile for each deal.

With respect to the behavioural liquidity

gap, we adjust the contractual profile of

certain assets and liabilities:

•Liquidity buffer: the actual contractual

profile of the assets in the liquidity

buffer is of little consequence, as

practically the Bank would meet any

unexpected net cash outflows by

repo’ing or selling these highly liquid

securities. Consequently, for the

liquidity buffer:

–The time horizon to monetise our

regulatory liquid assets which are

guaranteed by the central bank has

been adjusted to ‘on demand’

–The time horizon for the cash and

near cash portfolio of discretionary

treasury assets has been set to one

month where there are deep

secondary markets for this elective

asset class

•Customer deposits: the contractual

repayments of many deposits are on

demand, or at notice, but in reality

withdrawals vary significantly from

this. Historical observations of the

products are used to model the

behavioural lives, and this analysis has

identified significant additional

sources of structural liquidity in the

form of core deposits that exhibit

stable behaviour.

Contractual liquidity at 31 March 2022

£’million

Demand

to one

month

One to

three

months

Three

to six

months

Six

months

to one

year

One

to five

years

> Five

years

Total

Cash and short-term funds –

banks

6 763

—

6 847

Investment/trading assets

552

680

352

314

520

694

1 225

4 337

Securitised assets

—

Advances

720

527

1 093

1 445

7 569

3 216

14 574

Other assets

106

773

389

353

1 738

Assets

7 425

2 227

961

1 451

1 983

8 684

4 858

27 589

Deposits – banks

(278)

(92)

—

(1 657)

—

(2 027)

Deposits – non-banks

(7 734)

(644)

(3 622)

(2 988)

(2 079)

(1 461)

(88)

(18 616)

Negotiable paper

(1)

(5)

(7)

(31)

(41)

(1 023)

(13)

(1 121)

Securitised liabilities

—

(3)

(5)

(27)

(58)

—

(96)

Investment/trading liabilities

(115)

(166)

(93)

(65)

(233)

(312)

(77)

(1 061)

Subordinated liabilities

—

(759)

Other liabilities

(97)

(781)

(45)

(69)

(28)

(289)

(53)

(1 362)

Liabilities

(8 225)

(1 691)

(3 770)

(3 158)

(2 408)

(4 800)

(990)

(25 042)

Total equity

—

(2 547)

Contractual liquidity gap

(800)

536

(2 809)

(1 707)

(425)

3 884

1 321

—

Cumulative liquidity gap

(800)

(264)

(3 073)

(4 780)

(5 205)

(1 321)

—

Behavioural liquidity at 31 March 2022

As discussed above.

£’million

Demand

to one

month

One to

three

months

Three

to six

months

Six

months

to one

year

One

to five

years

> Five

years

Total

Behavioural liquidity gap

5 835

160

(2 574)

(1 342)

(596)

(2 756)

1 273

—

Cumulative

5 835

5 995

3 421

2 079

1 483

(1 273)

—

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

CONTINUED

Non-trading interest rate risk

description

Sources of interest rate risk in the

banking book include:

•Repricing risk: arises from the timing

differences in the fixed rate maturity

and floating rate repricing of Bank

assets, liabilities and off-balance

sheet derivative positions. This affects

the interest rate margin realised

between lending income and

borrowing costs when applied to our

rate sensitive portfolios

•Yield curve risk: repricing

mismatches also expose the Bank to

changes in the slope and shape of the

yield curve

•Basis risk: arises from imperfect

correlation in the adjustments of the

rates earned and paid on different

instruments with otherwise similar

repricing characteristics

•Embedded option risk: arises from

optional elements embedded in items

where the Bank or its customers can

alter the level and timing of their cash

flows

•Endowment risk: refers to the

interest rate risk exposure arising from

the net differential between interest

rate insensitive assets, interest rate

insensitive liabilities and capital.

The above sources of interest rate risk

affect the interest rate margin realised

between lending income and borrowing

costs when applied to our rate sensitive

asset and liability portfolios, which has a

direct effect on future net interest

earnings and the economic value of

equity.

Measurement and management of non-

trading interest rate risk

Non-trading interest rate risk is an

inherent consequence of conducting

banking activities, and arises from the

provision of non-trading banking

products and services. The Bank

considers the management of banking

margin of vital importance, and our non-

trading interest rate risk philosophy is

reflected in our day-to-day practices.

The aim of non-trading interest rate risk

management is to protect and enhance

net interest income and economic value

of equity in accordance with the Board-

approved risk appetite and to ensure a

high degree of stability of the net

interest margin over an interest rate

cycle. Non-trading interest rate risk is

measured and analysed by utilising

standard tools of traditional interest rate

repricing mismatch and net present

value (NPV) sensitivity to changes in

interest rate risk factors:

•Income metrics capture the change in

accruals expected over a specified

time horizon in response to a change

in interest rates

•Economic value metrics capture all

future cash flows in order to calculate

the Bank’s net worth and therefore

can highlight risks beyond the short-

term earnings time horizon.

These metrics are used to assess and to

communicate to senior management the

financial impact of possible future

interest rate scenarios, covering:

•Interest rate expectations and

perceived risks to the central view

•Standard shocks to levels and shapes

of interest rates and yield curves

•Historically-based yield curve

changes.

The repricing gap provides a simple

representation of the balance sheet,

with the sensitivity of fair values and

earnings to changes to interest rates

calculated off the repricing gap. This

also allows for the detection of interest

rate risk concentration in specific

repricing buckets. Net interest income

sensitivity measures the change in

accruals expected over the specified

horizon in response to a shift in the yield

curve, while economic value sensitivity

and stress testing to macro-economic

movement or changes to the yield curve

measures the interest risk implicit

change in net worth as a result of a

change in interest rates on the current

values of financial assets and liabilities.

Economic value measures have the

advantage that all future cash flows are

considered and therefore assess the risk

beyond the earnings horizon.

Each banking entity has its own Board-

approved non-trading interest rate risk

appetite, which is clearly defined in

relation to both income risk and

economic value risk. The Bank has

limited appetite for non-trading interest

rate risk.

Operationally, daily management of

interest rate risk is centralised within the

Treasury of each banking entity and is

subject to local independent risk and

ALCO review. Treasury mitigates any

residual undesirable risk where possible,

by changing the duration of the banking

book’s discretionary liquid asset

portfolio, or through derivative

transactions. The Treasury mandate

allows for a tactical response to market

volatility which may arise during

changing interest rate cycles, in order to

hedge residual exposures. Any resultant

interest rate position is managed under

the market risk limits. Balance sheet risk

management independently monitors a

broad range of interest rate risk metrics

to changes in interest rate risk factors,

detailing the sources of interest rate

exposure.

Automatic optionality arising from

variable rate products with an

embedded minimum lending rate serves

as an income protection mechanism for

the Bank against falling interest rates,

while behavioural optionality risk from

customers of fixed rate products is

mitigated by early repayment charges.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

CONTINUED

Interest rate sensitivity gap at 31 March 2022

The table below shows our non-trading interest rate mismatch assuming no management intervention.

£’million

Not

> three

months

> Three

months but <

six months

> Six months

but < one

year

> One year

but < five

years

> Five

years

Non-rate

Total non-

trading

Cash and short-term funds – banks

6 812

—

6 812

Investment/trading assets

2 153

169

152

162

333

3 001

Securitised assets

—

Advances

9 606

651

656

3 304

357

—

14 574

Other assets

—

1 388

Assets

18 664

820

808

3 466

389

1 721

25 868

Deposits – banks

(1 984)

(10)

(4)

(27)

—

(2 025)

Deposits – non-banks

(15 078)

(1 107)

(1 743)

(630)

—

(18 558)

Negotiable paper

(466)

—

(507)

—

(973)

Securitised liabilities

(96)

—

(96)

Investment/trading liabilities

(129)

—

(129)

Subordinated liabilities

—

(759)

—

(759)

Other liabilities

—

(872)

Liabilities

(17 753)

(1 117)

(1 747)

(1 923)

—

(872)

(23 412)

Total equity

—

(2 456)

Balance sheet

911

(297)

(939)

1 543

389

(1 607)

—

Off-balance sheet

1 358

(7)

221

(1 244)

(328)

—

Repricing gap

2 269

(304)

(718)

299

(1 607)

—

Cumulative repricing gap

2 269

1 965

1 247

1 546

1 607

—

Economic value sensitivity at 31 March 2022

As outlined, non-trading interest rate risk is measured and monitored using an economic value sensitivity approach. The table

below reflects our economic value sensitivity to a 2% parallel shift in interest rates assuming no management intervention. This

sensitivity effect would only have a negligible direct impact on our equity.

Sensitivity to the following interest rates

(expressed in original currencies)

million

GBP

USD

EUR

AUD

ZAR

Other (GBP)

All (GBP)

200bps down

(13.0)

7.7

3.0

1.8

—

0.1

(3.5)

200bps up

15.7

(5.5)

(2.2)

(1.8)

—

8.6

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

CONTINUED

100

Interest rate risk - IBOR reform

During the financial year, the Bank has successfully

transitioned almost all of the GBP assets away from

referencing IBOR to referencing alternative rates. A small

number of remaining GBP loans are expected to reference

Synthetic LIBOR. Furthermore, as from 1 January 2022, all new

USD lending is non-LIBOR based. The project will still continue

to monitor the transition of existing USD LIBOR linked products

to alternative rates, ahead of USD LIBOR cessation on 30 June

2023. For other benchmark interest rates such as EURIBOR

that have been reformed and can therefore continue, financial

instruments referencing those rates will not need to transition.

Given progress to date, the Bank has limited remaining risk

with respect to ongoing IBOR reform.

The project was led by senior representatives from functions

across the Bank including the client facing teams, Treasury,

legal, finance, operations, risk and technology and provided

regular progress updates to the DLC Board, DLC BRCC and

IBP BRCC.

IBOR reform exposes the Bank to various risks, which the

project is managing and monitoring closely.

These risks include but are not limited to the following:

•Conduct risk arising from discussions with clients and

market counterparties due to the amendments required to

existing contracts necessary to effect IBOR reform

•Business risk to the Bank and its clients that markets are

disrupted due to IBOR reform giving rise to financial losses

•Pricing risk from the potential lack of market information if

liquidity in IBORs reduces and risk-free rates are illiquid and

unobservable

•Operational risk arising from changes to the Bank’s IT

systems and processes, also the risk of payments being

disrupted if an IBOR ceases to be available

•Accounting risk if the Bank’s hedging relationships fail and

from unrepresentative income statement volatility as

financial instruments transition to risk-free rates

The tables that follow summarise the exposures impacted by interest rate benchmark reform.

At 31 March 2022

GBP

IBOR - no. of trades

GBP - Notional value

(£’million)

Other

IBOR - no. of trades

Other - Notional

value (£’million)

Derivatives

729

19 946

Other debt securities

208

Reverse repurchase agreements and cash

collateral on securities borrowed

—

114

Loans and advances to customers

185

174

1 345

Of which undrawn

—

193

Customer accounts (deposits)

—

456

Debt securities in issue

—

At 31 March 2021

GBP

IBOR - no. of trades

GBP - Notional value

(£’million)

Other

IBOR - no. of trades

Other - Notional

value (£’million)

Pre-2022 dated instruments

Derivatives

126

2 663

113

3 746

Sovereign debt securities

—

Other debt securities

—

Reverse repurchase agreements and cash

collateral on securities borrowed

—

Loans and advances to customers

491

982

104

196

Of which undrawn

—

178

—

Customer accounts (deposits)

Post-2022 dated instruments

Derivatives

613

11 054

769

20 681

Other debt securities

256

306

Reverse repurchase agreements and cash

collateral on securities borrowed

—

Loans and advances to customers

897

3 363

257

1 694

Of which undrawn

—

590

—

295

Other loans and advances

103

Customer accounts (deposits)

449

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

CONTINUED

101

Regulatory requirements

Liquidity risk

In response to the 2008/09 global

financial crisis, the BCBS introduced a

series of reforms designed to both

strengthen and harmonise global

liquidity standards to ensure strong

financial risk management and a safer

global economy.

Two minimum standards for funding

liquidity were introduced:

•The liquidity coverage ratio (LCR) is

designed to ensure that banks have

sufficient high quality liquid assets to

meet their liquidity needs throughout

a 30-calendar day severe stress

•The net stable funding ratio (NSFR) is

designed to capture structural issues

over a longer time horizon by requiring

banks to have a sustainable maturity

structure of assets and liabilities.

Following the UK’s departure from the

EU, the PRA have exercised temporary

transitional powers (TTP), meaning that

EU regulation in place prior to the end of

the transition period largely remained

valid in the UK until 31 March 2022. As

such, the LCR is calculated following the

EU Delegated Act and our own

interpretations where the regulation

calls for it. Banks are required to

maintain a minimum LCR of 100%. As at

31 March 2022 the LCR was 476% for

IBP (solo basis).

Within the UK, the NSFR has become a

binding requirement for banks since

January 2022. Banks are now required

to maintain a minimum NSFR of 100%.

Our calculation of the NSFR is based on

the reporting requirements set out in

Implementation of Basel standards July

2021 Annexes XII and XVIII of the CRR

Regulatory Reporting Part of the PRA

rulebook. The NSFR at 31 March 2022

was 136% for IBP (solo basis).

Investec plc undertakes an annual ILAAP

which documents the approach to

liquidity management across the firm,

including IBP (solo basis). This document

is reviewed and approved by IBP BRCC,

DLC BRCC and by the IBP and DLC

Boards before being provided to the

PRA for use, alongside the Liquidity

Supervisory Review and Evaluation

Process, to determine the bank’s

Individual Liquidity Guidance, also

known as a Pillar II requirement.

Non-trading interest rate risk

In 2016, the BCBS finalised their

standards for non-trading interest rate

risk which recommended the risk is

assessed as part of the Bank’s capital

requirements, outlined six prescribed

shock scenarios, and recommended

enhanced disclosure requirements for

supervisors to implement.

Within the UK, the PRA have published

the PS 22/21 Implementation of the

Basel standards, which are new binding

rules on the interest rate risk arising

from non-trading activities, effective

since 1 January 2022.

The regulatory framework requires

banks to assess their Pillar II

requirements, including those related to

non-trading interest rate risk, as part of

their ICAAP. This is reviewed on at least

an annual basis and reviewed and

approved by IBP BRCC, DLC BRCC and

by the IBP and DLC Boards.

Balance sheet risk year in review

The Bank maintained its strong liquidity

position and continues to hold high

levels of surplus liquid assets. Our

liquidity risk management process

remains robust and comprehensive.

Funding continues to be dynamically

raised through a mix of customer

liabilities diversified by customer type,

currency, channel and tenor, avoiding

reliance on any particular channel and

ensuring continued access to a wide

range of depositors. Those diversified

funding channels have proven to be

capable of raising funding throughout

the year supporting both strong asset

growth and our strategy to transition

retail deposits from a non-digital

process to the new lower cost digital

platform. The new digital retail deposit

products have demonstrated strong

growth in the market with the launch of

our Fixed Rate Saver product in July

2021, complementing the continued

growth of our Online Flexi Saver book

following its launch in 2020/2021.

We have limited reliance on wholesale

funding but we maintain access and

presence, using such issuance to

strategically diversify our funding base

and complement the other liability

channels by focusing, where

appropriate, on tenor and currency.

Wholesale issuance in the year took

advantage of strong market conditions

in 2021 to focus on both additional

opportunities and refinance maturities at

attractive spreads, with the added

benefit of continuing to diversify the

debt capital markets investor base.

As at 31 March 2022, IBP had £1.2 billion

of drawings under the BoE Term

Funding Scheme with additional

incentives for Small and Medium

Enterprises (TFSME) maturing in late

2025.

This overall approach has enabled the

Bank to maintain a strong liquidity

position at the year end across a range

of metrics in line with our conservative

approach to balance sheet risk

management.

Cash and near cash balances at 31

March 2022 amounted to £8.9 billion (31

March 2021: £6.9 billion). Total customer

deposits were £18.6 billion at 31 March

2022 (31 March 2021: £16.2 billion).

Looking forward, the focus remains on

maintaining a strong liquidity position in

light of both market volatility as a result

of inflationary concerns and

exacerbated by the Russian invasion of

Ukraine, as well as the support of the

ongoing digital retail transition strategy.

Funding continues to be actively raised,

particularly in the retail market through

the digital channels, in line with a

medium- to long-term strategy to

reduce the overall cost of the liability

base supported by stable credit ratings.

Refer to page 47 for further detail

on credit ratings

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

CONTINUED

102

Operational risk

Operational risk is an inherent risk in the ordinary course of business activity. The impact could be financial as well as non-

financial. Possible non-financial impacts could include customer detriment, reputational or regulatory consequences.

Management and measurement of operational risk

The Bank manages operational risk through an operational risk management framework that is embedded across all levels of the

organisation and is supported by a strong risk management culture. The key purpose of the operational risk management

framework is to define the policies and practices that provide the foundation for a structured and integrated approach to

identify, assess, mitigate/manage, monitor and report on operational risks.

The key operational risk practices are as follows:

Identify and assess

Risk and control

assessments

•Risk and control assessments are forward-looking, qualitative assessments of inherent and

residual risk that are performed on key business processes using a centrally defined risk

framework

•These assessments enable business to identify, manage and monitor operational risks,

incorporating other elements of the operational risk management framework such as risk

events and key indicators

•Detailed control evaluations are performed, and action plans developed and implemented

where necessary to ensure that risk exposure is managed within acceptable levels.

Internal risk

events

•Internal risk events provide an objective source of information relating to failures in the

control environment

•The tracking of internal risk event data provides an opportunity to improve the control

environment and to minimise the occurrence of future risk events

•In addition, internal risk event data is used as a direct input into the Pillar II capital modelling

process.

External risk

events

•External risk events are operational risk related events experienced by external financial

institutions

•Investec Group is an active member of a global external data service used to benchmark our

internal risk event data against other local and international financial service organisations

•The external data is analysed to enhance the control environment, inform scenario analysis

and provide insight into emerging operational risks.

Scenario analysis

Mitigate/

manage

Risk exposures

•Risk exposures are identified through the operational risk management processes, including

but not limited to risk assessments, internal risk events, key indicators and audit findings

•Residual risk exposure is evaluated in terms of the Group’s risk appetite and mitigated where

necessary by improving the control environment, transferring through insurance, terminating

the relevant business activity or accepting the risk exposure for a period of time subject to

formal approval and monitoring.

Monitor

Key risk indicators

•Indicators are metrics used to monitor risk exposures against identified thresholds

•The output provides predictive capability in assessing the risk profile of the business.

Operational risk governance framework

The operational risk governance structures form an integral

part of the operational risk management framework. Key

components of the governance structures are:

Roles and responsibilities

The Bank, in keeping with sound governance practices, has

defined roles and responsibilities for the management of

operational risk in accordance with the three lines of defence

model, i.e. business line management, an independent

operational risk function and an independent internal audit

function.

Specialist control functions are responsible for the

management of key operational risks. These include, but are

not limited to: compliance (including financial crime

compliance), cyber, finance, fraud, legal and information

security risks.

Committees

Operational risk is managed and monitored through various

governance forums and committees that are integrated with

the Bank’s risk management governance structure and report

to Board level committees.

The Bank’s operational risk profile is reported to the

governance forums and committees on a regular basis, which

contributes to sound risk management and decision-making

by the Board and management.

•Operational risk:

Management forums and committees are in place at each

entity level. Key responsibilities include the monitoring of

operational risk and oversight of the operational risk

management framework, including approval of the operational

risk management policies.

•Technology and information security risk:

The DLC IT Risk and Governance Committee is responsible for

the monitoring of current and emerging technology and

information security risk. In addition, the committee considers

the strategic alignment of technology and business.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

OPERATIONAL RISK

103

Risk appetite

Operational risk appetite is defined as

the level of risk exposure that is

acceptable to the Board in order to

achieve its business and strategic

objectives. The Board is responsible for

setting and regularly reviewing the risk

appetite. The operational risk appetite

policy defines the amount of operational

risk exposure, or potential adverse

impact of a risk event, that the Bank is

willing to accept.

Operational risks are managed in

accordance with the approved risk

appetite. Any breaches of limits are

escalated in accordance with the

appropriate governance structures.

Operational risk year in review

Key operational risk themes

During the year the Bank remained

focused on the management of the

following key operational risk themes:

Business disruption and operational

resilience risk

•Resilience capabilities continued to be

tested by the ongoing pandemic

•The growing regulatory requirements

for operational resilience increased

the compliance expectations and

delivery of stakeholder value.

Information security and cyber risk

•Accelerated digitalisation of the

business and client services, and

remote/hybrid working, increased the

inherent cyber risk

•The sophistication of threat actors

continued to represent a growing

threat, with both frequency and

intensity of attacks increasing on a

global scale

•Security monitoring was stepped up in

light of the Russian invasion of

Ukraine and associated escalation in

cyber risk to the financial services

sector

•The Bank’s cyber risk was well

managed, and no material impact or

losses attributed to cyber events were

experienced.

People risk

•The COVID-19 pandemic continued to

impact on the physical, financial and

emotional wellbeing of staff

•Reduced infection rates and easing of

global and regional restrictions saw

the reintroduction of staff back to the

office

•An increasingly competitive skills

market necessitated targeted

strategies to source, retain and

advance talent/human capital

Regulatory compliance risk

•Increasingly stringent regulatory

compliance obligations continued to

be a focus for the Bank

•There has been a sustained focus by

regulators on resilience in the financial

services sector and emphasis placed

on working towards ensuring a

financial system that is fair, efficient

and resilient.

Third party risk

•The Bank’s strategic intent towards

digitalisation placed increased

reliance on third party services and

cloud providers

•Enhanced third party review, due

diligence and risk management

practices were a key focus area

•Monitoring of financial health, adverse

media, and cyber posture of key third

parties was implemented.

Operational risk events

The Bank continued to manage internal

risk events within the agreed Board-

approved operational risk appetite.

Causal analysis is performed on risk

events to determine the reason for the

failure and to assist with the effective

identification of actions required to

mitigate the reoccurrence of events.

The following analysis details the Bank’s

operational risk net losses spread across

key Basel risk event categories for the

financial year.

The evaluation of the top three

categories by net loss value are as

follows:

Execution, Delivery and Process

Management:

•The cause of events in this category

are primarily driven by human error

when executing transactions

•Process improvements and staff

training remain areas of focus to

mitigate risk events in this category.

External Fraud:

•Fraud threats continue to evolve and

become more sophisticated

•Continuous improvements are made

to fraud control measures and rules

enhanced to manage the threat within

acceptable loss levels.

Insurance

The Bank maintains adequate insurance

to cover key insurable risks. The

insurance process and requirements are

managed by the Group insurance risk

manager. Regular interaction between

operational risk management and

insurance risk management ensures that

there is an exchange of information in

order to enhance the mitigation of

operational risk.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

OPERATIONAL RISK

CONTINUED

104

Reputational and strategic risk

The Bank aspires to maintain an

excellent reputation for

entrepreneurship, strong risk

management discipline, a client-centric

approach and an ability to be flexible

and innovative. The Bank recognises the

serious consequences of any adverse

publicity or damage to reputation,

whatever the underlying cause.

We have various policies and practices

to mitigate reputational risk, including

strong values that are regularly and

proactively reinforced. We also

subscribe to sound corporate

governance practices, which require that

activities, processes and decisions are

based on carefully considered principles.

We are aware of the impact of practices

that may result in a breakdown of trust

and confidence in the organisation. The

Bank’s policies and practices are

regularly reinforced through transparent

communication, accurate reporting,

continuous Group culture and values

assessment, internal audit and

regulatory compliance review, and risk

management practices. As one of our

core values and philosophies, we

demand cast iron integrity in all internal

and external dealings, consistently and

uncompromisingly displaying moral

strength and behaviour which promotes

trust. Strategic and reputational risk is

mitigated as much as possible through

these detailed processes and

governance/escalation procedures from

business units to the IBP Board, and

from regular, clear communication with

shareholders, customers and all

stakeholders. In line with regulatory

requirements, the Investec Group has a

disclosure and market communications

policy which is reviewed and approved

annually by Group ERC and DLC BRCC.

This policy is distributed and readily

accessible to all staff. In addition, it is

the Investec Group’s policy to avoid any

transaction, service or association which

may bring with it the risk of potential

damage to our reputation. Transaction

approval governance structures such as

credit and new product committees

have therefore been tasked with this

responsibility in relation to all new

business undertaken.

Legal risk

Our objective is to identify, manage,

monitor and mitigate legal risks

throughout the Bank. We seek to

actively mitigate these risks by

identifying them, setting minimum

standards for their management and

allocating clear responsibility for such

management to legal risk managers, as

well as ensuring compliance through

proactive monitoring.

The scope of our activities is

continuously reviewed and includes,

among other things, the following areas:

•Commercial contracts with service

providers

•Legislation/governance

•Litigation

•Corporate events

•Incident or crisis management

•Ongoing quality control.

Overall responsibility for the legal risk

policy rests with the IBP Board. The IBP

Board delegates responsibility for

implementation of the policy to the

global head of IBP legal risk.

The legal risk policy is implemented

through:

•Identification and ongoing review of

areas where legal risk is found to be

present

•Allocation of responsibility for the

development of procedures for

management and mitigation of these

risks

•Installation of appropriate segregation

of duties, so that legal documentation

is reviewed and executed with the

appropriate level of independence

from the persons involved in

proposing or promoting the

transaction

•Ongoing examination of the inter-

relationship between legal risk and

other areas of risk management, so as

to ensure that there are no ‘gaps’ in

the risk management process

•Establishing procedures to ensure the

legal function is consulted at all

appropriate times to manage and

mitigate legal risks

•Establishing procedures to monitor

compliance, taking into account the

required minimum standards

•Establishing Legal Risk Forums

(bringing together the various legal

risk managers) to ensure we keep

abreast of developments and changes

in the nature and extent of our

activities, and to benchmark our

processes against best practice.

Further information on specific

legal matters, including the

investigation into historical

German dividend tax arbitrage

transactions, can be found on

page 262

Compliance

Regulatory change continues to be a key

feature in the financial sector with

ongoing global political events adding

uncertainty as to the shape of financial

services regulation going forward.

Technological risk and social concerns,

including environmental sustainability,

are increasingly being addressed

through regulation.

Global regulators expect financial

services institutions to implement robust

governance arrangements to enhance

stability and ensure financial services

are delivered in an appropriate manner.

Regulators continue to focus on

promoting resilience in financial markets,

with sustained emphasis on recovery

and resolution plans and structural

enhancements to the banking sector as

well as customer and market conduct

related reforms.

Non-financial risks such as cyber

security breaches and employee

misconduct are a focus for regulators to

ensure that consumers are appropriately

protected and that stakeholders are

treated appropriately. The maintenance

of data quality and security remains a

high priority for the banking industry and

its regulators, in order to increase the

efficiency of delivery and strengthen

oversight.

The Bank remains focused on

maintaining the highest levels of

compliance in relation to regulatory

requirements and integrity in all of our

jurisdictions. Our culture is central to our

compliance framework and is supported

by robust policies, processes and

talented professionals who ensure that

the interests of our customers and

shareholders remain at the forefront of

everything we do.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

REPUTATIONAL AND STRATEGIC RISK, LEGAL RISK AND COMPLIANCE

105

Conduct risk and consumer protection

The FCA has maintained its focus and

approach to managing conduct risk

across the financial services industry.

During the period the FCA has continued

to focus on advancing its three

operational objectives: securing an

appropriate degree of protection for

consumers; protecting and enhancing

the integrity of the UK financial system;

and promoting effective competition in

the interest of consumers. The FCA

remains committed to identifying and

tackling instances of consumer harm,

rooting out systemic risk within the

industry and securing remediation where

things go wrong. The FCA intends to set

higher standards for the industry and to

see greater levels of consumer

protection in place. To further that aim,

the FCA is consulting on the new

Consumer Duty, which aims to ensure

that firms put customers at the heart of

what they do. The new duty will consist

of a new Consumer Principle and a suite

of rules and guidance setting more

detailed expectations for firms. The new

duty will apply to Investec’s business

areas involved in the manufacturing,

distribution or sale of products to retail

consumers. The implementation is

scheduled for April 2023, although it

might be extended.

Since the beginning of the pandemic,

the FCA’s main priority was to protect

vulnerable customers by raising

awareness of the increased risk of

financial scams, ensuring that customers

maintain access to financial services,

and continue to be treated fairly. The

FCA has issued a range of forbearance

measures such as mortgage repayment

holiday, capital payment and interest

freezes on certain type of lending

facilities, and a temporary ban on

repossessions to support customers

through the pandemic.

The FCA expects all institutions to have

a robust conduct risk management

framework in place to facilitate culture

that delivers good outcomes for clients,

counterparties and the markets and

holds their staff and senior management

to appropriate standards of competence,

integrity and ethical behaviour.

Specifically, UK institutions are expected

to be able to demonstrate that their

culture, governance and approach to

rewarding and managing staff, are at all

times aligned to the interests of

customers and other stakeholders.

As a result, firms are expected to look

across their business models and

strategies and assess how to balance

the pursuit of profits with good

outcomes for clients and proper

standards of market conduct. Firms are

also required to have appropriate

policies and frameworks in place to

manage non-financial misconduct such

as discrimination, bullying, harassment,

sexual misconduct or victimisation. Firms

are required to create an environment in

which it is safe to speak up, the best

talent is retained and the best risk

decisions are taken.

The FCA and PRA are proposing a

number of changes to improve Diversity

and Inclusion (D&I) in regulated firms.

These proposals, if implemented, will

require firms to demonstrate steps that

are being taken to embed D&I into every

aspect of their business, including Board

and senior management composition

and succession planning, remuneration

and product governance. The regulators

will also require firms to gather D&I

related data, measure their performance

against key D&I metrics and report on

them to the regulators. The Bank has

participated in the consultation process

and is committed to building a diverse

and inclusive workplace that reflects the

diversity of our employees, client base

and the society within which we operate.

Culture, conduct and good governance

are ongoing themes which underline

much of the FCA’s approach with focus

on the role of the individual as well as

the institution. The FCA has considered

the role of leaders, incentives and

capabilities and governance of decision-

making.

The IBP Board, along with senior

management, are ultimately responsible

for the Bank’s culture and conduct risk

frameworks. The Bank has continued

over the period to focus on

enhancements to our conduct risk

management framework to ensure

consistent delivery of good customer

outcomes and effective management of

conduct risk throughout our business.

This has included strengthening

business-led identification and

management of conduct risk,

improvements to the product review and

approval process, robust processes for

dealing with regulatory and conduct

breaches and a sustained focus on

maintaining the highest levels of

regulatory compliance throughout our

business. Investec’s conduct risk

management in the UK is underpinned

by the Senior Manager and Certification

Regime which strengthens individual

accountability and sets minimum

standards of individual behaviour in

financial services.

Financial crime

Financial crime continues to be an

increasing regulatory focus, with

regulators globally encouraging firms to

adopt a dynamic approach to the

management of risk and to increase

efforts around systems and controls to

combat money laundering, tax evasion

and bribery and corruption. The FCA

also highlights financial crime (frauds

and scams) and anti-money laundering

(AML) as one of their key cross-sector

priorities. The Bank maintains and

continues to enhance the robust risk

based approach to the ever-evolving

criminal typologies. Policies, procedures

and training are in place, in order to

guard against the risks of financial crime.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

REPUTATIONAL AND STRATEGIC RISK, LEGAL RISK AND COMPLIANCE

CONTINUED

106

Brexit

As of 1 January 2021, UK firms lost their

passporting rights to provide banking

and investment services to clients based

in the EU. Investec Europe Limited (IEL),

a fully licensed Irish MiFID firm, provides

a range of MiFID services to new and

existing EU clients that can no longer be

serviced by IBP. IBP is currently able to

provide corporate lending and

designated investment services to

professional clients in select EU

countries, based on local exemptions.

However, the EU has proposed new

harmonised rules for non-EU firms

carrying on banking and investment

business in the EU. The new rules, which

will form part of the CRR3/CRD6

package, would prohibit third-country

firms like IBP from carrying out banking

and MiFID activities with EU clients

without establishing a branch or a

subsidiary (except on a reverse

solicitation basis). These proposals are

subject to consultation and, once

approved, are likely to come into force at

the end of 2024. Investec is monitoring

these developments and assessing their

impact on its ability to conduct business

with EU clients in the long term.

Tax reporting (FATCA, CRS, MDR and

DAC6)

The Foreign Account Tax Compliance

Act (FATCA) aims to promote cross-

border tax compliance by implementing

an international standard for the

automatic exchange of tax information

relating to US investors. The provisions

call on tax authorities worldwide, to

obtain on an annual basis, detailed

account information from financial

institutions relating to US investors and

exchange that information automatically,

with the United States Internal Revenue

Service.

The OECD took further steps to improve

global cross-border tax compliance by

releasing the Common Reporting

Standard (CRS). The CRS is a set of

global standards for the annual

exchange of financial information by

financial institutions pertaining to

customers, ultimately to the tax

authorities of the jurisdictions in which

those customers are resident for tax

purposes. IBP is compliant with

obligations under FATCA and CRS in all

relevant jurisdictions.

The OECD published Mandatory

Disclosure Rules that aim to provide tax

administrations with information on CRS

avoidance arrangements and opaque

offshore structures, including the users

of those arrangements and structures

and those involved with facilitation.

Many CRS jurisdictions such as the

Channel Islands have now incorporated

this into domestic law. Following suit,

the EU introduced its own Mandatory

Disclosure Regime in relation to cross-

border tax arrangements, commonly

known as DAC6. This regime applies to

cross-border tax arrangements, which

meet one or more specified

characteristics (Hallmarks) and which

concern either more than one EU

country, or an EU country and a non-EU

country.

On 4 January 2021, the UK Tax

Authorities (HMRC) confirmed that the

UK will no longer apply DAC6 reporting

in its entirety following the conclusion of

the Free Trade Agreement with the EU.

Only arrangements that would be within

the scope of CRS will now need to be

reported which is in line with the OECD’s

Mandatory Disclosure Rules. The UK is

yet to finalise its regulations on

Mandatory Disclosure Rules. The draft

regulation named International Tax

Enforcement (Disclosable Arrangements)

Regulations was issued in October 2021.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

REPUTATIONAL AND STRATEGIC RISK, LEGAL RISK AND COMPLIANCE

CONTINUED

107

Recovery and resolution planning

The purpose of the recovery plan is to document how the

Investec plc Board and management will plan for Investec plc

to recover from extreme financial stress to avoid liquidity

and capital difficulties. The plans are reviewed and approved

by the IBP and Investec plc Boards on an annual basis.

The focus of the Investec plc recovery plan is the recovery

of IBP and the protection of its depositors and other clients.

The plan:

•Integrates with existing contingency planning

•Identifies roles and responsibilities

•Identifies early warning indicators and trigger levels

•Analyses how the Group could be affected by the stresses

under various scenarios

•Includes potential recovery actions available to the Boards

and management to respond to the situation, including

immediate, intermediate and strategic actions

•Identify the recovery capacity available to avoid resolution

actions.

The Bank Recovery and Resolution Directive (BRRD) was

implemented in the UK via the UK Banking Act 2009. It was

recently amended by the BRRD (Amendment) (EU Exit)

Regulation 2020, which implemented into UK law certain

amendments to the BRRD which were required to be

implemented prior to the UK leaving the EU.

The BoE, the UK resolution authority has the power to

intervene in and resolve a financial institution that is no longer

viable. This is achieved through the use of various resolution

tools, including the transfer of business and creditor financed

recapitalisation (bail-in within resolution) that allocates losses

to shareholders and unsecured and uninsured creditors in their

order of seniority, at a regulator determined point of non-

viability that may precede insolvency.

The PRA has made rules that require authorised institutions

to draw up recovery plans and resolution packs. Recovery

plans are designed to outline credible recovery options that

authorised institutions could implement in the event of severe

stress in order to restore their business to a stable and

sustainable condition. The resolution pack contains detailed

information on the services provided, as well as the structure

and operation of the authorised institution in question which

will be used by the BoE to develop resolution strategies for

that specific institution, assess its current level of resolvability

against the strategy, and to inform work on identifying barriers

to the implementation of operational resolution plans.

In line with PRA and onshored EU requirements, Investec plc

maintains a resolution pack and a recovery plan. Even though

the recovery plan is framed at Investec plc level, given that IBP

constitutes over 74% of Investec plc’s balance sheet, the

focus of this document is the recovery of IBP and the

protection of its depositors and other clients.

Similarly, the resolution pack is drafted for Investec plc.

As Investec plc is a financial holding company and IBP is its

most significant entity, the Investec plc resolution strategy

is expected to be driven and determined by the resolution

strategy for IBP.

The BoE confirmed in March 2021 the preferred resolution

strategy for IBP remains Modified Insolvency and the Minimum

Requirement for own funds and Eligible Liabilities (MREL)

requirement is set as equal to IBP’s Total Capital Requirement

(Pillar 1 plus Pillar 2A).

The BoE clarified in August 2021 that firms subject to Modified

Insolvency will no longer receive regular letters confirming

their preferred resolution strategy. An updated letter will only

be issued when the BoE considers it likely the preferred

resolution strategy will change.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

RECOVERY AND RESOLUTION PLANNING

108

Capital management and allocation

Current regulatory framework

IBP is authorised by the PRA and is regulated by the FCA and the PRA. The Bank calculates capital resources and requirements

using the Basel III framework, as implemented in the European Union through the Capital Requirements Regulation (CRR) and the

Capital Requirements Directive IV (CRD IV), as amended by CRR II and CRD V. Following the end of the Brexit transitional period,

the EU rules (including binding technical standards) have been onshored and now form part of domestic law in the UK by virtue

of the European Union (Withdrawal) Act 2018. The PRA confirmed it would make use of temporary transitional powers at the end

of the Brexit transitional period, which allows UK regulators to phase-in changes to UK regulatory requirements, enabling firms to

adjust to the UK’s post-transition period regime in an orderly way. The relief was available for a period of 15 months from the end

of the transitional period until 31 March 2022.

A summary of capital adequacy and leverage ratios

31 March 2022*

31 March 2021*

Common Equity Tier 1 ratio**

12.0%

11.8%

Common Equity Tier 1 ratio (fully loaded)***

11.6%

11.3%

Tier 1 ratio**

13.6%

13.4%

Total capital ratio**

18.2%

16.4%

Risk-weighted assets (£'million)**

16 462

15 789

Leverage exposure measure (£'million)^

23 874

26 351

Leverage ratio^

9.3%

8.0%

Leverage ratio (fully loaded)^ ***

9.1%

7.7%

*The capital adequacy disclosures for IBP include the deduction of foreseeable charges and dividends when calculating CET1 capital. These disclosures

are different to the capital adequacy disclosures included in Investec Group’s 2022 and 2021 integrated and strategic annual report, which follow our

normal basis of presentation and do not include this deduction when calculating CET1 capital. IBP’s CET1 ratios would be 37bps (31 March 2021: 16bps)

higher, on this basis.

**The CET1, Tier 1, total capital ratios and RWAs are calculated applying the IFRS 9 transitional arrangements (including the CRR II changes introduced

by the 'quick fix' regulation adopted in June 2020).

***The CET1 ratio (fully loaded) and the leverage ratio (fully loaded) assumes full adoption of IFRS 9 (including the ‘quick fix’ regulation in the UK).

^The leverage ratios are calculated on an end-quarter basis. The 31 March 2022 leverage ratio is calculated applying the UK leverage ratio framework

which applies to all UK firms from 1 January 2022. The 31 March 2021 comparative is calculated on a CRD IV basis.

IBP applies the Standardised Approach

to calculate credit risk and counterparty

credit risk, securitisation risk, operational

risk and market risk capital

requirements. Effective 1 January 2022,

IBP has implemented the outstanding

CRR II changes to be implemented in the

UK, most notably the new Standardised

Approach for measuring Counterparty

Credit Risk (SA-CCR) and changes to

the large exposure regime.

In October 2021, the Financial Policy

Committee and the PRA confirmed the

new UK leverage ratio framework will

apply from 1 January 2022 and the

existing leverage ratio parts of the UK

CRR would be revoked. IBP is not

subject to the minimum leverage ratio

requirement of 3.25%, but is subject to a

‘supervisory expectation’ to manage

excessive leverage by ensuring the

leverage ratio does not fall below 3.25%.

For simplicity, the same leverage ratio

exposure measure and capital measure

will now apply to all UK banks (including

the exemption of Central Bank reserves

and will reflect updated international

standards). These changes are reflected

in our disclosures.

Subsidiaries of IBP may be subject to

additional regulations as implemented

by local regulators in their respective

jurisdictions. Where capital is a relevant

consideration, management within each

regulated entity pays close attention

to prevailing local regulatory rules as

determined by their respective

regulators.

Year under review

During the year under review, Investec

Bank plc complied with the capital

adequacy requirements imposed on it by

the PRA. IBP continues to hold capital in

excess of all the capital and buffer

requirements. At 31 March 2022, the

CET1 ratio increased to 12.0% from

11.8% at 31 March 2021. CET1 capital

increased by £114 million to £2 billion,

mainly as a result of:

•CET1 capital generation of

£233 million through profit after

taxation

•An increase in other comprehensive

income of £15 million.

The increases were partially offset by:

•Dividends paid to ordinary

shareholder and Additional Tier 1

security holder of £73 million

•An increase in foreseeable charges

and dividends of £36 million

•A decrease of £12 million in our own

credit reserves

•A decrease of £12 million in the IFRS 9

transitional add-back adjustment.

Risk weighted assets (RWAs) increased

by 4% or £673 million to £16.5 billion

over the period, predominantly within

credit risk RWAs.

Credit risk RWAs, which include equity

risk, increased by a net £859 million

after the settlement of our Australian

loan portfolio sale in April 2021, which

reduced RWAs by £590 million. The

remaining increase is mainly driven by

growth in private client and Asset

Finance Group lending, predominately

within HNW mortgages, other HNW

lending and automobile loans.

On 1 January 2022, IBP implemented the

new counterparty credit risk

standardised approach (SA-CCR). Even

with the adoption of the new

counterparty credit risk methodology,

RWAs (including credit valuation

adjustment risk) decreased by

£56 million compared to 31 March 2021,

primarily driven by a reduction in the

volume of commodity swaps, equity

options and interest rate swaps traded

during the year.

Market risk RWAs decreased by

£170 million, mainly due to the run down

of the financial products and equity

derivative exposure book compared with

31 March 2021.

Operational risk RWAs increased by

£40 million, due to an increase in the

three-year average operating income

used to determine the capital

requirement.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

CAPITAL ADEQUACY

109

The Group's leverage ratio increased to

9.3% from 8.0% at 31 March 2021 and

reflects the change in the leverage

exposure measure implemented in the

UK from 1 January 2022. The revised

framework reflects the changes in SA-

CRR and excludes qualifying central

bank balances from the calculation of

the leverage exposure measure.

Significant regulatory developments in

the period

At the December 2021 FPC meeting, the

committee indicated that vulnerabilities

that can amplify economic shocks are at

a standard level, as was the case just

before the COVID-19 pandemic, and

therefore it would be appropriate for the

UK CCyB rate to return to the region of

2%. The FPC is therefore increasing the

UK CCyB rate from 0% to 1% effective

13 December 2022 in line with the usual

12-month implementation period. If the

UK economic recovery proceeds broadly

in line with the Monetary Policy

Committee’s projections and absent a

material change in the outlook for UK

financial stability, the FPC would expect

to increase the rate further to 2% in Q2

2022. This subsequent increase would

be expected to take effect after the

usual 12-month implementation period.

On 1 November 2021, the Financial

Services Regulatory Initiatives Forum

published the fourth edition of the

regulatory initiatives grid. The grid aims

to provide firms with a clear idea of

upcoming regulatory changes. The grid

confirms a delay to the consultation on

Basel 3.1. The consultation has been

pushed out from Q4 2021 to the second

half of 2022, with implementation not

expected until after March 2023. In a

subsequent statement issued by the

PRA on 21 March 2022, the PRA

confirmed the consultation paper will be

published in the fourth quarter of 2022

and the current intention is to consult on

a proposal that these changes will

become effective on 1 January 2025,

aligning with other major jurisdiction,

including the EU.

On 22 June 2021, HM Treasury

confirmed the Fundamental Review of

the Trading Book (FRTB) reporting

requirements would be delayed and

implemented alongside the FRTB

revisions to the Pillar 1 capital

requirements, which form part of

Basel 3.1.

Pillar 3 disclosure requirement

The Pillar 3 disclosures for Investec

plc and IBP are published in a

standalone disclosure report and can

be found on the Investec Group’s

website. The sub-set of pillar 3

disclosures the Bank is required to

disclose are included in appendix A

of this report.

Philosophy and approach

The Bank's approach to capital

management utilises both regulatory

capital as appropriate to the jurisdiction

in which it operates and internal capital,

which is an internal risk-based

assessment of capital requirements.

Capital management primarily relates to

management of the interaction of both,

with the emphasis on regulatory capital

for managing portfolio level capital

sufficiency and on internal capital for

ensuring that returns are appropriate

given the level of risk taken at an

individual transaction or business unit

level.

We intend to maintain a sufficient level

of capital to satisfy regulatory

requirements and our internal target

ratios. We target a total capital

adequacy ratio range of between 14%

and 17% on a consolidated basis, and we

target a minimum Tier 1 ratio of 11% and

a CET1 ratio above 10%.

The determination of target capital is

driven by our risk profile, strategy and

risk appetite, taking into account the

regulatory and market factors applicable

to the Group. At the most fundamental

level, we seek to balance our capital

consumption between prudent

capitalisation in the context of the

Group’s risk profile and optimisation of

shareholder returns. Our internal capital

framework is designed to manage and

achieve this balance. The internal capital

framework is based on the Group’s risk

identification, review and assessment

processes and is used to provide a risk-

based approach to capital allocation,

performance and structuring of our

balance sheet. The objectives of the

internal capital framework are to

quantify the minimum capital required to:

•Maintain sufficient capital to satisfy

the IBP board’s risk appetite across all

risks faced by the Group

•Provide protection to depositors

against losses arising from risks

inherent in the business

•Provide sufficient capital surplus to

ensure that the Group is able to retain

its going concern basis under

relatively severe operating conditions

•Inform the setting of minimum

regulatory capital through the ICAAP

and subsequent Supervisory Review

and Evaluation Process (SREP) review.

The framework has been approved by

the IBP Board and is managed by the IBP

Capital Committee, which is responsible

for oversight of the management of

capital on a regulatory and an internal

capital basis.

Capital planning and stress/scenario

testing

A capital plan is prepared for IBP and

maintained to facilitate discussion of the

impact of business strategy and market

conditions on capital adequacy. This

plan is designed to assess capital

adequacy under a range of economic

and internal conditions over the medium

term (three years), with the impact on

earnings, asset growth, risk appetite and

liquidity considered. The plan provides

the IBP board with an input into strategy

and the setting of risk appetite by

considering business risks and potential

vulnerabilities, capital usage and funding

requirements given constraints where

these exist.

12-month capital plans are prepared

monthly, with regulatory capital being

the key driver of decision-making.

The goal of capital planning is to provide

insight into potential sources of

vulnerability of capital adequacy by way

of market, economic or internal events.

As such, the three-year capital plans are

stressed based on conditions most likely

to cause IBP duress. The conditions are

agreed by the IBP Capital Committee

after the key vulnerabilities have been

determined through the stress testing

workshops. Such plans are used

by management to formulate balance

sheet strategy and agree management

actions, trigger points and influence the

determination of our risk appetite. At a

minimum level, each capital plan

assesses the impact on our capital

adequacy in an expected case and in

downturn scenarios. On the basis of the

results of this analysis, the IBP Capital

Committee, the DLC Capital Committee

and the IBP BRCC are presented with

the potential variability in capital

adequacy and are responsible, in

consultation with the IBP Board, for

considering the appropriate response.

Reverse stressing testing is performed

annually as part of the ICAAP process

Capital requirements country-by-

country reporting

HM Treasury has transposed the

requirements set out under CRD

IV and issued the Capital

Requirements Country-by-

Country Reporting Regulations

2013. The legislation requires the

Bank to publish certain additional

information in respect of the year

ended 31 March 2022. The

Country-by-Country information

can be found on the Investec

Group’s website.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

CAPITAL ADEQUACY

CONTINUED

110

Capital structure

£’million

31 March 2022*

31 March 2021*

Shareholder’s equity

2 215

2 081

Shareholder’s equity excluding non-controlling interests

2 296

2 114

Foreseeable charges and dividends

(61)

(25)

Deconsolidation of special purpose entities

(20)

(8)

Non-controlling interests

—

Non-controlling interests per balance sheet

—

Non-controlling interests excluded for regulatory purposes

(1)

—

Regulatory adjustments to the accounting basis

Additional value adjustments

(6)

Gains or losses on liabilities at fair value resulting from changes in our credit standing

—

Adjustment under IFRS 9 transitional arrangements

Deductions

(304)

(312)

Goodwill and intangible assets net of deferred taxation

(291)

(298)

Deferred taxation assets that rely on future profitability excluding those arising

from temporary differences

(8)

(12)

Securitisation positions which can alternatively be subject to a 1 250% risk weight

(5)

(2)

Common Equity Tier 1 capital**

1 982

1 868

Additional Tier 1 instruments

250

Tier 1 **

2 232

2 118

Tier 2 capital**

766

473

Tier 2 instruments

766

473

Total regulatory capital**

2 998

2 591

Risk-weighted assets and capital requirements

Risk-weighted assets**

Capital requirements**

£’million

31 March 2022

31 March 2021

31 March 2022

31 March 2021

16 462

15 789

1 317

1 263

Credit risk

13 332

12 413

1 066

992

Equity risk

117

Counterparty credit risk

591

691

Credit valuation adjustment risk

103

Market risk

608

778

Operational risk

1 771

1 731

142

138

*The capital adequacy disclosures for IBP include the deduction of foreseeable charges and dividends when calculating CET1 capital. These disclosures

are different to the capital adequacy disclosures included in Investec Group’s 2022 integrated and strategic annual report, which follow our normal basis

of presentation and do not include this deduction when calculating CET1 capital. IBP’s CET1 ratios would be 37bps (31 March 2021: 16bps) higher, on this

basis.

**The CET1, Tier 1, total capital ratios and RWAs are calculated applying the IFRS 9 transitional arrangements (including the CRR II changes introduced

by the ‘quick fix’ regulation adopted in June 2020).

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

CAPITAL ADEQUACY

CONTINUED

111

Leverage

£’million

31 March 2022*

31 March 2021*

Total exposure measure

23 874

26 351

Tier 1 capital**

2 232

2 118

Leverage ratio^

9.3%

8.0%

Total exposure measure (fully loaded)

23 797

26 258

Tier 1 capital (fully loaded)

2 155

2 029

Leverage ratio (fully loaded)*** ^

9.1%

7.7%

Total regulatory capital flow statement

£'million

31 March 2022*

31 March 2021*

Opening Common Equity Tier 1 capital

1 868

1 819

Dividends paid to ordinary shareholders and Additional Tier 1 security holders

(73)

(28)

Profit after taxation

233

Foreseeable charges and dividends

(36)

(25)

Share-based payment adjustments

—

Movement in other comprehensive income

(3)

Goodwill and intangible assets (deduction net of related taxation liability)

Deferred tax that relies on future profitability (excluding those arising from temporary differences)

Deconsolidation of special purpose entities

(12)

Gains or losses on liabilities at fair value resulting from changes in own credit standing

(12)

—

IFRS 9 transitional arrangements

(16)

Other, including regulatory adjustments and other transitional arrangements

—

Closing Common Equity Tier 1 capital

1 982

1 868

Opening Additional Tier 1 capital

250

Closing Additional Tier 1 capital

250

Closing Tier 1 capital

2 232

2 118

Opening Tier 2 capital

472

533

Issued capital

348

—

Other, including regulatory adjustments and other transitional arrangements

(54)

(60)

Closing Tier 2 capital

766

473

Closing total regulatory capital

2 998

2 591

*The capital adequacy disclosures for IBP include the deduction of foreseeable charges and dividends when calculating CET1 capital. These disclosures

are different to the capital adequacy disclosures included in Investec Group’s 2022 integrated and strategic annual report, which follow our normal basis

of presentation and do not include this deduction when calculating CET1 capital. IBP’s CET1 ratios would be 37bps (31 March 2021: 16bps) higher, on this

basis.

**The CET1, Tier 1, total capital ratios and RWAs are calculated applying the IFRS 9 transitional arrangements (including the CRR II changes introduced

by the 'quick fix' regulation adopted in June 2020).

***The CET1 ratio (fully loaded) and the leverage ratio (fully loaded) assumes full adoption of IFRS 9 (including the ‘quick fix’ regulation in the UK).

^The leverage ratios are calculated on an end-quarter basis. In the UK, the 31 March 2022 leverage ratio is calculated applying the UK leverage ratio

framework which applies to all UK firms from 1 January 2022. The 31 March 2021 comparative is calculated on a CRD IV basis.

Risk management and

governance

Investec Bank plc Annual Financial Statements 2022

CAPITAL ADEQUACY

CONTINUED

112

IN THIS SECTION

Corporate Governance

Chair’s introduction

114

Director Biographies

116

Governance framework

118

Compliance with the UK Corporate governance code

119

Board and executive roles

120

Board composition

123

Board activities

125

Board effectiveness

128

IBP Nomination Committee report

129

IBP Audit Committee report

132

IBP Board Risk and Capital report

138

Directors’ report

144

Disciplined growth on a platform of resilience

and sound governance

Brian Stevenson

Chair

My overviews in our previous two annual

reports focused on the ways we’ve been

strengthening and adapting our business

processes. These include enhancing the

ways we interact with our clients amidst

the unprecedented macro-economic

and societal changes the whole country

(and indeed the World) experienced in

2020 and 2021. In the current financial

year, we have successfully weathered

these storms by virtue of our resilient

business model. We have completed the

implementation of our One Investec

integrated client eco-system. As a

result, we are well-positioned with

a focus on our scale and relevance.

This is underpinned and enabled by our

resilient technology platform to serve

our clients and deliver growth and

efficiency as we all continue to emerge

from the period of Brexit and COVID-19

uncertainty.

The Board believes that strong

corporate governance and stakeholder

engagement remains the centrepiece of

successfully delivering our strategy. Set

out below are some of the Bank's key

corporate governance activities during

the year.

Stakeholder engagement

Delivering value to our shareholders

while supporting clients, colleagues

and our communities continues to be

a priority for the Board.

For our clients, we have completed the

implementation of our client-focused

One Investec strategy. Our teams of

product and service specialists and

business enablement functions were

reorganised to facilitate deeper

collaboration between our banking and

wealth and investment capabilities so

that we meet our clients’ needs using

the full breadth of our services. To

further underpin this closer way of

working, one of the Board’s directors,

Henrietta Baldock, was appointed as the

Chair of the Wealth & Investment Board

and also attends their Committee

meetings.

Our workforce adapted commendably

to the blended home and office work

environment required by the pandemic

period – supported by our technology

platforms which have enabled us to

continue to work flexibly and adapt our

business processes. In the latter half of

2021, when the UK Government

amended its guidance on working from

home, the Board spent time considering,

and continues to monitor, Investec’s

approach to hybrid working, having

regard to client needs and the needs

and desires and wellbeing of our

workforce. The Board has been regularly

updated on the discussions and output

of various workforce wellness and

wellbeing schemes and workshops,

including gathering employee input on

the concept of the ‘future of work’. Moni

Mannings remains in post as the Board’s

designated Non-Executive Director

responsible for overseeing and updating

the Board on the Bank's workforce

engagement initiatives. This is described

in more detail on page 127.

Details of how the Board takes account

of stakeholder interests in its strategic

planning and decision-making process

are set out on page 22.

Succession planning and Board

and committee changes

You will recall that the Board made a

number of changes to its composition in

2020 and 2021 which helped us oversee

the execution and oversight of the

business strategy amidst turbulent

market conditions.These changes also

strengthened the Board’s independent

governance while at the same time

enhancing reciprocity between the

Board and its committees and the

corresponding DLC forums. Indeed, it

is notable that in August 2021, I was

elected also as a DLC director – thereby

representing the Bank at the DLC level.

Board composition has remained steady

and stable throughout the year, which

we believe is important given the

external environment we’ve been

addressing. However, the Board keeps

its and its committees’ memberships

under review. There have been some

enhancements precipitated by changes

at the DLC level and with a view to

ensuring appropriate communication and

reciprocity between the Bank, DLC and

Wealth & Investment Boards and

committees.

In August 2021, Peregrine Crosthwaite

stepped down as DLC Chair (to be

replaced by Philip Hourquebie). Until this

date, Philip had been the DLC

representative member of the IBP

Remuneration Committee. Upon the

change of his DLC role, Henrietta

Baldock (Chair of the DLC Remuneration

Committee) was appointed as a member

of the IBP Remuneration Committee

instead.

As disclosed in last year’s report,

Henrietta Baldock was appointed as

a director of the Board on 10 February

2021. As highlighted above, in

September 2021, Henrietta was also

appointed as Chair of the Wealth &

Investment board and as Chair of the

Wealth & Investment Nominations

Committee. She also became a member

of the Wealth & Investment

Remuneration Committee and also

regularly attends the Wealth &

Investment Audit Committee. This

ensures alignment and reciprocity

between applicable matters discussed

at the Bank, Wealth & Investment and

DLC Boards and their committees, as

well as enhancing the governance and

oversight of the Wealth & Investment

business on the part of the Bank Board

notwithstanding that the Wealth &

Investment business has independent

governance arrangements.

Also as reported last year, David

Friedland stepped down as an

independent Non-Executive Director of

Investec Bank plc in September 2020

but remains a DLC Non-Executive

Director and a member of the Bank

Board Risk and Capital Committee to

provide reciprocity of oversight between

our committee and DLC. It is notable

that David is also a member of the

Wealth & Investment Board Risk

Committee. David is approaching the

end of his nine-year tenure at DLC level

in terms of the UK Governance Code

and will step down from the DLC Board

in August 2022. A new independent

Non-Executive Director, Vanessa Olver,

has been appointed to the DLC Board

with effect from May 2022. Vanessa has

been identified as the successor to

David as Chair of DLC BRCC. The Board

will keep the membership of the Bank

BRCC under review in consultation with

DLC in light of these changes.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

CHAIR'S INTRODUCTION

114

You will recall that in the previous year

the executive team was re-organised to

provide more focus around our client

segments – and the Board has

supported and overseen this transition

to a new Executive Committee

composition. The Board has also

considered the span of control of the

Executive Directors and reviewed

successions plans for the Executive

Directors and senior executive

management. As a consequence, the

Board intends to appoint an additional

Executive Director in the latter half of

2022 to act as the Finance Director on

the Bank Board, in addition to the CEO

and CRO. This appointment will

strengthen the executive team with a

particular focus on strategic operations

and finance.

Further information about these

appointment processes and succession

planning can be found on page 131.

Culture, belonging, inclusion,

and diversity

The Investec values-led ethos has long

been the bedrock of not only our client-

centric approach to business, but also

our culture of belonging, diversity and

inclusivity. This, we believe, results in

more innovative, engaged and

accountable teams who can deliver

better outcomes for our clients and

strengthen our values-led governance

and conduct culture. The Board receives

regular updates on our diversity profile

and management’s progress in driving

diverse recruitment and inclusive

programmes of work across the

business. More details of the approach

to diversity and workforce engagement

can be found on pages 27 and 127

respectively.

Environment, social and

governance and climate change

The Board believes that being a

responsible corporate citizen and having

regard to the ethical, social, and

environmental dimensions in which we

operate, generates long-term

sustainable stakeholder value. Climate

change in itself, societal expectations of

how we behave and how businesses are

managed in the interests of society has

been of increasing interest to

stakeholders in the last two years.

Similarly, ESG issues and climate change

has been on the Board’s agenda and we

have received regular updates on the

business’s approach to ESG matters.

More details of the business’s

engagement on ESG can be found in the

Group’s sustainability report.

Board effectiveness

A key component of governance is

ensuring the Board’s efficacy in

exercising its responsibilities. This year

the Board participated in an externally

facilitated evaluation process overseen

by the Nomination Committee. The

findings of this review and how we are

addressing our progress against these

findings can be found on page 128.

Corporate Governance Code

The Board has applied the UK Corporate

Governance Code 2018 for the year

under review. Further details of how we

applied it can be found in our statement

of compliance on page 119.

Looking ahead

The Board has overseen a period of

simplification and optimisation in terms

of our scale, resilience and technology.

The forthcoming financial period is one

of focus where the business builds on

these foundations to deliver growth and

efficiency. At the time of writing, there is

considerable uncertainty regarding the

war in Ukraine and its full economic

impact. This still requires continued

prudence and oversight from the Board.

Our business has adapted to the UK’s

departure from the European Union in

early 2021. However, with no broad-

based equivalency framework for UK

firms having been agreed to date, the

longer-term impact of this on UK

financial services remains to be seen.

Our business has the operational

flexibility to adapt to the appropriate

regulatory regime in due course and the

Board will continue to assess the Bank’s

strategy in Europe.

There are also some common macro-

economic headwinds around the world,

namely supply chain and labour market

conditions and commodity and energy

prices. There is also the war in Ukraine,

which is contributing to uncertainty. So

while there is certainly growing internal

confidence, and our business is

adaptable and resilient, the Board will

continue to assess how these broader

trends affect our clients and our

workforce in the longer term.

The Board will monitor these issues

together with other key themes

including our approach to ESG and

climate risks, and adapt our risk appetite

and people and technology strategies

accordingly.

Brian Stevenson

Chair

21 June 2022

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

CHAIR'S INTRODUCTION

CONTINUED

115

Who we are

Director biographies

Biographies of our current directors are

outlined below, including their relevant

skills and experience, key external

appointments and any appointments

to Board committees.

Committee membership key

IBP BRCC

IBP Nomination Committee

IBP Remuneration Committee

IBP Audit Committee

Gender diversity

Male

Female

Age

45-50

30.0%

51-59

40.0%

60-68

30.0%

Brian Stevenson

Moni Mannings

Chair

Senior Independent Non-Executive

Director

Appointed:

14 September 2016

Appointment

27 July 2016

Age: 68

Age: 59

Nationality:

Qualifications: MBA Business

administration, ACIB, FCBI

Qualifications

LLB

Relevant skills and experience:

Brian has substantial strategy,

governance and financial services

experience having held a number of

senior executive roles, including

previously serving as CEO and Chairman

of Royal Bank of Scotland’s global

transaction services division, as well as

various Non-Executive positions including

Agricultural Bank of China (UK) Limited

and Deutsche Bank Nederland NV

including as Chair of Audit and

Risk committees. Brian is an advisory

board member of the Lysis Group and a

Board mentor for Critical Eye.

External appointments

Westpac Europe Limited

Relevant skills and experience

Moni has extensive commercial,

governance and advisory experience in

finance and law having worked at Clifford

Chance LLP before becoming a senior

partner of Olswang LLP. She was also

Chief Operating Officer at Aistemos

Limited, an AI and data analytics company.

Moni is the Bank’s senior independent

director (SID) and the designated

workforce engagement Non-Executive

Director.

External appointments

Hargreaves Lansdown plc,Easyjet plc and

Cazoo Group Limited

Lesley Watkins

Paul Seward

Independent Non-Executive Director

Appointment

13 November 2018

Appointment

1 April 2019

Age: 63

Age: 66

Nationality:

Qualifications

BSc (Hons) Mathematics, FCA

Qualifications

BSc (Hons) Mathematics

Relevant skills and experience

Lesley has expert knowledge of audit and

assurance and regulatory reporting having

worked at PwC and subsequently as

finance director of private equity firm,

Calculus Capital Limited. She also has

significant experience of governance and

strategy in financial services having been

a managing director at UBS and Deutsche

Bank as well as having been a Non-

Executive Director and audit Chair at the

Competition Commission, Panmure

Gordon & Co Plc, Game Digital plc and

Braemar Shipping Services plc.

External appointments

Chaucer Syndicates Limited

Relevant skills and experience

Paul has comprehensive experience of

strategy and risk governance in financial

services having held a number of senior

executive roles including Chief Risk Officer

HSBC UK, as well as having held a number

of Non-Executive Directorships including

M&S Bank, HSBC Asset Finance and HSBC

Life (UK) Limited.

External appointments

Axis Bank UK Limited

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

DIRECTOR BIOGRAPHIES

116

David Germain

Henrietta Baldock

Zarina Bassa

Independent Non-Executive Director

Director of DLC Board and member of DLC

BRCC

Chair of DLC Audit Committee,

member of DLC BRCC, DLC Nomdac, DLC

Remuneration Committee and DLC Senior

Independent Non-Executive Director

Appointment

15 September 2020

Appointment

10 February 2021

Appointment

1 April 2017

Age: 46

Age: 50

Age: 58

Nationality:

Qualifications

FBCS, CITP, FIET

Qualifications

BSc (Hons) Economics & Accounting

Qualifications

BAcc, DipAcc, CA(SA)

Relevant skills and experience

David was appointed in 2020 due to his

extensive technology, operations and

transformation experience in financial

services. He is currently Group Chief

Information Officer for QBE Limited. He

was previously Group UK & Ireland Chief

Information Officer for RSA Limited

where he had oversight of significant

and complex IT transformation projects

and has previously held a number of

other roles including Head of

Technology, Operations and Product at

the Royal Bank of Scotland Corporate

and Private Banking, COO/CAO at

Deutsche Bank Capital Markets and

COO at Close Brothers Retail.

External appointments

University of Cambridge, Great Ormond

Street Hospital

Relevant skills and experience:

Henrietta has extensive knowledge

of the financial services sector, through her 25

years’ experience in investment banking, most

recently as chair of the European Financial

Institutions team at Bank of America Merrill

Lynch, where she advised many boards in the

sector on a number of significant transactions

Henrietta is also a director of Hydro Industries

and the Roehampton Club. In 2021, she was

appointed Chair of Investec Wealth &

Investment. This industry experience

demonstrates her valuable strategic and

transformation advisory skills.

External appointments:

Legal and General Group plc and Legal and

General Assurance Society Limited

Relevant skills and experience:

Zarina's previous appointments include

partner of Ernst & Young, Executive Director of

Absa Bank and head of Absa Private Bank,

chair of the South African Public Accountants'

and Auditors' Board and the South African

Auditing Standards Board.She has also been a

member of the Accounting Standard Board,

and a non-executive director of the Financial

Services Board, the South African Institute of

Chartered Accountants, Kumba Iron Ore

Limited, Sun International Limited, Mercedes

South Africa and Vodacom South Africa

Proprietary Limited, YeboYethu Limited and

Woolworths Holdings Limited. This

background affords significant audit and risk

experience in financial leadership, and

regulatory reporting skills.

External appointments: JSE Limited, Oceana

Group Limited and Mediclinic International plc

Fani Titi

Ruth Leas

Kevin McKenna

Executive Director, Group CE

Executive director, IBP CEO

Executive director, IBP CRO

Appointment

3 August 2011

Appointment

27 July 2016

Appointment

10 May 2012

Age: 59

Age: 50

Age: 55

Nationality:

Qualifications

BSc Hons (cum laude), MA, MBA

Qualifications

BA (cum laude), Hons (Economics), MPhil

(Cantab)

Qualifications

BCom, BAcc, CA(SA)

Relevant skills and experience:

Fani was a founding member of the

Kagiso Trust Investments Limited, and

later cofounded and led the public

offering of Kagiso Media Limited. He

was subsequently the founding

executive chair of the Tiso Group, which

later merged with Kagisgo Trust

Investments Limited, to form Kagiso Tiso

Holdings. Fani has served on the boards

of a number of listed entities, and

investment companies. He also joined

the Secretary General of the United

Nations CE Alliance on Global Investors

for Sustainable Development (GISD).

Fani brings strong investment banking

and commercial expertise to the board.

External appointments

None

Relevant skills and experience

Ruth has deep knowledge of Investec

and banking having worked for the Investec

group for 24 years. Ruth joined Investec

in South Africa in 1998 focusing on derivative

structuring and sales. She moved to Investec

in London in 2002 and in 2004 was appointed

co-head of US Principal Finance focusing on

credit derivatives and structured credit. Ruth

joined the credit team in 2008, and then

became head of UK Investor Relations in 2012.

She was appointed as an Executive Director of

the board of IBP in 2016 whilst head of risk

management before becoming chief risk

officer in June 2017. Ruth was appointed as

IBP CEO in November 2019. Prior to Investec,

Ruth was treasury economist for Gencor SA

Limited, and took up this role after winning the

Gencor-Chairman’s scholarship to study at

Cambridge University.

External appointments

UK Finance Board and Cambridge Judge

Business School Advisory Board

Relevant skills and experience

Kevin has substantial strategic, financial,

operational and risk experience. He is

a qualified accountant and previously worked

for ING Baring’s South Africa. He joined

Investec as Finance Director for Investec

Securities in 2000 after which he became

Chief Operating Officer for the Treasury and

Specialised Finance/Corporate and Investment

Banking division. He moved to London in this

role in 2006 before being appointed as Chief

Operating Officer for IBP in 2011. He was

appointed as Chief Risk Officer for the Bank

in November 2019.

External appointments

None

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

DIRECTOR BIOGRAPHIES

CONTINUED

117

Investec Bank plc is a member of the

Investec Group which has a dual listed

company legal structure (DLC). The DLC

comprises Investec plc, a public

company incorporated in the UK and

listed on the London Stock Exchange

with a secondary listing on the

Johannesburg Stock Exchange; and

Investec Limited, a public company

incorporated in South Africa and listed

on the Johannesburg Stock Exchange,

with secondary listings on the Namibia

Stock Exchange and the Botswana

Stock Exchange. Investec Bank plc is a

subsidiary of Investec plc in the UK

and is the Investec Group's principal

operating banking subsidiary in the UK.

Members of the DLC Board are

appointed as members of Investec Bank

plc Committees to ensure strong

reciprocity of oversight between the

DLC Board and its operating

subsidiaries. Membership of the IBP

Committees are discussed in more detail

in the relevant report below.

The group of companies comprising the

Investec Group’s wealth management

business, known as Investec Wealth &

Investment, comprises a number of UK

and SA subsidiaries, which in the UK are

subsidiaries of Investec Bank plc. The

Wealth business maintains an

independent governance structure,

comprising an independent Board, Audit

Committee, Nomination Committee,

Remuneration Committee and Risk

Committee which report to the DLC

Board and the applicable DLC Board

committee. The IBP Board receives

regular updates from the Chief

Executive of Investec Wealth.

As a listed DLC structure, the DLC has

regard to international corporate

governance principles, listing rules

and other regulations and best practice

in both the UK and South Africa and

adopts governance practices which

meet the highest appropriate standard

applicable in either or both jurisdictions.

For non-listed UK companies, the

Companies (Miscellaneous Reporting)

Regulations 2018 came into force for

financial periods commencing after

1 January 2019 whereby very large

private companies are required to

include a statement of which corporate

governance code, if any, has been

applied and how. As a non-listed but

significant operating subsidiary of the

Investec Group, similarly to the previous

financial year, the Investec Bank plc

Board deemed it appropriate to adopt

and apply the UK Corporate Governance

for the 2021/22 financial year. A

summary statement of compliance with

the various sections of this code is set

out on page 119 and is described in

detail throughout this governance

report.

An overview of the core features of

the Bank’s governance framework is

shown below. Details of the governance

framework of the DLC can be found in

the DLC 2022 integrated annual report.

Investec Bank plc Board

Our strategy

page 8

Our principal risks

page 52

Section 172(1) statement

page 22

Board activities

page 125

↓

The Board delegates certain matters to its four principal committees

IBP Audit Committee

IBP Remuneration

Committee

IBP Nomination

Committee

IBP Board Risk

& Capital Committee

•Monitors the integrity

of the Group’s financial

statements

•Evaluates the

effectiveness of the

Group's internal controls

•Scrutinises the activities

and performance of

the internal and

external auditors

•Oversees the

implementation of the

policy for Bank

directors’ remuneration

and setting

remuneration for Bank’s

Executive Directors and

senior management and

any identified

employees required by

regulation

•Reviews the

composition of the

Board

•Recommends the

appointments of new

directors

•Considers succession

plans for the Board and

senior management

•Oversees the Board

effectiveness review

•Monitors and

recommends the

Group's risk appetite

•Monitors the Group's

risk profile

•Considers and reports

on key financial and

non-financial risk issues

on page 132

on page 149

on page 129

on page 138

↓

Supporting Committees

Various supporting governance committees comprising executive management and applicable functional specialists oversee discrete

components of Investec Bank plc’s internal control framework and report on this principally to the IBP Audit Committee and BRCC

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

GOVERNANCE FRAMEWORK

118

The UK Corporate Governance Code 2018 (the code) applied

to the Bank for the financial year ended 31 March 2022. The

Board confirms that the Bank has complied with the principles,

the application of which are evidenced throughout this report.

The table below is designed to help stakeholders evaluate

how this has been achieved. The Board considers that

compliance has been achieved throughout the year.

Board leadership and Company purpose

A.An effective entrepreneurial Board, which is collectively

responsible for the long-term sustainable success of the Bank,

ensuring due regard is paid to the interests of our stakeholders.

Please refer to page 118 for the details of the Bank’s governance

framework, and pages 116-117 for the directors’ biographies

B.Purpose, values and strategy are aligned with culture, which

is promoted by the Board (read more on page 22)

C. Resources allow the Bank to meet its objectives and measure

performance. A framework of controls enables assessment and

management of risk (read more in Section 3 of this report)

D. Engagement with the Bank's stakeholders is effective and

encourages their participation (read more on page 22)

E. Workforce policies and practices are consistent with the Investec

Group's purpose and values, and overseen by the Board (read

more on page 23). The workforce is able to raise matters of

concern, and responsibility for whistleblowing arrangements sits

with the IBP Audit Committee, as detailed on page 136.

Division of responsibilities

F. The Chair has overall responsibility for the leadership of the

Board and for ensuring its effectiveness in all aspects of its

operations. The Chair, Brian Stevenson, was considered to be

independent on appointment. The responsibilities of the Chair are

set out on page 120

G. There is a clear division of responsibilities at the head of the

Company. There is a clear separation between the role of the

Chair and CEO. The Board comprises an appropriate combination

of Non-Executive and Executive Directors (read more on page

120)

H. Non-Executive Directors are advised of time commitments prior

to appointment. The time commitments of the directors are

considered by the Board on appointment, and annually

thereafter. External appointments, which may affect existing time

commitments, must be agreed with the Chair, and prior approval

must be obtained before taking on any new external

appointments.

I.The Company Secretaries and the correct policies, processes,

information, time and resources support the functioning

of the Board.

Composition, succession and evaluation

J. There is a procedure for Board appointments and succession

plans for Board and senior management which recognise merit

and promote diversity (read more on page 129)

K. There is a combination of skills, experience and knowledge

across the Board and the Board Committees. Independence,

tenure and membership are regularly considered (read more

on page 121)

L. The annual effectiveness review of the Board and the individual

directors considers overall composition, diversity, effectiveness

and contribution (read more on page 127)

Audit, risks and internal controls

M. Policies and procedures have been established to ensure the

independence and effectiveness of the internal and external

audit functions. The board satisfies itself of the integrity of the

Bank's financial and narrative statements (read more on pages

132-137)

N. The Board presents a fair, balanced and understandable

assessment of the Bank's position and prospects (read more

on page 135)

O. Procedures are in place to manage risk, oversee the internal

control framework, and determine the nature and extent of the

principal risks the Bank is willing to take in order to achieve its

long-term strategic objectives (read more on page 13)

Remuneration

P. The Bank is committed to offering all employees a reward

package that is competitive, performance-driven and fair. Our

policies are designed to support the Bank's strategy and to

promote its long-term sustainable success, with executive

remuneration aligned to our purpose, values and strategic

delivery (read more on page 149)

Q. A transparent and formal procedure is used to develop policy

and agree executive and senior management remuneration

(read more in the Remuneration Report starting on page 149)

R. The remuneration policy seeks to ensure all remuneration

decisions made by directors, fully consider the wider

circumstances as appropriate, including, but not limited to,

individual performance (read more in the Remuneration Report

starting on page 149).

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE

119

The key governance roles and responsibilities of the board are outlined below:

Chair

Chief Executive

Chief Risk Officer

•Leads the effective operation

and governance of the Board

•Sets agendas which support efficient

and balanced decision-making

•Ensures effective Board relationships

and a culture that supports

constructive discussion, challenge

and debate

•Together with the Investec Group

Chair, leads the development of and

monitors the effective implementation

of policies and procedures for the

induction, training and professional

development of all Board members

•Oversees the evaluation of the

performance of the Board collectively,

Non-Executive Board members

individually and contributes to the

evaluation of the performance of the

Executive Directors

•Ensures that the Board sets the tone

from the top, in regards to culture

•Serves as the primary senior interface

with regulators and the Investec

Group on behalf of the Board.

•Leads and manages the Bank within

the authorities delegated by the Board

•Proposes and directs the delivery of

strategy as agreed by the Board

•Develops and recommends business

plans, policies, strategies and

objectives for consideration by the

Board, taking into consideration

business, economic and political

trends that may affect the operations

of the Bank

•Ensures the Bank’s culture is

embedded and perpetuated

across the organisation

•Develops and supports the growth

of all the Bank’s businesses

•Monitors and manages the day-to-

day operational requirements and

administration of the Group

•Manages the Bank’s risk appetite.

•Responsible for the effective

management of risk within the Bank

•Ensures that the Bank’s risk

management, conduct and

governance processes and

procedures are effective

•Provides the Board with updates on

the Bank’s risk management, conduct

and governance processes

•Observes and manages within

the Bank’s risk appetite.

Senior Independent

Director

Non-Executive

Director

Company

Secretary

•Provides a sounding board to the

Chair

•Leads the Board in the assessment

of the effectiveness of the chair

•Acts as a trusted intermediary for

Non-Executive Directors, if required,

to assist them in challenging and

contributing effectively to the Board

•Addresses any concerns from

shareholders and other stakeholders

if they have any which are unable to

be resolved through normal channels,

or if contact through these channels

is deemed inappropriate.

•Brings unique perspectives to the

boardroom to facilitate constructive

dialogue on proposals

•Constructively challenges and

contributes to assist in developing

the Group’s strategy

•Monitors the performance of

management against their agreed

strategic goals

•Oversees the effectiveness of internal

controls and the integrity of financial

reporting

•Reviews succession planning for

the Board and management

•Oversees the risk management

framework

•Oversees the remuneration of the

Executive Directors and the Group's

employees.

•Maintains the flow of information

to the Board and its committees

and ensures compliance with

Board procedures

•Ensures and keeps the Board updated

on corporate governance

developments

•Facilitates a programme for the

induction and ongoing development

of directors

•Provides advice, services and support

to all directors as and when required.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

BOARD AND EXECUTIVE ROLES

120

Board composition

Membership

At the date of this annual report,

the Board comprised three Executive

Directors and seven Non-Executive

Directors, including the Chair. There

were no changes to the composition

of the Board during the year.

The names of the directors

during the year and at the date

of this annual report, and the

dates of their appointments

are set out on page 144.

The Board, with the assistance of the

IBP Nomination Committee, will continue

to review and monitor the composition

of the Board, with particular regard

to the breadth of skills, knowledge,

experience and diversity of

the members.

Further information regarding the

Bank’s approach to management

and Board succession planning

may be found in the IBP

Nomination Committee report

on page 129.

Further details in relation to

the Investec Group’s approach

to management and board

succession plan may be found

in Investec Group’s 2022

integrated annual report.

Independence

The Board considers the guidance

set out in the UK Corporate

Governance Code when considering

the independence of members of the

Board. Throughout the year ended

31 March 2022, the Board was

compliant with the UK Corporate

Governance Code in that the majority of

the Board, excluding the Chair,

comprised independent Non-Executive

Directors.

Open and honest dialogue is part

of Investec’s culture, and robust,

independent challenge is a fundamental

component of how the Board operates.

The IBP Nomination Committee, which

has been delegated the responsibility of

reviewing the directors’ independence,

considers all relevant circumstances in

undertaking its obligation to ensure

that the directors demonstrate

independence of character and

judgement, and exhibit this in the

boardroom by providing challenge

to the Executive Board members.

The Board, at the recommendation of

the IBP Nomination Committee, believes

that it functions effectively and that the

Non-Executive Directors are

independent of management and

promote the interests of stakeholders.

The proportion of Executive and Non-

Executive Directors is such that there

is a clear division of responsibility to

ensure a balance of power, such that

no individual or group can dominate

the Board’s processes or have

unfettered powers of decision-making.

The Board is of the view that the Chair

of the Bank, Brian Stevenson, was

independent on appointment. Prior to

becoming the Chair, Brian Stevenson

was the Senior Independent Director

of the Board.

Tenure

As identified, the IBP Nomination

Committee considers the guidance set

out in the UK Corporate Governance

Code when considering the

independence of the Non-Executive

Directors, and follows a thorough

process of assessing independence on

an annual basis for each director. The

IBP Nomination Committee considers

tenure when examining independence,

and when discussing the composition

of the Board as a whole.

The Board and the IBP Nomination

Committee are mindful that there needs

to be a balance resulting from the

benefits brought by new independent

directors, versus retaining individuals

with the appropriate skills, knowledge

and experience, and an understanding

of the Bank’s culture.

The Board’s Non-Executive Directors

have all served on the Board for less

than nine years. Accordingly, the Board

does not believe that the tenure of any

of the Non-Executive Directors

interferes with their independence of

judgement and ability to act in the

Bank’s best interest.

Diversity

In considering the composition of the

Board, the Board is mindful of all aspects

of diversity, including gender, race and

ethnicity. As a bank, we recognise that

having a diverse Board is a clear benefit,

bringing with it distinct and alternative

viewpoints, and mindsets able to

challenge the status quo. The Board is

committed to ensuring that the Bank

meets its governance, social and

regulatory obligations regarding

diversity. The Bank has a Board diversity

policy and has signed the Women in

Finance Charter and the Race at Work

Charter setting out the targets for Board

and senior management composition

in terms of gender and race.

As at the date of this report, there

was a 50% representation of women

on the Board and four persons of

colour on the Board, reflecting 40%

representation. We are proud of the

progress made to increase diversity

and there remains a strong pipeline of

diverse employees, whose progress into

more senior roles, including Board roles,

we will continue to strongly support.

Diversity remains a focus when

reviewing succession plans for the

Board and senior management.

Skills, knowledge and experience

The Board considers that the skills,

knowledge and experience of the

directors as a whole are appropriate for

their responsibilities, and the objectives

of the Bank.

Induction, training and development

On appointment to the Board, all

directors receive a comprehensive

induction which is tailored to the new

director’s individual requirements. The

induction schedule is designed to

provide the new director with an

understanding of how the Bank works

and the key issues that it faces. The

Company Secretary consults the Chair

when designing an induction schedule,

giving consideration to the particular

needs of the new director. When a

director is joining a Board Committee,

the schedule includes an induction to

the operations of that committee.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

BOARD AND EXECUTIVE ROLES

CONTINUED

121

Terms of appointment

On appointment, Non-Executive

Directors are provided with a letter of

appointment. The letter sets out, among

other things, duties, responsibilities and

expected time commitments, details of

our policy on obtaining independent

advice and, where appropriate, details of

the Board Committees of which the

Non- Executive Director will be a

member. The Bank has a directors' and

officers' liability insurance policy that

insures directors against liabilities they

may incur in the proper performance

of their duties.

On the recommendation of the IBP

Nomination Committee, Non-Executive

Directors will be appointed for an

expected term of nine years (three

terms of three years each) from the date

of their first appointment to the Board.

Independent advice

Through the Chair, the SID or the

Company Secretary, individual directors

are entitled to seek professional

independent advice on matters related

to the exercise of their duties and

responsibilities at the expense of the

Bank. No such advice was sought during

the 2022 financial year.

Conflicts of interest

Certain statutory duties with respect

to directors’ conflicts of interest are in

force under the UK Companies Act 2006

(the Act). In accordance with the Act

and the articles of association (the

articles), the Board may authorise any

matter that otherwise may involve the

directors breaching their duty to avoid

conflicts of interest. The Board has

adopted a procedure, as set out in the

articles, that includes a requirement

for directors to submit in writing,

disclosures detailing any actual or

potential conflict for consideration and,

if considered appropriate, approval. The

procedure also requires notification and

consideration by the Investec Group.

Actual and potential conflicts of interest

are considered in the annual assessment

of director independence.

Company Secretary

David Miller is the Company Secretary

of the Bank. The Company Secretary is

professionally qualified and has gained

experience over a number of years.

His services are evaluated by Board

members during the annual Board

effectiveness review. He is responsible

for the flow of information to the Board

and its committees and for ensuring

compliance with Board procedures.

All directors have access to the advice

and services of the Company Secretary

whose appointment and removal is a

Board matter.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

BOARD AND EXECUTIVE ROLES

CONTINUED

122

An experienced

and diverse team

We have designed the composition of the Board to ensure that

we have the appropriate mix of knowledge, skills, experience,

independence and diversity to provide the range of

perspectives, insights and challenge needed to support good

decision-making in order to support the delivery of the Bank’s

strategic objectives.

We consider the collective skills and experience of the

directors when assessing the overall composition and

suitability of the Board. The current collective skills and sector

experience of the Board include the following areas: banking,

risk, regulatory, strategic thinking, digital and ESG. The key

skills and experience of specific directors are detailed in their

respective biographies on pages 116 to 117.

Further information on Board composition can be

found on page 124.

Board tenure

0-2 years

10%

2-4 years

30%

4-6 years

40%

6-10 years

20%

Diversity

The Board remained focused

on inclusion and diversity with

the intention to set the tone and

direction for the Bank as an inclusive

employer, with diverse teams

delivering for the benefit of all

stakeholders.

The Board received updates in terms

of the progress against the HM

Treasury Women in Finance Charter

noting that the 30% target for female

representation in senior leadership

roles by 2022, which was achieved in

March 2022.

The gender balance of those in senior

management is provided in the 2022

Investec Group’s 2022 sustainability

report.

The Bank is also committed to

increasing the representation of

Black, Asian and Minority Ethnic

senior leadership. Investec is a

signatory to the Race at Work

Charter, the principles of which are

aimed at ensuring that ethnic minority

employees are represented at all

levels of the organisation. The Board

is proud of its progress in line with its

commitments to enhance diversity

and recognises the importance and

benefit of increasing diversity both at

a Board and all levels within the

organisation.

New appointments are made on

merit, taking account of the specific,

skills and experience, independence

and knowledge needed to ensure

a rounded Board and the diverse

benefits each candidate can bring

to the overall Board composition.

The composition of the Board can be

seen in the directors’ report on page

144. In terms of diversity on the board,

as at the date of this report:

•50% of the Board are female (this

will increase to 55% upon the

appointment of the new Finance

Director, Marlé van der Walt,which

is subject to regulatory approval)

•40% of the Board are Black, Asian

and Minority Ethnic

Diversity will remain an area of focus

when considering any succession

plans.

Further information on the

Bank’s broader approach to

diversity and inclusion can be

found on page 27

Information on the Bank’s gender

pay gap reporting and ethnicity

pay gap reporting can be found

on page 27.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

BOARD COMPOSITION

123

Board composition as at 31 March 2022

Board member

since

Investec Bank plc

(Six meetings in the year)1

Members

Independent

Attended

Eligible to attend

Brian Stevenson (Chair)

On appointment

14 Sep 2016

Ruth Leas (CEO)

Executive

27 Jul 2016

Henrietta Baldock

Yes

10 Feb 2021

Zarina Bassa

Yes

1 Apr 2017

David Germain

Yes

15 Sep 2020

Moni Mannings

Yes

27 Jul 2016

Kevin McKenna

Executive

10 May 2012

Paul Seward

Yes

1 Apr 2019

Fani Titi

Executive

3 Aug 2011

Lesley Watkins

Yes

13 Nov 2018

1.Where a director is unable to attend a meeting, they receive papers in advance and have the opportunity to provide comments to the Chair of the Board.

From time to time, the Board constitutes sub-committees of the Board mandated to deal with specific ad hoc matters that may arise.

Summary Board activities

11 May

19 Jul

20 Sept

15 Nov

09 Feb

15 Mar

Strategy

Financial management and

performance

Operating context

Risk and assurance

People strategy, leadership

and succession

Remuneration

Culture and values

Operational resilience

Conduct

ESG

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

BOARD COMPOSITION

CONTINUED

124

What we did

in 2021/22

The standard and regular agenda items of the Board include the CE report covering strategy and key issues and comprehensive

reports pertaining to financial performance, people and workforce engagement, conduct and the performance of the Structured

Products business.

2021

May

•The Board approved the financial statements

for FY2021 and declared a dividend on the

ordinary shares of the Bank for the financial

period ended 31 March 2021

•Received an in-depth presentation on the

culture framework which had been updated to

reflect the Financial Conduct Authority’s (FCA’s)

expectations, to address the gaps identified by

an internal audit review and to reflect current

working practices in terms of the Bank’s culture

reviews

•Approved the terms of reference for key

management committees following a review of

membership

•Received a detailed presentation on the Listed

Companies client franchise which included an

update on the desk’s performance, strategy

and any potential risks.

•Received a legal update from the General

Counsel

July

•Received an update on the unrest in South

Africa as a result of the ex-President, Jacob

Zuma’s arrest

•Received an in-depth presentation on the

Bank’s strategic investment in Monese which

allowed for the acceleration of the Bank’s

transactional banking proposition

•Considered the Bank’s approach to staff

returning back to the office after working from

home in the pandemic

•Approved the Internal Liquidity Adequacy

Assessment Process (ILAAP), Individual Capital

Adequacy Assessment Process (ICAAP),

Contingency Funding & Recovery Plan (CFRP)

•Approved the traded market risk appetite and

minor amendments to the Bank’s risk appetite

which had been requested by the Board

•Received a detailed presentation on the Private

Equity client franchise which included an update

on the desk’s performance, market position,

strategy and potential risks

•Considered the Bank’s Europe lending strategy

•Considered the letter from the Prudential

Regulation Authority (PRA) providing feedback

following its periodic summary meeting.

September

•Received an in-depth presentation from the

Head of People & Organisation (P&O) which

included feedback from recent listening posts

conducted as part of the workforce

engagement process

•Approved the revised business case which was

due to be submitted to the Business

Competition Remedies (BCR)

•Welcomed the PRA who attended to discuss

the feedback from the periodic summary

meeting

•Approved the counterparty credit risk appetite

•Approved the Management Responsibility Map

(MRM)

•Received a detailed update on the Investec

Group’s and Bank’s improvements in terms of

environmental, social and governance (ESG)

matters over the year and its impact on the

business

•Reviewed a presentation summarising the

strategy for remaining exposures held by

Investec Hong Kong and the actions taken

•Received an update on the Private Companies

and Specialist Sectors client franchises which

summarised the desk’s performance, strategy

and any potential risks.

November

•Received an update on the Bank’s gender

diversity statistics, female initiatives and the

Women in Finance Charter which had been

submitted in September 2021

•Reviewed the financial performance and the

financial statements for the half year ended 30

September 2021 and approved the declaration

of an interim dividend

•Reviewed the whistleblowing report and

approved the whistleblowing policy

•Approved the client assets (CASS) attestation

•Received a summary of outcomes following the

COP26 conference in Glasgow

•Received an update on the progress made so

far in terms of the Finance Director

appointment.

•Received a legal update including in relation to

dividend arbitrage litigation.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

BOARD ACTIVITIES

125

2022

February

•Invited an external speaker, Bob

Wigley, Head of UK Finance, to

provide an update on technology in

banking, remuneration and the future

of work

•Approved risk appetite and policies

•Reviewed the progress to date on the

stress testing scenario development

•Approved the Dividend Policy

Statement

•Received an update on Investec Bank

(Switzerland) AG and the Bank’s

oversight arrangements for that

business.

March

•Approved the 2022/23 budget

•Approved the Money Laundering

Reporting Officer (MLRO) Report

•Reviewed and approved the operational

resilience self-assessment which had

been reviewed in detail at a Directors’

Development session and at the BRCC

meeting in March

•Approved the Gender Pay Gap Report

and Ethnicity Pay Gap Report

•Received an update on belonging,

inclusion and diversity and a detailed

People & Organisation update from the

newly appointed Head of People &

Organisation

•Approved liquidity risk appetite

•Welcomed Fidelio Partners, external

Board evaluator and discussed the

outcome of the external Board

effectiveness review and proposed areas

to address

•Received an update on the war in

Ukraine, particularly in terms of liquidity

risk, market risk and business disruption

risk.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

BOARD ACTIVITIES

CONTINUED

126

How the Board engages

with our people

Our people are at the heart of our

business. We aim to be an organisation

that values all of its people for their

contributions and celebrates who they

are.

The recognition that our colleagues are

vital to the delivery of the Bank’s and

Investec Group’s strategy is reflected by

the Board’s extensive engagement with

employees.

The Board has supported the adoption

of appropriate arrangements for

engaging with the Bank’s workforce.

The Board will continue to monitor these

arrangements to ensure that they remain

effective and continue to give a

meaningful understanding of the views

of the workforce and to encourage

dialogue between the Board and our

people.

How we engage

The Bank has established a

comprehensive workforce engagement

programme, administered by our People

& Organisation consulting teams. This

programme includes various

mechanisms to monitor, gain a ‘felt

sense of’, and evaluate how people

experience our culture, as well as their

alignment and adherence to our system

of values. These include:

•Listening posts: Regular focus groups

to take the pulse of our culture and

climate, including an understanding of

the lived experience of all employees

•Team culture reviews: Where needed,

we conduct in-depth culture reviews

in teams or business units to assess

the distinctive beliefs, behaviours and

practices of Investec against how

they are perceived by our employees

•Organisation climate reviews: Identify

how an individual, specific team,

department or division is functioning

against the cultural norms and

requirements

•Dialogue sessions: Sessions with

colleagues from across the globe to

discuss a specific topic. This has

included dialogue on the creation of

two values, evolving belonging,

inclusion and diversity, and

recognising the environment

•Executive communication and team

check-in sessions: We frequently host

international, regional and division-

specific sessions where employees

have an opportunity to hear from and

engage with the executive

•Town halls: Provide an opportunity to

share information about our strategy,

growth plans, performance and

results, changes to the economic and

regulatory environment, and to

celebrate successes, with a large

audience

These engagement activities are further

supported by comprehensive wellbeing

programmes, belonging, inclusion and

diversity focused initiatives, and social

events.

What matters to our people

The key matters identified by employees

included:

•The transition to hybrid working, with

a particular focus on flexible working

conditions and expectations around

the future of work

•Belonging, inclusion and diversity,

with a continued focus on building an

inclusive working environment,

improving representation with respect

to gender and ethnicity, particularly at

a senior level and within decision-

making bodies, and enhancing

opportunities for progression

•Fair remuneration, especially given the

backdrop of rising inflation

•Wellbeing.

How we consider

As detailed in last year’s annual report,

and in accordance with the UK

Corporate Governance Code, Moni

Mannings, Senior Independent Director

of Investec Bank plc and Chair of the IBP

Remuneration Committee has been

appointed a designated Non-Executive

Director responsible for workforce

engagement for the Bank.

Meetings are held on a quarterly basis

between Moni Mannings for Bank and

Cath Thorpe and Henrietta Baldock (the

IW&I and DLC designated Non-Executive

Directors for workforce engagement

respectively) to consider a workforce

engagement report comprising a

summary of the Board’s and

Management’s employee engagement

activity, the key issues raised by

employees, and the actions undertaken

to address those issues.

The key items from these reports, and

details of the workforce engagement

activity that has taken place for all our

workforce including the common issues,

are provided to the Board on a six-

monthly basis. Management also provide

an update at each Board meeting, as to

the key matters of note in respect of our

people.

The themes identified through our

workforce engagement activities are

invaluable in informing Board decisions

and discussions.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

BOARD ACTIVITIES

CONTINUED

127

Board

effectiveness

The Board's annual effectiveness review

provides an opportunity for the Board to

consider ways of identifying greater

efficiencies, maximising strengths and

highlighting potential areas of further

development, to enable the Board to

continue to enhance its own

performance.

Internal reviews by way of

questionnaires and interviews were

conducted by the Chair with the

assistance of the Company Secretary for

the previous two financial years. In

keeping with the recommendations of

the Financial Reporting Council’s (FRC’s)

UK Corporate Governance Code 2018,

this year, the Board effectiveness review

was externally facilitated by Fidelio

Partners, an independent, external

corporate governance advisory firm.

Progress Against 2020

Effectiveness Review

As reported last year, the 2020 review

was an internal evaluation. Overall, the

Board, its committees and each of the

directors were found to be effective.

The review highlighted certain areas of

focus that would further improve

effectiveness. These were considered

by the Board, and an action plan was

agreed. The principal action items

identified from the 2020 review were (i)

to facilitate strategy days at which the

Board could focus on the strategy of the

bank; and (ii) to enhance communication

of matters from the Nomination

Committee and Remuneration

Committee to the whole Board. Work on

these on items is ongoing.

2021 Board Effectiveness

Review

In keeping with the recommendations of

the Financial Reporting Council’s (FRC’s)

UK Corporate Governance Code 2018,

this year, the Board effectiveness review

was externally facilitated by Fidelio

Partners.

Below we outline the various stages of

the 2021 review.

Stage 1

Fidelio Partners held in-depth one-on-

one meetings each of the directors,

select senior management and the

Company Secretary. These interviews

were based on open questions covering

key aspects of governance.

Stage 2

Fidelio Partners prepared a quantitative

survey, in which the directors provided

feedback on the key competences and

overall performance of the Board.

Stage 3

Fidelio Partners reviewed and analysed

Board and Board Committee materials,

including agendas, papers, minutes and

terms of reference.

Stage 4

Drawing upon best practice within the

sector, their extensive experience of

working with Boards internationally, and

their understanding and insight of

stakeholder expectations, Fidelio

Partners determined their key findings

and recommendations.

This final report was presented to the

Board in March 2022, following its

consideration by the IBP Nomination

Committee.

A thorough review and discussion took

place, with actions agreed for

implementation and monitoring.

Conclusions

The review identified that the Board, its

committees and the individual directors

were performing effectively.

The findings showed that the Board had

a positive and constructive dynamic

which was enhanced by inclusive and

effective chairing. It was found that

there was a good mix of relevant skills

and a high level of diversity, this breadth

of perspective was credited with

enhancing the Board’s contribution to

risk and cultural oversight.

In terms of recommended

enhancements the report grouped the

output into two core themes relating to

strategy and committee reporting.

In terms of strategy, the Bank will look to

ensure that it has visibility of Group and

shareholder expectations and targets for

Investec Bank plc, allowing the Board to

dedicate sufficient time at meetings to

discussing long-term strategy and

performance. Strategy sessions will be

coordinated with DLC in the broader

DLC strategy formulation process to

ensure that the overall DLC strategic

objectives and priorities are clear to the

Bank Board, and the results of the

sessions are fed into the DLC level

strategy formulation process.

Regarding committee reporting, the

visibility of discussions held at the

Nomination Committee and

Remuneration Committee was an area

identified for improvement and was part

of the action plan. The Board Risk and

Capital Committee should also review

reporting and refine the papers to

ensure the appropriate level of detail

comes to BRCC.

Committees

The Board Committees were also

reviewed and, overall, were considered

to function well in terms of their

effectiveness, decision-making and

the rigorous manner in which they

addressed any issues brought

to their attention.

Chair

The Chair was considered to provide

robust leadership for the Board, and

to strengthen the link between

the Executive and Non-Executive

members of the Board as well as the

Investec Group since his appointment to

the DLC Board.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

BOARD ACTIVITIES

CONTINUED

128

Brian Stevenson

Chair of IBP Nomination

Committee

Key achievements in 2021/22

•Considered the succession plans for

the Board and senior management

•Reviewed the skills, knowledge,

experience and diversity of the Board

•Coordinated and considered the external

Board effectiveness review

•Considered and recommended the

appointment of a Finance Director.

•Reviewed the internal and external CASS

assurance reports on client money and

assets

Areas of focus in 2022/23

•Consider the succession plans for

the Board and senior management

•Review the composition of the Board

and the principal Board Committees

•Review the skills, knowledge, experience

and diversity of the Board

•Oversee the actions arising from the

external Board effectiveness review.

Members

Member since

Meetings

attended

Eligible to

attend1

Brian Stevenson (Chair)

16 May 2019

Perry Crosthwaite2

13 Mar 2019

Philip Hourquebie3

5 Aug 2021

Moni Mannings

16 May 2017

1 Where a director is unable to attend a meeting, they receive papers in advance and have the opportunity to provide comments to the Chair of the

Committee.

2 Perry Crosthwaite stepped down as Chair of the Investec Group on 5 August 2021 and as such stepped down from the Committee

3Philip Hourquebie was appointed Chair of the Investec Group on 5 August 2021 and was appointed to the Committee

Introduction

I am pleased to present the IBP

Nomination Committee (the Committee)

report. The role of the Committee is to

have oversight of the composition and

effectiveness of the Board and its key

governance arrangements. Given the

ongoing uncertainty and challenging

macro-economic environment, ensuring

a stable and effective Board was of

utmost importance.

Succession planning

During the year, the Committee

continued to focus on succession

planning for the Board and subsidiary

Boards. There was a particular focus

placed on senior managers in control

positions as well as client sector and

international business heads and

members of the newly formed Executive

Committee. As the Bank moved to a

strategy of growth, the Committee was

focused on ensuring a balance of

collective skills while also aligning to the

Bank’s culture and values of diversity

and inclusion. The Committee also has

regard to the principles of the UK

Corporate Governance Code as well as

recommendations made within the

Parker and Hampton-Alexander Review.

The Committee considered the

composition of the Board and had

identified the need for additional

financial experience within the executive

team and agreed that the appointment

of a Finance Director would be

appropriate. The Committee has

identified a candidate for this role who it

is hoped will be appointed in 2022

subject to regulatory approvals.

Further details of the selection

process for this appointment

can be found on page 131

Further details on the

Committee's approach to

succession planning can be

found on page 131.

Board effectiveness

The 2021 Board effectiveness review

was facilitated externally in line with the

recommended approach set out in the

UK Corporate Governance Code. The

Committee, in conjunction with the DLC

Nominations and Directors’ Affairs

Committee (DLC Nomdac), agreed the

appointment of Fidelio Partners, as the

independent external facilitator for the

review. The Committee received and

discussed the report and had

recommended actions to the Board.

Full details of the Board

effectiveness review, including

the evaluation of the

Committee's effectiveness are

provided on page 128.

Board diversity

The Committee remained focused on

ensuring the Board considered diversity

when considering composition and

succession planning. The Committee

also focused on ensuring diversity within

the management team and challenged

management on the diversity of

candidates when reviewing succession

plans.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

IBP NOMINATION COMMITTEE REPORT

129

Roles and responsibilities

The role of the Committee is to keep the

Board's composition, skills, experience,

knowledge, independence and

succession arrangements under review

and to ensure that appropriate

procedures are in place for nominating

and evaluating directors. Due regard is

given to the benefits of diverse senior

leadership, including diversity of

thought, gender, social background

and ethnicity.

Investec Wealth & Investment (IW&I), a

subsidiary of Investec Bank plc

regulated by the FCA, maintains an

independent governance structure,

comprising an independent Board and

Nomination Committee. The

membership of the Nomination

Committee of the Wealth business

comprises independent Non-Executive

Directors. Matters relating to IW&I do not

fall within the remit of the IBP

Nomination Committee.

The IW&I Nomination Committee reports

to the DLC Nomdac. Any matters

relevant to the Bank are communicated

to the Bank, in part, through having the

Chair of the DLC Nomdac, Philip

Hourquebie, as a member of the IBP

Nomination Committee.

The Committee reports to the Board on

how it discharges its responsibilities and

makes appropriate recommendations

to the Board.

Role of the Chair

The role of the Chair of the IBP

Nomination Committee requires regular

meetings with the executives of the

Bank, along with liaison with the Chair of

the DLC Nomdac. The Chair also has

interactions with internal and external

specialist advisors and with Heads of

People & Organisation, Compliance and

Company Secretarial, in order to keep

knowledge up to date, and to keep

abreast of commercial, regulatory and

legislative developments and challenges

facing the business. These interactions

are an essential part of the role of the

Chair of the IBP Nomination Committee.

Committee composition, skills and

experience

The Committee is composed of

independent Non-Executive Directors

and a Chair who was independent on

appointment. The Committee welcomed

Philip Hourquebie as a member,

following his appointment as Chair of the

Investec Group and the Chair of the DLC

Nomdac. Philip’s appointment as a

member of the Committee supports the

alignment between the Bank and its

parent which strengthened further

following Brian Stevenson’s appointment

to the Investec plc Board and DLC

Nomdac. Membership is designed to

provide the breadth of experience

necessary, for the members to consider

the issues that are presented to the

Committee.

The Chief Executive is invited to attend

meetings as appropriate.

Looking ahead

In 2022/23, the Committee will continue

to review the composition of the Board

and the Board Committees, taking into

consideration the Bank’s strategy, the

continuing uncertainty across the UK

and worldwide as well and evolving

market conditions particularly as a result

of COVID-19, Brexit and the invasion of

Ukraine by Russia, while being mindful

of all aspects of diversity, including

gender, race, skills, experience and

knowledge. Below Board level there will

be a continued focus on succession

planning and ensuring that there are

development plans in place where

required as well as appropriate

interaction between senior management

and the Board.

The Committee will also oversee the

implementation of the action plan

following the external Board

effectiveness review.

Brian Stevenson

Chair, IBP Nomination Committee

21 June 2022

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

IBP NOMINATION COMMITTEE REPORT

CONTINUED

130

What we did in 2021/22

Succession planning

Robust succession planning takes into

account current and future business

needs and ensures a good balance of

skills, experience and effectiveness,

while recognising the benefits of

diversity.

Effective succession planning should

take into account contingency planning

(for any unforeseen departures or

unexpected absences), medium-term

planning (orderly refreshing of the Board

and Board Committees) and long-term

planning (looking ahead to the skills,

experience and knowledge that may

be required on the Board in the future).

Effective succession planning also

contributes to the ability of the Bank

to deliver on its strategic objectives.

In the previous year, the Committee’s

remit had been extended to cover

succession planning and approving the

appointment of non-Board senior

managers who held or were proposed to

hold a control function as well as Chair

appointments for the Bank’s principal

subsidiaries. In light of this, the

Committee reviewed the succession

plans for below the Board senior

management identifying ‘step in’

successors and longer-term candidates

throughout the financial year. In both the

short-term and longer-term plans, the

curricula vitae (CVs) of the potential

successors were reviewed.

The Committee also reviewed the

succession plans for the subsidiary

Boards and approved changes to their

Boards. A number of the recent

appointments had been utilised to offer

development and growth opportunities

to senior management. The

appointments and succession planning

had been considered in terms of

diversity, development of our employees

and the needs of the relevant Board

while ensuring alignment to regulatory

expectations and requirements.

Board effectiveness and training

The Committee oversees development

undertaken by the Non-Executive

Directors ensuring that the mandatory

computer-based compliance training

was completed. Directors’ Development

sessions were also held at least four

times a year, with the Bank’s parent

company, to provide the Board

opportunities to develop knowledge

regarding the business, the market,

trends and/or regulation. The

Committee, in conjunction with the DLC

Nomdac, drives the agenda and topics

discussed. Topics during the year

included:

•Capital

•Operational resilience

•Anti-money laundering and terrorist

financing

•Technology/digital.

The Board effectiveness review was

conducted externally, in line with the UK

Corporate Governance Code. The

review was conducted by Fidelio

Partners, who had been chosen by a

dedicated sub-committee of the DLC

Nomdac and approved by the

Committee and DLC Nomdac. The

Committee had reviewed the draft

report ahead of presentation to the

Board. The Committee received comfort

that the Board was considered to be

effective. There were areas for

improvement and the Committee will

oversee the actions being taken.

Board composition

The Committee has continued to review

its composition for Board and Board

Committees.

The need for a Finance Director with

strategic experience to join the Board,

strengthening the executive skills and

knowledge was identified. As a result,

Green Park, an independent executive

search firm, had been engaged to assist

from an external recruitment

perspective. The recruitment process

was formal and rigorous, with

consideration given to a broad range of

factors such as diversity of gender,

social and ethnic backgrounds, cognitive

and personal strengths, and diversity of

thought as merit and objective criteria

as the Committee had stressed the

importance that Green Park consider

diversity and also international

candidates as part of their search for

potential candidates. Green Park was

engaged to assist in the search for

candidates as it had no other connection

with the Company.

The Committee will oversee the

candidate’s induction and development

needs in due course.

Board suitability

In order to provide assurance that the

composition of the Board was

appropriate and in line with internal

procedures and regulatory guidance, the

suitability assessment of the Non-

Executive Directors was conducted in

March 2021, with the Committee

reviewing the feedback in the financial

year. Meetings were held covering

topics including but not limited to skills,

independence and the operation of

governance committees.

There were no matters of concern raised

and the Committee was satisfied that all

Non-Executive Directors remained

independent in character and

judgement. There were certain areas

identified for the Board and relevant

committees to focus on to better

enhance debate and consideration of

the Bank’s strategy and performance

including updates on employee

engagement, and ensuring succession

remain an area of focus for the

Committee. The review provided the

Committee with assurance that the

composition of the Board was

appropriate for the Bank to support the

Bank’s strategy.

The Committee also reviewed the

process and documentation that had

been drafted to assist the Committee

with the assessment of individual and

collective suitability and the assessment

of suitability prior to appointment.

Risk management and

governance

CORPORATE GOVERNANCE

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131

Lesley Watkins

Chair of the IBP Audit

Committee

Key achievements in 2021/22

•Reviewed macro-economic assumptions and

stress test scenarios and their impact on credit

model expected credit loss (ECL) forecasts as

COVID-19 support was withdrawn and in light

of the economic uncertainty arising from the

war in Ukraine

•Reviewed the valuation of fair value

movements with higher risk characteristics

including Structured Products and associated

costs

•Assessed whether internal audit and

compliance monitoring plans were risk-

focused, flexible and responsive to the

COVID-19 situation, particularly for overseas

operations

•Assessed the internal control environment

having regard to hybrid working by employees

•Considered the Bank’s reporting disclosures in

relation to climate change

• Assessed the need for any changes to

contingent liabilities in relation to uncertain tax

issues and legal proceedings

Areas of focus in 2022/23

•Monitor ECL forecasts in light of

continuing COVID-19 disruption and

geo-political upheaval

•Continue to assess the internal

control environment having regard

to flexible working by employees

and changes arising from business

developments

•Continue to consider the accounting

and disclosure implications, if any,

of emerging ESG and climate

change themes

•Continue to assess the

appropriateness of the accounting

disclosures for historic dividend

arbitrage transactions

•Monitor the effectiveness of moving

to a globally aligned internal audit

model and the increased use of data

analytics

•Consider changes to requirements

arising from outcome of the

government consultation to restore

trust in audit and corporate

governance.

Meetings held in

2021/22

Members

Member since

Eligible

to attend1

Attended

Lesley Watkins (Chair)

13 Nov 2018

Zarina Bassa

1 Apr 2017

Moni Mannings

2 Jul 2017

Paul Seward

1 Apr 2019

1.Includes a combined audit and BRCC meeting and single-topic Audit Committee meeting as well as the usual Audit Committee held on 5 November 2021

(for the purposes of attendance in the table above these have been treated as one meeting)

2.Where a director is unable to attend a meeting, they receive papers in advance and have the opportunity to provide comments to the Chair

of the Committee.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

IBP AUDIT COMMITTEE REPORT

132

Introduction

I am pleased to present you with the

report of the IBP Audit Committee (the

Committee) for the financial year ended

31 March 2022.

In the UK, the COVID-19 era has

ostensibly been put behind us. The UK

Government has removed all social

restrictions and businesses have been

permitted to fully re-open. However,

although the UK is normalizing, large

parts of the world (particularly Asia)

remain under some form of COVID-19

protocols, and most major economies

are facing strong inflationary pressure

and tight labour markets. The pace and

extent of recovery cannot be expected

to be symmetrical across all sectors of

the global economy, with some – for

example leisure and tourism – having

suffered more than others in the

protracted global shutdown.

Consequently, it may be some time

before all COVID-19 related credit risks

have shaken out of the global economy.

More recently there has been the

emergence of geo-political turmoil in

Eastern Europe. The path of this conflict

and the wider impact on the macro-

economic outlook is uncertain.

In light of the risk profile articulated

above, a key focus for the committee

has been in-depth consideration of

assumptions, key accounting

judgements and impairment

assessments in light of revised credit

model output and valuation

assessments.

Similarly to the previous year, given how

the unprecedented levels of government

COVID-19 support has resulted in the

de-coupling of the traditional

relationship between macro-economic

factors and credit models, the

Committee has devoted significant time

to assessing management’s estimates of

the appropriate ECL assumptions for the

Bank’s lending portfolios and the

appropriateness of COVID-19 ECL

overlays and other judgemental items in

the financial statements, including

management’s assessment of valuations

for the Bank’s principal investments and

mark-to-market and hedged positions.

Further details of the key accounting

issues considered by the Committee are

set out on the following pages.

Internal control environment

As a result of the Bank’s well-developed

internal control framework, the rapid and

widespread transition to the workforce

working at home required in the prior

period proved to be well-controlled.

Following the relaxation of social

restrictions Investec has introduced a

hybrid/flexible approach to the return to

office which has seen the workforce in

large parts returning to the office but

combined with a significant proportion

of the workforce working at home at any

given time. This has required continued

robust oversight from the Committee, of

this hybrid model and accordingly the

Committee has reviewed the output of

the internal audit and compliance

monitoring plans and received updates

from management’s Risk & Control

Forum.

Further details of the internal control

issues considered by the Committee

during the year are set out on the

following pages.

Looking ahead

The Committee will continue to assess

the key issues driving the economy as

COVID-19 continues to recede into the

distance having regard to the fact that

we may feel the macro-economic

aftershocks for some time to come. The

Committee will also monitor the war in

Ukraine in terms of its impact on our

clients and the wider global economy.

This will require us to monitor the

recovery of the economy and the

implications of this on accounting and

disclosure requirements.

Hybrid-flexible working looks set to

continue and become the de facto

work-life model for many businesses.

The Committee will continue to assess

adequacy of the internal audit and

compliance monitoring plans to ensure

adequate oversight of the control

environment.

Climate change and other

environmental, social and governance

issues continue to be an area of major

focus for Investec and for our clients,

investors and regulators. The Committee

will continue to ensure that the Bank

meets its reporting requirements on

these topics.

In May 2022, Government published its

response to the consultation on

strengthening the UK’s audit, corporate

reporting and corporate governance

systems. The Committee will take into

account changes to regulations,

particularly when the Investec Group

conducts the external audit tender.

Lesley Watkins

Chair

21 June 2022

Risk management and

governance

CORPORATE GOVERNANCE

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133

Significant matters

Significant matters are those matters in the view of the IBP Audit Committee that:

•Required significant focus from the Committee

•Were considered to be significant or material in nature requiring exercise of judgement

•In relation to the 2022 annual report and financial statements were otherwise considered to be subjective from an accounting

or auditing perspective.

Significant matters relating to the

2022 financial statements

What we did

Expected credit loss (ECL)

assessment

The appropriateness of the allowance for

expected credit losses is highly subjective and

judgemental. The impact of COVID-19 and

geo-political turmoil and the resultant

economic impacts in the geographies in which

the business operates have resulted in

additional key judgements and assumptions

being made during the current year.

•Reviewed the appropriateness of the forward-looking macro-economic

scenarios and assumptions (including the probability weights applied

to each scenario and the sensitivity of each) used in credit models and

the impact of these on forecast ECL.

•Evaluated the appropriateness of and methodology for management’s

proposed overlay to capture model limitations and the uncertainty

arising from the impact of COVID-19 and the withdrawal of government

support as well as the Russian invasion of Ukraine.

•Challenged the level of ECL and the assumptions used to calculate

the ECL provisions held

•Assessed ECL experienced against forecasts, and considered whether

the level of ECL was appropriate. Particular focus was given to

exposures which were specifically affected by the negative macro-

economic environment

•Considered management’s peer review, and a benchmarking

assessment, of ECLs, the overlay, and Stage 1 and 2 credit impairment

coverage ratios compared to other UK banks which found that that the

Bank’s coverage ratios were within the benchmarking range

•Evaluated the IFRS 9 disclosures for relevance and compliance

with IFRS.

Valuation of fair value

instruments with higher risk

characteristics and associated

income

For level 3 instruments, such as unlisted

investments in private equity businesses,

investment properties, fair value loans and

large bespoke derivative structures, and

structured products there is a large degree of

subjectivity and judgement surrounding the

inputs to the valuations.

•Received reports on the material investments including an analysis of

the key judgements and assumptions applied and approved the

valuation adjustments proposed by management for the year ended 31

March 2022

•Received reports on and considered the valuation of financial

instruments with higher risk characteristics

•Challenged and debated significant subjective exposures and

assumptions including:

–the valuation principles applied for the valuation of level 3

investments (unlisted and private equity investments) and fair value

loans

–fair value of exposures in industries affected by COVID-19 and the

Russia-Ukraine war

–the appropriateness of the IFRS 13 disclosures on fair value

–any initial impact of the war in Ukraine on exposures.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

IBP AUDIT COMMITTEE REPORT

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134

Uncertain tax and other legal

matters

Considered potential legal and uncertain tax

matters and contingent liabilities with a view

to ensuring appropriate accounting treatment

in the financial statements, including in

respect of historical German dividend tax

arbitrage transactions.

•Received regular updates from the Group Executive, Group Tax, Group

Finance, and Group Legal on uncertain tax and legal matters to enable

the Audit Committee to probe and consider the matters and evaluate

the basis and appropriateness of the accounting treatment

•Analysed the judgements and estimates made and discussed the

potential range of outcomes that might arise to determine the liability,

if any, for uncertain tax positions as required by the International

Financial Reporting Interpretations Committee (IFRIC) 23

•Concluded on the appropriateness of the IAS 37 accounting treatment,

the scenarios and sensitivities, and the overall disclosure in the

financial statements. Conferred with and received confirmation

from the external auditors on the overall treatment.

•Considered Post Balance Sheet Events (PBSE) considerations,

including external developments on the accounting and disclosures of

historical German dividend arbitrage transactions taking note of

correspondence received from the Federal Tax Office in Germany.

Refer to note 45 Contingent Liabilities and legal matters for further

information.

Going Concern & Viability

Statement

•Considered the Group’s profitability, board approved budgets and

capital plans through to March 2025, liquidity, operational risk and

contingent liabilities. Particular account was taken of the impact rising

inflation, the continuing Russia-Ukraine War, and the impact of legal

proceedings if any as well as the reverse stress testing conducted

•Following confirmation from the IBP BRCC, recommended the approval

of the going concern and the Group viability statement assumptions

underlying the financial statements to the IBP Board for approval.

External Audit

The performance and the work of the Group’s

external auditors, Ernst & Young (EY).

•Managed the Bank’s relationship with the external auditor

•Met with key members of the EY audit team to discuss and then

approve the 2021/2022 audit plan and agree key areas of focus

•Assessed regular reports from EY on the progress of the 2021/2022

audit and any material accounting and control issues identified

•Discussed EY’s feedback on the Bank’s critical accounting estimates

and judgements

•Discussed EY’s report on certain control areas including IT and the

control environment ahead of the 2022 financial year end

•Assessed the performance, independence and objectivity of the

external auditors.

Fair, balanced and

understandable reporting

The Bank is required to ensure that its external

reporting is fair, balanced and understandable,

and whether it provides the information

necessary for stakeholders to assess the

Bank’s position and performance, business

model and strategy.

•Met with senior management to gain assurance that the processes

underlying the compilation of the annual financial statements were

appropriate

•Conducted an in-depth, critical review of the annual financial

statements including the accounting policies used and, where

necessary, requested amendments to disclosure

•Reviewed the accounting treatment of key judgements

•Assessed disclosure controls and procedures

•Confirmed that management had reported on and evidenced the basis

on which representations to the external auditors were made

•Concluded that the processes underlying the preparation of the annual

report and financial statements for the year ended 31 March 2022

were appropriate in ensuring that those statements were fair, balanced

and understandable

•Obtained input and assurance from the external auditors and

considered the level of and conclusion on the summary audit

differences

•Recommended to the Board that the 2022 annual report and financial

statements were fair, balanced and understandable

•Considered in particular the disclosures relating to climate change.

Significant matters relating to the

2022 financial statements (continued)

What we did

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

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Other significant matters

What we did

Internal controls & the

business control environment

The effectiveness of the overall control

environment and the control environment

of individual business units and functions,

and the progress of any remediation plans

for management to address items arising from

the internal and external audits or compliance

monitoring.

•Received regular reports from the IBP Risk and Controls Forum and

the Heads of Compliance and Internal Audit on IBP and subsidiaries

within the committee’s terms of reference. Based on this reporting,

evaluated the impact of evolving risk, including operational risk, on

the internal control environment, including IT

•Evaluated and tracked the status of material control issues identified

by internal and external audit and tracked the progress of

the associated remediation plans against agreed timeframes. Particular

attention was paid to the effectiveness of IT general controls and

controls impacting financial reporting as well as IT and cyber security

risk management and governance

•Evaluated reports on the internal control environment from the internal

and external auditors

•Assessed reports on individual businesses and functions on their

control environment, scrutinised any identified control failures and

closely monitored the status of remediation plans

•Received updates from senior management, and scrutinised action

plans following internal audit findings

•Requested confirmation from management regarding the remediation

of any issues identified including the time frames and accountability

for remediation.

•Reviewed and approved the compliance monitoring plan and received

regular updates

•Reviewed the internal and external CASS assurance reports on client

money and assets

Internal audit

The performance of internal audit and delivery

of the internal audit plan, including scope of

work performed, the level of resources, and

the methodology and coverage of the internal

audit plan.

•Agreed the internal audit plan taking into account the risk assessment,

methodology and resourcing

•Received regular reports from internal audit of all significant issues

identified by them

•Monitored the delivery of the agreed plan

•Tracked the levels of high and moderate risk findings and monitored

the related remediation plans

•Met with the Head of Internal Audit without management being present

to discuss any issues arising

•Monitored the skill set, independence and objectivity of internal audit

and considered succession and resource planning

•Reviewed and approved the internal audit charter

•Received an opinion from internal audit on the effectiveness of

the internal controls and the risk management framework as part

of the year-end sign off process

•Reviewed the move to a globally aligned internal audit function and the

greater use of data analytics.

Whistleblowing

The adequacy of the bank’s arrangements

to allow employees to raise concerns in

confidence and anonymously without fear

of retaliation, and the outcomes of any

substantiated cases.

•Received and considered reports from management on the Bank's

whistleblowing arrangements

•Reviewed the reports to ensure that there were arrangements in place

which colleagues could use in confidence to report concerns about

inappropriate and unacceptable practices, and that there was

proportionate and independent investigation of such matters or

appropriate follow-up

•Considered the independence and effectiveness of the Bank’s policies

and procedures on whistleblowing.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

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136

How the Audit Committee works

The IBP Audit Committee’s principal

responsibilities are to:

•Monitor the integrity of the Bank’s

financial reporting and scrutinise and

satisfy itself, having regard to any

issues raised by the external auditor,

as to the appropriateness of

management’s accounting policies

and practices, and that any significant

financial judgements, assumptions

or estimates made and the disclosures

recommended by management are

appropriate, and assess whether

overall the annual report, taken as

a whole, is fair, balanced and

understandable, and provides

the information necessary for

stakeholders to assess the Bank’s

position and performance, business

model and strategy

•Review the effectiveness of the

Bank’s internal controls, including

internal financial controls

•Scrutinise the activities and the

performance of the internal and

external auditors (including monitoring

their independence and objectivity)

•Oversee the relationship with the

Bank’s external auditor

•Review and monitor the effectiveness

of the Bank’s whistleblowing policies

and procedures.

Composition, meeting attendance, and

interaction with Investec Group

All members of the Committee are

independent Non-Executive Directors in

accordance with the UK Corporate

Governance Code 2018. The Committee

includes members who have recent and

relevant financial experience and as a

whole have competence relevant to the

sectors in which the group operates.

The CE of the Bank attends meetings

on a regular basis but is not a member.

Other Bank directors may also attend

by invitation. The Head of Risk, Head of

Internal Audit, Head of Compliance,

Head of Finance, the external auditor,

Group Company Secretaries, and Head

of Tax also attend meetings on a regular

basis.

The Committee meets alone with the

external auditor and, separately, with

the Head of Internal Audit. Committee

members also meet periodically with

management and the heads of internal

audit, compliance, operational and IT

risk, and finance as well as the lead

external audit partner and senior

management in order to keep

knowledge up to date, and to keep

abreast of commercial developments

and challenges facing the business.

The Chair of the Committee is also a

member of the IBP BRCC and, similarly,

the chair of IBP BRCC, Paul Seward, is

a member of this Committee. This

reciprocity of membership helps to

ensure interaction between these two

committees and a coordinated

consideration of the Bank's risks and

internal controls where they overlap in

relation to both financial risks and non-

financial risks, which reflects the holistic

oversight of risk at Board level.

The Committee reports formally to the

Board. The chair of the DLC audit

committee, Zarina Bassa, is a member of

this Committee which reflects the dual

listed structure of the Investec Group in

which Investec Bank plc is the principal

banking subsidiary in the UK and the

parent company of other material

overseas subsidiaries. This

representation of the Investec Group

audit committees ensures that key audit

matters for Bank and its subsidiaries are

visible at the Investec Group level, and

likewise key audit matters and matters

of mutual interest for the Investec Group

and Investec Bank plc are

communicated and addressed, where

applicable, in the Bank and its

subsidiaries. As an example, the IBP

Audit Committee worked together with

the Investec Group Audit Committees

when assessing proposals for internal

audit to move to a globally aligned audit

function and the greater use of analytics

in the audit methodology.

Investec Wealth & Investment, a

subsidiary of Investec Bank plc and

separately regulated by the FCA,

maintains an independent governance

structure comprising an independent

Board and Audit Committee. The

membership of the Wealth & Investment

Audit Committee comprises independent

non-executive directors. Matters relating

to Wealth & Investment do not fall within

the remit of the IBP Audit Committee.

The Wealth & Investment Audit

Committee matters are reported to the

DLC Audit Committee. Any matters

relevant to the Bank are communicated

through the mechanism of having the

chair of the DLC Audit Committee as a

member of the IBP Audit Committee.

External audit

Ernst & Young (EY) were appointed

as the Bank’s auditor in 1996. It is

anticipated that a competitive tender

process will be carried out in 2022 to

rotate for the financial year commencing

1 April 2024. Further information

regarding the tender of the Investec

Group and the Bank’s external auditors

may be found in the Investec Group’s

2022 integrated annual report along

with the Investec Group’s information on

the effectiveness, objectivity and

independence of EY as auditor of

the wider Investec Group.

The Committee continuously assesses

the effectiveness, objectivity and

independence of the external auditors

at formal Committee meetings, during

private meetings with EY and through

discussions with key executive

stakeholders. The Committee considers

the relationship with the auditor to be

working well and remains satisfied with

their effectiveness. The Committee

monitors whether the level of non-audit

fees could impact the independence of

the auditors having regard to the nature

of the services rendered and the fees

paid as a proportion of the overall audit

fee. The Committee is satisfied that the

quantity and type of non-audit work

undertaken throughout the year did

not impair the independence of EY.

Accordingly, having considered the

effectiveness, independence and

objectivity of the auditor, the Committee

recommends that EY continue as auditor

for the following financial year.

Further details in regards to the

audit fees paid to the external

auditors for the financial year

ended 31 March 2022 may be

found in the financial statements

on page 204 and details of non-

audit services provided to the

Investec Group may be found in

Investec Group’s 2022 integrated

annual report.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

IBP AUDIT COMMITTEE REPORT

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137

Paul Seward

Chair of IBP BRCC

Key achievements in 2021/22

•Focused on the economic and financial

risk exacerbated by COVID-19 and

ongoing economic uncertainty. In

particular, ensuring that expected credit

losses were adequate and the quality

within the credit portfolio did not

deteriorate

•Monitored the run-down of the

Structured Products book, including the

effectiveness of the downside protection

macro-hedge and the management of the

residual risk and actions taken to de-risk

the book and reduce losses

•Reviewed the enhanced management of

the financial risks arising from climate

change and other risks arising from

ESG issues, including the review of stress

test scenarios and progress in calculating

Scope 3 emissions

•Focused on non-financial risk, in

particular,fraud risk, IT and cybersecurity,

operational resilience and people risk

•Monitored the core loan growth from the

perspective of credit underwriting

standards, capital requirements and the

ability to fund growth.

Areas of focus in 2022/23

•Monitor the potential risks that could

arise as the Bank focuses on growth and

its digital retail strategy

•Monitor people risk and it remains

heightened, ensuring that there is

adequate resourcing to maintain the

control environment

•Further enhancement of the management

of the financial risks arising from climate

change and other risks arising from

ESG issues

•Monitor regulatory developments

•Monitor the progress and actions taken

to improve the Bank’s operational

resilience and address the weaknesses

identified within the self-assessment

•Monitor the implementation of the

Advanced Internal Ratings-Based (AIRB)

approach (which is in its early stages)

•Closely monitor the macro-economic

environment including, but not limited to,

the inflationary pressures, geo-political

tensions and supply chain issues and the

potential risks and impact on the Bank.

Members

Member since

Attended

Eligible to

attend1

Paul Seward (Chair)

1 Apr 2019

David Friedland

18 Jan 2019

David Germain

5 Nov 2020

Brian Stevenson

8 Mar 2019

Lesley Watkins

18 Jan 2019

1.Includes one combined Audit and BRCC meeting held on 5 November 2021.

2.Where a director is unable to attend a meeting, they receive papers in advance and have the opportunity to provide comments to the Chair

of the Committee.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

IBP BOARD RISK AND CAPITAL MANAGEMENT REPORT

138

Introduction

I am pleased to present the report

on how the IBP BRCC (the Committee)

has discharged its responsibilities

throughout the financial year ended

31 March 2022.

The past year continued to be impacted

by COVID-19 and while there is now

optimism that the worst of the pandemic

is behind us with restrictions having

ended and the economy re-opening,

there continues to be ongoing

uncertainty both within the UK economy

and worldwide. Despite the risks

presented by COVID-19, Brexit and geo-

political tensions including the war in

Ukraine, the Committee was satisfied

that the Bank’s risk culture and control

environment had remained strong and

the Bank was in a good position to deal

with the risks faced by the business.

Throughout the financial year,

enhancements to reporting, particularly

in relation to non-financial risk reporting

including IT and cyber risk, projects,

operational risk and fraud risk had

enabled the Committee to strengthen

the independent oversight of the Bank's

risk management framework. The

Committee continues to consider both

current and forward-looking risks across

all key areas of risk management and

provides guidance to mitigate any

negative impacts.

The main objectives of the Committee

are to have oversight of the risk

management framework of the Bank and

to assist the Board in its responsibility

to ensure that the Bank maintains

effective systems and processes

for the management and control of

risk exposures.

The major focus areas for the

Committee had been the monitoring of

risks, in particular, liquidity, market risk,

credit quality, fraud and IT risks as the

impact of the COVID-19 pandemic and

the change in risks as a result of Brexit

had continued to impact clients,

employees, the Bank and the global and

UK economy throughout the financial

year. Based on previous losses

experienced within the Structured

Products book, the Committee had

reviewed market risk limits and the

active de-risking of the business where

appropriate, assessing whether any

similar impact could be experienced

within other parts of the business.

Although the Structured Products book

is in run-down and losses had been

immaterial, it remained an area of focus

to ensure that the book was

appropriately managed, reducing costs

and losses where possible, with support

provided for de-risking actions taken. An

independent third party review of the

book and its management had been

conducted which provided assurance to

the Committee.

The Committee reviewed and

challenged the appropriateness of the

funding mix of the Bank and the

changing business model. The Bank’s

liquidity and capital was closely

monitored and continued to be managed

conservatively in the event any further

impact of COVID-19 was felt, and in light

of the market volatility arising due to the

war in Ukraine. The liquidity and capital

metrics continued to far exceed

regulatory and internal minimums.

Regular stress testing (which includes

reverse stress testing) was conducted

given market uncertainty and the

assumptions were challenged. The

stress testing also extended to climate

change utilising the Bank of England’s

Climate Biennial Exploratory Scenario

(CBES) scenario, with the initial focus

being on the Energy and Real Estate

portfolios. The Committee continued its

practice of extensively reviewing the

benchmarking exercises undertaken by

management to seek comfort in terms of

ECLs, the COVID-19 ECL overlay and

management ECL overlay, credit loss

ratio and coverage ratios for assets.

The operational resilience of the Bank

continued to be an area of focus

particularly as the Bank prepared for the

new Prudential Regulation Authority

(PRA) and Financial Conduct Authority

(FCA) regulation on operational

resilience.

Given the market-wide increase in fraud

risk, including the rise in authorised push

payment fraud and investment scams,

the Committee had spent time reviewing

controls and enhancements both for the

Bank and clients had become

particularly important given the retail

migration strategy from analogue to

digital, regulation and losses

experienced. The Committee critically

reviewed the oversight of financial crime

for the Bank and its subsidiaries,

challenging the Money Laundering

Reporting Officer (MLRO) report and the

progress with implementing the new

transaction monitoring system.

IT and Cyber Risk reporting had also

improved significantly, and a deep dive

had been presented by the IT Security

team which provided an overview of the

key controls, areas for improvement and

key highlights from the cyber simulation

that had been conducted. People risk

had become a key area of focus as the

Bank evolved to hybrid working as well

as the increased risk around talent

retention and attrition particularly

relating to technology resourcing. This

was an area for close monitoring which

was being undertaken at Committee and

Board level, however, was recognised to

be an increasing risk industry-wide. The

Committee had also received in-depth

reporting on projects, predominantly

focusing on regulatory projects including

the IBOR transition, the implementation

of the non-traded market risk (NTMR)

regulation and operational resilience.

The Committee continued to challenge

and guide management in strengthening

the key risk documents including the risk

appetite statements (RAS), the internal

capital adequacy assessment process

(ICAAP), the internal liquidity adequacy

assessment process (ILAAP), the

contingency funding plan and recovery

plan (CFRP).

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Role of the Committee

The role of the Committee is to review,

on behalf of the Board, the range of risks

facing the business. The Committee

performs this function by considering

the risk reports presented and questions

whether existing actions taken by

management are appropriate.

The Committee is an essential part of

the Bank's governance framework to

which the Board has delegated the

overseeing of the Bank's risk framework

to ensure that the framework is

appropriate to the size, scale and nature

of the Bank's activities for the purposes

of effectively managing the material

risks to which the Bank is exposed. The

Committee is the most senior Risk

Management Committee of the Bank.

The Committee has to ensure that

all risks are identified and properly

mitigated and managed. The Committee

also considers whether the resources

allocated to the risk management

functions are adequate for effectively

managing the Bank's risk exposures.

The Committee reports to the Board on

how it discharges its responsibilities and

makes appropriate recommendations

to the Board.

Investec Wealth & Investment (IW&I), a

subsidiary of Investec Bank plc

regulated by the FCA, maintains an

independent governance structure,

comprising an independent Board and

Board Risk Committee. The membership

of the Board Risk Committee of the

Wealth business comprises independent

Non-Executive Directors. Matters

relating to IW&I do not fall within the

remit of the IBP Board Risk and Capital

Committee.

The IW&I Board Risk Committee reports

to the DLC BRCC. Any matters relevant

to the Bank are communicated to the

Bank, in part, through having the Chair

of the DLC BRCC, David Friedland, as a

member of the IBP BRCC.

Role of the Chair

The role of the Chair of the IBP Board

Risk and Capital Committee requires

regular meetings with the executives

of the Bank, along with liaison with

the Chair of the DLC BRCC. The Chair

also has interactions with the risk

functions, Compliance and Head of IT, in

order to keep knowledge up to date,

and to keep abreast of commercial,

regulatory and legislative developments

and challenges facing the business.

These interactions are an essential

part of the role of the Chair of the IBP

Board Risk and Capital Committee.

Composition

The Committee is composed solely of

independent Non-Executive Directors,

with membership designed to provide

the breadth of risk expertise and

commercial acumen it needs to fulfil its

responsibilities. The Chair of the DLC

BRCC is a member of the Committee

to ensure the interconnection between

the Bank and its parent.

Looking ahead

The Committee will continue to monitor

overall levels of risk within the business

as a result of the Bank’s growth strategy

as well as macro-economic factors such

as geo-political tensions including the

war in Ukraine, inflationary pressures on

consumers and businesses, and supply

chain disruption following COVID-19 and

Brexit. Monitoring will also cover the

regulatory changes as a result of Brexit.

The Committee will continue to review

risks arising out of the Bank’s retail and

overall funding strategies. The

Committee will also monitor the risks

emanating from the Structured Products

business while the book continues to be

managed down and the residual risks

are reduced.

The Committee recognises that while

ESG factors had been embedded within

business as usual processes, there is

further work and improvements

required. There will be a focus in

developing the Bank's ESG approach

with quantitative key performance

indicators for ESG and climate risk,

monitoring data and improving reporting

of the risk.

In terms of non-financial risks, people

risk will continue to be an area of focus

as well as the effective management of

cyber risks, fraud risk and operational

risk. Operational resilience will also be

closely monitored as while the

regulations were to be implemented by

31 March 2022 there is a three-year

transition period to address any

weaknesses. There will be enhanced

oversight of material regulatory projects,

including the process of migrating from

the standardised approach to the

Internal Ratings Based (IRB) approach,

which is in its early stages within the

Bank and, finally, improving risk

management and its reporting.

Paul Seward

Chair, IBP BRCC

21 June 2022

Risk management and

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COMMITTEE ACTIVITIES

COVID-19

Management of the risk in order to support the Bank's

stakeholders throughout the COVID-19 pandemic and

ongoing economic impact

•Continued to review and challenge management actions to

address the risks ensuring that there was surplus liquidity

and capital buffers in place to manage the possible

negative impact

•Monitored the exposures subject to the Coronavirus

Business Interruption Loan Scheme (CBILS), the

Coronavirus Large Business Interruption Loan Scheme

(CLBILS) and the Bounce Back Loan Scheme (BBLS). The

Committee reviewed the external report summarising the

findings of the Bank’s controls in relation to the

government schemes. The Committee reviewed whether

there had been any fraudulent applications / issues given

the losses reported by the government, particularly

relating to BBLS and CBILS. The Committee were

comfortable that the repayments under the government

schemes were happening in a timely manner

•Closely assessed the impact on the Bank’s ECLs, with

a review of the provision, in conjunction with the Audit

Committee, to ensure that it was appropriate, taking

into account the economic outlook and scenarios.

Benchmarking by management had been conducted to

provide assurance that the level of ECL and credit loss

ratio remained within the range of other UK banks

•The Committee were comfortable that whilst the credit

loss ratio was low and ECLs had not been experienced as

forecast, it was prudent to maintain the overlays especially

given the end of the government schemes and the

staggered reopening of the economy as certain

restrictions had impacted businesses which was a similar

approach to Bank’s peers

•Any potential or actual fraud losses were examined by the

Committee as fraud risk remained heightened throughout

the industry as a result of COVID-19

•The Committee closely monitored people risk and the risks

arising as a result of the prolonged nature of the pandemic

with the impact being on wellbeing of employees and

resourcing as well as the market-wide challenges in terms

of talent attraction and retention.

Structured Products

Close monitoring of the Structured Products book as the risk

was being managed down following the significant impact

that the unprecedented market dislocation and cancellation

of dividends had caused in 2020 and the associated risks.

•Received and challenged the in-depth reporting on the risk

management of the exposure to capital-at-risk products

including the results of stress testing

•Focused on management’s continued progress in de-

risking the book which included, but was not limited to, the

effectiveness of the macro hedge in place to provide

downside protection for the FTSE, Eurostoxx and S&P at

certain levels, the unwinding of over-the-counter (OTC)

interbank trades and monitored the forecasts of the book's

performance and run-off profile

•Reviewed the findings of the independent review of the

Structured Products book and monitored the

implementation of the improvements to risk management

techniques, tools and risk measurements.

Area of focus

Conclusions and Actions

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Financial risk management of the Bank

Consideration of the key risk documents and processes to

ensure that they were appropriate and effective to manage

the material risks faced by the Bank.

•Reviewed and challenged the key risk documents,

including the ILAAP, ICAAP and CFRP, ahead of final

approval, with particular challenge in relation to the stress

testing and reverse stress testing scenario included in the

ILAAP to ensure that the scenarios were severe enough

and provided sufficient detail

•Reviewed and supported the ongoing efforts to de-risk the

business areas subject to market risk and challenged the

changes to the traded market risk appetite which had been

proposed to be more conservative as well as to better

reflect the risks

•Closely monitored the credit book with detailed

presentations being received on the top non-performing

exposures and the overall performance of the book as well

as the mortgage book given the growth in this portfolio

over the last 18 months

•The Committee received an in-depth presentation from the

Bank Funding Group which detailed the transition in the

funding mix which was being undertaken in order to

maintain diversity of funding, reduce costs and ensure

adequate liquidity. The Committee also reviewed the risks

of the migration of the liability channels from analogue to

digital, the changing business model and the risks

presented with the strategic partnership between the Bank

and Monese as well as other partnerships with fintech’s

and financial institutions to ensure clients and the Bank

were protected

•Reviewed the risk appetite, challenging the categorisation

of important business services which drive the appetite for

business disruption. The Committee noted that there had

been improvements in terms of monitoring ESG exposures

and the ongoing work to calculate the Bank’s Scope 3

emissions and integrating ESG risk into business as usual

processes

•Further enhanced the review and focus on emerging risks

and the mitigation thereof which included both internal and

external risks

•Reviewed in-depth the impact of the war in Ukraine on the

Bank and received assurance that there was no material

direct or indirect exposures to Ukraine or Russia. Close

monitoring in particular relating to financial crime and IT

and cyber risk was ongoing

•Received a detailed update on the unrest in South Africa

as a result of the ex-President, Jacob Zuma’s arrest, the

impact on Investec Bank Limited and the Investec Group,

from a financial perspective and also from an employee

and client wellbeing perspective as well as any potential

risks presented to the Bank.

Area of focus

Conclusions and Actions

Risk management and

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Non-financial risk management of the

Bank

Consideration of the key controls and processes to ensure

that they were appropriate and effective to manage the

material non-financial risks faced by the Bank.

•There had been an enhanced focus on IT and cyber risk

with a deep dive into the Group’s security, the results of

denial-of-service (DDoS) simulations and the maturity of

controls within the Bank

•The committee reviewed the financial crime controls and

systems used, tracking the implementation of the new

transaction monitoring system, with a particular focus as a

result of the sanctions and risks arising from the war in

Ukraine. There was also attention given to the Bank’s

subsidiary in Guernsey given the new regulation

implemented by the Guernsey Financial Services

Commission and the thematic reviews that were being

undertaken by the regulators in Jersey and Guernsey

within the industry

•The Committee challenged the controls in place regarding

fraud and a detailed paper was presented providing

assurance that the risk was being managed effectively.

Losses remained low and within risk appetite and the

controls as well as the third party systems utilised assisted

in managing the risk effectively

•Closely monitored operational risk losses and events to

gain assurance that there were no trends or issues within

the control environment. The Committee reviewed the

operational risk scenarios considered for inclusion in the

ICAAP and challenged the gaps and remedial work

required to ensure compliance with the Basel Committee

on Banking Supervision’s updated principles for the sound

management of operational risks

•Received regular updates on regulatory projects including

the discontinuation of LIBOR and transition to risk-free

rates and the implementation of the non-traded market

risk (NTMR) regulation. In terms of the operational

resilience regulations, the Committee challenged the

Bank’s impact tolerances for important business services

as well as providing input on the Bank’s self-assessment.

This assisted in the Committee gaining comfort on the

Bank’s resilience particularly given the Bank’s reliance on

third parties and outsourcing arrangements

•Reviewed any regulatory breaches and actions taken to

mitigate breaches from occurring. The Committee were

kept abreast of any relevant regulatory guidance, fines or

new regulations.

•The chair of the committee and DLC representative

member (David Friednland) both attended DLC IT Risk and

Governance Committee meetings to provide enhanced

oversight of IT risk

Area of focus

Conclusions and Actions

Risk management and

governance

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The directors present their directors’ report and financial

statements for the year ended 31 March 2022.

The Company has chosen, in accordance with section

414C(11) of the UK Companies Act, to include certain matters

in its strategic report which is incorporated into this report by

reference as follows:

•An indication of likely future developments in the business

of the Company and its subsidiaries, see page 8

•Our risk management objectives and policies in relation to

the use of financial instruments, see page 48

•A statement as to material events since 31 March 2022, see

page 283

•Approach to diversity includes employment of disabled

persons, page 22, and more detail can be found in the

Investec Group Sustainability Report which will be made

available on the Investec website by the end of June 2022

•Stakeholder engagement (including employees and others),

page 22

•Details of charitable activities including any donations,

page 22

•Statement of corporate governance arrangements, page 113

Results and dividends

The results for the year are shown on page 32. Movements in

reserves are shown in the reconciliation of equity on page 184

of the financial statements. An interim dividend of £32.5

million was paid on 26 November 2021. On 16 May 2022, the

Board declared that a dividend for the period ended 31 March

2022, of £60 million be paid on 8 June 2022.

Directors

The names of the persons who were directors during the

financial year are set out in the table below. Biographical

details of directors appointed as at the date of this report

are set out on page 116.

Henrietta Baldock

Zarina Bassa

David Germain

Ruth Leas

Moni Mannings

Kevin McKenna

Paul Seward

Brian Stevenson

Fani Titi

Lesley Watkins

Independent auditor and audit information

Ernst & Young LLP have indicated their willingness to

continue in office as auditors. A resolution proposing their

re-appointment as auditors will be submitted to the annual

general meeting.

Each person who is a director at the date of approval of this

report, confirms that, so far as the director is aware, there is

no relevant audit information of which the company’s auditor

is unaware and each director has taken all steps that he or she

ought to have taken as a director to make himself or herself

aware of any relevant audit information and to establish that

the Company’s auditor is aware of that information. This

confirmation is given pursuant to Section 418 the Companies

Act 2006 and should be interpreted in accordance with and

subject to those provisions.

Going Concern statement

In adopting the going concern basis for preparing the

consolidated financial statements, the directors have

considered the Bank’s business activities, objectives and

strategy, principal risks and uncertainties in achieving its

objectives, and performance that are set out in the Strategic

Report. The Directors have performed a robust assessment of

the Bank’s financial forecasts across a range of scenarios over

a 12 month period from the date the financial statements are

authorised for issue. The assessment specifically incorporated

analysis of the macroeconomic environment caused by the

COVID-19 pandemic and the Russian-Ukraine war on the

Bank’s projected performance, capital, liquidity and funding

positions, including the impact of scheduled repayment of

borrowings and other liabilities. Based on these, the Directors

confirm that they have a reasonable expectation that the Bank

has adequate resources to continue in operational existence

for the 12 months from the date the financial statements are

authorised for issue. Therefore, the Directors consider it

appropriate to adopt the going concern basis of accounting in

preparing the accompanying consolidated financial

statements.

Viability statement

In accordance with the UK Corporate Governance Code,

which was adopted by Investec Bank plc as the corporate

governance code of the Bank, in addition to providing a going

concern statement, the Board is required to make a statement

with respect to Investec Bank plc’s viability (i.e. its ability to

continue in operation and meet its liabilities), taking into

account the current position of the Bank, the Board’s

assessment of Investec Bank plc’s prospects and the principal

risks it faces. Following consideration, the IBP Audit

Committee recommended the viability statement for Board

approval.

The Board has identified the principal and emerging risks

facing the Bank and these are highlighted on page 48

onwards, with further detail provided in the Investec plc

(Investec Bank plc’s parent company) annual report.

Through its various sub-committees, notably the IBP Audit

Committee, the IBP BRCC and the IBP Capital Committee, the

Board regularly carries out a robust assessment of these risks

and their potential impact on the performance, liquidity,

solvency and operational resilience of Investec Bank plc. The

activities of these Board sub-committees and the issues

considered by them are described in the governance section

of this report.

Taking these risks into account, together with the Bank’s

strategic objectives and the prevailing market environment,

the Board approved the overall mandated risk appetite

framework for Investec Bank plc. The risk appetite framework

Risk management and

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Investec Bank plc Annual Financial Statements 2022

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144

sets broad parameters relating to the Board’s expectations

around performance, business stability and risk management.

The Board considers that prudential risk management is

paramount in all it does. Protection of depositors, customers’

interests, capital adequacy and shareholder returns are key

drivers. To manage the Bank’s risk appetite, there are a

number of detailed policy statements and governance

structures in place. The Board ensures that there are

appropriate resources in place to manage the risks arising

from running the business by having independent Risk

Management, Compliance, and Financial Control functions.

These are supplemented by an Internal Audit function that

reports independently to a Non-Executive Audit Committee

Chair.

The Board believes that the risk management systems and

processes, supported by the conclusions of the Internal Audit

function, are adequate to support Investec Bank plc’s strategy

and allow the Bank to operate within its risk appetite

framework. A review of Investec Bank plc’s performance/

measurement against its risk appetite framework is provided

at each IBP BRCC meeting and at the main Board meetings.

In terms of the FCA and PRA requirements, Investec Bank plc

is also required to meet regulatory standards with respect to

capital and liquidity. In terms of these requirements, Investec

Bank plc is required to stress its capital and liquidity positions

under a number of severe stress conditions. Investec’s stress

testing framework is well embedded in its operations and is

designed to identify and regularly test the Bank’s key

‘vulnerabilities under stress’.

In order to manage liquidity risk, liquidity stress testing is

performed for a range of scenarios, each representing a

different set of assumptions. These include market-wide, firm

specific, and combined scenarios (combination of the market-

wide and firm specific stresses). Investec Bank plc manages

its liquidity risk appetite in relation to combined stress

parameters which represent extreme but plausible

circumstances. The objective is to have sufficient liquidity

under a combined stress scenario to continue to operate for a

minimum period as detailed in the Board-approved risk

appetite. In addition to these stress scenarios, the Bank’s risk

appetite also requires it to maintain specified minimum levels

for both the liquidity coverage ratio and net stable funding

ratio, greater than those required by the regulators; a minimum

cash and near cash to customer deposit ratio of 25%; and to

maintain low reliance on wholesale funding to fund core asset

growth. Each legal banking entity within Investec Bank plc is

required to be fully self-funded. the Bank currently has £8.9

billion in cash and near cash assets, representing 47.7% of

customer deposits.

Investec Bank plc develops annual capital plans (refreshed

after six months), that look forward over a three-year period.

The capital plans are refreshed on an ad hoc basis if a material

event occurs or is likely to occur. These plans are designed to

assess the capital adequacy of Investec Bank plc and its

subsidiaries under a range of economic and internal

conditions, with the impact on earnings, asset growth, risk

appetite and liquidity considered. The output of capital

planning allows senior management and the Board to make

decisions to ensure that the Bank continues to hold sufficient

capital to meet internal and regulatory capital targets over the

medium term (i.e. three years). Investec Bank plc targets a

CET1 ratio in excess of 10%, a tier 1 ratio greater than 11%, a

minimum capital adequacy ratio of 14% to 17%, and a leverage

ratio in excess of 6%.

The parameters used in the capital and liquidity stresses are

reviewed regularly, taking into account the principal and

emerging risks facing the Bank, changes in the business

environments and inputs from business units. Scenarios are

designed considering macro-economic downside risks,

portfolio-specific risk factors and business model

vulnerabilities.

The parameters used in the capital and liquidity stresses

are reviewed regularly, taking into account changes in the

business environments and inputs from business units.

Scenarios are designed considering macro‐economic

downside risks, portfolio‐specific risk factors and business

model vulnerabilities.

•Base case: The base case narrative envisages that UK

economic activity continues to recover in line with other

advanced markets, as social restrictions are lifted and pent-

up demand fuels a rebound in consumer spending. Inflation

is expected to rise sharply over the near term, but begins to

come down as upward influences dissipate over time. In

light of this, major central banks tighten monetary policy

gradually, with the Bank of England (BoE) raising the Bank

rate to 1.5% in Q1 2023 and reducing its Quantitative Easing

holdings. COVID-19 remains a risk, but vaccination

programmes prove effective in preventing the need for

further restrictions.

•Inflation: In the inflation scenario, the current rise in inflation

proves to be more sustained and at elevated levels.

Principally this is driven by developments in the labour

market. As such, central banks respond by raising interest

rates more aggressively, with the UK Bank rate rising to a

peak of 4% from the current setting of 1.25%. Markets

correct sharply on the restrictive central bank policy,

tightening financial conditions and weak economic activity.

The resultant shock to UK GDP is 4.2% (peak-to-trough),

with a recession across advanced markets in 2023.

•Synchronised global economic downturn: This is a

hypothetical scenario, designed to encapsulate a variety of

tail risks. It involves a severe global economic downturn and

a sharp repricing of all asset classes, particularly those

witnessing the most elevated valuations. Major equity

indices see falls of between 30-40%and higher yield bond

markets witness a sell off, with corporate credit spreads

widening. Residential and commercial real estate are also

severely affected. Whilst the start of the shock occurs in

year one, there are lasting headwinds resulting in slow

economic and asset price recoveries. Monetary policy is

loosened, with the BoE cutting the Bank rate and

conducting Quantitative Easing (although on a more limited

scale than during the pandemic given the already large

holdings of bonds). Inflation falls below 1% as the economy

contracts and energy prices fall. UK GDP experiences a

shock of around 5% (peak-to-trough).

Investec Bank plc’s capital process also incorporates the BoE

regulatory scenario. The BoE will return to its annual cyclical

scenario (ACS) stress testing framework in 2022, following

two years of COVID pandemic crisis-related stress testing.

However, in light of uncertainty related to the Russian invasion

of Ukraine, and in order to help lenders focus on managing the

ongoing financial markets disruption associated with the

invasion, there is a delay to the launch of the 2022 ACS, with

revised timelines to be communicated by BoE in 2Q22.

The Board has assessed the Bank’s viability in its ‘base case’

and stress scenarios. In assessing Investec Bank plc’s viability,

a number of assumptions are built into its capital and liquidity

plans. In the stress scenarios these include, for example,

foregoing or reducing dividend payments and asset growth

being curtailed.

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We also carry out ‘reverse stress tests’, i.e. scenarios that

would cause IBP business model to fail. Reverse stress

scenarios are developed thematically and their impact is

assessed in qualitative and quantitative terms with respect to

regulatory capital and liquidity threshold conditions, taking into

account the loss absorbing effects of the bank’s capital stack.

Escalating losses may expose the business model to

unacceptable levels of risk well before regulatory threshold

conditions are breached, and mitigation actions are identified

with the aim to prevent the failure of IBP. Reverse scenarios

are extreme tail events and are considered remote, and mainly

serve the purpose of identifying and addressing potential

weaknesses that may not be identified through the ongoing

risk management and stress testing processes.

In addition, the Bank performs climate scenario analysis in line

with the requirements stipulated by Supervisory Statement

SS3/19 ‘Enhancing banks’ and insurers’ approaches to

managing the financials risks from climate change’, on a

proportionate basis for the size and complexity of the firm.

The BoE’s ‘2021 Climate Biennial Exploratory Scenario’ has

been used as the framework for scenario analysis, with initial

focus on climate transition risk, and physical risks prioritised

for the second half of 2022. To date, findings indicate that

short-term transition risk is low and Investec Bank plc has

sufficient capital and liquidity to continue as a going concern

and meet regulatory capital and liquidity requirements.

Investec Bank plc’s parent company, Investec plc, is required

to maintain a recovery plan and a resolution pack for the

Investec plc consolidated Group. The purpose of the recovery

plan is to document how the Board and senior management

will ensure that the Investec plc Group recovers from extreme

financial stress to avoid liquidity and capital difficulties. The

key focus in the recovery plan is the principal banking

subsidiary, Investec Bank plc, and the protection of its

depositors and other clients.

Investec Bank plc also maintains an operational resilience

framework for building organisational resilience to respond

effectively to operationally disruptive events. This not only

ensures continuity of business but also safeguards the

interests of key stakeholders, as well as our reputation, brand

and value‐creating activities.

The capital and liquidity plans, stress scenarios, recovery plan,

resolution pack and the risk appetite statement are reviewed

at least annually. In times of severe economic distress and if

applicable, stress scenarios are reviewed more regularly; for

example, as was the case with the COVID‐19 pandemic. In

addition, senior management host an annual risk appetite

process at which the Bank’s risk appetite frameworks are

reviewed and modified to take into account risk experience

and changes in the environment. Furthermore, strategic

budget processes take place within each business division at

least annually. These focus on, amongst other things: the

business and competitive landscape; opportunities and

challenges; and financial projections. A summary of these

divisional budgets is presented to the Board during its

strategic review process early in the year.

In assessing the Bank’s viability, the Board has taken all of the

above-mentioned factors, documents and processes into

consideration. The directors can confirm that they have a

reasonable expectation that Investec Bank plc will continue to

operate and meet its liabilities as they fall due over the next

three years. The Board has used a three‐year assessment

period as this is aligned to Investec Bank plc’s medium-term

capital plans which incorporate profitability, liquidity, leverage

and capital adequacy projections and include impact

assessments from a number of stress scenarios. Detailed

management information therefore exists to provide senior

management and the Board sufficient and realistic visibility of

Investec Bank plc’s viability over the next three years to 31

March 2025.

The viability statement should be read in conjunction with the

following sections in the annual report, all of which have

informed the Board’s assessment of Investec Bank plc’s

viability:

•Pages 4 to 36, which show a strategic and financial

overview of the business

•Page 52, which provides detail on the principal and

emerging risks Investec Bank plc faces and information on

the Group’s overall risk appetite

•Pages 48 onwards, which provide an overview of Investec

Bank plc’s approach to risk management, and the processes

in place to assist Investec Bank plc in mitigating its principal

risks

•Pages 50 onwards which highlights information on Investec

Bank plc’s various stress testing processes

•Page 56 which focuses on Investec Bank plc’s philosophy

and approach to liquidity management

•Page 108 which provides detail on the recovery plan and

resolution pack

•Pages 109 which explains Investec Bank plc’s capital

management framework.

This forward‐looking viability statement made by the Board is

based on information and knowledge of Investec Bank plc at

21 June 2022. There could be a number of risks and

uncertainties arising from (but not limited to) domestic and

global economic and business conditions beyond IBP’s control

that could cause Investec Bank plc’s actual results,

performance or achievements in the markets in which it

operates to differ from those anticipated.

Directors’ responsibility statement

The following statement, which should be read in conjunction

with the auditor’s report set out on pages 167 to 178, is made

with a view to distinguishing for shareholders the respective

responsibilities of the directors and of the auditors in relation

to the accounts.

The directors are responsible for preparing the annual report

and the Group financial statements in accordance with

applicable United Kingdom law and regulations.

Company law requires the directors to prepare financial

statements for each financial year. Under that law the

directors have elected to prepare the financial statements in

accordance with International Financial Reporting Standards

(IFRSs) in conformity with the Companies Act 2006. Under

company law the directors must not approve the Group

financial statements unless they are satisfied that they give a

true and fair view of the state of affairs of the Group and the

Company and of the profit or loss of the Group and the

Company for that period.

Risk management and

governance

CORPORATE GOVERNANCE

Investec Bank plc Annual Financial Statements 2022

DIRECTORS' REPORT

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146

In preparing these financial statements the directors are

required to:

•Select suitable accounting policies in accordance with IAS 8

Accounting Policies, Changes in Accounting Estimates and

Errors and then apply them consistently;

•Make judgements and accounting estimates that are

reasonable and prudent

•Present information, including accounting policies, in a

manner that provides relevant, reliable, comparable and

understandable information

•Provide additional disclosures when compliance with the

specific requirements in IFRSs is insufficient to enable users

to understand the impact of particular transactions, other

events and conditions on the Group’s financial position and

financial performance

•In respect of the Group financial statements, state whether

IFRSs in conformity with the Companies Act 2006 and IFRSs

adopted pursuant to Regulation(EC) No. 1606/2002 as it

applies in the European Union have been followed, subject

to any material departures disclosed and explained in the

financial statements

•In respect of the parent company financial statements, state

whether IFRSs in conformity with the Companies Act 2006,

have been followed, subject to any material departures

disclosed and explained in the financial statements

•Prepare the financial statements on the going concern basis

unless it is appropriate to presume that the Company will

not continue in business.

The directors are responsible for keeping adequate

accounting records that are sufficient to show and explain the

Company’s and Group’s transactions and disclose with

reasonable accuracy at any time the financial position of the

Company and the Group and enable them to ensure that the

Company and the Group financial statements comply with the

Companies Act 2006. They are also responsible for

safeguarding the assets of the Group and parent company and

hence for taking reasonable steps for the prevention and

detection of fraud and other irregularities.

Under applicable law and regulations, the directors are also

responsible for preparing a strategic report, directors’ report,

directors’ remuneration report and corporate governance

statement that comply with that law and those regulations.

The directors are responsible for the maintenance and

integrity of the corporate and financial information included on

the Company’s website.

The directors confirm, to the best of their knowledge:

•That the consolidated financial statements, prepared in

accordance with IFRSs in conformity with the Companies

Act 2006 and IFRSs adopted pursuant to Regulation(EC)

No.1606/2002 as it applies in the European Union, give a

true and fair view of the assets, liabilities, financial position

and profit of the parent company and undertakings included

in the consolidation taken as a whole

•That the annual report, including the strategic report,

includes a fair review of the development and performance

of the business and the position of the Company and

undertakings included in the consolidation taken as a whole,

together with a description of the principal risks and

uncertainties that they face

•That they consider the annual report, taken as a whole, is

fair, balanced and understandable and provides the

information necessary for shareholders to assess the

Company’s position, performance, business model and

strategy.

The strategic report, directors’ report and the financial

statements of the Bank, were approved by the Board of

Directors on 21 June 2022.

Signed on behalf of the board

Ruth Leas

Chief Executive

21 June 2022

Brian Stevenson

Chair

21 June 2022

Risk management and

governance

CORPORATE GOVERNANCE

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IN THIS SECTION

Remuneration report

147

Moni Mannings

Chair of the IBP

Remuneration Committee

Key achievements in FY2022

•Considered and approved the proposed 2022

remuneration approach for the Chief Executive,

senior management, Material Risk Takers (MRTs),

control function employees and other employees

•Navigated through an extremely competitive job

market dealing with remuneration related matters

ensuring key talent was retained

•Approved the variable remuneration spend and

overall remuneration approach for the financial

year ended 31 March 2022

•Reviewed and approved fixed remuneration

increases taking into consideration the overall

approach in the context of the current high

inflationary environment and its impact on the

cost of living

•Reviewed the diversity implications of the

remuneration philosophy, policy and structures,

including the pay gap figures; ethnicity pay gap

figures were published for the first time this year

•Considered the interaction between culture and

reward and the potential implications thereof

•Reviewed the non-standard remuneration

structures within Investec Bank plc

•Regularly considered external legislative and

regulatory developments, and approved for

implementation required changes arising from

these including the implementation of Capital

Requirements Directive V (CRD V) effective

1 April 2021

•Regularly considered the application of malus

and/or clawback

•Reviewed key new hires and exits, including the

remuneration outcomes for good and bad

leavers.

Areas of focus in FY2023

•Continue to review fixed remuneration levels

considering the current high inflationary

environment and its impact on the cost of living for

our employees

•Consider and approve the remuneration framework

and objectives for the Chief Executive, in the

context of the Group Executive Team framework

•Consider the belonging, inclusion and diversity

implications of the remuneration philosophy, policy

and frameworks including equal pay and both the

gender and ethnicity pay gap

•Consider how our remuneration philosophy, policy

and practices support and align with our ESG

initiatives

•Review and consider how the overall remuneration

philosophy and approach supports and aligns with

the Investec Bank plc and Group strategy

•Continue to regularly consider the application of

malus and/or clawback

•Consider the alignment of remuneration for all

employees with the Chief Executive and executive

team

•Review and consider how the remuneration

philosophy, policy and approach align with and

support our culture

•Consider the risk implications of our remuneration

policies and frameworks.

Meetings held in 2021/22

Members

Member since

Eligible to

attend

Attended

Moni Mannings (Chair)*

20 May 2019

Brian Stevenson

20 May 2019

Henrietta Baldock**

05 August 2021

Philip Hourquebie***

20 May 2019

Lesley Watkins

20 May 2019

*Moni Mannings did not attend the Committee meeting held in March 2022 due to illness.

**Henrietta Baldock joined the Committee on 5 August 2021 and became the Investec group representative from that date.

***Philip Hourquebie acted as the Investec Group representative until 5 August 2021.

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149

2021

May (two meetings)

•Considered and approved the

proposed remuneration approach

for the Chief Executive, senior

management, Material Risk Takers,

control function employees and other

employees

•Approved the variable remuneration

spend and approach for the year

ending 31 March 2021; this was

materially impacted by the COVID-19

pandemic

•Reviewed the application of malus

and clawback

•Approved the annual remuneration

report for Investec Bank plc

•Reviewed an extensive benchmarking

exercise on Non-Executive Director

fees, and approved updated

principles for the determination of

fees and fees to be paid for the

2021/22 year

•Considered and approved an updated

remuneration governance approach.

July

•Reviewed recent regulatory

developments

•Considered the remuneration approach

for the Chief Executive, in the context of

the Group Executive Team framework, in

respect of the financial year ending

31 March 2022

•Received and considered a report for the

Investec Bank plc Reward Committee

•Reviewed analysis of the non-standard

remuneration packages for new hires

and leavers.

September

•Reviewed recent regulatory

developments

•Reviewed and approved the

methodology for identifying Material

Risk Takers, and the proposed

Material Risk Taker list for the

2021/22 year

•Reviewed and approved the annual

Remuneration Policy Statement for

the 2021/22 financial year.

November

•Reviewed recent regulatory

developments

•Received a presentation on the

methodology for determining the variable

remuneration spend and forecast spend

for the 2021/22 year

•Received a presentation on the

implications of CRD V for Investec Bank

plc and subsequent actions taken

•Reviewed and approved of the updated

Investec Bank plc Reward Committee

terms of reference.

2022

March

•Reviewed and approved for

publication the 2021 Gender and

Ethnicity Pay Gap report

•Reviewed the context and proposed

approach and guidance for the annual

reward review

•Reviewed and approved the final

methodology for identifying Material

Risk Takers, and the final list of

Material Risk Takers for the

2021/2022 financial year

•Reviewed and approved the final

Remuneration Policy Statement for

the 2021/22 financial year

•Reviewed analysis of the non-

standard remuneration packages for

new hires and leavers.

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150

Introduction

It is my pleasure to present the

remuneration report for the year ended

31 March 2022, which describes the

approach to remuneration at the

Specialist Bank.

The IBP Remuneration Committee

has responsibility for remuneration for

the Specialist Bank and ensures

compliance with applicable legislation

and governance requirements of the

jurisdictions within which the bank

operates, including its obligations as an

independent bank regulated by the

Prudential Regulation Authority (PRA)

and Financial Conduct Authority (FCA).

While the IBP Remuneration Committee

is responsible for remuneration within

the Specialist Bank, it reports key items

up to both the IBP Board and the DLC

Remuneration Committee.

Before we turn to look in more detail

at key aspects of our remuneration,

I would like to reflect on the

IBP Remuneration Committee’s

responsibilities, achievements and

challenges encountered over the past

year, and to consider the key areas

of focus for the Committee in the

year ahead.

Role of the Chair

The role of the Chair of the IBP

Remuneration Committee requires

regular meetings with the executives

of the bank, along with liaison with

the Chair of the DLC Remuneration

Committee. The Chair also has

interactions with internal and external

specialist advisers and with the heads of

Reward, People & Organisation,

Compliance and Risk, in order to keep

knowledge up to date, and to keep

abreast of commercial, regulatory and

legislative developments and challenges

facing the business. These interactions

are an essential part of the role of the

Chair of the IBP Remuneration

Committee.

Composition

I served as Chair of the IBP

Remuneration Committee for the

financial year. The other members

of the Committee for the full year were

Brian Stevenson and Lesley Watkins.

The IBP Remuneration Committee

is composed of independent Non-

Executive Directors, with membership

designed to provide the breadth of

experience necessary for the members

to consider the issues that are

presented to the IBP Remuneration

Committee.

Philip Hourquebie was Chair of the DLC

Remuneration Committee until 5 August

2021 and Henrietta Baldock was Chair of

the DLC Remuneration Committee from

5 August 2021. The membership of Philip

and Henrietta of the IBP Remuneration

Committee for these periods, enhanced

the interconnection between the IBP

Remuneration Committee and the DLC

Remuneration Committee.

Committee responsibilities

The IBP Remuneration Committee

is responsible for considering the

remuneration arrangements of the

Executive Directors, senior employees

including Material Risk Takers, and that

of the wider workforce of the Specialist

Bank. The remuneration framework,

performance measures and metrics for

the IBP Chief Executive Ruth Leas, who

is a person discharging managerial

responsibilities (PDMR) of the Investec

Group, are determined by the DLC

Remuneration Committee following

consultation with the IBP Remuneration

Committee. The annual remuneration for

the Chief Executive is then reviewed by

the IBP Remuneration Committee, with a

recommendation provided to the DLC

Remuneration Committee.

The IBP Remuneration Committee

receive reports from the IBP Reward

Committee which has been mandated

to oversee the reward framework for

Investec Bank plc employees, and act as

the Malus and Clawback Committee to

apply the Specialist Bank’s policy in this

regard.

Investec Wealth & Investment (IW&I),

a subsidiary of Investec Bank plc

regulated by the FCA, maintains an

independent governance structure,

comprising an independent Board

and Remuneration Committee.

The membership of the Remuneration

Committee of our wealth business

comprises independent Non-Executive

Directors. Matters relating to IW&I do

not fall within the remit of the IBP

Remuneration Committee.

The IW&I Remuneration Committee

reports to the DLC Remuneration

Committee. Any matters relevant to the

Specialist Bank are communicated to the

Bank, in part, through having the Chair

of the DLC Remuneration Committee,

Henrietta Baldock, as a member of the

IBP Remuneration Committee.

The IBP Remuneration Committee

reviews and recommends the

remuneration for the Executive Directors

and senior employees of the Bank to

the DLC Remuneration Committee.

The policy on remuneration packages

for Non-Executive Directors is agreed

and determined by the Investec

Group Board.

The past year in focus

The past year has seen the IBP

Remuneration Committee deal with

many challenging matters which include

the evolving hybrid working environment

as COVID-19 restrictions eased,

operating and responding to the high

inflationary environment and its impact

on the cost of living and navigating

through and ensuring key talent was

retained in an extremely competitive job

market. The Committee ensured they

focused on balancing the interests of

various stakeholders in considering the

approach to remuneration, and

particularly variable remuneration

payouts.

As outlined in the Corporate

Governance section, the Board and

the IBP Remuneration Committee have

a strong focus on culture. It has been

frequently documented, including by our

regulators, that remuneration structures

and practices can and do have a

significant impact on the culture within

organisations. Therefore this potential

effect has a significant bearing on the

approach and deliberations of the IBP

Remuneration Committee when

reviewing remuneration processes

and practices within the Specialist Bank,

and has driven some of the changes

implemented, including the executive

remuneration framework outlined below.

I am still the designated Non-Executive

Director for workforce engagement for

the Specialist Bank and engagement

activities during the year have included

culture dialogues, diversity and inclusion

programmes, talent programmes, town

halls, and question and answer sessions.

A quarterly workforce engagement

synthesis meeting is also held with me,

Henrietta Baldock as the designated

Non-Executive Director for workforce

engagement for the Board of Investec

Group, and Cath Thorpe for IW&I, to

ensure that the matters of interest to our

people are considered across the

Investec Group.

The IBP Remuneration Committee

also oversaw the details and publication

of the Bank’s fifth annual pay gap report,

now also including the ethnicity pay gap.

Refer to the pay gap report published on

the Investec website for full details.

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151

The IBP Remuneration Committee is

committed to ensuring further

improvement in the future. In addition,

the Specialist Bank is a signatory to

the Women in Finance Charter, and

in doing so has committed to, among

other items, linking the pay of senior

executives to delivery against the

set targets. Our target date was

31 March 2022 and we are pleased to

confirm the targets have been met. Full

details will be disclosed on our website

by 31 December 2022.

Throughout the year, the Remuneration

Committee reviewed the proposed

approach to variable remuneration for

the financial year ending 31 March 2022

and agreed the final approach in

May 2022.

We are confident that the approach

taken has enabled those who performed

strongly to be rewarded, investment in

appropriate strategic initiatives,

retention of our key people and strong

alignment with the Specialist Bank,

Group and our shareholder in the future.

Performance and outcomes for

the year

The revenue momentum experienced in

the first half of the financial year

continued into the second half and the

Specialist Bank delivered a

commendable set of results, slightly

ahead of pre-COVID levels of

profitability with an enhanced quality of

earnings.

Variable remuneration for the 2022 year

was calculated using the standard

Economic Value Added (EVA)

calculation.

Profits have increased this year by

165.6% and our people have delivered a

strong performance and have been

rewarded accordingly. We considered

the needs of all of our stakeholders,

including our shareholder, when

determining the remuneration spend for

the year. We agreed the following

principles to guide our approach:

•Protect our business (so we have

a sustainable, viable business

in the long term)

•Ensure we retain those individuals

who are deemed key to the future

strategy of the business

•Mitigate flight risk and potential

impact to the franchise

•Account for external factors, including

the views of our shareholder and

regulators

•Ensure we are sensitive to and

supportive of the communities in

which we operate.

Looking ahead

There is still considerable uncertainty

regarding the Russian invasion of

Ukraine and its full economic impact.

However, we are confident in the

performance and strength of our

business, the dedication of our people

and the optimised scale, resilience and

technology within the business.

The IBP Remuneration Committee will

focus in the coming year on our

remuneration practices, with particular

attention being given to ensuring that

our philosophy, policy and approach

support and align with our culture, and

our approach to belonging, inclusion and

diversity. The IBP Remuneration

Committee will also be focused on the

evolving hybrid working environment

and operating within and responding to

the high inflationary environment and its

impact on the cost of living.

The IBP Remuneration Committee

believes that the Specialist Bank’s

approach to executive remuneration

is designed to incentivise exceptional

performance from its executives and

employees, and ensure that all the

Bank’s stakeholders, including

shareholders and employees are

rewarded appropriately for performance.

The Specialist Bank is also focused on

ensuring that its approach to reward is

fair in all aspects, and that all

stakeholders are taken into account

when determining how executives and

employees are rewarded.

The IBP Remuneration Committee

considers that there is strong alignment

between the Specialist Bank’s

remuneration structure and the Bank’s

stakeholder, especially with vesting

periods of share awards granted to

employees which generally vest over

five years, and in some cases seven

years, with additional post-vesting

retention periods for MRTs.

Conclusion

The Committee has had a positive year,

dealing with many challenging matters

which include the evolving hybrid

working environment as COVID-19

restrictions eased, operating and

responding to the high inflationary

environment and its impact on the cost

of living and navigating through and

ensuring key talent was retained in an

extremely competitive job market.

We are confident that the steps we

have taken have allowed us to

effectively reward our people who have

performed strongly, retain our key

people, and ensure strong alignment

with the Specialist Bank, Group and

our shareholder in the future.

Moni Mannings

Chair, IBP Remuneration Committee

21 June 2022

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Remuneration overview

Inside this section

Remuneration philosophy and approach for all employees

Remuneration policy

Variable remuneration

Other remuneration structures

Governance

Remuneration philosophy and

approach for all employees

Our remuneration approach is designed

to foster an exceptional performance

culture that enables an entrepreneurial

spirit as well as a strong sense of

ownership. We use remuneration to help

attract and retain culturally aligned,

smart, innovative and talented people

who adhere and subscribe to our

culture, risk appetite, values and

philosophies, and to recognise and drive

out of the ordinary performance.

The Specialist Bank’s remuneration

levers work to:

•Provide a sense of security, so people

feel free to innovate, challenge and

influence

•Motivate people to deliver exceptional

performance

•Give people a sense of ownership, so

they feel invested in the organisation.

Our remuneration approach reflects our

culture; it is an honest and challenging

process that is tailored to individual

roles and acknowledges personal and

team contributions. We reward people

for the contribution they make through

payment of a fixed package, variable

performance bonus, and ownership

through a share incentive scheme. We

strive to provide a working environment

that stimulates extraordinary

performance so that Executive Directors

and employees may be positive

contributors to our clients, our

communities and the Group.

When determining levels of variable

remuneration, the Specialist Bank

considers the overall level of

performance, culture and risk events in

the year. The proportion of variable to

fixed remuneration is carefully monitored

to ensure compliance with regulatory

requirements. All incentives are subject

to the Bank’s performance adjustment

policy. This provides the Bank with the

ability to reduce, revoke or recover

variable remuneration in respect of a

risk, control or conduct issue, event or

behaviour.

Given IBP Board Executive Directors

and additional senior Specialist Bank

executive incentives are deferred for up

to seven years, the Bank does not

believe that the incentive structures

inadvertently motivate irresponsible or

short-term behaviour.

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OVERVIEW OF REMUNERATION FOR ALL EMPLOYEES

Element

Operation – Specialist Bank

Salary

•Paid monthly in cash

Role-Based

Allowance

•Role-Based Allowances may be awarded to certain Material Risk Takers to reflect their

roles and ensure an appropriate balance between fixed and variable remuneration

–Paid monthly in cash

–These are fixed, according to the nature of each role, and can only be amended in

certain limited circumstances (e.g. a material increase in organisational

responsibilities).

Benefits and

pension/provident

•Benefits are provided, with the details depending on local market practice

–Employees have access to country-specific, company-funded benefits such

as pension schemes, private medical insurance, permanent health insurance, life

insurance and cash allowances

–Pension and benefit levels differ globally to be competitive in different markets, and

there is no single pension level across the Group

–Specialist Bank Executive Directors have access to the same benefits as bank

employees mentioned above, being Company-funded benefits such as pension

schemes, private medical insurance, permanent health insurance and life insurance.

Short-term

incentive

•Discretionary performance bonuses based on business and individual performance

•The amounts available to be distributed are based on the Bank-wide risk adjusted

Economic Value Added (EVA) model which is, at a high level, based on revenue less

risk-adjusted costs, and overall affordability

•At an individual level the bonus allocations are determined based on performance

against qualitative and quantitative factors. Qualitative measures include adherence to

culture, including supporting belonging, inclusion and diversity, market context,

contribution to performance and brand building, attitude displayed towards risk

consciousness and effective risk management.

Non-Material Risk Takers:

•For employees who are not Material Risk Takers, all bonus awards exceeding a pre-

determined threshold are subject to 60% deferral in respect of the portion exceeding

the threshold

•The deferred amount is awarded in the form of: short-term share awards vesting in

three equal tranches over a period of approximately three years; or cash released in

three equal tranches over a period of approximately three years

•Deferred bonuses are subject to malus conditions.

Material Risk Takers:

Bonus awards are subject to deferral as follows:

•Where variable remuneration, comprising bonus and LTIP, exceeds £500,000, 60% of

variable remuneration is deferred

•Where variable remuneration is less than £500,000 40% is deferred, unless the de

minimis concession is met in which case there is no deferral

•A minimum of 50% of both the deferred and non-deferred elements are delivered

in shares, with the remaining balance in cash or shares

•The deferred elements vest over periods from four up to seven years and are subject

to an appropriate retention period, generally12 months, after vesting

•All variable remuneration is subject to clawback

•All deferred variable remuneration is subject to malus

•MRTs are subject to the 2:1 maximum ratio of variable to fixed remuneration.

Other

•Variable remuneration of employees in the audit, risk and compliance functions is set

independently of the business they oversee

•The Non-Executive Directors are not eligible to participate in any of the Group’s

incentive plans or to join any pension scheme. They do not receive any taxable

benefits over and above reimbursement for agreed travel and subsistence.

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Consideration of all employee

remuneration

The IBP Remuneration Committee

reviews changes in remuneration

arrangements in the workforce as we

recognise that all our people play an

important role in the success of the

Specialist Bank. The Bank is committed

to creating an inclusive working

environment and to rewarding our

employees throughout the organisation

in a fair manner, and the IBP

Remuneration Committee reviews our

practices around creating a fair, diverse

and inclusive working environment.

In making decisions on executive pay,

the IBP Remuneration Committee

considers wider workforce remuneration

and conditions to ensure that they are

aligned on an ongoing basis. Effective

from 2019 the Board appointed a

designated Non-Executive Director

(NED) to represent employees in the

boardroom. The designated NED acts as

an engagement mechanism between our

employees and the Board and some of

their key objectives are to:

•Ensure the reward, incentives and

conditions available to the Company’s

workforce are taken into account

when deciding the pay of Executive

Directors and senior management

•Enable the IBP Remuneration

Committee to explain to the workforce

each year how decisions on executive

pay reflect wider Company pay policy

•Assist the IBP Remuneration

Committee to provide feedback to the

Board on workforce reward,

incentives and conditions, and

support the latter’s monitoring of

whether Company policies and

practices support culture and

strategy.

The Board believes that employees

throughout the Specialist Bank should

be able to share in the success of the

Bank. As such, as outlined in the table

on the prior page, in addition to the fixed

pay element, all of our employees have

access to market relevant benefits,

and all employees are eligible to be

considered for an annual bonus after a

short initial qualifying period. The Board

believes strongly in share ownership

among our employees and therefore all

employees are, in principle, eligible to

participate in our long-term incentive

scheme.

Remuneration policy

All remuneration payable (salary,

benefits and incentives) is assessed at

a Specialist Bank, business unit and

individual level. This framework seeks to

balance both financial and non-financial

measures of performance to ensure that

the appropriate factors are considered

prior to making awards, and that the

appropriate mix of cash and share-

based awards are made.

Determination of remuneration levels

for employees

Qualitative and quantitative

considerations form an integral part

of the determination of overall levels

of remuneration and total compensation

for each individual.

Factors considered for overall levels

of remuneration in the Specialist Bank

include:

•Financial measures of performance:

–Risk-adjusted EVA model

–Affordability.

•Non-financial measures of

performance:

–Market context

–Specific input from the risk and

compliance functions.

Factors considered to determine total

compensation for each individual

include:

•Financial measures of performance

–Achievement of individual

targets and objectives

–Scope of responsibility and

individual contributions.

•Non-financial measures of

performance

–Alignment and adherence to

our culture and values, including

supporting belonging, inclusion and

diversity

–The level of cooperation and

collaboration fostered

–Development of self and others

–Attitude displayed towards risk

consciousness and effective risk

management

–Adherence to internal control

procedures

–Compliance with the Specialist

Bank’s regulatory requirements and

relevant policies and procedures,

including treating customers fairly

–The ability to grow and develop

markets and client relationships

–Multi-year contribution to

performance and brand building

–Long-term sustained performance

–Specific input from the risk and

compliance functions

–Attitude and contribution to

sustainability principles and

initiatives.

Remuneration levels are targeted

to be commercially competitive

on the following basis:

•The most relevant competitive

reference points for remuneration

levels are based on the scope

of responsibility and individual

contributions made

•The IBP Remuneration Committee

recognises that the Specialist Bank

operates an international business and

competes with both local and

international competitors in each of

our markets

•Appropriate benchmark, industry

and comparable organisations’

remuneration practices are reviewed

regularly

•While benchmarking information is

utilised, it is considered along with

other relevant factors, including

internal comparators, the scope and

complexity of the role and the

individual’s contribution.

Variable remuneration

All employees are eligible to be

considered for a discretionary annual

bonus, subject inter alia to the factors

set out above in the section dealing

with the determination of remuneration

levels. The structure of short-term

incentives reflects differing regulatory

requirements for the different legal

entities and also differing competitive

pressures in each distinct market

in which the Specialist Bank operates.

Specialist Bank: variable short-term

incentive

Risk-weighted returns form the basis

for variable remuneration levels

In our ordinary course of

business, we face a number

of risks that could affect our

business operations, as

highlighted on page 52.

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155

Risk management is independent

from the business units and monitors,

manages and reports on the Specialist

Bank’s risk to ensure it is within the

stated risk appetite as mandated by the

Board of Directors through the IBP Board

Risk and Capital Committee (IBP BRCC).

The Bank monitors and controls risk

exposure through credit, market,

liquidity, operational and legal risk

divisions/ forums/committees.

The Specialist Bank’s central credit,

investment and risk forums, IBP

Executive Risk Review Forum (Review

ERRF) and IBP Executive Risk Committee

(IBP ERC) provide transaction approval

independent of the business unit on

a deal-by-deal basis.

EVA model: allocation of performance-

related bonus pool

Our business strategy and associated

risk appetite, together with effective

capital utilisation, underpin the EVA

annual bonus allocation model.

Business units share in the annual

bonus pool to the extent that they have

generated a realised return on their

allocated risk-adjusted capital base in

excess of their target return on equity.

Many of the potential future risks that

the firm may face are avoided through

ensuring that the bonus pools are based

on actual realised risk-adjusted profits.

The bonus pools for non-operating

business units (central services and

head office functions) are generated

by a levy payable by each business unit

on its operating profit. This bonus pool

may, in some years, be supplemented by

a discretionary allocation as determined

by the executive, and agreed by the IBP

Remuneration Committee.

In terms of our EVA process, if business

and individual performance goals

are exceeded, the variable element

of the total remuneration package

is likely to be substantially higher than

the relevant target benchmark. This

ensures that overall remuneration levels

have the potential to be positioned

at the upper quartile level for superior

performance, in line with our overarching

remuneration policy.

In circumstances where a business unit

does not have an EVA pool (e.g. when

it incurs a loss or when it is a start-up),

the executive and IBP Remuneration

Committee, with support from the Group

and the DLC Remuneration Committee,

may consider a discretionary allocation

to allow for a modest bonus for those

staff who were expected to contribute

to the longer-term interests of that

business unit or the Specialist Bank,

despite the lack of EVA profits in the

short term, e.g. control functions,

support staff and key business staff.

It should be noted the salaries and

proposed bonuses for employees

responsible for risk, internal audit and

compliance are not based on a formulaic

approach and are independent of any

revenues or profits generated by the

business units where they work. The

level of rewards for these employees

are assessed against the overall

financial performance of the Specialist

Bank; objectives based on their function;

and compliance with the various non-

financial aspects referred to above.

Key elements of the bonus allocation

process are set out below:

•A fixed predetermined percentage

of any return in excess of the EVA

hurdle accrues to the business

units’ EVA pool

•A portion of the total EVA pool is

allocated towards the bonus pool

for central services and head

office employees

•These bonus pools are reviewed

regularly by the appropriate

management and non-executive

committees to ensure that awards

are only paid when it is appropriate

to do so, considering Group-wide

performance against non-financial

risk (both current and future) and

compliance-based objectives and in

order to ensure that the payment of

such discretionary bonuses does not

inhibit the Bank’s ability to maintain/

raise its capital levels. All users of

capital operate within a strict

philosophical framework that requires

a balancing of risk and reward and

that is designed to encourage

behaviour in the interests of all

stakeholders as opposed to just

employees

•The EVA pools are calculated centrally

by the Specialist Bank’s finance

function and are subject to audit as

part of the year-end audit process

•Once the annual audit is complete,

line managers in each business unit

will make discretionary bonus

recommendations for each team

member taking into consideration

qualitative and quantitative criteria

(as mentioned above)

•Bonus recommendations are then

subject to an extensive geographic

review involving the People &

Organisation function and the

executive

•Thereafter, these recommendations

are subject to a global review by

executive management before the IBP

Remuneration Committee and DLC

Remuneration Committee review

and approval process.

Deferral of annual bonus awards:

other than Material Risk Takers

within the Bank

All annual bonus awards exceeding a

predetermined hurdle level are subject

to 60% deferral in respect of that portion

that exceeds the hurdle level. The

deferred amount is awarded in the form

of: forfeitable share awards vesting in

three equal tranches over approximately

three years; or cash released in

three equal tranches over approximately

three years. Where shares are being

awarded to employees as part of the

deferral of performance bonus awards,

these are referred to as short-term

share awards. These awards are made

under the terms of our existing long-

term incentive plans. The entire amount

of the annual bonus that is not deferred

is payable upfront in cash.

Deferral of variable remuneration

awards: Material Risk Takers within

the Bank

•Material Risk Takers include senior

management, risk takers, staff

engaged in certain central functions

and any other employees whose

professional activities have a material

impact on the Specialist Bank’s risk

profile

•Individual awards to MRTs are

determined based on EVA pools in

the same manner as is applicable

to all staff (as set out above), and

subject to the Specialist Bank’s

remuneration policy and governance

processes (also set out above)

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156

•Variable remuneration awards

to Executive Directors of the Bank

(excluding Executive Directors who

are employees of a separately

regulated firm) and all variable

remuneration awards to other MRTs

where total variable remuneration

exceeds £500 000 are subject to 60%

deferral

•All variable remuneration awards

to other MRTs where total variable

remuneration is less than £500 000

are subject to 40% deferral

•The 40% not deferred in the former

instance or the 60% not deferred

in the latter instance are awarded

as 50% in cash and 50% in short-term

share awards

•The upfront short-term share

awards vest immediately, but are only

released after a period of 12 months

for all MRTs, with the exception of risk

managers, for which it is six months

•Variable remuneration awards for

MRTs who are not exempted by the

de minimis concession are subject

to 40% deferral (60% if total variable

remuneration exceeds £500 000)

after taking into account the value

of share awards granted to each staff

member in the applicable financial

year and which are included in

deferred variable remuneration.

The deferred portion of discretionary

awards to Material Risk Takers will,

at the election of the staff member,

be made either entirely in the form

of short-term share awards, or 50%

in short-term share awards and 50%

in cash

•All deferrals in the form of short-term

share awards (being either 50% or

100% of such deferral) vest over

periods of up to seven years and are

then subject to an appropriate period

of retention, being 12 months, with the

exception of risk managers, for which

it is six months.

Malus and clawback within the

Specialist Bank

Employees who leave the employment

of the Specialist Bank prior to vesting of

deferred incentive awards will lose their

deferred bonus forfeitable shares other

than as a result of retirement, subject

to the Bank’s normal good leaver

provisions and approval process

in exceptional cases.

The deferred share and cash awards for

MRTs are subject to malus and clawback

adjustments. The assessment of

whether any malus adjustment should

be made to an individual’s unvested

awards will be undertaken within the

following framework:

•Where there is reasonable evidence

of employee misbehaviour

•Where the firm or business unit

suffers a material failure of risk

management

•Other relevant events.

In these cases, management and the IBP

Remuneration Committee will take into

account the following factors in

determining the extent (if any) to which

the quantum of deferred awards should

be subject to clawback:

•The extent to which the individual

had control over the outcome

•Failure of internal control systems

•The impact of the risk profile of the

relevant member of the Specialist

Bank or business unit

•Any violation of the Bank’s culture

and values

•The long-term impact of the outcome

on the Bank or relevant business unit

•External factors including market

conditions

•Any other relevant factors.

Specifically for short-term share awards,

where profits used to determine the

original bonus are materially reduced

after the bonus determination, the

awards will be recalculated for such

reduction and consideration given to

malus and/or clawback (if any) to the

extent that the prior period’s EVA pool

is reduced and the extent to which it

affected each employee.

The deferred share awards of non

Material Risk Takers are subject to

malus adjustments.

Long-term incentive: share awards

The Specialist Bank has a number of

share option and long-term share

incentive plans that are designed to

align the interests of employees with

those of shareholder and long-term

organisational interests, and to build

material share ownership over the long

term through share awards. These share

option and incentive plans are also used

in appropriate circumstances as a

mechanism for retaining key talent.

Awards are made in the form of

forfeitable share awards other than for

countries where the taxation of such

awards is penal. In these cases awards

are made in the form of conditional

awards or market strike options.

In principle all employees are eligible

for long-term incentives. Awards are

considered by the IBP Remuneration

Committee and made only in the 42-day

period following the release of our

interim or final financial results in

accordance with the Investment

Association Principles of Remuneration.

These awards comprise two elements,

namely:

•‘New starter’ awards may be awarded

on a discretionary basis to new

starters and are generally linked

to salary levels

•‘‘Top up’ awards are made at the

discretion of line management

primarily to ensure multi-year

performance and long-term value

generation.

All proposed long-term incentive awards

are recommended by business unit

management, approved by the DLC

Share Incentive Executive Committee

and the IBP Remuneration Committee

before being awarded.

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157

Forfeitable shares for non Material Risk

Takers are subject to one third vesting

after approximately three, four and five

years, which we believe is appropriate

for our business requirements. LTIP

awards to Material Risk Takers are

subject to performance conditions and

to vesting over a period of two to four

years, or three to seven years,

determined by regulatory requirements,

and are then subject to a 12 month

retention period, with the exception of

risk managers, for which it is six months.

The awards are forfeited on termination,

but ‘good leaver’ discretion is applied in

exceptional circumstances.

Retention is addressed through the

long-term nature of awards granted,

which provides an element of ‘lock-in’

for employees throughout the vesting

period and allows for multi-year

contribution to performance and

brand building.

For further information on the

share option and long-term share

incentive plans in operation and

in which the directors are eligible

to participate, refer to the

Investec Group’s 2022

Remuneration Report.

Other remuneration structures

Guaranteed variable remuneration

comprises all forms of remuneration

whose value can be determined prior

to award. This includes, but is not limited

to sign-on, buy-out and guaranteed

awards. Guaranteed variable awards

will not be awarded, paid or provided

to any individual within the Specialist

Bank unless they are:

•Exceptional

•In the context of hiring new staff

•Limited to the first year of service.

The IBP Remuneration Committee, or the

Chair on behalf of the Committee, is

required to pre-approve individual

remuneration packages (including new

joiner, retention and severance

remuneration) for the following:

•IBP Executive Directors, in

consultation with the DLC

Remuneration Committee

•IBP PDMRs

•IBP Senior Managers defined under

the Senior Management and

Certification Regime (SMCR).

All other forms of guaranteed

remuneration above pre-determined

thresholds are reported to the IBP

and DLC Remuneration Committees.

Retention awards

The Specialist Bank only pays retention

awards to serving staff in exceptional

circumstances. In all such cases, the

People & Organisation and Reward

functions shall review proposed

payments to ensure that they are in line

with this policy and any other relevant

regulation. Additionally, for MRTs, the

IBP Remuneration Committee shall

review and approve all proposed

awards. Circumstances where the Bank

will consider making retention awards

include the case of a major restructuring

of the Group or any subsidiary or one of

its business units (for instance in the

start-up of a new business line, or the

closure of a business line), where the

retention of individuals is essential to the

completion of the task. A valid business

case for the retention of the individual

must be presented to the IBP

Remuneration Committee in order for

a retention award to be approved. It is

required that the PRA be notified prior

to a retention award being made to

an MRT, and their guidance sought

on the appropriateness of retention

awards for certain other individuals.

Severance awards

Severance payments for the early

termination of a contract are at

executive management’s absolute

discretion and must reflect performance

achieved over time and be designed in

a way that does not reward failure.

Severance payments for MRTs in the

Specialist Bank are subject to all

necessary regulatory requirements, and

approval by the IBP Remuneration

Committee.

Other remuneration structures

On occasion the Specialist Bank may

utilise other remuneration structures, not

mentioned above, in certain pre-agreed

circumstances such as are required

by our clients or market practice.

Discretionary extended pension

benefits policy

Extended pension payments are very

rarely made and any such proposed

payments to employees upon reaching

retirement are required to be reviewed

and approved by the IBP Remuneration

Committee for alignment with

appropriate laws, policy and regulation.

Governance

Compliance and governance statement

The remuneration report complies with

the provisions of Schedule 8 of the

Large and Medium-sized Companies

and Groups (Accounts and Reports)

(Amendment) Regulations 2008 (as

amended), the UK Corporate

Governance Code, the UK Companies

Act 2006, the Rules of the UK Listing

Authority, the UK Financial Conduct

Authority rules, the PRA and FCA

Remuneration Code and Pillar III

disclosure requirements.

Scope of our remuneration policy

The Specialist Bank aims to apply

remuneration policies to Executive

Directors and employees that are largely

consistent across the Bank, but

recognises that certain parts of the Bank

are governed by local regulations that

may contain more onerous requirements

in certain respects.

In those cases, the higher requirements

are applied to that part of the Specialist

Bank. This is relevant to Investec Bank

plc and its subsidiary companies that are

subject to the PRA and FCA

Remuneration Code (as a level 2

organisation as defined therein), and in

particular in relation to MRTs.

Additionally, where any aspect of our

remuneration policy contravenes local

laws or regulations, the local laws or

regulations shall prevail.

The following Investec Bank plc Group

entities are separately regulated by the

PRA and/or FCA and as such maintain

their own remuneration policies separate

from the Bank policy and in line with

such entity’s own risk profile and

business activities:

•Investec Wealth & Investment Limited.

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158

Audit information

Directors’ shareholdings in Investec plc and Investec Limited shares as at 31 March 2022

Beneficial and

non-beneficial interest

% of shares

in issue1

Beneficial and

non-beneficial interest

% of shares

in issue1

Investec plc2

Investec plc

Investec Limited3

Investec Limited

Name

31 March 2022

1 April 2021

31 March 2022

1 April 2021

31 March 2022

Executive Directors

Fani Titi

324 065

541 970

0.05%

—

Ruth Leas

180 676

146 847

0.03%

—

Kevin McKenna

48 296

25 659

0.01%

—

Total

553 037

714 476

0.09%

—

Non-Executive Directors

Brain Stevenson (Chair)

—

Henrietta Baldock

—

Zarina Bassa

—

David Germain

—

Moni Mannings

—

Paul Seward

—

Lesley Watkins

—

Total

—

0.00%

—

0.00%

1.The issued share capital of Investec plc and Investec Limited at 31 March 2022 was 696.1 million and 310.4 million respectively.

2.The market price of an Investec plc share at 31 March 2022 was £5.04 (2021: £2.19), ranging from a high of £5.14 to a low of £2.19

during the financial year.

3.The market price of an Investec Limited share as at 31 March 2022 was R97.51 (2021: R43.27), ranging from a high of 98.16 to a low of R42.68 during the

financial year.

Directors’ interest in preference shares at 31 March 2022

The directors’ do not have any interest in preference shares.

Directors’ interests in options at 31 March 2022

Investec plc shares

The directors do not have any interest in options over Investec plc shares.

Investec Limited shares

The directors do not have any interest in options over Investec Limited shares.

Directors’ interests in long-term incentive plans at 31 March 2022

Investec plc shares

The directors do not have any interest in options over Investec plc shares.

Investec Limited shares

The directors do not have any interest in options over Investec Limited shares.

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Directors’ interests in the Investec plc Executive Incentive Plan 2013 at 31 March 2022

Long-term share awards granted in respect of the 2019, 2020 and 2021 financial year

Name

Date of grant

Exercise

price

Number of

Investec

plc shares

at 1 April 2021

Conditional

awards

made

during

the year

Balance

at 31

March

2022

Fani Titi

29 May 2019

Nil

278 080

—

278 080

5 June 2020

Nil

769 231

—

769 231

27 May 2021

Nil

—

349 651

Note: Upon termination of employment awards will be pro rated based on service over the performance period

Notes

First vesting aligns with the end of the performance period.

The June 2016 and 2017 awards have a six month retention period post vesting and all other awards a 12 month retention period.

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Conditional awards to Material Risk Takers at 31 March 2022 not subject to performance conditions

Name

Date of

grant

Exercise

price

Number of

Investec

plc shares

at 1 April

2021

Options

granted/

lapsed

during the

year

Exercised

during the

year

Balance

at 31

March

2022

Market

price at

date of

exercise

Gross

gains

made on

date of

exercise

Period exercisable

Fani Titi

29 May

2019

Nil

36 902

—

(36 902)

—

£3.07

113 460

One half is exercisable on 29 May each

year, commenced on 29 May 2020 until 29

May 2021, subject to a further 12 months'

retention period after vesting date.

27 May

2021

Nil

140 926

29% is exercisable on 27 May 2022 and 27

May 2023, 9% is exercisable on 27 May

each year commencing on 27 May 2024

until 27 May 2028. subject to a further 12

months' retention period after vesting date.

Ruth Leas

31 May

2018

Nil

20 375

—

(4 075)

16 300

£3.07

12 529

One fifth is exercisable on 31 May each

year, commenced on 31 May 2021 until 31

May 2025, subject to a further 12 months'

retention period after vesting date.

29 May

2019

Nil

37 933

—

37 933

—

One fifth is exercisable on 29 May each

year, commencing on 29 May 2022 until 29

May 2026, subject to a further 12 months'

retention period after vesting date.

27 May

2021

Nil

4 413

—

4 413

—

One fifth is exercisable on 27 May each

year, commencing on 27 May 2024 until 27

May 2028, subject to a further 12 months'

retention period after vesting date.

Kevin

McKenna

8 June

2017

Nil

15 080

—

15 080

—

One half is exercisable on 8 June each

year, commencing on 8 June 2023 until 8

June 2024, subject to a further six months'

retention period after vesting date.

31 May

2018

Nil

55 137

—

(11 027)

44 110

£3.07

33 903

One fifth is exercisable on 31 May each

year, commenced on 31 May 2021 until 31

May 2025, subject to a further 12months'

retention period after vesting date.

29 May

2019

Nil

75 866

—

75 866

—

One fifth is exercisable on 29 May each

year, commencing on 29 May 2022 until 29

May 2026, subject to a further 12 months'

retention period after vesting date.

27 May

2021

Nil

12 812

—

12 812

—

One fifth is exercisable on 27 May each

year, commencing on 27 May 2024 until 27

May 2028, subject to a further 12 months'

retention period after vesting date.

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Conditional awards to Material Risk Takers at 31 March 2022 subject to performance conditions

Name

Date of grant

Exercise

price

Number of

Investec

plc shares

at 1 April

2021

Options

granted/

lapsed

during the

year

Exercised

during the

year

Balance

at 31

March

2022

Market

price at

date of

exercise

Gross

gains

made on

date of

exercise

Period exercisable

Ruth Leas

8 June

2017

Nil

20 000

—

20 000

Final one third is exercisable on 8

June 2022 and subject to six

months' retention after vesting

date.

31 May

2018

Nil

60 000

(12 000)

48 000

3.07

36 896

One fifth is exercisable on 31 May

each year, commenced on 31 May

2021 until 31 May 2025, subject to

a further 12 months' retention

period after vesting date.

29 May

2019

Nil

62 631

—

62 631

—

One fifth is exercisable on 29 May

each year, commencing on 29

May 2022 until 29 May 2026,

subject to a further 12 months'

retention period after vesting

date.

5 June

2020

Nil

256 411

—

256 411

—

One fifth is exercisable on 05

June each year, commencing on

05 June 2023 until 05 June 2027,

subject to a further 12 months'

retention period after vesting

date.

27 May

2021

Nil

—

69 931

—

One fifth is exercisable on 27 May

each year, commencing on 27

May 2024 until 27 May 2028,

subject to a further 12 months'

retention period after vesting

date.

Kevin

McKenna

8 June

2017

Nil

48 000

—

(12 000)

36 000

£3.05

36 569

One fifth is exercisable on 8 June

each year, commenced on 8 June

2020 until 8 June 2024, subject to

a further six months' retention

period after vesting date.

31 May

2018

Nil

60 000

—

(12 000)

48 000

3.07

36 896

One fifth is exercisable on 31 May

each year, commenced on 31 May

2021 until 31 May 2025, subject to

a further 12 months' retention

period after vesting date.

31 May

2019

Nil

62 631

—

62 631

—

One fifth is exercisable on 29 May

each year, commencing on 29

May 2022 until 29 May 2026,

subject to a further 12 months'

retention period after vesting

date.

27 May

2021

Nil

—

42 833

—

One fifth is exercisable on 27 May

each year, commencing on 27

May 2024 until 27 May 2028,

subject to a further 12 months'

retention period after vesting

date.

The above awards to Material Risk Takers are subject to performance conditions and a six or 12 month retention period after the

award vests. In addition, these awards are subject to clawback in respect of some or all of the unvested portion of the award in

terms of the PRA Remuneration Code.

The performance conditions will be assessed by the IBP Remuneration Committee and the DLC Remuneration Committee, in

accordance with the rules and requirements of the PRA from time to time, at the end of each financial year of the performance

period. For each year within the performance period that the return on risk weighted assets for Investec Bank plc is equal to or

greater than 0.3%, the performance condition for 25% of the award is satisfied, in which case 25% of the award will vest on the

relevant vesting date (subject to clawback).

Outstanding unvested deferred forfeitable share awards not subject to performance conditions

Name

Award type

Performance

conditions

Eligible for

dividends

Vesting period

Total number

outstanding at

31 March

2022

Ruth Leas

Forfeitable shares

None

Yes

From 1 to 7 years

1 049

Kevin McKenna

Forfeitable shares

None

Yes

From 1 to 7 years

7 539

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Executive Directors’ emoluments

2022

2021

Aggregate emoluments (excluding pension contributions)

6 057

4 544

Contributions to defined contributions scheme

102

111

6 159

4 655

Number of directors in defined contribution scheme

Number of directors in closed defined benefits scheme

—

–

Included in aggregate executive director emoluments for the current year are performance awards to IBP Executive Directors.

Performance awards comprise £359 056 in upfront cash, £1 350 656 in upfront shares (vesting immediately and subject to 12

months’ retention thereafter), £225 581 in deferred cash (vesting equally over three to seven years, subject to regulatory

requirements), and £1 153 707 in deferred short-term share awards (vesting equally over three to seven years, subject to

regulatory requirements).

Emoluments of the highest paid director were £2 757 933 (2021: £1 905 832) excluding £34 527 of pension contribution to the

defined contribution scheme. The performance awards of the highest paid director comprise £0 in upfront cash, £991 600 in

upfront shares (vesting immediately and subject to 12 months’ retention thereafter) and £687,400 in deferred short-term share

awards (vesting over four to seven years). The emoluments exclude long-term incentives with vesting subject to achievement

against future performance conditions.

The directors have, during the year, exercised options granted to them under various of the Investec plc Group's long-term

incentive plans.

Full details are included on pages 159-162.

Non-Executive Directors receive fees based on their Board and committee membership and roles.

The number of shares in issue and share prices for Investec plc and Investec Limited over the period are provided below.

Summary: Investec plc and Investec Limited share statistics

31 March 2022

31 March 2021

High over

the year

Low over

the year

Investec plc share price

£5.04

£2.19

£5.14

£2.19

Investec Limited share price

R97.51

R43.27

R98.16

R42.68

Number of Investec plc shares in issue (million)

696.1

Number of Investec Limited shares in issue (million)

310.4

318.9

Additional remuneration disclosures (unaudited)

PRA and FCA Remuneration Code and Pillar III disclosures

In terms of the PRA’s Chapter on Disclosure Requirements and Part 8 of the Capital Requirements Regulation, the Specialist Bank

in the UK is required to make certain quantitative and qualitative remuneration disclosures on an annual basis with respect to

Material Risk Takers.

Material Risk Takers are defined as those employees (including directors) whose professional activities could have a material

impact on the Specialist Bank’s risk profile. A total of 51 individuals were Material Risk Takers at 31 March 2022.

The bank’s qualitative remuneration disclosures are

provided on pages 149 to 158 and further information

is provided in the Investec Group’s 2022 Remuneration

Report.

The information contained in the tables below sets out the Specialist Bank’s quantitative disclosures in respect of Material Risk

Takers for the year ended 31 March 2022.

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Investec Bank plc Annual Financial Statements 2022

REMUNERATION REPORT

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163

Aggregate remuneration by remuneration type awarded during the financial year

Senior

management

Other Material

Risk Takers

Total

Fixed remuneration

–Cash

13.9

9.7

23.6

–Shares

—

Variable remuneration*

–Upfront cash

2.5

2.0

4.5

–Deferred cash

1.9

1.2

3.1

–Upfront shares

5.8

2.0

7.8

–Deferred shares

5.1

1.8

6.9

–Deferred shares – long-term incentive awards**

5.3

2.1

7.4

Total aggregate remuneration and deferred incentives (£’million)

34.5

18.8

53.3

Number of employees

Ratio of variable to fixed pay

1.5

0.9

1.3

*Total number of employees receiving variable remuneration was 44.

**Value represents the number of shares awarded multiplied by the applicable share price. These awards were made during the period but have not yet

vested. These awards are subject to performance conditions and vest over a period from two and a half to four and a half years, up to three to seven

years, determined by regulatory requirements. They are also subject to a six or 12 month retention period after vesting.

Material Risk Takers received total remuneration in the following bands:

Number of

Material Risk

Takers

£800 000 – £1 200 000

£1 200 001 – £1 600 000

£1 600 001 – £2 000 000

£2 000 001 – £2 400 000

£2 400 001 – £2 800 000

£2 800 001 – £3 200 000

£3 200 001 – £3 600 000

£3 600 001 – £4 000 000

£4 000 001 – £4 400 000

£4 400 001 – £4 800 000

£4 800 001 – £5 200 000

> £5 200 001

Additional disclosure on deferred remuneration

£’million

Senior

management

Other

Material

Risk Takers

Total

Deferred unvested remuneration outstanding at the beginning of year

23.5

18.6

42.1

Deferred unvested remuneration adjustment – employees no longer MRT staff

and reclassifications

(2.2)

(1.3)

(3.5)

Deferred remuneration awarded in the year

12.2

5.1

17.3

Deferred remuneration reduced in year through performance adjustments

—

Deferred remuneration reduced in year through malus and clawback adjustments^^

—

Deferred remuneration vested in year

(1.9)

(3.5)

(5.4)

Deferred unvested remuneration outstanding at end of year

31.6

18.9

50.5

^^All employees are subject to malus and clawback provisions as discussed on page 157. No remuneration was reduced for ex post implicit adjustments

during the year.

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Investec Bank plc Annual Financial Statements 2022

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164

£’million

Senior

management

Other

Material

Risk Takers

Total

Deferred unvested remuneration outstanding at the end of the year

–Equity

29.1

16.9

46.0

–Cash

2.5

2.0

4.5

31.6

18.9

50.5

£’million

Senior

management

Other

Material

Risk Takers

Total

Deferred remuneration vested in year

–For awards made in 2019 financial year

0.6

1.1

1.7

–For awards made in 2018 financial year

0.8

1.6

2.4

–For awards made in 2017 financial year

0.6

0.7

1.3

–For awards made in 2016 financial year

—

2.0

3.4

5.4

£’million

Senior

management

Other

Material

Risk Takers

Total

Sign-on payments

Made during the year (£’million)

—

Number of beneficiaries

—

Severance payments

Made during the year (£’million)

0.6

0.7

1.3

Number of beneficiaries

Guaranteed bonuses

Made during the year (£’million)

—

Number of beneficiaries

—

Key Management Personnel (audited)

Details of directors’ remuneration and interest in shares

are disclosed on pages 159-162.

IAS 24 ‘Related party disclosures’ requires the following additional information for key management compensation.

Compensation of key management personnel

2022

£’000

2021

£’000

Short-term employee benefits

17 568

11 919

Other long-term employee benefits

3 950

4 263

Share-based payments

2 941

3 105

Total

24 459

19 287

Shareholdings, options and other securities of key management personnel

2022

£’000

2021

£’000

Number of options held over Investec plc or Investec Limited ordinary shares under employee

share schemes

6 593

5 764

2022

£’000

2021

£’000

Number of Investec plc or Investec Limited

Ordinary shares held beneficially and non-beneficially

3 693

3 833

We have defined key management personnel as the directors of Investec Bank plc plus those classified as persons discharging

managerial responsibility. In addition to the directors listed in the report, those are Mark Currie, Marc Kahn, Nishlan Samujh,

Lyndon Subroyen, Stuart Spencer, Richard Wainwright and Ciaran Whelan.

Remuneration report

Investec Bank plc Annual Financial Statements 2022

REMUNERATION REPORT

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165

Annual financial

statements

IN THIS SECTION

Independent auditor’s report to the

members of Investec Bank plc

167

Consolidated Income Statement

179

Consolidated Statement of Total

Comprehensive Income

180

Balance Sheets

181

Cash Flow Statements

183

Statements of Changes in Equity

184

Accounting policies

188

Notes to the Financial Statements

200

Opinion

In our opinion:

•Investec Bank plc’s Group financial statements and Parent Company financial statements (the “financial statements”) give

a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2022 and of the Group’s

profit for the year then ended;

•the Group financial statements have been properly prepared in accordance with UK adopted international accounting

standards and with International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002

as it applies in the European Union;

•the Parent Company financial statements been properly prepared in accordance with UK adopted international accounting

standards as applied in accordance with section 408 of the Companies Act 2006; and

•the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements of Investec Bank plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the

year ended 31 March 2022 which comprise:

Group

Parent company

Consolidated balance sheet as at 31 March 2022

Balance sheet as at 31 March 2022

Consolidated income statement for the year then ended

Statement of changes in equity for the year then

ended

Consolidated statement of comprehensive income for the year then

ended

Cash flow statement for the year then ended

Consolidated statement of changes in equity for the year then ended

Related notes 8, 9,13-31, 33-40, 42-48, 51-52 and

56 to the financial statements

Consolidated statement of cash flows for the year then ended

Related notes 1 to 55 to the financial statements, including a summary

of significant accounting policies

Information identified as ‘audited’ in the annual report on risk

management in section three

Information identified as ‘audited’ in the annual report on remuneration

in section four

The financial reporting framework that has been applied in the preparation is applicable law and UK adopted international

accounting standards and with International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No

1606/2002 as it applies in the European Union and; as regards to the Parent Company financial statements, as applied in

accordance with section 408 of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our

responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial

statements section of our report. We are independent of the Group and Parent Company in accordance with the ethical

requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Councils

(FRC’s) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in

accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Annual financial

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167

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the

preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group and Parent

Company’s ability to continue to adopt the going concern basis of accounting included:

•understanding management’s going concern assessment process, including the impact of the COVID-19 pandemic

(‘‘COVID-19’’) and current macro-economic environment in which the Group operates;

•assessing the board approved budgets, including the reasonableness and completeness of assumptions. In assessing these

assumptions, we considered the impact of COVID-19 and the current macro-economic environment, the trading environment,

current operating performance, principal risks and appropriate mitigating factors;

•assessing the information used in the going concern assessment for consistency with the information obtained through

auditing other areas of the business, obtaining an understanding of the business planning process and challenging the central

assumptions;

•involving specialists to assess the results of management’s stress testing, including consideration of principal and emerging

risks on funding, liquidity and regulatory capital. We performed independent stress testing of capital and liquidity ratios and

evaluated the plausibility of the outcome under which regulatory minimum requirements would be breached. In addition,

we evaluated the viability of management actions available to mitigate erosion of capital and liquidity;

•assessing the Group’s compliance with external debt covenants;

•inspecting correspondence with the Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA) for matters

that may impact the going concern assessment; and

•evaluating the appropriateness and conformity of the going concern disclosure included in the annual report with the reporting

standards and management’s going concern assessment.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,

individually or collectively, may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern

for a 12 month period from the date the financial statements are authorised for issue.

In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have

nothing material to add or draw attention to in relation to the directors’ statement in the ﬁnancial statements about whether the

directors considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections

of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the

Group’s ability to continue as a going concern.

Overview of our audit approach

Audit Scope

•We performed an audit of the complete financial information of two components and audit procedures

on specific balances for a further two components.

•The components where we performed full or specific audit procedures accounted for 99% of

operating profit before impairment of goodwill and amortisation of acquired intangibles and strategic

actions (“operating profit”), 98% of total operating income before expected credit loss impairment

charges (“revenue”) and 98% of total assets.

Key Audit Matters

•Adequacy of the provision for expected credit losses on loans and advances to customers;

•Valuation of financial instruments with higher risk characteristics and associated income;

•Adequacy of the provision held relating to the investigation by the Office of the Public Prosecutor

in Cologne and related potential civil and tax claims; and

•IT systems and controls impacting financial reporting.

Materiality

•We applied Group materiality of £14.4 million which represents 5% of operating profit before

impairment of goodwill and amortisation of acquired intangibles and strategic actions

(“operating profit”).

Annual financial

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168

An overview of the scope of the Parent and Group audits

Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit

scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial

statements.

We take into account size, risk profile, the organisation of the Group and effectiveness of Group wide controls, and other factors

such as changes in the business environment when assessing the level of work to be performed at each company.

Of the four components selected, we performed an audit of the complete financial information of two components (“full scope

components”) which were selected based on their size or risk characteristics. For the two other components (“specific scope

components”), we performed audit procedures on specific accounts within that component that we considered had the potential

for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or

their risk profile.

Component

Scoping

Investec Bank plc*

Full

Investec Wealth and Investment Limited

Full

Investec Bank (Channel Islands) Limited

Specific

Investec Holdings Australia Limited

Specific

* This component consists of Investec Bank plc, the Parent Company along with all the

consolidation adjustments and other material balances relating to UK subsidiaries of

Investec Bank plc which are also signed off by the senior statutory auditor.

The reporting components where we performed audit procedures accounted for 99% (2021: 93%) of the Group’s operating

profit, 98% (2021: 97%) of the Group’s revenue and 98% (2021: 98%) of the Group’s total assets. For the current year, the full

scope components contributed 94% (2021: 85%) of the Group’s operating profit, 94% (2021: 90%) of the Group’s revenue and

88% (2021: 89%) of the Group’s total assets. The specific scope component contributed 5% (2021: 8%) of the Group’s operating

profit, 4% (2021: 7%) of the Group’s revenue and 10% (2021: 9%) of the Group’s total assets. The audit scope of these

components may not have included testing of all significant accounts of the component but will have contributed to the

coverage of significant accounts tested for the Group. The remaining components represent 1% (2021: 7%) of the Group’s

operating profit and for these components, we performed other procedures, including analytical review, review scope

components and testing of journals to respond to potential risks of material misstatement to the Group financial statements.

The charts below illustrate the coverage obtained from the work performed by our audit teams.

Operating profit

Full scope components

94%

Specific scope components

Other procedures

Revenue

Full scope components

94%

Specific scope components

Other procedures

Total Assets

Full scope components

88%

Specific scope components

10%

Other procedures

Annual financial

statements

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169

Changes from the prior year

Investec Holdings (Ireland) Limited, which we performed a limited review over in the prior year, was brought out of scope in the

current year considering the component’s contribution to overall operating profits.

Involvement with component teams

In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each

of the components by us, as the primary audit engagement team, or by component auditors from other EY global network firms

operating under our instruction. Where the work was performed by component auditors, we determined the appropriate level of

involvement to enable us to determine that sufficient audit evidence had been obtained as a basis for our opinion on the Group

as a whole.

During the current year’s audit cycle, the primary audit team followed a programme of in-person visits and virtual oversight

reviews that had been designed to ensure that the Senior Statutory Auditor visits all full scope, specific scope and review scope

locations in the UK, Australia and Europe. These in-person visits and virtual reviews involved discussing the audit approach with

the component team and any issues arising from their work. The primary audit engagement team interacted regularly with the

component audit teams, where appropriate, throughout the course of the audit, which included attending planning meetings,

maintaining regular communication on the status of the audits, attending closing meetings and reviewing relevant audit working

papers on risk areas and taking responsibility for the scope and direction of the audit process. We also attended audit team

meetings with component management and component audit committee meetings.

This, together with the additional procedures performed at Group level, gave us appropriate evidence for our opinion on the

Group financial statements.

Climate change

There has been increasing interest from stakeholders as to how climate change will impact the Group. The Group has

determined that the most significant future impacts from climate change on their operations will be from credit risk, operational

risk, conduct risk, regulatory risk, and reputational risk. These are explained in the Directors’ Report and in the ESG (including

climate) risk section within the Risk management section, which form part of the “Other information,” rather than the audited

financial statements. Our procedures on these disclosures therefore consisted solely of considering whether they are materially

inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appear to be

materially misstated.

As explained in the Accounting policies note, governmental and societal responses to climate change risks are still developing,

and are interdependent upon each other, and consequently financial statements cannot capture all possible future outcomes as

these are not yet known. The degree of certainty of these changes may also mean that they cannot be taken into account when

determining asset and liability valuations and the timing of future cash flows under the requirements of IFRS as issued by the

International Accounting Standards Board (IASB) and with IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies

in the European Union. In the Accounting Policy note, explanation of the impact of certain transition and physical risks were

provided for the key assumptions and significant judgements and estimates.

Our audit effort in considering climate change was focused on evaluating management’s assessment of the impact of climate

risk, physical and transition, and ensuring that the effects of material climate risks disclosed in the Accounting Policy note have

been appropriately reflected in the asset and liability values and the nature and timing of future cash flows. Details of our

procedures and results on the valuation of financial instruments with higher risk characteristics and expected credit losses are

included in our key audit matters below. We also challenged the directors’ considerations of climate change in their assessment

of going concern and viability and associated disclosures.

Whilst the Group have stated their commitment to the aspirations to achieve net zero emissions is aligned with the Paris

Agreement, the Group is currently unable to determine the full future economic impact on their business model, operational

plans and customers to achieve this and therefore as set out above the potential impacts are not fully incorporated in these

financial statements.

Key audit matters

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

statements of the current period and include the most significant assessed risks of material misstatement (whether or not due

to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the

allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the

context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion

on these matters.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

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170

Risk

Our response to the risk

Adequacy of the provision for expected credit losses on loans and advances to customers

Refer to the Audit Committee Report (page 134);

Accounting policies (page 198); and Note 26 of

the Consolidated Financial Statements (page 246)

The determination of the provision for expected

credit losses is highly subjective. The subjectivity

relates to the path to recovery from COVID-19, the

impact of the Russian invasion of Ukraine and the

impact of climate change.

At year-end the Group reported gross loans and

advances to customers subject to expected credit

losses of £13,948 million (2021: £11,968 million);

expected credit losses on loans and advances to

customers at amortised cost of £130 million (2021:

£164 million); and expected credit loss impairment

charges of £25 million (2021: £71 million).

Given the subjective nature of the calculation

of Expected Credit Loss (‘‘ECL’’) there is a

heightened risk that the provisions could be

misstated.

We focused on the following:

•Staging/assessment of significant increase in

credit risk: Allocation of assets recognised in

stages 1, 2 and 3, including the triggers for an

asset moving between stages;

•Multiple economic scenarios: The

appropriateness of the economic scenarios

determined by management, the probability

weights assigned to each and the inputs and

assumptions used to estimate their impact;

•ECL models: The assumptions used in the

models to calculate ECL, including:

–the accounting interpretations, modelling

assumptions and data used in the Probability

of Default (‘‘PD’’), Loss Given Default (‘‘LGD’’)

and Exposure at Default (‘‘EAD’’) models;

–Key model assumptions and techniques,

including in-model adjustments.

•Post model adjustments: Adequacy and

completeness of post model adjustments,

including those in relation to the effect of

COVID-19 and macro factors relating to the

Russian invasion of Ukraine;

•Individually assessed provisions: Individually

assessed provisions where the measurement of

the provision is dependent on the valuation of

collateral, estimates of exit value, timing of cash

flows, the recovery strategies and discount

rates.

The level of risk has remained consistent with the

prior year.

To address the risks we performed the following key procedures, amongst

others:

Staging/assessment of significant increase in credit risk

We assessed the design and tested the operating effectiveness of key

controls focusing on the following:

•assessment and approval of a significant increase or reduction in credit

risk and monitoring of asset in each stage;

•assessment of manual overrides to staging outcomes; and

•data accuracy and completeness.

We recalculated the assets in stages 1, 2 and 3 to assess if they were

allocated to the appropriate stage and performed sensitivity analysis to

assess the impact of different criteria on the ECL.

Multiple economic scenarios

We assessed the design and tested the operating effectiveness of key

controls focusing on the following:

•generation and approval of the base case scenario, the methodology

and output of alternative scenarios, including the probability weights

assigned;

•production and approval of models used to calculate the ECL impact

of the scenarios; and

•the governance processes that the Group have put in place to review

and approve the economic scenarios. As part of this assessment we

attended the Capital Committee where the economic scenarios were

approved.

We involved EY economists to assist us to assess the base case and

alternative scenarios generated, including the probability weights applied

to each scenario. This included independent analysis on management’s

economic forecasts, which incorporated the use of third-party data. This

assessment included developments related to COVID-19 and the Russian

invasion of Ukraine at 31 March 2022.

We involved our modelling specialists to assess the correlation of the

forecast macroeconomic factors to the ECL and to test the translation

of the macroeconomic factors to the ECL.

ECL models

We assessed the design and tested the operating effectiveness of key

controls, focusing on model governance, including the design, build,

testing, review, and approval of relevant models. As part of this we

assessed the accounting interpretations made for compliance with IFRS 9.

We involved modelling specialists to test assumptions used in the in-

scope ECL models including the in-model adjustments.

This included performing an assessment of:

•the model design documentation against accepted industry principles;

•the appropriateness of the methodology, considering alternative

techniques including the in-model adjustments; and

•the programming code to review its consistency with the design

documentation.

We also tested a sample of the reporting date data used in the models by

tracing back to the source systems.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

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171

Risk

Our response to the risk

Adequacy of the allowance for expected credit losses on loans and advances to customers (continued)

Post model adjustments

We obtained an understanding of the model limitations to evaluate the

completeness and appropriateness of the related adjustments. We also

independently recalculated these adjustments.

We assessed the governance processes that the Group has put in place

to review and approve the post model adjustments.

For the COVID-19 and Management overlays, we assessed the adjustment

made by management to reflect the impact from COVID-19 and the

Russian invasion of Ukraine by considering the data judgements,

methodology and sensitivity analysis of these adjustments with our

modelling specialists.

Individually assessed provisions

We selected a sample of loans to recalculate the ECL with the

involvement of our valuation specialists, where appropriate. Our sample

considered high-risk sectors including retail, hotel and leisure properties,

and transport including aviation. For each sample selected we formed an

independent view of collateral or exit values, cash flow assumptions and

exit strategies.

We also considered management’s potential alternative scenarios and the

probability weights assigned. We assessed the discount rate used, re-

performed the discounted cash flow calculations and compared our

measurement outcomes to those prepared by management, investigating

any differences arising.

Disclosures

We evaluated the adequacy of disclosures in the financial statements

including the assumptions and sensitivities disclosed. We tested the data

and calculations supporting the disclosures.

Overall stand-back assessment

We performed a stand-back assessment of the ECL provision and

coverage at an overall level and by stage to determine if provision levels

were reasonable by considering the overall credit quality of the Group’s

portfolios, risk profile, and the impacts of the COVID-19 pandemic, climate

change, from the cost-of-living crisis and geopolitical factors. We

performed peer benchmarking where available to assess overall staging

and provision coverage levels.

The audit work was performed centrally by the Group audit team supported by relevant component audit teams, as required.

We have performed audit work over 100% of the ECL.

Key observations communicated to the Audit Committee

Based on the testing performed we concluded that the ECL provision made by management is within a reasonable range of

outcomes and in compliance with IFRS 9.

We highlighted the following matters to the Audit Committee:

•Our stand-back assessment of the overall provision balance in light of the current economic environment and through peer

benchmarking analysis of key indicators, such as coverage ratios, indicated the provision recorded as at year end was

reasonable;

•Where the design of key controls was effective, we tested those key controls and concluded they had operated effectively.

We identified a limited number of design deficiencies that required us to perform compensating substantive procedures to

conclude that the account was not materially misstated;

•Our testing of models and model assumptions highlighted some design deficiencies resulting in judgemental differences that

led to both over and under provision; however, these did not result in a material impact on the financial statements;

•Overall, the in-model and post-model adjustments applied were reasonable and addressed model shortcomings identified;

and

•For individually assessed impairments and the COVID-19 and Management overlays, judgemental differences both

increasing and decreasing impairment levels were identified; however, none of these individually or in aggregate were

material to the financial statements.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

INDEPENDENT AUDITORS' REPORT TO THE MEMBER OF INVESTEC BANK PLC

CONTINUED

172

Risk

Our response to the risk

Valuation of fair value instruments with higher risk characteristics and associated income

Refer to the Audit Committee Report (page 134);

Accounting policies (page 198); and Note 14 of the

Consolidated Financial Statements (page 222).

As at 31 March 2022, the Group held financial

instruments assets of £4,651 million and liabilities

of £1,048 million (2021: assets £4,596 million and

liabilities £1,527 million). This included certain

level 2 and level 3 assets and liabilities with higher

risk characteristics whose values are dependent

upon unobservable inputs, where management’s

significant judgement is applied.

The valuation of those financial instruments with

higher risk characteristics can include significant

judgement and therefore the risk of inappropriate

revenue recognition through incorrect valuation as

outlined below.

The judgement in estimating the fair value of

these instruments can involve complex valuation

models or techniques, or significant fair value

adjustments. Both of which may be reliant on

inputs where there is limited market observability

or liquidity.

Management’s estimates which required

significant judgement included:

•Complex models – complex model-dependent

derivatives and debt securities, which include

structured equity derivatives with exotic

features;

•Valuation techniques – illiquid investments in,

and fair valued loans to, unquoted private

companies valued using different valuation

techniques (e.g. price-earnings multiples,

discounted cashflow, net asset valuations);

•Illiquid inputs – pricing inputs, calibrations and

discounts for illiquid instruments, which include

securities, unlisted equity investments and

profit shares, and fair valued loans referencing

the corporate, aviation and property sectors.

The level of risk has remained consistent with the

prior year.

We obtained an understanding of management’s processes and tested

the design and operating effectiveness of controls relating to financial

instrument valuation and related income statement measurement.

We performed a detailed examination of management’s valuation

methodologies and assessed the appropriateness and consistency of

model inputs, key assumptions, contractual obligations and exit values on

a sample basis. In addition, we assessed whether there were any

indicators of aggregate bias in financial instrument valuation pricing

sources and methodology assumptions.

We considered the impact of, and economic recovery from, the COVID-19

pandemic as well as the impact of the Russian invasion of Ukraine

throughout the procedures performed on the higher risk characteristic

financial instruments by challenging whether the valuation methodologies

and assumptions used remained appropriate. Throughout our audit

procedures, we considered the appropriateness of modelling changes in

relation to IBOR reform and impact of climate change on the valuation of

financial instruments.

Complex models

We involved valuation and modelling specialists where appropriate to

assist in testing complex model-dependent valuations for derivatives, fair

value loans and debt securities by performing independent revaluation,

on a sample basis, to assess the appropriateness of models and the

adequacy of assumptions and inputs used. We performed back-testing

analysis of recent trade activity to evaluate the drivers of significant

differences between book value and trade value and to assess the impact

on the fair value of similar instruments within the portfolio.

Valuation techniques

We performed procedures on key judgments made by management in the

calculation of fair value on illiquid unlisted investments, fair value loans

and profit sharing arrangements, including:

•assessing the suitability, applicability and completeness of the

comparable companies used in the calculation of the earnings multiples

in price-earnings multiple valuations, and obtained supporting evidence

and explanation for any adjustments made to the multiples;

•performing calculations to assess the appropriateness of discount rates

used in discounted cashflow valuations, with reference to relevant

industry and market data;

•assessing external valuation reports received by management, where

an external valuer has been engaged, and assessed their competence

and objectivity in valuations which reference a net asset valuation; and

•confirming the accuracy of information provided by management was

free from manipulation or amendment, including management accounts

and reporting, unaudited financial information, and market pricing

sources.

Illiquid inputs

We performed procedures on key judgments made by management on

inputs used in the valuation of equity investments, illiquid securities, fair

value corporate, aviation and property loans and unlisted investment

portfolios including:

•for equity investments and illiquid securities, independently re-pricing

instruments that had been valued using illiquid pricing inputs, using

alternative pricing sources where available, to evaluate management’s

valuation; and

•for the fair value corporate, aviation and property loans and unlisted

investment portfolios: we involved aircraft, real estate, and business

valuation specialists to independently assess the valuations of a sample

of positions undertaken by management. We derived a range of

acceptable fair values through our analysis including taking account

of other qualitative risk factors, such as company specific risk factors.

For all positions, we compared our determined ranges and estimates to

management’s fair values.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

INDEPENDENT AUDITORS' REPORT TO THE MEMBER OF INVESTEC BANK PLC

CONTINUED

173

Risk

Our response to the risk

Valuation of fair value instruments with higher risk characteristics and associated income (continued)

We performed full audit procedures over this risk area for two components, which covered 100% (2021: 100%) of the risk

amount.

Key observations communicated to the Audit Committee

We are satisfied that the assumptions used by management to reflect the fair value of financial instruments with higher risk

characteristics and the recognition of related income are reasonable and in accordance with IFRS. We highlighted the following

matters to the Audit Committee:

•Complex-model dependent valuations and techniques were appropriate based on the output of our independent re-

valuations, including the analysis of any trade activity during the year, peer benchmarking; sales and/or exits;

•The fair value estimates of higher risk characteristic financial instruments appropriately reflected pricing information available

at 31 March 2022.

Adequacy of the provision held relating to the investigation by the Office of the Public Prosecutor in Cologne and related

potential civil and tax claims

Refer to the Audit Committee Report (page 135 of

volume One); Accounting policies (page 197); and

Note 45 of the Consolidated Financial Statements

(page 262)

There are ongoing investigations into historical

German dividend tax arbitrage transactions where

the outcome is dependent on the resolution of the

investigation by the Office of the Public

Prosecutor in Cologne. Additional enquiries have

also been made, subsequent to year end, by the

German Federal Tax Office related to reclaims of

tax related to the dividend tax arbitrage

transactions.

Further, whilst the Group is not a claimant nor

a defendant to any civil claims in respect of

dividend arbitrage transactions, it cannot rule out

the possibility of civil claims by or against the

Group in the future.

Consequently, management made judgements

about the adequacy of provisions which are

subject to change in future periods as more

information becomes available. Management have

also assessed the need to disclose these matters

as contingent liabilities.

The level of risk has increased compared to the

prior year, as a result of the recent enquiries made

by the German Federal Tax Office.

We examined the latest court rulings and analysis performed by

management which set out the basis for the judgements in relation to

the historical German dividend tax arbitrage transactions and related

provision.

We also inspected the correspondence between the Group and its

external advisors, between the Group and Office of the Public Prosecutor

in Cologne, and between the Group and the German Federal Tax Office.

In addition, we obtained legal confirmations from, and spoke directly with,

the Group’s external legal counsels to confirm the current status of the

matters.

We have obtained and evaluated the minutes of internal committees

overseeing management’s response to the matters.

With the assistance of tax specialists, we have considered the matters in

dispute and compared with externally available information to challenge

management’s assessment.

We also evaluated the appropriateness of management’s accounting

treatment and disclosure in relation to the investigation by the Office

of the Public Prosecutor in Cologne, the German Federal Tax Office

enquiries, and the potential related civil claims.

We performed full scope audit procedures over this risk area in the component impacted by the risk.

Key observations communicated to the Audit Committee

Based on the information that is currently available we are satisfied with management’s assessment, calculation and

recognition of the provision in relation to the investigation by the Office of the Public Prosecutor in Cologne. Based on the

information currently available we are satisfied with management’s conclusions in relation to the German Federal Tax Office

enquiries and the potential related civil claims arising from the investigation by the office of the Public prosecutor in Cologne.

We are also satisfied with the adequacy of the disclosure presented in the financial statements for these matters.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

INDEPENDENT AUDITORS' REPORT TO THE MEMBER OF INVESTEC BANK PLC

CONTINUED

174

Risk

Our response to the risk

IT systems and controls impacting financial reporting

The IT environment is complex and pervasive to

the operations of the Group due to the large

volume of transactions processed in numerous

locations on a daily basis with extensive reliance

on automated controls. Appropriate IT controls are

required to ensure that applications process data

as expected and that changes are made in an

appropriate manner. As part of our audit we rely

upon the IT control environment, in particular in

relation to:

•User access management across application,

database and operating systems;

•Controls over changes to the IT environment,

including transformation that changes the IT

landscape;

•IT operational controls; and

•IT application or IT-dependent controls.

These controls contribute to mitigating the risk of

potential fraud or error in the financial accounting

and reporting records as a result of changes to IT

systems, applications or data.

While the group have implemented a series of

remediation programmes during the year to

address previously identified control deficiencies,

the risk of inappropriate access and unauthorised

changes to in-scope applications and production

environments remains.

The level of risk has remained consistent with the

prior year.

We evaluated the design and tested the operating effectiveness of IT

general controls in the access management and change management IT

processes for key applications, operating systems and databases that are

material to financial reporting. We tested the operating effectiveness of

key automated controls for in-scope business processes, including

automated calculations and, the completeness and accuracy of system

and data feeds.

Certain systems are outsourced to third party service providers. For these

systems, we tested IT general controls through evaluating the relevant

Service Organisation Controls reports (where available). This included

assessing the timing of the reporting, the controls tested by the service

auditor and whether they address relevant IT risks.

In response to control deficiencies identified during the year, where we

could not rely on compensating IT controls we performed substantive

testing procedures to address the resulting risk to the financial

statements. Where these IT substantive procedures were not possible, we

performed the following additional testing procedures to mitigate the risks

identified:

•we understood the nature of the deficiency and, where possible,

obtained further evidence to support the appropriateness of any

activities performed using the impacted IT application;

•tested downstream compensating business controls; and

•performed incremental substantive testing in relation to external

confirmations and key year-end reconciliations.

We have considered the impact of IT systems and controls impacting financial reporting throughout the audit.

Key observations communicated to the Audit Committee

We identified certain control deficiencies predominately in relation to user access controls and the segregation of IT duties in

the change management process. However, based on the initial and additional testing outlined above, we concluded that the

findings identified in relation to the IT control environment relevant to the financial statements did not give rise to a material

misstatement.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

INDEPENDENT AUDITORS' REPORT TO THE MEMBER OF INVESTEC BANK PLC

CONTINUED

175

Our application of materiality

We apply the concept of materiality in planning and performing

the audit, in evaluating the effect of identified misstatements

on the audit and in forming our audit opinion.

Materiality

The magnitude of an omission or misstatement that,

individually or in the aggregate, could reasonably be expected

to influence the economic decisions of the users of the

financial statements. Materiality provides a basis for

determining the nature and extent of our audit procedures.

We determined materiality for the Group to be £14.4 million

(2021: £9.7 million), which is 5% (2021: 5%) of operating profit

before impairment of goodwill and amortisation of acquired

intangibles and strategic actions (‘’operating profit’’)

(£287.6 million). We believe that operating profit provides us

with the most appropriate measure to reflect the performance

of the Group, as this is also the level at which management

considers the financial performance of the Group when

reporting externally in profit announcements and pre-close

meetings with market analysts and shareholders.

We determined materiality for the Parent Company to be

£9.7 million (2021: £8.8 million), which is 1% (2021: 1%) of

distributable equity. There has been no change in the basis

from the prior year.

Performance materiality

The application of materiality at the individual account or

balance level. It is set at an amount to reduce to an

appropriately low level the probability that the aggregate of

uncorrected and undetected misstatements exceeds

materiality.

On the basis of our risk assessments, together with our

assessment of the Group’s overall control environment, our

judgement was that performance materiality was 50% (2021:

50%) of our planning materiality, namely £7.2 million (2021:

£4.8 million). We have set performance materiality at this

percentage based on our understanding of the Group and past

experience with the audit.

Audit work at component locations for the purpose of

obtaining audit coverage over significant financial statement

accounts is undertaken based on a percentage of total

performance materiality. The performance materiality set for

each component is based on the relative scale and risk of the

component to the Group as a whole and our assessment of

the risk of misstatement at that component. In the current

year, the range of performance materiality allocated to

components was £1.4 million to £4.8 million (2021: £0.9 million

to £4.4 million).

Reporting threshold

An amount below which identified misstatements are

considered as being clearly trivial.

We agreed with the Audit Committee that we would report to

them all uncorrected audit differences in excess of £0.7 million

(2021: £0.5 million), which is set at 5% of planning materiality,

as well as differences below that threshold that, in our view,

warranted reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the

quantitative measures of materiality discussed above and in

light of other relevant qualitative considerations in forming our

opinion.

Other information

The other information comprises the information included in

the annual report including the Strategic Report (Operations

and Strategic Overview set out on pages 4 to 27 and Financial

Review set out on pages 32 to 45), Risk Management (set out

on pages 48 to 112), Corporate Governance (set out on pages

113 to 143), Remuneration Report (set out on pages 149 to

150), Directors’ Report (set out on pages 144 to 147),

Definitions (set out on page 292), Glossary (set out on page

253), Credit Ratings (set out on page 295) and Corporate

Information (set out on page 296), other than the financial

statements and our auditor’s report thereon. The directors are

responsible for the other information contained within the

annual report.

Our opinion on the financial statements does not cover the

other information and, except to the extent otherwise explicitly

stated in this report, we do not express any form of assurance

conclusion thereon.

Our responsibility is to read the other information and, in doing

so, consider whether the other information is materially

inconsistent with the financial statements or our knowledge

obtained in the course of the audit or otherwise appears to

be materially misstated. If we identify such material

inconsistencies or apparent material misstatements, we are

required to determine whether this gives rise to a material

misstatement in the financial statements themselves. If, based

on the work we have performed, we conclude that there is a

material misstatement of the other information, we are

required to report that fact.

We have nothing to report in this regard.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

INDEPENDENT AUDITORS' REPORT TO THE MEMBER OF INVESTEC BANK PLC

CONTINUED

176

Opinions on other matters prescribed by the

Companies Act 2006

In our opinion, based on the work undertaken in the course of

the audit:

•the information given in the Strategic Report and the

Directors’ Report for the financial year for which the financial

statements are prepared is consistent with the financial

statements; and

•the Strategic Report and Directors’ Report have been

prepared in accordance with applicable legal requirements.

Matters on which we are required to report by

exception

In the light of the knowledge and understanding of the Group

and the Parent Company and its environment obtained in the

course of the audit, we have not identified material

misstatements in the Strategic Report or the Directors’ Report.

We have nothing to report in respect of the following matters

in relation to which the Companies Act 2006 requires us to

report to you if, in our opinion:

•adequate accounting records have not been kept by the

Parent Company, or returns adequate for our audit have not

been received from branches not visited by us; or

•the Parent Company financial statements are not in

agreement with the accounting records and returns; or

•certain disclosures of directors’ remuneration specified by

law are not made; or

•we have not received all the information and explanations

we require for our audit

Corporate Governance Statement

We have reviewed the directors’ statement in relation to going

concern, longer-term viability and that part of the Corporate

Governance Statement relating to the Group and Parent

Company’s compliance with the provisions of the UK

Corporate Governance Code specified for our review by the

Listing Rules.

Based on the work undertaken as part of our audit, we have

concluded that each of the following elements of the

Corporate Governance Statement is materially consistent with

the financial statements or our knowledge obtained during the

audit:

•Directors’ statement with regards to the appropriateness of

adopting the going concern basis of accounting and any

material uncertainties identified;

•Directors’ explanation as to its assessment of the Group and

Parent Company’s prospects, the period this assessment

covers and why the period is appropriate;

•Directors’ statement on whether it has a reasonable

expectation that the Group will be able to continue in

operation and meets its liabilities;

•Directors’ statement on fair, balanced and understandable;

•Board’s confirmation that it has carried out a robust

assessment of the emerging and principal risks;

•The section of the annual report that describes the review

of effectiveness of risk management and internal control

systems; and;

•The section describing the work of the audit committee.

Responsibilities of directors

As explained more fully in the directors’ responsibilities

statement [set out on page 146], the directors are responsible

for the preparation of the financial statements and for being

satisfied that they give a true and fair view, and for such

internal control as the directors determine is necessary to

enable the preparation of financial statements that are free

from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are

responsible for assessing the Group and Parent Company’s

ability to continue as a going concern, disclosing, as

applicable, matters related to going concern and using the

going concern basis of accounting unless the directors either

intend to liquidate the Group or the Parent Company or to

cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the

financial statements

Our objectives are to obtain reasonable assurance about

whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to

issue an auditor’s report that includes our opinion. Reasonable

assurance is a high level of assurance, but is not a guarantee

that an audit conducted in accordance with ISAs (UK) will

always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they

could reasonably be expected to influence the economic

decisions of users taken on the basis of these financial

statements.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

INDEPENDENT AUDITORS' REPORT TO THE MEMBER OF INVESTEC BANK PLC

CONTINUED

177

Explanation as to what extent the audit was

considered capable of detecting irregularities,

including fraud

Irregularities, including fraud, are instances of non-compliance

with laws and regulations. We design procedures in line with

our responsibilities, outlined above, to detect irregularities,

including fraud. The risk of not detecting a material

misstatement due to fraud is higher than the risk of not

detecting one resulting from error, as fraud may involve

deliberate concealment by, for example, forgery or intentional

misrepresentations, or through collusion. The extent to which

our procedures are capable of detecting irregularities,

including fraud is detailed below.

However, the primary responsibility for the prevention and

detection of fraud rests with both those charged with

governance of the Group and management.

•We obtained an understanding of the legal and regulatory

frameworks that are applicable to the Group and determined

that the most significant are those that relate to the

reporting framework (UK-adopted IAS and IFRS), the

Companies Act 2006 and the UK Corporate Governance

Code, the FCA Listing Rules, regulations and supervisory

requirements of the PRA, FRC, FCA and other overseas

regulatory requirements, including but not limited to

regulations in markets such as Switzerland, Ireland,

Guernsey, Australia, India, Singapore, the United States of

America, and the relevant tax compliance regulations in the

jurisdictions in which the Group operates.

•We understood how Group and parent are complying with

these legal and regulatory frameworks by making enquiries

of management, internal audit, and those responsible for

legal and compliance matters. We also reviewed

correspondence between the Group and Parent Company

and UK regulatory bodies; reviewed minutes of the Board,

Audit Committee and Risk and Capital Committee; and

gained an understanding of the Group and Parent

Company’s approach to governance, demonstrated by the

Board’s approval of the Group and Parent Company’s

governance framework and the Board’s review of the

Group’s risk management framework and internal control

processes.

•For laws and regulations, we considered the extent of

compliance with those laws and regulations as part of our

procedures on the related financial statement items.

•Based on this understanding, we designed our audit

procedures to identify non-compliance with such laws and

regulations. Our procedures involved: making enquiry of

those charged with governance and senior management for

their awareness of any non-compliance of laws or

regulations, inquiring about the policies that have been

established to prevent non-compliance with laws and

regulations by officers and employees, inquiring about the

Group and Parent Company’s methods of enforcing and

monitoring compliance with such policies and inspecting

correspondence with the PRA and FCA.

•The Group and Parent Company operate in the banking

industry which is a highly regulated environment. As such

the Senior Statutory Auditor considered the experience and

expertise of the engagement team to ensure that the team

had the appropriate competence and capabilities, which

included the use of specialists where appropriate.

•We assessed the susceptibility of the Group’s financial

statements to material misstatement, including how fraud

might occur by considering the controls that the Group and

Parent Company has established to address risks identified

by the Group and Parent Company, or that otherwise seek

to prevent, deter, or detect fraud. We also considered

performance incentives and their potential to influence

management to manage earnings.

•Based on this understanding we designed our audit

procedures to identify non-compliance with such laws and

regulations identified above. Our procedures involved

inquiries of management, internal audit and those

responsible for legal and compliance matters; as well as

focused testing referred to in the Key Audit Matters section

above. In addition, we performed procedures to identify

significant items inappropriately held in suspense and tested

journal entries with a focus on manual journals and journals

indicating large or unusual transactions based on our

understanding of the business.

A further description of our responsibilities for the audit of the

financial statements is located on the Financial Reporting

Council’s website at https://www.frc.org.uk/

auditorsresponsibilities. This description forms part of our

auditor’s report.

Other matters we are required to address

•Following the recommendation from the audit committee we

were appointed by the by the Group on 8 November 1996 to

audit the financial statements for the year ending 31 March

1997 and subsequent financial periods.

•The period of total uninterrupted engagement including

previous renewals and reappointments is 26 years, covering

the years ending 31 March 1997 to 31 March 2022.

•The non-audit services prohibited by the FRC’s Ethical

Standard were not provided to the Group or the Parent

Company and we remain independent of the Group and the

Parent Company in conducting the audit.

•The audit opinion is consistent with the additional report to

the audit committee.

Use of our report

This report is made solely to the company’s member, as a

body, in accordance with Chapter 3 of Part 16 of the

Companies Act 2006. Our audit work has been undertaken so

that we might state to the company’s member those matters

we are required to state to them in an auditor’s report and for

no other purpose. To the fullest extent permitted by law, we

do not accept or assume responsibility to anyone other than

the Parent Company and the company’s member, for our audit

work, for this report, or for the opinions we have formed.

Chris Brouard (Senior statutory auditor)

for and on behalf of Ernst & Young LLP, Statutory Auditor

London

21 June 2022

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

INDEPENDENT AUDITORS' REPORT TO THE MEMBER OF INVESTEC BANK PLC

CONTINUED

178

For the year to 31 March

2022

2021

£’000

Notes

Interest income

719 538

702 126

Interest income calculated using effective interest method

619 498

585 399

Other interest income

100 040

116 727

Interest expense

(223 230)

(288 035)

Net interest income

496 308

414 091

Fee and commission income

508 929

499 671

Fee and commission expense

(14 697)

(13 201)

Investment income

10 579

23 820

Share of post-taxation profit of associates and joint venture holdings

1 988

1 768

Trading income/(loss) arising from

– customer flow

60 372

(11 025)

– balance sheet management and other trading activities

(1 305)

11 206

Other operating income

11 158

10 002

Total operating income before expected credit loss impairment charges

1 073 332

936 332

Expected credit loss impairment charges

(25 363)

(71 134)

Operating income

1 047 969

865 198

Operating costs

(760 286)

(757 758)

Operating profit before goodwill, acquired intangibles and strategic actions

287 683

107 440

Impairment of goodwill

—

(8 787)

Amortisation of acquired intangibles

(12 936)

(12 851)

Closure and rundown of the Hong Kong direct investments business

(1 203)

7 387

Profit before taxation

273 544

93 189

Taxation on operating profit before goodwill, acquired intangibles and strategic actions

(42 174)

(31 270)

Taxation on goodwill, acquired intangibles and strategic actions

1 511

1 029

Profit after taxation

232 881

62 948

Loss attributable to non-controlling interests

—

861

Earnings attributable to shareholder

232 881

63 809

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

CONSOLIDATED INCOME STATEMENT

179

For the year to 31 March

2022

2021

£’000

Notes

Profit after taxation

232 881

62 948

Other comprehensive income/(loss):

Items that may be reclassified to the income statement:

(Gains)/losses on realisation of debt instruments at FVOCI recycled through

the income statement*

(307)

821

Fair value movements on debt instruments at FVOCI taken directly to other

comprehensive income*

(2 276)

(228)

Foreign currency adjustments on translating foreign operations

5 401

(3 771)

Effect of rate change on deferred taxation relating to adjustment for IFRS 9

617

380

Items that will not be reclassified to the income statement:

Gains attributable to own credit risk*

11 059

Movement in post-retirement benefit liabilities

(39)

Total comprehensive income

247 415

60 173

Total comprehensive loss attributable to non-controlling interests

—

(861)

Total comprehensive income attributable to ordinary shareholder

230 540

44 159

Total comprehensive income attributable to perpetual preferred securities

and Additional Tier 1 securities

16 875

Total comprehensive income

247 415

60 173

*Net of £4.2 million tax credit (31 March 2021: £0.2 million tax credit), except for the impact of rate changes on deferred tax as shown separately above.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

180

Group

At 31 March

2022

2021

£’000

Notes

Assets

Cash and balances at central banks

5 379 994

3 043 034

Loans and advances to banks

1 467 039

1 383 602

Reverse repurchase agreements and cash collateral on securities borrowed

1 447 473

2 065 232

Sovereign debt securities

1 165 777

1 108 253

Bank debt securities

61 714

48 044

Other debt securities

437 649

708 845

Derivative financial instruments

717 457

773 334

Securities arising from trading activities

163 165

281 645

Investment portfolio

333 221

350 941

Loans and advances to customers

14 426 475

12 316 313

Other loans and advances

147 025

162 456

Other securitised assets

93 087

107 259

Interests in associated undertakings and joint venture holdings

11 444

4 213

Deferred taxation assets

109 542

109 849

Current taxation assets

15 727

42 620

Other assets

1 161 549

1 395 915

Property and equipment

155 055

185 502

Goodwill

244 072

Software

7 066

7 791

Other acquired intangible assets

44 145

56 618

27 588 676

24 395 538

Liabilities

Deposits by banks

2 026 573

1 352 279

Derivative financial instruments

863 295

916 352

Other trading liabilities

42 944

49 055

Repurchase agreements and cash collateral on securities lent

154 828

157 357

Customer accounts (deposits)

18 616 233

16 240 634

Debt securities in issue

1 120 841

1 193 378

Liabilities arising on securitisation of other assets

95 885

108 281

Current taxation liabilities

2 082

37 287

Deferred taxation liabilities

—

20 652

Other liabilities

1 360 071

1 183 862

24 282 752

21 259 137

Subordinated liabilities

758 739

771 481

25 041 491

22 030 618

Equity

Ordinary share capital

1 280 550

Share premium

199 538

Capital reserve

153 177

Other reserves

1 667

(12 827)

Retained income

661 420

494 092

Shareholder’s equity excluding non-controlling interests

2 296 352

2 114 530

Additional Tier 1 securities in issue

250 000

Non-controlling interests in partially held subsidiaries

833

390

Total equity

2 547 185

2 364 920

Total liabilities and equity

27 588 676

24 395 538

Ruth Leas

Chief Executive

21 June 2022

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

BALANCE SHEETS

181

Company

At 31 March

2022

2021

£’000

Notes

Assets

Cash and balances at central banks

5 326 533

2 993 119

Loans and advances to banks

535 738

454 596

Reverse repurchase agreements and cash collateral on securities borrowed

1 447 473

2 065 232

Sovereign debt securities

323 494

542 016

Bank debt securities

57 844

43 781

Other debt securities

1 144 024

1 401 707

Derivative financial instruments

672 124

742 869

Securities arising from trading activities

163 165

278 074

Investment portfolio

70 229

67 948

Loans and advances to customers

10 930 443

9 360 090

Other loans and advances

3 027 162

2 813 729

Other securitised assets

5 083

5 774

Interests in associated undertakings and joint venture holdings

2 167

584

Deferred taxation assets

70 214

70 858

Current taxation assets

28 997

39 236

Other assets

615 033

702 351

Property and equipment

70 514

84 837

Software

545

Investment in subsidiaries

827 599

845 839

25 317 870

22 513 185

Liabilities

Deposits by banks

2 214 555

1 451 745

Derivative financial instruments

828 405

885 793

Other trading liabilities

42 944

49 055

Repurchase agreements and cash collateral on securities lent

197 903

157 357

Customer accounts (deposits)

17 290 014

15 493 774

Debt securities in issue

1 119 658

1 163 050

Current taxation liabilities

—

140

Deferred taxation liabilities

—

6 288

Other liabilities

676 409

528 547

22 369 888

19 735 749

Subordinated liabilities

758 739

771 481

23 128 627

20 507 230

Equity

Ordinary share capital

1 280 550

Share premium

199 538

Capital reserve

153 177

Other reserves

(2 901)

(12 915)

Retained income

308 879

135 605

Shareholder’s equity excluding non-controlling interests

1 939 243

1 755 955

Additional Tier 1 securities in issue

250 000

Total equity

2 189 243

2 005 955

Total liabilities and equity

25 317 870

22 513 185

The Company's profit for the year, determined in accordance with the Companies Act 2006, was £240.1 million

(2021: £70.2 million).

Ruth Leas

Chief Executive

21 June 2022

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

BALANCE SHEETS

CONTINUED

182

Group

Company

For the year to 31 March

2022

2021

2022

2021

£’000

Notes

Profit before taxation adjusted for non-cash items

350 162

193 584

178 254

72 775

Taxation paid

(53 294)

(52 385)

(17 732)

(37 737)

Dividends received from subsidiaries*

—

147 848

98 537

(Increase)/decrease in operating assets

(823 132)

472 934

(424 376)

24 318

Increase/(decrease) in operating liabilities

3 076 202

(167 411)

2 608 741

116 562

Net cash inflow from operating activities

2 549 938

446 722

2 492 735

274 455

Cash flow on acquisition of Group operations and

subsidiaries

—

(21 984)

(50)

Cash flow on disposal of Group operations and subsidiaries

14 274

20 388

3 016

—

Derecognition of cash on disposal of subsidiaries

(4 152)

(7 799)

—

Cash flow on net disposal of non-controlling interest

443

7 239

—

Cash flow on net acquisition of associates and

joint venture holdings

(8 780)

—

Cash flow on acquisition of property, equipment, software

and other intangible assets

(4 931)

(7 236)

(1 573)

(481)

Cash flow on disposal of property, equipment, software and

other intangible assets

4 273

318

(677)

439

Return of capital by subsidiary

—

24 280

—

Net cash inflow from investing activities

1 127

12 910

3 062

(92)

Dividends paid to ordinary shareholder

(56 500)

(11 000)

(56 500)

(11 000)

Dividends paid to other equity holders

(16 875)

Proceeds from issue of subordinated debt

347 536

—

347 536

—

Redemption of subordinated debt

(307 962)

—

(307 962)

—

Lease liabilities paid

(43 253)

(53 454)

(8 375)

(10 071)

Net cash outflow from financing activities

(77 054)

(81 329)

(42 176)

(37 946)

Effects of exchange rate changes on cash

and cash equivalents

(607)

5 872

(279)

1 606

Net increase in cash and cash equivalents

2 473 404

384 175

2 453 342

238 023

Cash and cash equivalents at the beginning of the year

4 367 635

3 983 460

3 402 935

3 164 912

Cash and cash equivalents at the end of the year

6 841 039

4 367 635

5 856 277

3 402 935

Cash and cash equivalents is defined as including:

Cash and balances at central banks

5 379 994

3 043 034

5 326 533

2 993 119

On demand loans and advances to banks

1 461 045

1 324 601

529 744

409 816

Cash and cash equivalents at the end of the year

6 841 039

4 367 635

5 856 277

3 402 935

*In the Company, dividends from investment in subsidiaries have been separately shown as a cash flow from operating activities for the current and prior

year. It was previously presented in the line operating profit adjusted for non-cash items and other required adjustments.

Cash and cash equivalents have a maturity profile of less than three months. Loans and advances to banks with a maturity

profile of greater than three months are £6.0 million (31 March 2021: £59.0 million) for Group. Company £6.0 million (31 March

2021: £44.8 million).

The Group is required to maintain reserve deposits with central banks and other regulatory authorities and these amounted to

£43.2 million (31 March 2021: £35.9 million). These deposits are not available to finance the Group's day-to-day operations.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

CASH FLOW STATEMENTS

183

£’000

Ordinary

share capital

premium

Capital

reserve

account

Group

At 1 April 2020

1 280 550

199 538

153 177

Movement in reserves 1 April 2020 – 31 March 2021

Profit after taxation

—

Effect of rate change on deferred taxation relating to adjustment for IFRS 9

—

Losses on realisation of debt instruments at FVOCI recycled through the income statement

—

Fair value movements on debt instruments at FVOCI taken directly to other

comprehensive income

—

Foreign currency adjustments on translating foreign operations

—

Gains attributable to own credit risk

—

Movement in post-retirement benefit liabilities

—

Total comprehensive income for the year

—

Share-based payments adjustments

—

Employee benefit liability recognised

—

Dividends paid to ordinary shareholder

—

Dividends declared to Additional Tier 1 security holders

—

Dividends paid to Additional Tier 1 security holders

—

Transfer from foreign currency reserve

—

Net equity impact of non-controlling interest movements

—

At 31 March 2021

1 280 550

199 538

153 177

Movement in reserves 1 April 2021 – 31 March 2022

Profit after taxation

—

Effect of rate change on deferred taxation relating to adjustment for IFRS 9

—

Gains on realisation of debt instruments at FVOCI recycled through the income statement

—

Fair value movements on debt instruments at FVOCI taken directly to other

comprehensive income

—

Foreign currency adjustments on translating foreign operations

—

Gains attributable to own credit risk

—

Movement in post-retirement benefit liabilities

—

Total comprehensive income for the year

—

Share-based payments adjustments

—

Employee benefit liability recognised

—

Dividends paid to ordinary shareholder

—

Dividends declared to Additional Tier 1 security holders

—

Dividends paid to Additional Tier 1 security holders

—

Net equity impact of non-controlling interest movements

—

At 31 March 2022

1 280 550

199 538

153 177

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

STATEMENT OF CHANGES IN EQUITY

184

Other reserves

Fair value

reserve

Foreign

currency

reserves

Own credit

reserve

Retained

income

Shareholder’s

equity

excluding

non-

controlling

interests

Additional

Tier 1

securities in

issue

Non-

controlling

interests

Total equity

2 469

(1 356)

(12 184)

455 609

2 077 803

250 000

3 369

2 331 172

—

63 809

—

(861)

62 948

(19)

—

399

—

380

—

380

821

—

821

—

821

(228)

—

(228)

—

(228)

—

(3 771)

—

(3 771)

—

(3 771)

—

(39)

—

(39)

574

(3 771)

461

63 770

61 034

—

(861)

60 173

—

107

—

107

—

3 729

—

3 729

—

(11 000)

—

(11 000)

—

(16 875)

16 875

—

(16 875)

—

(16 875)

—

980

—

(980)

—

(268)

—

(2 118)

(2 386)

3 043

(4 147)

(11 723)

494 092

2 114 530

250 000

390

2 364 920

—

232 881

—

232 881

(47)

—

664

—

617

—

617

(307)

—

(307)

—

(307)

(2 276)

—

(2 276)

—

(2 276)

—

5 401

—

5 401

—

5 401

—

11 059

—

11 059

—

11 059

—

(2 630)

5 401

11 723

232 921

247 415

—

247 415

—

3 637

—

3 637

—

4 145

—

4 145

—

(56 500)

—

(56 500)

—

(16 875)

16 875

—

(16 875)

—

(16 875)

—

443

413

1 254

—

661 420

2 296 352

250 000

833

2 547 185

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

STATEMENT OF CHANGES IN EQUITY

CONTINUED

185

£’000

Ordinary

share capital

premium

Capital

reserve

account

Company

At 1 April 2020

1 280 550

199 538

153 177

Movement in reserves 1 April 2020 – 31 March 2021

Profit after taxation

—

Effect of rate change on deferred taxation relating to adjustment for IFRS 9

—

Losses on realisation of debt instruments at FVOCI recycled through the income statement

—

Fair value movements on debt instruments at FVOCI taken directly to other

comprehensive income

—

Foreign currency adjustments on translating foreign operations

—

Gains attributable to own credit risk

Total comprehensive income for the year

—

Share-based payments adjustments

—

Employee benefit liability recognised

—

Dividends paid to ordinary shareholder

—

Dividends declared to Additional Tier 1 security holders

—

Dividends paid to Additional Tier 1 security holders

—

At 31 March 2021

1 280 550

199 538

153 177

Movement in reserves 1 April 2021 – 31 March 2022

Profit after taxation

—

Effect of rate change on deferred taxation relating to adjustment for IFRS 9

—

Gains on realisation of debt instruments at FVOCI recycled through the income statement

—

Fair value movements on debt instruments at FVOCI taken directly to other

comprehensive income

—

Foreign currency adjustments on translating foreign operations

—

Gains attributable to own credit risk

—

Total comprehensive income for the year

—

Share-based payments adjustments

—

Employee benefit liability recognised

—

Dividends paid to ordinary shareholder

—

Dividends declared to Additional Tier 1 security holders

—

Dividends paid to Additional Tier 1 security holders

—

At 31 March 2022

1 280 550

199 538

153 177

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

STATEMENT OF CHANGES IN EQUITY

CONTINUED

186

Other reserves

Fair value

reserve

Foreign

currency

reserves

Own credit

reserve

Retained

income

Shareholder’s

equity

excluding

non-

controlling

interests

Additional

Tier 1

securities in

issue

Total equity

1 913

(4 347)

(12 184)

90 468

1 709 115

250 000

1 959 115

—

70 216

—

70 216

(19)

399

—

380

—

380

818

—

818

—

818

777

—

777

—

777

—

(334)

—

(334)

—

(334)

—

1 576

(334)

461

70 216

71 919

—

71 919

—

107

—

107

—

2 689

—

2 689

—

(11 000)

—

(11 000)

—

(16 875)

16 875

—

(16 875)

3 489

(4 681)

(11 723)

135 605

1 755 955

250 000

2 005 955

—

240 131

—

240 131

(47)

664

—

617

—

617

(329)

—

(329)

—

(329)

(1 365)

—

(1 365)

—

(1 365)

—

11 059

—

11 059

—

11 059

(1 741)

11 723

240 131

250 145

—

250 145

—

3 477

—

3 477

—

3 041

—

3 041

—

(56 500)

—

(56 500)

—

(16 875)

16 875

—

(16 875)

1 748

(4 649)

—

308 879

1 939 243

250 000

2 189 243

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

STATEMENT OF CHANGES IN EQUITY

CONTINUED

187

Basis of presentation

These Group and Company annual financial statements have

been prepared in accordance with UK adopted international

accounting standards and with International Financial

Reporting Standards (IFRS) adopted pursuant to Regulation

(EC) No. 1606/2002 as it applies in the European Union (EU).

The Group and Company annual financial statements have

been prepared on a historical cost basis, except for debt

instruments at FVOCI, derivative financial instruments,

financial assets and financial liabilities held at fair value

through profit or loss or subject to hedge accounting.

As stated on page 144, the directors consider that it is

appropriate to continue to adopt the going concern basis

in preparing the financial statements.

The accounting policies adopted by the Group are consistent

with the prior year.

Presentation of information

Disclosure under IFRS 7 Financial Instruments: Disclosures

and IAS 1 Presentation of Financial Statements: relating to

the nature and extent of risks have been included in sections

marked as audited in the risk management report on pages

48 to 112.

Certain disclosures required under IAS 24 Related Party

Disclosures have been included in the section marked as

audited in the remuneration report on pages 149 to 165.

Basis of consolidation

All subsidiaries or structured entities are consolidated

when the Group controls an investee. The Group controls

an investee if it is exposed to, or has rights to variable returns

from its involvement with the investee and has the ability to

affect those returns through its power over the investee.

The financial results of subsidiaries are included in the

consolidated annual financial statements of the Group from

the date on which control is obtained until the date the

Group can no longer demonstrate control.

The Group performs a reassessment of control whenever

there is a change in the substance of the relationship between

the Group and an investee. A change in the ownership interest

of a subsidiary, without a loss of control, is accounted for as

an equity transaction.

If the Group loses control over a subsidiary, it derecognises

the related assets (including goodwill), liabilities, non-

controlling interest and other components of equity, while

any resultant gain or loss is recognised in profit or loss.

Any investment retained is recognised at fair value.

The Group also holds investments, for example, in private

equity investments, which give rise to significant, but not

majority, voting rights. Assessing these voting rights and

whether the Group controls these entities requires judgement

that affects the date at which subsidiaries are consolidated

or deconsolidated.

Entities, other than subsidiary undertakings, in which

the Group exercises significant influence or joint control over

operating and financial policies, are treated as interests in

associated undertakings and joint venture holdings. Interests

in associated undertakings and joint venture holdings are

accounted for using the equity method from the date that

significant influence commences until the date that significant

influence ceases. In circumstances where interests in

associated undertakings and joint venture holdings arise in

which the Group has no strategic intention, these investments

are classified as ‘venture capital’ holdings and are designated

as held at fair value through profit or loss.

For equity accounted associates and joint venture holdings,

the consolidated annual financial statements include the

attributable share of the results and reserves of associated

undertakings and joint venture holdings. The Group’s interests

in associated undertakings and joint venture holdings are

included in the consolidated balance sheet at cost plus the

post-acquisition changes in the Group’s share of the net

assets of the associated undertakings and joint venture

holdings.

The consolidated balance sheet reflects the associated

undertakings and joint venture holdings net of accumulated

impairment losses.

Investments in subsidiaries and interests in associated

undertakings and joint venture holdings are carried at their

cost less any accumulated impairment in the Company

financial statements.

All intergroup balances, transactions and unrealised gains

or losses within the Group that do not reflect an impairment

to the asset are eliminated in full regarding subsidiaries and

to the extent of the interest in associated undertakings

and joint venture holdings.

Segmental reporting

An operating segment is a component of the Group that

engages in business activities from which it may earn

revenues and incur expenses, including revenues and

expenses that relate to transactions with any of the Group’s

other components, where operating results are reviewed

regularly by chief operating decision-makers who are

considered to be executive members of the Board and for

which discrete financial information is available.

The Group’s segmental reporting is presented in the form

of a business analysis. The business analysis is presented in

terms of the Group’s three principal business divisions namely,

Wealth & Investment, Private Banking and Corporate,

Investment Banking, and Other.

For further detail on the Group's segmental basis, refer to the

divisional review section of the integrated annual report.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

ACCOUNTING POLICIES

188

Business combinations and goodwill

Business combinations are accounted for using the acquisition

method. The cost of an acquisition is measured as the

aggregate of the consideration transferred, at the acquisition

date fair value and the amount of any prior non-controlling

interest in the acquiree. For each business combination, the

Group measures the non-controlling interest in the acquiree

either at fair value or at the proportionate share of the

acquiree’s identifiable net assets. Acquisition costs incurred

are expensed immediately in the income statement.

When the Group acquires a business, it assesses the financial

assets and liabilities assumed for appropriate classification

and the designation in accordance with the contractual terms,

economic circumstances and pertinent conditions at the

acquisition date. This includes the separation of embedded

derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the

acquisition date fair value of the Group’s previously held equity

interest in the acquiree is remeasured to fair value at each

acquisition date through the income statement.

Any contingent consideration to be transferred by the Group

will be recognised at fair value at the acquisition date.

Subsequent changes to the fair value of the contingent

consideration, which is deemed to be an asset or liability, will

be recognised in accordance with IFRS 9, either in the income

statement or as a change to other comprehensive income. If

the contingent consideration is classified as equity, it will not

be remeasured until it is finally settled within equity.

Goodwill is initially measured at cost, being the excess of the

aggregate of the consideration transferred and the amount

recognised for non-controlling interest over the net identifiable

assets acquired and liabilities assumed. If this consideration

and amount recognised for non-controlling interest is less

than the fair values of the identifiable net assets acquired, the

discount on acquisition is recognised directly in the income

statement as a gain in the year of acquisition.

After initial recognition, goodwill is measured at cost less

any accumulated impairment losses. The Group tests goodwill

acquired in a business combination for impairment annually,

irrespective of whether an indication of impairment exists

and in accordance with IAS 36.

For the purpose of impairment testing, goodwill acquired in a

business combination is, from the acquisition date, allocated

to each of the Group’s cash-generating units that are

expected to benefit from the combination.

Where goodwill forms part of a cash-generating unit, and part

of the operation within that unit is disposed of, the goodwill

associated with the operation disposed of is included in the

carrying amount of the operation when determining the gain

or loss on disposal of the operation.

Goodwill disposed of in these circumstances is measured

based on the relative values of the operation disposed of

and the portion of the cash-generating units retained.

Share-based payments to employees

The Group engages in equity-settled share-based payments

in respect of services received from employees. These are

the shares of the Company's parent, Investec plc, and are

accounted for as equity-settled share-based payments as

at Investec plc level but, in accordance with IFRS 2, as cash-

settled share-based payment transactions by subsidiaries

of Investec plc.

The fair value of the services received in respect of equity-

settled share-based payments is determined by reference

to the fair value of the shares or share options on the date

of grant to the employee. The cost of the share-based

payment, together with a corresponding increase in equity,

is recognised in the income statement over the period the

service conditions of the grant are met, with the amount

changing according to the number of awards expected to

vest. The cumulative expense recognised for equity-settled

transactions at each reporting date until the vesting date

reflects the extent to which the vesting period has expired and

the Group’s best estimate of the number of equity instruments

that will ultimately vest.

Fair value measurements are based on option pricing models,

taking into account the risk-free interest rate, volatility of the

underlying equity instrument, expected dividends and share

prices at grant date.

Where the terms of an equity-settled award are modified,

the minimum expense recognised in staff costs is the expense

as if the terms had not been modified. An additional expense

is recognised for any modification which increases the total

fair value of the share-based payment arrangement, or is

otherwise beneficial to the employee as measured at the date

of modification.

Employee benefits

The Group operates various defined contribution schemes.

In respect of the defined contribution schemes, all employer

contributions are charged to the income statement as

incurred, in accordance with the rules of the scheme, and

included under staff costs.

Short-term employee benefits are expensed as the related

service is provided. A liability is recognised for the amount

expected to be paid if the Group has a present legal or

constructive obligation to pay this amount as a result of past

service provided by the employee and the obligation can be

estimated reliably.

The long-term employment benefits liability relates to the

obligation of the Investec Group to deliver ordinary shares of

Ninety One plc and Ninety One Limited to employees over a

predetermined vesting period. The fair value of this liability is

calculated by applying the Black-Scholes option pricing model

at each reporting date. The changes in fair value will be

recognised as an employee benefit expense. The liability is

included in other liabilities on the balance sheet.

The Group has no liabilities for other post-retirement benefits.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

189

Foreign currency transactions and foreign

operations

The presentation currency of the Group is Pound Sterling,

being the functional currency of Investec Bank plc.

Foreign operations are subsidiaries, interests in associated

undertakings and joint venture holdings or branches of the

Group, the activities of which are based in a functional

currency other than that of the reporting entity. The functional

currency of Group entities is determined based on the primary

economic environment in which the entity operates.

Foreign currency transactions are translated into the

functional currency of the entity in which the transactions

arise based on rates of exchange ruling at the date of the

transactions.

At each balance sheet date foreign currency items are

translated as follows:

•Monetary items (other than monetary items that form part

of the net investment in a foreign operation) are translated

using closing rates, with gains or losses recognised in the

income statement

•Exchange differences arising on monetary items that form

part of the net investment in a foreign operation are

determined using closing rates and recognised as a

separate component of equity (foreign currency translation

reserve) upon consolidation and is reclassified to the

income statement upon disposal of the net investment

•Non-monetary items that are measured at historical cost

are translated using the exchange rates ruling at the date

of the transaction.

On consolidation, the results and financial position of foreign

operations are translated into the presentation currency

of the Group, as follows:

▪Assets and liabilities for each balance sheet presented

are translated at the closing rate at the date of

the balance sheet

▪Income and expense items are translated at exchange rates

ruling at the date of the transaction

▪All resulting exchange differences are recognised in other

comprehensive income (foreign currency translation

reserve), which is recognised in the income statement

on disposal of the foreign operation

▪Cash flow items are translated at the exchange rates ruling

at the date of the transactions.

On loss of control or disposal of a foreign operation, the

cumulative amount of the exchange differences relating to

that foreign operation recognised in other comprehensive

income is reclassified from equity to profit or loss and included

in the profit on loss of control.

Revenue recognition

Revenue consists of interest income, fee and commission

income, investment income, trading income arising from

customer flow, trading income arising from balance sheet

management and other trading activities, share of post-

taxation profit of associates and joint venture holdings and

other operating income.

Interest income on debt instruments at amortised cost or

FVOCI is recognised in the income statement using the

effective interest method. Calculation of the effective interest

rate takes into account fees payable or receivable that are an

integral part of the instruments’ yield, premiums or discounts

on acquisition or issue, early redemption fees and transaction

costs.

The effective interest method is based on the estimated life

of the underlying instrument and, where this estimate is not

readily available, the contractual life. Interest on instruments

at fair value through profit or loss is recognised based on

the contractual rates.

Fee and commission income includes revenue from contracts

with customers earned from providing advisory services as

well as portfolio management.

Revenue from contracts with customers is recognised in

accordance with five steps to: identify the contract; identify

the performance obligations; determine the transaction price;

allocate the transaction price to the performance obligations;

and recognise revenue when the performance obligations

are satisfied.

Investment advisory and management fees are earned over

the period in which the services are provided. Performance

fees can be variable and recognition is constrained until such

time as it is highly probable that a significant reversal in the

amount of cumulative revenue recognised will not occur and

the services related to the transactions have been completed

under the terms of the contract.

Investment income includes income, other than margin from

securities held for the purpose of generating interest yield,

dividends and capital appreciation.

Customer flow trading income includes income from trading

activities arising from making and facilitating client activities.

Trading income arising from balance sheet management and

other trading activities consists of proprietary trading income

and other gains or losses arising from balance sheet

management.

Trading profit includes the unrealised profit on trading

portfolios, which are marked-to-market daily. Equity

investments received in lieu of corporate finance fees are

included in investment portfolio and valued accordingly.

Dividend income is recognised when the Group’s right to

receive payment is established and the cash is received.

Included in other operating income is incidental rental income,

gains on realisation of properties, operating lease income,

income from interests in associated undertakings and revenue

from other investments. Operating costs associated with

these investments are included in operating costs in the

income statement.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

190

Fair value measurement

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 Group has access at that date. The fair value of an asset

or a liability reflects its non-performance risk.

When available, the Group 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 Group

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.

If an asset or a liability measured at fair value has a bid price

and an ask price, then the Group measures assets and long

positions at a bid price and liabilities and short positions

at an ask price.

The Group classifies disclosed fair values according to a

hierarchy that reflects the significance of observable market

inputs.

A transfer is made between the hierarchy levels when the

inputs have changed or there has been a change in the

valuation method. Transfers are deemed to occur at the end

of each semi-annual reporting period.

Financial instruments

Financial instruments are initially recognised at their fair value.

For financial assets or financial liabilities not held at fair value

through profit or loss, transaction costs that are directly

attributable to the acquisition or issue of the financial assets

or financial liabilities are included in the initial measurement. All

other transaction costs are recorded in the income statement

immediately. Regular way purchase and sales transactions in

respect of financial assets that require delivery of a financial

instrument within the time-frame established by market

convention are recorded at trade date.

Business model assessment

For financial assets, IFRS 9 requires that a business model

assessment is carried out which reflects how the Group

manages the assets in order to generate cash flows. The

assessment is at a portfolio level, being the level at which the

portfolio is managed. Factors considered by the Group in

determining the business model for a Group of assets include

past experience on how the cash flows for these assets were

collected, how the assets’ performance is evaluated and

reported and how risks are assessed and managed.

The standard sets out different types of business models:

▪Hold to collect: it is intended to hold the asset to maturity

to earn interest, collecting repayments of principal and

interest from the customer. These assets are accounted

for at amortised cost

▪Hold to collect and sell: this model is similar to the hold to

collect model, except that the entity may elect to sell some

or all of the assets before maturity to achieve the objectives

of the business model. These assets are accounted for

at FVOCI

▪Hold to sell/managed on a fair value basis: the entity

originates or purchases an asset with the intention of

disposing of it in the short or medium term to benefit from

capital appreciation or the portfolio is managed on a fair

value basis. These assets are accounted for at FVPL.

However, the Group may make the following irrevocable

election/designation at initial recognition of a financial asset

on an asset-by-asset basis:

▪Elect to present subsequent changes in fair value of an

equity investment that is neither held-for-trading nor

contingent consideration recognised by an acquirer in a

business combination to which IFRS 3 applies, in OCI

▪A debt instrument that meets the amortised cost or FVOCI

criteria as measured at FVPL if doing so eliminates or

significantly reduces an accounting mismatch (referred to

as the fair value option).

The classification into one of these categories is based on

the Group’s business model for managing the assets and the

contractual cash flow characteristics of the assets.

Solely payments of principal and interest (SPPI)

Where the business model is to hold assets to collect

contractual cash flows or to collect contractual cash flows and

sell, the Group assesses whether the assets’ cash flows

represent solely payments of principal and interest (the SPPI

test). In making this assessment, the Group considers whether

the contractual cash flows are consistent with a basic lending

arrangement (i.e. interest includes only consideration for the

time value of money, credit risk, other basic lending risks

and a profit margin that is consistent with a basic lending

arrangement). Where the contractual terms introduce

exposure to risk or volatility that are inconsistent with a basic

lending arrangement, the related asset is classified and

measured at FVPL.

Financial assets with embedded derivatives are considered

in their entirety when determining whether their cash flows

are solely payments of principal and interest.

Financial assets and liabilities measured at amortised cost

Financial assets that are held to collect the contractual

cash flows and that contain contractual terms that give rise

to cash flows that are solely payments of principal and

interest, such as most loans and advances to banks and

customers and some debt securities, are measured at

amortised cost. In addition, most financial liabilities are

measured at amortised cost.

The Group may commit to provide a loan which has not yet

been drawn. When the loan that arises from the lending

commitment is expected to meet the criteria to be measured

at amortised cost, the undrawn commitment is also considered

to be and is included in the impairment calculation.

The carrying value of these financial assets at initial

recognition includes any directly attributable transaction

costs. If the initial fair value is lower than the cash amount

advanced, such as in the case of some leveraged finance

and syndicated lending activities, the difference is deferred

and recognised over the life of the loan through the

recognition of interest income, unless the loan

is credit impaired.

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Financial assets measured at fair value through other

comprehensive income (FVOCI)

Financial assets held for a business model that is achieved

by both collecting contractual cash flows and selling and that

contain contractual terms that give rise on specified dates to

cash flows that are solely payments of principal and interest

are measured at FVOCI. They are recognised on the trade

date when the Group enters into contractual arrangements

to purchase and are normally derecognised when they are

either sold or redeemed.

They are subsequently remeasured at fair value and changes

therein (except for those relating to impairment, interest

income and foreign currency exchange gains and losses)

are recognised in other comprehensive income until the assets

are sold. Upon disposal, the cumulative gains or losses in

other comprehensive income are recognised in the income

statement as ‘Gains less losses arising from derecognition

of debt instruments measured at fair value through other

comprehensive income’.

Financial assets measured at FVOCI are included in the

impairment calculations set out below and impairment

is recognised in profit or loss.

Impairment of financial assets held at amortised cost or

FVOCI

At each balance sheet date, each financial asset or portfolio

of advances categorised at amortised cost or at FVOCI, issued

financial guarantee and loan commitment is measured for ECL

impairment.

The costs of loss allowances on assets held at amortised

cost and at FVOCI are presented as impairments in the income

statement. Allowances in respect of financial guarantees

and loan commitments are presented as other liabilities

and charges recorded within income statement impairments.

Financial assets held at amortised cost are presented net

of allowances, except where the asset has been wholly

or partially written off.

Stage 1

Financial assets that are considered performing and have not

had a significant increase in credit risk are reported as Stage 1

assets. Stage 1 financial assets have loss allowances

measured at an amount equal to 12-month ECL. In line with

regulatory and accounting bodies’ guidance, exposures that

have been granted COVID-19 relief measures such as payment

holidays are not automatically considered to have been

subject to a significant increase in credit risk and therefore

do not alone result in a transfer across stages. Where relief

measures are granted, there is no change in expectation

of the total amount due. Should the expected recoverability

of the loan remain the same, these exposures will remain

reported in Stage 1 for the foreseeable future, and will not

be required to hold a lifetime ECL.

Stage 2

Financial assets are considered to be in Stage 2 when their

credit risk has increased significantly since initial recognition.

A loss allowance equivalent to a lifetime ECL is required to

be held.

The Group’s primary indicator for Stage 2 assets are

distressed loans, potential problem loans and exposures in

arrears that require additional attention and supervision from

watchlist committees and are under management review.

Assets in forbearance are considered to be, at a minimum,

Stage 2. Forbearance measures refer to concessions such as

modification of the terms and conditions or refinancing that

has been granted to a debtor in financial difficulty. These

exposures are assessed on a case-by-case basis to determine

whether the proposed modifications will be considered as

forbearance. Where the Credit Committee considers it likely

that the client will be able to return to perform against the

original contractual obligations within a reasonable time-frame

these assets will be considered performing and in Stage 2.

Forbearance is distinguished from commercial renegotiations

which take place as part of normal business activity and

standard banking practice.

In addition to loans under management review, an asset may

also move from Stage 1 to Stage 2 if the model calculated

probability of default (PD) has significantly increased since

origination. This is tested on both a relative and absolute basis

to assess whether a significant deterioration in lifetime risk of

default has occurred. There is a common definition across the

Bank’s exposures regarding what constitutes a significant PD

movement. The test involves both an absolute and relative

movement threshold. An asset is considered to have been

subjected to a significant increase in credit risk if the

appropriate PD has doubled relative to the value at origination

and on an absolute basis has increased by more than 1%. Any

asset with an original rating that is classified as investment

grade will be judged to have had a significant movement if the

new PD would classify it as sub-investment grade and the

equivalent rating has moved by more than three notches.

The Group adopts the view that all financial assets that are

more than 30 days past due have experienced a significant

increase in credit risk.

Exposures move back to Stage 1 once they no longer meet the

criteria above for a significant increase in credit risk and as

cure periods (specifically relating to forborne exposures)

are met.

Stage 3

Financial assets are included in Stage 3 when there is

objective evidence of credit impairment. The Group assesses

a loan as Stage 3 when contractual payments of either

principal or interest are past due for more than 90 days, the

debtor is assessed as unlikely to pay and credit impaired, or

the loan is otherwise considered to be in default, for example,

due to the appointment of an administrator or the client is in

receivership. Forborne loans that are considered non-

performing, for example, if a loan is not expected to meet the

original contractual obligations in a reasonable time-frame, the

loan will be classified as Stage 3. Loans which are 90 days or

more past due are considered to be in default.

The Group calculates the credit adjusted effective interest

rate on Stage 3 assets, which is calculated based on the

amortised cost of the financial asset (i.e. gross carrying

amount less ECL allowance) instead of its gross carrying

amount and incorporates the impact of the ECLs in estimated

future cash flows.

Definition of default

The Group has aligned the IFRS 9 and regulatory definitions of

default, credit impaired and non-performing exposure. Assets

that are more than 90 days past due, or considered by

management as unlikely to pay their obligations in full without

realisation of collateral are considered as exposures in default.

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ECL

The assessment of credit risk and the estimation of ECL

are required to be unbiased, probability-weighted and

should incorporate all available information relevant to the

assessment, including information about past events, current

conditions and reasonable and supportable forecasts of

economic conditions at the reporting date. In addition, the

estimation of ECL should take into account the time value

of money. As a result, the recognition and measurement of

impairment is intended to be forward‑looking and therefore,

potentially volatile.

Write-offs

The Group has developed specific guidelines on write-off

aimed at granting full compliance with IFRS 9 and the

document 'Guidance to banks on non-performing loans' issued

by the European Central Bank.

A loan or advance is normally written off in full against the

related ECL impairment allowance when the proceeds from

realising any available security have been received or there

is a reasonable amount of certainty that the exposure will not

be recovered. This is assessed on a case-by-case basis with

considerations to indicators such as whether the exposure

has been restructured or the given financial position of

the borrower and guarantors. Any recoveries of amounts

previously written off decrease the amount of

impairment losses.

Process to determine ECL

ECLs are calculated using three main components:

•A probability of default (PD)

•A loss given default (LGD)

•The exposure at default (EAD).

The 12-month and lifetime PDs represent the probability of a

default occurring over the next 12 months or the lifetime of the

financial exposures, respectively, based on conditions existing

at the balance sheet date and future forecast macro-

economic conditions that affect credit risk.

The LGD represents losses expected on default, taking into

account the mitigating effect of collateral, its expected value

when realised and the time value of money. The forecast value

for the collateral is also affected by the range of forward-

looking probability-weighted macro-economic scenarios.

The EAD represents the expected balance at default, taking

into account the repayment of principal and interest from the

balance sheet date to the default event together with any

expected drawdown of a committed facility.

The calculation of the 12-month ECL is based on the 12-month

PD and LGD along with the EAD and EIR for the asset. Lifetime

ECL is calculated using the lifetime PD curve, and the

appropriate LGDs and EADs and discount rates derived from

the EIR based on the remaining life of the financial asset.

Expert judgement models are also utilised for certain portfolios

where the ECL is found to be minimal, either due to the

portfolio’s small relative size or the low default nature of these

portfolios, such as cash and balances held at central banks.

Management adjustments are made to modelled output to

account for situations where additional information and known

or expected risk factors have not been captured in the

modelling process.

Financial assets and liabilities held at fair value through

profit or loss (FVPL)

Financial instruments held at fair value through profit or loss

include all instruments classified as held-for-trading, those

instruments designated as held at fair value through profit

or loss and those financial assets which do not meet the

criteria for amortised cost or FVOCI.

Financial instruments classified as FVPL are initially recorded

at fair value on the balance sheet with changes in fair value

subsequently recognised in the income statement. Financial

instruments are classified as held-for-trading when they are

held with the intention of short-term disposal, held with the

intention of generating short-term profit, or are derivatives

which are not designated as part of effective hedges.

Financial instruments designated as held at fair value through

profit or loss are designated as such on initial recognition

of the instrument and remain in this classification

until derecognition.

Financial assets and liabilities are designated as held at fair

value through profit or loss only if:

•They eliminate or significantly reduce a measurement or

recognition inconsistency that would otherwise arise from

measuring assets or liabilities or recognising the gains

and losses on them on different bases; or

•A Group of financial liabilities or both financial assets

and financial liabilities is managed and its performances

evaluated on a fair value basis in accordance with a

documented risk management or investment strategy and

information about the Group is provided internally on that

basis to the Group’s key management personnel; or

•A financial liability contract contains one or more embedded

derivatives (which significantly modifies the cash flows

that would be required by the contract and is not clearly

prohibited from separation from the host contract) and

the Group has designated the entire hybrid contract as

a financial instrument at fair value through profit or loss.

Changes in own credit risk on financial liabilities designated

at fair value are recognised in other comprehensive income.

Any other changes are recognised in the income statement.

Securitisation/credit investment and trading activities

exposures

The Group makes use of securitisation vehicles as a source

of finance, as a means of risk transfer and to leverage returns

through the retention of equity tranches in low default

rate portfolios. The Group predominantly focuses on the

securitisation of residential and commercial mortgages

and lease receivables. The Group also trades in structured

credit investments.

The structured entities are consolidated under IFRS 10

Consolidated Financial Statements when the Group has

exposure to, or rights to, variable returns from its involvement

with the investee and has the ability to affect those returns

through its power over the investee.

Loans and advances that are originated are transferred

to structured entities, and the structured entities issue debt

securities to external investors to fund the purchase of

the securitised assets. When the Group consolidates the

structured entity, the Group recognises the assets and

liabilities on a gross basis. When the Group does not

consolidate the structured entity, the securitised assets are

derecognised and only any position still held by the Group

in the structured entity is reflected.

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Day-one profit or loss

When the transaction price differs from the fair value of other

observable current market transactions in the same instrument

or based on the valuation technique whose variables include

only data from observable markets, the difference between

the transaction price and fair value is recognised immediately

in the income statement.

In cases where fair value is determined using data which is not

observable, the difference between the transaction price and

model value is only recognised in the income statement when

the inputs become observable, or when the instrument is

derecognised or over the life of the transaction.

Derecognition of financial assets and liabilities

A financial asset, or a portion thereof, is derecognised when

the Group’s rights to cash flows have expired or when the

Group has transferred its rights to cash flows relating to the

financial assets and either (a) the Group has transferred

substantially all the risks and rewards associated with the

financial assets or (b) the Group has neither transferred nor

retained substantially all the risks and rewards associated with

the financial assets but has transferred control of the assets.

The treatment of a renegotiation or modification of the

contractual cash flows of a financial asset depends upon

whether the modification is done for commercial reasons, in

which case if they are significant the old asset is derecognised

and a new asset recognised, or because of financial difficulties

of the borrower. Where such modifications are solely due to

IBOR reform and result in an interest rate which is

economically equivalent, they are treated as a change to the

floating rate of interest and so do not result in any adjustment

to the carrying value of the asset.

A financial liability is derecognised when it is extinguished,

that is when the obligation is discharged, cancelled or expired.

When an existing financial liability is replaced or modified

with substantially different terms, such a replacement or

modification is treated as a derecognition of the original

liability and the recognition of a new liability. The difference

in the respective carrying amounts is recognised in the

income statement.

Reclassification of financial instruments

Financial assets are only reclassified where there has been

a change in business model. Financial liabilities cannot

be reclassified.

Derivative instruments

All derivative instruments of the Group are recorded on the

balance sheet at fair value positive and negative fair values

are reported as assets and liabilities, respectively.

Derivative positions are entered into either for trading

purposes or as part of the Group’s asset and liability

management activities to manage exposures to interest rate

and foreign currency risks. Both realised and unrealised profit

or losses arising on derivatives are recognised in the income

statement as part of trading income.

Derivative instruments entered into as economic hedges

which do not qualify for hedge accounting and derivatives that

are entered into for trading purposes are treated in the same

way as instruments that are held-for-trading.

Credit derivatives are entered into for trading purposes. Credit

derivatives are initially recognised at their fair values, being

the transaction price of the derivative. Subsequently the

derivatives are carried at fair value, with movements in fair

value through the income statement, based on the current

market price or remeasured price. The counterparty risk from

derivative transactions is taken into account when reporting

the fair value of derivative positions. The adjustment to the fair

value is known as the credit value adjustment (CVA).

Hedge accounting

When the Group first implemented IFRS 9, it made an election

to continue to apply the hedge accounting requirements of

IAS 39 as an accounting policy.

The Group applies either fair value or hedge accounting of net

investments in foreign operations accounting when the

transactions meet the specified hedge accounting criteria.

To qualify for hedge accounting treatment, the Group ensures

that all of the following conditions are met:

•At inception of the hedge, the Group formally documents

the relationship between the hedging instrument(s) and

hedged item(s) including the risk management objectives

and the strategy in undertaking the hedge transaction. Also

at the inception of the hedge relationship, a formal

assessment is undertaken to ensure the hedging instrument

is expected to be highly effective in offsetting the

designated risk in the hedged item. A hedge is expected to

be highly effective if the changes in fair value or cash flows

attributable to the hedged risk during the period for which

the hedge is designated are expected to offset in a range of

80% to 125%

▪The effectiveness of the hedge can be reliably measured,i.e.

the fair value or cash flows of the hedged item that are

attributable to the hedged risk and the fair value of the

hedging instrument can be reliably measured

▪The hedge effectiveness is assessed on an ongoing basis

and determined actually to have been highly effective

throughout the financial reporting periods for which the

hedge was designated.

For qualifying fair value hedges, the change in fair value of

the hedging instrument is recognised in the income statement.

Changes in fair value of the hedged item that is attributable to

the hedged risk are also recognised in the income statement.

For qualifying hedges of a net investment in a foreign

operation, including a hedge of a monetary item that is

accounted for as part of the net investment, changes in the

fair value of the hedging instrument relating to the effective

portion of the hedge are recognised in other comprehensive

income while any gains or losses relating to the ineffective

portion are recognised in the income statement. On disposal

of the foreign operation, the cumulative value of any such

gain or loss recorded in other comprehensive income is

reclassified to the income statement.

Hedge accounting is discontinued when it is determined

that the instrument ceases to be highly effective as a hedge;

when the derivative expires, or is sold, terminated or

exercised; when the hedged item matures or is sold or repaid;

when a forecasted transaction is no longer deemed highly

probable or when the designation as a hedge is revoked.

Sources of hedge ineffectiveness may arise from basis

risk, including but not limited to the discount rates used

for calculating the fair value of derivatives, hedges

using instruments with a non-fair value, and notional

and timing differences between the zero hedged items

and hedging instruments.

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The Group applied the IBOR reform Phase 1 reliefs to hedging

relationships directly affected by IBOR reform during the year

ended 31 March 2020. A hedging relationship is affected if

IBOR reform gives rise to uncertainties about the timing and/or

amount of benchmark-based cash flows of the hedged item or

the hedging instrument. The reliefs require that for the

purpose of determining whether a forecast transaction is

highly probable, it is assumed that the IBOR on which the

hedged cash flows are based is not altered as a result of IBOR

reform.

IBOR reform Phase 1 required that for hedging relationships

affected by IBOR reform, the Group must assume that for the

purpose of assessing expected future hedge effectiveness,

the interest rate is not altered as a result of IBOR reform. Also,

the Group is not required to discontinue the hedging

relationship if the results of the assessment of retrospective

hedge effectiveness fall outside the range of 80% to 125%,

although any hedge ineffectiveness must be recognised in

profit or loss, as normal.

The reliefs cease to apply once certain conditions are met.

These include when the uncertainty arising from IBOR reform

is no longer present with respect to the timing and amount of

the benchmark-based cash flows of the hedged item, if the

hedging relationship is discontinued or once amounts in the

cash flow hedge reserve have been released.

The Group early adopted the IBOR reform Phase 2 in the prior

period. IBOR reform Phase 2 provides temporary reliefs that

allow the Group’s hedging relationships to continue upon the

replacement of an existing interest rate benchmark with an

RFR. The reliefs require the Group to amend the hedge

designations and hedge documentation and are set out above.

Refer to page 101 for more detail on the impact of IBOR reform.

Offsetting of financial assets and liabilities

Financial assets and liabilities are offset when there is both

an intention to settle on a net basis (or simultaneously) and

a currently enforceable legal right to offset exists.

Issued debt and equity financial instruments

Financial instruments issued by the Group are classified as

liabilities if they contain a contractual obligation to deliver

cash or another financial asset.

Financial instruments issued by the Group are classified as

equity where they confer on the holder a residual interest in

the Group, and the Group has no obligation to deliver either

cash or another financial asset to the holder. The components

of compound issued financial instruments are accounted for

separately with the liability component separated first and any

residual amount being allocated to the equity component.

Equity instruments issued by subsidiaries of Investec Bank plc

are recorded as non-controlling interests on the balance

sheet.

Equity instruments are initially measured net of directly

attributable issue costs.

Dividends on ordinary shares are recognised as a deduction

from equity at the earlier of payment date or the date that it

is approved by Investec Bank plc shareholders.

Sale and repurchase agreements (including

securities borrowing and lending)

Securities sold subject to a commitment to repurchase, at

a fixed price or a selling price plus a lender’s return, remain

on-balance sheet. Proceeds received are recorded as a

liability on the balance sheet under ‘repurchase agreements

and cash collateral on securities lent’. Securities that are

purchased under a commitment to resell the securities at

a future date are not recognised on the balance sheet. The

consideration paid is recognised as an asset under ‘reverse

repurchase agreements and cash collateral on securities

borrowed’.

Where sovereign debt securities have been purchased at the

same time as derivatives with the same counterparty, such

that the combined position has the economic substance

similar to secured lending, an asset is recognised under

‘reverse repurchase agreements and cash collateral on

securities borrowed’.

The difference between the sale and repurchase prices

is treated as interest expense and is accrued over the life

of the agreement using the effective interest method.

Securities borrowing transactions that are not cash

collateralised are not included on the balance sheet.

Securities lending and borrowing transactions which are

cash collateralised are accounted for in the same manner

as securities sold or purchased subject to repurchase

commitments.

Financial guarantees

Financial guarantee contracts issued by the Group are those

contracts that require a payment to be made to reimburse the

holder for a loss it incurs because the specified debtor fails to

make a payment when due, in accordance with the terms of a

debt instrument. Financial guarantees are initially recognised

at fair value, adjusted for the transaction costs that are

directly attributable to the issuance of the guarantee.

Subsequent to initial recognition, the liability under each

guarantee is measured at the higher of the amount recognised

less cumulative amortisation and the expected credit loss.

Subsequent to initial measurement, all changes in the balance

sheet carrying value are recognised in the income statement.

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Property and equipment

Property and equipment are recorded at cost less

accumulated depreciation and impairments.

Cost is the cash equivalent paid or the fair value of the

consideration given to acquire an asset and includes other

expenditures that are directly attributable to the acquisition

of the asset.

Depreciation is provided on the depreciable amount of each

component on a straight-line basis over the expected useful

life of the asset.

The depreciable amount related to each asset is determined

as the difference between the cost and the residual value of

the asset. The residual value is the estimated amount, net of

disposal costs that the Group would currently obtain from the

disposal of an asset in similar age and condition as expected

at the end of its useful life.

The current and comparative annual depreciation rates for

each class of property and equipment are as follows:

•Computer and related equipment20% to 33%

•Motor vehicles20% to 25%

•Furniture and fittings10% to 20%

•Freehold buildings2%

•Right of use assets*

•Leasehold property and improvements*

*Leasehold improvements depreciation rates are determined by

reference to the appropriate useful life of its separate components,

limited to the period of the lease. Leasehold property and right of use

asset depreciation rates are determined by reference to the period of

the lease.

Routine maintenance and service costs for Group assets

are expensed as incurred. Subsequent expenditure is only

capitalised if it is probable that future economic benefits

associated with the item will flow to the Group.

Leases

At inception of a contract the Group assesses whether a

contract is, or contains, a lease. A contract is, or contains, a

lease if the contract conveys the right to control the use of an

identified asset for a period of time in exchange for

consideration. To assess whether a contract conveys the right

to control the use of an identified asset, the Group assesses

whether:

•The Group has the right to obtain substantially all of the

economic benefits from use of the asset throughout the

period of use, and

•The Group has the right to direct the use of the asset.

As a lessee, the Group recognises a right of use (ROU) asset

and a lease liability at the lease commencement date.

The lease liability is initially measured at the present value of

the lease payments that are not paid at the commencement

date, discounted at the rate implicit in the lease, or, where that

is not available, at the Group’s incremental borrowing rate.

The lease liability will increase for the accrual of interest, and

will result in a constant rate of return throughout the life of the

lease, and reduce when payments are made.

The ROU asset is initially measured at cost, which comprises

the initial amount of the lease liability adjusted for any lease

payments made at or before the commencement date, plus

any indirect costs incurred and an estimate of costs to

dismantle and remove the underlying asset or to restore the

underlying asset or the site on which it is located, less any

lease incentives received.

The ROU asset is subsequently depreciated using the straight-

line method from the commencement date to the end of the

lease term. In addition, the ROU asset is periodically reduced

by impairment losses, if any, and adjusted for certain re-

measurements of the lease liability.

The lease liability is subsequently remeasured when there

is a change in future lease payments arising from a change

in index or rate, if there is a change in the Group’s estimate

of the amount expected to be payable under a residual value

guarantee, or if the Group changes its assessment of whether

it will exercise a purchase, extension or termination option.

Where the lease liability is remeasured, a corresponding

adjustment is made to the carrying amount of the ROU asset,

or is recorded in the income statement if the carrying amount

of the ROU asset has been reduced to zero.

The Group has elected not to recognise ROU assets and lease

liabilities for low value assets and short-term leases that have

a lease term of 12 months or less. The Group recognises the

lease payments associated with these leases as an expense

on a straight-line basis over the lease term.

When the Group is the lessor, the lease must be classified

as either a finance lease or an operating lease. A finance lease

is a lease which confers substantially all the risks and rewards

of the leased assets on the lessee. An operating lease is a

lease where substantially all of the risks and rewards of the

leased asset remain with the lessor.

When the lease is deemed a finance lease, the leased asset

is not held on the balance sheet; instead a finance lease

receivable is recognised representing the minimum lease

payments receivable under the terms of the lease, discounted

at the rate of interest implicit in the lease.

When the lease is deemed an operating lease, the lease

income is recognised on a straight-line basis over the

period of the lease unless another systematic basis

is more appropriate.

For the balance sheet, the ROU assets are included

within property and equipment, finance lease receivables

are included within loans and advances to customers and

other assets and the lease liabilities are included within

other liabilities.

Where the Group has a head lease and sublease arrangement

with external partners, the finance lease receivable is

recognised in other assets on the balance sheet.

Trading properties

Trading properties are carried at the lower of cost and net

realisable value.

Software and intangible assets

Software and intangible assets are recorded at cost less

accumulated amortisation and impairments. Software and

intangible assets with a finite life are amortised over the useful

economic life on a straight-line basis. Amortisation of each

asset starts when it becomes available for use. The

depreciable amount related to each asset is determined

as the difference between the cost and the residual value

of the asset.

The current and comparative annual amortisation rates

for each class of intangible assets are as follows:

•Client relationships12 to 20 years

•Acquired software3 to 7 years

•Internally generated software5 years

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

196

Impairment of non-financial assets

At each balance sheet date, the Group reviews the carrying

value of non-financial assets. The recoverable amount, being

the higher of fair value less cost of disposal and value-in-

use, is determined for any assets for which an indication of

impairment is identified. If the recoverable amount of an asset

is less than its carrying value, the carrying value of the asset

is reduced to its recoverable amount.

Impairment losses are recognised as an expense in the income

statement in the period in which they are identified. Reversals

of impairment losses are recognised in income in the period

in which the reversals are identified, to the extent that the

carrying value of the asset does not exceed the amount that

would have been calculated without impairment.

Trust and fiduciary activities

The Group acts as a trustee or in other fiduciary capacities

that result in the holding, placing or managing of assets for

the account of and at the risk of clients. As these are not

assets of the Group, they are not recognised on the balance

sheet but are included at market value as part of third party

assets under management.

Taxation and deferred taxation

Current taxation payable is provided for based on the amount

expected to be payable on taxable profit at rates that are

enacted or substantively enacted and applicable to the

relevant period.

Deferred taxation is provided on temporary differences

between the carrying amount of an asset or liability in the

balance sheet and its tax base, except where such temporary

differences arise from:

•The initial recognition of goodwill

•The initial recognition of an asset or liability in a transaction

which is not a business combination and at the time of the

transaction has no effect on the income statement or

taxable profit

•Temporary differences associated with the investments

in subsidiaries and interests in associated undertakings

and joint venture holdings, where the timing of the reversal

of the temporary differences can be controlled and it is

probable that the temporary differences will not reverse

in the foreseeable future.

Deferred taxation assets or liabilities are measured using

the taxation rates that have been enacted or substantively

enacted at the balance sheet date.

Deferred taxation assets are recognised to the extent that it

is probable that future taxable profit will be available against

which the deferred taxation assets can be utilised.

Items recognised directly in other comprehensive income

are net of related current and deferred taxation.

Borrowing costs

Borrowing costs that are directly attributable to property

developments which take a substantial period of time to

develop are capitalised to qualifying properties.

Provisions, contingent liabilities and contingent

assets

Provisions are recognised when the Group has a present legal

or constructive obligation as a result of a past event; it is

probable that an outflow of resources embodying economic

benefits will be required to settle the obligation and a reliable

estimate can be made of the amount of the obligation. The

expense relating to a provision is presented in the income

statement net of any reimbursement. Contingent assets and

contingent liabilities are not recognised on the balance sheet.

Standards and interpretations issued but not yet

effective

The following significant standards and interpretations, which

have been issued but are not yet effective, are applicable

to the Group. These standards and interpretations have

not been applied in these annual financial statements.

The Group intends to comply with these standards from

the effective dates.

IFRS 17 Insurance Contracts

IFRS 17 Insurance Contracts was issued in May 2017 and sets

out the requirements that an entity should apply in accounting

for insurance contracts it issues and reinsurance contracts it

holds. It applies to all types of insurance contracts, regardless

of the type of entities that issue them, as well as to certain

guarantees and financial instruments with discretionary

participation features. A few scope exceptions will apply.

IFRS 17 is effective from 1 January 2023 and the Group

is considering its impact.

All other standards and interpretations issued but not

yet effective are not expected to have a material impact

on the Group.

Key management assumptions

In preparation of the annual financial statements, the Group

makes estimations and applies judgement that could affect

the reported amount of assets and liabilities within the next

financial year. Key areas in which judgement is applied include:

•The impact of COVID-19 and the Russian invasion of Ukraine

required management to apply significant judgements and

estimates to quantify the impact on the annual financial

statements. The assumptions can specifically be viewed on

pages 85 to 87 in section 3, pages 144 to 146 of section 3

and throughout section 5 of the annual financial statements

•The Group operates in a legal and regulatory environment

that exposes it to litigation risks. As a result, the Group is

involved in disputes and legal proceedings which arise in the

ordinary course of business. The Group evaluates all facts,

the probability of the outcome of legal proceedings and

advice from internal and external legal counsel when

considering the accounting implications

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

197

•In accordance with IFRS 13 Fair Value Measurement, the

Group categorises financial instruments carried on the

balance sheet at fair value using a three level hierarchy.

Financial instruments categorised as level 1 are valued

using quoted market prices and therefore there is minimal

judgement applied in determining fair value. However, the

fair value of financial instruments categorised as level 2

and, in particular, level 3 are determined using valuation

techniques including discounted cash flow analysis and

valuation models. The valuation techniques for level 3

financial instruments involve management judgement and

estimates the extent of which depends on the complexity

of the instrument and the availability of market observable

information. In particular, significant uncertainty exists in

the valuation of unlisted investments and fair value loans

in the private equity and direct investments portfolios. Key

valuation inputs are based on the most relevant observable

market information and can include expected cash flows,

discount rates, earnings multiples and the underlying assets

within a business, adjusted where necessary for factors that

specifically apply to the individual investments and

recognising market volatility. Further details of the Group’s

level 3 financial instruments and the sensitivity of the

valuation including the effect of applying reasonably

possible alternative assumptions in determining their fair

value are also set out in note 14.

Details of unlisted investments can be found in note 25

with further analysis contained in the risk management

section on page 89.

•The determination of ECL against assets that are carried

at amortised cost and ECL relating to debt instruments at

FVOCI involves a high degree of uncertainty as it involves

using assumptions that are highly subjective and sensitive

to risk factors. The most significant judgements relate to

defining what is considered to be a significant increase in

credit risk; determining the probability of default (PD),

exposure at default (EAD) and loss given default (LGD) and

future cash flows; incorporating information about forecast

economic conditions and the weightings to be applied to

economic scenarios. More detail relating to the

methodology, judgements and estimates and results of the

Group’s assessment of ECLs, including our assessment of

the impact of COVID-19 and the Russian invasion of Ukraine,

can be found on pages 85 to 87.

•The measurement of ECL has reliance on expert credit

judgement. Key judgemental areas are highlighted below

and are subject to robust governance processes. Key

drivers of measurement uncertainty include:

–The assessment of a significant increase in credit risk;

–A range of forward-looking probability weighted macro-

economic scenarios; and

–Estimations of probabilities of default, loss given default

and exposures at default using models.

In addition to these drivers, some initial judgements and

assumptions were required in the design and build of the

Group’s ECL methodology, which are not considered to have

a material impact. These include the use of income

recognition effective interest rates (EIRs), in accordance

with accounting standards, as the discount factor in the ECL

calculation as well as the use of contractual maturity to

assess behavioural lives. In addition, where we have

experienced limitations on the availability of probability

of default origination data for the historic book, a portfolio

average has been used in some instances.

Following a detailed review of the outcome of the ECL

models, management raised an additional overlay provision

in the UK. Detail of the approach followed and

management’s assumptions are set out on page 85

of section 3.

▪The Group’s income tax charge and balance sheet

provision are judgemental in nature. This arises from certain

transactions for which the ultimate tax treatment can only

be determined by final resolution with the relevant local tax

authorities. The Group has recognised in its current tax

provision certain amounts in respect of taxation that involve

a degree of estimation and uncertainty where the tax

treatment cannot finally be determined until a resolution has

been reached by the relevant tax authority and whether the

proposed tax treatment will be accepted by the authorities.

The carrying amount of this provision is sensitive to the

resolution of issues, which is often dependent on the

timetable and progress of discussion and negotiations with

the relevant tax authorities, arbitration process and legal

proceedings in the relevant tax jurisdictions in which the

Group operates. Issues can take many years to resolve and

assumptions on the likely outcome would therefore have to

be made by the Group in order to determine if an exposure

should be measured based on the most likely amount or

expected value.

•In making any estimates, management’s judgement has

been based on various factors, including:

–The current status of tax audits and enquiries;

–The current status of discussions and negotiations with

the relevant tax authorities;

–The results of any previous claims; and

–Any changes to the relevant tax environments.

•As explained in the hedge accounting policy, the Group

derecognises financial assets and financial liabilities if there

has been a substantial modification of their terms and

conditions. In the context of IBOR reform, many financial

instruments have already been amended or will be amended

as they transition from IBORs to RFRs. In addition to the

interest rate of a financial instrument changing, there may

be other changes made to the terms of the financial

instrument at the time of transition. For financial instruments

measured at amortised cost, the Group first applies the

practical expedient as described in the hedge accounting

policy, to reflect the change in the referenced interest rate

from an IBOR to a RFR. Secondly, for any changes not

covered by the practical expedient, the Group applies

judgement to assess whether the changes are substantial

and if they are, the financial instrument is derecognised and

a new financial instrument is recognised. If the changes are

not substantial, the Group adjusts the gross carrying amount

of the financial instrument by the present value of the

changes not covered by the practical expedient, discounted

using the revised effective interest rate

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

198

•The effective interest method as applied by the Group, as

explained in the hedge accounting policy, recognises

interest income using a rate of return that represents the

best estimate of a constant rate of return over the expected

behavioural life of loans and deposits and recognises the

effect of potentially different interest rates charged at

various stages and other characteristics of the product life

cycle (including prepayments and penalty interest and

charges). This estimation, by nature, requires an element of

judgement regarding the expected behaviour and life cycle

of the instruments, as well as expected changes to the base

rate and other fee income/expense that are integral parts of

the instrument. The Group has early adopted IBOR reform

Phase 2 in the prior period which required as a practical

expedient for changes to the basis for determining

contractual cash flows that are necessary as a direct

consequence of IBOR reform, to be treated as a change to a

floating rate of interest provided the transition from IBOR to

RFR takes place on a basis that is economically equivalent.

For changes that are not required by IBOR reform, the Group

applies judgement to determine whether they result in the

financial instrument being derecognised or adjust its

carrying value as described in the hedge accounting policy.

Therefore, as financial instruments transition from IBOR to

RFRs, the Group applies judgement to assess whether the

transition has taken place on an economically equivalent

basis. In making this assessment, the Group considers the

extent of any changes to the contractual cash flows as a

result of the transition and the factors that have given rise

to the changes, with consideration of both quantitative and

qualitative factors

•The Group has designated micro hedge relationships as fair

value hedges. The Group applies temporary reliefs which

enable its hedge accounting to continue during the period of

uncertainty, before the replacement of an existing interest

rate benchmark with an alternative nearly risk-free interest

rate. The Group has early adopted IBOR reform Phase 2 in

the prior period, which provided temporary reliefs to enable

the Group’s hedge accounting to continue upon the

replacement of an IBOR with a Risk-free rate (RFR). Under

one of the reliefs, the Group may elect for individual RFRs

designated as hedging the fair value of the hedged item for

changes due to a non-contractually specified component of

interest rate risk, to be deemed as meeting the IAS 39

requirement to be separately identifiable. For each RFR to

which the relief has been applied, the Group judges that

both the volume and market liquidity of financial instruments

that reference the RFR and are priced using the RFR will

increase during the 24-month period with the result that the

hedged RFR risk component will become separately

identifiable in the change in fair value of the hedged item.

•The Group operates in a legal and regulatory environment

that exposes it to litigation risks. As a result, the Group is

involved in disputes and legal proceedings which arise in the

ordinary course of business. The Group evaluates all facts,

the probability of the outcome of legal proceedings and

advice from internal and external legal counsel when

considering the accounting implications.

•The Group makes use of reasonable and supportable

information to make accounting judgments and estimates

related to climate change. This includes information about

the observable impact of climate change on the current

credit risk of clients and the valuation of assets. Many of the

effects arising from climate change will be longer term in

nature, with an inherent level of uncertainty and have limited

effect on accounting judgments and estimates for the

current period. The following items represent the most

significant effects:

–The measurement of expected credit loss considers the

ability of borrowers to make contractual payments as and

when they become due. Investec performed an

assessment of specific sectors that could be most

impacted by climate risk in all jurisdictions, specifically

focusing on the ability of the clients in these sectors to

meet their financing needs. The assessment further

included a review of Investec’s appetite to fund clients in

the respective sectors

–The assessment of asset impairment based on value in

use and the ability to recognise deferred tax assets are

based on future expected cash flows The expected cash

flows is based on management’s best estimate of the

operational results including the near-term impact of

climate risk. The Group did not consider any additional

adjustments to the cash flows to account for this risk

given the timeframe of the cashflows that were

considered.

–The use of market indicators as inputs to fair value is

assumed to include current information and knowledge

regarding the effect of climate risk.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

199

1. Segmental business analysis – income statement

Specialist Banking

Total Group

Private Client

Corporate,

Investment

Banking and

Other

For the year to 31 March 2022

Wealth &

Investment

Private Banking

£’000

Net interest income

2 268

70 692

423 348

496 308

Fee and commission income

344 685

1 579

162 665

508 929

Fee and commission expense

(656)

(23)

(14 018)

(14 697)

Investment income

(2)

816

9 765

10 579

Share of post-taxation profit of associates and joint venture holdings

—

1 988

Trading income/(loss) arising from

–customer flow

1 194

2 228

56 950

60 372

–balance sheet management and other trading activities

(307)

(1 000)

(1 305)

Other operating income

—

11 158

Total operating income before expected credit loss

impairment charges

347 182

75 294

650 856

1 073 332

Expected credit loss impairment charges

(5)

(2 432)

(22 926)

(25 363)

Operating income

347 177

72 862

627 930

1 047 969

Operating costs

(259 496)

(42 034)

(458 756)

(760 286)

Operating profit before goodwill, acquired intangibles

and strategic actions

87 681

30 828

169 174

287 683

Loss attributable to other non-controlling interests

—

Adjusted operating profit after non-controlling interests

87 681

30 828

169 174

287 683

Selected returns and key statistics

Cost to income ratio

74.7%

55.8%

70.5%

70.8%

Total assets (£’mn)

1 137

4 528

21 924

27 589

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

200

1. Segmental business analysis – income statement (continued)

Specialist Banking

Private Client

Corporate,

Investment

Banking and

Other

For the year to 31 March 2021

Wealth &

Investment

Private Banking

£’000

Total Group

Net interest income

2 296

34 664

377 131

414 091

Fee and commission income

316 813

705

182 153

499 671

Fee and commission expense

(773)

(61)

(12 367)

(13 201)

Investment income

272

23 529

23 820

Share of post-taxation profit of associates and joint venture holdings

—

1 768

Trading income/(loss) arising from

–customer flow

920

1 196

(13 141)

(11 025)

–balance sheet management and other trading activities

(9)

11 202

11 206

Other operating income

—

10 002

Total operating income before expected credit loss

impairment charges

319 519

36 536

580 277

936 332

Expected credit loss impairment release/(charges)

(4)

(1 515)

(69 615)

(71 134)

Operating income

319 515

35 021

510 662

865 198

Operating costs

(245 175)

(38 033)

(474 550)

(757 758)

Operating profit/(loss) before goodwill, acquired intangibles

and strategic actions

74 340

(3 012)

36 112

107 440

Profit attributable to other non-controlling interests

—

861

Adjusted operating profit/(loss) after non-controlling interests

74 340

(3 012)

36 973

108 301

Selected returns and key statistics

Cost to income ratio

76.7%

104.1%

81.7%

80.9%

Total assets (£’mn)

1 016

3 338

20 042

24 396

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

201

2. Net interest income

2022

2021

For the year to 31 March

Notes

Average

balance

sheet

value

Interest

income

Average

yield

Average

balance

sheet

value

Interest

income

Average

yield

£’000

Cash, near cash and bank debt

and sovereign debt securities

8 070 458

24 438

0.30%

7 709 727

27 778

0.36%

Loans and advances

13 423 611

623 975

4.65%

12 142 660

578 446

4.76%

Private client

4 013 304

123 740

3.08%

2 873 101

84 191

2.93%

Corporate, institutional and

other clients

9 410 307

500 235

5.32%

9 269 559

494 255

5.33%

Other debt securities and other

loans and advances

652 331

18 047

2.77%

912 818

34 207

3.75%

Other#

233 801

53 078

n/a

287 831

61 695

n/a

22 380 201

719 538

21 053 036

702 126

2022

2021

For the year to 31 March

Average

balance

sheet

value

Interest

expense

Average

yield

Average

balance

sheet

value

Interest

expense

Average

yield

£’000

Notes

Deposits by banks and other

debt-related securities

2 813 105

18 114

0.64%

2 794 305

27 636

0.99%

Customer accounts (deposits)

17 035 633

93 229

0.55%

16 218 480

131 227

0.81%

Subordinated liabilities

870 954

49 467

5.68%

789 555

48 145

6.10%

Other#

363 193

62 420

n/a

436 350

81 027

n/a

21 082 885

223 230

20 238 690

288 035

Net interest income

496 308

414 091

Net interest margin

2.22%

1.97%

Notes:

1Comprises (as per the balance sheet) cash and balances at central banks; loans and advances to banks; reverse repurchase agreements and cash

collateral on securities borrowed; sovereign debt securities; and bank debt securities.

2Comprises (as per the balance sheet) loans and advances to customers.

3Comprises (as per the balance sheet) lease receivables (housed in other assets on the balance sheet) as well as interest income from derivative financial

instruments and off-balance sheet assets where there is no associated balance sheet value.

4Comprises (as per the balance sheet) deposits by banks; debt securities in issue; repurchase agreements and cash collateral on securities lent.

5Comprises (as per the balance sheet) liabilities arising from lease liabilities (housed in other liabilities on the balance sheet) as well as interest expense

from derivative financial instruments where there is no associated balance sheet value.

# Includes interest income and interest expense on derivative assets and liabilities used for hedging purposes. This results in interest income and interest

expense being recognised with no associated balance sheet value.

3. Net fee and commission income

For the year to 31 March

2022

2021

£’000

Wealth & Investment businesses net fee and commission income

344 029

316 040

Fund management fees/fees for assets under management

301 950

267 381

Private client transactional fees

42 735

49 432

Fee and commission expense

(656)

(773)

Specialist Banking net fee and commission income

150 203

170 430

Specialist Banking fee and commission income

164 244

182 858

Specialist Banking fee and commission expense

(14 041)

(12 428)

Net fee and commission income

494 232

486 470

Annuity fees (net of fees payable)

317 990

284 109

Deal fees

176 242

202 361

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

202

4. Investment income

For the year to 31 March

2022

2021

£’000

Realised

28 988

37 878

Unrealised*

(26 994)

(20 288)

Dividend income

6 917

3 927

Funding and other net related income

1 668

2 303

10 579

23 820

For the year to 31 March

Listed

equities

Unlisted

equities

Warrants and

profit shares

Total

investment

portfolio

Debt

securities

(sovereign,

bank and

other)

Investment

and trading

properties

Other asset

categories

Total

£’000

2022

Realised

2 414

18 028

552

20 994

512

(4 383)

11 865

28 988

Unrealised*

(4 169)

2 082

1 176

(911)

(457)

4 274

(29 900)

(26 994)

Dividend income

6 667

—

6 704

—

213

6 917

Funding and other net

related income

—

1 668

—

1 668

(1 718)

26 777

1 728

26 787

1 559

(17 822)

10 579

2021

Realised

9 363

971

10 347

6 121

(1 755)

23 165

37 878

Unrealised*

6 449

8 229

(35)

14 643

(2 967)

(3 141)

(28 823)

(20 288)

Dividend income

3 906

—

3 927

—

3 927

Funding and other net

related income

—

2 303

—

2 303

15 833

13 106

(22)

28 917

3 154

(2 593)

(5 658)

23 820

*In a year of realisation, any prior period mark-to-market gains/(losses) recognised are reversed in the unrealised line item.

5. Other operating income

For the year to 31 March

2022

2021

£’000

Losses on realisation of properties

—

(73)

Unrealised gains on other investments

1 786

1 612

Income from operating leases

1 539

4 245

Income from government grants*

7 833

4 218

11 158

10 002

*Government grants income includes Research and Development Expenditure Credits and income from the Capability and Innovation Fund from the

Banking Competition Remedies Limited.

6. Expected credit loss impairment charges or (release)

For the year to 31 March

2022

2021

£’000

Expected credit losses have arisen on the following items:

Loans and advances to customers

22 024

65 270

Other loans and advances

(80)

Other balance sheet assets

3 824

604

Off-balance sheet commitments and guarantees

(499)

5 340

25 363

71 134

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

203

7. Operating costs

For the year to 31 March

2022

2021

£’000

Staff compensation costs

541 781

565 545

Salaries and wages (including directors’ remuneration)**

442 766

468 964

Share-based payment expense

21 476

22 777

Social security costs

49 335

44 812

Pensions and provident fund contributions

28 204

28 992

Training and other costs

11 986

3 857

Staff costs

553 767

569 402

Premises expenses

40 813

41 060

Premises expenses (excluding depreciation and impairments)

16 675

17 665

Premises depreciation and impairments

24 138

23 395

Equipment expenses (excluding depreciation)

54 266

49 305

Business expenses*

90 407

79 324

Marketing expenses

13 028

8 639

Depreciation, amortisation and impairment of equipment, software and intangibles

8 005

10 028

760 286

757 758

The following amounts were paid by the Group to the auditors in respect of the audit of the financial

statements and for other services provided to the Group:

Ernst & Young fees

Total fees paid to the audit firm by virtue of being the Group’s auditor

6 158

5 781

Audit of the Group’s accounts

2 891

2 619

Audit of the Group’s subsidiaries pursuant to legislation

2 265

2 450

Audit related assurance services

1 002

712

Total fees paid to the audit firm not in the capacity of being the Group’s auditor

362

379

Audit related assurance services

228

244

Tax compliance services

—

Other non-audit services

134

130

Total

6 520

6 160

*Business expenses mainly comprise insurance costs, consulting and professional fees, travel expenses and subscriptions.

**Details of the directors’ emoluments, pensions and their interests are disclosed in the remuneration report on pages 149 to 165.

During the year, the average number of permanent employees was 3 432 (2021: 3 729).

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

204

8. Share-based payments

The Investec Group operates share option and long-term share incentive plans for employees, the majority of which are on an

equity-settled basis in Investec plc but in accordance with IFRS 2 are cash-settled in the Company as set out in the accounting

policies on pages 188 to 199. The purpose of the staff share schemes is to promote an esprit de corps within the organisation,

create an awareness of Investec Group’s performance and provide an incentive to maximise individual and Group performance

by allowing all staff to share in the risks and rewards of the Group.

Further information on the Group share options and long-term incentive plans is provided on our website.

For the year to 31 March

2022

2021

£’000

Share-based payment expense:

Cash-settled (equity-settled at Investec plc)

21 476

22 777

Group

For the year to 31 March

2022

2021

£’000

Weighted average fair value of awards granted in the year

UK schemes

39 856

9 627

2022

2021

Details of awards outstanding during the year

Number

of share

awards

Weighted

average

exercise

price

Number

of share

awards

Weighted

average

exercise

price

Outstanding at the beginning of the year

18 416 191

0.02

17 751 435

0.02

Sale of business

(94 076)

0.00

—

0.00

Transfer of employees during the year

(68 376)

0.00

—

0.00

Granted during the year

13 332 426

0.00

6 552 280

0.00

Exercised during the year^

(4 835 026)

0.00

(4 902 226)

0.00

Awards forfeited during the year

(1 810 130)

0.04

(985 298)

0.21

Outstanding at the end of the year

24 941 009

0.00

18 416 191

0.01

Exercisable at the end of the year

481 443

—

396 484

—

^The weighted average share price during the year was £3.40 (2021: £1.73).

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

205

8. Share-based payments (continued)

Additional information relating to awards:

2022

2021

Options with strike prices

Exercise price range

£3.58 - £4.18

Weighted average remaining contractual life

0.22 years

0.71 years

Long-term incentive grants with no strike price

Exercise price range

£nil

Weighted average remaining contractual life

2.15 years

1.93 years

Weighted average fair value of awards and long-term grants at measurement date

£2.99

£1.47

The fair values of awards granted were calculated using a Black-Scholes option pricing model. For

awards granted during the year, the inputs into the model were as follows:

– Share price at date of grant

£3.06 - £3.80

£1.56 - £1.93

– Exercise price

£nil

– Expected volatility

n/a

– Award life

3 - 7.01 years

0.50 - 7 years

– Expected dividend yields

n/a

– Risk-free rate

n/a

Expected volatility was determined based on the implied volatility levels quoted by the derivatives trading desk. The expected

volatility is based on the respective share price movement over the last six months but also includes an element of forward

expectation.

The expected attrition rates used were determined based on historical Group data with an adjustment to actual attrition

on final vesting.

Company

For the year to 31 March

2022

2021

£’000

UK schemes

34 627

6 771

2022

2021

Details of awards outstanding during the year

Number of

awards

Weighted

average

exercise

price

Number

of share

awards

Weighted

average

exercise

price

Outstanding at the beginning of the year

11 556 757

0.00

10 421 333

0.00

Transfer of employees during the year

25 014

0.00

—

0.00

Granted during the year

11 612 608

0.00

4 558 796

0.00

Exercised during the year^

(2 308 461)

0.00

(2 642 459)

0.00

Awards forfeited during the year

(1 506 038)

0.00

(780 913)

0.01

Outstanding at the end of the year

19 379 880

0.00

11 556 757

0.00

Exercisable at the end of the year

217 307

—

137 902

—

^The weighted average share price during the year was £3.40 (2021: £1.73).

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

206

8. Share-based payments (continued)

Additional information relating to awards:

2022

2021

Company

Options with strike prices

Exercise price range

n/a

Weighted average remaining contractual life

n/a

Long-term incentive grants with no strike price

Exercise price range

£nil

Weighted average remaining contractual life

2.28 years

2.04 years

Weighted average fair value of awards and long-term grants at measurement date

£3.00

£1.48

The fair values of awards granted were calculated using a Black-Scholes option pricing model. For

awards granted during the year, the inputs into the model were as follows:

– Share price at date of grant

£3.06- £3.80

£1.56- £1.93

– Exercise price

£nil

– Expected volatility

n/a

– Award life

3- 7.01 years

0.50 - 7 years

– Expected dividend yields

n/a

– Risk-free rate

n/a

Expected volatility was determined based on the implied volatility levels quoted by the derivatives trading desk. The expected

volatility is based on the respective share price movement over the last six months, but also includes an element of forward

expectation.

The expected attrition rates used were determined based on historical Group data with an adjustment to actual attrition on final

vesting.

9. Long-term employment benefits

Group

In March 2020, as part of the Investec Asset Management Limited (IAM) demerger, each participant of the Investec Group share

option and long-term share incentive plans for employees received the right to receive one Ninety One plc share award for every

two Investec plc share awards they held. The Ninety One plc share awards were granted on the same terms and vesting period

as the Investec plc awards they related to.

Investec plc has an obligation to deliver Ninety One plc shares to the holders of Investec plc share awards. Accordingly, this

obligation was classified and measured as another long-term liability in terms of IAS 19 Employee Benefits (IAS 19). The initial

liability of £5 354 000 was calculated as the fair value of the liability at the date of demerger for the portion of the awards

already vested. The total value of the liability represented past service cost and as a result was accounted for in retained

income. The liability was subsequently measured at fair value through profit or loss.

IAS 19 long-term employment benefit liability fair value movement recognised in the income statement for the year ended

31 March 2022 was £3.0 million (31 March 2021: £6.6 million).

2022

2021

Details of awards outstanding during the year

Number of

Ninety One

awards

Weighted

average

exercise

price

Number of

Ninety One

awards

Weighted

average

exercise

price

Outstanding at the beginning of the year

5 600 071

0.00

7 625 659

0.00

Sale of business

(30 412)

0.00

—

0.00

Transfer of employees during the year

(14 039)

0.00

1 863

0.00

Exercised during the year

(1 677 112)

0.00

(1 719 729)

0.00

Awards forfeited during the year

(258 197)

0.12

(307 722)

0.26

Outstanding at the end of the year

3 620 311

0.01

5 600 071

0.00

Exercisable at the end of the year

234 104

—

197 285

—

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

207

9. Long-term employment benefits (continued)

For the liability calculated, the inputs into the model were as follows:

Additional information relating to awards:

2022

2021

The fair value of the liability was calculated by using the Black-Scholes option pricing model.

– Listed share price at 31 March

£2.55

£2.39

– Exercise price

Nil, £2.90 - £3.39

– Expected volatility

35.0%

35.4%

– Award life

0 - 4.42 years

0 - 5.42 years

– Expected dividend yields

0% - 7.41%

0% - 4.66%

– Risk-free rate

0.69% - 2.03%

0% - 0.73%

Company

In March 2020, as part of the Investec Asset Management Limited (IAM) demerger, each participant of the Investec Group share

option and long-term share incentive plans for employees, received the right to receive one Ninety One plc share award for

every two Investec plc share awards they held. The Ninety One plc share awards were granted on the same terms and vesting

period as the Investec plc awards they related to.

Investec plc has an obligation to deliver Ninety One plc shares to the holders of Investec plc share awards, accordingly this

obligation was classified and measured as another long-term liability in terms of IAS 19 Employee Benefits (IAS 19). The initial

liability of £3 987 000 was calculated as the fair value of the liability at the date of demerger for the portion of the awards

already vested. The total value of the liability represented past service cost and resultingly was accounted for in retained

income. The liability was subsequently measured at fair value through profit or loss.

IAS 19 long-term employment benefit liability fair value movement recognised in the income statement for the year ended

31 March 2022 was £2.0 million (31 March 2021: £4.4 million).

2022

2021

Details of awards outstanding during the year

Number of

Ninety One

awards

Weighted

average

exercise

price

Number of

Ninety One

awards

Weighted

average

exercise

price

Outstanding at the beginning of the year

3 739 502

0.00

5 208 521

0.00

Transfer of employees during the year

64 071

0.00

(13 507)

0.00

Exercised during the year^

(1 186 885)

0.00

(1 210 348)

0.00

Awards forfeited during the year

(196 088)

0.00

(245 164)

0.01

Outstanding at the end of the year

2 420 600

0.00

3 739 502

0.00

Exercisable at the end of the year

121 535

—

109 955

—

For the liability calculated, the inputs into the model were as follows:

Additional information relating to awards:

2022

2021

The fair value of the liability was calculated by using the Black-Scholes option pricing model.

– Listed share price at 31 March

£2.55

£2.39

– Exercise price

£nil

– Expected volatility

35.0%

35.4%

– Award life

0 - 4.42 years

0 - 5.42 years

– Expected dividend yields

0% - 6.97%

0% - 4.63%

– Risk-free rate

0.85% - 2.03%

0% - 0.73%

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

208

10. Taxation

For the year to 31 March

2022

2021

£’000

Income statement taxation charge

Current taxation

Current taxation on income for the year

60 793

11 290

Adjustments in respect of prior years

(390)

Corporation tax before double tax relief

60 866

10 900

Double tax relief

(436)

—

60 430

10 900

Europe

1 202

1 152

Australia

329

Other*

3 055

931

4 586

2 157

Total current taxation

65 016

13 057

Deferred taxation

(22 138)

4 665

Europe

(2 447)

(116)

Australia

1 008

13 722

Other

(776)

(1 087)

Total deferred taxation

(24 353)

17 184

Total taxation charge for the year

40 663

30 241

Total taxation charge for the year comprises:

Taxation on operating profit before goodwill

42 174

31 270

Taxation on acquired intangibles, goodwill and disposal of subsidiaries

(1 511)

(1 029)

40 663

30 241

Deferred taxation comprises:

Origination and reversal of temporary differences

(9 387)

16 174

Changes in taxation rates

(12 655)

154

Adjustment in respect of prior years

(2 311)

856

(24 353)

17 184

The deferred taxation (credit)/charge in the income statement arose from:

Deferred capital allowances

(8 371)

(2 862)

Income and expenditure accruals

(2 644)

15 899

Asset in respect of unexpired options

(13 385)

(2 233)

Unrealised fair value adjustment on financial instruments

(2 987)

620

Movement in deferred tax assets related to assessed losses

4 120

5 925

Asset in respect of pension surplus

(68)

—

Deferred tax on acquired intangibles

(1 149)

(2 379)

Other temporary differences

131

2 214

(24 353)

17 184

The deferred taxation charge in OCI/equity arose from:

Asset in respect of unexpired options

(4 538)

(107)

Unrealised fair value adjustment on financial instruments

8 215

3 243

3 677

3 136

*Where Other largely includes India and North America.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

209

10. Taxation (continued)

For the year to 31 March

2022

2021

£’000

The rates of corporation tax for the relevant years are:

Europe (average)

Australia

Profit before taxation

273 544

93 189

Taxation on profit before taxation

40 663

30 241

Effective tax rate

14.9%

32.5%

The taxation charge on activities for the year is different from the standard rate as detailed below:

Taxation on profit on ordinary activities before taxation at UK rate of 19% (2021: 19%)

51 973

17 706

Taxation adjustments relating to foreign earnings

(1 778)

2 982

Taxation relating to prior years

(2 238)

466

Impairment of goodwill and non-operating items

(199)

1 695

Share options accounting expense

(4 285)

(188)

Non-taxable income

(865)

(4 616)

Net other permanent differences

1 090

281

Bank surcharge

10 481

—

Capital gains – non-taxable/covered by losses

(2 160)

(1 907)

Movement in unrecognised trading losses

1 299

13 668

Change in tax rate

(12 655)

154

Total taxation charge as per income statement

40 663

30 241

Other comprehensive income taxation effects

(Gains)/losses on realisation of debt instruments at FVOCI recycled through the income statement

(307)

821

Pre-taxation

(429)

1 013

Taxation effect

122

(192)

Fair value movements on debt instruments at FVOCI taken directly to other comprehensive income

(2 276)

(228)

Pre-taxation

(2 657)

(93)

Taxation effect

381

(135)

Own credit risk

11 059

Pre-taxation

15 792

417

Taxation effect

(4 733)

(355)

Statement of changes in equity taxation effects

Additional Tier 1 capital

(16 875)

Pre-taxation

(16 875)

Taxation effect

—

Share-based payment adjustment

4 538

107

Pre-taxation

—

Taxation effect

4 538

107

IFRS 9 transitional adjustments

617

380

Pre-taxation

—

Taxation effect

617

380

The UK Government has also announced on 27 October 2021 that the current bank surcharge rate of 8% to be reduced to 3%

and the surcharge allowances available for banking group to be increased to £100 million from £25 million with effect from 1 April

2023. This will increase the combined rate of corporation tax applicable to banking entities from 27% to 28% with effect from 1

April 2023.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

210

11. Dividends

For the year to 31 March

2022

2021

£’000

Ordinary dividends

Dividends for current year

56 500

11 000

Total dividends attributable to ordinary shareholder

56 500

11 000

For the year to 31 March

2022

2021

£’000

Dividend attributable to Additional Tier 1 securities

16 875

The £200 000 000 Fixed Rate Reset Perpetual Additional Tier 1 Write Down Capital Securities (AT1 securities), issued

on 16 October 2018, pay a distribution rate of 6.75% per annum quarterly.

A further £50 000 000 Fixed Rate Reset Perpetual Additional Tier 1 Write Down Capital Securities issued on 22 January 2019,

pay a distribution rate of 6.75% per annum quarterly after the initial short period distribution paid on 5 March 2019. These notes

were consolidated to form a single series and are fungible with the £200 000 000 2024 notes issued on 16 October 2018.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

211

12. Analysis of income and impairments by category of financial instrument

At fair value through profit or loss

IFRS 9 mandatory

For the year to 31 March

Trading**

Non-trading**

Designated at

inception

£’000

2022

Net interest income

(17 200)

54 104

(26 472)

Fee and commission income

16 822

1 407

—

Fee and commission expense

—

Investment income

1 728

25 682

584

Share of post-taxation profit of associates and joint venture holdings

—

Trading income/(loss) arising from

– customer flow

34 630

30 413

(4 671)

– balance sheet management and other trading activities

(102)

(6 580)

7 344

Other operating income

—

Total operating income/(expense) before expected credit loss

35 878

105 026

(23 215)

Expected credit loss impairments charges*

—

Operating income/(expense)

35 878

105 026

(23 215)

For the year to 31 March

Trading**

Non-trading**

Designated at

inception

£’000

2021

Net interest income

(25 802)

61 871

(29 964)

Fee and commission income

17 766

3 162

—

Fee and commission expense

—

Investment income

(22)

8 767

1 977

Share of post-taxation profit of associates and joint venture holdings

—

Trading income/(loss) arising from

– customer flow

31 165

(7 025)

(35 165)

– balance sheet management and other trading activities

2 097

(3 951)

8 012

Other operating income

—

Total operating income/(expense) before expected credit loss

25 204

62 824

(55 140)

Expected credit loss impairments charges*

—

Operating income/(expense)

25 204

62 824

(55 140)

*Includes off-balance sheet items.

**Fair value through profit and loss income statement items have been split as trading and non-trading, as defined by regulatory rules for the trading book

and banking book requirements respectively. Trading consists of income and expenses from positions held for trading intent or to hedge elements of the

trading book. Non-trading consists of income and expenses from positions that are expected to be held to maturity.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

212

At fair value

through

comprehensive

income

Debt

instruments

with a dual

business

model

Amortised

cost

Non-financial

instruments

Other fee

income and

expenses

Total

36 558

446 055

1 538

1 725

496 308

—

68 661

—

422 039

508 929

—

(2 162)

—

(12 535)

(14 697)

1 134

1 214

(19 763)

—

10 579

—

1 988

—

1 988

—

60 372

—

(1 967)

—

(1 305)

—

1 539

—

9 619

11 158

37 692

513 340

(16 237)

420 848

1 073 332

—

(25 363)

—

(25 363)

37 692

487 977

(16 237)

420 848

1 047 969

Debt

instruments

with a dual

business

model

Amortised

cost

Non-financial

instruments

Other fee

income and

expenses

Total

28 312

380 161

2 170

(2 657)

414 091

—

66 675

—

412 068

499 671

—

(2 034)

—

(11 167)

(13 201)

(1 012)

2 507

11 603

—

23 820

—

1 768

—

1 768

—

(11 025)

—

5 048

—

11 206

—

4 246

(3)

5 759

10 002

27 300

456 603

15 538

404 003

936 332

—

(71 134)

—

(71 134)

27 300

385 469

15 538

404 003

865 198

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

213

13. Analysis of financial assets and liabilities by category of financial instruments

At fair value through profit or loss

IFRS 9 mandatory

At 31 March

Trading*

Non–trading*

Designated

at initial

recognition

£’000

Group

2022

Assets

Cash and balances at central banks

—

Loans and advances to banks

—

Reverse repurchase agreements and cash collateral on securities borrowed

89 889

540 570

38 649

Sovereign debt securities

—

33 658

—

Bank debt securities

—

Other debt securities

—

144 048

—

Derivative financial instruments

717 457

—

Securities arising from trading activities

138 032

4 780

20 353

Investment portfolio

—

333 221

—

Loans and advances to customers

—

609 083

—

Other loans and advances

—

Other securitised assets

—

93 087

Interests in associated undertakings and joint venture holdings

—

Deferred taxation assets

—

Current taxation assets

—

Other assets

9 606

—

Property and equipment

—

Goodwill

—

Software

—

Other acquired intangible assets

—

954 984

1 665 360

152 089

Liabilities

Deposits by banks

—

Derivative financial instruments

863 296

—

Other trading liabilities

42 944

—

Repurchase agreements and cash collateral on securities lent

—

Customer accounts (deposits)

—

Debt securities in issue

—

46 192

Liabilities arising on securitisation of other assets

—

95 885

Current taxation liabilities

—

Deferred taxation liabilities

—

Other liabilities

—

906 239

—

142 077

Subordinated liabilities

—

906 239

—

142 077

*Fair value through profit and loss balance sheet positions have been split as trading and non-trading, as defined by regulatory rules for the trading book

and banking book requirements respectively. Trading consists of positions held for trading intent or to hedge elements of the trading book. Non-trading

consists of positions that are expected to be held to maturity.

For more information on hedges, please refer to note 47 on pages 266 to 269.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

214

At fair value

through

comprehensive

income

Debt instrument

with dual

business model

Total

instruments at

fair value

Amortised

cost

Non-financial

instruments or

scoped out of

IFRS 9

Total

—

5 379 994

—

5 379 994

—

1 467 039

—

1 467 039

—

669 108

778 365

—

1 447 473

1 132 119

1 165 777

—

1 165 777

61 714

—

61 714

—

144 048

293 601

—

437 649

—

717 457

—

717 457

—

163 165

—

163 165

—

333 221

—

333 221

685 386

1 294 469

13 132 006

—

14 426 475

—

147 025

—

147 025

—

93 087

—

93 087

—

11 444

—

109 542

—

15 727

—

9 606

822 300

329 643

1 161 549

—

155 055

—

244 072

—

7 066

—

44 145

1 879 219

4 651 652

22 020 330

916 694

27 588 676

—

2 026 573

—

2 026 573

—

863 295

—

863 295

—

42 944

—

42 944

—

154 828

—

154 828

—

18 616 233

—

18 616 233

—

46 192

1 074 649

—

1 120 841

—

95 885

—

95 885

—

2 082

—

805 880

554 191

1 360 071

—

1 048 316

22 678 163

556 273

24 282 752

—

758 739

—

758 739

—

1 048 316

23 436 902

556 273

25 041 491

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

215

13. Analysis of financial assets and liabilities by category of financial instruments (continued)

At fair value through profit or loss

IFRS 9 mandatory

At 31 March

Trading*

Non–trading*

Designated

at initial

recognition

£’000

Group

2021

Assets

Cash and balances at central banks

—

Loans and advances to banks

—

Reverse repurchase agreements and cash collateral on securities borrowed

38 690

517 037

119 714

Sovereign debt securities

—

36 675

—

Bank debt securities

—

Other debt securities

—

203 338

—

Derivative financial instruments

773 334

—

Securities arising from trading activities

253 932

5 160

22 553

Investment portfolio

—

350 941

—

Loans and advances to customers

—

511 604

—

Other loans and advances

—

Other securitised assets

—

107 259

Interests in associated undertakings and joint venture holdings

—

Deferred taxation assets

—

Current taxation assets

—

Other assets

6 857

—

Property and equipment

—

Goodwill

—

Software

—

Other acquired intangible assets

—

1 072 813

1 624 755

249 526

Liabilities

Deposits by banks

—

294

Derivative financial instruments

916 352

—

Other trading liabilities

49 055

—

Repurchase agreements and cash collateral on securities lent

—

Customer accounts (deposits)

—

Debt securities in issue

—

118 690

Liabilities arising on securitisation of other assets

—

108 281

Current taxation liabilities

—

Deferred taxation liabilities

—

Other liabilities

—

965 407

—

227 265

Subordinated liabilities

—

334 804

965 407

—

562 069

*Fair value through profit and loss balance sheet positions have been split as trading and non-trading, as defined by regulatory rules for the trading book

and banking book requirements respectively. Trading consists of positions held for trading intent or to hedge elements of the trading book. Non-trading

consists of positions that are expected to be held to maturity.

For more information on hedges, please refer to note 47 on pages 266 to 269.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

216

At fair value

through

comprehensive

income

Debt instrument

with dual

business model

Total

instruments at

fair value

Amortised

cost

Non-financial

instruments or

scoped out of

IFRS 9

Total

—

3 043 034

—

3 043 034

—

1 383 602

—

1 383 602

—

675 441

1 389 791

—

2 065 232

1 071 578

1 108 253

—

1 108 253

43 781

4 263

—

48 044

—

203 338

505 507

—

708 845

—

773 334

—

773 334

—

281 645

—

281 645

—

350 941

—

350 941

534 059

1 045 663

11 270 650

—

12 316 313

—

162 456

—

162 456

—

107 259

—

107 259

—

4 213

—

109 849

—

42 620

—

6 857

951 818

437 240

1 395 915

—

185 502

—

244 072

—

7 791

—

56 618

1 649 418

4 596 512

18 711 121

1 087 905

24 395 538

—

294

1 351 985

—

1 352 279

—

916 352

—

916 352

—

49 055

—

49 055

—

157 357

—

157 357

—

16 240 634

—

16 240 634

—

118 690

1 074 688

—

1 193 378

—

108 281

—

108 281

—

37 287

—

20 652

—

612 006

571 856

1 183 862

—

1 192 672

19 436 670

629 795

21 259 137

—

334 804

436 677

—

771 481

—

1 527 476

19 873 347

629 795

22 030 618

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

217

13. Analysis of financial assets and liabilities by category of financial instruments (continued)

At fair value through profit or loss

IFRS 9 mandatory

At 31 March

Trading*

Non–trading*

Designated at

initial

recognition

£’000

Company

2022

Assets

Cash and balances at central banks

—

Loans and advances to banks

—

Reverse repurchase agreements and cash collateral on securities borrowed

89 889

540 570

38 649

Sovereign debt securities

—

33 658

—

Bank debt securities

—

Other debt securities

—

143 866

1 261

Derivative financial instruments

672 124

—

Securities arising from trading activities

138 032

4 780

20 353

Investment portfolio

—

70 229

—

Loans and advances to customers

—

508 076

—

Other loans and advances

—

572

—

Other securitised assets

—

5 083

Interests in associated undertakings and joint venture holdings

—

Deferred taxation assets

—

Current taxation assets

—

Other assets

9 606

—

Property and equipment

—

Software

—

Investment in subsidiaries

—

909 651

1 301 751

65 346

Liabilities

Deposits by banks

—

Derivative financial instruments

828 405

—

Other trading liabilities

42 944

—

Repurchase agreements and cash collateral on securities lent

—

Customer accounts (deposits)

—

Debt securities in issue

—

46 192

Current taxation liabilities

—

Deferred taxation liabilities

—

Other liabilities

—

871 349

—

46 192

Subordinated liabilities

—

871 349

—

46 192

*Fair value through profit and loss balance sheet positions have been split as trading and non-trading, as defined by regulatory rules for the trading book

and banking book requirements respectively. Trading consists of positions held for trading intent or to hedge elements of the trading book. Non-trading

consists of positions that are expected to be held to maturity.

For more information on hedges, please refer to note 47 on pages 266 to 269.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

218

At fair value

through

comprehensive

income

Debt instrument

with dual

business model

Total

instruments at

fair value

Amortised

cost

Non-financial

instruments or

scoped out of

IFRS 9

Total

—

5 326 533

—

5 326 533

—

535 738

—

535 738

—

669 108

778 365

—

1 447 473

289 836

323 494

—

323 494

57 844

—

57 844

—

145 127

998 897

—

1 144 024

—

672 124

—

672 124

—

163 165

—

163 165

—

70 229

—

70 229

685 386

1 193 462

9 736 981

—

10 930 443

—

572

3 026 590

—

3 027 162

—

5 083

—

5 083

—

2 167

—

70 214

—

28 997

—

9 606

531 429

73 998

615 033

—

70 514

—

827 599

1 033 066

3 309 814

20 934 533

1 073 523

25 317 870

—

2 214 555

—

2 214 555

—

828 405

—

828 405

—

42 944

—

42 944

—

197 903

—

197 903

—

17 290 014

—

17 290 014

—

46 192

1 073 466

—

1 119 658

—

482 028

194 381

676 409

—

917 541

21 257 966

194 381

22 369 888

—

758 739

—

758 739

—

917 541

22 016 705

194 381

23 128 627

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

219

13. Analysis of financial assets and liabilities by category of financial instruments (continued)

At fair value through profit or loss

IFRS 9 mandatory

At 31 March

Trading*

Non–trading*

Designated

at initial

recognition

£’000

Company

2021

Assets

Cash and balances at central banks

—

Loans and advances to banks

—

Reverse repurchase agreements and cash collateral on securities borrowed

38 690

517 037

119 714

Sovereign debt securities

—

36 675

—

Bank debt securities

—

Other debt securities

—

203 156

1 410

Derivative financial instruments

742 869

—

Securities arising from trading activities

253 932

1 589

22 553

Investment portfolio

—

67 948

—

Loans and advances to customers

—

485 299

—

Other loans and advances

—

59 157

—

Other securitised assets

—

5 774

Interests in associated undertakings and joint venture holdings

—

Deferred taxation assets

—

Current taxation assets

—

Other assets

6 857

—

Property and equipment

—

Software

—

Investment in subsidiaries

—

1 042 348

1 370 861

149 451

Liabilities

Deposits by banks

—

Derivative financial instruments

885 793

—

Other trading liabilities

49 055

—

Repurchase agreements and cash collateral on securities lent

—

Customer accounts (deposits)

—

Debt securities in issue

—

118 690

Current taxation liabilities

—

Deferred taxation liabilities

—

Other liabilities

—

934 848

—

118 690

Subordinated liabilities

—

334 804

934 848

—

453 494

*Fair value through profit and loss balance sheet positions have been split as trading and non-trading, as defined by regulatory rules for the trading book

and banking book requirements respectively. Trading consists of positions held for trading intent or to hedge elements of the trading book. Non-trading

consists of positions that are expected to be held to maturity.

For more information on hedges, please refer to note 47 on pages 266 to 269.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

220

At fair value

through

comprehensive

income

Debt instrument

with dual

business model

Total

instruments at

fair value

Amortised

cost

Non-financial

instruments or

scoped out of

IFRS 9

Total

—

2 993 119

—

2 993 119

—

454 596

—

454 596

—

675 441

1 389 791

—

2 065 232

505 341

542 016

—

542 016

43 781

—

43 781

—

204 566

1 197 141

—

1 401 707

—

742 869

—

742 869

—

278 074

—

278 074

—

67 948

—

67 948

534 059

1 019 358

8 340 732

—

9 360 090

—

59 157

2 754 572

—

2 813 729

—

5 774

—

5 774

—

584

—

70 858

—

39 236

—

6 857

632 593

62 901

702 351

—

84 837

—

545

—

845 839

1 083 181

3 645 841

17 762 544

1 104 800

22 513 185

—

1 451 745

—

1 451 745

—

885 793

—

885 793

—

49 055

—

49 055

—

157 357

—

157 357

—

15 493 774

—

15 493 774

—

118 690

1 044 360

—

1 163 050

—

140

—

6 288

—

375 345

153 202

528 547

—

1 053 538

18 522 581

159 630

19 735 749

—

334 804

436 677

—

771 481

—

1 388 342

18 959 258

159 630

20 507 230

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

221

14. Fair value hierarchy

The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair value

measurements are categorised into different levels in the fair value hierarchy based on the inputs to the valuation technique

used. The different levels are identified as follows:

Level 1 – quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly

(i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 –inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Fair value category

At 31 March

Total

instruments at

fair value

Level 1

Level 2

Level 3

£’000

Group

2022

Assets

Reverse repurchase agreements and cash collateral

on securities borrowed

669 108

—

669 108

—

Sovereign debt securities

1 165 777

—

Bank debt securities

61 714

—

Other debt securities

144 048

—

39 017

105 031

Derivative financial instruments

717 457

673 488

43 950

Securities arising from trading activities

163 165

158 213

172

4 780

Investment portfolio

333 221

2 034

6 552

324 635

Loans and advances to customers*

1 294 469

—

82 621

1 211 848

Other securitised assets

93 087

—

93 087

Other assets

9 606

—

4 651 652

1 397 363

1 470 958

1 783 331

Liabilities

Derivative financial instruments

863 295

—

817 526

45 769

Other trading liabilities

42 944

—

Debt securities in issue

46 192

—

46 192

—

Liabilities arising on securitisation of other assets

95 885

—

95 885

1 048 316

42 944

863 718

141 654

Net assets at fair value

3 603 336

1 354 419

607 240

1 641 677

*Loans and advances to customers at fair value include instruments where the business model is either to sell the loan or where the business model is to

hold to collect the contractual cash flows but the loan has failed the SPPI test.

Transfers between level 1 and level 2

During the current and prior year there were no transfers between level 1 and level 2.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

222

14. Fair value hierarchy (continued)

Fair value category

At 31 March

Total

instruments at

fair value

Level 1

Level 2

Level 3

£’000

Group

2021

Assets

Reverse repurchase agreements and cash collateral

on securities borrowed

675 441

—

675 441

—

Sovereign debt securities

1 108 253

—

Bank debt securities

43 781

—

Other debt securities

203 338

—

99 934

103 404

Derivative financial instruments

773 334

746 510

26 805

Securities arising from trading activities

281 645

275 526

959

5 160

Investment portfolio

350 941

9 149

4 841

336 951

Loans and advances to customers*

1 045 663

—

1 045 663

Other securitised assets

107 259

—

107 259

Other assets

6 857

—

4 596 512

1 443 585

1 527 685

1 625 242

Liabilities

Deposits by banks

294

—

294

Derivative financial instruments

916 352

—

888 612

27 740

Other trading liabilities

49 055

38 399

10 656

—

Debt securities in issue

118 690

—

118 690

—

Liabilities arising on securitisation of other assets

108 281

—

108 281

Subordinated liabilities

334 804

—

1 527 476

373 203

1 017 958

136 315

Net assets at fair value

3 069 036

1 070 382

509 727

1 488 927

*Loans and advances to customers at fair value include instruments where the business model is either to sell the loan or where the business model is to

hold to collect the contractual cash flows but the loan has failed the SPPI test.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

223

14. Fair value hierarchy (continued)

Level 3 instruments

The following table is a reconciliation of the opening balances to the closing balances for the fair value measurements in level 3

of the fair value hierarchy:

For the year to

Investment

portfolio

Loans and

advances to

customers

Other

securitised

assets

Other balance

sheet assets1

Total

£’000

Group

Assets

Balance as at 1 April 2020

339 086

1 067 376

106 218

178 840

1 691 520

Total gains or (losses)

1 809

21 988

8 732

11 787

44 316

In the income statement

1 809

24 180

8 732

11 787

46 508

In the statement of comprehensive income

—

(2 192)

—

(2 192)

Purchases

49 701

945 556

—

9 054

1 004 311

Sales

(27 327)

(495 008)

—

(26 367)

(548 702)

Issues

—

Settlements

(17 617)

(447 858)

(7 691)

(29 409)

(502 575)

Transfers into level 3

—

7 802

—

5 033

12 835

Foreign exchange adjustments

(8 701)

(54 193)

—

(13 606)

(76 500)

Balance as at 31 March 2021

336 951

1 045 663

107 259

135 369

1 625 242

Total gains or (losses)

22 677

63 202

(657)

19 577

104 799

In the income statement

22 677

63 768

(657)

19 577

105 365

In the statement of comprehensive income

—

(566)

—

(566)

Purchases

33 602

1 845 044

—

59 165

1 937 811

Sales

(66 682)

(1 079 005)

—

(19 783)

(1 165 470)

Settlements

(8 498)

(695 450)

(13 515)

(49 392)

(766 855)

Transfers into level 3

621

—

621

Foreign exchange adjustments

5 964

32 394

—

8 825

47 183

Balance as at 31 March 2022

324 635

1 211 848

93 087

153 761

1 783 331

1.Comprises level 3 other debt securities, derivative financial instruments and securities arising from trading.

The Group transfers between levels within the fair value hierarchy when the observability of inputs change, or if the valuation

methods change.

For the year to 31 March 2022, investment portfolio of £0.6 million was transferred from level 2 to level 3. In the prior year, loans

and advances to customers of £7.8 million; other debt securities of £4.6 million; and derivative assets of £0.4 million were

transferred from level 2 to level 3. The valuation methodologies were reviewed and unobservable inputs were used to determine

the fair value.

For the year to

Liabilities

arising on

securitisation

of other assets

Other

balance

sheet

liabilities2

Total

£’000

Group

Liabilities

Balance as at 1 April 2020

110 679

27 017

137 696

Total (gains) or losses

5 460

4 927

10 387

In the income statement

5 460

4 927

10 387

Settlements

(7 858)

(1 188)

(9 046)

Foreign exchange adjustments

—

(2 722)

Balance as at 31 March 2021

108 281

28 034

136 315

Total (gains) or losses

(2 094)

16 148

14 054

In the income statement

(2 094)

16 148

14 054

Settlements

(10 303)

(270)

(10 573)

Foreign exchange adjustments

1 857

1 858

Balance as at 31 March 2022

95 885

45 769

141 654

2.Comprises level 3 deposits by banks and derivative financial instruments.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

224

14. Fair value hierarchy (continued)

The following table quantifies the gains or (losses) included in the income statement and other comprehensive income

recognised on level 3 financial instruments:

For the year to 31 March

Total

Realised

Unrealised

£’000

Group

2022

Total gains or (losses) included in the income statement for the year

Net interest income

65 943

57 918

8 025

Investment income*

27 562

52 666

(25 104)

Trading income/(loss) arising from customer flow

(2 194)

(491)

(1 703)

91 311

110 093

(18 782)

Total gains or (losses) included in other comprehensive income for the year

Gains on realisation on debt instruments at FVOCI recycled through the income

statement

440

—

Fair value movements on debt instruments at FVOCI taken directly

to other comprehensive income

(566)

—

(566)

(126)

440

(566)

2021

Total gains or (losses) included in the income statement for the year

Net interest income

62 643

52 085

10 558

Investment income*

(24 133)

2 158

(26 291)

Trading income/(loss) arising from customer flow

(2 389)

428

(2 817)

36 121

54 671

(18 550)

Total gains or (losses) included in other comprehensive income for the year

Losses on realisation on debt instruments at FVOCI recycled through the income

statement

(1 009)

—

Fair value movements on debt instruments at FVOCI taken directly

to other comprehensive income

(2 192)

—

(2 192)

(3 201)

(1 009)

(2 192)

*Included within the investment income statement balance are unrealised gains of £0.7 million (31 March 2021: unrealised gains of £10.3 million) presented

within operational items in the income statement.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

225

14. Fair value hierarchy (continued)

Level 2 financial assets and financial liabilities

The following table sets out the Group’s principal valuation techniques as at 31 March 2022 used in determining the fair value of

its financial assets and financial liabilities that are classified within level 2 of the fair value hierarchy:

VALUATION BASIS/TECHNIQUES

MAIN INPUTS

Assets

Reverse repurchase agreements and

cash collateral on securities borrowed

Discounted cash flow model

Discount rates

Other debt securities

Discounted cash flow model

Discount rates, swap curves and NCD

curves, external prices and broker

quotes

Derivative financial instruments

Discounted cash flow model, Hermite

interpolation and industry standard

derivative pricing models including

Black-Scholes and Local Volatility

Discount rate, risk-free rate, volatilities,

forex forward points and spot rates,

interest rate swap curves and credit

curves

Securities arising from trading activities

Discounted cash flow model, Hermite

interpolation and industry standard

derivative pricing models including Local

Volatility

Discount rate, risk-free rate, volatilities,

forex forward points and spot rates,

interest rate swap curves and credit

curves

Investment portfolio

Discounted cash flow model and

net asset value model

Discount rate and fund unit price

Comparable quoted inputs

Discount rate and net assets

Loans and advances to customers

Average broker quotes

Broker quotes

Liabilities

Derivative financial instruments

Discounted cash flow model, Hermite

interpolation and industry standard

derivative pricing models including

Black-Scholes and Local Volatility

Discount rate, risk-free rate, volatilities,

forex forward points and spot rates,

interest rate swap curves and credit

curves

Other trading liabilities

Discounted cash flow model, Hermite

interpolation and industry standard

derivative pricing models including Local

Volatility

Discount rate, risk-free rate, volatilities,

forex forward points and spot rates,

interest rate swap curves and credit

curves

Debt securities in issue

Discounted cash flow model, Hermite

interpolation and industry standard

derivative pricing models including Local

Volatility

Discount rate, risk-free rate, volatilities,

forex forward points and spot rates,

interest rate swap curves and credit

curves

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

226

14. Fair value hierarchy (continued)

Sensitivity of fair values to reasonably possible alternative assumptions by level 3 instrument type

The fair value of financial instruments in level 3 are measured using valuation techniques that incorporate assumptions that are

not evidenced by prices from observable market data. The table below shows the sensitivity of these fair values to reasonably

possible alternative assumptions, determined at a transactional level:

At 31 March 2022

Balance

sheet

value

£’000

Significant unobservable input

Range of

unobservable

input used

Favourable

changes

£’000

Unfavourable

changes

£’000

Group

Assets

Other debt securities

105 031

Potential impact on income statement

3 199

(5 851)

Credit spreads

0.74%-2.75%

141

(286)

Cash flow adjustments

CPR 8.4%

(8)

Other

3 052

(5 557)

Derivative financial instruments

43 950

Potential impact on income statement

4 643

(5 266)

Volatilities

5%-18.9%

(29)

Cash flow adjustments

CPR 8.4%

—

(6)

Underlying asset value

4 026

(4 028)

Other

602

(1 203)

Securities arising from trading

activities

4 780

Potential impact on income statement

Cash flow adjustments

CPR 11%

481

(635)

Investment portfolio

324 635

Potential impact on income statement

34 225

(68 234)

Price earnings multiple

5.5x-15x

9 505

(18 206)

Underlying asset value

9 636

(20 897)

Other

15 084

(29 131)

Loans and advances to

customers

1 211 848

Potential impact on income statement

24 838

(40 047)

Credit spreads

0.15%-34.3%

10 656

(27 586)

Price earnings multiple

3.5x-4.2x

7 824

(1 136)

Underlying asset value

3 528

(5 665)

Other

2 830

(5 660)

Potential impact on other

comprehensive income

Credit spreads

0.14%-6.17%

8 440

(15 725)

Other securitised assets

93 087

Potential impact on income statement

Cash flow adjustments

CPR 8.4%

988

(1 057)

Total level 3 assets

1 783 331

76 814

(136 815)

Liabilities

Derivative financial instruments

45 769

Potential impact on income statement

(4 046)

4 060

Volatilities

5%-18.9%

(21)

Underlying asset value

(4 025)

4 025

Liabilities arising on

securitisation of other assets*

95 885

Potential impact on income statement

Cash flow adjustments

CPR 8.4%

(292)

299

Total level 3 liabilities

141 654

(4 338)

4 359

Net level 3 assets

1 641 677

*The sensitivity of the fair value of liabilities arising on securitisation of other assets has been considered together with other securitised assets.

^Other – The valuation sensitivity has been assessed by adjusting various inputs such as expected cash flows and earnings multiples rather than a single

input. It is deemed appropriate to reflect the outcome on a portfolio basis for the purposes of this analysis as the sensitivity of the assets cannot be

determined through the adjustment of a single input.

^^Underlying asset values are calculated by reference to a tangible asset, for example, property, aircraft or shares.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

227

14. Fair value hierarchy (continued)

At 31 March 2021

Balance

sheet

value

£’000

Significant unobservable input

Range of

unobservable input

used

Favourable

changes

£’000

Unfavourable

changes

£’000

Group

Assets

Other debt securities

103 404

Potential impact on income statement

3 790

(10 320)

Credit spreads

0.4%-3.3%

107

(198)

Cash flow adjustments

CPR 4.4%

(7)

Other

3 676

(10 115)

Derivative financial instruments

26 805

Potential impact on income statement

5 232

(6 226)

Volatilities

5.4% - 21.4%

(148)

Cash flow adjustments

CPR 4.4%

(9)

Underlying asset value

4 724

(4 724)

Other

448

(1 345)

Securities arising from trading

activities

5 160

Potential impact on income statement

Cash flow adjustments

CPR 8.0%

1 310

(1 685)

Investment portfolio

336 951

Potential impact on income statement

35 801

(98 411)

Price earnings multiple

4.2x -9.0x

5 560

(13 330)

Discount rate

17.5%

2 179

(3 959)

Underlying asset value

2 561

(5 967)

Other

25 501

(75 155)

Loans and advances to

customers

1 045 663

Potential impact on income statement

25 430

(43 612)

Credit spreads

0.08%-37.3%

9 439

(14 745)

Price earnings multiple

3.5x-4.1x%

4 200

(2)

Underlying asset value

3 094

(8 932)

Other

8 697

(19 933)

Potential impact on other

comprehensive income

Credit spreads

0.12%-4.3%

5 590

(9 711)

Other securitised assets

107 259

Potential impact on income statement

Cash flow adjustments

CPR 4.4%

1 554

(1 653)

Total level 3 assets

1 625 242

78 707

(171 618)

Liabilities

Deposits by banks

294

Potential impact on income statement

Underlying asset value

—

Derivative financial instruments

27 740

Potential impact on income statement

(4 749)

4 800

Volatilities

5.4%-21.1%

(25)

Underlying asset value

(4 724)

4 724

Liabilities arising on

securitisation of other assets*

108 281

Potential impact on income statement

Cash flow adjustments

CPR 4.4%

(213)

240

Total level 3 liabilities

136 315

(4 962)

5 083

Net level 3 assets

1 488 927

*The sensitivity of the fair value of liabilities arising on securitisation of other assets has been considered together with other securitised assets.

^Other – The valuation sensitivity has been assessed by adjusting various inputs such as expected cash flows and earnings multiples rather than a single

input. It is deemed appropriate to reflect the outcome on a portfolio basis for the purposes of this analysis as the sensitivity of the assets cannot be

determined through the adjustment of a single input.

^^Underlying asset values are calculated by reference to a tangible asset, for example, property, aircraft or shares.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

228

14. Fair value hierarchy (continued)

In determining the value of level 3 financial instruments, the following are the principal inputs that can require judgement:

Credit spreads

Credit spreads reflect the additional yield that a market participant would demand for taking exposure to the credit risk

of an instrument. The credit spread for an instrument forms part of the yield used in a discounted cash flow calculation. In

general, a significant increase in a credit spread in isolation will result in a movement in fair value that is unfavourable for

the holder of a financial instrument. It is an unobservable input into a discounted cash flow valuation.

Discount rates

Discount rates are used to adjust for the time value of money when using a discounted cash flow valuation method. Where

relevant, the discount rate also accounts for illiquidity, market conditions and uncertainty of future cash flows.

Volatilities

Volatility is a key input in the valuation of derivative products containing optionality. Volatility is a measure of the variability or

uncertainty in returns for a given derivative underlying. It represents an estimate of how much a particular underlying instrument,

parameter or index will change in value over time.

Cash flows

Cash flows relate to the future cash flows that can be expected from the instrument and requires judgement. Cash flows

are input into a discounted cash flow valuation.

Price earnings multiple

The price-to-earnings ratio is an equity valuation multiple used in the adjustment of underlying market prices. It is a key driver

in the valuation of unlisted investments.

Underlying asset value

In instances where cash flows have links to referenced assets, the underlying asset value is used to determine the fair value.

The underlying asset valuation is derived using observable market prices sourced from broker quotes, specialist valuers or other

reliable pricing sources.

Fair value category

At 31 March

Total

instruments at

fair value

Level 1

Level 2

Level 3

£’000

Company

2022

Assets

Reverse repurchase agreements and cash collateral

on securities borrowed

669 108

—

669 108

—

Sovereign debt securities

323 494

—

Bank debt securities

57 844

—

Other debt securities

145 127

—

39 018

106 109

Derivative financial instruments

672 124

664 781

7 324

Securities arising from trading activities

163 165

158 213

172

4 780

Investment portfolio

70 229

449

836

68 944

Loans and advances to customers*

1 193 462

—

1 889

1 191 573

Other loans and advances

572

—

572

Other securitised assets

5 083

—

5 083

Other assets

9 606

—

3 309 814

549 625

1 375 804

1 384 385

Liabilities

Derivative financial instruments

828 405

—

813 587

14 818

Other trading liabilities

42 944

—

Debt securities in issue

46 192

—

46 192

—

917 541

42 944

859 779

14 818

Net assets at fair value

2 392 273

506 681

516 025

1 369 567

*Loans and advances to customers at fair value include instruments where the business model is either to sell the loan or where the business model is to

hold to collect the contractual cash flows but the loan has failed the SPPI test.

Transfers between level 1 and level 2

During the current year and prior year there were no transfers between level 1 and level 2

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

229

14. Fair value hierarchy (continued)

Fair value category

At 31 March

Total

instruments at

fair value

Level 1

Level 2

Level 3

£’000

Company

2021

Assets

Reverse repurchase agreements and cash collateral

on securities borrowed

675 441

—

675 441

—

Sovereign debt securities

542 016

—

Bank debt securities

43 781

—

Other debt securities

204 566

—

99 752

104 814

Derivative financial instruments

742 869

737 558

5 292

Securities arising from trading activities

278 074

275 526

959

1 589

Investment portfolio

67 948

1 805

1 687

64 456

Loans and advances to customers*

1 019 358

—

1 019 358

Other loans and advances

59 157

—

59 157

Other securitised assets

5 774

—

5 774

Other assets

6 857

—

3 645 841

870 004

1 515 397

1 260 440

Liabilities

Derivative financial instruments

885 793

—

873 837

11 956

Other trading liabilities

49 055

38 399

10 656

—

Debt securities in issue

118 690

—

118 690

—

Subordinated liabilities

334 804

—

1 388 342

373 203

1 003 183

11 956

Net assets at fair value

2 257 499

496 801

512 214

1 248 484

*Loans and advances to customers at fair value include instruments where the business model is either to sell the loan or where the business model

is to hold to collect the contractual cash flows but the loan has failed the SPPI test.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

230

14. Fair value hierarchy (continued)

Level 3 instruments

The following table is a reconciliation of the opening balances to the closing balances for the fair value measurements in level 3

of the fair value hierarchy:

For the year to

Investment

portfolio

Loans and

advances to

customers

Other

securitised

assets

Other balance

sheet assets1

Total

£’000

Company

Assets

Balance as at 1 April 2020

57 714

1 014 095

6 137

224 683

1 302 629

Total gains or (losses)

4 688

27 137

1 848

4 675

38 348

In the income statement

4 688

29 329

1 848

4 675

40 540

In the statement of comprehensive income

—

(2 192)

—

(2 192)

Purchases

7 292

944 236

—

46 936

998 464

Sales

(1 353)

(467 562)

—

(24 026)

(492 941)

Issues

—

Settlements

(250)

(445 913)

(2 211)

(68 119)

(516 493)

Transfers into level 3

—

7 802

—

5 033

12 835

Foreign exchange adjustments

(3 635)

(60 437)

—

(18 367)

(82 439)

Balance as at 31 March 2021

64 456

1 019 358

5 774

170 852

1 260 440

Total gains or (losses)

8 804

66 129

1 170

(6 241)

69 862

In the income statement

8 804

66 695

1 170

(6 241)

70 428

In the statement of comprehensive income

—

(566)

—

(566)

Purchases

19 748

1 838 154

—

40 312

1 898 214

Sales

(26 176)

(1 066 692)

—

(19 783)

(1 112 651)

Settlements

—

(697 388)

(1 861)

(74 715)

(773 964)

Foreign exchange adjustments

2 112

32 012

—

8 360

42 484

Balance as at 31 March 2022

68 944

1 191 573

5 083

118 785

1 384 385

1.Comprises level 3 other debt securities, derivative financial instruments, other loans and advances and securities arising from trading.

For the year to

Liabilities2

Total

£’000

Company

Liabilities

Balance as at 1 April 2020

13 479

Total (gains) or losses

836

In the income statement

836

Settlements

(1 189)

Foreign exchange adjustments

(1 170)

Balance as at 31 March 2021

11 956

Total (gains) or losses

2 304

In the income statement

2 304

Foreign exchange adjustments

558

Balance as at 31 March 2022

14 818

2.Comprises level 3 derivative financial instruments.

The Group transfers between levels within the fair value hierarchy when the observability of inputs change, or if the valuation

methods change.

For the year to 31 March 2022, there were no transfers into or from level 3. In the prior year, loans and advances to customers of

£7.8 million; other debt securities of £4.6 million; and derivative assets of £0.4 million were transferred from level 2 to level 3.

The valuation methodologies were reviewed and unobservable inputs were used to determine the fair value.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

231

14. Fair value hierarchy (continued)

The following table quantifies the gains or (losses) included in the income statement and other comprehensive income

recognised on level 3 financial instruments:

For the year to 31 March

Total

Realised

Unrealised

£’000

Company

2022

Total gains or (losses) included in the income statement for the period

Net interest income

64 888

57 047

7 841

Investment income*

5 056

18 462

(13 406)

Trading income/(loss) arising from customer flow

(1 819)

—

(1 819)

68 125

75 509

(7 384)

Total gains or (losses) included in other comprehensive income for the period

Losses on realisation on debt instruments at FVOCI recycled through

the income statement

440

—

Fair value movements on debt instruments at FVOCI taken directly

to other comprehensive income

(566)

(126)

440

(566)

2021

Total gains or (losses) included in the income statement for the period

Net interest income

63 222

52 657

10 565

Investment income

(21 909)

2 630

(24 539)

Trading income/(loss) arising from customer flow

(1 609)

—

(1 609)

39 704

55 287

(15 583)

Total gains or (losses) included in other comprehensive income for the period

Losses on realisation on debt instruments at FVOCI recycled through

the income statement

(1 009)

—

Fair value movements on debt instruments at FVOCI taken directly

to other comprehensive income

(2 192)

—

(2 192)

(3 201)

(1 009)

(2 192)

*Included within the investment income statement balance are unrealised gains of £0.7 million (31 March 2021: unrealised gains of £10.3 million) presented

within operational items in the income statement.

Level 2 financial assets and financial liabilities

The Company follows the Group’s principal valuation techniques set out on page 226 in determining the fair value of its financial

assets and financial liabilities that are classified within level 2 of the fair value hierarchy.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

232

14. Fair value hierarchy (continued)

Sensitivity of fair values to reasonably possible alternative assumptions by level 3 instrument type

The fair value of financial instruments in level 3 are measured using valuation techniques that incorporate assumptions that are

not evidenced by prices from observable market data. The table below shows the sensitivity of these fair values to reasonably

possible alternative assumptions, determined at a transactional level:

At 31 March 2022

Balance

sheet

value

£’000

Significant unobservable input

Range of

unobservable

input used

Favourable

changes

£’000

Unfavourable

changes

£’000

Company

Assets

Other debt securities

106 109

Potential impact on income statement

3 195

(5 845)

Credit spreads

0.74%-2.75%

140

(284)

Cash flow adjustments

CPR 8.4%

(4)

Other

3 052

(5 557)

Derivative financial instruments

7 324

Potential impact on income statement

618

(1 235)

Volatilities

5%-18.9%

(29)

Underlying asset value

(3)

Other

602

(1 203)

Securities arising from trading

activities

4 780

Potential impact on income statement

Cash flow adjustments

CPR 11%

481

(635)

Investment portfolio

68 944

Potential impact on income statement

7 358

(14 871)

Underlying asset value

1 450

(4 351)

Other

5 908

(10 520)

Loans and advances to

customers

1 191 573

Potential impact on income statement

15 910

(36 633)

Credit spreads

0.15%-34.3%

10 656

(27 586)

Underlying asset value

3 183

(4 905)

Other

2 071

(4 142)

Potential impact on other

comprehensive income

Credit spreads

0.14%-6.17%

8 440

(15 725)

Other securitised assets

5 083

Potential impact on income statement

Cash flow adjustments

CPR 8.4%

390

(490)

Other loans and advances

572

Potential impact on income statement

Underlying asset value

152

—

Total level 3 assets

1 384 385

36 544

(75 434)

Liabilities

Derivative financial instruments

14 818

Potential impact on income statement

(388)

820

Discount rate

10%

(367)

785

Volatilities

5%-18.9%

(21)

Total level 3 liabilities

14 818

(388)

820

Net level 3 assets

1 369 567

*The sensitivity of the fair value of liabilities arising on securitisation of other assets has been considered together with other securitised assets.

^Other – The valuation sensitivity has been assessed by adjusting various inputs such as expected cash flows and earnings multiples rather than a single

input. It is deemed appropriate to reflect the outcome on a portfolio basis for the purposes of this analysis as the sensitivity of the assets cannot be

determined through the adjustment of a single input.

^^Underlying asset values are calculated by reference to a tangible asset, for example, property, aircraft or shares.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

233

14. Fair value hierarchy (continued)

At 31 March 2021

Balance

sheet

value

£’000

Significant unobservable input

Range of

unobservable input

used

Favourable

changes

£’000

Unfavourable

changes

£’000

Company

Assets

Other debt securities

104 814

Potential impact on income statement

3 787

(10 317)

Credit spreads

0.4%-3.3%

107

(198)

Cash flow adjustments

CPR 4.4%

(4)

Other

3 676

(10 115)

Derivative financial instruments

5 292

Potential impact on income statement

500

(1 493)

Volatilities

5.4%-21.4%

(148)

Other

449

(1 345)

Securities arising from trading

activities

1 589

Potential impact on income statement

Cash flow adjustments

CPR 8.0%

403

(519)

Investment portfolio

64 456

Potential impact on income statement

6 833

(18 784)

Underlying asset value

2 357

(5 357)

Other

4 476

(13 427)

Loans and advances to

customers

1 019 358

Potential impact on income statement

17 642

(39 131)

Credit spreads

0.08%-37.3%

9 363

(14 644)

Underlying asset value

2 983

(8 599)

Other

5 296

(15 888)

Potential impact on other

comprehensive income

Credit spreads

0.12%-4.3%

5 590

(9 711)

Other securitised assets

5 774

Potential impact on income statement

Cash flow adjustments

CPR 4.4%

549

(674)

Other loans and advances

59 157

Potential impact on income statement

Underlying asset value

6 329

(2 012)

Total level 3 assets

1 260 440

41 633

(82 641)

Liabilities

Derivative financial instruments

11 956

Potential impact on income statement

(402)

474

Discount rate

11.8%

(377)

398

Volatilities

5.4%-21.1%

(25)

Total level 3 liabilities

11 956

(402)

474

Net level 3 assets

1 248 484

*The sensitivity of the fair value of liabilities arising on securitisation of other assets has been considered together with other securitised assets.

^Other – The valuation sensitivity has been assessed by adjusting various inputs such as expected cash flows and earnings multiples rather than a single

input. It is deemed appropriate to reflect the outcome on a portfolio basis for the purposes of this analysis as the sensitivity of the assets cannot be

determined through the adjustment of a single input.

^^Underlying asset values are calculated by reference to a tangible asset, for example, property, aircraft or shares.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

234

15. Fair value of financial instruments at amortised cost

Level within the fair value hierarchy

At 31 March

Carrying

amount

Fair value

approximates

carrying

amount

Balances

where fair

values do not

approximate

carrying

amounts

Fair value of

balances that

do not

approximate

carrying

amounts

Level 1

Level 2

Level 3

£’000

Group

2022

Assets

Cash and balances

at central banks

5 379 994

—

Loans and advances to banks

1 467 039

—

Reverse repurchase

agreements and cash collateral

on securities borrowed

778 365

662 151

116 214

115 088

—

115 088

—

Bank debt securities

—

Other debt securities

293 601

7 601

286 000

285 840

12 961

272 879

—

Loans and advances to

customers

13 132 006

521 321

12 610 685

12 593 362

—

1 022 302

11 571 060

Other loans and advances

147 025

85 782

61 243

61 253

—

61 253

—

Other assets

822 300

—

22 020 330

8 946 188

13 074 142

13 055 543

Liabilities

Deposits by banks

2 026 573

280 386

1 746 187

1 654 635

—

1 654 635

—

Repurchase agreements

and cash collateral

on securities lent

154 828

103 729

51 099

49 243

—

49 243

—

Customer accounts (deposits)

18 616 233

12 001 165

6 615 068

6 616 337

—

6 616 337

—

Debt securities in issue

1 074 649

1 183

1 073 466

1 076 817

483 649

593 168

—

Other liabilities

805 880

802 453

3 427

2 419

—

2 419

Subordinated liabilities

758 739

—

758 739

767 436

—

23 436 902

13 188 916

10 247 986

10 166 887

For financial assets and financial liabilities that are liquid or have a short-term maturity (less than three months) it is assumed

that the carrying amounts approximate their fair value. These assets and liabilities include demand deposits, savings accounts

without a specific maturity, which are included in customer accounts (deposits), and variable rate instruments.

Financial instruments for which fair value does not approximate carrying value

Differences in amortised cost and fair value occur in fixed rate instruments. The fair value of fixed-rate financial assets and

financial liabilities carried at amortised cost are estimated by comparing spreads earned on the transactions with spreads earned

on similar new transactions entered into by the Group. The estimated fair value of fixed interest-bearing deposits is based on

discounted cash flows, using prevailing money market interest rates for debts with similar credit risk and maturity. For quoted

subordinated debt issued, the fair values are calculated based on quoted market prices. For those notes issued where quoted

market prices are not available, a discounted cash flow model is used based on a current interest rate yield curve appropriate

for the remaining term to maturity.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

235

15. Fair value of financial instruments at amortised cost (continued)

Level within the fair value hierarchy

At 31 March

Carrying

amount

Fair value

approximates

carrying

amount

Balances

where fair

values do not

approximate

carrying

amounts

Fair value of

balances that

do not

approximate

carrying

amounts

Level 1

Level 2

Level 3

£’000

Group

2021

Assets

Cash and balances

at central banks

3 043 034

—

Loans and advances to banks

1 383 602

1 378 080

5 522

5 474

—

5 474

Reverse repurchase

agreements and cash collateral

on securities borrowed

1 389 791

1 118 428

271 363

271 992

—

271 992

—

Bank debt securities

4 263

—

Other debt securities

505 507

62 244

443 263

445 257

17 890

420 432

6 935

Loans and advances

to customers

11 270 650

644 517

10 626 133

10 614 861

—

969 764

9 645 097

Other loans and advances

162 456

100 241

62 215

62 916

—

62 916

—

Other assets

951 818

951 545

273

256

—

256

18 711 121

7 302 352

11 408 769

11 400 756

Liabilities

Deposits by banks

1 351 985

241 046

1 110 939

1 119 997

—

1 117 341

2 656

Repurchase agreements and

cash collateral on securities lent

157 357

109 636

47 721

47 803

—

47 803

—

Customer accounts (deposits)

16 240 634

10 069 791

6 170 843

6 213 235

—

6 213 235

—

Debt securities in issue

1 074 688

283 742

790 946

803 915

—

803 915

—

Other liabilities

612 006

607 745

4 261

3 660

—

3 660

Subordinated liabilities

436 677

—

436 677

455 188

—

19 873 347

11 311 960

8 561 387

8 643 798

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

236

15. Fair value of financial instruments at amortised cost (continued)

Fixed rate financial instruments

The fair value of fixed rate financial assets and financial liabilities carried at amortised cost are estimated by comparing spreads

earned on the transactions with spreads earned on similar new transactions entered into by the Group. The estimated fair value

of fixed interest-bearing deposits is based on discounted cash flows, using prevailing money market interest rates for debts

with similar credit risk and maturity.

For quoted subordinated debt issued, the fair values are calculated based on quoted market prices. For those notes issued

where quoted market prices are not available, a discounted cash flow model is used based on a current interest rate yield curve

appropriate for the remaining term to maturity.

Certain financial instruments that would normally be carried at fair value continue to be recognised at transaction price. This

occurs when the fair value would normally be determined using valuation techniques which cannot be relied on due to

insufficient external inputs. This results in gains or losses which have not been recognised on-balance sheet.

The following table sets out the Group’s principal level 2 and 3 valuation techniques used in determining the fair value of its

financial assets and financial liabilities:

Loans and advances to banks

Calculation of the present value of future cash flows, discounted as appropriate.

Other debt securities

Priced with reference to similar trades in an observable market.

Reverse repurchase agreements

and cash collateral on

securities borrowed

Calculation of the present value of future cash flows, discounted as appropriate.

Loans and advances to customers

Calculation of the present value of future cash flows, discounted as appropriate.

Other loans and advances

Calculation of the present value of future cash flows, discounted as appropriate.

Other assets

Calculation of the present value of future cash flows, discounted as appropriate.

Deposits by banks

Calculation of fair value using appropriate funding rates.

Repurchase agreements and cash

collateral on

securities lent

Calculation of the present value of future cash flows, discounted as appropriate.

Customer accounts (deposits)

Where the deposits are short-term in nature, carrying amounts are assumed to approximate fair

value. Where deposits are of longer-term maturities, they are valued using a cash flow model

discounted as appropriate.

Debt securities in issue

Where the debt securities are fully collateralised, fair value is equal to the carrying value. Other

debt securities are valued using a cash flow model discounted as appropriate to the securities

for funding and interest rates.

Other liabilities

Where the other liabilities are short term in nature, carrying amounts are assumed

to approximate fair value.

Annual financial

statements

Investec Bank plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

237

15. Fair value of financial instruments at amortised cost (continued)

Level within the fair value hierarchy

At 31 March

Carrying

amount

Fair value

approximates

carrying

amount

Balances

where fair

values do not

approximate

carrying

amounts

Fair value of

balances that

do not

approximate

carrying

amounts

Level 1

Level 2

Level 3

£’000

Company

2022

Assets

Cash and balances

at central banks

5 326 533

—

Loans and advances to banks

535 738

—

Reverse repurchase

agreements and cash collateral

on securities borrowed

778 365

662 151

116 214

115 088

—

115 088

—

Other debt securities

998 897

713 710

285 187

285 010

12 961

272 049

—

Loans and advances

to customers

9 736 981

244 574

9 492 407

9 470 954

—

9 470 954

Other loans and advances

3 026 590

2 965 346

61 244

61 253

—

61 253

—

Other assets

531 429

—

20 934 533

10 979 481

9 955 052

9 932 305

Liabilities

Deposits by banks

2 214 555

468 368

1 746 187

1 654 635

—

1 654 635

—

Repurchase agreements

and cash collateral

on securities lent

197 903

146 804

51 099

49 243

—

49 243

—

Customer accounts (deposits)

17 290 014

10 741 995

6 548 019

6 549 281

—

6 549 281

—

Debt securities in issue

1 073 466

—

1 073 466

1 076 817

483 649

593 168

—

Other liabilities

482 028

478 602

3 426

2 419

—

2 419

Subordinated liabilities

758 739

—

758 739

767 436

—

22 016 705

11 835 769

10 180 936

10 099 831