INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF FINANCE HOUSE P.J.S.C

Our response

Our procedures included the following:

• Evaluating the appropriateness of the accounting policies adopted based on the requirements of IFRS 9, our business understanding and industry practice;

• Performing procedures to understand the appropriateness of the ECL accounting estimate including, but not limited to, obtaining information about the entity’s control environment in relation to the estimate, obtaining an understanding of the process by which the estimate is developed, understanding the methods, assumptions and data used to develop the accounting estimate, and evaluating any subsequent events that may impact the estimate;

• Updating our understanding of the ECL end-to-end processes, including reassessing the design, implementation, and operating effectiveness of selected relevant controls;

• We involved our Financial Risk Modelling (“FRM”) specialists to review the reasonableness and appropriateness of the methodology and assumptions used in various components of ECL modelling and governance over the application of expert credit judgement to determine the ECL. This included challenging key assumptions/ judgments relating to significant increase in credit risk (“SICR”), definition of default, probability of default, recovery rates, use of macro-economic variables and probability weighted outcomes to check that the ECL amounts recorded are reflective of underlying credit quality and macroeconomic trends including the impact of COVID-19;

• Testing the completeness and accuracy of the data used within the ECL calculation;

• Re-performing key aspects of the Group’s SICR determinations and selecting samples of loans and advances to determine whether a SICR event was appropriately identified including assessing the additional judgements made for the borrowers who have been granted payment deferrals;

• Evaluating the reasonableness of and testing a sample of post model adjustments and management overlays particularly in light of the volatility caused by the current COVID-19 pandemic, as applicable;

• Performing credit assessments for a sample of selected customers, including Stage 3 customers, to test the appropriateness of the credit grades at a given point in time, assessing the financial performance of the borrower, source of repayment and future cash flows of the borrower; and

• Assessing the adequacy of the Group’s disclosures by reference to the requirements of the relevant accounting standards and Central Bank of the UAE regulations.