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NOTESTOTHEFINANCIALSTATEMENTS
31 DECEMBER 2013
37. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D)
Capital management
Capital monitoring
The Group and the Bank’s capital are closely monitored and actively managed. Besides the regulatory capital requirement of
8%, the Group and the Bank have set an internal capital requirement limit that would act as a buffer to the regulatory capital
and as an indicator that affords the Group and the Bank a “well capitalised” status. The MRC shall be responsible in managing
and monitoring both the internal capital limit and regulatory capital requirement.
Market risk management
Approach and risk strategy
The principal objectives of the market risk management are to assume an appropriate balance between the level of risk and
the level of return desired in order to maximise the return to shareholder’s funds and to ensure prudent management of the
Group and the Bank’s resources to support the growth of the Group’s and the Bank’s economic value.
The Groups’ market risk management strategies are to identify measure, monitor and manage the Group’s and the Bank’s
earnings and capital against market risk inherent in all activities of the Group and the Bank and ensure all relevant personnel
clearly understand the Group and the Bank’s approach in managing market risk.
Risk identification
The Group’s and the Bank’s market risk arises due to changes in market rates, prices and volatilities which lead to a decline
in the value of the Group’s and Bank’s investment securities, foreign exchange and equity position.
Measurement
The Group’s and the Bank’s policy are to minimise the exposures to foreign currency risk arising from lending activities by
monitoring and obtaining the Board’s approval for funding requisitions that involve foreign currencies.
The table below shows the Group’s and the Bank’s foreign currency sensitivity based on reasonable possible movements in
foreign exchange (FX) rates:
Changes in
foreign exhange
Effect on profit/loss
Effect on equity
rates
Increase
Decrease
Increase
Decrease
(+/–)
in FX rate
in FX rate
in FX rate
in FX rate
%
RM’000
RM’000
RM’000
RM’000
2013
AED
10
(3)
3
(3)
3
EUR
5
(152)
152
(152)
152
GBP
5
1,354
(1,354)
1,354
(1,354)
JPY
10
9
(9)
9
(9)
SGD
5
5,622
(5,622)
5,622
(5,622)
USD
10
(24,831)
24,831
(24,831)
24,831
(18,001)
18,001
(18,001)
18,001
160
EXIM Bank Annual Report 2013