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37. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D)
Market risk management (cont’d)
Measurement (cont’d)
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
2012
AED
10
2
(2)
2
(2)
EUR
5
1,187
(1,187)
1,187
(1,187)
GBP
5
797
(797)
797
(797)
JPY
10
97
(97)
97
(97)
SGD
5
11,136
(11,136)
11,136
(11,136)
USD
10
(59,216)
59,215
(59,215)
59,215
(45,997)
45,997
(45,997)
45,997
Asset liability management
Approach and risk strategy
The main objective is to proactively manage the Group’s and the Bank’s financial position which includes assets, liabilities
and capital, in order to maximise earnings and to attain its strategic goal, within the overall risk/return preferences.
The Group’s and the Bank’s Asset and Liability Management (“ALM’) strategies
• Ensure that the Group and the Bank achieve its financial objective through strategic business plan which shall be
developed within the risk tolerance level;
• Ensure that the Group’s and Bank’s pricing and funding are adequately maintain to support a sound capital base through
strategic management of balance sheet; and
• Ensure that the Group and the Bank are able to sustain its capital against ALM risk inherent in all activities of the Group
and the Bank.
Risk identification
When analysing whether or not an activity introduces a new element of ALM risk exposure, the Group and the Bank should
be aware that changes to an instrument’s maturity, repricing or repayment terms could materially affect the product’s ALM
risks characteristics.
Measurement
The Group and the Bank face interest rate risks arising from re-pricing mismatches of assets and liabilities from its banking
businesses. These risks are monitored through economic value of equity limit and net interest income changes.
The Group and the Bank perform regular net interest income simulation to better understand the sensitivity to changes in
interest rates on the net interest income. In addition, MRC will actively manage the re-pricing mismatches with the aid of
monthly re-pricing gap and Earning-at-Risk (“EAR”) reports.
EXIM Bank Annual Report 2013
161