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Our Performance Sustainability Statement Governance Our Numbers Other Information

4.0 CrEDIT rISk (GENErAL DISCLOSurE) (CONT’D)
Credit risk Management Approach

Credit risk is inherent in all credit-related activities such as in the granting of financing facilities and participation in treasury
and investment banking activities.
Credit risk exposures are controlled and managed at every stage of the credit process through various methods and techniques.
At the point of origination, the credit exposure is assessed with well-defined financing granting criteria, which include the
identification of a clear and adequate source of payment or income generation from the customer, structuring of an effective
financing package and incorporation of appropriate risk mitigants.
The Bank’s credit-origination and granting activities are segregated by business lines based on customer types/business
segments. Specifically, these are Business Banking for corporate, commercial and retail SME customers, Consumer Banking for
retail/individual customers and Investment Banking for syndications and capital market instruments. These departments are
responsible for marketing, developing and managing the Bank’s financing and investment assets as well as ensuring the quality
and timely delivery of its products and services.

The Bank has an established structure to facilitate the credit approval process which defines the appropriate level of approving
authority and limits. These approving authority and limits are duly sanctioned by the Board and are subject to periodic reviews
to assess its effectiveness as well as compliance. To enhance the risk identification process, the financing proposals by the
origination departments are subjected to independent credit reviews and risk assessments by the relevant credit assessment
departments prior to submission to the approving authority for decision.

Credit portfolios are managed and monitored against stipulated portfolio exposure limits with the objective to avoid credit
concentration and excessive build-up of exposures and to preserve the credit portfolios’ quality through timely and appropriate
corrective actions.

The Credit Risk report is produced and deliberated at the management and board level committees on a monthly basis to
monitor the overall exposures and limits. Risk Profiling Analysis on selected asset portfolios is conducted on a regular basis to
analyze the asset quality for possible deterioration or concentration build-up and potential weaknesses or threats arising from
internal and external factors.

Stress Test on credit exposures is used as a tool to identify possible events or future changes in the financial and economic
conditions that could have an unfavorable impact on the Bank’s exposures. It is also used to assess the Bank’s ability to withstand
such changes in relation to the capacity of capital and earnings to absorb potentially significant losses.

The monitoring and recovery of delinquent and problematic financing accounts are undertaken by two departments; namely
the Consumer Financing Supervision and Recovery Department (“CFSRD”) and the Business Financing Supervision and
Recovery Department (“BFSRD”). Within the BFSRD, the Early Care and Remedial Management units have been tasked to
monitor and undertake pre-emptive measures on business financing with early warning signs to prevent further deterioration
and/or initiate rehabilitation actions such as rescheduling and restructuring of the affected accounts.

Classification and loss provisioning of the Bank’s impaired financing and investment assets is performed upon determination
of impairment evidence and by categorization into individual and collective assessment. The process and approach is defined
in the GCRP and other related policies and SOPs as prescribed under the MFRS 9 and BNM guidelines.

The Bank implemented a new risk rating approach for its business and consumer financing portfolios, introduced gradually
from year 2011. Credit scorecards using statistical and heuristic-based methodologies were developed and applied to assess
the customers’ risk levels and assist in the Bank’s credit decision. The credit risk grades are also used in portfolio monitoring
and limit setting and in building a more robust estimation of credit losses in the future as prescribed under the Internal Rating
Based (“IRB”) approach.

Aside from the credit risk rating, the Bank is also enhancing its portfolio management capability through the development of a
data mart and acquisition of more analytical and risk management systems.