Page 398 - Bank-Muamalat-AR2020

396 BANK MUAMALAT MALAYSIA BERHAD About Us Our Leadership Our Strategy
ANNUAL REPORT FY2020

BASEL II
PILLAr 3 DISCLOSurE

6.0 CrEDIT rISk MITIGATION (“CrM”) DISCLOSurES uNDEr ThE STANDArDISED APPrOACh
Upon assessment of a customer’s credit standing and payment capacity and identification of the proposed financing’s source
of payment, the Bank may provide a financing facility on a secured, partially secured or unsecured basis. In mitigating its
credit exposure, the Group and the Bank may employ Credit Risk Mitigants in the form of collaterals and other supports.
Examples of these CRMs include charges over residential and commercial properties being financed; pledge over shares and
marketable securities, ownership claims over vehicles being financed, and supports in the form of debentures, assignments and
guarantees.
The Bank utilise specific techniques to identify eligible collaterals and securities and ascertain their value, and subsequently,
implement adequate monitoring process to ensure continued coverage and enforceability.
Credit documentation, administration and disbursement are carried out under clear guidelines and procedures to ensure
protection and enforceability of collaterals and other credit risk mitigants. Valuation updates of collaterals are concurrently
done during the periodic review of the financing facilities to reflect current market value and ensure adequacy and continued
coverage.

The following tables present the credit exposures covered by eligible financial collateral and financial guarantees as defined
under the Standardised Approach. Eligible financial collateral consists primarily of cash, securities from listed exchange,
unit trust or marketable securities. The Group and the Bank do not have any credit exposure, which is reduced through the
application of other eligible collateral.
Table 18: Credit risk mitigation on credit exposures

Total
Exposures
Covered by
Eligible
Gross Financial *Net
Group Exposures Collateral Exposures
31 December 2020 rM’000 rM’000 rM’000

Credit risk
(a) On Balance sheet exposures
Sovereign/Central banks 6,058,325 - 6,058,325
Public sector entities 251,982 190 251,792
Banks, Development Financial Institution & MDBs 669,900 - 669,900
Corporates 6,517,329 107,940 6,409,389
Regulatory retail 7,106,909 11,067 7,095,842
Residential real estate 4,640,167 - 4,640,167
Higher risk assets 826 - 826
Other assets 447,352 - 447,352
Defaulted exposure 107,289 - 107,289

25,800,079 119,197 25,680,882

(b) Off-Balance Sheet Exposures
Credit-related off-balance sheet exposure 1,115,215 - 1,115,215
Derivative financial instruments 148,181 - 148,181

1,263,396 - 1,263,396
Total Credit Exposures 27,063,475 119,197 26,944,278

* After netting and credit risk mitigation