Page 285 - Bank-Muamalat-Annual-Report-2021

ANNUAL REPORT 2021 283
SUSTAINABILITY STATEMENT OUR GOVERNANCE OUR NUMBERS OTHER INFORMATION

46. fINANcIAL RIsk MANAGeMeNT OBJecTIves AND POLIcIes (cONT’D.)

(a) credit risk (cont’d.)
To mitigate credit concentration risks, the Group and the Bank set exposure limits to individual/single customer, groups
of related customers, connected parties, global counterparty, industry/sector and other various funded and non-funded
exposures. This is monitored and enforced throughout the credit delivery process.
The Group and the Bank also introduced the Credit Risk Mitigation Techniques (“CRMT”) to ascertain the strength of
collaterals and securities pledged for financing. The technique outlines the criteria for the eligibility and valuation as
well as the monitoring process of the collaterals and securities pledged.
The Group’s and the Bank’s credit risk disclosures also cover past due and impaired financing including the approaches
in determining the individual and collective impairment provisions.
Included in financing of customers is a financing given to a corporate customer and identified structured personal
financing customers which are hedged by profit rate derivatives. The hedge achieved the criteria for hedge accounting
and the financing are carried at fair value.

During the year, the maximum credit exposure of the financing of customers amount to RM700.0 million (December
2020: RM700.0 million). The cumulative change in fair value of the financing attributable to changes in profit rate risks
amount to a gain of RM48,238,151 (December 2020: gain of RM91,112,801) and the change for the current period is a
loss of RM42,874,650 (December 2020: gain of RM43,423,333). The changes in fair value of the designated financing
attributable to changes in profit risk have been calculated by determining the changes in profit spread implicit in the fair
value of securities issued by entities with similar credit characteristics.

(i) Maximum credit risk exposures and credit risk concentration
The following tables present the Group’s and the Bank’s maximum exposure to credit risk (without taking account
of any collateral held or other credit enhancements) for each class of financial assets, including derivatives with
positive fair values, and commitments and contingencies. Where financial assets are recorded at fair value, the
amounts shown represent the current credit risk exposure but not the maximum risk exposure that could arise in
the future as a result of changes in values. Included in commitments and contingencies are contingent liabilities
and credit commitments. For contingent liabilities, the maximum exposures to credit risk is the maximum amount
that the Group or the Bank would have to pay if the obligations for which the instruments are issued are called
upon. For credit commitments, the maximum exposure to credit risk is the full amount of undrawn credit granted
to customers and derivative financial instruments.

A concentration credit risk exists when a number of counterparties are engaged in similar activities and have similar
economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by
changes in economic and other conditions.

By sector analysis
The presented analysis of credit risk concentration relates to financial assets, including derivatives with positive
fair values, and commitments and contingencies, subject to credit risk and are based on the sector in which the
counterparties are engaged (for non-individual counterparties) or the economic purpose of the credit exposure
(for individuals). The exposures to credit risk are presented without taking into account of any collateral held or
other credit enhancements.