Page 218 - EXIM-Bank_Annual-Report-2023

EXIM BANk MALAySIA
216 A Vision to Serve Empowering Growth Management Discussion and Analysis
ANNUAL REPORT 2023
Notes to the fiNaNcial statemeNts

43. FINANCIAL rISk MANAGEMENT PoLICIES (cont’d)
Fair values (cont’d)

(iii) Financial assets and liabilities not carried at fair value
The following methods and assumptions are used to estimate the fair value of each class of financial instruments:

Financial investments at amortised cost
For non actively traded financial investments, independent broker quotations are obtained. Fair values of equity financial
investments are estimated using a number of methods, including earning multiples and discounted cash flows analysis.
Where discounted cash flows technique is used, the estimated future cash flows are discounted using applicable prevailing
market or indicative rates of similar instruments at the reporting date.
Loans, advances and financing

Loans, advances and financing to borrowers/customers, where such market prices are not available, various
methodologies have been used to estimate the approximate fair values of such instruments. These methodologies are
significantly affected by the assumptions used and judgements made regarding risk characteristics of various financial
instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors. Changes in
the assumptions could significantly affect these estimates and the resulting fair value estimates. Therefore, for a significant
portion of the Group’s and the Bank’s financial instruments, including loans, advances and financing to customers, their
respective fair value estimates do not purport to represent, nor should they be construed to represent, the amount that
the Group and the Bank could realise in a sale transaction at the reporting date.

The fair values of variable rate loans/financing are estimated to approximate their carrying values. For fixed rate loans
and Islamic financing, the fair values are estimated based on expected future cash flows of contractual instalment
payments, discounted at applicable and prevailing rates at reporting date offered for similar facilities to new
borrowers/customers with similar credit profiles. In respect to impaired loans/financing, the fair values are deemed to
approximate the carrying values which are net of allowances for stage 3 ECL.
Investment properties

The fair values of investment properties are estimated based on comparison with indicative market value determined by
an accredited independent valuer.

Borrowings (Non-hedged items)
The fair value of variable rate non-concessional borrowings is estimated to approximate the carrying amount.

44. INSurANCE rISkS

The principal underwriting risk to which the Group and the Bank is exposed is credit risk in connection with credit,
guarantee and political risk insurance underwriting activities. Management has established underwriting processes and limits
to manage this risk by performing credit review on its policy holders and buyers.
The underwriting function undertakes qualitative and quantitative risk assessments on all buyers and clients before deciding
on an approved insured amount. Policies in riskier markets may be rejected or charged at a higher premium rate accompanied
by stringent terms and conditions to commensurate the risks.
Concentration limits are set to avoid heavy concentration within a specific region or country. Maximum limits are set for buyer
credit limits and client facility limits for prudent risk mitigation.

For the monitoring of buyer risks, the Group and the Bank takes into consideration both qualitative and quantitative factors
and conducts regular reviews on the buyers’ credit standing and payment performance to track any deterioration in their
financial position that may result in a loss to the Group and the Bank.