Page 170 - EXIM-BANK-AR20

168 EXIM BANK MALAYSIA
Annual Report 2020

NOTES TO THE FINANCIAL STATEMENTS

42. FINANCIAL RISK MANAGEMENT POLICIES (CONT’D.)
Capital monitoring

The Group’s and the Bank’s capital are closely monitored and actively managed. Besides the regulatory capital requirement of
8%, the Group and the Bank have set an internal capital requirement limit that would act as a buffer to the regulatory capital
and as an indicator that affords the Group and the Bank a “well capitalised” status. The MRC shall be responsible in managing
and monitoring both the internal capital limit and regulatory capital requirement.
Market risk management
Approach and risk strategy

The principal objectives of market risk management are to assume an appropriate balance between the level of risk and the
level of return desired in order to maximise the return to shareholders’ funds and to ensure prudent management of the
Group’s and the Bank’s resources to support the growth of the Group’s and the Bank’s economic value.
The Group’s and the Bank’s market risk management strategies are to identify, measure, monitor and manage the Group’s and
the Bank’s earnings and capital against market risk inherent in all activities of the Group and the Bank and ensure all relevant
personnel clearly understand the Group’s and the Bank’s approach in managing market risk.
Risk identification

The Group’s and the Bank’s market risk arise due to changes foreign currency which would lead to a decline in the value of
the Group’s and the Bank’s investment securities, derivatives, borrowings, foreign exchange and equity position.

Measurement
The Group’s and the Bank’s policies are to minimise the exposures to foreign currency risk arising from lending activities
by monitoring and obtaining the Board’s approval for funding requisitions that involve foreign currencies.

The table below shows the Group’s and the Bank’s foreign currencies sensitivity based on reasonable possible movements
on the increase/(decrease) in foreign exchange (“FX”) rates that resulted to the increase/(decrease) in profit and loss:

Changes in
foreign Effect on profit/loss Effect on equity
exchange Increase Decrease Increase Decrease
rates (+/-) in FX rate in FX rate in FX rate in FX rate
% RM’000 RM’000 RM’000 RM’000

2020
EUR 5 42 (42) 42 (42)
GBP 5 24 (24) 24 (24)
SGD 5 2,466 (2,466) 2,466 (2,466)
USD 10 1,463 (1,463) 1,463 (1,463)
AUD 10 3,284 (3,284) 3,284 (3,284)
7,279 (7,279) 7,279 (7,279)