2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.9 Impairment Impairment of financial assets (i) Impairment of financial assets The Group and the Bank recognise allowance for impairment or allowance for expected credit losses “ECL” on financial assets measured at amortised cost, financial guarantee contracts, financing commitments and debt securities measured at FVOCI, but not to investments in equity instruments. The Group and the Bank define a financial instruments that has objective evidence of impairment as default, when it meets one or more of the following criteria; Quantitative criteria; i) Principal or profit of both is past due for more than 90 days/MIA 3 ii) Cross default Qualitative criteria; A financing is credit impaired when one or more triggers/criteria that have a detrimental impact on the estimated future cash flow of the financial asset have occurred. The Group and the Bank consider the following mandatory triggers; i) Ceased operation ii) Bankruptcy/wound up iii) Fraud with investigation report duly confirmed as fraud iv) Liquidator/R&M appointed v) Deceased Financial instruments that are credit-impaired with exposure more than RM1 million are assessed on individual basis. The Group and the Bank have considered the impact of the pandemic and has taken into account the economic and financial measures announced by the Government in estimating the ECL on the financial assets. Under collective assessment, the Group and the Bank apply a three-stage approach to measuring ECL on financial assets measured at amortised cost and FVOCI. Financial assets migrate through the following three stages based on the change in credit quality since initial recognition: i) Stage 1: 12 months ECL (“Stage 1”) For exposures where there has not been a significant increase in credit risk since initial recognition and that are not credit impaired upon recognition, the portion of lifetime ECL associated with the probability of default events occurring within the next 12 months is recognised. ii) Stage 2: Lifetime ECL – not credit impaired (“Stage 2”) For exposures where there has been a significant increase in credit risk since initial recognition but that are not credit impaired, a lifetime ECL is recognised. BANK I SLAM MALAYS IA BERHAD NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 256
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