39. FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Market risk (continued) (iii) Foreign exchange risk The Group and the Bank manages and controls the trading book portfolio’s foreign exchange risk by limiting the net open exposure to individual currencies and on an aggregate basis. The Group and the Bank also has in place the sensitivity limit. For the Bank-wide (trading book and banking book portfolios) foreign exchange risk, the Group and the Bank manage and control by limiting the net open exposure on an aggregate basis. Sensitivity Analysis Assuming that other risk variables remain constant, the foreign currency revaluation sensitivity for the Group and the Bank as at reporting date is summarised as follows (only net open position for major currencies are shown in its specific currency in the table below. For other currencies, these exposures are grouped as ‘Others’): Impact on profit after tax - Increase/(Decrease) Group and Bank 2021 2020 -1% Depreciation RM’000 +1% Appreciation RM’000 -1% Depreciation RM’000 +1% Appreciation RM’000 US Dollar vs RM 12,136 (12,136) 8,844 (8,844) Euro vs RM 4,576 (4,576) 5,072 (5,072) Others vs RM (193) 193 (194) 194 (d) Liquidity risk Overview Liquidity risk is the potential inability of the Group and the Bank to meet its funding needs and regulatory obligation when they fall due, or will have to do it at excessive cost. This risk can arise from mismatches in the timing of cash flows. The Group and the Bank maintains a diversified and stable funding base comprising of retail and corporate customer deposits. This is augmented by wholesale funding and highly liquid assets portfolios. The objective of the Group’s and the Bank’s liquidity management is to ensure that all foreseeable funding commitments and deposit withdrawals can be met when due and that wholesale market remains accessible and cost effective. Savings account, current account, investment accounts (IA) and term deposits form a critical part of the Group’s and the Bank’s funding profile and the Group and the Bank place considerable importance on maintaining their stability. The stability depends upon preserving depositor confidence in the Group and the Bank and the Group’s and the Bank’s capital strength and liquidity, and on competitive and transparent pricing. INTEGRATED ANNUAL REPORT 202 1 Key Messages Overview Value Creation MD&A Sustainability Leadership Accountability Financial Additional Information 343
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