4. CREDIT RISK 4.3 Management of Credit Risk The management of credit risk is being performed by the Group Credit Management Division (“CMD”) and Group Risk Management Division (“RMD”) and two other units outside of CMD and RMD domain, namely, Credit Administration Department and Recovery & Rehabilitation Division. The combined objectives are, amongst others: • • To build a high quality credit portfolio which is in line with the Group’s overall strategy and risk appetite; • • To ensure that the Group is compensated for the risk taken, balancing/optimising the risk/return relationship; • • To develop an increasing ability to recognise, measure and avoid or mitigate potential credit risk problem areas; and • • To conform with statutory, regulatory and internal credit requirements. The Group monitors its credit exposures either on a portfolio basis or individual basis through annual reviews. Credit risk is proactively monitored through a set of early warning signals that could trigger immediate reviews of (a certain part of) the portfolio. The affected portfolio or financing is placed on a watchlist to enforce close monitoring and prevent financing from turning impaired and to increase chances of full recovery. A detailed limit structure is in place to ensure that risks taken are within the risk appetite as set by the Board and to avoid credit risk concentration on a single customer, sector, product, etc. Credit risk arising from dealing and investing activities are managed by the establishment of limits which include counterparty limits and permissible acquisition of private entities’ instruments, subject to a specified minimum rating threshold. Furthermore, the dealing and investing activities are monitored by an independent middle office unit. 4.4 Capital Treatment for Credit Risk The Group adopts the Standardised Approach to compute the credit risk capital requirement under BNM’s CAFIB. PILLAR 3 DISCLOSURE as at 31 December 2021 BANK I SLAM MALAYS IA BERHAD 390
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