5. MARKET RISK (CONTINUED) 5.3 Management of Market Risk (continued) a) Profit rate risk in the banking book portfolio Profit rate risk in the banking book portfolio is managed and controlled using measurement tools known as Earnings-at-Risk (“EaR”) and Economic Value of Equity (“EVE”). The Group monitors the sensitivity of EaR and EVE under varying profit rate scenarios (i.e., simulation modelling). The model is a combination of standard and non-standard scenarios relevant to the local market. The standard scenarios include the parallel fall or rise in the profit rate curve and historical simulation. These scenarios assume no management action. Hence, it does not incorporate actions that would be taken by Treasury to mitigate the impact of the profit rate risk. In reality, depending on the view on future market movements, Treasury would proactively manage and strategise to change the profit rate exposure profile to minimise losses and to optimise net revenues. The Group’s hedging and risk mitigation strategies range from the use of derivative financial instruments, such as profit rate swaps, to more intricate hedging strategies to address inordinate profit rate risk exposures. The table below shows the Group’s and Bank’s profit rate sensitivity to a 1501 basis points parallel shift as at reporting date. 31 December 2021 31 December 2020 (Decrease)/Increase (Decrease)/Increase -150bps +150bps -100bps +100bps Group RM million RM million RM million RM million Impact on EaR (206.6) 206.6 (131.4) 131.4 Impact on EVE 294.0 (294.0) 241.0 (241.0) 31 December 2021 31 December 2020 (Decrease)/Increase (Decrease)/Increase -150bps +150bps -100bps +100bps Bank RM million RM million RM million RM million Impact on EaR (204.7) 204.7 (131.4) 131.4 Impact on EVE 293.6 (293.6) 240.9 (240.9) 1 Based on BNM’s revised RORBB reporting requirements, the Group’s and the Bank’s reporting were revised from 100bps to 150bps parallel shock effective 1 January 2021. PILLAR 3 DISCLOSURE as at 31 December 2021 BANK I SLAM MALAYS IA BERHAD 422
RkJQdWJsaXNoZXIy NDgzMzc=