6. LIQUIDITY RISK (CONTINUED) 6.1 Overview (continued) The Group’s liquidity management is primarily carried out in accordance with Bank Negara Malaysia’s requirements and the internal limits approved by ALCO and/or BRC. The limits vary, taking into account the depth and liquidity of the market in which the Group operates. The Group maintains a strong liquidity position and manages the liquidity profile of its assets, liabilities, and commitments to ensure that cash flows are appropriately balanced, and all obligations are met when due. The Group’s liquidity management process includes: • • Daily projection of cash flows and ensuring that the Group has sufficient liquidity surplus and reserves to sustain a sudden liquidity shock; • • Projecting cash flows and considering the level of liquid assets necessary in relation thereto; • • Maintaining liabilities of appropriate term relative to the asset base; • • Maintaining a diverse range of funding sources with adequate back-up facilities; • • Monitoring depositor concentration in order to avoid undue reliance on large individual depositors and ensure a satisfactory overall funding mix; and • • Managing the maturities and diversifying funding liabilities across products and counterparties. 6.2 Liquidity Risk Governance The management of liquidity risk is principally carried out by using sets of policies and guidelines approved by ALCO and/or BRC, guided by the Board’s approved Group Risk Appetite Statement Policy. ALCO is responsible under the authority delegated by BRC for managing liquidity risk at strategic level. 6.3 Management of Liquidity Risk All liquidity risk exposures are managed by Treasury, who has the necessary skills, tools, management and governance to manage such risks. Limits and triggers are set to meet the following objectives: • • Maintaining sufficient liquidity surplus and reserves to sustain a sudden liquidity shock; • • Ensuring that cash flows are relatively diversified across all maturities; • • Ensuring that the deposit base is not overly concentrated on a relatively small number of depositors; • • Maintaining sufficient borrowing capacity in the Interbank market and highly liquid financial assets to back it up; and • • Not over-extending financing activities relative to the deposit base. MRMD is an independent risk control function and is responsible for ensuring efficient implementation of liquidity risk framework. It is also responsible for developing the Group’s liquidity risk management guidelines, monitoring tools, behavioural assumptions and limit setting methodologies. Strict escalation procedures are documented and approved by ALCO and/or BRC, with proper authorities to ratify or approve the excess. In addition, the liquidity risk exposures and limits are regularly reported to ALCO and BRC. Stress testing and scenario analysis are important tools used by the Group to manage the liquidity risk. Stress test results are produced regularly to determine the impact of a sudden liquidity shock. The stress-testing provides the Management and BRC with an assessment of the financial impact of identified extreme events on the liquidity and funding risk exposures of the Group. Another key control feature of the Group’s liquidity risk management is the liquidity contingency management plans. These plans identify the pre-emptive quantitative and qualitative indicators of stress conditions arising from systemic or other crises and provide guidance on actions to be taken in order to minimise the adverse implications to the Group. INTEGRATED ANNUAL REPORT 202 1 425 Key Messages Overview Value Creation MD&A Sustainability Leadership Accountability Financial Additional Information
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