2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.10 Impairment (continued) Impairment of financial assets (continued) (i) Impairment of financial assets (continued) General approach/three stage approach (continued) 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. iii) Stage 3: Lifetime ECL – credit impaired (“Stage 3”) Financial assets are assessed as credit impaired when one or more events that have a negative impact on the estimated future cash flows of that asset have occurred. For financial assets that have become credit impaired, a lifetime ECL is recognised. Financial instruments that are credit-impaired with exposure more than RM1 million are assessed on individual basis. 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 obligatory triggers; i) Ceased operation ii) Bankruptcy/wound up iii) Fraud with investigation report duly confirmed as fraud iv) Liquidator/R&M appointed v) Deceased vi) Practice Note 17 (“PN17”) classification by Bursa Malaysia and a loss of repayment capability The Group and the Bank consider the economic and financial measures announced by the Government, i.e. automatic moratorium as well as rescheduling and restructuring for eligible customers are granted as part of an unprecedented government effort to support the economy amid the pandemic, rather than in response to the financial circumstances of individual customers. Judgement is excercised in determining the significant increase in credit risk for customers receiving relief assistance and do not automatically result in a stage transfer. Notes to the financial statements for the financial year ended 31 December 2022 Integrated Report 2022 270
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