4. CREDIT RISK (CONTINUED) 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 one other unit outside of CMD and RMD domain i.e., Credit Administration Department. 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. 4.5 Credit Quality of Gross Financing and Advances The table below presents the Group’s and the Bank’s gross financing and advances analysed by credit quality: Group and Bank 31.12.2023 RM’000 31.12.2022 RM’000 Neither past due nor impaired 66,278,057 64,437,823 Past due but not impaired 710,766 668,802 Impaired 635,966 835,232 67,624,789 65,941,857 Gross Impaired Financing as a percentage of Gross Financing and Advances 0.94% 1.27% 422 Pillar 3 Disclosure as at 31 December 2023 Bank Islam Malaysia Berhad ◆ Integrated Annual Report 2023
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