5. MARKET RISK (CONTINUED) 5.3 Management of Market Risk (continued) c) Foreign Exchange Risk The Bank manages and controls the trading book portfolio’s foreign exchange risk by limiting the net open exposure to individual currencies and on an aggregate basis. For the Bank-wide (trading and banking portfolios) foreign exchange risk, the Bank manages and controls by limiting the net open exposure on an aggregate basis. Sensitivity Analysis The Bank has a sensitivity limit for managing the foreign exchange risk in place. The foreign currency revaluation sensitivity for the Bank as at reporting date is summarised as follows (only net open position for major currencies are shown in its specific currency in the table below. For other currencies, these exposures are grouped as “Others”): Bank 31 December 2023 31 December 2022 –1% Depreciation RM’000 +1% Appreciation RM’000 –1% Depreciation RM’000 +1% Appreciation RM’000 US Dollar (4,195) 4,195 (4,805) 4,805 Euro 5,122 (5,122) 4,348 (4,348) Others (318) 318 (143) 143 5.4 Capital Treatment for Market Risk The Group adopts the Standardised Approach to compute the market risk capital requirement under BNM’s CAFIB. 6. LIQUIDITY RISK 6.1 Overview Liquidity risk is the risk of adverse impact to the financial condition of the Group, or the soundness of the Group being adversely affected by an inability (or perceived inability) to meet its contractual obligations. This risk can arise from mismatches in the timing of cash flows. The Group maintains a diversified and stable funding base comprising retail and corporate customer deposits. This is augmented by wholesale funding and highly liquid assets portfolios. The objectives of the Group’s liquidity management are to ensure that all foreseeable funding commitments and deposit withdrawals can be met when due and that wholesale market access remains accessible and cost effective. Savings accounts, current accounts, investment accounts (IA) and term deposits form a critical part of the Group’s funding profile and the Group places considerable importance on maintaining their stability. The stability depends upon preserving depositors’ confidence in the Group and the Group’s capital strength and liquidity, and on competitive and transparent pricing. 459 www.bankislam.com 1 2 3 4 5 6 7 8 9 FINANCIAL STATEMENTS
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