38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.) (a) Interest rate risk (cont'd.) The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s and the Corporation’s profit before taxation and equity via floating rate borrowings and interest rate swaps respectively. Effect on Effect on profit other Increase/ before comprehensive (Decrease) taxation income in LIBOR (Decrease)/ Increase/ basis points Increase (Decrease) RM’000 RM’000 As at 31 December 2021 Group USD - 3 Months LIBOR +10 (4,951) 30,020 USD - 3 Months LIBOR -10 4,951 (30,020) Corporation USD - 3 Months LIBOR +10 – – USD - 3 Months LIBOR -10 – – As at 31 December 2020 Group USD - 3 Months LIBOR +10 (2,308) 21,403 USD - 3 Months LIBOR -10 2,308 (21,403) Corporation USD - 3 Months LIBOR +10 (1,071) – USD - 3 Months LIBOR -10 1,071 – As at 31 December 2021, the Group’s and the Corporation’s exposure to the risk of changes in market interest rate relates primarily to the Group’s and the Corporation’s placement of deposits with licensed banks, cash and bank balances, loans to subsidiaries and associate, interest-bearing loans and borrowings and loans from subsidiaries. 38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.) (a) Interest rate risk (cont’d.) The interest-bearing financial instruments of the Group and of the Corporation based on carrying amount, as at reporting date were as follows: Group Corporation 2021 2020 2021 2020 RM’000 RM’000 RM’000 RM’000 Fixed rate instruments Financial assets Deposits with licensed banks 401,820 991,620 21,916 11,171 Deposits with IFSSC 5,462,424 4,023,265 2,810,026 1,609,734 Loans and advances to subsidiaries – – 222,106 644,439 Financial liabilities Fixed rate borrowings 369,636 248,396 – – Floating rate borrowings (swapped to fixed rate) 11,441,014 10,115,264 – – Loans from subsidiaries – – 648,116 167,548 Floating rate instruments Financial assets Cash and bank balances 2,088,103 1,840,120 52 42 Loans and advances to subsidiaries – – 730,530 569,553 Financial liabilities Floating rate borrowings 4,984,954 2,727,493 – 342,423 Loans from subsidiaries – – – 684,845 The Group is also exposed to the ongoing interbank offered rates (“IBOR”) reforms on its financial instruments that will be replaced or reformed as part of market-wide initiatives. The Group’s main IBOR exposure is indexed to USD LIBOR which will be discontinued on a revised timeline of 30 June 2023. The alternative reference rate is Secured Overnight Financing Rate (“SOFR”). The Group has established a transition committee which monitors and manages the Groupwide transition to alternative rates with an aim to achieve economically equivalent transactions and minimal impact upon transition. As at reporting date, transitional activities are currently ongoing, and the Group has no transactions for which benchmark rate had been replaced with an alternative benchmark rate. NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 MISC Berhad 418 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 419 FINANCIAL STATEMENTS FINANCIAL STATEMENTS
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