Introduction. Scope of Application

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2 Contents Introduction... 1 Scope of Application Capital Structure and Capital Adequacy Capital Structure Capital Adequacy Information Related to the Risks Credit Risk Credit Risk Management Classification and Impairment of Assets Credit Rating Credit Risk Mitigation Market Risk Market Risk Management Traded Market Risk Interest Rate Risk in the Bangking Book (IRRBB) Equity Exposure in the Banking Book Operational Risk... 44

3 Index of Tables Table 1: Capital Structure... 2 Table 2: Capital Adequacy... 3 Table 3: Component of Capital... 5 Table 4: Minimum Capital Requirements for Each Type of Risks... 7 Table 5: Main Features of Regulatory Capital Instruments... 8 Table 6: Reconciliation of Regulatory Capital and Financial Statement under Consolidated Supervision Table 7: Significant on-statement of financial position assets and off-statement of financial position items before credit risk mitigation classified by remaining maturity Table 8: Significant on-statement of financial position assets and off-statement of financial position items before credit risk mitigation classified by customer s country of residence Table 9: Loans and accrued interest receivables (including interbank and money market items) and investment in debt securities before credit risk mitigation classified by customer s country of residence and by asset classification guidelines specified by regulators Table 10: General and specific provisions and bad debt written off for loans and accrued interest receivables (including interbank and money market items) and investment in debt securities classified by customer s country of residence Table 11: Loans and accrued interest receivables (including interbank and money market items) before credit risk mitigation, classified by business type and by asset classification guidelines specified by regulators Table 12: General and specific provisions and bad debt written off for loans and accrued interest receivables (including interbank and money market items) classified by business type Table 13: Reconciliation of general and specific provisions for loans and accrued interest receivables (including interbank and money market items) Table 14: On-statement of financial position assets and credit equivalent amount of off-statement of financial position items, net of specific provisions, classified by asset type under SA approach Table 15: On-statement of financial position assets and credit equivalent amount of off-statement of financial position items, net of specific provisions, after credit risk mitigation for each asset type classified by risk weights under SA approach Table 16: Secured portion of credit exposures after on- and off-balance sheet netting for each asset type under SA approach classified by credit risk mitigation types Table 17: Minimum capital requirements for market risk based on Standardised Approach (SA) Table 18: Net Interest Income Impact if interest rate rises by 100 bps Table 19: Equity exposures in the banking book... 43

4 Introduction Bangkok Bank ( the Bank ) recognizes that effective risk management and good corporate governance are essential to the stability and sustainable credibility of the Bank and its subsidiaries in the Group ( the Group ). therefore places great emphasis on continually improving risk management processes and on having a sufficient level of capital to support business operations, at both the Bank level and the Group level. The use of market discipline is deemed to be an important driver in the enhancement of the risk management system. Therefore disclosures of information regarding capital, risk exposures, risk assessment processes, and capital adequacy are provided at both the Bank level (Solo Basis) and the Group level (Full Consolidation Basis) in accordance with the disclosure requirements of the Bank of Thailand ( BOT ). The complete disclosure report of information regarding capital management in accordance with Basel III - Pillar 3 is provided, of which the quantitative information regarding capital structure, capital adequacy, and market risk assessment is disclosed semi-annually. As for the disclosure of qualitative information, it is updated annually or when there is a material change in the risk management policy. Disclosures will be made for information that the Bank considers to be of material nature. The Pillar 3 disclosure reports will be made available on the Bank s website under the section About Bangkok Bank/ Investor Relations within four months after the end of relevant period. Scope of Application The disclosure report covers information at both the Bank level (Solo Basis) and the Group level (Full Consolidation Basis). There are 10 companies in the Group consisting of; Bangkok Bank Public Company Limited engaged in commercial banking (as the parent company) Bangkok Bank Berhad engaged in commercial banking Bangkok Bank (China) Company Limited engaged in commercial banking BBL Asset Management Company Limited engaged in fund management Bangkok Capital Asset Management Company Limited engaged in fund management Bualuang Securities Public Company Limited engaged in securities business Sinsuptawee Asset Management Company Limited engaged in asset management BBL Nominees (Tempatan) Sdn. Bhd engaged in supporting business BBL (Cayman) Limited engaged in finance business Bualuang Ventures Limited engaged in venture capital The scope of consolidation for accounting and regulatory purposes has no difference (See Table 6). 1

5 1. Capital Structure and Capital Adequacy 1.1 Capital Structure s capital structure according to the regulations on capital requirements under the principles of BOT s Basel III, is revised into Common Equity Tier 1 capital, Additional Tier 1 capital and Tier 2 capital. Common Equity Tier 1 capital comprises 1) Paid-up share capital 2) Premium (discount) on common share 3) Legal reserves 4) Reserves appropriated from net profit 5) Retained earnings after appropriations 6) Non-controlling interest classified as Common Equity Tier 1 7) Other reserves 8) Deductions such as intangible assets Additional Tier 1 capital consists of non-controlling interest classified as Tier 1 Capital. Tier 2 capital consists of 1) Long-term subordinated debt instrument subordinated to depositors and general creditors 2) General provisions for normal assets not exceeding 1.25 percent of credit risk- weighted assets 3) Non-controlling interest classified as Tier 2 In adopting Basel III, BOT relaxes for new items by allowing to phase in the addition into or deduction from the capital at 20 percent p.a. starting from 2014 to As for subordinated debt instruments classified as Tier 2 of which the criteria do not meet qualifications under Basel III regarding capability for loss absorbency of the Bank at the point of non-viability i.e. no conversion feature to common shares or written off upon the authority s decision to make financial support to the Bank, BOT requires phasing out capital at 10 percent p.a. starting from 2013 to Table 1: Capital Structure Capital Unit : Million Baht 31 December June December June 2017 Common Equity Tier 1 Capital 383, , , ,369 Tier 1 Capital 383, , , ,369 Total Capital 419, , , ,470 2

6 1.2 Capital Adequacy The objective of the Bank s and the Group s capital management policy is to maintain an adequate level of capital to support growth strategies within an acceptable risk framework, as well as to meet regulatory requirements and market expectations. In compliance with the BOT s supervisory review process guidelines, the Bank s capital management process assesses the overall risk and capital adequacy under the Internal Capital Adequacy Assessment Process (ICAAP). The process covers assessments of all substantial risks to the Bank s operations under projected normal and stressed scenarios, so that the Bank can effectively manage its risks while ascertaining and ensuring that it has a sound capital base in line with its risk profile. Therefore, the Bank will expand the capital management process to the Group. The Standardised Approach (SA) is used to measure credit risk, market risk, and operational risk for computing regulatory capital requirements under BOT s Basel III at both the Bank level and the Group level. Under the principles of Basel III, the BOT requires that commercial banks registered in Thailand and their groups must maintain three minimum capital adequacy ratios: a Common Equity Tier 1 capital adequacy ratio of no less than 4.50 percent, a Tier 1 capital adequacy ratio of no less than 6.00 percent, and a total capital adequacy ratio of no less than 8.50 percent. The aforementioned minimum ratios have yet to include the Capital Conservation Buffer which the BOT is phasing in with an additional capital ratio of more than percent p.a. that began on January 1, 2016 rising in increments to more than 2.50 percent on January 1, In addition, in September 2017 the BOT announced guidelines to identify and regulate Domestic Systemically Important Banks (D-SIBs). The BOT requires the Bank, which is classified as a D-SIB, to have additional capital to meet the Higher Loss Absorbency (HLA) requirement by 1.00 percent, beginning with a 0.50 percent increase from January 1, 2019 followed by a 1.00 percent increase from January 1, 2020 onwards. Consequently, a Common Equity Tier 1 capital adequacy ratio of more than 5.75 percent, a Tier 1 capital adequacy ratio of more than 7.25 percent, and a total capital adequacy ratio of more than 9.75 percent are required to be maintained from January 1, Effective from January 1, 2019, Common Equity Tier 1 ratio, Tier 1 ratio and total capital ratio must be more than 7.50, 9.00 and percent, respectively, of the total risk-weighted assets. And from January 1, 2020, Common Equity Tier 1 ratio, Tier 1 ratio and total capital ratio must be more than 8.00, 9.50 and percent, respectively, of the total risk-weighted assets. Moreover, BOT may require banks to maintain additional capital for Countercyclical Buffer at maximum 2.50 percent. As at December 31, 2017, the Bank and the Group has adequate capital for such buffers. Table 2: Capital Adequacy Capital 31 December June December June 2017 Common Equity Tier 1 Capital 16.62% 16.35% 16.47% 16.14% Tier 1 Capital 16.63% 16.35% 16.47% 16.14% Total Capital 18.17% 18.13% 18.03% 17.93% 3

7 Capital Adequacy Ratio Group Level (Full Consolidation Basis) Bank Level (Solo Basis) Remark: The BOT requires commercial banks to maintain an additional Capital Conservation Buffer. The buffer will gradually increase by more than percent each year from January 1, 2016 until it reaches more than 2.5 percent in January 1, And the BOT also requires commercial banks to have additional capital requirement for Higher Loss Absorbency (HLA) requirement by increasing the Common Equity Tier 1 ratio at 1 percent, beginning at 0.50 percent from January 1, 2019 and increasing to be 1.00 percent from January 1, 2020 onwards. 4

8 Table 3: Component of Capital Component of Capital Unit : Million Baht 31 December June December June 2017 Tier 1 Capital 383, , , ,369 Common Equity Tier 1 Capital 383, , , ,369 Paid-up share capital 19,088 19,088 19,088 19,088 Premiums on share capital 56,346 56,346 56,346 56,346 Legal reserves 22,000 21,500 22,000 21,500 Reserves appropriated from net profit 96,500 91,500 96,500 91,500 Net profit after appropriations 134, , , ,206 1 Other comprehensive income * 56,126 51,842 57,374 53,237 2 Deductions from Common Equity Tier 1 Capital * (825) (563) (761) (508) Additional Tier 1 Capital Non-controlling interest * Tier 2 Capital 35,638 39,974 34,965 39,101 5 Subordinated debenture * 9,535 14,768 9,535 14,768 General provision 26,091 25,198 25,430 24,333 4 Non-controlling interest * Total Capital 419, , , ,470 *Component of capital subject to phasing in (out) As at December 31, 2017 Phasing in (out) at 20 percent p.a. beginning Classified As Capital Outstanding Balance for Phasing In (Out) Classified As Capital Unit : Million Baht Outstanding Balance for Phasing In (Out) 1 Other comprehensive income 56,126 (657) 57,374 (291) 2 Deductions from Common Equity Tier 1 Capital (825) (207) (761) (191) 3 Non-controlling interest 101 (45) Non-controlling interest Phasing in (out) at 10 percent p.a. beginning Subordinated debenture 9,535 (9,535) 9,535 (9,535) 5

9 *Component of capital subject to phasing in (out) As at 30 June 2017 Phasing in (out) at 20 percent p.a. beginning Classified As Capital Outstanding Balance for Phasing In (Out) Classified As Capital Unit : Million Baht Outstanding Balance for Phasing In (Out) 1 Other comprehensive income 51,842 (380) 53, Deductions from Common Equity Tier 1 Capital (563) (141) (508) (128) 3 Non-controlling interest 86 (43) Non-controlling interest Phasing in (out) at 10 percent p.a. beginning Subordinated debenture 14,768 (14,768) 14,768 (14,768) 6

10 Table 4: Minimum Capital Requirements for Each Type of Risks Type of Risks Unit : Million Baht 31 December June December June 2017 Minimum capital requirements for credit risk 177, , , ,705 Performing 174, , , ,443 - Sovereigns and central banks, Multilateral development banks (MDBs 1 ), and Provincial organizations/ Government entities/ State enterprises (PSEs 2 ) which have the same risk weight as Sovereigns 3,098 1,677 3,078 1,676 - Financial institutions, Securities firms, and Provincial organizations/ Government entities/ State enterprises (PSEs) which have the same risk weight as Financial Institutions 8,609 7,663 7,760 7,158 - Corporates, and Provincial organizations/ Government entities/ State enterprises (PSEs) which have the same risk weight as Corporates 125, , , ,250 - Retail 14,418 13,342 14,285 13,247 - Residential mortgage loans 7,594 7,358 7,594 7,358 - Other assets 15,844 14,825 17,708 16,754 Non-Performing 2,522 2,318 2,498 2,262 Minimum capital requirements for market risk 3,716 3,259 3,478 3,148 - Interest Rate Risk 2,626 2,565 2,585 2,541 - Equity Price Risk Foreign Exchange Risk Commodity Price Risk Minimum capital requirements for operational risk 15,157 14,775 14,108 13,713 Total minimum capital requirements 196, , , ,566 Remark 1 Multilateral Development Banks 2 Non-central Government Public Sector Entities 7

11 Table 5: Main Features of Regulatory Capital Instruments Ordinary share Subordinated debt 1 Issuer Bangkok Bank Public Company Limited Bangkok Bank Public Company Limited Hong Kong Branch ISIN Code TH USY0606WBQ25 (Reg S) US059895AH54 (144A) Regulatory treatment Instrument type Common Equity Tier 1 Tier 2 capital Qualified Basel III Qualified Non-qualified Non-qualified Basel III features N/A No loss absorption features Phased-out or full-amount Full-amount Phased-out at 10% p.a. Eligible at solo/group level Group & solo Group & solo Amount recognized in regulatory capital (Net of phasing out) (Unit: THB Million) 19,088 9,535 Par value 10 Baht 1,000 U.S. Dollar Accounting classification Shareholder's equity Amortized-cost debt Original date of issuance Multiple January 28, 1999 Perpetual or dated Perpetual Dated Original maturity date No maturity March 15, 2029 Issuer's authority to call subject to prior supervisory approval No No Optional call date, contingent call date and redemption amount has the option to redeem N/A the subordinated notes if there are changes in or amendments to the tax laws or regulations of Thailand and/or Hong Kong resulted that the Bank has additional amount to pay in respect to the withholding tax. The redemption amount of the notes shall be equal to total outstanding principal plus accrued interest. Subsequent call dates, if applicable N/A Any date after original date of issuance 8

12 Table 5: Main Features of Regulatory Capital Instruments (Continued) Coupons / dividends Ordinary share Subordinated debt 1 Fixed or floating dividend/coupon Discretionary dividend amount Fixed rate Coupon rate and any related index Distributable profit that has been declared as dividend % p.a. Existence of a dividend stopper No No Fully discretionary, partially discretionary or mandatory Fully discretionary Mandatory by BOT Existence of step up or other incentive to redeem No No Non-cumulative or cumulative Non-cumulative Non-cumulative Convertible or non-convertible Non-convertible Non-convertible Write-down feature No No Position in subordination hierarchy in liquidation The ordinary shareholders shall of the return of capital in a winding-up at the last position. The subordinated noteholders shall of the return of capital in a windingup after preferred shareholders, depositors and general creditors. 9

13 Table 6: Reconciliation of Regulatory Capital and Financial Statement under Consolidated Supervision capital Item Unit : Million Baht 31 December 2017 Amount 30 June 2017 Amount References based on balance sheet under the consolidated supervision Tier 1 capital Common Equity Tier 1 Capital Paid-up common shares after deducting treasury shares 19,088 19,088 A Premiums on share capital 56,346 56,346 B Legal reserves 22,000 21,500 C Reserves appropriated from net profit 96,500 91,500 D Net profit after appropriation 134, ,996 E Other comprehensive income Revaluation surplus on land building and condominium appraisal 23,499 23,970 F Revaluation surplus (deficit) of available for sale equity and debt securities 38,390 32,058 G Foreign currency translation differences (5,763) (4,186) H Other owner changes items - - Total CET1 capital before regulatory adjustments and deduction 384, ,272 Regulatory adjustments on CET1 - - Regulatory deduction on CET1 Intangible assets (Software computer license) Total regulatory deduction on CET1 (825) (825) (563) (563) Total CET1 383, ,709 Additional Tier 1 capital Non-controlling interest J Total Tier 1 capital 383, ,795 Tier 2 capital Proceeds from issuing subordinated debt securities 9,535 14,768 K General provision 26,091 25,198 L Non-controlling interest 12 8 M Total Tier 2 capital 35,638 39,974 Total regulatory capital 419, ,769 I 10

14 Table 6: Reconciliation of Regulatory Capital and Financial Statement under Consolidated Supervision (Continued) Balance sheet under the consolidated supervision 1 Unit : Million Baht Items 31 December June 2017 References for the Group Amount Amount capital items Assets Cash 65,473 51,782 Interbank and money market items, net 437, ,488 Claim on securities 7 8 Derivative assets 27,360 26,103 Investments, net 591, ,825 Investments in subsidiaries and associates, net 1,460 1,362 Loans to customers and accrued interest receivables, net Loans to customers 2,004,496 1,978,947 Accrued interest receivables 5,061 3,888 Total Loans to customers and accrued interest receivables 2,009,557 1,982,835 Less Deferred revenue (507) (556) Less Allowance for doubtful accounts (137,711) (127,396) Qualified as capital (26,091) (25,198) L Less Revaluation allowance for debt restructuring (2,310) (2,522) Total Loans to customers and accrued interest receivables, net 1,869,029 1,852,361 Customers' liabilities under acceptances 1,433 1,291 Properties for sale, net 11,415 11,298 Premises and equipment, net 43,834 44,366 Other Intangible assets, net 1, Deduction from capital (825) (563) I Deferred tax assets 3,676 3,535 Securities business receivables - cash accounts 5,301 3,928 Collateral placed with financial counterparties 3,203 2,698 Other assets, net 13,629 12,383 Total assets 3,076,310 3,041,132 Liabilities Deposits 2,310,743 2,297,918 Interbank and money market items, net 133, ,537 Liabilities payable on demand 13,643 13,065 Liabilities to deliver securities Derivative liabilities 21,002 19,530 Debt issued and borrowings 107, ,595 Debt instruments that are qualified as capital 9,535 14,768 K Bank's liabilities under acceptances 1,433 1,291 Provisions 13,504 12,848 Deferred tax liabilities 5,743 5,751 Other liabilities 67,040 58,939 Total liabilities 2,674,303 2,656,343 11

15 Table 6: Reconciliation of Regulatory Capital and Financial Statement under Consolidated Supervision (Continued) Balance sheet under the consolidated supervision 1 Unit : Million Baht 31 December June 2017 References for the Items Amount Amount Group capital items Owner' Equity Share capital Authorized share capital Preferred shares Common shares 39,983 39,983 Issued and paid-up share capital Common shares 19,088 19,088 A Premium on share capital Premium on common shares 56,346 56,346 B Other comprehensive income 56,283 52,282 Qualified as capital 56,126 51,842 F, G, H Retained earnings Appropriated Legal reserve 22,000 21,500 C Others 96,500 91,500 D Unappropriated 151, ,816 Qualified as capital 134, ,996 E Total shareholders' equity 401, ,532 Non-controlling interest Qualified as Tier 1 capital J Qualified as Tier 2 capital 12 8 M Total owner's equity 402, ,789 Total liabilities and owner's equity 3,076,310 3,041,132 Remark 1 The scope of consolidation for accounting and regulatory purposes has n o difference. 12

16 2. Information Related to the Risks The effective risk management is fundamental to good banking practice of the Bank and the Group. Accordingly, the Bank has established guidelines for managing risk in each area of the business of the Bank and the Group to ensure that proper risk management mechanisms are in place. Over the past few years, the Bank proactively identified, monitored and analyzed major risk factors which could affect the financial operations of the Bank and the Group and, where necessary, has adjusted their organizational structure and risk management processes. This is to ensure that their risk management systems are effective and in line with international standards and are in accordance with the BOT guidelines. The Risk Management Committee, the Board of Executive Directors and the senior management all play significant roles in prescribing and reviewing the sufficiency of the risk management policy and system. They also define the risk management strategy, and monitor and control the risk of the Bank and the Group to be at an appropriate level, in compliance with the risk management policy approved by the Board of Directors. The risk management process of the Bank and the subsidiaries in the Group comprises the identification of significant risks which may potentially impact business operations, the assessment of each type of risk, the monitoring and control of risks to an appropriate level, and the reporting of the status for each type of risk to relevant parties so as to enable them to manage and/or handle the risks in a timely manner. The key principle of risk management is based on each business unit being responsible for continuously managing its relevant risk exposures and ensuring each risk remains within the approved limits and is in compliance with the overall risk management policy approved by the Board of Directors, while the Risk Management Division is responsible for monitoring and controlling the overall risks on a regular basis. The Risk Management Division and all risk-generating units are audited by the Audit and Control Division to assess the effectiveness, adequacy and appropriateness of the internal control systems. The approach used by the Bank and the subsidiaries in the Group for the management of credit risk, market risk and operational risk are as follows: 2.1 Credit Risk Credit Risk is the risk that arises from the inability of borrowers or counterparties to perform their obligations under contractual agreements in relation to lending, investment and other contractual activities, for example the borrowers failure to repay principal and/or interest as agreed in the contract Credit Risk Management has established credit underwriting processes which include the formulation of the credit policy, credit risk ratings for customers, and the establishment of different levels of delegation of authority for credit approval, depending upon the type of business and/or the size of the credit line. In considering, the approval of loans in general, the Bank considers the purpose of the loan and assesses the repayment ability of the applicant, taking into account the applicant s operating cash flows, business feasibility, management capability, and collateral coverage. performs credit reviews which include reviewing credit risk rating on a regular basis. In order to effectively monitor and manage its credit risks, the Bank has, therefore, set up the following divisions. Risk Management Division is responsible for analyzing and reporting to management on the status of various risks of the Bank, as well as proposing recommendations for the review of the overall risk policy of the Bank in anticipation 13

17 of, and in compliance with, new rules, regulations and international standards. The division is also responsible for overseeing the management of each type of risk to comply with the Bank s risk management policy. Credit Management Division is responsible for managing risks related to credit extension by supervising and monitoring credit extensions in accordance with the Bank s credit policies. The Credit Management Division comprises the Credit Policy unit, the Credit Acceptance unit, the Portfolio Management unit, the Risk Asset Review unit, the Special Asset Management unit, the Loan Recovery and Legal unit, and the Bank Property unit. The functions of each unit are summarized below - Credit Policy unit oversees the credit policy framework and coordinates the improvement and adjustment of the credit policy. It is also responsible for disseminating the credit policy, credit standards and credit processes; for monitoring and overseeing exceptional cases which are inconsistent with the credit policy; and for gathering various inputs which may be used for improving the credit policy. - Credit Acceptance oversees the quality of credit extensions to ensure they are in line with the credit policy and credit underwriting standards, reviews the appropriateness of loan structures as well as the results of customers credit risk ratings, promotes the development of a good credit culture, and maintains a systematic and reliable credit extension process. - Portfolio Management unit is responsible for analyzing and making recommendations for adjustments to the portfolio structure, recommending the appropriate portfolio composition and the provision of reserves for loan losses at the portfolio level, developing and overseeing credit risk management tools and methodologies, constructing credit databases, and overseeing related management standards. - Risk Asset Review unit is charged with reviewing credit quality and credit management processes, assessing the adequacy of loan loss reserves, and evaluating compliance with credit policy, regulations and credit underwriting standards. - Special Asset Management unit is responsible for managing non-performing loans, and for determining and executing strategies for the resolution and restructuring of troubled loans. - Loan Recovery and Legal unit is responsible for taking legal actions, negotiating loan settlements, and seizing collateral for sale by public auction. - Bank Property unit is responsible for managing and selling foreclosed assets obtained from loan recovery processes and from legal actions. For the credit process, credit applications are first considered by the business units and then submitted to the Credit Acceptance unit. The unit conducts additional analysis to help mitigate credit risk by ensuring that the proposals comply with the Bank s credit policies in areas such as credit underwriting standards, credit risk rating, and collateral appraisal. In handling nonperforming loans, there is a specific unit to manage and resolve such loans. also has an independent unit to review credit quality and credit management processes; assess the adequacy of loan loss reserves for non-performing loans; evaluate the effectiveness in complying with credit policy, regulations and credit underwriting standards; and assess the appropriateness of portfolio composition, the adequacy of capital and the effectiveness of stress testing as specified by the Bank and the BOT. All the above units report to the senior management, the Board of Executive Directors and the Risk Management Committee on a regular basis. 14

18 has established different measures to control credit risk. For example, the Bank has instituted limits on the amount of total credit extended, contingent liabilities, and investment in a group of borrowers, an industry and a country. All of this will limit the loss of capital due to an economic downturn. Moreover, the Bank monitors and reports on these aspects to the senior management, the Board of Executive Directors and the Risk Management Committee to ensure that there will be adequate capital to safeguard the continuity of business operations in difficult times. For the subsidiaries in the Group, credit risk management processes similar to that of the Bank have been established, but the organizational structure of the units that are responsible for the supervision and management of credit risk may vary according to the structure of each company Classification and Impairment of Assets and each subsidiary in the Group follow the guidelines of the BOT and/or the relevant local regulators regarding the classification of assets and relevant provisions. Assets are classified as normal, special mention, substandard, doubtful, doubtful of loss and loss by taking into consideration the length of time in default of payment whether of principal or interest, and also qualitative measures. Under the Standardised Approach (SA) for measuring capital adequacy, the Bank and the subsidiaries in the Group s provisions are differentiated into Specific Provision and General Provision as follows: Specific Provisions include provisions that have been set aside for non-performing loans based on the difference between the book value of such loans and the present value of estimated future cash flows to be received, either from the debtors or from disposal of collateral; and provisions that have been set aside for performing loans in accordance with the minimum guidelines specified by the BOT and/or the relevant regulators. For loans with similar credit risk characteristics, the Collective Approach may be adopted using historical loss information and current observable data to determine the provisioning level. Furthermore, specific provisions include provisions for any off-balance sheet items where a loss may be realized upon settlement of obligations on behalf of such debtors; provisions for other on-balance sheet assets where objective evidence of impairment exists and the impairment loss can be estimated; and unrealized loss on revaluation of securities categorized as trading and available-for-sale. Specific provisions do not include provisions for assets classified as normal which have already been included in Tier 2 capital. General Provisions include provisions that have been set aside in excess of the minimum regulatory requirements for potential loss due to changes in economic and legal environment and other factors as outlined above which are not earmarked specifically for any particular debtor; and provisions that have been set aside for assets classified as normal that are included in Tier 2 capital. 15

19 The following tables present the quantitative information related to credit risk at the Bank and the Group level as at December 31, 2017 and Table 7: Significant on-statement of financial position assets and off-statement of financial position items before credit risk mitigation classified by remaining maturity 31 December 2017 Remaining maturity On-statement of financial position assets Off-statement of financial position items before multiplying by credit conversion factors Net loans and accrued interest receivables* Net investment in debt securities Deposits (including accrued interest receivables) Derivatives assets Total Avals, loan guarantees, letters of credit OTC derivatives Undrawn committed lines Up to 1 year 972,519 66, ,678 9,667 1,240,852 51, ,461 29, ,056 Over 1 year 1,170, ,601-17,693 1,588,300 9,098 1,034,242 30,029 1,073,369 Total 2,142, , ,678 27,360 2,829,152 60,435 1,922,703 59,287 2,042,425 * Including interbank and money market items but excluding general provisions Total 31 December 2016 Remaining maturity On-statement of financial position assets Off-statement of financial position items before multiplying by credit conversion factors Net loans and accrued interest receivables* Net investment in debt securities Deposits (including accrued interest receivables) Derivatives assets Total Avals, loan guarantees, letters of credit OTC derivatives Undrawn committed lines Up to 1 year 889,490 85, ,738 8,711 1,180,397 43, ,334 14, ,770 Over 1 year 1,159, ,425-15,760 1,531,957 16, ,514 54,308 1,009,972 Total 2,049, , ,738 24,471 2,712,354 59,153 1,864,848 68,741 1,992,742 * Including interbank and money market items but excluding general provisions Total 16

20 31 December 2017 Remaining maturity On-statement of financial position assets Off-statement of financial position items before multiplying by credit conversion factors Net loans and accrued interest receivables* Net investment in debt securities Deposits (including accrued interest receivables) Derivatives assets Total Avals, loan guarantees, letters of credit OTC derivatives Undrawn committed lines Up to 1 year 928,325 55, ,190 9,356 1,141,641 40, ,194 32, ,498 Over 1 year 1,156, ,301-17,692 1,569,970 6,770 1,034,078 30,029 1,070,877 Total 2,085, , ,190 27,048 2,711,611 47,548 1,904,272 62,555 2,014,375 * Including interbank and money market items but excluding general provisions Total 31 December 2016 Remaining maturity On-statement of financial position assets Off-statement of financial position items before multiplying by credit conversion factors Net loans and accrued interest receivables* Net investment in debt securities Deposits (including accrued interest receivables) Derivatives assets Total Avals, loan guarantees, letters of credit OTC derivatives Undrawn committed lines Up to 1 year 852,486 71, ,677 8,281 1,083,132 40, ,487 18, ,132 Over 1 year 1,144, ,049-15,760 1,509,802 7, ,515 54,308 1,000,946 Total 1,997, , ,677 24,041 2,592,934 47,752 1,841,002 72,324 1,961,078 * Including interbank and money market items but excluding general provisions Total 17

21 Table 8: Significant on-statement of financial position assets and off-statement of financial position items before credit risk mitigation classified by customer s country of residence 31 December 2017 Customer s country of residence 1 On-statement of financial position assets Off-statement of financial position items before multiplying by credit conversion factors Net loans Net Deposits Derivatives Total Avals, loan OTC Undrawn Total and accrued interest receivables 2 investment in debt securities (including accrued interest receivables) assets guarantees, letters of credit derivatives committed lines Thailand 1,711, ,163 29,714 25,215 2,128,428 30,289 1,522,914 39,136 1,592,339 Asia 379,014 98, ,487 1, ,545 29, ,566 8, ,141 Europe 23,922 1,388 14, , , ,589 America 16,035 3,855 10, , ,174 9,729 19,032 Others 12,218 1,455 3, ,876-8,929 1,395 10,324 Total 2,142, , ,678 27,360 2,829,152 60,435 1,922,703 59,287 2,042,425 1 Based on customer s country of residence 2 Including interbank and money market items but excluding general provisions 31 December 2016 Customer s country of residence 1 On-statement of financial position assets Off-statement of financial position items before multiplying by credit conversion factors Net loans Net Deposits Derivatives Total Avals, loan OTC Undrawn Total and accrued interest receivables 2 investment in debt securities (including accrued interest receivables) assets guarantees, letters of credit derivatives committed lines Thailand 1,669, ,574 24,129 16,860 2,072,018 30,811 1,454,315 50,949 1,536,075 Asia 333,146 74, ,635 3, ,992 28, ,768 13, ,991 Europe 25,156 1,628 23,885 3,436 54, , ,764 America 17,352 2,417 12, , ,106 4,479 18,716 Others 4,153 1,792 2, ,517-10,196-10,196 Total 2,049, , ,738 24,471 2,712,354 59,153 1,864,848 68,741 1,992,742 1 Based on customer s country of residence 2 Including interbank and money market items but excluding general provisions 18

22 Customer s country of residence 1 Net loans and accrued interest receivables 2 On-statement of financial position assets Net investment in debt securities Deposits (including accrued interest receivables) Derivatives assets 31 December 2017 Total Off-statement of financial position items before multiplying by credit conversion factors Avals, loan guarantees, letters of credit OTC derivatives Undrawn committed lines Thailand 1,711, ,256 19,428 25,216 2,111,152 30,289 1,522,675 39,137 1,592,101 Asia 321,875 89, ,632 1, ,627 16, ,381 12, ,336 Europe 23,922 1,388 14, , , ,589 America 16,035 3,855 10, , ,173 9,729 19,032 Others 12,218 1,456 3, ,859-8,923 1,394 10,317 Total 2,085, , ,190 27,048 2,711,611 47,548 1,904,272 62,555 2,014,375 1 Based on customer s country of residence 2 Including interbank and money market items but excluding general provisions Total Customer s country of residence 1 Net loans and accrued interest receivables 2 On-statement of financial position assets Net investment in debt securities Deposits (including accrued interest receivables) Derivatives assets 31 December 2016 Total Off-statement of financial position items before multiplying by credit conversion factors Avals, loan guarantees, letters of credit OTC derivatives Undrawn committed lines Thailand 1,670, ,482 16,273 1,520 2,038,308 30,811 1,454,103 50,949 1,535,863 Asia 280,785 64,419 95,827 20, ,358 16, ,134 16, ,539 Europe 25,156 1,628 23,852 1,759 52, , ,764 America 17,352 2,417 12, , ,106 4,479 18,716 Others 4,153 1,791 2, ,490-10,196-10,196 Total 1,997, , ,677 24,041 2,592,934 47,752 1,841,002 72,324 1,961,078 1 Based on customer s country of residence 2 Including interbank and money market items but excluding general provisions Total 19

23 Table 9: Loans and accrued interest receivables (including interbank and money market items) and investment in debt securities before credit risk mitigation classified by customer s country of residence and by asset classification guidelines specified by regulators 31 December 2017 Customer s country of residence * Loans and accrued interest receivables Investment Normal Special Substandard Doubtful Doubtful Total in debt Mentioned of Loss securities: Doubtful of Loss Thailand 1,696,652 30,543 11,320 18,442 53,537 1,810, Asia 373,133 15, , , Europe 23, ,344 - America 16, , Others 12, ,548 2 Total 2,122,524 46,001 11,760 19,012 56,681 2,255, * Based on customer s country of residence 31 December 2016 Customer s country of residence * Loans and accrued interest receivables Investment Normal Special Substandard Doubtful Doubtful Total in debt Mentioned of Loss securities: Doubtful of Loss Thailand 1,657,803 31,634 8,866 15,894 40,691 1,754,888 1,267 Asia 324,470 14, , , Europe 25, ,195 - America 17, ,531 2 Others 4, ,384 - Total 2,029,141 46,253 9,495 16,050 43,316 2,144,255 1,370 * Based on customer s country of residence 20

24 31 December 2017 Customer s country of residence * Loans and accrued interest receivables Investment Normal Special Substandard Doubtful Doubtful Total in debt Mentioned of Loss securities: Doubtful of Loss Thailand 1,696,569 30,543 11,319 18,348 53,537 1,810, Asia 315,830 14, , , Europe 23, ,344 - America 16, , Others 12, ,548 2 Total 2,065,138 45,672 11,756 18,918 55,357 2,196, * Based on customer s country of residence 31 December 2016 Customer s country of residence * Loans and accrued interest receivables Investment Normal Special Substandard Doubtful Doubtful Total in debt Mentioned of Loss securities: Doubtful of Loss Thailand 1,658,390 31,634 8,857 15,800 40,690 1,755,371 1,267 Asia 273,652 11, , , Europe 25, ,195 - America 17, ,531 2 Others 4, ,384 - Total 1,978,909 43,589 9,364 15,955 42,222 2,090,039 1,321 * Based on customer s country of residence 21

25 Table 10 : General and specific provisions and bad debt written off for loans and accrued interest receivables (including interbank and money market items) and investment in debt securities classified by customer s country of residence 31 December 2017 Customer s country of residence * Loans and accrued interest receivables Investment in debt General provision Specific provision Bad debt written off securities: Specific provision Thailand 99, ,075 Asia 13, Europe America Others Total 27, ,453 1,156 3,375 * Based on customer s country of residence 31 December 2016 Customer s country of residence * Loans and accrued interest receivables Investment in debt General provision Specific provision Bad debt written off securities: Specific provision Thailand 85,433 1,202 3,084 Asia 9, Europe America Others Total 25,160 94,993 1,233 3,192 * Based on customer s country of residence 22

26 31 December 2017 Customer s country of residence * Loans and accrued interest receivables Investment in debt General provision Specific provision Bad debt written off securities: Specific provision Thailand 99, ,075 Asia 11, Europe America Others Total 25, ,539 1,034 3,338 * Based on customer s country of residence 31 December 2016 Customer s country of residence * Loans and accrued interest receivables Investment in debt General provision Specific provision Bad debt written off securities: Specific provision Thailand 85,338 1,202 3,084 Asia 6, Europe America Others Total 23,759 92,560 1,202 3,143 * Based on customer s country of residence 23

27 Table 11: Loans and accrued interest receivables (including interbank and money market items) before credit risk mitigation, classified by business type and by asset classification guidelines specified by regulators 31 December 2017 Type of Business Normal Special Mentioned Substandard Doubtful Doubtful of Loss Agriculture and mining 44, , ,790 Manufacturing and commercial 736,063 20,467 8,682 13,332 42, ,262 Real estate and construction 178,722 5, , ,772 Utilities and services 402,780 13,851 1,157 1,180 3, ,542 Housing loans 220,244 2,381 1,009 1,521 3, ,716 Others 540,276 3, ,896 Total 2,122,524 46,001 11,760 19,012 56,681 2,255,978 Total Type of Business Normal Special Mentioned 31 December 2016 Substandard Doubtful Doubtful Total of Loss Agriculture and mining 36, ,641 Manufacturing and commercial 738,939 25,452 5,560 9,045 33, ,016 Real estate and construction 168,716 5,051 1,008 1,669 4, ,515 Utilities and services 382,796 10,564 1,248 3,074 2, ,270 Housing loans 211,884 2,511 1,161 1,400 2, ,845 Others 489,820 1, ,968 Total 2,029,141 46,253 9,495 16,050 43,316 2,144,255 24

28 Type of Business Normal Special Mentioned 31 December 2017 Substandard Doubtful Doubtful Total of Loss Agriculture and mining 42, , ,921 Manufacturing and commercial 709,441 20,402 8,679 13,332 41, ,270 Real estate and construction 172,120 5, , ,147 Utilities and services 397,796 13,851 1,157 1,180 3, ,558 Housing loans 220,233 2,378 1,009 1,521 3, ,692 Others 522,978 2, ,253 Total 2,065,138 45,672 11,756 18,918 55,357 2,196,841 Type of Business Normal Special Mentioned 31 December 2016 Substandard Doubtful Doubtful Total of Loss Agriculture and mining 33, ,360 Manufacturing and commercial 712,948 23,166 5,535 9,045 31, ,684 Real estate and construction 163,355 5, ,669 4, ,004 Utilities and services 379,294 10,564 1,248 3,074 2, ,768 Housing loans 211,870 2,509 1,158 1,400 2, ,817 Others 477,737 1, ,406 Total 1,978,909 43,589 9,364 15,955 42,222 2,090,039 25

29 Table 12: General and specific provisions and bad debt written off for loans and accrued interest receivables (including interbank and money market items) classified by business type 31 December December 2016 Type of Business General provision Specific provision Bad debt written off General provision Specific provision Bad debt written off Agriculture and mining 1, Manufacturing and commercial 70, , Real estate and construction 10, , Utilities and services 19, ,481 9 Housing loans 5, , Others 6, ,541 1,026 Total 27, ,453 1,156 25,160 94,993 1,233 Type of Business General provision 31 December December 2016 Specific provision Bad debt written off General provision Specific provision Bad debt written off Agriculture and mining 1, Manufacturing and commercial 69, , Real estate and construction 10, , Utilities and services 19, ,450 9 Housing loans 5, , Others 5, ,188 1,026 Total 25, ,539 1,034 23,759 92,560 1,202 26

30 Table 13: Reconciliation of general and specific provisions for loans and accrued interest receivables (including interbank and money market items) 31 December December 2016 Item General provision Specific provision Total General provision Specific provision Beginning balance 25,160 94, ,153 24,966 79, ,879 Bad debt written off - (1,156) (1,156) - (1,233) (1,233) Doubtful accounts 2,276 21,201 23, ,718 16,912 Others - (1,585) (1,585) - (405) (405) Ending balance 27, , ,889 25,160 94, ,153 Total Item General provision 31 December December 2016 Specific provision Total General provision Specific provision Beginning balance 23,759 92, ,319 23,606 77, ,401 Bad debt written off - (1,034) (1,034) - (1,202) (1,202) Doubtful accounts 1,872 21,542 23, ,183 16,336 Others - (1,529) (1,529) - (216) (216) Ending balance 25, , ,170 23,759 92, ,319 Total 27

31 Table 14: On-statement of financial position assets and credit equivalent amount of off-statement of financial position items, net of specific provisions, classified by asset type under SA approach 31 December December 2016 Type of Asset On-statement of financial position assets Off-statement of financial position items* Total On-statement of financial position assets Off-statement of financial position items* Performing - Sovereigns and central banks, Multilateral development banks (MDBs), and Provincial organizations/ Government entities/ State enterprises (PSEs) which have the same risk weight as Sovereigns 584,088 66, , ,136 60, ,495 - Financial institutions, Securities firms, and Provincial organizations/ Government entities/ State enterprises (PSEs) which have the same risk weight as Financial Institutions 205,786 46, , ,724 48, ,208 - Corporates, and Provincial organizations/ Government entities/ State enterprises (PSEs) which have the same risk weight as Corporates 1,456, ,531 1,682,941 1,387, ,447 1,577,967 - Retail 247,816 10, , ,639 10, ,599 - Residential mortgage loans 217, , , ,453 - Other assets 287, , , ,101 Non-performing 26,610 1,358 27,968 19,180 1,544 20,724 Total 3,026, ,538 3,377,006 2,864, ,794 3,176,547 * Including repo-style transactions Total 28

32 Type of Asset On-statement of financial position assets 31 December December 2016 Off-statement of Total Off-statement of Total financial financial position items * position items* On-statement of financial position assets Performing - Sovereigns and central banks, Multilateral development banks (MDBs), and Provincial organizations/ Government entities/ State enterprises (PSEs) which have the same risk weight as Sovereigns 559,516 66, , ,293 60, ,653 - Financial institutions, Securities firms, and Provincial organizations/ Government entities/ State enterprises (PSEs) which have the same risk weight as Financial Institutions 174,479 47, , ,108 48, ,868 - Corporates, and Provincial organizations/ Government entities/ State enterprises (PSEs) which have the same risk weight as Corporates 1,399, ,927 1,610,108 1,334, ,280 1,513,097 - Retail 243,191 10, , ,099 10, ,989 - Residential mortgage loans 217, , , ,434 - Other assets 303, , , ,225 Non-performing 26,329 1,358 27,687 18,806 1,519 20,325 Total 2,923, ,404 3,260,218 2,760, ,809 3,060,591 * Including repo-style transactions Credit Rating In assigning risk weights for the calculation of risk weighted assets (RWA) using the Standardised Approach (SA) under Basel III, the Bank and the subsidiaries in the Group use credit ratings from the external credit assessment institutions (ECAIs) who meet the qualifications specified by the BOT. The credit rating from Standard & Poor s is applied for sovereign and financial institutions, while the credit ratings from Fitch Ratings (Thailand) and TRIS Rating are applied for corporate. The process of mapping the ECAI s ratings with the borrower risk weights is prescribed by the BOT. 29