A ALINMA INVESTMENT CMA PILLAR 3 DISCLOSURES FO OR FY 2015 March 2016 Page 1 of 21
TABLES OF CONTENT 1 SCOPE OF APPLICATION... 4 2 CAPITAL STRUCTURE... 5 3 CAPITAL ADEQUACY... 5 4 RISK MANAGEMENT... 8 4.1 GENERAL QUALITATIVE DISCLOSURE FOR RISKS... 8 4.2 CREDIT RISK... 9 4.3 CREDIT RISK MITIGATION... 14 4.4 COUNTERPARTY CREDIT RISK AND OFF-BALANCE SHEET DISCLOSURE... 15 4.5 MARKET RISK... 15 4.6 OPERATIONAL RISK... 16 4.7 LIQUIDITY RISK... 20 Page 2 of 21
LIST OF TABLES Table 1 Total Capital Base... 5 Table 2 Capital Adequacy Ratio... 6 Table 3 Summary of the Risk Appetite Process... 8 Table 4 Credit Risk Exposures by Credit Risk s Risk Weight... 12 Table 5 Credit Risk Exposures by Credit quality Step... 13 Table 6 Total Assets by Residual Maturity... 14 Table 7 Credit Risk Mitigation... 15 Table 8 Market Risk Capital Required... 16 Table 9 Operational Risk Capital Required... 19 Table 10 Liquidity Risk Ratio Analysis... 21 Page 3 of 21
1 Scope of Application Alinma Investment Company (AIC) is a Saudi Joint Stock Company established pursuant to ministerial resolution numbered 183 dated 7 Jumad Thani 1430H (corresponding to May 31, 2009) and registered in Riyadh, Kingdom of Saudi Arabia under commercial registration numbered 1010269764 dated 23 Jumad Thani 1430H (corresponding to 16 June 2009). The Company is fully owned by Alinma Bank (AIB), a Saudi Joint Stock Company. The principal activities of the Company are to deal as principal, agent, managing, arranging, advising and custody as licensed by the Capital Market Authority (CMA) under license numbered 09134-37 dated 23 Rabi Thani 1430H (corresponding to 19 April 2009). The Company commenced providing investment services pursuant to commencement letter issued by CMA on 2 Safar 1431H (corresponding to 17 January 2010). Medium and Location of Disclosure The Pillar 3 Disclosure will be made available on the company s website www.alinmainvestment.com. Regulatory Context The Pillar 3 Disclosure of AIC is prepared in accordance with the CMA Prudential Rules issued in December 2012. Frequency of Disclosure AIC will be making Pillar 3 disclosures annually. The disclosures will be as at the end of the Financial Year. This disclosure reflects the position of AIC as of 31 st December 2015. Subsidiaries AIC does not have any subsidiaries. Page 4 of 21
2 Capital Structure AIC authorised share capital consists of 100 million shares of SR 10 each. As at 31 December 2015, 25 million shares of SR 10 each have been fully paid up. AIC s capital base comprise of two main classes: 1. Tier-1 capital consists of paid-up share capital, retained earnings and verified profit for the year ended 31 December 2015. 2. Tier-2 capital consists of revaluation reserves on available for sale investments. (All Figures are in SAR '000) Capital Base Dec-2015 Tier-1 capital Paid-up capital 250,000 Reserves (other than revaluation reserves) 6,831 Audited retained earnings (65,486) Verified Interim Profits 68,310 Deductions from Tier-1 capital (578) Total Tier-1 capital 259,077 Tier-2 capital Revaluation reserves 17,249 Total Tier-2 capital 17,249 TOTAL CAPITAL BASE 276,326 Table 1 Total Capital Base 3 Capital Adequacy AIC objectives when managing capital are, to comply with the capital requirements set by CMA; to safeguard the company s ability to continue as a going concern; and to maintain a strong capital base. In the Prudential Rules, the CMA has prescribed the framework and guidance regarding the minimum regulatory capital requirement and its calculation methodology as prescribed under these Rules. Page 5 of 21
AIC has calculated its minimum capital required and capital adequacy ratios as follows: (All Figures are in SAR '000) Exposure Class Exposures before Credit Risk Mitigation (CRM) Net Exposures after CRM Risk Weighted Assets Capital Requirement Credit Risk On-balance Sheet Exposures Governments and Central Banks - - - Authorised Persons and Banks 72,025 72,025 14,405 2,017 Corporates 10,000 10,000 71,400 9,996 Retail - - - - Investments 167,513 167,513 309,219 43,291 Securitisation - - - - Margin Financing 29,202 29,202 43,804 6,133 Other Assets 35,824 35,824 107,472 15,046 Total On-Balance sheet Exposures 314,564 314,564 546,300 76,482 Off-balance Sheet Exposures OTC/Credit Derivatives - - - - Repurchase agreements - - - - Securities borrowing/lending - - - - Commitments - - - - Other off-balance sheet exposures - - - - Total Off-Balance sheet Exposures - - - - Total On and Off-Balance sheet Exposures 314,564 314,564 546,300 76,482 Prohibited Exposure Risk Requirement - - - - Total Credit Risk Exposures 314,564 314,564 546,300 76,482 Market Risk Long Position Short Position Interest rate risks - - - Equity price risks 2,827-509 Risks related to investment funds - - - Securitisation/resecuritisation positions - - - Excess exposure risks - - - Settlement risks and counterparty risks - - - Foreign exchange rate risks 13,302-266 Commodities risks. - - - Total Market Risk Exposures 16,129-775 Operational Risk 16,021 Minimum Capital Requirements 93,278 Surplus/(Deficit) in capital 183,048 Total Capital ratio (time) 2.96 Table 2 Capital Adequacy Ratio Page 6 of 21
The Total Capital Ratio of 2.96 for the year ended 31 December 2015, coveys that AIC has met the CMA requirements for the minimum level of capital. Internal Capital Adequacy Assessment Process (ICAAP) AIC has an Internal Capital Adequacy Assessment Process (ICAAP) by which it assess of all type of material risks, testing the capital requirement under different stress scenarios and capital required for covering all material risks due to current as well as prospective business profile from both regulatory and internal risk capital perspective. Stress Testing AIC has started its stress testing framework in 2013. It is embedded in the risk and capital management process. Stress testing is a form of deliberately intense or thorough testing used to determine the resilience, solvency, liquidity and profitability of the Company to various stressed events. Such events may arise from macroeconomic, strategic, political and business environmental factors. Depending on the nature of the risk factor, the impact of the stress testing exercise where applicable, are measured on the following indicators of the Company: Assets quality increase/decrease in nonperforming assets measured in terms of ratio to financing assets; Profitability increase/decrease in the accounting profit/loss; Macroeconomic changes measured in terms of changes in general Marco-economic indicators (eg Interest Rates, Inflation, Oil price, etc ). Capital adequacy measured in terms of changes in total amount of capital and the Capital Adequacy Ratio (CAR); Management is regularly informed of the stress test outcomes to ensure that the Company has sufficient capital in place and that any unacceptable risks are mitigated. Page 7 of 21
The Company s Capital Plan shows that its current and projected capital is adequate to bear any stressed losses, to support its current activities, and future strategies & operational plans. 4 Risk Management 4.1 General Qualitative disclosure for Risks Risk Appetite Risk Appetite defines the level of aggregate risk that is acceptable to the company to undertake and successfully manage over long term. It reflects the company s willingness and ability to absorb decline in the value of its asset, liability, income, transactions and portfolio size. Risk Appetite Risk Capacity Target Risk Profile Actual Risk Profile RR CR MR OR LR Reputation Credit Market Operational Liquidity Table 3 Summary of the Risk Appetite Process Roles and Responsibilities The Board of Directors is responsible for approving the risk appetite of the company. Risk Appetite is the company s willingness and ability to absorb decline in the value of its asset, income, transactions and portfolio size or increase in its liabilities or losses in pursuit of its mission or vision. The company measures risk appetite in terms of risk components, regulatory capital, losses, income volatility, exposures, prohibited Page 8 of 21
activities, and prohibited collaterals. Risk Appetite must be reviewed and updated at least annually by the Board. All new products approvals, new initiatives, acquisitions and strategies are subject to risk appetite review. A process to report and elevate management action triggers for breaches of risk appetite limits / risk tolerance levels are planned to be in place. Risk Management department is responsible to manage risk profile set forth in the risk appetite. Risk Management Process The risk management approach is premised on three lines of defence risk taking business units, risk control units and internal audit: The risk taking business units are responsible for the day-to-day management of risks inherent in their business activities. The risk control units are responsible for setting-up the risk management frameworks and developing tools and methodologies for the identification, measurement, monitoring, control and testing of risk General Macro-economic variables such as Interest Rates, inflation, Oil price, etc The internal audit provides independent assurance of the effectiveness of the risk management approach. 4.2 Credit Risk Credit Risk Management Credit Risk refers to the risk of loss resulting from fluctuations in the credit standing of issuers of securities, counterparties and any debtors to which AIC is exposed. Page 9 of 21
Management and Assessment Portfolio Financing (Margin Lending) The Portfolio Financing product, a Sharia a compliant version of the Margin Lending that has been introduced by AIC in 2015, is a secured financing product in which the partner s portfolio holdings (cash and securities) are held as collateral against the financing amount, and all Portfolio Financing contracts are monitored on a daily basis, and partners are notified whenever the collateral coverage falls below the approved limits. The credit risk is limited since portfolios are always under AIC custody, and the minimum collateral coverage allowed by the product is 130% of the financing principal. In addition Risk department monitors the quality of the collateral to ensure that the securities held as a collateral are both liquid and their company s financials are robust. Large Exposures The large exposures form part of open ended and closed ended funds. The risk-return profile of potential investments is carefully analysed before taking an investment decision. AIC has complied with CMA regulations in the calculation of risk capital required for credit risk. AIC has followed the Standardized approach for credit risk. Impairments of Investments The management exercises judgment to calculate the impairment loss of investments. An assessment is made at each balance sheet date to determine whether there is objective evidence which causes an other than temporary decline in the value of investments. The management also considers impairment testing to be appropriate when there is evidence of deterioration in the financial health of the investee, industry and sector performance, changes in technology, and operational and financing cash flows. All the impairment losses are recognized in the statement of income as impairment charge on investments. The previously recognized impairment loss in respect of equity investments cannot be reversed through the statement of income. Page 10 of 21
Impairments of non-financial assets Non-current assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss, if any, is recognized for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Non-current assets that suffered impairment are reviewed for possible reversal of impairment at each reporting date. Where an impairment loss subsequently reverses, the carrying amount of the asset or cashgenerating unit is increased to the revised estimate of its recoverable amount, but the increased carrying amount should not exceed the carrying amount that would have been determined, had no impairment loss been recognized for the assets or cash-generating unit in prior years. A reversal of an impairment loss is recognized as income immediately in the statement of income. Impairments and Provisions AIC does not have any impairments or provisions as of 31 December 2015. Qualitative Disclosures on Credit Risk s Risk weight: AIC s Credit risk exposures associated with each Credit Risk s Risk weight as detailed in the CMA s Prudential Rules are highlighted below Page 11 of 21
(All Figures are in SAR '000) Risk Weights Authorised persons and banks Margin Financing Corporates Investment Funds Investments Other assets Total Exposure after netting and Credit Risk Mitigation Total Risk Weighted Assets 0% 2,827 2,827 20% 72,025 44,396 116,421 23,284 50% 100% 150% 29,202 13,302 27,412 69,917 104,875 200% 225% 880 880 1,980 300% 78,403 35,824 114,227 342,681 400% 500% 714% 10,000 290 10,290 73,471 Average Risk Weight 20% 150% 714% 278% 74% 278% 174% 174% Deduction from Capital Base 2,017 6,133 9,996 35,723 7,567 15,046 76,481 76,481 Table 4 Credit Risk Exposures by Credit Risk s Risk Weight Page 12 of 21
Credit Rating Agencies AIC currently uses either Moody s or Fitch s ratings from the Credit Rating Agencies mentioned in the Prudential Rules. No Changes happened during the period of this report. Credit Risk Exposures with each credit quality step. AIC s credit risk exposure associated with each credit quality step as of 31 December 2015 is presented below: (All Figures are in SAR '000) Long term Ratings of counterparties Credit quality step 1 2 3 4 5 6 Unrated Exposure Class S&P AAA TO AA A+ TO A BBB+ TO BBB BB+ TO BB B+ TO B CCC+ and below Unrated Fitch AAA TO AA A+ TO A BBB+ TO BBB BB+ TO BB B+ TO B CCC+ and below Unrated Moody's Aaa TO Aa3 A1 TO A3 Baa1 TO Baa3 Ba1 TO Ba3 B1 TO B3 Caa1 and below Unrated Capital Intelligence AAA AA TO A BBB BB B C and below Unrated On and Off balance sheet Exposures Governments and Central Banks Authorised Persons and Banks 65,000 7,025 Corporates 10,000 Retail Investments 167,513 Securitisation Margin Financing 29,202 Other Assets 35,824 Total 65,000 249,564 Short term Ratings of counterparties Credit quality step 1 2 3 4 Unrated Exposure Class S & P A 1+, A 1 A 2 A 3 Below A 3 Unrated Fitch F1+, F1 F2 F3 Below F3 Unrated Moody s P 1 P 2 P 3 Not Prime Unrated Capital Intelligence A1 A2 A3 Below A3 Unrated On and Off balance sheet Exposures Governments and Central Banks Authorised Persons and Banks 65,000 7,025 Corporates 10,000 Retail Investments 167,513 Securitisation Margin Financing 29,202 Other Assets 35,824 Total 65,000 249,564 Table 5 Credit Risk Exposures by Credit quality Step Geographic Concentration AIC has most of its credit risk exposure within the Gulf Cooperation Council Countries (GCC), hence the exposure to Geographic concentration is limited. Residual Maturity The Residual Maturity of the total Assets as at 31 December 2015 is presented below: (All Figures are in SAR '000) Page 13 of 21
Particulars 1 Day > 1day to 1 week >1 week to 1 month >1 month to 3 months >3 months to 6 months > 6 months to 1 year > 1 year Past Due No Maturity Total Assets Cash and cash equivalents 7,025 - - - - - - - - 7,025 Deposits with Other Banks - - 40,000 25,000 - - - - - 65,000 Portfolio Financing - - - 1,316 299 27,587 - - - 29,202 Investments - - - - - - 10,000-167,513 177,513 Property and equipments, net - - - - - - - - 3,765 3,765 Receivables, Prepayments and other assets - - - - - - - - 32,059 32,059 Total Assets 7,025-40,000 26,316 299 27,587 10,000-203,337 314,564 Table 6 Total Assets by Residual Maturity 4.3 Credit Risk Mitigation Collaterals are securities, cash or assets that are offered to secure a financing or a credit sales transaction. Collateral becomes subject to seizure on default. It is a form of security to the financier/seller in case the purchaser fails to pay back the finance amount. For Portfolio Financing (Margin Lending), AIC has collateral against the financing of all the eligible securities held within the Partner s portfolio as well as all cash balances within the client investment account. Risk Department at AIC, monitors the collateral value of each partner against the facility outstanding on a daily basis, and Margin Call are applied when the collateral coverage ratio drops below agreed thresholds. For the duration of the Financing, AIC s partners are restricted from withdrawing cash or securities from their investment accounts/portfolios unless sufficient collateral coverage ratio is maintained. Page 14 of 21
Credit Risk Exposures before/ after Credit Risk Mitigation The Credit Risk Exposures before/ after Credit Risk Mitigation as at 31 December 2015 is presented below: (All Figures are in SAR '000) Exposure Class Exposures before CRM Exposures covered by Guarantees/ Credit derivatives Exposures covered by Financial Collateral Exposures covered by Netting Agreement Exposures covered by other eligible collaterals Exposures after CRM Credit Risk On balance Sheet Exposures Governments and Central Banks Authorised Persons and Banks 72,025 72,025 Corporates 10,000 10,000 Retail Investments 91,707 91,707 Securitisation Margin Financing 29,202 55,939 29,202 Other Assets 35,824 35,824 Total On Balance sheet Exposures 238,758 55,939 238,758 Off balance Sheet Exposures OTC/Credit Derivatives Exposure in the form of repurchase agreements Exposure in the form of securities lending Exposure in the form of commitments Other Off Balance sheet Exposures Total Off Balance sheet Exposures Total On and Off Balance sheet Exposures 238,758 55,939 238,758 Table 7 Credit Risk Mitigation 4.4 Counterparty Credit Risk and Off-Balance Sheet Disclosure AIC does not have transactions in OTC derivatives, repos and reverse repos and securities borrowing/ lending, hence this section does not apply. 4.5 Market Risk Market risk refers to the risk of losses in on-and off-balance sheet positions arising from movements in market rates or prices such as profits rates, foreign exchange rates, equity prices, credit spreads and/or commodity prices resulting in a loss to earnings and capital. Market Risk also includes the settlement risk which occurs when the company simultaneously exchanges value with a partner or with another company in settlement of a foreign exchange obligation or a similar type of obligation. However, the company does not deal in such transactions that reflect in the balance sheet. Hence, settlement risk is not material for the company. Page 15 of 21
Management and Assessment The business lines of the Company that have an effect of market risk are The Principal Book business, and Investment Banking business. The provisions and guidelines are covered in detail in AIC s manuals. It also provides the foundation for managing asset Management risk and Investment Banking risks. AIC has complied with CMA regulations in the calculation of risk capital required for Market risk. AIC has followed the Standardized approach for Market risk. Capital Charge for Market Risk Capital requirement for the Market Risk as of 31 December 2015 is presented below: (All Figures are in SAR '000) Risk Capital Required Interest Rate Risk - Equity Price Risk 509 FX Risk 266 Securitization Risk - Excess Exposure Risk - Settlement Risk and Counterparty Risk - Total 775 Table 8 Market Risk Capital Required 4.6 Operational Risk Operational risk is the risk of direct or indirect loss resulting from inadequate or failed internal processes, people, and systems or from external events. It will include legal risks covering, but not limited to, exposure to fines, penalties, or punitive damages resulting from supervisory actions, as well as private settlements. Page 16 of 21
Management and Assessment The company broadly categorizes Operational risks based on systems, people and process related failures that would eventually perpetuate to financial losses. The company recognizes that good management measures and a strong internal control culture and contingency planning are all crucial elements of effective operational risk management and takes measures to continually develop procedures and systems to support such requirements. The company also classifies Fiduciary Risk as one of the operational risks, which is defined as the risk of AIC breaching its fiduciary duties when it acts in a Fiduciary capacity as a Manager / Trustee for a Fund or a Partner Managed Portfolio, the risk is managed through internal process as defined below: Open ended funds A detailed research and study to verify the feasibility of the new product is undertaken and risk and return are assessed through a due diligence exercise by the Product development team. New product ideas are presented to the Asset Management Investment committee for review and presented to the Fund Board for approval before being introduced to the market. The risk adjusted performance of all equity based funds is monitored against approved benchmarks on a regular basis. Closed ended funds AIC has a well-defined Investment risk policy that acts as guidance to all investments with respect to risk profile, size of its investment, general directions and risk limits delegated by the Board Executive committee. A detailed due diligence of the issuing or managing Company is undertaken and risk-return profile is studied. The approval process involves approvals from AICRIC/EXCOM/Board depending on the limits prescribed in the Authority matrix. The company has incorporated certain measures to control the financial losses arising out of operational risks. Some of the company s key measures to protect against operational risk are summarized below: Page 17 of 21
Operational loss event form: The Company maintains an operational loss event form which follows a structured method to identifying and mitigating risk. The steps involved in the risk identification process are as follows: o The Business Head would identify an operational loss event specific to the business line. o The Business Head would duly fill the operational loss event form and submit it to CEO and Risk Management department of the Company. o The Risk Management department analyses the risk and assign controls to mitigate these risks and plug loop-holes if any. Professional Indemnity Insurance (PII) AIC has been covered by a Professional Indemnity Insurance policy by Tawuniya Property and Casualty, which insures the Company for a sum of SAR 60 Million. The policy is covered in two sections: Section-A deals with Stockbrokers indemnity insurance and covers the Company across a range of operational risks such as incomplete transactions, direct financial loss, computer crime indemnity and errors and omissions. Section B of the Policy covers Directors and officers Liability insurance. Business Continuity Plan AIC has a Business continuity plan (BCP) that serves to ensure that the Company has in place resources to manage unexpected crises and to ensure continued effective operations. The compliance department of AIC has prepared the BCP and runs feasibility tests and makes improvements if necessary on an annual basis. The plan is duly reviewed and approved by the CEO of AIC. Disaster Recovery Plan AIC has a Disaster recovery plan (DRP) that serves to ensure that the Company has adequate backup IT infrastructure in the event of disaster, which is increasingly associated with the recovery of information technology data, assets, and facilities. A service level agreement for Information technology in general that includes preparation of framework and implementation of DRP is made Page 18 of 21
with AIB. AIC with coordination with AIB conducts live tests and enhances the features of the plan on an annual basis. The plan is duly reviewed and approved by Chief Executive Officer (CEO) of AIC. Systems and Processes The Company monitors and manages operational risks through a comprehensive set of processes, systems of internal controls, and policies, to reduce the probability and potential impact of losses from Operational Risks. AIC has invested in IT infrastructure that allows the Company to ensure that it provides its key stakeholders with the best possible levels of service and delivery. Capital Charge for Operational Risk In compliance with CMA requirements, the Company has adopted the Expenditure based approach (EBA) in order to estimate the required capital charge for operational risk as it leads to a higher capital charge than the Basic Indicator Approach (BIA): 1) Basic Indicator Approach: Under the Basic Indicator Approach, 15% capital charge is calculated on average operating income of the last three audited financials. 2) Expenditure Based Approach: Under the Expenditure Based Approach, 25% capital charge is calculated on all overhead expenses except extraordinary expenses as per the most recent audited annual financial statements. (All Figures are in SAR '000) Approach 1 Year Average Gross Income Risk Capital Charge (%) Capital Required Basic Indicator Approach (BIA) 2013-2015 86,107 15% 12,916 Approach 2 Expenditure Based Approach (EBA) Year Overhead Expenses Risk Capital Charge (%) Capital Required 2015 64,084 25% 16,021 Capital requirement for Operational Risk for 2015 Maximum of BIA or EBA 16,021 Table 9 Operational Risk Capital Required Page 19 of 21
4.7 Liquidity Risk Liquidity or cash flow risk is defined as the risk that the Company, irrespective of solvency and profitability, may not have sufficient available cash (or near cash assets or funding facilities) to meet Government, regulatory or operational obligations as they fall due. This risk could arise as a result of illiquid asset holdings, inappropriate asset / liability matching, or inaccurate assessments of potential operating liquidity requirements resulting in insufficient short-term (including intra-day) and longer term liquidity. Liquidity risk is categorized into following risks: Funding liquidity risk appears when the Company cannot fulfil its obligations because of its inability to obtain new funding. Market liquidity risk appears when the Company is unable to sell or realize specific assets without significant losses in price. Management and Assessment The Company s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company s reputation. Managing the day-to-day liquidity of the company falls under the purview of the Chief Financial Officer (CFO). The Company invests funds in the money market instruments in order to support the liquidity requirements of the company. Risk Measures and Ratios AIC prepares a statement of expected cash flows that would arise at the time of settlement of its assets and liabilities and allocates them in different time intervals in which they are expected to occur. An analysis of the residual maturity profile of AIC s assets and liabilities has been conducted segregating them in different maturity buckets. The assets and liabilities with no maturity have been placed under a separate bucket, Non- Maturity. The net cash flows across all time intervals are accumulated to observe the Page 20 of 21
amount of cumulative new cash flow in each bucket. The time buckets have been defined as per the prudential rules of the CMA as presented below: Particulars 1 Day > 1 day to 1 week >1 week to 1 month >1 month to 3 months >3 months to 6 months > 6 months to 1 year > 1 year Non Maturity AIC measures the liquidity risk by calculating cash flow gaps based on the maturity buckets relating to all its asset and liabilities. AIC ensures liquidity of asset management funds by maintaining sufficient cash balances in settlement and investment accounts. AIC also holds sufficient cash deposits with banks to meet its contingencies. Apart from cash flow gap analysis, following ratios are being monitored to maintain appropriate liquidity levels. S. No. Indicators Values Inference 1 Current Ratio (Short term Assets / Short Term Liabilities) 4.25 This reflects the cushion/comfort level in meeting its shortterm liabilities and fixed cost payments. 2 Liquidity Coverage Ratio 613% This reflects that the Company has sufficient high quality liquid assets to cover the net cash outflows over the 30-day period under stressed scenarios. Table 10 Liquidity Risk Ratio Analysis For liquidity risk assessment, the Company also uses benchmark ratios like Liquidity Coverage Ratio to determine the impact the liquidity emergency situation wherein funds from the liquid assets shall be utilized for liabilities falling due. The aforesaid ratio as on Dec 15 shows comfortable position of 613% which means that the Company ensured the availability of highly liquid assets to meet the short term obligations. Thus, although the liquidity risk is deemed to be material, no capital charge is kept aside for liquidity risk. Contingency Funding Plan Any liquidity shortfall requirement of business is met through a short-term draw down facility from the Holding parent Bank. Also the Company maintains Liquidity Coverage Ratio greater than 150% in order to meet its net cash outflows over the 30-day period under stressed scenario. Page 21 of 21