BASEL II PILLAR 3 REPORT FOR THE FINANCIAL PERIOD ENDED 30 SEPTEMBER 2012
ALLIANCE ISLAMIC BANK MALAYSIA BERHAD CONTENTS PAGE Overview 1 1.0 Scope of Application 1 2.0 Capital 1-4 2.1 Capital Adequacy Ratios 1 2.2 Capital Structure 2 2.3 Risk-Weighted Assets and Regulatory Capital Requirements 3-4 3.0 Credit Risk 5-19 3.1 Distribution of Credit Exposures 5-8 3.2 Past due Financing and Advances Analysis 9 3.3 Impaired Financing and Advances Analysis 10-11 3.4 Assignment of Risk Weights for Portfolios Under the Standardised Approach 12-16 3.5 Credit Risk Mitigation 17-18 3.6 Off-Balance Sheet Exposures and Counterparty Credit Risk 19 4.0 Market Risk 20 5.0 Rate of Return Risk in the Banking Book 21 6.0 Shariah Governance Disclosures and 21 Profit Sharing Investment Account ("PSIA")
BASEL II PILLAR 3 REPORT FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2012 Overview The Bank's Pillar 3 Disclosure is governed by the Capital Adequacy Framework for Islamic Banks ("CAFIB") - Pillar 3 which sets out the minimum disclosure standards, the approach for determining the appropriateness of information disclosed and the internal controls over the disclosure process which covers the verification and review of the accuracy of information disclosed. 1.0 Scope of Application The Basel II Pillar 3 Disclosure provided in this document is in respect of the Bank, which is involved in Islamic banking financial services. There are no significant restrictions or other major impediments on transfer of funds or regulatory capital between the Bank and its holding company, Alliance Bank Malaysia Berhad. There were no capital deficiencies in the Bank as at the financial period end. The capital adequacy information is computed in accordance with CAFIB. The Bank has adopted the Standardised Approach for credit risk and market risk, and Basic Indicator Approach for operational risk. 2.0 Capital 2.1 Capital Adequacy Ratios Under Pillar I, the Bank adopted the Standardised Approach in determining the capital requirements for credit risk and market risk and applied the Basic Indicator Approach for operational risk. Under the Standardised Approach, risk-weights are used to assess the capital requirements for exposures in credit risk and market risk whilst the capital required for operational risk under the Basic Indicator Approach is computed as a fixed percentage of the Bank's average gross income. The capital adequacy ratios of the Bank are as follows: 30 September 31 March 2012 2012 (Restated) Before deducting proposed dividends Core capital ratio - 13.00% Risk-weighted capital ratio - 14.04% After deducting proposed dividends Core capital ratio 12.57% 12.17% Risk-weighted capital ratio 13.43% 13.21% 1
2.0 Capital (contd.) 2.2 Capital Structure The following tables present the components of Tier I and Tier II capital and deduction from capital. 30 September 31 March 2012 2012 (Restated) RM'000 RM'000 Tier I Capital (Core Capital) Paid-up share capital 300,000 300,000 Retained profits 125,556 147,203 Statutory reserves 136,710 122,122 562,266 569,325 Less: Deferred tax assets - (1,716) Total Tier I capital 562,266 567,609 Tier II Capital Collective assessment allowance 38,405 45,246 Total Tier II capital 38,405 45,246 Total Capital Base 600,671 612,855 The comparative capital adequacy ratios and components of capital base have been restated for the effects of the change in accounting policy on collective assessment allowance in accordance to adoption of MFRS139. 2
2.0 Capital (contd.) 2.3 Risk Weighted Assets ("RWA") and Capital Requirements Regulatory Capital Requirements The following table presents the minimum regulatory capital requirement of the Bank: Risk- Gross Net Weighted Capital 30 September 2012 Exposures Exposures Assets Requirements Exposure Class RM'000 RM'000 RM'000 RM'000 (i) Credit Risk On-balance sheet exposures: Sovereigns/Central banks 1,220,558 1,220,558 - - Banks, Development Financial Institutions ("DFIs") and Multilateral Development Banks ("MDBs") 679,932 679,932 135,986 10,879 Insurance Companies, Securities Firm and Fund Managers 25 25 25 2 Corporates 1,267,347 1,238,868 1,164,401 93,152 Regulatory retail 2,231,240 2,193,181 1,657,724 132,618 Residential Real Estate ("RRE") financing 1,197,138 1,196,430 571,115 45,689 Higher risk assets 81 81 121 10 Other assets 21,759 21,759 21,759 1,741 Defaulted exposures 43,784 43,779 50,839 4,067 Total on-balance sheet exposures 6,661,864 6,594,613 3,601,970 288,158 Off-balance sheet exposures: Credit-related off-balance sheet exposures 611,018 610,754 467,205 37,376 Defaulted exposures 745 745 1,118 89 Total off-balance sheet exposures 611,763 611,499 468,323 37,465 Total on and off-balance sheet exposures 7,273,627 7,206,112 4,070,293 325,623 (ii) Market Risk (Note 4.0) Long Short Position Position Rate of return risk 185,447-58 5 (iii) Operational Risk - - 403,550 32,284 Total RWA and capital requirements 7,273,627 7,206,112 4,473,901 357,912 3
2.0 Capital (contd.) 2.3 RWA and Capital Requirements (contd.) Regulatory Capital Requirements (contd.) The following table presents the minimum regulatory capital requirement of the Bank (contd.): Risk- Gross Net Weighted Capital 31 March 2012 Exposures Exposures Assets Requirements Exposure Class RM'000 RM'000 RM'000 RM'000 (i) Credit Risk On-balance sheet exposures: Sovereigns/Central banks 1,279,533 1,279,533 - - Banks, DFIs and MDBs 457,869 457,869 91,574 7,326 Insurance Companies, Securities Firm and Fund Managers 29 29 29 2 Corporates 1,147,219 1,122,312 1,076,207 86,097 Regulatory retail 2,364,940 2,326,327 1,754,558 140,365 RRE financing 1,045,689 1,045,041 499,903 39,992 Higher risk assets 95 95 142 11 Other assets 43,368 43,368 43,368 3,469 Defaulted exposures 38,711 38,711 50,883 4,071 Total on-balance sheet exposures 6,377,453 6,313,285 3,516,664 281,333 Off-balance sheet exposures: Credit-related off-balance sheet exposures 588,880 588,023 452,870 36,230 Defaulted exposures 6,319 6,319 9,479 758 Total off-balance sheet exposures 595,199 594,342 462,349 36,988 Total on and off-balance sheet exposures 6,972,652 6,907,627 3,979,013 318,321 (ii) Market Risk (Note 4.0) Long Short Position Position Rate of return risk 149,693-2,492 199 (iii) Operational Risk - - 383,373 30,670 Total RWA and capital requirements 6,972,652 6,907,627 4,364,878 349,190 Note: The Bank does not use Profit-sharing Investment Account ("PSIA") as a risk absorbent mechanism. The Bank does not have exposure to any Large Exposure Risk for equity holdings specificed in BNM's Guidelines on Investment in Shares, Interest-in-Shares and Collective Investment Schemes. 4
3.0 Credit Risk 3.1 Distribution of Credit Exposures Geographical Distribution The following tables represent the Bank's major type of gross credit exposure by geographical distribution. Exposure are allocated to the region in which the customer is located and are disclosed before taking account of any collateral held or other credit enhancements and after allowance for impairment where applicable. Geographical region East Northern Central Southern Malaysia 30 September 2012 RM'000 RM'000 RM'000 RM'000 Cash and short-term funds - 273,849 - - Deposits and placements with banks and other financial institutions - 171 - - Financial assets held-for-trading - 185,447 - - Financial investments available-for-sale - 1,197,973 - - Financial investments held-to-maturity - 444,310 - - Financing and advances 234,604 3,530,891 441,679 330,195 Total on-balance sheet 234,604 5,632,641 441,679 330,195 Financial guarantees 17,681 43,532 6,644 3,324 Credit related commitments and contingencies 68,046 945,060 168,988 467,901 Total credit exposure 320,331 6,621,233 617,311 801,420 Geographical region East Northern Central Southern Malaysia 31 March 2012 (Restated) RM'000 RM'000 RM'000 RM'000 Cash and short-term funds - 213,329 - - Deposits and placements with banks and other financial institutions - 169 - - Financial assets held-for-trading - 149,693 - - Financial investments available-for-sale - 1,063,812 - - Financial investments held-to-maturity - 444,669 - - Financing and advances 218,735 3,489,332 397,887 310,169 Total on-balance sheet 218,735 5,361,004 397,887 310,169 Financial guarantees 18,820 40,455 6,499 3,280 Credit related commitments and contingencies 65,292 1,029,765 128,398 466,233 Total credit exposure 302,847 6,431,224 532,784 779,682 Comparative as at 31 March 2012 have been restated in the current year's presentation. This is due to changes in accounting policies arising from adoption of MFRS139. 5
3.1 Distribution of Credit Exposures (contd.) (b) Industry Distribution The following table represents the Bank's major type of gross credit exposure by sector. The analysis are based on the sector in which the customer is engaged. Financial, Agriculture, Government Insurance and Transport, Manufacturing, Motor Other and Central Business Storage and Wholesale & Residential Vehicle Consumer Bank Services Communication Retail Trade Construction Financing Financing Financing Total RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 30 September 2012 Cash and short-term funds 123,725 150,124 - - - - - - 273,849 Deposits and placements with banks and other financial institutions - 171 - - - - - - 171 Financial assets held-for-trading 185,447 - - - - - - - 185,447 Financial investments available-for-sale 476,283 653,536 16,578 51,576 - - - - 1,197,973 Financial investments held-to-maturity 439,120-5,190 - - - - - 444,310 Financing and advances - 297,779 25,576 1,068,397 34,117 1,702,927 248,207 1,160,366 4,537,369 Total on-balance sheet 1,224,575 1,101,610 47,344 1,119,973 34,117 1,702,927 248,207 1,160,366 6,639,119 Financial guarantees - 2,560 89 67,920 - - - 612 71,181 Credit related commitments and contingencies - 162,729 1,910 440,278 31,410 653,390 319 359,959 1,649,995 Total credit exposure 1,224,575 1,266,899 49,343 1,628,171 65,527 2,356,317 248,526 1,520,937 8,360,295 6
3.1 Distribution of Credit Exposures (contd.) (b) Industry Distribution (contd.) The following table represents the Bank's major type of gross credit exposure by sector. The analysis are based on the sector in which the customer is engaged. (contd.) Financial, Agriculture, Government Insurance and Transport, Manufacturing, Motor Other and Central Business Storage and Wholesale & Residential Vehicle Consumer Bank Services Communication Retail Trade Construction Financing Financing Financing Total RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 31 March 2012 (Restated) Cash and short-term funds 163,321 50,008 - - - - - - 213,329 Deposits and placements with banks and other financial institutions - 169 - - - - - - 169 Financial assets held-for-trading 149,693 - - - - - - - 149,693 Financial investments available-for-sale 489,287 506,324 11,614 56,587 - - - - 1,063,812 Financial investments held-to-maturity 439,463-5,206 - - - - - 444,669 Financing and advances - 296,197 29,205 993,979 32,217 1,416,828 295,227 1,352,470 4,416,123 Total on-balance sheet 1,241,764 852,698 46,025 1,050,566 32,217 1,416,828 295,227 1,352,470 6,287,795 Financial guarantees - 3,209 91 64,084 1,391 - - 279 69,054 Credit related commitments and contingencies - 170,413 779 510,846 28,500 617,150 225 361,775 1,689,688 Total credit exposure 1,241,764 1,026,320 46,895 1,625,496 62,108 2,033,978 295,452 1,714,524 8,046,537 Comparative as at 31 March 2012 have been restated in the current year's presentation. This is due to changes in accounting policies arising from adoption of MFRS139. 7
3.1 Distribution of Credit Exposures (contd.) (c) Residual Contractual Maturity The following table represents the residual contractual maturity for major types of gross credit exposures for on-balance sheet exposures of financial assets of the Bank: Up to 1 month >1-3 months >3-6 months >6-12 months >1 year Total 30 September 2012 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Cash and short-term funds 273,849 - - - - 273,849 Deposits and placements with banks and other financial institutions - - - 171-171 Financial investments 281,929 351,004 100,836 40,210 1,053,751 1,827,730 Financing and advances 667,553 312,721 197,217 185,982 3,194,531 4,558,004 Other asset balances 603 42 63 126 229,741 230,575 Total on-balance sheet exposure 1,223,934 663,767 298,116 226,489 4,478,023 6,890,329 Up to 1 month >1-3 months >3-6 months >6-12 months >1 year Total 31 March 2012 (Restated) RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Cash and short-term funds 213,329 - - - - 213,329 Deposits and placements with banks and other financial institutions - - 169 - - 169 Financial investments 297,422 282,793 1,447 5,007 1,071,505 1,658,174 Financing and advances 589,328 272,648 182,874 204,191 3,192,893 4,441,934 Other asset balances 17,167 1 2 4 215,551 232,725 Total on-balance sheet exposure 1,117,246 555,442 184,492 209,202 4,479,949 6,546,331 Comparative as at 31 March 2012 have been restated in the current year's presentation. This is due to changes in accounting policies arising from adoption of MFRS139. 8
3.2 Past Due Financing and Advances Analysis (a) Past due but not impaired financing and advances are financing where the customer has failed to make a principal or profit payment when contractually due, and includes financing which are due one or more days after the contractual due date but less than 3 months. Past due financing and advances are analysed as follows: 30 September 31 March 2012 2012 RM'000 RM'000 Past due up to 1 month 298,509 306,214 Past due > 1-2 months 72,531 60,128 Past due > 2-3 months 12,567 15,017 383,607 381,359 Past due financing and advances analysed by sector are as follows: 30 September 31 March 2012 2012 RM'000 RM'000 Financial, insurance and business services 1,063 984 Transport, storage and communication 1,267 1,503 Agriculture, manufacturing, wholesale & retail trade 4,710 7,009 Construction 4,440 5,430 Residential financing 86,258 56,794 Motor vehicle financing 77,730 86,090 Other consumer financing 208,139 223,549 383,607 381,359 Past due financing and advances analysed by significant geographical areas: 30 September 31 March 2012 2012 RM'000 RM'000 Northern region 13,803 19,900 Central region 309,756 298,800 Southern region 44,832 46,052 East Malaysia region 15,216 16,607 383,607 381,359 9
3.3 Impaired Financing and Advances Analysis Impaired financing and advances analysed by sectors: 30 September 31 March 2012 2012 (Restated) RM'000 RM'000 Transport, storage and communication 86 79 Agriculture, manufacturing, wholesale & retail trade 34,782 35,339 Construction 3,716 4,549 Residential financing 21,362 15,399 Motor vehicle financing 2,876 2,597 Other consumer financing 14,937 12,281 77,759 70,244 Comparative as at 31 March 2012 have been restated in the current year's presentation. This is due to changes in accounting policies arising from adoption of MFRS139. Impairment allowances on impaired financing and advances analysed by sectors: Individual impairment net Individual Individual Collective (write-back)/ impairment impairment impairment charge for write-off allowance allowance the period for the period RM'000 RM'000 RM'000 RM'000 30 September 2012 Financial, insurance & business services - 2,388 - - Transport, storage & communication - 167 - - Agriculture, manufacturing, wholesale & retail trade 13,752 23,191 4,894 - Construction - 829 - - Residential financing 1,757 9,326 1,698 - Motor vehicle financing - 2,250 - - Other consumer financing 1,306 15,834 - - 16,815 53,985 6,592-31 March 2012 (Restated) Financial, insurance & business services - 4,116 - - Transport, storage & communication - 250 - - Agriculture, manufacturing, wholesale & retail trade 8,858 27,083 (56) (194) Construction - 1,047 (26) - Residential financing - 7,853 - - Motor vehicle financing - 2,469 - - Other consumer financing 1,306 16,525 12-10,164 59,343 (70) (194) Comparative as at 31 March 2012 have been restated in the current year's presentation. This is due to changes in accounting policies arising from adoption of MFRS139. 10
3.3 Impaired Financing and Advances Analysis (contd.) Impaired financing and advances and impairment allowances by geographical areas: 30 September 2012 Impaired Individual Collective financing and impairment impairment advances allowance allowance RM'000 RM'000 RM'000 Northern region 26,309 13,424 4,603 Central region 43,357 3,391 41,134 Southern region 6,597-6,311 East Malaysia region 1,496-1,937 77,759 16,815 53,985 31 March 2012 (Restated) Northern region 25,753 8,530 6,596 Central region 39,638 1,634 45,493 Southern region 3,605-4,891 East Malaysia region 1,248-2,363 70,244 10,164 59,343 Comparative as at 31 March 2012 have been restated in the current year's presentation. This is due to changes in accounting policies arising from adoption of MFRS139. Movement in financing impairment allowances are analysed as follows: Individual assessment allowance: 30 September 31 March 2012 2012 (Restated) RM'000 RM'000 At beginning of year - As previously stated 25,305 26,473 - Transfers to collective assessment allowance (15,141) (16,045) As restated 10,164 10,428 Allowance made/(write-back) during the period/year (net) 6,592 (70) Amount written-off - (194) Transfer from collective assessment allowance 59 - At end of period/year 16,815 10,164 Collective assessment allowance: At beginning of year - As previously stated 81,191 67,087 - Effect of change in accounting policy (36,989) (23,731) - Transfers from individual assessment allowance 15,141 16,045 As restated 59,343 59,401 Allowance made during the period/year (net) 7,281 26,453 Amount written-off (12,580) (26,511) Transfer to individual assessment allowance (59) - At end of period/year 53,985 59,343 Comparative as at 31 March 2012 have been restated in the current year's presentation. This is due to changes in accounting policies arising from adoption of MFRS139. 11
3.4 Assignment of Risk-Weights for Portfolio Under the Standardised Approach The following tables present the credit exposures by risk-weights and after credit risk mitigation: Exposures after netting and credit risk mitigation Insurance Total companies, exposures Securities after Total 30 September 2012 Sovereigns Banks, firms and Higher netting and Risk- Risk- /Central DFIs and Fund Regulatory RRE risk Other credit risk Weighted Weights banks MDBs managers Corporates retail financing assets assets mitigation Assets RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 0% 1,280,558 - - - - - - - 1,280,558-20% - 679,932-93,084 - - - - 773,016 154,603 35% - - - - - 535,813 - - 535,813 187,535 50% - - - 1 2,665 451,809 - - 454,475 227,238 75% - - - - 2,473,595 212,507 - - 2,686,102 2,014,576 100% - - 25 1,368,391 58,207 7,378-21,759 1,455,760 1,455,760 150% - - - 6,943 13,322-123 - 20,388 30,581 Total exposures 1,280,558 679,932 25 1,468,419 2,547,789 1,207,507 123 21,759 7,206,112 4,070,293 Risk-weighted assets by exposures - 135,986 25 1,397,421 1,934,719 580,198 185 21,759 4,070,293 Average risk-weight - 20% 100% 95% 76% 48% 150% 100% 56% Deduction from Capital base - - - - - - - - - 12
3.4 Assignment of Risk-Weights for Portfolio Under the Standardised Approach (contd.) The following tables present the credit exposures by risk-weights and after credit risk mitigation (contd.): Exposures after netting and credit risk mitigation Insurance Total companies, exposures Securities after Total 31 March 2012 Sovereigns Banks, firms and Higher netting and Risk- Risk- /Central DFIs and Fund Regulatory RRE risk Other credit risk Weighted Weights banks MDBs managers Corporates retail financing assets assets mitigation Assets RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 0% 1,339,533 - - - - - - - 1,339,533-20% - 457,869-57,631 - - - - 515,500 103,100 35% - - - - - 460,416 - - 460,416 161,146 50% - - - - 339 400,139 - - 400,478 200,239 75% - - - - 2,586,165 185,488 - - 2,771,653 2,078,740 100% - - 29 1,298,310 39,514 7,341-43,368 1,388,562 1,388,562 150% - - - 21,881 9,467-137 - 31,485 47,226 Total exposures 1,339,533 457,869 29 1,377,822 2,635,485 1,053,384 137 43,368 6,907,627 3,979,013 Risk-weighted assets by exposures - 91,574 29 1,342,657 1,993,507 507,673 205 43,368 3,979,013 Average risk-weight - 20% 100% 97% 76% 48% 150% 100% 58% Deduction from Capital base - - - - - - - - - 13
3.4 Assignment of Risk-Weights for Portfolio Under the Standardised Approach (contd.) For the purpose of determining counterparty risk-weights, the Bank uses external credit assessments from Rating Agency Malaysia ("RAM"), Malaysian Rating Corporation ("MARC"), Standard and Poor's ("S&P"), Moody's and Fitch. In the context of the Bank's portfolio, external credit assessments are mainly applicable to banks/financial institutions and rated corporations. The Bank follows the process prescribed under BNM CAFIB- Basel II to map the ratings to the relevant risk weights. The ratings are monitored and updated regularly to ensure that the latest and most appropriate risk-weights are applied in the capital computation. The following tables shows the rated exposures according to rating by Eligible Credit Assessment Institutions ("ECAIs"): 30 September 2012 (a) Ratings of corporate by approved ECAIs Exposure Class On and Off-Balance Sheet Exposures Ratings of Corporate by Approved ECAIs Moody's Aaa to Aa3 A1 to A3 Baa1 to Ba3 B1 to C Unrated S&P AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated Fitch AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated RAM AAA to AA3 A+ to A3 BBB1 to BB3 B to D Unrated MARC AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated RM'000 RM'000 RM'000 RM'000 RM'000 Credit Exposures (using Corporate Risk-Weights) Public Sector Entities (applicable for entities risk-weighted based on their external ratings as corporates) - - - - - Insurance Cos, Securities Firms & Fund Managers - - - - 25 Corporates 93,084 83,602 - - 1,320,365 Total 93,084 83,602 - - 1,320,390 (b) Short-term ratings of banking institutions and corporate by approved ECAIs Exposure Class On and Off-Balance Sheet Exposures Short term Ratings of Banking Institutions and Corporate by Approved ECAIs Moody's P-1 P-2 P-3 Others Unrated S&P A-1 A-2 A-3 Others Unrated Fitch F1+, F1 F2 F3 B to D Unrated RAM P-1 P-2 P-3 NP Unrated MARC MARC-1 MARC-2 MARC-3 MARC-4 Unrated RM'000 RM'000 RM'000 RM'000 RM'000 Banks, MDBs and FDIs 430,669 - - - 249,263 Rated Credit Exposures (using Corporate Risk- Weights) Public Sector Entities (applicable for entities risk-weighted based on their external ratings as corporates) - - - - - Insurance Cos, Securities Firms & Fund Managers - - - - - Corporates - - - - - Total 430,669 - - - 249,263 14
3.4 Assignment of Risk Weights for Portfolio Under the Standardised Approach (contd.) The following tables show the rated exposures according to rating by ECAIs (contd): 30 September 2012 (c) Ratings of Sovereigns and Central banks by approved ECAIs Exposure Class On and Off-Balance Sheet Exposures Ratings of Sovereigns and Central Banks by Approved ECAIs Moody's Aaa to Aa3 A1 to A3 Baa1 to Ba3 Ba1 to B3 Caa1 to C Unrated S&P AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated Fitch AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Sovereigns and Central Banks - 1,280,558 - - - - Total - 1,280,558 - - - - 31 March 2012 (a) Ratings of corporate by approved ECAIs Exposure Class On and Off-Balance Sheet Exposures Ratings of Corporate by Approved ECAIs Moody's Aaa to Aa3 A1 to A3 Baa1 to Ba3 B1 to C Unrated S&P AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated Fitch AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated RAM AAA to AA3 A+ to A3 BBB1 to BB3 B to D Unrated MARC AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated RM'000 RM'000 RM'000 RM'000 RM'000 Credit Exposures (using Corporate Risk-Weights) Public Sector Entities (applicable for entities risk-weighted based on their external ratings as corporates) - - - - - Insurance Cos, Securities Firms & Fund Managers - - - - 29 Corporates 62,705 88,752 - - 1,251,742 Total 62,705 88,752 - - 1,251,771 15
3.4 Assignment of Risk Weights for Portfolio Under the Standardised Approach (contd.) The following tables show the rated exposures according to rating by ECAIs (contd): 31 March 2012 (b) Short-term ratings of banking institutions and corporate by approved ECAIs Exposure Class On and Off-Balance Sheet Exposures Short term Ratings of Banking Institutions and Corporate by Approved ECAIs Moody's P-1 P-2 P-3 Others Unrated S&P A-1 A-2 A-3 Others Unrated Fitch F1+, F1 F2 F3 B to D Unrated RAM P-1 P-2 P-3 NP Unrated MARC MARC-1 MARC-2 MARC-3 MARC-4 Unrated RM'000 RM'000 RM'000 RM'000 RM'000 Banks, MDBs and FDIs 214,206 - - - 243,663 Rated Credit Exposures (using Corporate Risk- Weights) Public Sector Entities (applicable for entities risk-weighted based on their external ratings as corporates) - - - - - Insurance Cos, Securities Firms & Fund Managers - - - - - Corporates - - - - - Total 214,206 - - - 243,663 (c) Ratings of Sovereigns and Central banks by approved ECAIs Exposure Class On and Off-Balance Sheet Exposures Ratings of Sovereigns and Central Banks by Approved ECAIs Moody's Aaa to Aa3 A1 to A3 Baa1 to Ba3 Ba1 to B3 Caa1 to C Unrated S&P AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated Fitch AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Sovereigns and Central Banks - 1,339,533 - - - - Total - 1,339,533 - - - - Note: There is no outstanding securitisation contract at the Bank that required disclosure of ratings and short term rating of securitisation by approved ECAIs. 16
3.5 Credit Risk Mitigation ("CRM") The following tables represent the Bank's credit exposure including off-balance sheet items under the standardised approach, the total exposure (after, where applicable, eligible netting benefits) that is covered by eligible guarantees and credit derivatives; and eligible collateral after haircuts, allowed under the CAFIB. Exposures Exposures covered by covered by Exposures guarantees/ eligible covered by Exposure credit financial other eligible 30 September 2012 before CRM derivatives collateral collateral Exposure Class RM'000 RM'000 RM'000 RM'000 Credit Risk On-balance sheet exposures: Sovereigns/Central banks 1,220,558 - - - Banks, DFIs and MDBs 679,932 - - - Insurance Companies, Securities Firm and Fund Managers 25 - - - Corporates 1,267,347-28,479 - Regulatory retail 2,231,240-38,059 - RRE financing 1,197,138-707 - Higher risk assets 81 - - - Other assets 21,759 - - - Defaulted exposures 43,784-5 - Total on-balance sheet exposures 6,661,864-67,250 - Off-balance sheet exposures Off-balance sheet exposures other than OTC derivatives or credit derivatives 611,018-264 - Defaulted exposures 745 - - - Total off-balance sheet exposures 611,763-264 - Total on and off-balance sheet exposures 7,273,627-67,514-17
3.5 Credit Risk Mitigation ("CRM") (contd.) Exposures Exposures covered by covered by Exposures guarantees/ eligible covered by Exposure credit financial other eligible 31 March 2012 before CRM derivatives collateral collateral Exposure Class RM'000 RM'000 RM'000 RM'000 Credit Risk On-balance sheet exposures: Sovereigns/Central banks 1,279,533 - - - Banks, DFIs and MDBs 457,869 - - - Insurance Companies, Securities Firm and Fund Managers 29 - - - Corporates 1,147,219-24,906 - Regulatory retail 2,364,940-38,613 - RRE financing 1,045,689-648 - Higher risk assets 95 - - - Other assets 43,368 - - - Defaulted exposures 38,711 - - - Total on-balance sheet exposures 6,377,453-64,167 - Off-balance a sheet exposures: es Off-balance sheet exposures other than OTC derivatives or credit derivatives 588,880-857 - Defaulted exposures 6,319 - - - Total off-balance sheet exposures 595,199-857 - Total on and off-balance sheet exposures 6,972,652-65,024-18
3.6 Off-Balance Sheet Exposures and Counterparty Credit Risk Off-balance sheet exposures of the Bank are mainly from the commitments to extend credit including the unutilised or undrawn portions of credit facilities. The off-balance sheet exposures and their related counterparty credit risk of the Bank are as follows: Positive Fair Value Credit Risk- Principal of Derivative Equivalent Weighted Amount Contracts Amount Assets 30 September 2012 RM'000 RM'000 RM'000 RM'000 Credit-related exposures Direct credit substitutes 44,730-44,730 44,730 Transaction-related contingent items 27,089-13,545 13,545 Short-term self-liquidating traderelated contingencies 26,451-5,290 5,290 Irrevocable commitments to extent credit: - maturity exceeding one year 745,389-372,695 295,118 - maturity not exceeding one year 877,517-175,503 109,640 1,721,176-611,763 468,323 Positive Fair Value Credit Risk- Principal of Derivative Equivalent Weighted Amount Contracts Amount Assets 31 March 2012 RM'000 RM'000 RM'000 RM'000 Credit-related exposures Direct credit substitutes 42,270-42,270 42,270 Transaction-related contingent items 23,756-11,878 11,878 Short-term self-liquidating traderelated contingencies 26,784-5,357 5,357 Irrevocable commitments to extent credit: - maturity exceeding one year 675,024-337,512 267,528 - maturity not exceeding one year 990,908-198,182 135,316 1,758,742-595,199 462,349 19
4.0 Market Risk Regulatory capital requirements The risk-weighted assets and capital requirements for the various categories of risk under market risk are as follows: Risk- Weighted Capital Assets Requirements 30 September 2012 RM'000 RM'000 Profit rate risk - General profit rate risk 58 5 - Specific profit rate risk - - 58 5 Equity risk - General profit rate risk - - - Specific profit rate risk - - - - Foreign exchange risk - - 31 March 2012 58 5 Profit rate risk - General profit rate risk 2,492 199 - Specific profit rate risk - - 2,492 199 Equity risk - General profit rate risk - - - Specific profit rate risk - - - - Foreign exchange risk - - 2,492 199 20
5.0 Rate of Return Risk in the Banking Book The following tables present the Bank's projected sensitivity to a 100 basis point parallel shock to profit rates across all maturities applied on the Bank's profit sensitivity gap as at reporting date. 30 September 2012 31 March 2012-100 bps + 100 bps - 100 bps + 100 bps Increase/(Decrease) Increase/(Decrease) RM'000 RM'000 RM'000 RM'000 Impact on net profit income Ringgit Malaysia (1,764) 1,764 (1,399) 1,399 Impact on Economic value Ringgit Malaysia (55,654) 55,654 (76,233) 76,233 6.0 Shariah Governance Disclosures and Profit Sharing Investment Account ("PSIA") There is no major Shariah non-complaint transaction nor events during the period under review. The Bank does not use PSIA as a risk absorbent mechanism. 21