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NOTES TO THE
FINANCIAL STATEMENTS

for the financial year ended 31 december 2020 (continUed)

49 FINANCIAL RISk MANAGEMENT POLICIES (CONTINUED)
49.3 Credit risk (continued)
(a) Banking (continued)
Management of Credit Risk

the management of credit risk is being performed by credit management division (“cmd”) and risk management
inteGrated annUal rePort 2020 • To build a high quality credit portfolio in line with the Bank’s overall strategy and risk appetite;
division (“rmd”), and two other units outside of the cmd and rmd domain, namely, credit administration
department and recovery & rehabilitation division. the combined objectives are, amongst others:

• To ensure that the Bank is compensated for the risk taken, balancing/optimising the risk/return relationship;
• To develop an increasing ability to recognise, measure and avoid or mitigate potential credit risk problem areas;
and

• To conform with statutory, regulatory and internal credit requirements.
the bank monitors its credit exposures either on a portfolio basis or individual basis through annual reviews.
credit risk is proactively monitored through a set of early warning signals that could trigger immediate reviews of
278 (certain part of) the portfolio. the affected portfolio or financing is placed on a watchlist to enforce close monitoring
and prevent financing from turning impaired and to increase chances of full recovery.
a detailed limit structure is in place to ensure that risks taken are within the risk appetite as set by the bank’s board
bimb holdinGS berhad 199701008362 (423858-X) (b) counterparties limits and permissible acquisition of private debt securities, subject to specified minimum rating
and to avoid credit risk concentration to a single customer, sector, product, Shariah contract, etc.
credit risk arising from dealing and investing activities are managed by the establishment of limits which include

threshold. furthermore, the dealing and investing activities are monitored by an independent middle office unit.
Takaful
credit risk is the potential financial loss resulting from the failure of a customer, an intermediary or counterparty

to settle its financial and contractual obligations to the takaful malaysia Group as and when they fall due.
the takaful malaysia Group’s portfolio of islamic debt securities, and to a lesser extent short-term and other

investments, are subject to credit risk. this risk is defined as the potential loss resulting from adverse changes in a
borrower’s ability to repay the debt. the takaful malaysia Group’s objective is to earn competitive relative returns
by investing in a diversified portfolio of securities.
management has an investment credit risk policy in place. limits are established to manage credit quality and
concentration risk.
takaful malaysia has takaful and other receivable balances that are subject to credit risk. among the most significant
of these are retakaful recoveries. to mitigate the risk of the counterparties not paying the amount due, takaful
malaysia has established certain business and financial guidelines for retakaful approval, incorporating ratings by
major agencies and considering currently available market information.

takaful malaysia also periodically review the financial stability of retakaful companies from public and other sources
and the settlement trend of amounts due from retakaful companies.
cash and deposits are generally placed with banks and financial institutions licensed under the financial Services
act 2013 and islamic financial Services act 2013 which are regulated by bank negara malaysia and Sharia insurance
regulation in indonesia.
takaful malaysia manage individual exposures as well as concentration of credit risks. there are no significant
changes as compared to prior periods. at end of the reporting period, there were no significant concentration of
credit risks, other than investments in islamic debt securities issued by single issuer and investment in institutional
trust account. there are no significant changes as compared to prior periods.