BIMB Integrated Annual Report 2019

48 FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 48.3 Credit risk (continued) Maximum exposure to credit risk (continued) Banking (a) Derivative financial assets In mitigating the counterparty credit risks from foreign exchange and derivatives transactions, the Bank enter into master agreements that provide for closeout netting with counterparties, whenever possible. A master agreement that governs all transactions between two parties, creates the greater legal certainty that the netting of outstanding obligations can be enforced upon termination of outstanding transactions if an event of default occurs. (b) Financing, advances and others Business and retail Financing, advances and others will may have levels of collateralisation depending on the nature of the product. The general creditworthiness of a corporate and commercial customer tends to be the most relevant indicator of credit quality of a financing extended to it. The Bank manages its exposures to these customers by completing a credit evaluation to assess the customer’s character, industry, business model and capacity to meet their commitments in a timely manner. The Bank may take collateral in the form of a first charge over real estate, floating charges over all corporate assets and other liens and guarantees. The Bank routinely updates the valuation of collateral held against all financing as it adopts an annual internal valuation policy and a 2 years external valuation policy. At 31 December 2019, the net carrying amount of credit-impaired financing and advances to corporate and commercial customers amounted to RM198,655,000 (2018: RM RM219,737,000) and the value of collateral held against those financing and advances amounted to RM310,524,000 (2018: RM104,605,000). House financing The following table presents credit exposures from financing and advances that are credit impaired by ranges of financing-to-value (“FTV”) ratio. FTV is calculated as the ratio of the gross amount of the financing, or the amount committed for financing commitments - to the value of the collateral. Group 2019 2018 RM’000 RM’000 FTV ratio Credit-impaired financing Less than 51% 31,884 22,469 51-70% 19,801 11,662 More than 70% 110,477 94,169 Total 162,162 128,300 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 274 Integrated Annual Report 2019 Group Overview Sustaining The Group Management Discussion & Analysis Group Governance