BIMB Integrated Annual Report 2019

48 FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 48.4 Market risk (continued) (a) Banking (continued) (iii) Market risk in the trading book portfolio (continued) The historical simulation model used by the Bank incorporates the following features: • potential market movements are calculated with reference to data from the past two years; • historical market rates and prices are calculated with reference to foreign exchange rates and profit rates; and • VaR is calculated using a 99 per cent confidence level and for a one-day holding period. A summary of the VaR position of the Bank’s trading book portfolios at the reporting date is as follows: 1.1.2019 to 31.12.2019 As at 31.12.2019 Average Maximum Minimum Bank Islam RM’Million RM’Million RM’Million RM’Million Profit rate risk 0.33 1.07 1.60 0.03 Foreign exchange risk 0.34 0.47 0.94 0.21 Overall 0.67 1.54 2.26 0.30 1.1.2018 to 31.12.2018 As at 31.12.2018 Average Maximum Minimum Bank Islam RM’Million RM’Million RM’Million RM’Million Profit rate risk 0.05 1.96 4.08 0.05 Foreign exchange risk 0.26 0.48 1.00 0.15 Overall 0.31 2.44 4.62 0.29 In addition to VaR, the Bank has put in place the maximum loss limits, position limits, tenor limits and PV01 limits in monitoring the trading book portfolio. (iv) Foreign exchange risk The Bank manages and controls the trading book portfolio’s foreign exchange risk by limiting the net open exposure to individual currencies and on an aggregate basis. The Bank also has in place the sensitivity limit. For the Bank-wide (trading book and banking book portfolios) foreign exchange risk, the Bank manages and controls by limiting the net open exposure on an aggregate basis. Sensitivity Analysis Assuming that other risk variables remain constant, the foreign currency revaluation sensitivity for the Bank as at reporting date is summarised as follows (only net open position for major currencies are shown in its specific currency in the table below. For other currencies, these exposures are grouped as ‘Others’): 2019 2018 -1% +1% -1% +1% Depreciation Appreciation Depreciation Appreciation Bank Islam RM’000 RM’000 RM’000 RM’000 US Dollar 11,611 (11,611) 11,830 (11,830) Euro 4,591 (4,591) 4,938 (4,938) Others (279) 279 (112) 112 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 289 BIMB HOLDINGS BERHAD 199701008362 (423858-X) Shareholders’ Information Financial Statements Additional Information Disclosure Summary