BIMB Integrated Annual Report 2019

48 FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 48.5 Liquidity risk (continued) (a) Banking (continued) Management of liquidity risk All liquidity risk exposures are managed by the Bank’s Treasury, who has the necessary skills, tools, management and governance to manage such risks. Limits and other risk controls are set to meet the following objectives: • Maintaining sufficient liquidity surplus and reserves to sustain a sudden liquidity shock; • Ensuring cash flows are relatively diversified across all maturities; • Ensuring deposit base is diversified and not overly concentrated to a relatively small number of depositors; • Maintaining sufficient borrowing capacity in the Interbank market • Maintain sufficient highly liquid financial assets; • Not over-extending financing activities relative to the deposit base; and • Not over-relying on non-Ringgit liabilities to fund Ringgit assets. The Bank’s MRMD is the independent risk control function and is responsible for ensuring efficient implementation of liquidity risk management framework. It is also responsible for developing the Bank’s liquidity risk management guidelines, monitoring tools, behavioural assumptions and limit setting methodologies. Escalation procedures are documented and approved by the Bank’s ALCO and/or BRC, with proper authorities to ratify or approve the excess. In addition, the liquidity risk exposures and limits are regularly reported to the Bank’s ALCO and the BRC. Stress testing and scenario analysis are important tools used by the Bank to manage the liquidity risk. Stress test results are produced regularly to determine the impact of a sudden liquidity shock. The stress-testing provides the Bank’s Management and the BRC with an assessment of the financial impact of identified extreme events on the liquidity and funding risk exposures of the Bank. Another key control feature of the Bank’s liquidity risk management is the liquidity contingency management plans. These plans identify the pre-emptive quantitative and qualitative indicators of stress conditions arising from systemic or other crises and provide guidance on the actions to be taken in order to minimize the adverse implications to the Bank. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 294 Integrated Annual Report 2019 Group Overview Sustaining The Group Management Discussion & Analysis Group Governance