RORBB risk may cause fluctuations in Group’s profitability and capital. How Does This Impact Us? Funding at higher costs or disposal of liquid assets may impact the Group’s profitability and capital. How Does This Impact Us? RATE OF RETURN RISK IN BANKING BOOK LIQUIDITY RISK Outlook BNM is expected to maintain the OPR at the current level throughout 2025 with a focus on supporting economic growth while managing inflation. RORBB framework will remain an important aspect of banking regulation and it’s likely that BNM will release the exposure draft of the RORBB Policy in 2025. The Group has the necessary tools in place to proactively manage the RORBB risk within the approved Board limit and will further strengthen its risk management practices. Outlook The Group’s Liquidity Risk position is expected to remain stable in 2025 with the forecasted LCR and NSFR expected to remain above the regulatory requirement of a minimum of 100%. The BNM’s Liquidity Risk Policy Document which will take effect on 15 Oct 2025, will further ensure that the Group’s Liquidity Risk is more effectively monitored and managed. Description Risk of potential losses to the Group’s earnings and economic value of equity arising from adverse movement in profit rates. Description Risk of adverse impact to the financial condition and soundness of the Group arising from inability (or perceived inability) to meet its obligations. Response and Mitigating Actions • Maintain a robust RORBB risk policy and limits based on best practices. • Proactively assess, monitor, analyse, manage and report to ensure that RORBB risk management aligns with the approved risk appetite. • Proactively review risk controls and parameters in line with the Group’s business strategy and the current economic environment. • Conduct regular and ad-hoc stress testing to assess adequacy of capital to cushion the impact of profit rate changes to both on and off-balance sheet positions. • Promptly and accurately report all exposures, non-compliances, and emerging risks to Management and Board Committees. Response and Mitigating Actions • Maintain a comprehensive liquidity risk policy and limits to support risk profile and balance sheet strategies. • Proactively assess, monitor, analyse, manage and report to ensure effective liquidity risk management within approved Risk Appetite, business strategy and current economic environment. • Preserve high-quality liquid assets, term mismatch management to avoid significant maturity mismatches that could amplify liquidity risk and diversify funding sources as a liquidity risk buffer under both business-as-usual (BAU) and stress conditions. • Conduct regular and ad-hoc stress testing and scenario analysis to identify potential liquidity strain and ensure alignment with the Group’s risk tolerance. • Establish a robust liquidity crisis management plan and a viable contingency funding plan. • Promptly report on liquidity risk and funding profile to Management and Board Committees. Opportunities Arising From This Risk • Be responsive to changes in the profit rates and restructure the banking book when necessary to safeguard the Group’s interest. Opportunities Arising From This Risk • Diversify the Group’s funding base to achieve the desired assets and liabilities profile and balance sheet objectives. • Improve financial efficiency by optimising the cost of funds, leading to reduced overall cost of funding for the Group. RORBB LR 59 w w w . b a n k i s l a m. c o m 01 02 03 04 MD&A – STRATEGIC REVIEW 05 06 07 08 09
RkJQdWJsaXNoZXIy NDgzMzc=