Page 180 - Exim iar24_Ebook

EXIM BANK MALAYSIA
178

NOTES TO THE FINANCIAL STATEMENTS

42. FINANCIAL RISK MANAGEMENT POLICIES (cont’d)
Capital management
Capital policy

The overall objective of capital management is to maintain a strong capital position in order to provide opportunities for
business growth and able to provide cushion for any potential losses. In line with this objective, the Group and the Bank view
capital position as an important key barometer of financial health.

In order to support its mandated roles, the Group and the Bank must have strong and adequate capital to support its business
activities on an on-going basis. BNM has imposed several regulatory capital requirements whereby, the Bank must have an
absolute minimum capital funds of RM300,000,000 and a minimum Risk Weighted Capital Ratio (“RWCR”) of 8% at all times.
The minimum capital funds refers to paid-up capital and reserves as defined in Section 3 of Development Financial Institution
Act 2002.

In order to further strengthen the capital position of the Group and the Bank through a progressive and systematic building up
of the reserve fund, the Group and the Bank are required to maintain a reserve fund and transfer a certain percentage of its net
profits to the reserve fund once the RWCR falls below the threshold of 16%.

As at the reporting date, the reserve fund is not yet required as at the reporting date as the Group’s and the Bank’s capital is
currently above the threshold of 16%.
The Bank has adopted BNM’s transitional arrangements to add back a portion of the Stage 1 and Stage 2 allowance for ECL to
Tier 1 Capital over a four-year period from financial year beginning 2020. The transitional arrangements are consistent with the
guidance issued by the Basel Committee of Banking Supervision on “Regulatory treatment of accounting provisions – interim
approach and transitional arrangement” (March 2017) and “Measures to reflect the impact of Covid-19” dated April 2020.

Regulatory capital
The following table set forth capital resources and capital adequacy for the Bank as at 31 December:

Without With Without With
Transitional Transitional Transitional Transitional
Arrangement Arrangement Arrangement Arrangement
2024 2024 2023 2023
RM’000 RM’000 RM’000 RM’000
Ordinary share capital 2,708,665 2,708,665 2,708,665 2,708,665
Accumulated losses (1,374,220) (1,374,220) (1,396,129) (1,396,129)
#
Current year profit 113,402 113,402 38,274 38,274
#
Eligible Tier 1 capital 1,447,847 1,447,847 1,350,810 1,350,810

*
Loss provision and regulatory reserve 182,046 182,046 190,518 190,518
Redeemable convertible cumulative preference shares 250,000 250,000 250,000 250,000
Provision for guarantee and claims 18,684 18,684 23,015 23,015
#
Provision for commitment and contingencies 17,843 17,843 44,412 44,412
Eligible Tier 2 capital 468,573 468,573 507,945 507,945

Investment in subsidiaries (64,129) (64,129) (64,129) (64,129)
Total capital base 1,852,291 1,852,291 1,794,626 1,794,626

Risk weighted assets 4,380,887 4,380,887 4,411,445 4,411,445