Page 197 - Exim iar24_Ebook

EXIM BANK MALAYSIA ANNUAL REPORT 2024

7 FINANCIAL STATEMENTS 195
NOTES TO THE FINANCIAL STATEMENTS

42. FINANCIAL RISK MANAGEMENT POLICIES (cont’d)
Credit risk management (cont’d)
Risk identification

The Group and the Bank take into account the sources of credit risks identified from all lines of business on a bank-wide
basis such as direct financing risk, contingent financing risk, issuer risk, pre-settlement risk and settlement risk.

As a development financial institution, the Group and the Bank are expected primarily to fill the gaps in the supply of
financial services that are not normally provided by other banking institutions.
Therefore, the Group and the Bank are exposed to credit risk mainly from credit facilities to finance and support exports
and imports of goods, services and overseas projects with emphasis on non-traditional markets, provision of export credit
insurance services, export financing insurance, overseas investment insurance and guarantee facilities.

The Group and the Bank are also exposed to credit risk from investment in securities and other financial market transactions.
Measurement
The Group and the Bank monitor actual exposures against established limits and have procedures in place for the purpose
of monitoring and taking appropriate actions when such limits are breached. If exceeded limits, such occurrences must be
reported to the MRC and subsequently, corrective measures are taken to avoid recurrence of such breaches.
Internal credit rating system is an integral part of the Group’s and the Bank’s credit risk management. It provides a good
means of differentiating the degree of credit risk in the different credit exposures of the Group and the Bank. This will allow
more accurate determination of the overall characteristics of the credit portfolio, concentrations, problem credits and the
adequacy of allowances for losses on loans, advances and financing.
Impairment of financial assets
The Group and the Bank individually assesses its financial assets for any objective evidence of impairment as a result of
one or more loss events that occurred after the initial recognition. In determining that there is objective evidence of an
impaired loss, the Group and the Bank adopted a systematic mechanism for a prompt trigger of impairment test whereby the
triggers are based on obligatory and judgmental event triggers.

When there is objective evidence of impairment of the financial assets, the classification of these assets as impaired shall
be endorsed and approved by Management Committee (“MC”). Impairment losses are recorded as charges to the statement
of profit or loss. The carrying amount of impaired loans, advances and financing on the statement of financial position is
reduced through the use of impairment allowance account. Losses expected from future events are not recognised.