financial statements - affin bank · 2015. 10. 5. · 42 affin bank berhad annual report 2014...
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42 Affin Bank Berhad Annual Report 2014
FINANCIAL STATEMENTS43 Directors’ Report
60 Statements of Financial Position
61 Income Statements
62 Statements of Comprehensive Income
63 Statements of Changes in Equity
65 Statements of Cash Flows
68 Summary of Significant Accounting Policies
85 Notes to the Financial Statements
184 Statement by Directors
184 Statutory Declaration
185 Independent Auditors’ Report
187 Basel II Pillar 3 Disclosures
43Affin Bank Berhad Annual Report 2014
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
The Directors hereby submit their report together with the audited �nancial statements of the Group and the Bank for the
�nancial year ended 31 December 2014.
PRINCIPAL ACTIVITIES
The principal activities of the Bank during the �nancial year are banking and related �nancial services. The principal activities of
the subsidiaries are Islamic banking business, property management services, nominee and trustee services. Islamic banking
business refers generally to the acceptance of deposits and granting of �nancing under the Shariah principles. There were no
signi�cant changes in the nature of these activities during the �nancial year.
FINANCIAL RESULTS
The Group The Bank
RM’000 RM’000
Pro�t before zakat and taxation 720,130 627,700
Zakat (4,772) -
Pro�t before taxation 715,358 627,700
Taxation (171,631) (151,221)
Net profit for the financial year 543,727 476,479
DIVIDENDS
The dividends on ordinary shares paid or declared by the Bank since 31 December 2013 were as follows:
In respect of the �nancial year ended 31 December 2013 as shown in the Directors’ report for that �nancial year:
RM’000
Final single-tier dividend of 6 sen per share paid on 31 March 2014 91,100
In respect of the �nancial year ended 31 December 2014:
Single-tier interim dividend of 10 sen per share paid on 22 December 2014 168,877
The Directors now recommend the payment of a �nal single-tier dividend of 3.91 sen per share on the Bank’s issued and paid
up capital of RM1,688,769,616 comprising of 1,688,769,616 shares amounting to RM66,030,892 for the �nancial year ended
31 December 2014 which is subject to the approval of members at the forthcoming Annual General Meeting of the Bank.
44 Affin Bank Berhad Annual Report 2014
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
RESERVES AND PROVISIONS
All material transfers to or from reserves or provisions during the �nancial year are shown in the �nancial statements and notes
to the �nancial statements.
BAD AND DOUBTFUL DEBTS AND FINANCING
Before the �nancial statements of the Group and the Bank were made out, the Directors took reasonable steps to ascertain
that proper action had been taken in relation to the writing off of bad debts and �nancing and the making of allowance for bad
and doubtful debts and �nancing, and satis�ed themselves that all known bad debts and �nancing had been written off and
adequate allowances made for doubtful debts and �nancing.
At the date of this report, the Directors are not aware of any circumstances which would render the amount written off for bad
debts and �nancing, or the amount of the allowance for doubtful debts and �nancing, in the �nancial statements of the Group
and the Bank inadequate to any substantial extent.
CURRENT ASSETS
Before the �nancial statements of the Group and the Bank were made out, the Directors took reasonable steps to ascertain
that any current assets, other than debts and �nancing, which were unlikely to realise in the ordinary course of business, their
values as shown in the accounting records of the Group and the Bank, have been written down to an amount which they might
expected so to realise.
At the date of this report, the Directors are not aware of any circumstances which would render the values attributed to the
current assets in the �nancial statements of the Group and the Bank misleading.
VALUATION METHODS
At the date of this report, the Directors are not aware of any circumstances which have arisen which render adherence to
the existing methods of valuation of assets or liabilities in the Group’s and the Bank’s �nancial statements misleading or
inappropriate.
CONTINGENT AND OTHER LIABILITIES
At the date of this report there does not exist:
(a) any charge on the assets of the Group or the Bank which has arisen since the end of the �nancial year which secures the
liabilities of any other person; or
(b) any contingent liability in respect of the Group or the Bank that has arisen since the end of the �nancial year other than in
the ordinary course of banking business or activities of the Group.
No contingent or other liability of the Group or the Bank has become enforceable, or is likely to become enforceable within the
period of twelve months after the end of the �nancial year which, in the opinion of the Directors, will or may substantially affect
the ability of the Group or the Bank to meet their obligation as and when they fall due.
45Affin Bank Berhad Annual Report 2014
CHANGE OF CIRCUMSTANCES
At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the
�nancial statements of the Group and the Bank that would render any amount stated in the �nancial statements misleading.
ITEMS OF AN UNUSUAL NATURE
The results of the operations of the Group and the Bank during the �nancial year were not, in the opinion of the Directors,
substantially affected by any item, transaction or event of a material and unusual nature.
There has not arisen in the interval between the end of the �nancial year and the date of this report any item, transaction or
event of a material and unusual nature likely, in the opinion of the Directors, to affect substantially the results of the operations
of the Group or the Bank for the current �nancial year in which this report is made.
SIGNIFICANT EVENT DURING THE FINANCIAL YEAR
There is no signi�cant event during the �nancial year.
SUBSEQUENT EVENTS
There were no material events subsequent to the reporting date that require disclosure or adjustments to the �nancial
statements.
DIRECTORS
The Directors of the Bank who have held of�ce since the date of the last report and at the date of this report are:
Jen Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara)
Chairman / Non-Independent Non-Executive Director
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin
Non-Independent Non-Executive Director
Dr Raja Abdul Malek Bin Raja Jallaludin
Independent Non-Executive Director
(Retired w.e.f. 29.3.2014)
Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman
Independent Non-Executive Director
Tan Sri Dato’ Seri Mohamed Jawhar
Independent Non-Executive Director
Tan Sri Mohd Ghazali Bin Mohd Yusoff
Independent Non-Executive Director
(Appointment w.e.f. 20.6.2014)
En. Mohd Suf�an Bin Haji Haron
Independent Non-Executive Director
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
46 Affin Bank Berhad Annual Report 2014
DIRECTORS (continued)
Mr Aubrey Li Kwok-Sing
Non-Independent Non-Executive Director
Mr Gary Cheng Shui Hee
Non-Independent Non-Executive Director (Alternate Director to Mr Aubrey Li Kwok-Sing)
(Resigned w.e.f. 17.3.2014)
Mr Tang Peng Wah
Non-Independent Non-Executive Director (Alternate Director to Mr Aubrey Li Kwok-Sing)
(Appointment w.e.f. 23.6.2014)
RESPONSIBILITY STATEMENT BY BOARD OF DIRECTORS
In the course of preparing the annual �nancial statements of the Group and of the Bank, the Directors are collectively responsible
in ensuring that these �nancial statements are drawn up in accordance with Malaysian Financial Reporting Standards,
International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.
It is the responsibility of the Directors to ensure that the �nancial reporting of the Group and of the Bank present a true and fair
view of the state of affairs of the Group and of the Bank as at 31 December 2014 and of the �nancial results and cash !ows of
the Group and of the Bank for the �nancial year then ended.
The �nancial statements are prepared on the going concern basis and the Directors have ensured that proper accounting
records are kept, applied the appropriate accounting policies on a consistent basis and made accounting estimates that are
reasonable and fair so as to enable the preparation of the �nancial statements of the Group and of the Bank with reasonable
accuracy.
The Directors have also taken the necessary steps to ensure that appropriate systems are in place for the assets of the Group
and of the Bank to be properly safeguarded for the prevention and detection of fraud and other irregularities. The systems, by
their nature, can only provide reasonable and not absolute assurance against material misstatements, whether due to fraud
or error.
The Statement by Directors pursuant to Section 169 of the Companies Act, 1965 is set out on page 184 of the �nancial
statements.
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
47Affin Bank Berhad Annual Report 2014
DIRECTORS’ INTERESTS
According to the register of Directors’ shareholdings, the interest of Directors in of�ce at the end of the �nancial year in shares,
warrants and options of related companies are as follows:
Ordinary shares of RM1 each
As at As at
1.1.2014 Bought Sold 31.12.2014
AFFIN Holdings Berhad
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin * 808,714 ^ 242,614 - * 1,051,328
Boustead Heavy Industries Corporation Berhad
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin * 2,000,000 - - * 2,000,000
Boustead Petroleum Sdn Bhd
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin 5,916,465 - - 5,916,465
Al-Hadharah Boustead REIT
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin * 250,000 - ^^ 250,000 -
* Shares held in trust by nominee company^ Rights shares issued on 4 July 2014^^ Privatisation of Al-Hadharah Boustead REIT on 29 January 2014
Ordinary shares of 50 sen each
As at As at
1.1.2014 Bought Sold 31.12.2014
Pharmaniaga Berhad
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin 12,500,148 - - 12,500,148
Ordinary shares of RM10 each; RM5 uncalled
As at As at
1.1.2014 Bought Transfer 31.12.2014
ABB Trustee Berhad **
Jen Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara) 20,000 - - 20,000
** Shares held in trust for the Bank
Ordinary shares of 50 sen each
As at As at
1.1.2014 Bought Sold 31.12.2014
Boustead Holdings Berhad
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin 28,192,758 - - 28,192,758
Boustead Plantation Berhad ***
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin - + 31,381,600 - 31,381,600
+ IPO on 26 June 2014
*** Shares held in trust by nominee company - 30,941,600 Shares held under own name - 440,000
Other than the above, the Directors in of�ce at the end of the �nancial year did not have any other interest in shares, warrants
and options over shares in the Bank or its related corporations during the �nancial year.
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
48 Affin Bank Berhad Annual Report 2014
DIRECTORS’ BENEFITS
During and at the end of the �nancial year, no other arrangements subsisted to which the Bank or any of its subsidiaries is a
party with the object or objects of enabling Directors of the Bank or any of its subsidiaries to acquire bene�ts by means of the
acquisition of shares in, or debenture of, the Bank or any other body corporate.
Since the end of the previous �nancial year, no Director of the Bank has received or become entitled to receive a bene�t (other
than the fees and other emoluments shown in the Note 31 to the �nancial statements) by reason of a contract made by the
Bank or by a related corporation with the Director or with a �rm of which he is a member or with a company in which he has a
substantial �nancial interest.
CORPORATE GOVERNANCE
The Board of Directors is committed to ensure the highest standards of corporate governance throughout the organisation
with the objectives of safeguarding the interests of all stakeholders and enhancing the shareholders’ value and �nancial
performance of the Bank. The Board considers that it has applied the Best Practices as set out in the Malaysian Code of
Corporate Governance throughout the �nancial year. The Bank is also required to comply with BNM’s Guidelines on Corporate
Governance for Licensed Institutions.
(i) Board of Directors Responsibility and Oversight
The Board of Directors
The direction and control of the Bank rest �rmly with the Board as it effectively assumes the overall responsibility for
corporate governance, strategic direction, formulation of policies and overseeing the investments and operations of
the Bank. The Board exercises independent oversight on the management and bears the overall accountability for the
performance of the Bank and compliance with the principle of good governance.
There is a clear division of responsibility between the Chairman and the Managing Director/Chief Executive Of�cer (‘MD/
CEO’) to ensure that there is a balance of power and authority. The Board is responsible for reviewing and approving the
longer-term strategic plans of the Bank as well as the business strategies. It is also responsible for identifying the principal
risks and implementation of appropriate systems to manage those risks as well as reviewing the adequacy and integrity of
the Bank’s internal control systems, management information systems, including systems for compliance with applicable
laws, regulations and guidelines.
Whilst, the Management Committee, headed by the MD/CEO, is responsible for the implementation of the strategies and
internal control as well as monitoring performance. The Committee is also a forum to deliberate issues pertaining to the
Bank’s business, strategic initiatives, risk management, manpower development, supporting technology platform and
business processes.
The Board Meetings
The Board meets on a monthly basis, to review the Bank’s �nancial and business performance, to oversee the conduct
of the Bank’s business as well as to ensure that adequate internal control systems are in place. The Board met 12 times
during the �nancial year.
Board Balance
The Board of Directors comprises of seven Non-Executive Directors and one alternate Non-Executive Director. There are four
Independent Non-Executive Directors and four Non-Independent Non-Executive Directors. The Board of Directors meetings are
presided by a Non-Independent Non-Executive Chairman whose role is clearly separated from the role of the MD/CEO.
In 2014, the Bank continues to have a strong and experienced Board, be�tting its aspiration to become a mid size Bank
of prominence. It consists of representatives from the private sector with suitable quali�cations and experience in relevant
areas particularly in banking.
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
49Affin Bank Berhad Annual Report 2014
CORPORATE GOVERNANCE
(i) Board of Directors Responsibility and Oversight (continued)
Board Balance (continued)
The composition of the Board and the number of meetings attended by each director are as follows:
Directors Total Meetings Attended
Jen Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara) 13 / 14
Chairman / Non-Independent Non-Executive Director
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin 14 / 14
Member / Non-Independent Non-Executive Director
Dr Raja Abdul Malek Bin Raja Jallaludin 4 / 4
Member / Independent Non-Executive Director
(Retired w.e.f. 29.3.2014)
Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman 13 / 14
Member / Independent Non-Executive Director
Tan Sri Dato’ Seri Mohamed Jawhar 14 / 14
Member / Independent Non-Executive Director
Tan Sri Mohd Ghazali Bin Mohd Yusoff 8 / 8
Member / Independent Non-Executive Director
(Appointment w.e.f. 20.6.2014)
En. Mohd Suf�an Bin Haji Haron 14 / 14
Member / Independent Non-Executive Director
Mr Aubrey Li Kwok-Sing 9 / 14
Member / Non-Independent Non-Executive Director
Mr Gary Cheng Shui Hee 0 / 3
Member / Non-Independent Non-Executive Director
(Alternate Director to Mr Aubrey Li Kwok-Sing)
(Resigned w.e.f. 17.3.2014)
Mr Tang Peng Wah 3 / 8
Member / Non-Independent Non-Executive Director
(Alternate Director to Mr Aubrey Li Kwok-Sing)
(Appointment w.e.f. 23.6.2014)
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
50 Affin Bank Berhad Annual Report 2014
CORPORATE GOVERNANCE
(i) Board of Directors Responsibility and Oversight (continued)
Board Committees
Nomination Committee
Nominating Committee was established to provide a formal and transparent procedure for the appointment of Directors
and MD/CEO. The committee also assesses the effectiveness of the Board as a whole, contribution of each Director,
contribution of the Board’s various committees and the performance of MD/CEO and key senior management of�cers.
During the �nancial year ended 31 December 2014, a total of 6 meetings were held. The Nominating Committee comprises
the following members and the details of attendance of each member at the Nominating Committee meetings held during
the �nancial year are as follows:
Members Total Meetings Attended
En. Mohd Suf�an Bin Haji Haron 6 / 6
Chairman / Independent Non-Executive Director
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin 6 / 6
Member / Non-Independent Non-Executive Director
Dr Raja Abdul Malek Bin Raja Jallaludin 2 / 2
Member / Independent Non-Executive Director
(Retired w.e.f. 29.3.2014)
Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman 6 / 6
Member / Independent Non-Executive Director
Tan Sri Dato’ Seri Mohamed Jawhar 6 / 6
Member / Independent Non-Executive Director
Tan Sri Mohd Ghazali bin Mohd Yusoff 3 / 3
Member / Independent Non-Executive Director
(Appointment w.e.f. 25.7.2014)
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
51Affin Bank Berhad Annual Report 2014
CORPORATE GOVERNANCE
(i) Board of Directors Responsibility and Oversight (continued)
Board Committees (continued)
Remuneration Committee
Remuneration Committee was established to evaluate and recommend a framework of remuneration for Directors, the
MD/CEO and key senior management of�cers that is competitive and consistent with the Bank’s culture, objectives and
strategy.
During the �nancial year ended 31 December 2014, a total of 3 meetings were held. The Remuneration Committee
comprises the following members and the details of attendance of each member at the Remuneration Committee meetings
held during the �nancial year are as follows:
Members Total Meetings Attended
En. Mohd Suf�an Bin Haji Haron 3 / 3
Chairman / Independent Non-Executive Director
(Appointment w.e.f. 29.3.2014)
Dr Raja Abdul Malek Bin Raja Jallaludin 1 / 1
Chairman / Independent Non-Executive Director
(Retired w.e.f. 29.3.2014)
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin 3 / 3
Member / Non-Independent Non-Executive Director
Tan Sri Mohd Ghazali Bin Mohd Yusoff 2 / 2
Member / Independent Non-Executive Director
(Appointment w.e.f. 25.7.2014)
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
52 Affin Bank Berhad Annual Report 2014
CORPORATE GOVERNANCE
(i) Board of Directors Responsibility and Oversight (continued)
Board Committees (continued)
Shariah Committee
AFFIN Islamic Bank Berhad’s business activities are subject to Shariah compliance and conformation by the Shariah
Committee. The Shariah Committee is formed as legislated under the Islamic Financial Services Act 2013 and as per
Shariah Governance Framework for Islamic Financial Institutions.
The main duties and responsibilities of the Shariah Committee are as follows:
• To advise the Board on Shariah matters in order to ensure that the business operations of the Bank comply with the
Shariah principles at all times;
• To endorse and validate relevant documentations of the Bank’s products to ensure that the products comply with
Shariah principles; and
• To advise the AFFIN Islamic Bank Berhad on matters to be referred to the Shariah Advisory Council.
The Shariah Committee was established in December 1995. During the year, a total of 9 meetings were held. The Shariah
Committee comprises the following members and the details of attendance of each member at the Shariah Committee
meetings held are as follows:
Members Total Meetings Attended
Associate Professor Dr. Said Bouheraoua 9 / 9
Chairman
(Appointment w.e.f. 9.5.2014)
Dr. Asyraf Wajdi Bin Dato’ Dusuki 4 / 4
Chairman
(Resigned w.e.f. 8.5.2014)
Assistant Professor Dr. Ahmad Azam Bin Othman 9 / 9
Member
Dr. Yasmin Hanani Binti Mohd Sa�an 9 / 9
Member
Dr. Zulki!i Bin Hasan 7 / 9
Member
Ustaz Mohammad Mahbubi Bin Ali 4 / 4
Member
(Appointment w.e.f. 1.6.2014)
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
53Affin Bank Berhad Annual Report 2014
CORPORATE GOVERNANCE
(ii) Group Risk Management
The Group Risk Management function, operating in an independent capacity, is part of the Bank’s senior management
structure which works closely as a team in managing risks to enhance stakeholders’ value.
The Group Risk Management function provides support to the Board Risk Management Committee (‘BRMC’). Committees
namely Board Loan Review and Recovery Committee (‘BLRRC’), Management Committee (‘MCM’), Group Management
Loan Committee (‘GMLC’), Asset and Liability Management Committee (‘ALCO’), Liquidity Management Committee
(‘LMC’), Group Operational Risk Management Committee (‘GORMC’) and Group Early Alert Committee (‘GEAC’) assist the
BRMC in managing credit, market, liquidity and operational risks respectively.
Responsibilities of these committees include:
• risk identi�cation
• risk assessment and measurement
• risk control and mitigation
• risk monitoring
Board Risk Management Committee (‘BRMC’)
The main function of Board Risk Management Committee (‘BRMC’) is to assist the Board in its supervisory role in the management
of risk in the Bank. It has responsibility for approving and reviewing all risk management policies and methodologies of the Bank.
BRMC also reviews guidelines and portfolio management reports including risk exposure information.
BRMC provides oversight and management of all risks in the Bank. The Committee also ensures that the procedures and
framework in relation to identifying, measuring, monitoring and controlling risk are operating effectively. The Bank’s risk
management framework is set out in Note 38 to the �nancial statements.
The BRMC meeting for the Bank were jointly held with AFFIN Islamic Bank Berhad and during the �nancial year ended 31
December 2014, a total of 5 meetings were held. The BRMC comprises the following members and details of attendance
of each member at the BRMC meetings held during the �nancial year are as follows:
Members Total Meetings Attended
Tan Sri Dato’ Seri Mohamed Jawhar 5 / 5
Chairman / Independent Non-Executive Director
Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman 5 / 5
Member / Independent Non-Executive Director
Dr Raja Abdul Malek Bin Raja Jallaludin 1 / 1
Member / Independent Non-Executive Director
(Retired w.e.f. 29.3.2014)
En. Mohd Suf�an Bin Haji Haron 5 / 5
Member / Independent Non-Executive Director
(Represent AFFIN Islamic Bank Berhad)
Tan Sri Mohd Ghazali Bin Mohd Yusoff 2 / 2
Member / Independent Non-Executive Director
(Appointment w.e.f. 25.7.2014)
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
54 Affin Bank Berhad Annual Report 2014
CORPORATE GOVERNANCE
(ii) Group Risk Management (continued)
Board Loan Review and Recovery Committee (‘BLRRC’)
Board Loan Review and Recovery Committee (‘BLRRC’) critically reviews loans and other credit facilities with higher
risk implications, after due process of checking, analysis, review and recommendation by the Credit Risk Management
function, and if found necessary, exercise the power to veto loan applications that have been accepted by the Group
Management Loan Committee (‘GMLC’). The Committee is also responsible to review the impaired loans presented by
Management.
The BLRRC meeting for the Bank were jointly held with AFFIN Islamic Bank and during the �nancial year ended 31
December 2014, a total of 12 meetings were held. The BLRRC comprises the following members and details of attendance
of each member at the BLRRC meetings held during the �nancial year are as follows:
Members Total Meetings Attended
Jen Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara) 12 / 12
Chairman / Non-Independent Non-Executive Director
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin 12 / 12
Member / Non-Independent Non-Executive Director
Laksamana Madya Tan Sri Dato’ Seri Ahmad Ramli Bin Mohd Nor (Bersara) 12 / 12
Member / Non-Independent Non-Executive Director
(Represent AFFIN Islamic Bank Berhad)
En. Mohd Suf�an Bin Haji Haron 11 / 12
Member / Independent Non-Executive Director
Management Committee (‘MCM’)
MCM comprising the senior management team chaired by the MD/CEO, assists the Board in managing the day-to-day
operations and ensure its effectiveness. MCM formulates tactical plans and business strategies, monitors the Bank’s
overall performance, and ensures that the activities are in accordance with corporate objectives, strategies, policies and
annual business plan and budget.
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
55Affin Bank Berhad Annual Report 2014
CORPORATE GOVERNANCE
(ii) Group Risk Management (continued)
Group Management Loan Committee (‘GMLC’)
Group Management Loan Committee (‘GMLC’) approves complex and larger loans and workout/recovery proposals
beyond the delegated authority of the concerned individual senior management personnel of the Bank.
Individual approvers
Credit authority is delegated based on skills, experience and track record of the of�cer assuming an approver’s position.
Delegation of credit authority is subject to credit checks to ensure approvers have a clean disciplinary record and not be
in a �nancially embarrassed position.
Asset and Liability Management Committee (‘ALCO’)
ALCO comprising the senior management team chaired by the MD/CEO, manages the Bank’s asset liability position and
oversees the Bank’s capital management to ensure that the Bank is adequately capitalised on an economic and regulatory
basis.
Liquidity Management Committee (‘LMC’)
LMC is a sub-committee of the ALCO and its role is to augment the functions of the ALCO by directing its focus speci�cally
to liquidity issues.
Group Operational Risk Management Committee (‘GORMC’)
Responsibilities of the committee include:
• To evaluate operational risks issues of escalating importance/strategic risk exposure;
• To review and recommend on broad operational risks management policies/best practices for adoption by the Bank’s
operating units;
• To review the effectiveness of broad internal controls and make recommendation/approve on changes, if necessary;
• To review/approve recommendation of operational risk management groups set up to address speci�c area;
• To take the lead in inculcating an operational risks awareness culture;
• To approve operational risk management methodologies/measurements tools;
• To review and approve the strategic operational risk management initiatives/plans and to endorse for BRMC’s approval
if necessary;
• To update BRMC on loss events and relevant key issues that may adversely impact core processes, system defects
and any changes to critical business or system related processes; and
• To effectively manage reputational risk in relation to environmental, social, business and regulatory issues across the
Bank.
Group Early Alert Committee (‘GEAC’)
Group Early Alert Committee (‘GEAC’) is established within senior management to monitor credit quality through monthly
review of the Early Alert, Watchlist and Exit Accounts and review the actions taken to address the emerging risks and
issues in these accounts.
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
56 Affin Bank Berhad Annual Report 2014
CORPORATE GOVERNANCE
(iii) Internal Audit and Internal Control Activities
In accordance with Bank Negara Malaysia’s Guidelines on Corporate Governance for Licensed Institutions, the Group
Internal Audit Division (‘GIA’) conducts continuous reviews on auditable areas within the Bank. The continuous reviews
by GIA are focused on areas of signi�cant risks and effectiveness of internal control in accordance to the audit plan
approved by the Audit and Examination Committee (‘AEC’). The risk highlighted on the respective auditable areas as well
as recommendation made by the GIA are addressed at AEC and Management meetings on bi-monthly basis. The AEC
also conduct annual reviews on the adequacy of internal audit function, scope of work, resources and budget of GIA.
At present, GIA consists of Operational Audit, IS Audit, Credit Review, Investigation and Compliance. Audit activities
include these key components:
• Conduct audit on all auditable entities (Head Of�ce, branches and subsidiaries) processes, services, products, system
and provide an independent assessment to the Board of Directors, AEC and Management that appropriate control
environment is maintained with clear authority and responsibility with suf�cient staff and resources to carry out control
responsibilities.
• Perform risk assessments to identify risk and evaluate actions taken to provide reasonable assurance that procedures
and controls exist to contain those risks.
• Maintain strong control activities including documented processes and system incorporating adequate controls to
produce accurate �nancial data and provide for the safeguarding of assets, and a documented review of reported
results.
• Ensure effective information !ows and communication, including:
- training and the dissemination of standards and requirements;
- an information system to produce and convey complete, accurate and timely data including �nancial data;
- the upward communication of trends, developments and emerging issues.
• Monitor controls, including procedures to verify that controls are in place and functioning, follow up on corrective
action on control �nding until its full resolution.
Based on GIA’s review, identi�cation and assessment of risk, testing and evaluation of controls, GIA will provide an opinion
on the effectiveness of internal controls maintained by each entity.
Audit and Examination Committee (‘AEC’)
The AEC comprises members of the Bank’s Board of Directors whose primary function is to assist the Board of Directors
in its supervision over:
• The reliability and integrity of accounting policies and �nancial reporting and disclosure practices;
• The provision of advice to the Board with regards to the �nancial statements and business risks to enable the Board
to ful�ll its �duciary duties and obligations; and
• The establishment and maintenance of processes to ensure that they:
- are in compliance with all applicable laws, regulations and policies; and
- have adequately addressed the risk relating to internal controls and system, management of inherent and business
risks, and ensuring that the assets are properly managed and safeguarded.
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
57Affin Bank Berhad Annual Report 2014
CORPORATE GOVERNANCE
(iii) Internal Audit and Internal Control Activities (continued)
Audit and Examination Committee (‘AEC’) (continued)
The AEC is made up of at least three but not more than �ve members appointed by the Board of Directors from among its
non-executive directors.
The AEC meeting for the Bank were jointly held with AFFIN Islamic Bank Berhad and during the �nancial year ended 31
December 2014, a total of 7 meetings were held. The AEC comprises the following members and details of attendance of
each member at the AEC meetings held during the �nancial year are as follows:
Members Total Meetings Attended
Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman 7 / 7
Chairman / Independent Non-Executive Director
Tan Sri Dato’ Seri Mohamed Jawhar 7 / 7
Member / Independent Non-Executive Director
(Represent AFFIN Islamic Bank Berhad)
Dr Raja Abdul Malek Bin Raja Jallaludin 2 / 2
Member / Independent Non-Executive Director
(Retired w.e.f. 29.3.2014)
Dr. Asyraf Wajdi Bin Dato’ Dusuki 2 / 3
Member / Independent Non-Executive Director
(Resigned w.e.f. 8.5.2014)
Tan Sri Mohd Ghazali bin Mohd Yusoff 3 / 3
Member / Independent Non-Executive Director
(Appointment w.e.f. 25.7.2014)
Associate Professor Dr. Said Bouheraoua 3 / 3
Member / Independent Non-Executive Director
(Represent AFFIN Islamic Bank Berhad)
(Appointment w.e.f. 25.7.2014)
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
58 Affin Bank Berhad Annual Report 2014
CORPORATE GOVERNANCE
(iv) Management Reports
Before each Board meeting, Directors are provided with a complete set of board papers itemised in the agenda for Board’s
review/approval and/or notation.
The Board monitors the Bank’s performance by reviewing the monthly Management Report, which provides a comprehensive
review and analysis of the Bank’s operations and �nancial issues. In addition, the minutes of the Board Committees and
Management Committees meetings and other issues are also tabled and considered by the Board.
Procedures are in place for Directors to seek both independent professional advice at the Bank’s expense and the advice
and services of the Company Secretary in order to ful�ll their duties and speci�c responsibilities.
BUSINESS PLAN AND STRATEGY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014
In �nancial year 2014, the Bank was able to sustain its business growth despite challenging economic environment. The
Bank’s continuous efforts to increase pro�table loans, with strong focus in SME market has led to 8.9% growth in net loans
and advances. The Bank also performed well in the consumer banking segment by registering consumer deposits growth
exceeding 11% despite stiff competition. Our cost to income ratio of 45.4% is also within the industry average of 48.0%.
One of our key focuses in 2014 given the challenging economic climate was preservation of asset quality. Proactive account
management allows us to identify potential distress assets thus allowing the Bank to take necessary remedial/preventive
measures. As at 31 December 2014, our gross and net impaired loans ratios stood at 1.8% and 0.8% respectively, as compared
to the industry average of 1.7% and 1.3% respectively.
Management will continue to remain prudent to ensure business sustainability and pro�tability growth in the next �nancial year.
BUSINESS OUTLOOK FOR 2015
Moving forward, the Bank expects the upcoming �nancial year to present many challenges but we also see huge opportunities
ahead. Recent economic development on oil prices, Ringgit depreciation, subsidy rationalisation as well as the implementation
of Goods and Services Tax (‘GST’) in the second quarter of 2015, will give an impact to the Banking industry as a whole.
We would also expect a moderation in household demand and potential stress in asset quality.
Under the current environment, the Bank will be stepping up efforts to improve ef�ciency and productivity in delivering our
products and services. In consumer segment, the Bank will be more active in secondary mortgage market and will also take
advantage of the government’s affordable housing schemes.
In the auto �nancing segment, we see opportunities in the national car segment, where yield is expected to be better.
Opportunities in commercial vehicle �nancing will also be our focus area. For business banking, we will continue to focus on
SME lending and target �nancing to bankable sectors aligned with the Economic Transformation Programme (‘ETP’) projects.
The Bank will also continue to focus on transactional banking as a major source of fee income.
As we explore new collaboration and opportunities within the Group, the Bank is in a solid position to deliver another year
of business growth. The Bank is also continuously enhancing our network presence for better customer service and actively
seeking out for new growth opportunities domestically or beyond Malaysian shore.
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
59Affin Bank Berhad Annual Report 2014
RATING BY EXTERNAL AGENCIES
The Bank has been rated by the following external rating agency:
Name of rating agency: RATING AGENCY MALAYSIA BERHAD (‘RAM’)
Date of rating: 24 July 2014
Rating classi�cations:
- Long term: AA3
- Short term: P1
RAM has reaf�rmed the Bank’s long-term and short-term �nancial institution ratings, at AA3 and P1, respectively, with a stable
outlook.
‘AA’ rating is de�ned by RAM as an entity has a strong capacity to meet its �nancial obligations and is resilient against adverse
changes in circumstances, economic condition and/or operating environments. The subscript 3 in this category indicates as
the lower end of its generic rating in the AA category.
A P1 rating is de�ned by RAM as obligations which are supported by superior ability with regards to timely payment of
obligations.
ZAKAT
The Bank’s subsidiary, AFFIN Islamic Bank Berhad (‘AFFIN Islamic’) is obliged to pay zakat to comply with the principles of
Shariah. AFFIN Islamic does not pay zakat on behalf of its depositors.
HOLDING COMPANY AND ULTIMATE HOLDING CORPORATE BODY
The holding company of the Bank is AFFIN Holdings Berhad, a public listed company incorporated in Malaysia and the
ultimate holding corporate body is Lembaga Tabung Angkatan Tentera, a statutory body incorporated under the Tabung
Angkatan Tentera Act, 1973.
AUDITORS
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in of�ce.
In accordance with resolution of the Board of Directors dated 6 March 2015.
Jen Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara)
Chairman
En. Mohd Suffian Bin Haji Haron
Director
DIRECTORS’ REPORTfor the �nancial year ended 31 December 2014
60 Affin Bank Berhad Annual Report 2014
The Group The Bank
Note
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
ASSETS
Cash and short-term funds 2 6,938,912 9,401,701 3,777,042 4,987,696
Deposits and placements with banks and
other �nancial institutions 3 238,222 482,597 962,050 1,106,756
Financial assets held-for-trading 4 149,904 149,544 149,904 149,544
Derivative �nancial assets 5 88,658 56,274 88,672 56,274
Financial investments available-for-sale 6 9,947,911 7,614,537 8,415,411 6,331,414
Financial investments held-to-maturity 7 476,155 500,336 393,401 415,271
Loans, advances and �nancing 8 39,456,172 36,227,785 32,292,551 30,178,910
Other assets 9 223,406 220,097 174,655 176,555
Amount due from subsidiaries 10 - - 438 60,723
Amount due from joint ventures 14,855 4,185 - -
Tax recoverable 20 17 - -
Deferred tax assets 11 3,118 9,945 218 6,985
Statutory deposits with Bank Negara Malaysia 12 1,696,550 1,459,350 1,398,550 1,226,350
Investment in subsidiaries 13 - - 389,074 389,088
Property and equipment 15 149,131 158,740 141,031 150,803
Intangible assets 16 147,688 152,005 150,690 154,232
TOTAL ASSETS 59,530,702 56,437,113 48,333,687 45,390,601
LIABILITIES AND EQUITY
Deposits from customers 17 48,047,224 46,088,082 38,180,212 36,800,728
Deposits and placements of banks and
other �nancial institutions 18 4,849,676 4,065,544 3,699,386 2,659,535
Derivative �nancial liabilities 19 237,426 94,522 237,419 94,522
Bills and acceptances payable 94,308 90,208 94,308 90,208
Recourse obligation on loans
sold to Cagamas Berhad 20 139,147 397,790 139,147 397,790
Other liabilities 21 359,644 391,977 328,063 359,837
Amount due to subsidiaries 22 - - 296,781 53,559
Provision for taxation 28,029 36,402 23,939 34,351
Subordinated term loan 23 604,310 904,964 604,310 904,964
TOTAL LIABILITIES 54,359,764 52,069,489 43,603,565 41,395,494
Share capital 24 1,688,770 1,518,337 1,688,770 1,518,337
Reserves 25 3,482,168 2,849,287 3,041,352 2,476,770
TOTAL EQUITY 5,170,938 4,367,624 4,730,122 3,995,107
TOTAL LIABILITIES AND EQUITY 59,530,702 56,437,113 48,333,687 45,390,601
COMMITMENTS AND CONTINGENCIES 37 23,427,860 21,863,606 21,359,914 20,196,417
STATEMENTS OF FINANCIAL POSITIONas at 31 December 2014
61Affin Bank Berhad Annual Report 2014
INCOME STATEMENTSfor the �nancial year ended 31 December 2014
The Group The Bank
Note
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Interest income 26 2,270,988 2,121,127 2,299,786 2,150,845
Interest expense 27 (1,451,528) (1,308,068) (1,451,595) (1,308,113)
Net interest income 819,460 813,059 848,191 842,732
Income from Islamic banking business 28 244,223 220,745 - -
1,063,683 1,033,804 848,191 842,732
Other operating income 29 223,222 237,366 222,544 234,862
Net income 1,286,905 1,271,170 1,070,735 1,077,594
Other operating expense 30 (584,693) (565,186) (465,228) (461,133)
Operating profit before allowances 702,212 705,984 605,507 616,461
Write-back of allowances for losses on
loans, advances and �nancing 32 18,468 56,937 22,193 56,567
Impairment losses on securities (550) (499) - (499)
720,130 762,422 627,700 672,529
Share of joint venture’s results - (210) - -
Profit before zakat and taxation 720,130 762,212 627,700 672,529
Zakat (4,772) (8,583) - -
Profit before taxation 715,358 753,629 627,700 672,529
Taxation 34 (171,631) (183,807) (151,221) (163,930)
Net profit after zakat and taxation 543,727 569,822 476,479 508,599
Attributable to:
Equity holders of the Bank 543,727 569,822 476,479 508,599
Earnings per share (sen):
- Basic 35 33.3 37.5 29.2 33.5
The accounting policies on pages 68 to 84 and the notes on pages 85 to 183 form an integral part of these �nancial statements.
62 Affin Bank Berhad Annual Report 2014
STATEMENTS OF COMPREHENSIVE INCOMEfor the �nancial year ended 31 December 2014
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Profit after zakat and taxation 543,727 569,822 476,479 508,599
Other comprehensive income:
Items that may be reclassi�ed subsequently to
pro�t and loss:
Net fair value change in �nancial
investments available-for-sale 25,742 (102,027) 24,360 (86,770)
Deferred tax on �nancial
investments available-for-sale (Note 11) (6,178) 24,811 (5,847) 21,758
Other comprehensive income/(expense) for the
�nancial year, net of tax 19,564 (77,216) 18,513 (65,012)
Total comprehensive income for
the financial year 563,291 492,606 494,992 443,587
Attributable to equity holders of the Bank:
- Total comprehensive income 563,291 492,606 494,992 443,587
The accounting policies on pages 68 to 84 and the notes on pages 85 to 183 form an integral part of these �nancial statements.
63Affin Bank Berhad Annual Report 2014
Attributable to Equity Holders of the Bank
AFS
revaluation
reserves
RM’000
Share
capital
RM’000
Share
premium
RM’000
Statutory
reserves
RM’000
Regulatory
reserves
RM’000
Retained
profits
RM’000
Total
RM’000 The Group
At 1 January 2014 1,518,337 529,337 1,317,376 (1,960) - 1,004,534 4,367,624
Net pro�t for the �nancial
year - - - - - 543,727 543,727
Other comprehensive
income (net of tax)
- Financial investments
available-for-sale - - - 19,564 - - 19,564
Total comprehensive
income - - - 19,564 - 543,727 563,291
Shares issued during the
�nancial year (Note 24) 170,433 329,567 - - - - 500,000
Dividends paid (Note 36) - - - - - (259,977) (259,977)
Transfer to statutory
reserves / regulatory
reserves - - 152,418 - 184,366 (336,784) -
At 31 December 2014 1,688,770 858,904 1,469,794 17,604 184,366 951,500 5,170,938
At 1 January 2013 1,518,337 529,337 1,160,651 75,256 - 834,371 4,117,952
Net pro�t for the �nancial
year - - - - - 569,822 569,822
Other comprehensive
income (net of tax)
- Financial investments
available-for-sale - - - (77,216) - - (77,216)
Total comprehensive
income - - - (77,216) - 569,822 492,606
Dividends paid (Note 36) - - - - - (242,934) (242,934)
Transfer to statutory
reserves - - 156,725 - - (156,725) -
At 31 December 2013 1,518,337 529,337 1,317,376 (1,960) - 1,004,534 4,367,624
STATEMENTS OF CHANGES IN EQUITYfor the �nancial year ended 31 December 2014
64 Affin Bank Berhad Annual Report 2014
Non-distributable Distributable
AFS
revaluation
reserves
RM’000
Share
capital
RM’000
Share
premium
RM’000
Statutory
reserves
RM’000
Regulatory
reserves
RM’000
Retained
profits
RM’000
Total
RM’000 The Bank
At 1 January 2014 1,518,337 529,337 1,144,350 4,965 - 798,118 3,995,107
Net pro�t for the �nancial
year - - - - - 476,479 476,479
Other comprehensive
income (net of tax)
- Financial investments
available-for-sale - - - 18,513 - - 18,513
Total comprehensive
income - - - 18,513 - 476,479 494,992
Shares issued during the
�nancial year (Note 24) 170,433 329,567 - - - - 500,000
Dividends paid (Note 36) - - - - - (259,977) (259,977)
Transfer to statutory
reserves / regulatory
reserves - - 119,120 - 135,347 (254,467) -
At 31 December 2014 1,688,770 858,904 1,263,470 23,478 135,347 760,153 4,730,122
At 1 January 2013 1,518,337 529,337 1,017,200 69,977 - 659,603 3,794,454
Net pro�t for the �nancial
year - - - - - 508,599 508,599
Other comprehensive
income (net of tax)
- Financial investments
available-for-sale - - - (65,012) - - (65,012)
Total comprehensive
income - - - (65,012) - 508,599 443,587
Dividends paid (Note 36) - - - - - (242,934) (242,934)
Transfer to statutory
reserves - - 127,150 - - (127,150) -
At 31 December 2013 1,518,337 529,337 1,144,350 4,965 - 798,118 3,995,107
STATEMENTS OF CHANGES IN EQUITYfor the �nancial year ended 31 December 2014
The accounting policies on pages 68 to 84 and the notes on pages 85 to 183 form an integral part of these �nancial statements.
65Affin Bank Berhad Annual Report 2014
STATEMENTS OF CASH FLOWSfor the �nancial year ended 31 December 2014
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation 715,358 753,629 627,700 672,529
Adjustments for items not involving the movement
of cash and cash equivalents:
Interest income:
- �nancial assets held-for-trading (155,606) (94,163) (155,606) (94,163)
- �nancial investments available-for-sale (234,629) (202,084) (234,629) (201,936)
- �nancial investments held-to-maturity (20,062) (19,984) (20,062) (19,984)
Dividend income:
- �nancial investments available-for-sale (2,589) (4,058) (2,589) (4,058)
Accretion of discount less amortisation of premium
- �nancial investments available-for-sale (35,642) (12,004) (35,642) (12,004)
- �nancial investments held-to-maturity (1,092) (1,024) (1,092) (1,024)
Gain on sale:
- �nancial assets held-for-trading (347) (366) (347) (366)
- �nancial investments available-for-sale (9,743) (22,369) (9,743) (18,894)
Gain on redemption of �nancial investments
held-to-maturity (3,500) (6,144) (3,500) (6,144)
Unrealised (gain)/loss on revaluation
- �nancial assets held-for-trading (219) (455) (219) (455)
- derivatives (7,302) (5,282) (7,302) (5,282)
- foreign exchange 122,129 54,118 122,129 54,118
Allowance for impairment loss
- �nancial investments available-for-sale 550 499 - 499
Depreciation of property and equipment 14,951 16,019 13,954 15,166
Property and equipment written-off 114 91 110 91
Gain on sale of property and equipment (6,319) (3,910) (6,319) (3,910)
Amortisation of intangible assets 6,304 7,989 5,529 7,197
Gain on sale of foreclosed properties (3,329) (11,041) (2,937) (11,041)
Net individual impairment 83,225 43,872 85,498 43,615
Net collective impairment 35,666 15,253 29,283 15,011
Bad debt and �nancing written-off 4,380 4,583 4,370 4,509
Interest expense - subordinated term loan 29,879 41,473 29,879 41,473
Zakat 4,772 8,583 - -
Subsidiaries - writeback of allowances for
impairment losses - - - (1,707)
Share of joint venture’s results - 210 - -
Operating profit before changes
in working capital 536,949 563,435 438,465 473,240
66 Affin Bank Berhad Annual Report 2014
STATEMENTS OF CASH FLOWSfor the �nancial year ended 31 December 2014
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
CASH FLOWS FROM OPERATING
ACTIVITIES (continued)
Decrease/(increase) in operating assets:
Reverse repurchase agreements with
�nancial institutions - 20,057 - 20,057
Deposits and placements with banks and
other �nancial institutions 244,375 113,855 144,706 (62,931)
Financial assets held-for-trading 155,812 111,032 155,812 111,032
Loans, advances and �nancing (3,351,658) (2,808,867) (2,232,792) (1,902,776)
Other assets (166,316) 18,210 (158,609) (2,818)
Derivative �nancial instruments 110,520 47,457 110,499 47,457
Statutory deposits with Bank Negara Malaysia (237,200) (46,050) (172,200) (14,550)
Amount due from subsidiaries - - 303,507 98,257
Amount due from joint ventures (10,670) (1,440) - -
Increase/(decrease) in operating liabilities:
Deposits from customers 1,959,142 4,824,546 1,379,484 4,575,911
Deposits and placements of banks and
other �nancial institutions 784,132 (743,779) 1,039,851 (1,068,728)
Bills and acceptances payable 4,100 (62,192) 4,100 (62,192)
Recourse obligation on loans sold to
Cagamas Berhad (258,643) (15,759) (258,643) (15,759)
Other liabilities (26,221) 86,746 (29,639) 78,172
Cash (used in)/generated from operations (255,678) 2,107,251 724,541 2,274,372
Zakat paid (10,885) (7,616) (2,134) -
Tax refund 2,016 510 - 480
Tax paid (181,372) (210,386) (160,713) (182,778)
Net cash (used in)/generated from
operating activities (445,919) 1,889,759 561,694 2,092,074
67Affin Bank Berhad Annual Report 2014
STATEMENTS OF CASH FLOWSfor the �nancial year ended 31 December 2014
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in associate - 30 - 30
Investment in joint ventures - (150) - -
Interest received:
- �nancial investments available-for-sale 234,629 202,084 234,629 201,936
- �nancial investments held-to-maturity 20,062 19,984 20,062 19,984
Dividend income:
- �nancial investments available-for-sale 2,589 4,058 2,589 4,058
Redemption of �nancial investments
held-to-maturity net of purchase 28,773 (41,497) 26,464 43,568
Net purchase of �nancial investments
available-for-sale (2,262,796) (42,036) (2,014,252) (729,623)
Proceeds from disposal of
- property and equipment 13,009 7,377 13,009 7,377
- foreclosed properties 10,055 21,961 9,075 21,961
Purchase of property and equipment (13,898) (17,443) (12,734) (16,624)
Purchase of intangible assets (236) (1,236) (236) (1,236)
Net cash (used in)/generated from
investing activities (1,967,813) 153,132 (1,721,394) (448,569)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of shares 500,000 - 500,000 -
Repayment of subordinated term loan (330,534) (41,469) (330,534) (41,469)
Payment of dividend (259,977) (242,934) (259,977) (242,934)
Net cash used in financing activities (90,511) (284,403) (90,511) (284,403)
Net (decrease)/increase in cash and
cash equivalents (2,504,243) 1,758,488 (1,250,211) 1,359,102
Net increase/(decrease) in foreign exchange 41,454 (5,691) 39,557 (5,248)
Cash and cash equivalents at beginning of
the �nancial year 9,401,701 7,648,904 4,987,696 3,633,842
CASH AND CASH EQUIVALENTS AT
END OF THE FINANCIAL YEAR (Note 2) 6,938,912 9,401,701 3,777,042 4,987,696
The accounting policies on pages 68 to 84 and the notes on pages 85 to 183 form an integral part of these �nancial statements.
68 Affin Bank Berhad Annual Report 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
The following accounting policies have been used consistently in dealing with items which are considered material in relation
to the �nancial statements. These policies have been consistently applied to all the �nancial years presented, unless otherwise
stated.
(A) BASIS OF PREPARATION
The �nancial statements of the Group and the Bank have been prepared in accordance with Malaysian Financial Reporting
Standards (‘MFRS’), International Financial Reporting Standards and the requirements of the Companies Act 1965 in
Malaysia. The �nancial statements incorporate those activities relating to Islamic banking business which have been
undertaken by AFFIN Islamic Bank Berhad, a wholly owned subsidiary of the Bank. Islamic banking business refers
generally to the acceptance of deposits and granting of �nancing under the Shariah principles.
The �nancial statements of the Group and the Bank have been prepared under the historical cost convention, unless
otherwise indicated in this summary of signi�cant accounting policies.
The preparation of �nancial statements in conformity with MFRS requires the use of certain critical accounting estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the �nancial statements, and the reported amounts of revenues and expenses during the reported period.
It also requires Directors to exercise their judgment in the process of applying the Group and Bank’s accounting policies.
Although these estimates and judgment are based on the Directors’ best knowledge of current events and actions,
actual results may differ. The areas involving a higher degree of judgment or complexity, or areas where assumptions and
estimates are signi�cant to the �nancial statements are disclosed in Note 44.
Standards, amendments to published standards and interpretations that are effective
The new accounting standards, amendments and improvements to published standards and interpretations that are
effective for the Group and the Bank’s �nancial year beginning on or after 1 January 2014 are as follows:
• Amendments to MFRS 132 ‘Offsetting Financial Assets and Financial Liabilities’
• Amendments to MFRS 136 ‘Recoverable Amount Disclosures for Non-Financial Assets’
• Amendments to MFRS 139 ‘Novation of Derivatives and Continuation of Hedge Accounting’
• Amendments to MFRS 10, MFRS 12 and MFRS 127 ‘Investment entities’
• IC Interpretation 21 ‘Levies’
The adoption of the above accounting standards, amendments and improvements to published standards and
interpretations did not have any signi�cant impact to the results of the Group and the Bank.
Standards, amendments to published standards and interpretations to existing standards that are applicable to the
Group and the Bank but not yet effective
The new accounting standards and amendments to standards and interpretations are effective for annual periods beginning
after 1 January 2015 are as follows:
• Amendment to MFRS 11 ‘Joint arrangements’ (effective from 1 January 2016) requires an investor to apply the
principles of MFRS 3 ‘Business Combination’ when it acquires an interest in a joint operation that constitutes a
business. The amendments are applicable to both the acquisition of the initial interest in a joint operation and the
acquisition of additional interest in the same joint operation. However, a previously held interest is not re-measured
when the acquisition of an additional interest in the same joint operation results in retaining joint control.
69Affin Bank Berhad Annual Report 2014
(A) BASIS OF PREPARATION
Standards, amendments to published standards and interpretations to existing standards that are applicable to the
Group and the Bank but not yet effective (continued)
• Amendments to MFRS 116 ‘Property, plant and equipment’ and MFRS 138 ‘Intangible assets’ (effective from 1
January 2016) clarify that the use of revenue-based methods to calculate the depreciation and amortisation of an item
of property, plant and equipment and intangible are not appropriate. This is because revenue generated by an activity
that includes the use of an asset generally re!ects factors other than the consumption of the economic bene�ts
embodied in the asset.
The amendments to MFRS 138 also clarify that revenue is generally presumed to be an inappropriate basis for
measuring the consumption of the economic bene�ts embodied in an intangible asset. This presumption can be
overcome only in the limited circumstances where the intangible asset is expressed as a measure of revenue or where
it can be demonstrated that revenue and the consumption of the economic bene�ts of the intangible asset are highly
correlated.
• Amendments to MFRS 10 and MFRS 128 regarding sale or contribution of assets between an investor and its
associate or joint venture (effective from 1 January 2016) resolve a current inconsistency between MFRS 10 and MFRS
128. The accounting treatment depends on whether the non-monetary assets sold or contributed to an associate or
joint venture constitute a ‘business’. Full gain or loss shall be recognised by the investor where the non-monetary
assets constitute a ‘business’. If the assets do not meet the de�nition of a business, the gain or loss is recognised
by the investor to the extent of the other investors’ interests. The amendments will only apply when an investor sells
or contributes assets to its associate or joint venture. They are not intended to address accounting for the sale or
contribution of assets by an investor in a joint operation.
• MFRS 9 ‘Financial Instruments’ (effective from 1 January 2018) will replace MFRS 139 “Financial Instruments:
Recognition and Measurement”. The complete version of MFRS 9 was issued in November 2014.
MFRS 9 retains but simpli�es the mixed measurement model in MFRS 139 and establishes three primary
measurement categories for �nancial assets: amortised cost, fair value through pro�t or loss and fair value through
other comprehensive income (“OCI”). The basis of classi�cation depends on the entity’s business model and the
contractual cash !ow characteristics of the �nancial asset. Investments in equity instruments are always measured at
fair value through pro�t or loss with a irrevocable option at inception to present changes in fair value in OCI (provided
the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it
to collect contractual cash !ows and the cash !ows represent principal and interest.
For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for
most �nancial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair
value option is taken for �nancial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded
in other comprehensive income rather than the income statement, unless this creates an accounting mismatch.
There is now a new expected credit losses model on impairment for all �nancial assets that replaces the incurred loss
impairment model used in MFRS 139. The expected credit losses model is forward-looking and eliminates the need
for a trigger event to have occurred before credit losses are recognised.
• MFRS 15 ‘Revenue from contracts with customers’ (effective from 1 Jan 2017) deals with revenue recognition and
establishes principles for reporting useful information to users of �nancial statements about the nature, amount, timing
and uncertainty of revenue and cash !ows arising from an entity’s contracts with customers. Revenue is recognised
when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the bene�ts
from the good or service. The standard replaces MFRS 118 ‘Revenue’ and MFRS 111 ‘Construction contracts’ and
related interpretations.
The Group and the Bank will apply these standards when effective. The adoption of the above standards, amendments
to published standards and interpretations to existing standards are not expected to have any signi�cant impact on the
�nancial statements of the Group and the Bank except for MFRS 9. The �nancial effect of adoption of MFRS 9 is still being
assessed by the Group and the Bank.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
70 Affin Bank Berhad Annual Report 2014
(B) CONSOLIDATION
The consolidated �nancial statements include the �nancial statements of the Bank, subsidiaries and a joint venture, made
up to the end of the �nancial year.
(i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an
entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for
the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners
of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of
any asset or liability resulting from a contingent consideration arrangement. Identi�able assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition
date. The Group recognises any non-controlling interest in the acquiree on the acquisition-by-acquisition basis, either
at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identi�able
net assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identi�ed net assets
acquired is recorded as goodwill. If the total of the consideration transferred, non-controlling interest recognised and
previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of
a bargain purchase, the difference is recognised directly in the income statement.
Acquisition related cost are expensed as incurred.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity
interest in the acquiree is remeasured to fair value at the acquisition date, any gains or losses arising from such re-
measurement are recognised in pro�t or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is
recognised in accordance with MFRS 139 either in pro�t or loss or as a change to other comprehensive income.
Contingent consideration that is classi�ed as equity is not remeasured, and its subsequent settlement is accounted
for within equity.
The Group applies predecessor accounting to account for business combinations under common control. Under
the predecessor accounting, assets and liabilities acquired are not restated to their respective fair values but at the
carrying amounts from the consolidated �nancial statements of the ultimate holding company of the Group and
adjusted to ensure uniform accounting policies of the Group. The difference between any consideration given and
the aggregate carrying amounts of the assets and liabilities (as of the date of the transaction) of the acquired entity is
recorded as an adjustment to retained earnings. No additional goodwill is recognised.
The acquired entity’s results, assets and liabilities are consolidated from the date on which the business combination
between entities under common control occurred. Consequently, the consolidated �nancial statements do not re!ect
the results of the acquired entity for the period before the transaction occurred. The corresponding amounts for the
previous year are not restated.
Inter-company transactions, balances, unrealised gains and losses on transactions between group companies are
eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
71Affin Bank Berhad Annual Report 2014
(B) CONSOLIDATION
(ii) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions,
that is, as transactions with the owners in their capacity as owners. The difference between fair value of any
consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in
equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
(iii) Disposal of subsidiaries
When the Group ceases to have control over a subsidiary, any retained interest in the entity is re-measured to its fair
value at the date when control is lost, with the change in carrying amount recognised in pro�t or loss. The fair value is
the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint
venture or �nancial asset. In addition, any amounts previously recognised in other comprehensive income in respect
of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean
that amounts previously recognised in other comprehensive income are reclassi�ed to pro�t or loss.
(iv) Joint arrangements
A joint arrangement is an arrangement of which there is contractually agreed sharing of control by the Group with
one or more parties, where decisions about the relevant activities relating to the joint arrangement require unanimous
consent of the parties sharing control. The classi�cation of a joint arrangement as a joint operation or a joint venture
depends upon the rights and obligations of the parties to the arrangement. A joint venture is a joint arrangement
whereby the joint venturers have rights to the net assets of the arrangement. A joint operation is a joint arrangement
whereby the joint operators have rights to the assets and obligations for the liabilities, relating to the arrangement.
The Group’s interest in joint ventures are accounted for in the �nancial statements by the equity method of accounting.
Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter
to recognise the Group’s share of the post-acquisition pro�ts or losses and movements in other comprehensive
income. When the Group’s share of losses in a jointly controlled entities equals or exceeds its interests in the joint
venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint
ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf
of the joint ventures.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s
interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to
ensure consistency with the policies adopted by the Group.
(C) INVESTMENTS IN SUBSIDIARIES AND JOINT VENTURES
In the Bank’s separate �nancial statements, investments in subsidiaries and joint ventures are carried at cost less
accumulated impairment losses. On disposal of investments in subsidiaries and joint ventures, the difference between
disposal proceeds and carrying amounts of the investments are recognised in pro�t or loss.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
72 Affin Bank Berhad Annual Report 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
(D) INTANGIBLE ASSETS
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the aggregate of the acquisition date fair
value of consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair
value of any previous equity interest in the acquiree over the net of the acquisition date fair value of the identi�able assets
acquired and liabilities assumed. If the fair value of consideration transferred, the amount of non-controlling interest and
the fair value of previously held interest in the acquiree are less than the fair value of the net identi�able assets of the
acquiree, the resulting gain is recognised in the pro�t or loss.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash
generating units (“CGUs”), or groups of CGUs, that is expected to bene�t from the synergies of the combination. Each
unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill
is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a
potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in
use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently
reversed.
Computer software
Acquired computer software are capitalised on the basis of the cost incurred to acquire and bring to use the speci�c
software. These costs are amortised over their estimated useful lives of �ve years. Computer software classi�ed as
intangible asset are stated at cost less accumulated amortisation and accumulated impairment losses, if any.
(E) IMPAIRMENT OF NON-FINANCIAL ASSETS
Assets that have an inde�nite useful life, for example goodwill, are not subject to amortisation and are tested annually
for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identi�able cash !ows (cash-
generating units). Non-�nancial assets other than goodwill that suffered impairment are reviewed for possible reversal of
the impairment at each reporting date.
The impairment loss is charged to the income statement unless it reverses a previous revaluation in which case it is charged
to the revaluation surplus. Impairment losses on goodwill are not reversed. In respect of other assets, any subsequent
increase in recoverable amount is recognised in the income statement unless it reverses an impairment loss on a revalued
asset in which case it is taken to revaluation surplus reserve.
73Affin Bank Berhad Annual Report 2014
(F) RECOGNITION OF INTEREST AND FINANCING INCOME AND EXPENSE
Interest and �nancing income and expense for all interest/pro�t-bearing �nancial instruments are recognised within
“interest income”, “interest expense” and “income from Islamic banking business” respectively in the income statement
using the effective interest/pro�t method.
The effective interest/pro�t method is a method of calculating the amortised cost of a �nancial asset or a �nancial liability
and of allocating the interest and �nancing income or expense over the relevant period. The effective interest/pro�t rate
is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the �nancial
instruments or, when appropriate, a shorter period to the net carrying amount of the �nancial asset or �nancial liability.
When calculating the effective interest/pro�t rate, the Group and the Bank take into account all contractual terms of the
�nancial instrument and includes any fees or incremental costs that are directly attributable to the instrument and are an
integral part of the effective interest rate, but not future credit losses.
Interest or income on impaired �nancial assets is recognised using the rate of interest/pro�t used to discount the future
cash !ows for the purpose of measuring the impairment loss. A �nancial asset or a group of �nancial assets is deemed to
be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred
after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the
estimated future cash !ows of the �nancial asset or the group of �nancial assets that can be reliably estimated.
When a loan/�nancing receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being
the estimated future cash !ow discounted at the original effective interest/pro�t rate of the instrument, and continues
unwinding the discount as interest/pro�t income. Interest/pro�t income on impaired loans/�nancing and receivables are
recognised using the original effective interest/pro�t rate.
(G) RECOGNITION OF FEES AND OTHER INCOME
Fees and commissions are recognised as income when all conditions precedent are ful�lled. Commitment fees for loans,
advances and �nancing that are likely to be drawn down are deferred (together with related direct costs) and income which
forms an integral part of the effective interest/pro�t rate of a �nancial instrument is recognised as an adjustment to the
effective interest/pro�t rate on the �nancial instrument.
Commitment fees and guarantee fees which are material are recognised as income based on a time apportionment
method.
Dividends are recognised when the right to receive payment is established.
Net pro�t from �nancial assets held at fair value through pro�t or loss and �nancial investments available-for-sale are
recognised upon disposal of the assets, as the difference between net disposal proceeds and the carrying amount of the
assets.
(H) FINANCIAL ASSETS
Classification
The Group classi�es its �nancial assets in the following categories: at fair value through pro�t or loss, loans and receivables,
available-for-sale and held-to-maturity. The classi�cation depends on the purpose for which the �nancial assets were
acquired. Management determines the classi�cation at initial recognition.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
74 Affin Bank Berhad Annual Report 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
(H) FINANCIAL ASSETS
Classification (continued)
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through pro�t or loss are �nancial assets held-for-trading. A �nancial asset is classi�ed
in this category if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term.
Derivatives are also categorised as held for trading unless they are designated as hedges (see Note O)
(ii) Loans and receivables
Loans and receivables are non-derivative �nancial assets with �xed or determinable payments that are not quoted in
an active market.
(iii) Financial investments available-for-sale
Financial investments available-for-sale are non-derivatives that are either designated in this category or not classi�ed
in any of the other categories.
(iv) Financial investments held-to-maturity
Financial investments held-to-maturity are non-derivative �nancial assets with �xed or determinable payments and
�xed maturities that the Group’s and the Bank’s management has the positive intention and ability to hold to maturity.
If the Group and the Bank were to sell other than an insigni�cant amount of held-to-maturity �nancial assets, the whole
category would be tainted and reclassi�ed as available for sale.
Recognition and initial measurement
Regular purchases and sales of �nancial assets are recognised on the settlement date, the date that an asset is delivered
to or by the Group and the Bank.
Financial assets are initially recognised at fair value plus transaction costs for all �nancial assets not carried at fair value
through pro�t or loss. Financial assets carried at fair value through pro�t or loss are initially recognised at fair value, and
transaction costs are expensed in pro�t or loss.
Subsequent measurement – gains and losses
Financial investments available-for-sale and �nancial assets at fair value through pro�t or loss are subsequently carried at
fair value. Loans and receivables and held-to-maturity �nancial assets are subsequently carried at amortised cost using
the effective interest/pro�t method.
Changes in the fair values of �nancial assets at fair value through pro�t or loss, including the effects of currency translation,
interest and dividend income are recognised in income statement in the period in which the changes arise.
Changes in the fair value �nancial investments available-for-sale are recognised in other comprehensive income, except for
impairment losses (see accounting policy Note I) and foreign exchange gains and losses on monetary assets (Note N).
Interest and dividend income on �nancial investments available-for-sale are recognised separately in income statements.
Interest on �nancial investments available-for-sale calculated using the effective interest/ pro�t method is recognised in
income statements. Dividend income on available-for-sale equity instruments are recognised in income statements when
the Group’s right to receive payments is established.
75Affin Bank Berhad Annual Report 2014
(H) FINANCIAL ASSETS
De-recognition
Financial assets are de-recognised when the rights to receive cash !ows from the investments have expired or have been
transferred and the Group has transferred substantially all risks and rewards of ownership.
Loans and receivables that are factored out to banks and other �nancial institutions with recourse to the Group are
not derecognised until the recourse period has expired and the risks and rewards of the receivables have been fully
transferred. The corresponding cash received from the �nancial institutions is recorded as borrowings.
When �nancial investments available-for-sale are sold, the accumulated fair value adjustments recognised in other
comprehensive income are reclassi�ed to pro�t or loss.
Reclassification of financial assets
The Group and the Bank may choose to reclassify non-derivative �nancial assets held-for-trading out of the held-for-
trading category where:
• in rare circumstances, it is no longer held for the purpose of selling or repurchasing in the near term; or
• it is no longer held for purpose of trading, it would have met the de�nition of a loan and receivable on initial classi�cation
and the Group and the Bank have the intention and ability to hold it for the foreseeable future or until maturity at the
date of reclassi�cation.
Reclassi�cations are made at the fair value at the date of reclassi�cation.
(I) IMPAIRMENT OF FINANCIAL ASSETS
Assets carried at amortised cost
The Group assesses at the end of the reporting period whether there is objective evidence that a �nancial asset or group of
�nancial assets is impaired. A �nancial asset or a group of �nancial assets is impaired and impairment losses are incurred
only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition
of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash !ows of the �nancial
asset or group of �nancial assets that can be reliably estimated.
The criteria that the Group and the Bank use to determine that there is objective evidence of an impairment loss include
among others:
• past due contractual payments;
• signi�cant �nancial dif�culties of the borrower;
• probability of bankruptcy or other �nancial re-organisation;
• default of related borrower;
• measurable decrease in estimated future cash!ow than was originally envisaged; and
• signi�cant deterioration in issuer’s credit rating.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
76 Affin Bank Berhad Annual Report 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
(I) IMPAIRMENT OF FINANCIAL ASSETS
Assets carried at amortised cost (continued)
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash !ows (excluding future credit losses that have not been incurred) discounted at the �nancial asset’s
original effective interest/pro�t rate. The asset’s carrying amount of the asset is reduced and the amount of the loss is
recognised in income statements. If ‘loans and receivables’ or a ‘held-to-maturity investment’ has a variable interest/pro�t
rate, the discount rate for measuring any impairment loss is the current effective interest/pro�t rate determined under the
contract.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal
of the previously recognised impairment loss is recognised in income statements.
When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all
the necessary procedures have been completed and the amount of the loss has been determined.
For loans, advances and �nancing, the Group and the Bank �rst assess whether objective evidence of impairment exists
individually for loans, advances and �nancing that are individually signi�cant, and individually or collectively for loans,
advances and �nancing that are not individually signi�cant. If the Group and the Bank determine that no objective evidence
of impairment exists for individually assessed loans, advances and �nancing, whether signi�cant or not, it includes the
asset in a group of loans, advances and �nancing with similar credit risk characteristics and collectively assesses them for
impairment.
(i) Individual impairment allowance
Loans, advances and �nancing that are individually assessed for impairment and for which an impairment loss is
or continues to be recognised are not included in a collective assessment of impairment. Loans/�nancings that are
individually assessed for impairment and for which no impairment loss is required (over-collateralised loans) are
collectively assessed as a separate segment.
The amount of the loss is measured as the difference between the loan/�nancing’s carrying amount and the present
value of estimated future cash !ows (excluding future credit losses that have not been incurred) discounted at the loan/
�nancing’s original effective interest/pro�t rate. The carrying amount of the loan/�nancing is reduced through the use of
an allowance account and the amount of the loss is recognised in the income statement. If a loan/�nancing has a variable
interest rate, the discount rate for measuring any impairment loss is the current effective interest/pro�t rate determined
under the contract.
The calculation of the present value of the estimated future cash !ows of a collateralised loan re!ects the cash !ows
that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is
probable.
77Affin Bank Berhad Annual Report 2014
(I) IMPAIRMENT OF FINANCIAL ASSETS
(ii) Collective impairment allowance
For the purposes of a collective evaluation of impairment, loans, advances and �nancing are grouped on the basis of
similar credit risk characteristics. Those characteristics are relevant to the estimation of future cash !ows for groups
of such loans, advances and �nancing by being indicative of the borrowers’ ability to pay all amounts due according
to the contractual terms of the loans being evaluated.
Future cash !ows in a group of loans that are collectively evaluated for impairment are estimated on the basis of the
contractual cash !ows of the loans in the Bank and historical loss experience for loans with credit risk characteristics
similar to those in the Bank. Historical loss experience is adjusted on the basis of current observable data to re!ect
the effects of current conditions that did not affect the period on which the historical loss experience is based and to
remove the effects of conditions in the historical period that do not currently exist.
Estimates of changes in future cash !ows for groups of loans should re!ect and be directionally consistent with
changes in related observable data from period to period (for example, changes in unemployment rates, property
prices, payment status, or other factors indicative of changes in the probability of losses in the Group and the Bank
and their magnitude). The methodology and assumptions used for estimating future cash !ows are reviewed regularly
by the Group and the Bank to reduce any differences between loss estimates and actual loss experience.
Pursuant to Paragraph 13 of the Guideline on Classi�cation and Impairment Provisions for Loans/Financing, Bank
Negara Malaysia (‘BNM’) had issued a letter on 4 February 2014, which require banking institutions to maintain, in
aggregate collective impairment provisions and regulatory reserves of no less than 1.2% of total outstanding loans/
�nancing (excluding loans/�nancing with an explicit guarantee from the Federal Government of Malaysia), net of
individual impairment provisions. Banking institutions are required to comply with the requirement by 31 December
2015.
As at reporting date, the Group and the Bank have maintained the collective impairment provisions and regulatory
reserves of no less than 1.2% in the books by transferring from retained pro�ts to regulatory reserves (Group: RM184.4
million, Bank: RM135.3 million).
Assets classified as available-for-sale
The Group and the Bank assess at the end of the reporting period whether there is objective evidence that a �nancial asset
or a group of �nancial assets is impaired.
For debt securities, the Group and the Bank assess at each date of the statement of �nancial position whether there is
any objective evidence that a �nancial investment or group of �nancial investments is impaired. The criteria the Group and
the Bank use to determine whether there is objective evidence of impairment include non-payment of coupon or principal
redemption, signi�cant �nancial dif�culty of issuer or obligor and signi�cant drop in rating. In the case of equity securities
classi�ed as available-for-sale, in addition to the criteria above, a signi�cant or prolonged decline in the fair value of the
security below its cost is also considered as an indicator that the assets are impaired.
If any such evidence exists for available-for-sale �nancial assets, the cumulative loss that had been recognised directly
in equity is removed from equity and recognised in income statements. The amount of cumulative loss reclassi�ed to
pro�t or loss is the difference between the acquisition cost and the current fair value, less any impairment loss on that
�nancial asset previously recognised in income statements. Impairment losses recognised in income statements on equity
instruments classi�ed as available-for-sale are not reversed through income statements.
If, in a subsequent period, the fair value of a debt instrument classi�ed as available-for-sale increases and the increase
can be objectively related to an event occurring after the impairment loss was recognised in income statements, the
impairment loss is reversed through income statements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
78 Affin Bank Berhad Annual Report 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
(J) FINANCIAL LIABILITIES
All �nancial liabilities which include derivative �nancial instruments have to be recognised in the statement of �nancial
position and measured in accordance with their assigned category.
The Group and the Bank’s holding in �nancial liabilities are in �nancial liabilities at fair value through pro�t or loss (including
�nancial liabilities held-for-trading and those that designated at fair value) and �nancial liabilities at amortised cost.
Financial liabilities are initially recognised at fair value plus transaction costs for all �nancial liabilities not carried at fair
value through pro�t or loss.
Financial liabilities at fair value through profit or loss
This category comprises two sub-categories: �nancial liabilities classi�ed as held-for-trading, and �nancial liabilities
designated by the Group and the Bank as at fair value through pro�t or loss upon initial recognition. The Group and the
Bank do not have any non-derivative �nancial liabilities designated at fair value through pro�t or loss.
A �nancial liability is classi�ed as held-for-trading if it is acquired or incurred principally for the purpose of selling or
repurchasing it in the near term or if it is part of a portfolio of identi�ed �nancial instruments that are managed together
and for which there is evidence of a recent actual pattern of short-term pro�t-taking. Derivatives are also categorised as
held-for-trading unless they are designated and effective as hedging instruments.
Financial liabilities classi�ed as held-for-trading are initially recognised at fair value, and transaction costs are expensed
in pro�t or loss. Gains and losses arising from changes in fair value of �nancial liabilities classi�ed held-for-trading are
included in the income statement.
Other liabilities measured at amortised cost
Financial liabilities that are not classi�ed as at fair value through pro�t or loss fall into this category and are measured at
amortised cost.
De-recognition
Financial liabilities are de-recognised when they have been redeemed or otherwise extinguished.
(K) OFFSETTING FINANCIAL INSTRUMENTS
Financial assets and liabilities are offset and the net amount presented in the statement of �nancial position when there is
a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the
assets and settle the liability simultaneously.
The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of
business and in the event of default, insolvency or bankruptcy.
79Affin Bank Berhad Annual Report 2014
(L) PROPERTY AND EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost
includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic bene�ts associated with the item will !ow to the Group and the cost of the item
can be measured reliably. The carrying amount of the replaced part is de-recognised. All other repairs and maintenance
are charged to the income statement during the �nancial period in which they are incurred.
Freehold land is not depreciated as it has an in�nite life. Other property and equipment are depreciated on the straight-line
basis to write off the cost of the assets or their revalued amounts, to their residual values over their estimated useful lives,
summarised as follows:
Buildings 50 years
Leasehold buildings 50 years or over the remaining lease period, whichever is shorter
Renovation and leasehold premises 5 years or the period of the lease whichever is greater
Of�ce equipment and furniture 10 years
Computer equipment and software 5 years
Motor vehicles 5 years
Depreciation on capital work in progress commences when the assets are ready for their intended use.
Residual value and useful lives of assets are reviewed, and adjusted if appropriate, at each reporting date.
At each reporting date, the Group assesses whether there is any indication of impairment or whenever events or changes in
circumstances indicate the carrying amount may not be recoverable. A write down is made if the carrying amount exceeds
the recoverable amount. Any subsequent increase in the recoverable amount is recognised in the income statement (refer
to accounting policy E on impairment of non-�nancial assets).
Gains and losses on disposal are determined by comparing proceeds with carrying amount and are recognised within
other operating income in the income statement.
(M) LEASES
Accounting by lessee
Finance leases
Leases of property and equipment where the Group assumes substantially all the bene�ts and risks of ownership are
classi�ed as �nance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the
leased property and the present value of the minimum lease payments.
Each lease payment is allocated between the liability and �nance charges so as to achieve a periodic constant rate on
the �nance balance outstanding. The corresponding rental obligations, net of �nance charges, are included in borrowings.
The interest element of the �nance charge is charged to the income statement over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability for each period. Property and equipment acquired
under �nance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term.
Initial direct costs incurred by the Group in negotiating and arranging �nance leases are added to the carrying amount of
the leased assets and recognised as an expense in income statement over the lease term on the same basis as the lease
expense.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
80 Affin Bank Berhad Annual Report 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
(M) LEASES
Accounting by lessee (continued)
Operating leases
Leases of assets where a signi�cant portion of the risks and rewards of ownership are retained by the lessor are classi�ed
as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged
to the income statement on the straight-line basis over the lease period.
Initial direct costs incurred by the Group in negotiating and arranging operating leases are recognised in income statement
when incurred.
(N) FOREIGN CURRENCY TRANSLATIONS
Functional and presentation currency
Items included in the �nancial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The �nancial statements are presented in
Ringgit Malaysia, which is the Bank’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchanges rate prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised
in the income statement, except when deferred in other comprehensive income as qualifying cash !ow hedges and
qualifying net investment hedges.
Changes in the fair value of monetary �nancial assets denominated in foreign currency classi�ed as available-for-sale are
analysed between translation differences resulting from changes in the amortised cost of the �nancial asset and other
changes in the carrying amount of the �nancial asset. Translation differences related to changes in the amortised cost
are recognised in income statement, and other changes in the carrying amount are recognised in other comprehensive
income.
Translation differences on non-monetary �nancial assets and liabilities such as equities held at fair value through pro�t and
loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary �nancial assets such as
equities classi�ed as available-for-sale are included in other comprehensive income.
81Affin Bank Berhad Annual Report 2014
(O) DERIVATIVE FINANCIAL INSTRUMENTS
Derivatives are initially recognised at fair values on the date on which derivative contracts are entered into and are
subsequently remeasured at their fair values. Fair values are obtained from quoted market prices in active markets,
including recent market transactions, and valuation techniques, including discounted cash !ow models and option pricing
models, as appropriate. All derivatives are carried as assets when fair values are positive and as liabilities when fair values
are negative.
The best evidence of fair value of a derivative at initial recognition is the transaction price (i.e the fair value of the
consideration given or received) unless fair value of the instrument is evidenced by comparison with other observable
current market transactions in the same instrument (i.e without modi�cation or repackaging) or based on a valuation
technique whose variables include only data from observable markets.
The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a
hedging instrument, and if so, the nature of the item being hedged.
As at reporting date, the Group and the Bank have not designated any derivative as hedging instruments.
Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately
in the income statement.
Gains and losses on interest rate swaps, futures, forward and option contracts that do not qualify as hedges are recognised
in the current �nancial year using the mark-to-market method and are included in the income statement.
(P) CURRENT AND DEFERRED INCOME TAXES
Current tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in income statement, except to the
extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also
recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of
the reporting period where the Group’s subsidiaries and branch operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be
paid to the tax authorities. This liability is measured using the single best estimate of the most likely outcome.
Deferred tax
Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts
attributed to assets and liabilities for tax purposes and their carrying amounts in the �nancial statements. However,
deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither accounting nor taxable pro�t or loss.
Deferred tax assets are recognised to the extent that it is probable that taxable pro�t will be available against which the
deductible temporary differences or unused tax losses can be utilised.
Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantially substantively enacted by
the end of the reporting period and are expected to apply when the related deferred tax assets is realised or the deferred
tax liability is settled.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
82 Affin Bank Berhad Annual Report 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
(P) CURRENT AND DEFERRED INCOME TAXES
Deferred tax (continued)
Deferred tax is recognised on temporary differences arising on investment in subsidiaries and joint venture except where
the timing of the reversal of the temporary difference can be controlled by the Group and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred income tax amounts are recognised on deductible temporary differences arising from investment in subsidiaries
and joint arrangements only to the extent that it is probable the temporary difference will reverse in future and there is
suf�cient taxable pro�t available against which the deductible temporary difference can be utilised.
Deferred and income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income tax assets and liabilities relate to taxes levied by the same
taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances
on net basis.
(Q) ZAKAT
Zakat represents business zakat payable by the Group to comply with the principles of Shariah and as approved by the
Shariah Committee. The Bank’s subsidiary, AFFIN Islamic Bank Berhad only pays zakat on its business and does not pay
zakat on behalf of depositors. Zakat provision is calculated based on 2.5775% of the prior year’s net asset method.
(R) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of cash in hand, bank balances and deposits and placements maturing within one
month which are held for the purpose of meeting short term commitments and are readily convertible to cash without
signi�cant risk of changes in value.
(S) FORECLOSED PROPERTIES
Foreclosed properties are stated at the lower of their carrying amount and fair value less cost to sell.
(T) CONTINGENT LIABILITIES AND CONTINGENT ASSETS
The Group and the Bank do not recognise contingent assets and liabilities other than those arising from business
combination, but disclose its existence in the �nancial statements. A contingent liability is possible obligation that arises
from past events whose existence will be con�rmed by the occurrence or non-occurrence of one or more uncertain
future events beyond the control of the Group and the Bank or a present obligation that is not recognised because it is
not probable that an out!ow of resources will be required to settle the obligation. A contingent liability also arises in the
extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably. However,
contingent liabilities do not include �nancial guarantee contracts.
A contingent asset is a possible asset that arises from past events whose existence will be con�rmed by the occurrence
or non-occurrence of one or more uncertain future events beyond the control of the Group and the Bank. The Group and
the Bank do not recognise contingent assets but discloses its existence where in!ows of economic bene�ts are probable,
but not virtually certain.
83Affin Bank Berhad Annual Report 2014
(U) BILLS AND ACCEPTANCES PAYABLE
Bills and acceptances payable, which are �nancial liabilities, represent the Bank’s own bills and acceptances rediscounted
and outstanding in the market. (See Note J)
(V) PROVISIONS
Provisions are recognised by the Group and the Bank when all of the following conditions have been met:
• the Group and the Bank have a present legal or constructive obligation as a result of past events;
• it is probable that an out!ow of resources to settle the obligation will be required; and
• a reliable estimate of the amount of obligation can be made.
Where the Group and the Bank expect a provision to be reimbursed (for example, under an insurance contract), the
reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are
recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an out!ow will be required in settlement is determined
by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an out!ow with
respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a
pre-tax rate that re!ects current market assessments of the time value of money and the risks speci�c to the obligation.
The increase in the provision due to passage of time is recognised as �nance cost expense.
(W) EMPLOYEE BENEFITS
Short-term employee benefits
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary bene�ts are accrued in the period in which
the associated services are rendered by employees of the Group.
Defined contribution plan
The de�ned contribution plan is a pension plan under which the Group pays �xed contributions to the National Pension
Scheme, the Employees’ Provident Fund (‘EPF’) and will have no legal or constructive obligations to pay further contributions
if the fund does not hold suf�cient assets to pay all employee bene�ts relating to employee service in the current and prior
periods.
The Group’s contribution to de�ned contribution plans are charged to the income statement in the period to which they
relate. Once the contributions have been paid, the Group has no further payment obligations.
Termination benefits
Termination bene�ts are payable whenever an employee’s employment is terminated before the normal retirement date or
whenever an employee accepts voluntary redundancy in exchange for these bene�ts. The Group recognises termination
bene�ts when it is demonstrably committed to either terminate the employment of current employees according to a
detailed formal plan without any possibility of withdrawal or to provide termination bene�ts as a result of an offer made to
encourage voluntary redundancy.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
84 Affin Bank Berhad Annual Report 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESfor the �nancial year ended 31 December 2014
(X) FINANCIAL GUARANTEE CONTRACTS
Financial guarantee contracts are contracts that require the Group or Bank to make speci�ed payments to reimburse the
holder for a loss it incurs because a speci�ed debtor fails to make payments when due, in accordance with the terms of
a debt instrument. Such �nancial guarantees are given to �nancial institutions and other bodies on behalf of customers to
secure loans, overdrafts and other banking facilities.
Financial guarantee contracts are recognised as a �nancial liability at the time the guarantee is issued. The fair value of a
�nancial guarantee at the time of signature is zero because all guarantees are agreed on arm’s length terms and the value
of the premium agreed corresponds to the value of the guarantee obligation. No receivable for the future premiums is
recognised.
The liability is subsequently recognised at the higher of the amount determined in accordance with MFRS 137 “Provisions,
contingent liabilities and contingent assets” and the amount initially recognised less cumulative amortisation, where
appropriate.
The fair value of �nancial guarantees is determined as the present value of the difference in net cash !ows between the
contractual payments under the debt instrument and the payments that would be required without the guarantee, or the
estimated amount that would be payable to a third party for assuming the obligations.
Where �nancial guarantees in relation to loans or payables of subsidiaries are provided by the Group for no compensation,
the fair values are accounted for as contributions and recognised as part of the cost of investment in subsidiaries.
(Y) SALE AND REPURCHASE AGREEMENTS
Securities purchased under resale agreements are securities which the Group and the Bank have purchased with a
commitment to resell at future dates. The commitment to resell the securities is re!ected as an asset on the statements of
�nancial position.
Conversely, obligations on securities sold under repurchase agreements are securities which the Group and the Bank have
sold from its portfolio, with a commitment to repurchase at future dates. Such �nancing and the obligation to repurchase
the securities is re!ected as a liability on the statement of �nancial position.
The difference between sale and repurchase price as well as purchase and resale price are amortised as interest income
and interest expense respectively on an effective yield method.
(Z) SHARE CAPITAL
Classification
Ordinary shares are classi�ed as equity. Other shares are classi�ed as equity and/or liability according to the economic
substance of the particular instrument.
Share issue costs
Incremental costs directly attributable to the issue of new shares or options are deducted against share premium account.
Dividend distribution
Distributions to holders of an equity instrument is recognised directly in equity and the corresponding liability is recognised
in the period in which the dividends are approved.
85Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
1 GENERAL INFORMATION
The Bank is principally engaged in all aspects of banking and related �nancial services. The principal activities of the
Bank’s subsidiaries are Islamic banking business, property management services, nominee and trustee services. There
have been no signi�cant changes in these principal activities during the �nancial year.
The number of employees in the Group and the Bank as at 31 December 2014 was 3,499 (2013: 3,417) and 3,250 (2013:
3,187) employees respectively.
The holding company of the Bank is AFFIN Holdings Berhad, a public listed company incorporated in Malaysia and the
ultimate holding corporate body is Lembaga Tabung Angkatan Tentera, a statutory body incorporated under the Tabung
Angkatan Tentera Act, 1973.
The Bank is a limited liability company, incorporated and domiciled in Malaysia.
2 CASH AND SHORT-TERM FUNDS
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Cash and bank balances with banks
and other �nancial institutions 265,430 207,501 258,390 202,529
Money at call and deposit placements
maturing within one month 6,673,482 9,194,200 3,518,652 4,785,167
6,938,912 9,401,701 3,777,042 4,987,696
3 DEPOSITS AND PLACEMENTS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Licensed banks 238,222 359,040 962,050 983,199
Licensed investment banks - 123,557 - 123,557
238,222 482,597 962,050 1,106,756
4 FINANCIAL ASSETS HELD-FOR-TRADING
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
At fair value
Bank Negara Malaysia Monetary Notes 149,904 149,544 149,904 149,544
149,904 149,544 149,904 149,544
86 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
5 DERIVATIVE FINANCIAL ASSETS
The Group
2014
The Group
2013
Contract/
notional
amount
RM’000
Contract/
notional
amount
RM’000
Assets
RM’000
Assets
RM’000
At fair value
Foreign exchange derivatives:
Currency forwards 911,475 41,850 312,991 6,979
Cross currency swaps 1,670,492 24,710 1,230,649 19,660
Interest rate derivatives:
Interest rate swaps 2,461,000 22,098 1,920,713 29,635
5,042,967 88,658 3,464,353 56,274
The Bank
2014
The Bank
2013
Contract/
notional
amount
RM’000
Contract/
notional
amount
RM’000
Assets
RM’000
Assets
RM’000
At fair value
Foreign exchange derivatives:
Currency forwards 921,005 41,864 312,991 6,979
Cross currency swaps 1,670,492 24,710 1,230,649 19,660
Interest rate derivatives:
Interest rate swaps 2,461,000 22,098 1,920,713 29,635
5,052,497 88,672 3,464,353 56,274
87Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
6 FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
At fair value
Money market instruments:
Malaysian Government treasury bills 225,782 - 200,778 -
Malaysian Government securities 50,663 - 50,663 -
Malaysian Government investment issues 2,180,038 1,759,211 1,678,503 1,142,371
Sukuk Perumahan Kerajaan 351,735 337,661 272,595 269,361
Bank Negara Malaysia Monetary Notes 1,387,284 629,674 1,102,406 571,160
Negotiable Instruments of Deposit and
Islamic Debt Certi�cates 1,331,452 882,314 1,331,452 882,314
Bankers’ acceptances and Islamic accepted bills - 196,522 - 196,522
Khazanah Bonds/Sukuk 353,165 237,441 232,996 207,756
5,880,119 4,042,823 4,869,393 3,269,484
Quoted securities:
Shares in Malaysia 13,487 13,604 13,005 13,122
Private debt securities in Malaysia 2,167 2,167 2,167 2,167
Unquoted securities:
Shares in Malaysia 160,379 148,155 159,804 148,086
Private debt securities
- in Malaysia 3,406,335 2,947,839 2,884,586 2,438,124
- outside Malaysia 530,746 504,721 530,746 504,721
9,993,233 7,659,309 8,459,701 6,375,704
Allowance for impairment losses (45,322) (44,772) (44,290) (44,290)
9,947,911 7,614,537 8,415,411 6,331,414
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Movement in allowance for impairment losses
At beginning of the �nancial year 44,772 48,031 44,290 45,781
Transfer from allowance for impairment losses
on loans, advances and �nancing 6,157 - 6,157 -
Allowance made during the �nancial year 550 499 - 499
Amount written-off (6,505) (3,758) (6,505) (1,990)
Exchange differences 348 - 348 -
At end of the financial year 45,322 44,772 44,290 44,290
88 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
7 FINANCIAL INVESTMENTS HELD-TO-MATURITY
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
At amortised cost
Quoted securities:
Private debt securities in Malaysia 23,439 31,781 23,439 31,781
Unquoted securities:
Private debt securities in Malaysia 496,994 524,919 414,240 439,854
520,433 556,700 437,679 471,635
Allowance for impairment losses (44,278) (56,364) (44,278) (56,364)
476,155 500,336 393,401 415,271
Movement in allowance for impairment losses
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
At beginning of the �nancial year 56,363 62,148 56,363 62,148
Amount written-off (12,085) (5,784) (12,085) (5,784)
At end of the financial year 44,278 56,364 44,278 56,364
89Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
8 LOANS, ADVANCES AND FINANCING
(i) By type
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Overdrafts 1,943,124 1,752,882 1,739,162 1,569,936
Term loans/�nancing
- Housing loans/�nancing 5,777,114 5,510,534 3,944,934 3,797,843
- Hire purchase receivables 10,963,715 10,524,044 8,919,007 8,728,354
- Syndicated �nancing 1,488,044 1,520,412 1,226,013 1,252,340
- Business term loans/�nancing 13,424,503 12,540,363 11,505,061 10,929,608
Bills receivables 1,194,884 318,677 1,182,694 286,417
Trust receipts 244,117 435,591 224,268 409,889
Claims on customers under
acceptances credits 1,120,038 986,666 998,621 919,192
Staff loans/�nancing (of which
RM Nil to Directors) 133,166 138,769 123,537 127,888
Credit cards 81,870 82,137 81,870 82,137
Revolving credits 3,612,801 2,934,652 2,805,676 2,523,945
Factoring 4,674 7,073 4,674 7,073
Gross loans, advances and financing 39,988,050 36,751,800 32,755,517 30,634,622
Less:
Allowance for impairment losses
- Individual (239,259) (223,701) (207,740) (189,117)
- Collective (292,619) (300,314) (255,226) (266,595)
Total net loans, advances and financing 39,456,172 36,227,785 32,292,551 30,178,910
- Included in the Group and the Bank’s term loans are housing loans sold to Cagamas Berhad with recourse
amounting to RM139,147,000 (2013: RM397,790,000).
- Included in the Group’s business term loans/�nancing as at reporting date is RM53.7 million (2013: RM47.4
million) and RM62.9 million (2013: RM68.9 million) of term �nancing disbursed by AFFIN Islamic Bank Berhad to
joint ventures AFFIN-i Nadayu Sdn Bhd and KL South Development Sdn Bhd respectively.
90 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
8 LOANS, ADVANCES AND FINANCING
(ii) By maturity structure
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Maturing within one year 9,259,050 7,183,104 8,051,792 6,433,997
One year to three years 4,439,970 4,955,354 3,923,647 4,394,607
Three years to �ve years 6,508,671 6,498,822 5,573,588 5,727,883
Over �ve years 19,780,359 18,114,520 15,206,490 14,078,135
39,988,050 36,751,800 32,755,517 30,634,622
(iii) By type of customer
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Domestic non-banking institutions
- Stockbroking companies 231 241 231 241
- Others 1,304,372 1,622,525 1,092,416 1,449,099
Domestic business enterprises
- Small medium enterprises 7,706,811 5,900,985 7,068,567 5,421,258
- Others 13,952,430 13,234,095 11,608,972 11,649,365
Government and statutory bodies 92,725 162,591 33,298 108,756
Individuals 15,521,321 14,939,353 11,671,052 11,475,917
Other domestic entities 13,634 251,166 9,442 8,567
Foreign entities 1,396,526 640,844 1,271,539 521,419
39,988,050 36,751,800 32,755,517 30,634,622
(iv) By interest/profit rate sensitivity
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Fixed rate
- Housing loans/�nancing 357,709 309,977 295,427 237,886
- Hire purchase receivables 10,963,715 10,524,043 8,919,007 8,728,354
- Other �xed rate loans/�nancing 3,823,161 4,178,246 3,180,638 3,556,430
Variable rate
- BLR plus 16,064,029 14,098,831 12,972,290 11,458,345
- Cost plus 8,779,436 7,640,703 7,388,155 6,653,607
39,988,050 36,751,800 32,755,517 30,634,622
91Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
8 LOANS, ADVANCES AND FINANCING
(v) By economic sectors
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Primary agriculture 684,340 478,281 417,288 470,268
Mining and quarrying 622,359 649,621 621,563 648,488
Manufacturing 2,049,476 2,516,273 1,814,510 2,297,207
Electricity, gas and water supply 254,771 290,994 201,658 253,405
Construction 3,990,973 3,277,346 3,411,861 2,772,575
Real estate 6,045,231 4,623,807 5,441,854 4,192,630
Wholesale & retail trade and
restaurants & hotels 2,117,173 2,140,392 1,915,945 1,993,533
Transport, storage and communication 2,037,263 1,965,627 1,902,028 1,858,700
Finance, insurance and business services 4,853,095 4,360,854 4,099,442 3,837,340
Education, health and others 1,663,541 1,358,801 1,140,497 711,807
Household 15,659,678 15,082,264 11,781,844 11,593,915
Others 10,150 7,540 7,027 4,754
39,988,050 36,751,800 32,755,517 30,634,622
(vi) By economic purpose
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Purchase of securities 290,047 326,463 287,098 326,450
Purchase of transport vehicles 11,444,211 11,232,452 9,391,932 9,438,264
Purchase of landed property of which:
- Residential 5,733,144 5,948,524 3,890,037 4,219,088
- Non-residential 5,771,894 5,009,095 4,864,336 4,161,066
Fixed assets other than land and building 326,163 238,059 259,089 158,411
Personal use 886,926 933,727 852,043 899,671
Credit card 81,870 82,137 81,870 82,137
Consumer durable 803 868 803 860
Construction 3,117,428 1,996,832 2,434,105 1,417,340
Merger and acquisition 340,771 312,667 340,771 312,667
Working capital 11,478,251 9,945,383 9,981,580 8,928,713
Others 516,542 725,593 371,853 689,955
39,988,050 36,751,800 32,755,517 30,634,622
92 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
8 LOANS, ADVANCES AND FINANCING
(vii) By geographical distribution
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Perlis 130,950 85,125 32,923 33,470
Kedah 1,216,316 1,088,305 791,638 754,925
Pulau Pinang 1,985,420 1,825,875 1,828,526 1,698,009
Perak 1,169,769 1,163,213 835,636 848,478
Selangor 12,530,054 11,281,264 9,927,910 9,140,199
Wilayah Persekutuan 11,127,076 10,529,110 9,201,666 8,901,544
Negeri Sembilan 894,089 813,316 674,051 676,394
Melaka 982,343 869,233 879,071 782,055
Johor 3,145,860 3,207,965 2,825,710 2,946,869
Pahang 824,164 755,143 549,200 504,854
Terengganu 989,058 989,295 589,445 609,267
Kelantan 230,819 244,022 63,553 49,906
Sarawak 1,270,558 1,117,347 1,246,449 1,088,646
Sabah 1,704,712 1,692,677 1,620,334 1,604,644
Labuan 520,747 553,770 520,677 553,682
Outside Malaysia 1,266,115 536,140 1,168,728 441,680
39,988,050 36,751,800 32,755,517 30,634,622
(viii) Movements of impaired loans
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
At beginning of the �nancial year 706,185 753,194 574,555 623,403
Amount converted to �nancial investments
available-for-sale (16,865) - (16,865) -
Classi�ed as impaired 543,093 432,629 452,130 363,583
Reclassi�ed as non-impaired (289,556) (298,268) (234,726) (252,304)
Amount recovered (134,856) (130,527) (100,780) (110,745)
Amount written-off (94,353) (50,843) (89,823) (49,382)
At end of the financial year 713,648 706,185 584,491 574,555
Ratio of gross impaired loans, advances
and �nancing to gross loans, advances and
�nancing 1.78% 1.92% 1.78% 1.88%
93Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
8 LOANS, ADVANCES AND FINANCING
(ix) Movements in allowance for impairment on loans, advances and financing
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Individual impairment
At beginning of the �nancial year 223,701 210,372 189,117 175,277
Amount converted to �nancial investments
available-for-sale (6,157) - (6,157) -
Transfer from collective impairment 12,314 - 12,314 -
Allowance made during the �nancial year 75,297 47,903 73,788 47,213
Amount recovered (4,386) (4,031) (604) (3,598)
Amount written-off (50,870) (12,974) (49,057) (12,974)
Unwinding of income (12,432) (17,825) (11,669) (16,780)
Exchange differences 1,792 256 8 (21)
At end of the financial year 239,259 223,701 207,740 189,117
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Collective impairment
At beginning of the �nancial year 300,314 322,629 266,595 287,693
Transfer to individual impairment (12,314) - (12,314) -
Net allowance made during the �nancial year 47,980 15,253 41,597 15,011
Amount written-off (43,361) (37,568) (40,652) (36,109)
At end of the financial year 292,619 300,314 255,226 266,595
94 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
8 LOANS, ADVANCES AND FINANCING
(x) Impaired loans by economic sectors
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Primary agriculture 17,556 6,335 17,439 6,222
Manufacturing 31,450 40,414 28,747 18,373
Electricity, gas and water supply 246 118 246 118
Construction 258,070 193,447 187,791 127,471
Real estate 323 190 323 190
Wholesale & retail trade and
restaurants & hotels 30,344 31,222 29,986 29,213
Transport, storage and communication 5,099 9,542 4,805 9,477
Finance, insurance and business services 38,442 60,065 37,816 59,483
Education, health and others 1,607 1,868 1,607 1,868
Household 330,511 362,984 275,731 322,140
713,648 706,185 584,491 574,555
(xi) Impaired loans by economic purpose
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Purchase of securities 10,298 11,641 10,298 11,641
Purchase of transport vehicles 86,409 75,350 74,189 66,780
Purchase of landed property of which:
- Residential 231,048 272,103 188,967 241,357
- Non-residential 31,278 23,707 30,192 21,762
Fixed assets other than land and building 282 282 282 282
Personal use 7,826 7,937 7,346 7,742
Credit card 326 476 326 476
Consumer durable 13 14 13 14
Construction 77,071 65,797 7,041 141
Working capital 252,663 234,766 249,403 210,248
Others 16,434 14,112 16,434 14,112
713,648 706,185 584,491 574,555
95Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
8 LOANS, ADVANCES AND FINANCING
(xii) Impaired loans by geographical distribution
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Perlis 901 472 649 460
Kedah 22,141 23,005 20,841 21,182
Pulau Pinang 35,458 18,781 33,462 17,309
Perak 15,193 14,081 11,156 11,015
Selangor 277,204 318,270 248,105 276,443
Wilayah Persekutuan 105,792 117,805 100,721 114,492
Negeri Sembilan 24,258 28,827 21,392 26,196
Melaka 8,575 8,368 8,401 8,011
Johor 49,319 46,552 46,620 43,939
Pahang 48,236 12,038 44,789 8,670
Terengganu 17,139 5,465 12,830 2,985
Kelantan 5,152 4,124 1,790 1,803
Sarawak 14,407 6,290 14,082 5,794
Sabah 12,384 11,298 12,195 11,100
Outside Malaysia 77,489 90,809 7,458 25,156
713,648 706,185 584,491 574,555
9 OTHER ASSETS
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Other debtors, deposits and prepayments 34,596 35,131 33,456 34,288
Cheque clearing accounts 179,711 169,141 132,691 127,621
Foreclosed properties (a) 9,099 15,825 8,508 14,646
223,406 220,097 174,655 176,555
(a) Foreclosed properties
At beginning of the �nancial year 15,825 26,745 14,646 25,566
Disposal during the �nancial year (6,726) (10,920) (6,138) (10,920)
At end of the financial year 9,099 15,825 8,508 14,646
96 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
10 AMOUNT DUE FROM SUBSIDIARIES
The Bank
2014
RM’000
2013
RM’000
Advances to AFFIN Islamic Bank Berhad - 60,115
Advances to other subsidiaries 438 608
438 60,723
The advances to subsidiaries are unsecured, bear no interest rate (2013: 3.00%) and repayable on demand.
11 DEFERRED TAX ASSETS / (LIABILITIES)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against
current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts determined after
appropriate offsetting, are shown in the statement of �nancial position:
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Deferred tax assets:
- settled more than 12 months - - - -
- settled within 12 months 17,904 20,730 14,479 17,062
17,904 20,730 14,479 17,062
Deferred tax liabilities:
- settled more than 12 months (4,188) (5,531) (3,968) (5,263)
- settled within 12 months (10,598) (5,254) (10,293) (4,814)
(14,786) (10,785) (14,261) (10,077)
Deferred tax assets/(liabilities) 3,118 9,945 218 6,985
At beginning of the �nancial year 9,945 (13,365) 6,985 (13,099)
(Charged)/credited to income
statement (Note 34) (649) (1,501) (920) (1,674)
- property and equipment 809 471 813 532
- intangible assets 1,036 (703) 850 (917)
- provision for other liabilities (2,494) (1,269) (2,583) (1,289)
(Charged)/credited to equity
- �nancial investments available-for-sale (6,178) 24,811 (5,847) 21,758
At end of the financial year 3,118 9,945 218 6,985
97Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
11 DEFERRED TAX ASSETS / (LIABILITIES)
The movements in deferred tax assets and liabilities during the �nancial year are as follows:
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Subject to income tax
Deferred tax assets (before offsetting)
AFS revaluation reserves 1,855 2,187 - -
Provision for other liabilities 16,049 18,543 14,479 17,062
17,904 20,730 14,479 17,062
Offsetting (14,786) (10,785) (14,261) (10,077)
Deferred tax assets (after offsetting) 3,118 9,945 218 6,985
Deferred tax liabilities (before offsetting)
Property and equipment (3,950) (4,759) (3,638) (4,451)
Intangible assets (3,422) (4,458) (3,208) (4,058)
AFS revaluation reserves (7,414) (1,568) (7,415) (1,568)
(14,786) (10,785) (14,261) (10,077)
Offsetting 14,786 10,785 14,261 10,077
Deferred tax liabilities (after offsetting) - - - -
The amount of unused tax losses for which no deferred tax asset is recognised in the statement of �nancial position are
as follows:
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Tax losses 98,860 99,209 - -
12 STATUTORY DEPOSIT WITH BANK NEGARA MALAYSIA
A non-interest bearing statutory deposit is maintained with Bank Negara Malaysia in compliance with requirements of
Section 26(2)(c) of the Central Bank of Malaysia Act 2009, the amounts of which is determined at a set percentages of total
eligible liabilities.
98 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
13 INVESTMENT IN SUBSIDIARIES
The Bank
2014
RM’000
2013
RM’000
Unquoted shares, at cost 419,509 419,549
Less: Allowance for impairment losses (30,435) (30,461)
389,074 389,088
The subsidiaries of the Bank, all of which are incorporated in Malaysia, are as follows:
Percentage of equity held
Name Principal Activities 2014
%
2013
%
AFFIN Islamic Bank Bhd Islamic banking business 100 100
PAB Properties Sdn Bhd Property management services 100 100
ABB Nominee (Tempatan) Sdn Bhd Share nominee services 100 100
ABB Trustee Berhad * Trustee management services 100 100
AFFIN Recoveries Bhd Recovery of impaired loans 100 100
AFFIN Factors Sdn Bhd Dormant 100 100
AFFIN Futures Sdn Bhd Dormant 100 100
ABB Nominee (Asing) Sdn Bhd Dormant 100 100
ABB IT & Services Sdn Bhd Dormant 100 100
BSNCB Nominees (Tempatan) Sdn Bhd Dormant 100 100
BSNC Nominees (Tempatan) Sdn Bhd (#) Dormant 100 100
PAB Property Development Sdn Bhd (#) Dormant 100 100
AFFIN-ACF Nominees (Tempatan)
Sdn Bhd (#) Dormant 100 100
ABB Venture Capital Sdn Bhd (@) Dormant - 100
PAB Property Management Services
Sdn Bhd (@) Dormant - 100
* 80% held by Directors of the Bank, in trust for the Bank.
# The Bank has �led application to strike-off company at Suruhjaya Syarikat Malaysia (‘SSM’).
@ Struck off and gazetted on 2 September 2014.
99Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
14 INVESTMENT IN JOINT VENTURES
The Group
2014
RM’000
2013
RM’000
Unquoted shares at cost 650 650
Group’s share of post acquisition retained losses (650) (650)
- -
The summarised �nancial information of joint ventures are as follows:
Revenue 4,920 16,781
Loss after tax (3,515) (3,050)
Total assets 216,417 181,084
Total liabilities 222,420 183,572
AFFIN-i KLSD
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Net liabilities
At beginning of the �nancial year (1,142) (880) (2,789) -
Loss for the �nancial year (1,572) (262) (1,943) (2,789)
At end of the financial year (2,714) (1,142) (4,732) (2,789)
Issued and paid up share capital 1,000 1000 500 500
Interest in joint venture (%) 50 50 30 30
Interest in joint venture (RM’000) (1,357) (571) (1,420) (837)
Both the joint ventures’ principal activities are property development.
As the Group’s share of cumulative losses of RM2.1 million (2013: RM0.8 million) as at 31 December 2014 has exceeded
its interest in the joint ventures, the Group does not recognise further losses in its �nancial statements.
100 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
14 INVESTMENT IN JOINT VENTURES
AFFIN-i Nadayu Sdn Bhd (‘AFFIN-i’)
On 1 April 2008, AFFIN Islamic Bank Berhad (‘AiBB’) and Jurus Positif Sdn Bhd, a subsidiary of Nadayu Properties
Berhad entered into a Musharakah Joint Venture Agreement under the Shariah principles (‘Musharakah Agreement’) to
joint develop a land into a housing scheme at Bukit Gambir, Pulau Pinang.
The Musharakah Agreement also includes an arrangement whereby Jurus Positif Sdn Bhd may acquire the AiBB’s shares
upon the completion of the project at a mutually agreed price, unless if both shareholders decide to continue the joint
venture for subsequent projects.
Major strategic operation and �nancial decisions relating to the activities of AFFIN-i Nadayu requires unanimous consent
by both joint venture parties. The Group’s interest in AFFIN-i Nadayu Sdn Bhd has been treated as investment in joint
venture, which has been accounted for in the consolidated �nancial statements using the equity method of accounting.
KL South Development Sdn Bhd (‘KLSD’)
On 2 January 2013, AiBB entered into a Musharakah Joint Venture Agreement (‘Musharakah Agreement’) with Albatha
Bukit Kiara Holdings Sdn Bhd (‘Albatha’), a subsidiary of Bukit Kiara Capital Sdn Bhd, to joint develop a property project
namely “VERVE Suites KL South” at Jalan Klang Lama, Kuala Lumpur.
Pursuant to the Musharakah Agreement, AiBB acquired 30% stake in the joint venture company namely KL South
Development Sdn Bhd (‘KL South’) by way of subscription of 150,000 shares of RM1.00 each in KL South at par. The
remaining stake of 70% in KL South is held by Albatha.
Under the Musharakah structure, AiBB would be the sole banker to KL South, providing �nancing using the Islamic
concept such as Ijarah for the purchase of building and Istisna’ for the bridging �nancing.
Major strategic operation and �nancial decisions relating to the activities of KL South requires consent by both joint venture
parties. The Group’s interest in KL South has been treated as investment in joint venture, which has been accounted for in
the consolidated �nancial statements using the equity method of accounting.
KL South has commenced operations and the project is scheduled for completion by mid 2016.
101
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
15 PROPERTY AND EQUIPMENT
Buildings
on
freehold
land
RM’000
Buildings
on
leasehold
land
RM’000
Office
equipment
and
furniture
RM’000
Computer
equipment
and
software
RM’000
<---Leasehold land-->
Capital
work in
progress
RM’000
Freehold
land
RM’000
50 years
or more
RM’000
Less than
50 years
RM’000
Motor
vehicles
RM’000
The Group Renovation
RM’000
Total
RM’0002014
Cost
At beginning of the �nancial year 19,676 12,862 5,380 26,803 89,069 114,084 59,427 70,560 5,354 2,698 405,913
Additions - - - - - 2,354 1,561 1,757 9 8,217 13,898
Disposals (440) (520) - (435) (8,087) (2,408) (40) - (1,713) - (13,643)
Write-off - - - - - (1,890) (1,910) (4) - - (3,804)
Reclassi�cation to intangible assets
(Note 16) - - - - - - - - - (1,751) (1,751)
At end of the financial year 19,236 12,342 5,380 26,368 80,982 112,140 59,038 72,313 3,650 9,164 400,613
Accumulated depreciation and
impairment losses
At beginning of the �nancial year 140 2,146 1,693 12,273 25,160 98,526 41,001 63,037 3,197 - 247,173
Charge for the �nancial year - 106 120 438 1,491 5,707 3,386 3,110 593 - 14,951
Disposal - (110) - (326) (2,369) (2,407) (27) - (1,713) - (6,952)
Write-off - - - - - (1,884) (1,802) (4) - - (3,690)
At end of the financial year 140 2,142 1,813 12,385 24,282 99,942 42,558 66,143 2,077 - 251,482
Net book value at end of the financial year 19,096 10,200 3,567 13,983 56,700 12,198 16,480 6,170 1,573 9,164 149,131
102
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
15 PROPERTY AND EQUIPMENT
Buildings
on
freehold
land
RM’000
Buildings
on
leasehold
land
RM’000
Of�ce
equipment
and
furniture
RM’000
Computer
equipment
and
software
RM’000
<---Leasehold land-->
Capital
work in
progress
RM’000
Freehold
land
RM’000
50 years
or more
RM’000
Less than
50 years
RM’000
Motor
vehicles
RM’000
The Group Renovation
RM’000
Total
RM’0002013
Cost
At beginning of the �nancial year 21,126 12,862 5,380 29,950 89,069 110,842 57,561 68,775 3,609 7,839 407,013
Additions - - - - - 5,146 2,438 1,785 2,077 5,997 17,443
Disposals (1,450) - - (3,147) - (1,238) (1) - (332) - (6,168)
Write-off - - - - - (755) (572) - - - (1,327)
Reclassi�cation to intangible assets
(Note 16) - - - - - 89 1 - - (11,138) (11,048)
At end of the �nancial year 19,676 12,862 5,380 26,803 89,069 114,084 59,427 70,560 5,354 2,698 405,913
Accumulated depreciation and
impairment losses
At beginning of the �nancial year 140 2,034 1,572 12,962 23,371 94,065 38,232 59,630 3,085 - 235,091
Charge for the �nancial year - 112 121 442 1,789 6,449 3,256 3,407 443 - 16,019
Disposal - - - (1,131) - (1,238) (1) - (331) - (2,701)
Write-off - - - - - (750) (486) - - - (1,236)
At end of the �nancial year 140 2,146 1,693 12,273 25,160 98,526 41,001 63,037 3,197 - 247,173
Net book value at end of the �nancial year 19,536 10,716 3,687 14,530 63,909 15,558 18,426 7,523 2,157 2,698 158,740
103
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
15 PROPERTY AND EQUIPMENT
Buildings
on
freehold
land
RM’000
Buildings
on
leasehold
land
RM’000
Office
equipment
and
furniture
RM’000
Computer
equipment
and
software
RM’000
<---Leasehold land-->Capital
work in
progress
RM’000
Freehold
land
RM’000
50 years
or more
RM’000
Less than
50 years
RM’000
Motor
vehicles
RM’000
The Bank Renovation
RM’000
Total
RM’0002014
Cost
At beginning of the �nancial year 17,168 10,972 5,380 25,504 88,161 110,184 57,280 68,044 4,397 2,698 389,788
Additions - - - - - 1,787 1,219 1,501 10 8,217 12,734
Disposals (440) (520) - (435) (8,087) (2,408) (40) - (1,255) - (13,185)
Write-off - - - - - (1,889) (1,894) (4) - - (3,787)
Reclassi�cation to intangible assets
(Note 16) - - - - - - - - - (1,751) (1,751)
At end of the financial year 16,728 10,452 5,380 25,069 80,074 107,674 56,565 69,541 3,152 9,164 383,799
Accumulated depreciation and
impairment losses
At beginning of the �nancial year - 1,903 1,693 11,481 24,621 95,485 40,034 61,082 2,686 - 238,985
Charge for the �nancial year - 98 120 412 1,473 5,331 3,164 2,861 495 - 13,954
Disposal - (110) - (326) (2,369) (2,408) (26) - (1,255) - (6,494)
Write-off - - - - - (1,883) (1,790) (4) - - (3,677)
At end of the financial year - 1,891 1,813 11,567 23,725 96,525 41,382 63,939 1,926 - 242,768
Net book value at end of the financial year 16,728 8,561 3,567 13,502 56,349 11,149 15,183 5,602 1,226 9,164 141,031
104
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4
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
15 PROPERTY AND EQUIPMENT
Buildings
on
freehold
land
RM’000
Buildings
on
leasehold
land
RM’000
Of�ce
equipment
and
furniture
RM’000
Computer
equipment
and
software
RM’000
<---Leasehold land-->Capital
work in
progress
RM’000
Freehold
land
RM’000
50 years
or more
RM’000
Less than
50 years
RM’000
Motor
vehicles
RM’000
The Bank Renovation
RM’000
Total
RM’0002013
Cost
At beginning of the �nancial year 18,618 10,972 5,380 28,651 88,161 107,089 55,482 66,364 3,148 7,839 391,704
Additions - - - - - 4,999 2,367 1,680 1,581 5,997 16,624
Disposals (1,450) - - (3,147) - (1,238) (1) - (332) - (6,168)
Write-off - - - - - (755) (571) - - - (1,326)
Reclassi�cation to intangible assets
(Note 16) - - - - - 89 1 - - (11,138) (11,048)
Transfer from subsidiary - - - - - - 2 - - - 2
At end of the �nancial year 17,168 10,972 5,380 25,504 88,161 110,184 57,280 68,044 4,397 2,698 389,788
Accumulated depreciation and
impairment losses
At beginning of the �nancial year - 1,800 1,572 12,196 22,850 91,329 37,456 57,911 2,639 - 227,753
Charge for the �nancial year - 103 121 416 1,771 6,144 3,062 3,171 378 - 15,166
Disposal - - - (1,131) - (1,238) (1) - (331) - (2,701)
Write-off - - - - - (750) (485) - - - (1,235)
Transfer from subsidiary - - - - - - 2 - - - 2
At end of the �nancial year - 1,903 1,693 11,481 24,621 95,485 40,034 61,082 2,686 - 238,985
Net book value at end of the �nancial year 17,168 9,069 3,687 14,023 63,540 14,699 17,246 6,962 1,711 2,698 150,803
105Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
16 INTANGIBLE ASSETS
Computer
Software
RM’000
The Group Goodwill
RM’000
Total
RM’000 2014
Cost
At beginning of the �nancial year 133,430 132,492 265,922
Additions - 236 236
Reclassi�cation from property and equipment (Note 15) - 1,751 1,751
At end of the financial year 133,430 134,479 267,909
Less: Accumulated amortisation
At beginning of the �nancial year - (113,917) (113,917)
Amortised during the �nancial year - (6,304) (6,304)
At end of the financial year - (120,221) (120,221)
Net book value at end of the financial year 133,430 14,258 147,688
2013
Cost
At beginning of the �nancial year 133,430 120,959 254,389
Additions - 1,236 1,236
Write-off - (9) (9)
Reclassi�cation from property and equipment (Note 15) - 11,048 11,048
Adjustment - (742) (742)
At end of the �nancial year 133,430 132,492 265,922
Less: Accumulated amortisation
At beginning of the �nancial year - (105,937) (105,937)
Amortised during the �nancial year - (7,989) (7,989)
Write-off - 9 9
At end of the �nancial year - (113,917) (113,917)
Net book value at end of the �nancial year 133,430 18,575 152,005
106 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
16 INTANGIBLE ASSETS
Computer
Software
RM’000
The Bank Goodwill
RM’000
Total
RM’000 2014
Cost
At beginning of the �nancial year 137,323 126,090 263,413
Additions - 236 236
Reclassi�cation from property and equipment (Note 15) - 1,751 1,751
At end of the financial year 137,323 128,077 265,400
Less: Accumulated amortisation
At beginning of the �nancial year - (109,181) (109,181)
Amortised during the �nancial year - (5,529) (5,529)
At end of the financial year - (114,710) (114,710)
Net book value at end of the financial year 137,323 13,367 150,690
2013
Cost
At beginning of the �nancial year 137,323 114,557 251,880
Additions - 1,236 1,236
Write-off - (9) (9)
Reclassi�cation from property and equipment (Note 15) - 11,048 11,048
Adjustment - (742) (742)
At end of the �nancial year 137,323 126,090 263,413
Less: Accumulated amortisation
At beginning of the �nancial year - (101,993) (101,993)
Amortised during the �nancial year - (7,197) (7,197)
Write-off - 9 9
At end of the �nancial year - (109,181) (109,181)
Net book value at end of the �nancial year 137,323 16,909 154,232
107Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
16 INTANGIBLE ASSETS
Goodwill
The carrying amount of the Group’s and the Bank’s goodwill has been allocated to the following business segments, which
represent the Bank’s cash-generating units (‘CGUs’):
2014
RM’000
2013
RM’000
Business banking 123,591 123,591
Consumer banking 13,732 13,732
137,323 137,323
Goodwill is allocated to the Bank’s CGU which are expected to bene�t from the synergies of the acquisitions. For annual
impairment testing purposes, the recoverable amount of the CGUs are determined based on value-in-use calculations
using the cash !ow projections based on the 2015 �nancial budgets approved by the Directors, covering a period of 5
years based on the historical internal growth rate, revised for current economic conditions. The cash !ow beyond the
�fth year are projected based on the assumption that the Year 5 operating cash !ow will be generated by the respective
CGUs at a growth rate of 5% (2013: 5%), based on historical Gross Domestic Product (‘GDP’) growth rate of Malaysia, on
perpetual basis.
The cash !ow projections are derived based on a number of key factors including past performance and management’s
expectations of the market developments. The discount rates used are based on the pre-tax weighted average cost of
capital plus an appropriate risk premium where applicable, at the date of assessment of the CGUs. The pre-tax discount
rates below re!ect the speci�c risks relating to the CGUs.
2014
Business
banking
%
2014
Consumer
banking
%
2013
Business
banking
%
2013
Consumer
banking
%
Pre-tax discount rate 11.44 11.44 9.90 9.82
No impairment charge was required for goodwill arising from all the business segments. Management views that any
reasonable possible change to the assumptions applied is not likely to cause the recoverable amount of all the business
segments to be lower than its carrying amount.
108 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
17 DEPOSITS FROM CUSTOMERS
The Group The Bank
(i) By type of deposit 2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Demand deposits 8,096,462 8,202,749 5,434,453 5,449,295
Savings deposits 2,047,242 2,004,242 1,651,904 1,639,656
Fixed deposits 28,592,534 27,693,589 23,063,094 22,098,467
Special investment deposits - 574,192 - -
Commodity Murabahah 1,030,814 - - -
Money market deposits 1,177,702 1,050,233 1,177,703 1,050,233
Negotiable instruments of deposit (‘NID’) 7,102,470 6,563,077 6,853,058 6,563,077
48,047,224 46,088,082 38,180,212 36,800,728
The Group The Bank
(ii) Maturity structure of fixed deposits
and NID
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Due within six months 29,384,792 27,809,157 24,816,632 23,574,338
Six months to one year 5,641,216 6,287,140 4,667,425 4,929,588
One year to three years 621,587 118,705 385,335 116,227
Three years to �ve years 37,090 31,344 36,441 31,071
Five years and above 10,319 10,320 10,319 10,320
35,695,004 34,256,666 29,916,152 28,661,544
The Group The Bank
(i) By type of customer 2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Government and statutory bodies 8,715,204 8,747,406 5,315,859 5,438,276
Business enterprise 13,771,604 14,007,892 9,993,760 10,327,724
Individuals 13,062,614 11,660,423 11,869,711 10,603,679
Domestic banking institutions 6,903,478 5,792,563 6,654,065 5,792,553
Domestic non-banking �nancial institutions 4,347,937 4,485,465 3,370,981 3,608,966
Foreign entities 381,967 328,666 321,512 279,382
Other entities 864,420 1,065,667 654,324 750,148
48,047,224 46,088,082 38,180,212 36,800,728
109Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
18 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Licensed banks 2,018,521 3,042,849 1,467,113 1,847,213
Licensed investment banks 401,518 597,792 401,518 567,761
Bank Negara Malaysia 47,898 - 47,898 -
Other �nancial institutions 2,381,739 424,903 1,782,857 244,561
4,849,676 4,065,544 3,699,386 2,659,535
Maturity structure of deposits
Due within six months 4,801,778 4,057,599 3,651,488 2,651,590
Six months to one year 47,898 7,945 47,898 7,945
4,849,676 4,065,544 3,699,386 2,659,535
19 DERIVATIVE FINANCIAL LIABILITIES
The Group
2014
The Group
2013
Contract/
notional
amount
RM’000
Liabilities
RM’000
Contract/
notional
amount
RM’000
Liabilities
RM’000
At fair value
Foreign exchange derivatives:
Currency forwards 194,753 1,532 498,726 5,099
Cross currency swaps 2,881,617 215,582 2,284,085 51,018
Interest rate derivatives:
Interest rate swaps 966,552 20,312 2,033,725 38,405
4,042,922 237,426 4,816,536 94,522
The Bank
2014
The Bank
2013
Contract/
notional
amount
RM’000
Liabilities
RM’000
Contract/
notional
amount
RM’000
Liabilities
RM’000
At fair value
Foreign exchange derivatives:
Currency forwards 206,166 1,525 498,726 5,099
Cross currency swaps 2,881,617 215,582 2,284,085 51,018
Interest rate derivatives:
Interest rate swaps 966,552 20,312 2,033,725 38,405
4,054,335 237,419 4,816,536 94,522
110 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
20 RECOURSE OBLIGATION ON LOANS SOLD TO CAGAMAS BERHAD
In the normal course of banking operations, the Bank sells loans to Cagamas Berhad with recourse at values equivalent to
the unpaid principal balances of loans and advances due from the borrowers.
The Bank is liable in respect of housing loans and hire purchase portfolio sold directly and indirectly to Cagamas Berhad,
under the condition that the Bank undertakes to administer these loans on behalf of Cagamas Berhad and to buy back
any loans which are regarded as defective based on an agreed prudential criteria. Such �nancing transactions and the
obligations to buy back the loans are re!ected as a liability on the statement of �nancial position.
21 OTHER LIABILITIES
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Bank Negara Malaysia and Credit
Guarantee Corporation Funding programmes 33,602 27,897 33,602 27,897
Margin and collateral deposits 145,430 108,258 134,435 103,428
Other creditors and accruals 74,325 88,341 65,889 80,457
Sundry creditors 89,430 143,282 82,046 132,608
Provision for zakat 4,040 10,152 - 2,134
De�ned contribution plan (a) 12,588 13,818 11,885 13,107
Accrued employee bene�ts (b) 229 229 206 206
359,644 391,977 328,063 359,837
(a) The Group and the Bank contributes to the Employee Provident Fund (‘EPF’), the national de�ned contribution plan.
Once the contributions have been paid, the Group and the Bank has no further payment obligations.
(b) This refers to the accruals for short-term employee bene�ts for leave entitlement. Under employment contract,
employees earn their leave entitlement which they are entitled to carry forward and will lapse if not utilised in the
following accounting period. Accruals are made for the estimated liability for unutilised annual leave.
22 AMOUNT DUE TO SUBSIDIARIES
The amount due to subsidiaries is unsecured, interest-free and repayable on demand.
111Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
23 SUBORDINATED TERM LOAN
On 10 March 2009, the Bank has taken the �rst 10 year subordinated loan (‘Subordinated loan I’) amounting to RM300
million. The �rst subordinated loan was constituted by agreement date 6 March 2009 and were issued on 10 March 2009.
On 10 March 2014, the Bank prepaid the 10 year subordinated loan with the Bank’s holding company.
On 26 May 2011, the Bank has taken the second 10 year subordinated loan (‘Subordinated loan II’) amounting to RM300
million. The second subordinated loan was constituted by agreement date 20 May 2011 and were issued on 26 May 2011.
On 16 January 2012, the Bank has taken the third 10 year subordinated loan (‘Subordinated loan III’) amounting to RM300
million. The third subordinated loan was constituted by agreement date 3 January 2012 and were issued on 16 January 2012.
All the subordinated loans were taken with the Bank’s holding company.
The subordinated loans have a prepayment option on the �rst prepayment date or any interest payment date subsequent
to the �rst prepayment date, giving the Bank the right, subject to Bank Negara Malaysia (‘BNM’) approval, to prepay the
loans in whole or in part.
Interest on subordinated loans payable by quarterly.
Subordinated loan II and Subordinated loan III
Value : RM300 million each
Interest rate : Cost of Fund (‘COF’) plus 1.00% per annum for the 10 years.
Maturity date : 26 May 2021 (Subordinated loan II)
16 January 2022 (Subordinated loan III)
COF refers to rate determined by the lender on an interest determination date falling within the interest duration.
Both subordinated loans are unsecured and also qualify for tier 2 capital for the purposes of determine the risk-weighted
capital ratio of the Bank.
24 SHARE CAPITAL
Number of ordinary
shares of RM1 each The Group and The Bank
2014
‘000
2013
‘000
2014
RM’000
2013
RM’000
Authorised
At beginning/end of the �nancial year 2,000,000 2,000,000 2,000,000 2,000,000
Issued and fully paid
At beginning of the �nancial year 1,518,337 1,518,337 1,518,337 1,518,337
Issued during the �nancial year 170,433 - 170,433 -
At end of the financial year 1,688,770 1,518,337 1,688,770 1,518,337
During the �nancial year, the Bank’s issued and paid-up capital increased from RM1,518,337,000 to RM1,688,770,000 by
way of issuance of non-renounceable rights issue to the Bank’s holding company via:
(i) Issuance of 103,092,784 of new ordinary shares of RM1.00 each at an issue price of RM2.91 each amounting to
RM300 million; and
(ii) Issuance of 67,340,067 of new ordinary shares of RM1.00 each at an issue price of RM2.97 each amounting to RM200
million.
112 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
25 RESERVES
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Retained pro�ts 951,500 1,004,534 760,153 798,118
Share premium 858,904 529,337 858,904 529,337
AFS revaluation reserves 17,604 (1,960) 23,478 4,965
Statutory reserves 1,469,794 1,317,376 1,263,470 1,144,350
Regulatory reserves 184,366 - 135,347 -
3,482,168 2,849,287 3,041,352 2,476,770
Statutory reserves
At beginning of the �nancial year 1,317,376 1,160,651 1,144,350 1,017,200
Transfer from retained pro�ts 152,418 156,725 119,120 127,150
At end of the �nancial year 1,469,794 1,317,376 1,263,470 1,144,350
(a) As at 31 December 2014, the Bank has a tax exempt account balance of RM10,931,988 (2013: RM10, 931,988) under
Section 12 of the Income Tax (Amendment) Act 1999, subject to agreement by the Inland Revenue Board.
(b) The statutory reserves of the Group and the Bank are maintained in compliance with Section 47(2)(f) of the Financial
Services Act 2013 and Section 57(2)(f) of the Islamic Financial Services Act 2013 and is not distributable as cash
dividends.
(c) AFS revaluation reserves represent the unrealised gains or losses arising from the change in fair value of investments
classi�ed as �nancial investment available-for-sale. The gains or losses are transferred in the income statement upon
disposal or when the securities become impaired.
(d) The Group and the Bank are required to maintain in aggregate collective impairment allowances and regulatory reserves
of no less than 1.2% of total outstanding loans, advances and �nancing, net of individual impairment allowances.
113Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
26 INTEREST INCOME
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Loans, advances and �nancing 1,681,044 1,612,728 1,681,044 1,612,728
Money at call and deposit placements
with �nancial institutions 142,913 178,906 171,320 204,769
Reverse repurchase agreements with
�nancial institutions - 234 - 234
Financial assets
- Held-for-trading 155,606 94,163 155,606 94,163
- Available-for-sale 234,629 202,084 234,629 201,936
- Held-to-maturity 20,062 19,984 20,062 19,984
Others - - 391 4,003
2,234,254 2,108,099 2,263,052 2,137,817
Accretion of discount less amortisation of premium 36,734 13,028 36,734 13,028
2,270,988 2,121,127 2,299,786 2,150,845
of which:
Interest income earned on impaired
loans, advances and �nancing 7,933 10,957 7,933 10,957
27 INTEREST EXPENSE
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Deposits and placements of banks
and other �nancial institutions 92,204 119,487 92,235 119,498
Deposits from customers 1,163,362 1,025,610 1,163,398 1,025,644
Subordinated term loan 29,879 41,473 29,879 41,473
Loan sold to Cagamas Berhad 13,263 19,164 13,263 19,164
Interest rate derivatives 148,395 99,226 148,395 99,226
Others 4,425 3,108 4,425 3,108
1,451,528 1,308,068 1,451,595 1,308,113
28 INCOME FROM ISLAMIC BANKING BUSINESS
The Group
2014
RM’000
2013
RM’000
Income derived from investment of depositors’ funds and others 472,995 428,386
Income derived from investment of shareholders’ funds 33,586 29,781
Total distributable income 506,581 458,167
Income attributable to depositors (262,358) (237,422)
244,223 220,745
of which:
Financing income earned on impaired �nancing, advances and other �nancing 1,345 549
114 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
29 OTHER OPERATING INCOME
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Fee income
Commission 16,428 14,046 16,428 14,046
Service charges and fees 59,267 62,785 59,267 62,785
Guarantee fees 22,673 20,615 22,673 20,615
98,368 97,446 98,368 97,446
Income from financial instruments
Gain arising on �nancial assets
held-for-trading:
- net gain on disposal 347 366 347 366
- unrealised gains 219 455 219 455
566 821 566 821
Gains on derivatives:
- realised 6,789 3,156 6,789 3,156
- unrealised 7,302 5,282 7,302 5,282
14,091 8,438 14,091 8,438
Gain arising on �nancial investments
available-for-sale:
- net gain on disposal 9,743 22,369 9,743 18,894
- gross dividend income 2,589 4,058 2,589 4,058
12,332 26,427 12,332 22,952
Gain arising on �nancial investments
held-to-maturity:
- net gain on redemption 3,500 6,144 3,500 6,144
3,500 6,144 3,500 6,144
Other income
Foreign exchange gains 63,968 66,975 63,968 66,975
Rental income 1,646 1,673 1,635 1,631
Gain on sale of property and equipment 6,319 3,910 6,319 3,910
Gain on disposal of foreclosed properties 3,329 11,041 2,937 11,041
Other non-operating income 19,103 14,491 18,828 13,788
Subsidiaries - writeback of allowances for
impairment losses - - - 1,707
94,365 98,090 93,687 99,052
223,222 237,366 222,544 234,853
115Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
30 OTHER OPERATING EXPENSES
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Personnel costs (a) 341,999 335,200 266,659 269,727
Establishment costs (b) 179,066 169,429 147,167 142,300
Marketing expenses (c) 16,843 16,485 14,068 13,332
Administrative and general expenses (d) 46,785 44,072 37,334 35,774
584,693 565,186 465,228 461,133
(a) Personnel costs
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Wages, salaries and bonuses 264,862 259,313 205,763 208,440
De�ned contribution plan (‘EPF’) 43,298 42,198 33,669 33,929
Other personnel costs 33,839 33,689 27,227 27,358
341,999 335,200 266,659 269,727
(b) Establishment costs
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Rental of premises 23,430 21,496 18,933 17,723
Equipment rental 1,099 898 974 782
Repair and maintenance 31,228 26,337 25,517 21,942
Depreciation of property and equipment 14,951 16,019 13,954 15,166
Amortisation of intangible assets 6,304 7,989 5,529 7,197
IT Consultancy fees 61,746 61,893 51,989 53,231
Dataline rental 4,523 3,890 3,799 3,372
Security services 17,652 13,566 13,867 10,899
Electricity, water and sewerage 10,521 9,566 8,597 7,994
Insurance and indemnities 3,890 3,853 3,870 3,731
Other establishment costs 3,722 3,922 138 263
179,066 169,429 147,167 142,300
116 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
30 OTHER OPERATING EXPENSES
(c) Marketing expenses
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Business promotion and advertisement 8,551 7,860 7,532 6,660
Entertainment 2,984 2,628 2,559 2,244
Traveling and accommodation 3,641 4,494 2,802 3,328
Other marketing expenses 1,667 1,503 1,175 1,100
16,843 16,485 14,068 13,332
(d) Administration and general expenses
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Telecommunication expenses 5,522 5,558 4,353 4,655
Auditors’ remuneration 1,778 1,433 1,285 1,036
Professional fees 6,686 6,142 5,640 5,154
Property and equipment written-off 114 91 110 91
Mail and courier charges 3,432 2,777 2,716 2,310
Stationery and consumables 8,569 8,902 6,126 6,566
Commissions expenses 3,110 3,215 2,851 2,996
Brokerage expenses 1,662 1,368 974 1,242
Directors’ fees and allowances 1,927 1,873 1,472 1,480
Donations 3,662 1,706 3,430 1,619
Settlement, clearing and bank charges 7,388 7,131 6,816 6,779
Stamp duties 177 198 173 196
Operational and litigation write-off expenses 19 - 19 -
Other administration and general expenses 2,739 3,678 1,369 1,650
46,785 44,072 37,334 35,774
The expenditure includes the following statutory disclosure:
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Directors’ remuneration (Note 31) 8,621 8,281 8,166 7,888
Auditors’ remuneration
- statutory audit fees 926 850 729 682
- audit related fees 391 465 245 297
- non audit fees 461 118 311 57
117Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
31 CEO AND DIRECTORS’ REMUNERATION
The MD/CEO and Directors of the Bank who have held of�ce during the �nancial year are as follows:
Managing Director/Chief Executive Officer
Dato’ Zulki!ee Abbas Bin Abdul Hamid
Non-Executive Directors
Jen Tan Sri Dato’ Seri Ismail Bin Haji Omar (Bersara) (Chairman)
Tan Sri Dato’ Seri Lodin Bin Wok Kamaruddin
Dr Raja Abdul Malek Bin Raja Jallaludin (Retired w.e.f. 29.3.2014)
Tan Sri Dato’ Sri Abdul Aziz Bin Abdul Rahman
Tan Sri Dato’ Seri Mohamed Jawhar
Tan Sri Mohd Ghazali bin Mohd Yusoff (Appointment w.e.f. 20.6.2014)
En. Mohd Suf�an Bin Haji Haron
Mr Aubrey Li Kwok-Sing
Mr Gary Cheng Shui Hee (Alternate Director to Mr Aubrey Li Kwok-Sing) (Resigned w.e.f. 17.3.2014)
Mr Tang Peng Wah (Alternate Director to Mr Aubrey Li Kwok-Sing) (Appointment w.e.f. 23.6.2014)
The aggregate amount of remuneration for the Directors of the Bank for the �nancial year were as follows:
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Managing Director/Chief Executive Officer
Salaries 1,980 1,935 1,980 1,935
Bonuses 3,418 3,315 3,418 3,315
De�ned contribution plan (‘EPF’) 1,044 907 1,044 907
Other employee bene�ts 99 99 99 99
Bene�ts-in-kind 153 152 153 152
Non-Executive Directors
Fees 1,899 1,844 1,444 1,451
Bene�ts-in-kind 28 29 28 29
Directors’ remuneration (Note 30) 8,621 8,281 8,166 7,888
118 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
31 CEO AND DIRECTORS’ REMUNERATION
A summary of the total remuneration of the MD/CEO and Directors, distingushing between Executive and Non-Executive
Directors.
Directors’
Fees
RM’000
* Other
emoluments
RM’000
Benefits-
in-kind
RM’000
The Group
2014
Salaries
RM’000
Bonuses
RM’000
Total
RM’000
Managing Director/
Chief Executive Officer
Dato’ Zulki!ee Abbas Bin
Abdul Hamid 1,980 3,418 - 1,143 153 6,694
Total 1,980 3,418 - 1,143 153 6,694
Non-executive Directors
Jen Tan Sri Dato’ Seri Ismail Bin
Haji Omar (Bersara) - - 338 96 26 460
Tan Sri Dato’ Seri Lodin Bin
Wok Kamaruddin - - 355 - - 355
Tan Sri Dato’ Sri Abdul Aziz Bin
Abdul Rahman - - 363 - 2 365
Tan Sri Dato’ Seri Mohamed Jawhar - - 378 - - 378
En. Mohd Suf�an Bin Haji Haron - - 369 - - 369
Total - - 1,803 96 28 1,927
Grand total 1,980 3,418 1,803 1,239 181 8,621
2013
Managing Director/
Chief Executive Of�cer
Dato’ Zulki!ee Abbas Bin
Abdul Hamid 1,935 3,315 - 1,006 152 6,408
Total 1,935 3,315 - 1,006 152 6,408
Non-executive Directors
Jen Tan Sri Dato’ Seri Ismail Bin Haji
Omar (Bersara) - - 338 96 29 463
Tan Sri Dato’ Seri Lodin Bin Wok
Kamaruddin - - 342 - - 342
Tan Sri Dato’ Sri Abdul Aziz Bin
Abdul Rahman - - 351 - - 351
Tan Sri Dato’ Seri Mohamed Jawhar - - 362 - - 362
En. Mohd Suf�an Bin Haji Haron - - 355 - - 355
Total - - 1,748 96 29 1,873
Grand total 1,935 3,315 1,748 1,102 181 8,281
* Executive Director’s other emoluments include allowance and EPF.
119Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
31 CEO AND DIRECTORS’ REMUNERATION
Directors’
Fees
RM’000
* Other
emoluments
RM’000
Benefits-
in-kind
RM’000
The Bank
2014
Salaries
RM’000
Bonuses
RM’000
Total
RM’000
Managing Director/
Chief Executive Officer
Dato’ Zulki!ee Abbas Bin
Abdul Hamid 1,980 3,418 - 1,143 153 6,694
Total 1,980 3,418 - 1,143 153 6,694
Non-executive Directors
Jen Tan Sri Dato’ Seri Ismail
Bin Haji Omar (Bersara) - - 187 96 26 309
Tan Sri Dato’ Seri Lodin
Bin Wok Kamaruddin - - 195 - - 195
Dr. Raja Abdul Malek
Bin Raja Jallaludin - - 59 - - 59
Tan Sri Mohd Ghazali
Bin Mohd Yusoff - - 124 - - 124
Tan Sri Dato’ Sri Abdul Aziz
Bin Abdul Rahman - - 218 - 2 220
Tan Sri Dato’ Seri Mohamed Jawhar - - 216 - - 216
En. Mohd Suf�an Bin Haji Haron - - 221 - - 221
Mr Aubrey Li Kwok-Sing - - 125 - - 125
Mr Tang Peng Wah - - 3 - - 3
Total - - 1,348 96 28 1,472
Grand total 1,980 3,418 1,348 1,239 181 8,166
* Executive Director’s other emoluments include allowance and EPF.
120 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
31 CEO AND DIRECTORS’ REMUNERATION
Directors’
Fees
RM’000
* Other
emoluments
RM’000
Bene�ts-
in-kind
RM’000
The Bank
2013
Salaries
RM’000
Bonuses
RM’000
Total
RM’000
Managing Director/
Chief Executive Of�cer
Dato’ Zulki!ee Abbas Bin
Abdul Hamid 1,935 3,315 - 1,006 152 6,408
Total 1,935 3,315 - 1,006 152 6,408
Non-executive Directors
Jen Tan Sri Dato’ Seri Ismail Bin
Haji Omar (Bersara) - - 188 96 29 313
Tan Sri Dato’ Seri Lodin Bin
Wok Kamaruddin - - 188 - - 188
Dr. Raja Abdul Malek Bin
Raja Jallaludin - - 226 - - 226
Tan Sri Dato’ Sri Abdul Aziz Bin
Abdul Rahman - - 212 - - 212
Tan Sri Dato’ Seri Mohamed Jawhar - - 208 - - 208
En. Mohd Suf�an Bin Haji Haron - - 214 - - 214
Mr Aubrey Li Kwok-Sing - - 112 - - 112
Mr Gary Cheng Shui Hee - - 7 - - 7
Total - - 1,355 96 29 1,480
Grand total 1,935 3,315 1,355 1,102 181 7,888
* Executive Director’s other emoluments include allowance and EPF.
121Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
32 WRITE-BACK OF ALLOWANCES FOR LOSSES ON LOANS, ADVANCES AND FINANCING
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Individual impairment
- made during the �nancial year 87,611 47,903 86,102 47,213
- written-back (4,386) (4,031) (604) (3,598)
Collective impairment
- net allowance made during the �nancial year 35,666 15,253 29,283 15,011
Bad debts and �nancing
- recovered (141,739) (120,645) (141,344) (119,702)
- written-off 4,380 4,583 4,370 4,509
(18,468) (56,937) (22,193) (56,567)
33 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES
Related parties that have transactions and their relationship with the Bank are as follows:
Related parties Relationship
Lembaga Tabung Angkatan Tentera (‘LTAT’) Ultimate holding corporate body, which is Government-
Linked Investment Company (‘GLIC’) of the Government
of Malaysia
AFFIN Holdings Berhad (‘AHB’) Holding company
Subsidiaries and associates of LTAT Subsidiary and associate companies of the ultimate holding
corporate body
Subsidiaries and associates of AHB as disclosed in its
�nancial statements
Subsidiary and associate companies of the holding
company
Subsidiaries of AFFIN Bank Berhad as disclosed in Note 13 Subsidiaries
Joint ventures as disclosed in Note 14 Joint ventures
Key management personnel The key management personnel of the Group and the Bank
consist of:
- Directors
- Managing Director/Chief Executive Of�cer - Members of Senior Management team and the company
secretary
Related parties of key management personnel (deemed
as related to the Bank)
- Close family members and dependents of key management personnel
- Entities that are controlled, jointly controlled or for which
signi�cant voting power in such entity resides with,
directly or indirectly by key management personnel or its
close family members
Key management personnel are those persons having the authority and responsibility for planning, directing and controlling
the activities of the Group and the Bank either directly or indirectly. Key management personnel includes the Managing
Director/Chief Executive Of�cer of the Bank in of�ce during the �nancial year and his remuneration for the �nancial year
are disclosed in Note 31.
122
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
33 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES
The Group and the Bank do not have any individually or collectively signi�cant transaction outside the ordinary course of business with the Government of Malaysia
and government-related entities. In addition to related party disclosures mentioned elsewhere in the �nancial statements, set out below are other signi�cant related
party transactions and balances.
(a) Related parties transactions and balances
Companies in which
certain Directors
have substantial
interest
Ultimate holding
corporate body Holding company
Other related
companies
Key management
personnel
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000The Group
Income
Interest on private debt securities - - - - 26,889 27,296 - - - -
Interest on loans, advances and �nancing - - - - 75,852 41,151 - - 86 81
Interest on deposits and placements with
banks and other �nancial institutions - - - - 3,851 8,401 - - - -
Other income - - - - 8,508 7,590 - - - -
- - - - 115,100 84,438 - - 86 81
Expenditure
Interest on �xed deposits 1,389 5,448 4,331 5,989 15,184 11,325 - - 199 242
Interest on Negotiable instruments of deposit - - - - 5,489 838 - - - -
Interest on deposits and placements of banks
and other �nancial institutions - - - - 6,562 9,165 - - - -
Hibah/pro�t paid on special investment deposits - 1 - - 1,400 1,565 - - - -
Hibah/pro�t paid on commodity murabahah - - - - 1,524 - - - - -
Interest on money market deposits 8,395 9,911 2,043 93 1,708 2,004 - - - -
Interest on subordinated term loan - - 29,879 41,473 - - - - - -
Brokerage fees - - - - 563 431 - - - -
Rental 239 239 - - 12,107 11,426 - - - -
Others - - - - 5,707 5,877 - 638 - -
10,023 15,599 36,253 47,555 50,244 42,631 - 638 199 242
123Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
33 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES
(a) Related parties transactions and balances (continued)
Ultimate holding
corporate body
Holding
company
Other related
companies
The Group
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Amount due from
Private debt securities - - - - 787,747 782,076
Loans, advances and �nancing - - - - 2,258,158 1,334,698
Deposits and placement with banks
and other �nancial institutions - - - 3,852 56,000 213,447
Intercompany balances - - - - 14,855 4,185
Security deposits - - 7 - 2,993 2,992
- - 7 3,852 3,119,753 2,337,398
Amount due to
Demand and saving deposits 97,771 160,122 4,218 3,328 272,486 410,447
Fixed deposits 22,114 201,452 117,684 133,184 522,394 393,664
Negotiable instruments of deposit - - - - 120,370 120,656
Deposits and placement of banks
and other �nancial institutions - - - - 332,004 211,042
Special investment deposits - - - - - 68,726
Money market deposits 300,423 399,838 485 300 66,988 129,938
Subordinated term loan - - 604,310 904,964 - -
420,308 761,412 726,697 1,041,776 1,314,242 1,334,473
Commitments and contingencies - - - - 1,977,952 1,668,959
Companies in which
certain Directors have
substantial interest
Key management
personnel
The Group
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Amount due from
Loans, advances and �nancing - - 2,540 2,812
- - 2,540 2,812
Amount due to
Demand and saving deposits 145 45 6,519 6,002
Fixed deposits - - 4,520 11,123
145 45 11,039 17,125
Commitments and contingencies - - - -
No impairment allowances were required at the Group and the Bank in 2014 and 2013 for loans, advances and
�nancing made to key management personnel.
124
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
33 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES
(a) Related parties transactions and balances (continued)
Ultimate holding
corporate body
Holding
company Subsidiaries
Other related
companies
Companies which
certain Directors have
substantial interest
Key management
personnel
The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Income
Interest on special investment
deposits - - - - 27,917 25,311 - - - - - -
Interest on private debt securities - - - - - - 26,889 27,296 - - - -
Interest on loans, advances and
�nancing - - - - - - 68,804 38,336 - - 86 81
Interest on deposits and
placements with banks and
other �nancial institutions - - - - 487 576 3,851 5,552 - - - -
Other income - - - - 81,851 71,745 8,508 7,590 - - - -
- - - - 110,255 97,632 108,052 78,774 - - 86 81
Expenditure
Interest on �xed deposits 1,383 5,371 4,331 5,989 36 35 6,562 9,754 - - 125 202
Interest on negotiable instruments
of deposit - - - - - - 9,119 838 - - - -
Interest on deposits and
placements with banks and
other �nancial institutions - - - - 12 14 5,489 9,165 - - - -
Interest on money market deposits 8,395 9,911 2,043 93 - - 1,708 2,004 - - - -
Interest on subordinated term loan - - 29,879 41,473 - - - - - - - -
Brokerage fees - - - - - - 563 431 - - - -
Rental 239 239 - - 407 407 12,107 11,426 - - - -
Others - - - - - - 5,636 5,738 - 638 - -
10,017 15,521 36,253 47,555 455 456 41,184 39,356 - 638 125 202
125Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
33 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES
(a) Related parties transactions and balances (continued)
Ultimate holding
corporate body Holding company Subsidiaries
The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Amount due from
Special investment account - - - - 826,689 715,807
Deposits and placements with
banks and other �nancial
institutions - - - 3,852 68,741 93,945
Intercompany balances - - - - 438 60,723
Security deposits - - 7 - - -
- - 7 3,852 895,868 870,475
Amount due to
Demand and saving deposits 96,169 158,706 4,218 3,328 849 1,898
Fixed deposits 22,114 156,545 117,684 133,184 390 1,826
Deposits and placement of banks
and other �nancial institutions - - - - - 26,720
Money market deposits 300,423 399,838 485 300 - -
Intercompany balances - - - - 296,781 53,559
Subordinated term loan - - 604,310 904,964 - -
418,706 715,089 726,697 1,041,776 298,020 84,003
Commitments and contingencies - - - - - -
Other related companies
Companies which
certain Directors have
substantial interest
Key management
personnel
The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Amount due from
Private debt securities 787,747 782,076 - - - -
Loans, advances and �nancing 1,824,678 1,235,568 - - 2,540 2,812
Deposits and placement of banks
and other �nancial institutions 56,000 213,447 - - - -
Security deposits 2,993 2,992 - - - -
2,671,418 2,234,083 - - 2,540 2,812
Amount due to
Demand and saving deposits 255,969 394,704 - - 4,656 4,531
Fixed deposits 335,147 346,665 - - 1,626 9,436
Negotiable instruments of deposit 120,370 120,656 - - - -
Deposits and placement of banks
and other �nancial institutions 332,004 211,042 - - - -
Money market deposits 66,988 129,938 - - - -
1,110,478 1,203,005 - - 6,282 13,967
Commitments and contingencies 1,910,887 1,550,779 - - - -
No impairment allowances were required at the Bank in 2014 and 2013 for loans, advances and �nancing made to
key management.
126 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
33 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES
(b) Key management personnel compensation
The remuneration of key management personnel of the Group and the Bank during the year are as follows:
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Directors’ fees and allowances
Fees 1,899 1,844 1,444 1,451
Bene�ts-in-kind 28 29 28 29
1,927 1,873 1,472 1,480
Short-term employment benefits
Salaries 7,870 7,681 7,225 7,081
Bonuses 10,133 10,852 9,455 10,072
De�ned contribution plan (‘EPF’) 3,197 3,177 2,979 2,949
Other employee bene�ts 1,111 1,168 1,068 1,125
Bene�ts-in-kind 428 512 340 442
22,739 23,390 21,067 21,669
Included in the above table is the CEO and directors’ remuneration as disclosed in Note 31.
34 TAXATION
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
The taxation charge arising in
Malaysia for the financial year
Current tax 172,347 180,425 149,819 159,936
(Over)/under provision in prior year (1,365) 1,881 482 2,320
Deferred tax (Note 11) 649 1,501 920 1,674
Tax expense for the year 171,631 183,807 151,221 163,930
127Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
34 TAXATION
The Group The Bank
2014
%
2013
%
2014
%
2013
%
Statutory tax rate in Malaysia 25.00 25.00 25.00 25.00
Tax effect in respect of:
Non allowable expenses 0.26 0.41 0.18 0.23
Non taxable income (0.31) (0.18) (0.35) (0.27)
Utilisation of previously unrecognised tax losses (0.01) (0.12) - -
Effect of different tax rate (0.71) (0.86) (0.81) (0.97)
Tax savings arising from income exempt from tax
for International Currency Business Unit (‘ICBU’) (0.05) (0.17) - -
(Over)/under accrual in prior years (0.19) 0.25 0.08 0.34
Change in tax rate - 0.05 (0.01) 0.05
Average effective tax rate 23.99 24.38 24.09 24.38
Tax savings of the Group as a result of utilisation of tax losses brought forward from previous years from which the related
credit is recognised during the �nancial year amounted to RM87,000 (2013: RM922,320).
35 EARNINGS PER SHARE
The basic earnings per ordinary share for the Group and the Bank have been calculated based on the net pro�t attributable
to equity holders of the Group and the Bank of RM543,727,000 (2013: RM569,822,000) and RM476,479,000 (2013:
RM508,599,000) respectively. The weighted average number of shares in issue during the �nancial year of 1,633,403,000
(2013: 1,518,337,000) is used for the computation.
36 DIVIDENDS
Dividends recognised as distribution to ordinary equity holders of the Bank:
The Group and The Bank
2014
The Group and The Bank
2013
Dividend
per share
sen
Amount of
dividend
RM’000
Dividend
per share
sen
Amount of
dividend
RM’000
Ordinary shares
Single tier dividend:
- Interim dividend 10.00 168,877 10.00 151,834
- Final dividend 6.00 91,100 6.00 91,100
16.00 259,977 16.00 242,934
At the forthcoming Annual General Meeting, a single-tier �nal dividend in respect of the current �nancial year of 3.91 sen
per share amounting to RM66,030,892 will be proposed for shareholders’ approval. These �nancial statements do not
re!ect this �nal dividend which will be accounted for in the shareholder’s equity as an appropriation of retained pro�ts in
the �nancial year ending 31 December 2015 when approved by the shareholder.
128 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
37 COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Group and the Bank make various commitments and incurs certain contingent
liabilities with legal recourse to their customers. No material losses are anticipated as a result of these transactions. These
commitment and contingencies are not secured over the assets of the Group and the Bank.
The commitments and contingencies consist of:
The Group The Bank
2014 2013 2014 2013
Principal
amount
RM’000
Principal
amount
RM’000
Principal
amount
RM’000
Principal
amount
RM’000
Direct credit substitutes (*) 679,779 1,410,611 669,843 1,402,157
Transaction-related contingent items 2,043,704 1,974,804 1,891,540 1,849,237
Short-term self-liquidating trade-related
contingencies 746,576 573,412 345,057 353,020
Irrevocable commitments to extend credit: 10,663,047 9,444,689 9,137,777 8,131,913
- maturity less than one year 8,641,021 7,263,403 7,428,229 6,285,251
- maturity more than one year 2,022,026 2,181,286 1,709,548 1,846,662
Foreign exchange related contracts (#): 5,658,337 4,326,451 5,679,280 4,326,451
- less than one year 5,110,352 3,636,267 5,131,295 3,636,267
- one year to less than �ve years 451,955 594,154 451,955 594,154
- more than �ve years 96,030 96,030 96,030 96,030
Interest rate related contracts (#): 3,427,552 3,954,438 3,427,552 3,954,438
- less than one year 1,256,279 809,068 1,256,279 809,068
- one year to less than �ve years 1,781,125 2,442,222 1,781,125 2,442,222
- more than �ve years 390,148 703,148 390,148 703,148
Unutilised credit card lines 208,865 179,201 208,865 179,201
23,427,860 21,863,606 21,359,914 20,196,417
* Included in direct credit substitutes as above are �nancial guarantee contracts of RM454.7 million and RM444.8
million at the Group and the Bank, respectively (2013: RM336.6 million and RM328.1 million at the Group and the
Bank, respectively), of which fair value at the time of issuance is zero.
# The fair value of these derivatives have been recognised as “derivative �nancial assets” and “derivative �nancial
liabilities” in the statement of �nancial position and disclosed in Note 5 and 19 to the �nancial statements.
129Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(i) Credit risk
Credit risk is the potential �nancial loss resulting from the failure of the customer or counterparty to settle the
�nancial and contractual obligations to the Bank. Credit risk emanates mainly from loans, advances and �nancing,
loan commitments arising from such lending activities, as well as through �nancial transactions with counterparties
including interbank money market activities, derivative instruments used for hedging and debt securities.
The management of credit risk in the Bank is governed by a set of approved credit policies, guidelines and procedures.
Approval authorities are delegated to Senior Management and Group Management Loan Committee (‘GMLC’) to
implement the credit policies and ensure sound credit granting standards.
An independent Group Risk Management (‘GRM’) function, headed by Group Chief Risk Of�cer (‘GCRO’), with direct
reporting line to Board Risk Management Committee (‘BRMC’) is in place to ensure adherence to risk standards and
discipline. Portfolio management risk reports are submitted regularly to BRMC.
Lending guidelines and credit strategies are formulated and incorporated in the Annual Credit Plan. New businesses
are governed by the risk acceptance criteria and customer qualifying criteria/�tness standards prescribed in the
Annual Credit Plan. The Annual Credit Plan is reviewed at least annually and approved by the BRMC.
Credit risk measurement
Loans, advances and financing
Credit evaluation is the process of analysing the creditworthiness of the prospective customer against the Bank’s
underwriting criteria and the ability of the Bank to make a return commensurate to the level of risk undertaken. A
critical element in the evaluation process is the assignment of a credit risk grade to the counterparty. This assists in
the risk assessment and decision making process. The Bank has developed internal rating models to support the
assessment and quanti�cation of credit risk.
For consumer mass market products, statistically developed application scorecards are used by the Business to
assess the risks associated with the credit application. The scorecards are used as a decision support tool at loan
origination.
Over-the-Counter (‘OTC’) Derivatives
The OTC Derivatives credit exposure is computed using the Current Exposure Method. Under the Current Exposure
method, computation of credit equivalent exposure for interest rate and exchange rate related contracts is derived
from the summation of the two elements; the replacement costs (obtained by marking-to-market) of all contracts and
the potential future exposure of outstanding contracts (Add On charges depending on the speci�c remaining tenor to
maturity).
Risk limit control and mitigation policies
The Bank employs various policies and practices to control and mitigate credit risk.
Lending limits
The Bank establishes internal limits and related lending guidelines to manage large exposures and avoid undue
concentration of credit risk in its credit portfolio. The limits include single customer groupings, large exposures,
connected parties, and geographical and industry segments. These risks are monitored regularly and the limits
reviewed annually or sooner depending on changing market and economic conditions.
The credit risk exposure for derivative and loan books is managed as part of the overall lending limits with customers
together with potential exposure from market movements.
130 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(i) Credit risk (continued)
Risk limit control and mitigation policies (continued)
Collateral
Credits are established against borrower’s capacity to repay rather than rely solely on security. However, collateral
may be taken to mitigate credit risk. The main collateral types accepted and given value by the Bank are:
- mortgage over residential properties;
- charges over commercial real estate or vehicles �nanced;
- charges over business assets such as business premises, inventory and accounts receivable; and
- charges over �nancial instruments such as marketable equities.
Documentary and commercial letters of credit are collateralised by the underlying shipments of goods to which they
relate and therefore carry less risk than a direct loan.
Credit related commitments
Commitment to extend credit represents unutilised portion of approved credit in the form of loans, guarantees
or letters of credit. In terms of credit risk, the Bank is potentially exposed to loss in an amount equal to the total
unutilised commitments. However, the potential amount of loss is less than the total unutilised commitments, as most
commitments to extend credit are contingent upon customers maintaining speci�c minimum credit standards.
The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a
greater degree of credit risk than short-term commitments.
Credit risk monitoring
Retail credits are actively monitored and managed on a portfolio basis by product type. A collection management
system is in place to promptly identify, monitor and manage delinquent accounts at early stages of delinquency.
Corporate credits and large individual accounts are reviewed by the Business Units at least once a year against
updated information. This is to ensure that the credit grades remain appropriate and detect any signs of weaknesses
or deterioration in the credit quality. Remedial action is taken where evidence of deterioration exists.
Early Alert Process is in place as part of a means to pro-actively identify, report and manage deteriorating credit quality.
Watchlist accounts are closely reviewed and monitored with corrective measures initiated to prevent them from turning
impaired. As a rule, watchlist accounts are either worked up or worked out within a period of twelve months.
Active portfolio monitoring enables the Bank to understand the overall risk pro�le and identify any adverse trends or
areas of risk concentrations affecting asset quality so that appropriate actions are adopted to manage and mitigate risks.
131Affin Bank BerhadAnnual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(i) Credit risk (continued)
Credit risk culture
The Bank recognises that learning is a continuous journey and is committed to enhance the knowledge and required
skills set of its staff. It places strong emphasis in creating and enhancing risk awareness in the organisation.
For effective and ef�cient staff learning, an E-Learning Program is implemented with an online Learning Management
System (‘LMS’). The LMS provides staff with a progressive self-learning alternative at own pace.
Group Risk Management implements an Internal Credit Certi�cation (‘ICC’) Programme for both Business Banking
and Consumer Credit.
The aim of the ICCs is to assist the core credit related group of personnel in the Bank achieve a minimum level of
knowledge and analytical skills required to make sound corporate and commercial loans to customers.
Maximum exposure to credit risk
For �nancial assets recognised on the statement of �nancial position, the exposure to credit risk equals their carrying
amount. For �nancial guarantees granted, the maximum exposure to credit risk is the maximum amount that the Group
and the Bank would have to pay if guarantee were to be called upon. For loan commitments and other commitments,
the maximum exposure to credit risk is the full amount of the undrawn credit facilities granted to customers.
All �nancial assets of the Group and the Bank are subject to credit risk except for cash in hand, equity securities held
as �nancial assets held-for-trading or �nancial investments available-for-sale, as well as non-�nancial assets.
The exposure to credit risk of the Group and the Bank equals their carrying amount in the statement of �nancial
position as at reporting date, except for the followings:
The Group The Bank
2014 2014 2014 2014
Carrying
Value
RM’000
Maximum
Credit
Exposure
RM’000
Carrying
Value
RM’000
Maximum
Credit
Exposure
RM’000
Credit risk exposures of
on-balance sheet assets:
Cash and short-term funds * 6,938,912 6,770,321 * 3,777,042 3,608,451
Financial investments available-for-sale # 9,947,911 9,817,200 # 8,415,411 8,284,726
Other assets @ 223,406 200,875 @ 174,655 153,014
Credit risk exposure of
off-balance sheet items:
Financial guarantees ^ 454,742 454,742 ^ 444,806 444,806
Loan commitments and other
credit related commitments ^ 13,887,229 4,177,194 ^ 11,808,276 3,622,011
Total maximum credit risk exposure 31,452,200 21,420,332 24,620,190 16,113,008
132 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(i) Credit risk (continued)
Maximum exposure to credit risk (continued))
The Group The Bank
2013 2013 2013 2013
Carrying
Value
RM’000
Maximum
Credit
Exposure
RM’000
Carrying
Value
RM’000
Maximum
Credit
Exposure
RM’000
Credit risk exposures of
on-balance sheet assets:
Cash and short-term funds * 9,401,701 9,234,368 * 4,987,696 4,820,362
Financial investments available-for-sale # 7,614,537 7,495,386 # 6,331,414 6,212,331
Other assets @ 220,097 191,679 @ 176,555 148,663
Credit risk exposure of
off-balance sheet items:
Financial guarantees ^ 336,577 336,577 ^ 328,123 328,123
Loan commitments and other
credit related commitments ^ 13,246,140 4,755,283 ^ 11,587,405 4,285,478
Total maximum credit risk exposure 30,819,052 22,013,293 23,411,193 15,794,957
The following have been excluded for the purpose of maximum credit risk exposure calculation:
* cash in hand# investment in quoted and unquoted shares@ prepayment^ amount stated at notional value
Whilst the Group and the Bank’s maximum exposure to credit risk is the carrying value of the assets, or in the case of
off-balance sheet items, the amount guaranteed, committed or accepted, in most cases the likely exposure is far less
due to collateral, credit enhancements and other actions taken to mitigate the credit exposure.
The �nancial effect of collateral held for loans, advances and �nancing of the Group and the Bank are 67% (2013: 68%)
and 66% (2013: 66%) respectively. The �nancial effects of collateral for the other �nancial assets are insigni�cant.
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38 FINANCIAL RISK MANAGEMENT
(i) Credit risk (continued)
Credit risk concentrations
Credit risk is the risk of �nancial loss from the failure of customers to meet their obligations. Exposure to credit risk is managed through portfolio management.
The credit portfolio’s risk pro�les and exposures are reviewed and monitored regularly to ensure that an acceptable level of risk diversi�cation is maintained.
Exposure to credit risk is also managed in part by obtaining collateral security and corporate and personal guarantees.
The credit risk concentrations of the Group and the Bank, by industry concentration, are set out in the following tables:
The Group
2014
Cash and
short-term
funds
RM’000
Deposits and
placements
with banks
and other
financial
institutions
RM’000
Financial
assets
held-for-
trading
RM’000
Derivative
financial
assets
RM’000
Financial
investments
available-
for-sale
RM’000
Financial
investments
held-to-
maturity
RM’000
Loans,
advances
and
financing
RM’000
Other
assets
RM’000
On
balance
sheet
total
RM’000
Commitments
and
contingencies
RM’000
Agriculture - - - 119 - - 679,067 - 679,186 74,395
Mining and quarrying - - - 1,132 - - 620,990 - 622,122 84,463
Manufacturing - - - 3,620 55,077 60,040 2,019,420 - 2,138,157 632,111
Electricity, gas and water
supply - - - 37 167,170 - 253,948 - 421,155 1,455
Construction - - - - 90,569 190,155 3,784,234 - 4,064,958 1,325,891
Real estate - - - - 5,006 - 6,027,509 - 6,032,515 469,141
Transport, storage and
communication - - - 35 220,459 - 2,028,262 - 2,248,756 204,217
Finance, insurance and
business services 752,780 238,222 - 81,880 3,455,064 202,521 4,794,881 - 9,525,348 425,008
Government and
government agencies 6,017,541 - 149,904 - 5,778,549 - 92,404 - 12,038,398 213,748
Wholesale & retail trade
and restaurants & hotels - - - 372 45,306 23,439 2,095,396 - 2,164,513 426,421
Others - - - 1,463 - - 17,060,061 200,875 17,262,399 775,086
Total assets 6,770,321 238,222 149,904 88,658 9,817,200 476,155 39,456,172 200,875 57,197,507 4,631,936
134
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(i) Credit risk (continued)
Credit risk concentrations (continued)
The Group
2013
Cash and
short-term
funds
RM’000
Deposits and
placements
with banks
and other
�nancial
institutions
RM’000
Financial
assets
held-for-
trading
RM’000
Derivative
�nancial
assets
RM’000
Financial
investments
available-
for-sale
RM’000
Financial
investments
held-to-
maturity
RM’000
Loans,
advances
and
�nancing
RM’000
Other
assets
RM’000
On
balance
sheet
total
RM’000
Commitments
and
contingencies
RM’000
Agriculture - - - 78 - - 472,912 - 472,990 98,156
Mining and quarrying - - - - - - 648,276 - 648,276 121,024
Manufacturing - - - 2,446 19,500 120,058 2,485,248 - 2,627,252 555,901
Electricity, gas and water
supply - - - 308 163,109 - 290,400 - 453,817 11,153
Construction - - - - 74,578 195,105 3,112,399 - 3,382,082 1,084,015
Real estate - - - - 41,345 1,525 4,609,643 - 4,652,513 414,212
Transport, storage and
communication - - - - 55,259 - 1,953,907 - 2,009,166 206,558
Finance, insurance and
business services 1,274,635 482,597 - 53,351 3,072,400 159,741 4,308,662 - 9,351,386 476,028
Government and
government agencies 7,959,733 - 149,544 - 4,023,818 - 117,213 - 12,250,308 158,639
Wholesale & retail trade
and restaurants & hotels - - - 91 45,377 23,907 2,119,218 - 2,188,593 1,189,137
Others - - - - - - 16,109,907 191,679 16,301,586 777,037
Total assets 9,234,368 482,597 149,544 56,274 7,495,386 500,336 36,227,785 191,679 54,337,969 5,091,860
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(i) Credit risk (continued)
Credit risk concentrations (continued)
The Bank
2014
Cash and
short-term
funds
RM’000
Deposits and
placements
with banks
and other
financial
institutions
RM’000
Financial
assets
held-for-
trading
RM’000
Derivative
financial
assets
RM’000
Financial
investments
available-
for-sale
RM’000
Financial
investments
held-to-
maturity
RM’000
Loans,
advances
and
financing
RM’000
Other
assets
RM’000
On
balance
sheet
total
RM’000
Commitments
and
contingencies
RM’000
Agriculture - - - 119 - - 412,662 - 412,781 67,615
Mining and quarrying - - - 1,132 - - 620,198 - 621,330 84,463
Manufacturing - - - 3,620 55,077 60,040 1,787,978 - 1,906,715 552,369
Electricity, gas and water
supply - - - 37 167,170 - 200,989 - 368,196 1,455
Construction - - - - 90,569 190,155 3,235,572 - 3,516,296 1,169,856
Real estate - - - - 5,006 - 5,425,234 - 5,430,240 438,337
Transport, storage and
communication - - - 35 165,971 - 1,893,563 - 2,059,569 173,656
Finance, insurance and
business services 438,296 962,050 - 81,897 3,151,547 119,767 4,043,701 - 8,797,258 402,052
Government and
government agencies 3,170,155 - 149,904 - 4,614,297 - 33,228 - 7,967,584 67,363
Wholesale & retail trade
and restaurants & hotels - - - 369 35,089 23,439 1,894,966 - 1,953,863 412,208
Others - - - 1,463 - - 12,744,460 153,014 12,898,937 697,443
Total assets 3,608,451 962,050 149,904 88,672 8,284,726 393,401 32,292,551 153,014 45,932,769 4,066,817
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(i) Credit risk (continued)
Credit risk concentrations (continued)
The Bank
2013
Cash and
short-term
funds
RM’000
Deposits and
placements
with banks
and other
�nancial
institutions
RM’000
Financial
assets
held-
for-
trading
RM’000
Derivative
�nancial
assets
RM’000
Financial
investments
available-
for-sale
RM’000
Financial
investments
held-to-
maturity
RM’000
Loans,
advances
and
�nancing
RM’000
Other
assets
RM’000
On
balance
sheet
total
RM’000
Commitments
and
contingencies
RM’000
Agriculture - - - 78 - - 465,022 - 465,100 92,900
Mining and quarrying - - - - - - 647,148 - 647,148 121,024
Manufacturing - - - 2,446 19,500 120,058 2,273,269 - 2,415,273 528,050
Electricity, gas and water
supply - - - 308 163,109 - 252,920 - 416,337 11,153
Construction - - - - 74,578 195,105 2,636,379 - 2,906,062 907,811
Real estate - - - - 41,345 1,525 4,179,469 - 4,222,339 384,572
Transport, storage and
communication - - - - 55,259 - 1,847,243 - 1,902,502 194,257
Finance, insurance and
business services 1,115,964 1,106,756 - 53,351 2,771,996 74,676 3,786,540 - 8,909,283 437,521
Government and
government agencies 3,704,398 - 149,544 - 3,051,440 - 95,647 - 7,001,029 78,011
Wholesale & retail trade
and restaurants & hotels - - - 91 35,104 23,907 1,974,904 - 2,034,006 1,163,264
Others - - - - - - 12,020,369 148,663 12,169,032 695,038
Total assets 4,820,362 1,106,756 149,544 56,274 6,212,331 415,271 30,178,910 148,663 43,088,111 4,613,601
137Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(i) Credit risk (continued)
Collaterals
The main types of collateral obtained by the Group and the Bank are as follows:
- for personal housing loans, mortgages over residential properties;
- for commercial property loans, charges over the properties being �nanced;
- for hire purchase, charges over the vehicles or plant and machineries �nanced; and
- for other loans, charges over business assets such as premises, inventories, trade receivables or deposits.
Total loans, advances and financing - credit quality
All loans, advances and �nancing are categorised into “neither past due nor impaired”, “past due but not impaired”
and “impaired”. Past due loans refer to loans that are overdue by one day or more. Impaired loans are loans with
months-in-arrears more than 3 months (i.e. 90 days) or with impairment allowances.
Distribution of loans, advances and financing by credit quality
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Neither past due nor impaired (a) 36,629,306 33,612,968 30,006,363 28,026,769
Past due but not impaired (b) 2,645,096 2,432,647 2,164,663 2,033,298
Impaired (c) 713,648 706,185 584,491 574,555
Gross loans, advances and �nancing 39,988,050 36,751,800 32,755,517 30,634,622
less: Allowance for impairment
- Individual (239,259) (223,701) (207,740) (189,117)
- Collective (292,619) (300,314) (255,226) (266,595)
Net loans, advances and financing 39,456,172 36,227,785 32,292,551 30,178,910
138 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(i) Credit risk (continued)
Total loans, advances and financing - credit quality (continued)
(a) Loans neither past due nor impaired
Analysis of loans, advances and �nancing that are neither past due nor impaired analysed based on the Group
and the Bank’s internal credit grading system is as follows:
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Quality classification
Satisfactory 33,065,493 30,400,612 26,834,857 25,143,738
Special mention 3,563,813 3,212,356 3,171,506 2,883,031
36,629,306 33,612,968 30,006,363 28,026,769
Quality classi�cation de�nitions
Satisfactory: Exposures demonstrate a strong capacity to meet �nancial commitments, with negligible or low
probability of default and/or levels of expected loss.
Special mention: Exposures require varying degrees of special attention and default risk is of greater concern.
(b) Loans past due but not impaired
Certain loans, advances and �nancing are past due but not impaired as the collateral values of these loans are in
excess of the principal and pro�t outstanding. Allowances for these loans may have been set aside on a portfolio
basis. The Bank’s loans, advances and �nancing which are past due but not impaired are as follows:
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Past due up to 30 days 1,510,507 1,312,337 1,298,568 1,165,696
Past due 31-60 days 801,073 767,638 607,415 595,137
Past due 61-90 days 333,516 352,672 258,680 272,465
2,645,096 2,432,647 2,164,663 2,033,298
139Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(i) Credit risk (continued)
Total loans, advances and financing - credit quality (continued)
(c) Loans impaired
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Analysis of impaired assets:
Gross impaired loans 713,648 706,185 584,491 574,555
Individually impaired loans 407,907 367,220 324,945 272,043
Collateral and other credit enhancements obtained
During the year, the Bank has obtained the following assets by taking possession of collateral held as security or
calling upon other credit enhancements.
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Nature of assets
Industrial and residential properties 9,099 15,825 8,508 14,646
Deposits and short-term funds, private debt securities, treasury bills and derivatives - credit quality
Private debt securities, treasury bills and other eligible bills included in �nancial assets held-for-trading and �nancial
investments available-for-sale are measured on a fair value basis. The fair value will re!ect the credit risk of the issuer.
Most listed and some unlisted securities are rated by external rating agencies. The Group and the Bank mainly uses
external credit ratings provided by RAM, MARC, Standard & Poors’ or Moody’s.
The table below presents the deposits and short-term funds, private debt securities, treasury bills and other eligible
bills by that neither past due nor impaired, analysed by rating.
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38 FINANCIAL RISK MANAGEMENT
(i) Credit risk (continued)
The table below presents the deposits and short-term funds, private debt securities, treasury bills and other eligible bills that neither past due nor impaired and
impaired, analysed by rating:
The Group
2014
Sovereigns
RM’000
AAA
RM’000
AA- to AA+
RM’000
A- to A+
RM’000
Lower
than A-
RM’000
Unrated
RM’000
* Impaired
RM’000
Total
RM’000
Short-term funds 6,017,541 353,896 375,483 21,860 1,541 - - 6,770,321
Deposits and placements with banks and
other �nancial institutions - 116,739 121,483 - - - - 238,222
Financial assets held-for-trading Bank Negara Malaysia
Monetary Notes 149,904 - - - - - - 149,904
Derivative �nancial assets - 24,462 11,737 309 912 51,238 - 88,658
Financial investments available-for-sale
Malaysian Government treasury bills 225,782 - - - - - - 225,782
Malaysian Government securities 50,663 - - - - - - 50,663
Malaysian Government investment issues 2,180,038 - - - - - - 2,180,038
Sukuk Perumahan Kerajaan 351,735 - - - - - - 351,735
Bank Negara Malaysia Monetary Notes 1,387,284 - - - - - - 1,387,284
Negotiable Instruments of Deposit and
Islamic Debt Certi�cates - - 1,331,452 - - - - 1,331,452
Khazanah Bonds/Sukuk 353,165 - - - - - - 353,165
Private debt securities 1,229,882 1,166,778 1,092,663 304,817 112,895 30,046 - 3,937,081
Financial investments held-to-maturity
Private debt securities - - - - - 408,716 67,439 476,155
11,945,994 1,661,875 2,932,818 326,986 115,348 490,000 67,439 17,540,460
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38 FINANCIAL RISK MANAGEMENT
(i) Credit risk (continued)
The Group
2013
Sovereigns
RM’000
AAA
RM’000
AA- to AA+
RM’000
A- to A+
RM’000
Lower
than A-
RM’000
Unrated
RM’000
* Impaired
RM’000
Total
RM’000
Short-term funds 7,959,732 776,161 217,858 196,840 75,073 8,704 - 9,234,368
Deposits and placements with banks and
other �nancial institutions - 177,049 181,991 - 123,557 - - 482,597
Financial assets held-for-trading
Bank Negara Malaysia Monetary Notes 149,544 - - - - - - 149,544
Derivative �nancial assets - 16,693 28,185 1,865 250 9,281 - 56,274
Financial investments available-for-sale
Malaysian Government investment issues 1,759,211 - - - - - - 1,759,211
Sukuk Perumahan Kerajaan 337,661 - - - - - - 337,661
Bank Negara Malaysia Monetary Notes 629,674 - - - - - - 629,674
Negotiable Instruments of Deposit and
Islamic Debt Certi�cates - - - 100,569 781,745 - - 882,314
Bankers’ acceptances and Islamic accepted bills - - - - - 196,522 - 196,522
Khazanah Bonds/Sukuk 237,441 - - - - - - 237,441
Private debt securities 1,059,831 1,218,999 697,306 369,074 59,071 48,282 - 3,452,563
Financial investments held-to-maturity
Private debt securities - - - - - 432,429 67,907 500,336
12,133,094 2,188,902 1,125,340 668,348 1,039,696 695,218 67,907 17,918,505
* Net of allowance for impairment.
Collateral is not generally obtained directly from the issuers of debt securities. Certain debt securities may be collateralised by speci�cally identi�ed assets that
would be obtainable in the event of default.
Deposits and short-term funds, private debt securities, treasury bills and derivatives which are past due but not impaired is not signi�cant.
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT (continued)
(i) Credit risk (continued)
The table below presents the deposits and short-term funds, private debt securities, treasury bills and other eligible bills that neither past due nor impaired and
impaired, analysed by rating:
The Bank
2014
Sovereigns
RM’000
AAA
RM’000
AA- to AA+
RM’000
A- to A+
RM’000
Lower
than A-
RM’000
Unrated
RM’000
* Impaired
RM’000
Total
RM’000
Short-term funds 3,170,155 73,871 173,225 18,056 1,541 171,603 - 3,608,451
Deposits and placements with banks and
other �nancial institutions - 116,738 121,484 - - 723,828 - 962,050
Financial assets held-for-trading
Bank Negara Malaysia Monetary Notes 149,904 - - - - - - 149,904
Derivative �nancial assets - 24,462 11,737 309 928 51,236 - 88,672
Financial investments available-for-sale
Malaysian Government treasury bills 200,778 - - - - - - 200,778
Malaysian Government securities 50,663 - - - - - - 50,663
Malaysian Government investment issues 1,678,503 - - - - - - 1,678,503
Sukuk Perumahan Kerajaan 272,595 - - - - - - 272,595
Bank Negara Malaysia Monetary Notes 1,102,406 - - - - - - 1,102,406
Negotiable Instruments of Deposit and
Islamic Debt Certi�cates - - 1,331,452 - - - 1,331,452
Khazanah Bonds/Sukuk 232,996 - - - - - - 232,996
Private debt securities 1,076,356 893,559 997,660 304,817 112,895 30,046 - 3,415,333
Financial investments held-to-maturity
Private debt securities - - - - - 325,962 67,439 393,401
7,934,356 1,108,630 2,635,558 323,182 115,364 1,302,675 67,439 13,487,204
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38 FINANCIAL RISK MANAGEMENT
(i) Credit risk (continued)
The Bank
2013
Sovereigns
RM’000
AAA
RM’000
AA- to AA+
RM’000
A- to A+
RM’000
Lower
than A-
RM’000
Unrated
RM’000
* Impaired
RM’000
Total
RM’000
Short-term funds 3,704,398 776,161 174,696 15,755 75,073 74,280 - 4,820,363
Deposits and placements with banks and
other �nancial institutions - 117,039 121,985 - 123,557 744,175 - 1,106,756
Financial assets held-for-trading
Bank Negara Malaysia Monetary Notes 149,544 - - - - - - 149,544
Derivative �nancial assets - 16,693 28,185 1,865 250 9,281 - 56,274
Financial investments available-for-sale
Malaysian Government investment issues 1,142,371 - - - - - - 1,142,371
Sukuk Perumahan Kerajaan 269,361 - - - - - - 269,361
Bank Negara Malaysia Monetary Notes 571,160 - - - - - - 571,160
Negotiable Instruments of Deposit and
Islamic Debt Certi�cates - - - 100,569 781,745 - - 882,314
Bankers’ acceptances and Islamic accepted bills - - - - - 196,522 - 196,522
Khazanah Bonds/Sukuk 207,756 - - - - - - 207,756
Private debt securities 860,792 918,595 687,033 369,074 59,071 48,282 - 2,942,847
Financial investments held-to-maturity
Private debt securities - - - - - 347,364 67,907 415,271
6,905,382 1,828,488 1,011,899 487,263 1,039,696 1,419,904 67,907 12,760,539
* Net of allowance for impairment.
Collateral is not generally obtained directly from the issuers of debt securities. Certain debt securities may be collateralised by speci�cally identi�ed assets that
would be obtainable in the event of default.
Deposits and short-term funds, private debt securities, treasury bills and derivatives which are past due but not impaired is not signi�cant.
144 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(i) Credit risk (continued)
Other financial assets - credit quality
Other �nancial assets of the Group and the Bank are neither past due nor impaired are summarised as below:
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Other assets 200,875 191,679 153,014 148,663
Amount due from subsidiaries - - 438 60,723
Amount due from joint ventures 14,855 4,185 - -
Other �nancial assets that are past due but not impaired or impaired are not signi�cant.
(ii) Market risk
Market risk is de�ned as the risk of losses to the Bank’s portfolio positions arising from movements in market factors
such as interest rates, foreign exchange rates and changes in volatility. The Bank is exposed to market risks from
its trading and investment activities. The Bank’s market risk management objective is to ensure that market risk is
appropriately identi�ed, measured, controlled, managed and reported.
The Bank’s exposure to market risk stems primarily from interest rate risk and foreign exchange rate risk. Interest rate
risk arises mainly from differences in timing between the maturities or repricing of assets, liabilities and derivatives.
The Bank is also exposed to basis risk when there is a mismatch between the change in price of a hedge and the
change in price of the assets it hedges. Foreign exchange rate risk arises from unhedged positions of customers’
requirements and proprietary positions.
The Bank’s market risk management control strategy is established based on its risk appetite, market liquidity and
business strategies as well as macroeconomic conditions. These limits are reviewed at least on an annual basis.
Market risk arising from the Bank’s trading book is primarily controlled through the imposition of Cut-loss and Value-
at-Risk (‘VaR’) Limits.
The Bank quanti�es interest rate risk by analysing the repricing mismatch between the rate sensitive assets and rate
sensitive liabilities. It also conducts Net Interest Income simulations to assess the variation in earnings under various
rates scenarios. The potential long term effects of the Bank’s overall exposure is also tracked by assessing the impact
on economic value of equity (‘EVE’).
The Bank’s interest rate risk is managed through Earnings-at-Risk (‘EaR’) and Economic Value-at-Risk (‘EVaR’) limits.
In addition, the Bank conducts periodic stress test of its respective business portfolios to ascertain market risk under
abnormal market conditions.
The Bank’s Management, ALCO and BRMC are regularly kept informed of its risk pro�le and positions.
145Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(ii) Market risk (continued)
Value-at-risk (‘VaR’)
Value-at-Risk (‘VaR’) is used to compute the maximum potential loss amount over a speci�ed holding period of a
trading portfolio. It measures the risk of losses arising from potential adverse movements in interest rates and foreign
exchange rates that could affect values of �nancial instruments.
In May 2014, arising from the Bank’s Treasury Management System Upgrade project, the Bank changed its methodology
of computing potential loss amount or Value-at-Risk (‘VaR’) to Historical Pricing Simulation Method (‘HPS’) from the
current Variance Co-variance (‘VCV’) approach. HPS was chosen because it is a robust methodology able to cater for
a spectrum of �nancial instruments.
The Historical Pricing Method uses the relative change of historical prices to estimate future potential changes in
the market value of outstanding positions. The Bank currently adopts 250 simulated business days for its HPS VaR
computation. After applying these price changes to the outstanding portfolios, 250 simulated market values for the
portfolio are generated and the change in the day-to-day market value is taken as simulated Pro�t & Loss (‘P&L’)
for the portfolio. Since VaR calculates the worst expected loss over a given day horizon and con�dence level under
normal market condition, simulated 250 values are sorted from the lowest to the highest simulated P&L. The VaR
focuses on the tail of the distribution (i.e the loss �gures).
The table below sets out a summary of the Bank’s VaR pro�le by �nancial instrument types for the trading portfolio:
The Group and The Bank
2014
Balance
RM’000
Average
for the
financial year
RM’000
Minimum
RM’000
Maximum
RM’000
Instruments
FX swap 668 432 6 2,400
FX spot (Metro Desk) 138 222 31 776
FX option 5 206 5 550
Government securities 1 - - 3
The Group and The Bank
2013
Balance
RM’000
Average
for the
�nancial year
RM’000
Minimum
RM’000
Maximum
RM’000
Instruments
FX swap 713 607 252 1,375
FX spot (Metro Desk) 88 150 6 678
Government securities 2 - - 2
Private debt securities - - - 60
146 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(ii) Market risk (continued)
Other risk measures
• Mark-to-market
Mark-to-market valuation tracks the current market value of the outstanding �nancial instruments.
• Stress testing
Stress tests are conducted to attempt to quantify market risk arising from low probability, abnormal market
movements. Stress tests measure the changes in values arising from extreme movements in interest rates and
foreign exchange rates based on past experience and simulated stress scenarios.
Interest/profit rate sensitivity
The table below shows the sensitivity for the �nancial assets and �nancial liabilities held at reporting date.
Impact on pro�t after tax is measured using Repricing Gap Simulation Methodology based on 100 basis point parallel
shifts in interest/pro�t rate.
Impact on equity represents the changes in fair values of �xed income instruments held in available-for-sale portfolio
arising from the shift in interest/pro�t rate.
The Group The Bank
2014 2014 2014 2014
+100
basis point
RM million
-100
basis point
RM million
+100
basis point
RM million
-100
basis point
RM million
Impact on profit after tax (18.8) 18.8 (26.4) 26.4
Impact on equity (206.8) 217.1 (176.2) 184.9
The Group The Bank
2013 2013 2013 2013
+100
basis point
RM million
-100
basis point
RM million
+100
basis point
RM million
-100
basis point
RM million
Impact on pro�t after tax (13.9) 13.9 (16.1) 16.1
Impact on equity (186.7) 199.2 (163.2) 174.4
147Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(ii) Market risk (continued)
Foreign exchange risk sensitivity analysis
An analysis of the exposure to assess the impact of a one per cent change in exchange rate to the pro�t after tax are
as follows:
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
+1%
Euro 1,206 1,966 886 1,551
United States Dollar 35,418 39,858 33,763 38,156
Great Britain Pound 33 1,165 36 1,155
Australian Dollar 211 1,173 217 1,167
Japanese Yen 45 14 42 16
Others 10,926 3,808 9,929 3,800
47,839 47,984 44,873 45,845
-1%
Euro (1,206) (1,966) (886) (1,551)
United States Dollar (35,418) (39,858) (33,763) (38,156)
Great Britain Pound (33) (1,165) (36) (1,155)
Australian Dollar (211) (1,173) (217) (1,167)
Japanese Yen (45) (14) (42) (16)
Others (10,926) (3,808) (9,929) (3,800)
(47,839) (47,984) (44,873) (45,845)
Foreign exchange risk
The Bank is exposed to the effects of !uctuations in the prevailing foreign currency exchange rates on its �nancial
position and cash !ows. Limits are set on the level of exposure by currency and in aggregate for both overnight
and intra-day positions, which are monitored daily. The following table summarises the Bank’s exposure to foreign
currency exchange rate risk at reporting date. Included in the table are the Bank’s �nancial instruments at carrying
amounts, categorised by currency.
148
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT (continued)
(ii) Market risk (continued)
Foreign exchange risk (continued)
The Group
2014
Euro
RM’000
United
States
Dollar
RM’000
Great
Britain
Pound
RM’000
Australian
Dollar
RM’000
Japanese
Yen
RM’000
Others
RM’000
Total
RM’000
Assets
Cash and short-term funds 4,814 142,377 5,415 14 1,415 8,623 162,658
Derivative �nancial assets 373 63,987 15 38 75 663 65,151
Financial investments available-for-sale 42,439 216,024 - 31,439 - 240,844 530,746
Loans, advances and �nancing 195 1,255,095 - - - 962,170 2,217,460
Other assets - 1,317 - - - - 1,317
Total financial assets 47,821 1,678,800 5,430 31,491 1,490 1,212,300 2,977,332
Liabilities
Deposits from customers 80,243 250,865 6,305 7,187 3,952 9,570 358,122
Deposits and placements of banks and other
�nancial institutions - 119,269 - 2,200 - 47,898 169,367
Derivative �nancial liabilities 562 2,509 - 3 - 1,127 4,201
Other liabilities 29 3,138 - - - - 3,167
Total financial liabilities 80,834 375,781 6,305 9,390 3,952 58,595 534,857
Net on-balance sheet �nancial position (33,013) 1,303,019 (875) 22,101 (2,462) 1,153,705 2,442,475
Off balance sheet commitments 193,781 3,419,439 5,319 6,006 8,470 303,161 3,936,176
149
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(ii) Market risk (continued)
Foreign exchange risk (continued)
The Group
2013
Euro
RM’000
United
States
Dollar
RM’000
Great
Britain
Pound
RM’000
Australian
Dollar
RM’000
Japanese
Yen
RM’000
Others
RM’000
Total
RM’000
Assets
Cash and short-term funds 7,594 245,259 4,637 16 1,399 31,534 290,439
Deposits and placements with banks and other
�nancial institutions - 67,299 - 29,289 - 26,969 123,557
Derivative �nancial assets - 1,121 - - - 213 1,334
Financial investments available-for-sale 46,552 254,631 - 56,450 - 147,088 504,721
Loans, advances and �nancing 207 1,294,883 107,860 - 422 264,128 1,667,500
Other assets - 892 - - - 928 1,820
Total �nancial assets 54,353 1,864,085 112,497 85,755 1,821 470,860 2,589,371
Liabilities
Deposits from customers 77,562 221,478 14,962 6,010 9,839 16,520 346,371
Deposits and placements of banks and other
�nancial institutions - - - 11,319 - 45 11,364
Derivative �nancial liabilities - 4,597 - - - 1,077 5,674
Other liabilities - 2,904 - - - - 2,904
Total �nancial liabilities 77,562 228,979 14,962 17,329 9,839 17,642 366,313
Net on-balance sheet �nancial position (23,209) 1,635,106 97,535 68,426 (8,018) 453,218 2,223,058
Off balance sheet commitments 285,323 3,679,237 57,795 87,955 9,932 54,566 4,174,808
150
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(ii) Market risk (continued)
Foreign exchange risk (continued)
The Bank
2014
Euro
RM’000
United
States
Dollar
RM’000
Great
Britain
Pound
RM’000
Australian
Dollar
RM’000
Japanese
Yen
RM’000
Others
RM’000
Total
RM’000
Assets
Cash and short-term funds 4,233 139,380 4,608 14 1,006 7,865 157,106
Derivative �nancial assets 373 63,994 15 44 75 662 65,163
Financial investments available-for-sale 42,439 216,024 - 31,439 - 240,844 530,746
Loans, advances and �nancing 195 1,109,123 - - - 962,171 2,071,489
Other assets - 1,290 - - - - 1,290
Total financial assets 47,240 1,529,811 4,623 31,497 1,081 1,211,542 2,825,794
Liabilities
Deposits from customers 80,226 250,752 6,295 7,180 3,949 9,570 357,972
Deposits and placements of banks and other
�nancial institutions - 50,528 - 2,692 - 47,899 101,119
Derivative �nancial liabilities 563 2,514 - 3 - 1,131 4,211
Other liabilities 29 3,227 - - - - 3,256
Total financial liabilities 80,818 307,021 6,295 9,875 3,949 58,600 466,558
Net on-balance sheet �nancial position (33,578) 1,222,790 (1,672) 21,622 (2,868) 1,152,942 2,359,236
Off balance sheet commitments 151,762 3,278,939 6,408 7,289 8,470 170,915 3,623,783
151
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(ii) Market risk (continued)
Foreign exchange risk (continued)
The Bank
2013
Euro
RM’000
United
States
Dollar
RM’000
Great
Britain
Pound
RM’000
Australian
Dollar
RM’000
Japanese
Yen
RM’000
Others
RM’000
Total
RM’000
Assets
Cash and short-term funds 6,089 310,064 4,381 16 1,355 30,691 352,596
Deposits and placements with banks and
other �nancial institutions - 95,667 - 29,289 - 26,969 151,925
Derivative �nancial assets - 1,121 - - - 213 1,334
Financial investments available-for-sale 46,552 254,631 - 56,450 - 147,088 504,721
Loans, advances and �nancing 207 1,158,914 107,860 - 422 264,129 1,531,532
Other assets - 892 - - - 928 1,820
Total �nancial assets 52,848 1,821,289 112,241 85,755 1,777 470,018 2,543,928
Liabilities
Deposits from customers 77,544 220,879 14,955 6,003 9,835 16,519 345,735
Deposits and placements of banks and
other �nancial institutions - 26,720 - 12,046 - 45 38,811
Derivative �nancial liabilities - 4,597 - - - 1,077 5,674
Other liabilities - 2,987 - - - - 2,987
Total �nancial liabilities 77,544 255,183 14,955 18,049 9,835 17,641 393,207
Net on-balance sheet �nancial position (24,696) 1,566,106 97,286 67,706 (8,058) 452,377 2,150,721
Off balance sheet commitments 231,559 3,521,399 56,676 87,955 10,195 54,258 3,962,042
152
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(ii) Market risk (continued)
Interest/profit rate risk
Interest/ pro�t rate risk is the risk to earnings and capital arising from exposure to adverse movements in interest/pro�t rates mainly due to mismatches in timing repricing
of assets and liabilities. These mismatches are actively managed from an earnings and economic value perspective, Interest/pro�t rate risk limits are established and
approved in line with the Group’s strategy and risk appetite. These limits are reviewed regularly to ensure relevance in the context of prevailing market conditions.
The following table represents the Group’s and the Bank’s assets and liabilities at carrying amount, categorised by the earlier of contractual repricing or maturity
dates as at reporting date.
Non-trading book
The Group
2014
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Non-
interest /
profit
sensitive
RM’000
Trading
book
RM’000
Total
RM’000
Assets
Cash and short-term funds 6,667,893 - - - - 271,019 - 6,938,912
Deposits and placements with banks and other
�nancial institutions - - - 195,000 40,000 3,222 - 238,222
Financial assets held-for-trading - - - - - - 149,904 149,904
Derivative �nancial assets - - - - - - 88,658 88,658
Financial investments available-for-sale 814,505 890,031 1,398,421 4,323,531 2,320,409 201,014 - 9,947,911
Financial investment held-to-maturity - 321,985 82,690 - - 71,480 - 476,155
Loans, advances and �nancing
- non-impaired 22,603,483 2,299,560 3,814,294 8,331,073 2,225,992 (292,619) * - 38,981,783
- impaired - - - - - 474,389 # - 474,389
Others (1) - - - - - 229,162 - 229,162
Statutory deposits with Bank Negara Malaysia - - - - - 1,696,550 - 1,696,550
Total assets 30,085,881 3,511,576 5,295,405 12,849,604 4,586,401 2,654,217 238,562 59,221,646
* The negative balance represents collective impairment allowance for loans, advances and �nancing.
# Net of individual impairment allowance.
(1) Others include other assets and amount due from joint ventures.
153
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(ii) Market risk (continued)
Interest/profit rate risk (continued)
Non-trading book
The Group
2014
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Non-
interest
sensitive
RM’000
Trading
book
RM’000
Total
RM’000
Liabilities
Deposits from customers 18,948,297 12,454,090 12,673,829 656,015 10,000 3,304,993 - 48,047,224
Deposits and placements of banks and other �nancial
institutions 2,052,022 2,321,073 464,273 - - 12,308 - 4,849,676
Derivative �nancial liabilities - - - - - - 237,426 237,426
Bills and acceptances payable - - - - - 94,308 - 94,308
Recourse obligation on loans sold to Cagamas Berhad - - - 138,313 - 834 - 139,147
Subordinated term loan 600,000 - - - - 4,310 - 604,310
Other liabilities - - - - - 359,644 - 359,644
Total liabilities 21,600,319 14,775,163 13,138,102 794,328 10,000 3,776,397 237,426 54,331,735
Net interest sensivity gap 8,485,562 (11,263,587) (7,842,697) 12,055,276 4,576,401
154
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(ii) Market risk (continued)
Interest/profit rate risk (continued)
Non-trading book
The Group
2013
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Non-
interest /
pro�t
sensitive
RM’000
Trading
book
RM’000
Total
RM’000
Assets
Cash and short-term funds 9,178,632 - - - - 223,069 - 9,401,701
Deposits and placements with banks and other
�nancial institutions 90,000 286,741 101,437 - - 4,419 - 482,597
Financial assets held-for-trading - - - - - - 149,544 149,544
Derivative �nancial assets - - - - - - 56,274 56,274
Financial investments available-for-sale 210,041 767,998 1,318,762 3,056,311 2,087,340 174,085 - 7,614,537
Financial investment held-to-maturity 1,525 268,102 85,000 73,658 - 72,051 - 500,336
Loans, advances and �nancing
- non-impaired 19,430,962 2,113,869 3,518,151 8,648,969 2,333,664 (300,314) * - 35,745,301
- impaired - - - - - 482,484 # - 482,484
Others (1) - - - - - 208,457 - 208,457
Statutory deposits with Bank Negara Malaysia - - - - - 1,459,350 - 1,459,350
Total assets 28,911,160 3,436,710 5,023,350 11,778,938 4,421,004 2,323,601 205,818 56,100,581
* The negative balance represents collective impairment allowance for loans, advances and �nancing.
# Net of individual impairment allowance.
(1) Others include other assets and amount due from joint ventures.
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(ii) Market risk (continued)
Interest/profit rate risk (continued)
Non-trading book
The Group
2013
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Non-
interest /
pro�t
sensitive
RM’000
Trading
book
RM’000
Total
RM’000
Liabilities
Deposits from customers 18,347,659 9,935,597 14,499,590 119,512 - 3,185,724 - 46,088,082
Deposits and placements of banks and other �nancial
institutions 2,263,614 1,517,415 274,925 - - 9,590 - 4,065,544
Derivative �nancial liabilities - - - - - - 94,522 94,522
Bills and acceptances payable - - - - - 90,208 - 90,208
Recourse obligation on loans sold to Cagamas Berhad - - - 394,708 - 3,082 - 397,790
Subordinated term loan 900,000 - - - - 4,964 - 904,964
Other liabilities - - - - - 391,977 - 391,977
Total liabilities 21,511,273 11,453,012 14,774,515 514,220 - 3,685,545 94,522 52,033,087
Net interest/pro�t sensivity gap 7,399,887 (8,016,302) (9,751,165) 11,264,718 4,421,004
156
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(ii) Market risk (continued)
Interest/profit rate risk (continued)
Non-trading book
The Bank
2014
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Non-
interest
sensitive
RM’000
Trading
book
RM’000
Total
RM’000
Assets
Cash and short-term funds 3,514,330 - - - - 262,712 - 3,777,042
Deposits and placements with banks and other
�nancial institutions - 315,164 67,233 492,210 40,000 47,443 - 962,050
Financial assets held-for-trading - - - - - - 149,904 149,904
Derivative �nancial assets - - - - - - 88,672 88,672
Financial investments available-for-sale 814,505 750,805 1,077,083 3,553,769 2,027,215 192,034 - 8,415,411
Financial investment held-to-maturity - 321,985 - - - 71,416 - 393,401
Loans, advances and �nancing
- non-impaired 18,563,002 2,061,238 3,193,231 6,828,808 1,524,747 (255,226) * - 31,915,800
- impaired - - - - - 376,751 # - 376,751
Others - - - - - 166,147 - 166,147
Amount due from subsidiaries - - - - - 438 - 438
Statutory deposits with Bank Negara Malaysia - - - - - 1,398,550 - 1,398,550
Total assets 22,891,837 3,449,192 4,337,547 10,874,787 3,591,962 2,260,265 238,576 47,644,166
* The negative balance represents collective impairment allowance for loans, advances and �nancing.
# Net of individual impairment allowance.
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(ii) Market risk (continued)
Interest/profit rate risk (continued)
Non-trading book
The Bank
2014
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Non-
interest
sensitive
RM’000
Trading
book
RM’000
Total
RM’000
Liabilities
Deposits from customers 13,174,947 10,694,447 10,627,244 419,653 10,000 3,253,921 - 38,180,212
Deposits and placements of banks and other �nancial
institutions 1,349,550 2,121,073 219,720 - - 9,043 - 3,699,386
Derivative �nancial liabilities - - - - - - 237,419 237,419
Bills and acceptances payable - - - - - 94,308 - 94,308
Recourse obligation on loans sold to Cagamas Berhad - - - 138,313 - 834 - 139,147
Subordinated term loan 600,000 - - - - 4,310 - 604,310
Other liabilities - - - - - 328,063 - 328,063
Amount due to subsidiaries - - - - - 296,781 - 296,781
Total liabilities 15,124,497 12,815,520 10,846,964 557,966 10,000 3,987,260 237,419 43,579,626
Net interest sensivity gap 7,767,340 (9,366,328) (6,509,417) 10,316,821 3,581,962
158
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(ii) Market risk (continued)
Interest/profit rate risk (continued)
Non-trading book
The Bank
2013
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Non-
interest
sensitive
RM’000
Trading
book
RM’000
Total
RM’000
Assets
Cash and short-term funds 4,777,182 - - - - 210,514 - 4,987,696
Deposits and placements with banks and other
�nancial institutions 90,000 520,155 163,679 197,210 100,000 35,712 - 1,106,756
Financial assets held-for-trading - - - - - - 149,544 149,544
Derivative �nancial assets - - - - - - 56,274 56,274
Financial investments available-for-sale 210,041 702,959 904,603 2,466,357 1,884,482 162,972 - 6,331,414
Financial investment held-to-maturity 1,525 268,101 - 73,658 - 71,987 - 415,271
Loans, advances and �nancing
- non-impaired 16,143,542 1,904,549 3,003,968 7,313,314 1,694,694 (266,595) * - 29,793,472
- impaired - - - - - 385,438 # - 385,438
Others - - - - - 161,909 - 161,909
Amount due from subsidiaries 60,115 - - - - 608 - 60,723
Statutory deposits with Bank Negara Malaysia - - - - - 1,226,350 - 1,226,350
Total assets 21,282,405 3,395,764 4,072,250 10,050,539 3,679,176 1,988,895 205,818 44,674,847
* The negative balance represents collective impairment allowance for loans, advances and �nancing.
# Net of individual impairment allowance.
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NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(ii) Market risk (continued)
Interest/profit rate risk (continued)
Non-trading book
The Bank
2013
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Non-
interest
sensitive
RM’000
Trading
book
RM’000
Total
RM’000
Liabilities
Deposits from customers 13,043,316 8,579,819 11,940,823 116,771 - 3,119,999 - 36,800,728
Deposits and placements of banks and other �nancial
institutions 955,762 1,517,415 179,392 - - 6,966 - 2,659,535
Derivative �nancial liabilities - - - - - - 94,522 94,522
Bills and acceptances payable - - - - - 90,208 - 90,208
Recourse obligation on loans sold to Cagamas Berhad - - - 394,708 - 3,082 - 397,790
Subordinated term loan 900,000 - - - - 4,964 - 904,964
Other liabilities - - - - - 359,837 - 359,837
Amount due to subsidiaries - - - - - 53,559 - 53,559
Total liabilities 14,899,078 10,097,234 12,120,215 511,479 - 3,638,615 94,522 41,361,143
Net interest sensivity gap 6,383,327 (6,701,470) (8,047,965) 9,539,060 3,679,176
160 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(iii) Liquidity risk
Liquidity risk is the current and prospective risk to earnings or capital arising from a bank’s inability to meet its
obligations when they fall due. Liquidity risk includes the inability to manage sudden decreases or changes in funding
sources. Liquidity risk also arises from the failure to recognise changes in market conditions that affect the ability to
liquidate assets quickly and with minimal loss in value.
Liquidity risk management is managed on Group basis. The objective of liquidity risk management is to ensure that
there are suf�cient funds to meet contractual and regulatory obligations without incurring unacceptable losses as
well as to undertake new transactions. The Group’s liquidity management process involves establishing liquidity risk
management policies and limits, liquidity risk limits monitoring, stress testing and establishing contingency funding
plans. These building blocks of liquidity risk management are subject to regular reviews to ensure relevance in the
context of prevailing market conditions.
Liquidity monitoring is performed via projection of contractual and behavioral cash !ows, which are built upon from
BNM’s Liquidity Framework (‘LF’). The LF ascertains the liquidity condition based on the contractual and behavioral
cash-!ow of assets, liabilities and off-balance sheet commitments, taking into consideration the realisable cash value
of the eligible lique�able assets. The LF is also supported by indicative ratios on the Bank’s funding structure to
monitor the reliance on particular funding sources. Liquid assets in excess of regulatory requirements are maintained
for contingency in the event of a liquidity crisis.
The Bank employs liquidity risk indicators as an early alert of any structural change for liquidity risk management.
Liquidity risk is tracked using internal and external qualitative and quantitative indicators. Liquidity positions in the
major currencies are being closely monitored by tracking the availability of medium to long term foreign currency
funding and adhering to the guiding principles for foreign currency assets creations.
The Bank also conducts liquidity stress test to gauge its resilience in the event of a liquidity crisis. A Contingency
Funding Plan is in place to alert and enable Management to act effectively and ef�ciently in handling liquidity disruption.
The document encompasses early warning system, strategies, decision-making authorities, and courses of actions to
be taken in the event of liquidity crisis and emergencies.
Basel III Liquidity Standards
The Basel Committee developed the Liquidity Coverage Ratio (‘LCR’) and Net Stable Funding Ratio (‘NSFR’) with the
goal of strengthening the resilience of banking systems. The LCR and NSFR are tracked monthly to assess the short
term and long term liquidity risk pro�le of the Bank, in line with BNM observation period reporting for Basel III liquidity
ratios which commenced in June 2012.
The BRMC is responsible for the Bank’s liquidity policy although the strategic management of liquidity has been
delegated to the ALCO. The BRMC is informed regularly on the liquidity situation in the Bank.
161Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(iii) Liquidity risk (continued)
Liquidity risk disclosure table which is based on contractual undiscounted cash flow
The table below provides analysis of cash !ow payables for �nancial liabilities based on remaining contractual
maturities on undiscounted basis. The balances in the table below do not agree directly to the balances reported
in the statement of �nancial position as the table incorporates all contractual cash !ows, on an undiscounted basis,
relating to both principal and interest payments.
The Group
2014
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Total
RM’000
Deposits from customers 22,031,100 12,648,427 13,058,333 700,615 10,347 48,448,822
Deposits and placements of banks
and other �nancial institutions 2,101,968 2,337,475 472,699 - - 4,912,142
Bills and acceptances payable 94,308 - - - - 94,308
Recourse obligation on loans sold to
Cagamas Berhad - 2,572 7,729 139,712 - 150,013
Other liabilities 359,644 - - - - 359,644
Subordinated term loan 1,175 2,236 20,764 110,716 651,190 786,081
24,588,195 14,990,710 13,559,525 951,043 661,537 54,751,010
The Group
2013
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Total
RM’000
Deposits from customers 21,271,311 10,109,260 14,896,910 167,547 11,033 46,456,061
Deposits and placements of banks
and other �nancial institutions 2,361,576 1,527,301 279,061 - - 4,167,938
Bills and acceptances payable 90,208 - - - - 90,208
Recourse obligation on loans sold to
Cagamas Berhad 2,791 5,312 263,436 150,442 - 421,981
Other liabilities 391,977 - - - - 391,977
Subordinated term loan 3,526 305,835 19,777 105,072 671,474 1,105,684
24,121,389 11,947,708 15,459,184 423,061 682,507 52,633,849
162 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(iii) Liquidity risk (continued)
Liquidity risk disclosure table which is based on contractual undiscounted cash flow (continued)
The Bank
2014
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Total
RM’000
Deposits from customers 16,239,178 10,861,632 10,948,721 450,924 10,347 38,510,802
Deposits and placements of banks
and other �nancial institutions 1,355,497 2,136,204 224,406 - - 3,716,107
Bills and acceptances payable 94,308 - - - - 94,308
Recourse obligation on loans sold to
Cagamas Berhad - 2,572 7,729 139,712 - 150,013
Other liabilities 328,063 - - - - 328,063
Amount due to subsidiaries 296,781 - - - - 296,781
Subordinated term loan 1,175 2,236 20,764 110,716 651,190 786,081
18,315,002 13,002,644 11,201,620 701,352 661,537 43,882,155
The Bank
2013
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Total
RM’000
Deposits from customers 15,956,114 8,722,130 12,255,551 164,593 11,033 37,109,421
Deposits and placements of banks
and other �nancial institutions 958,535 1,527,301 182,527 - - 2,668,363
Bills and acceptances payable 90,208 - - - - 90,208
Recourse obligation on loans sold to
Cagamas Berhad 2,791 5,312 263,436 150,442 - 421,981
Other liabilities 359,836 - - - - 359,836
Amount due to subsidiaries 53,559 - - - - 53,559
Subordinated term loan 3,526 305,835 19,777 105,072 671,474 1,105,684
17,424,569 10,560,578 12,721,291 420,107 682,507 41,809,052
163Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(iii) Liquidity risk (continued)
Derivative financial liabilities
Derivative �nancial liabilities based on contractual undiscounted cash !ow:
The Group
2014
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Total
RM’000
Derivatives settled on net basis
Interest rate derivatives (118) (1,038) (1,679) (4,221) (1,400) (8,456)
Derivatives settled on gross basis
Foreign exchange derivatives:
Out!ow (954,124) (591,013) (1,391,627) 79,230 (105,145) (2,962,679)
In!ow 954,362 592,492 1,396,306 417,974 98,789 3,459,923
238 1,479 4,679 497,204 (6,356) 497,244
The Bank
2014
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Total
RM’000
Derivatives settled on net basis
Interest rate derivatives (118) (1,038) (1,679) (4,221) (1,400) (8,456)
Derivatives settled on gross basis
Foreign exchange derivatives:
Out!ow (943,045) (591,013) (1,391,627) 79,230 (105,145) (2,951,600)
In!ow 943,290 592,492 1,396,306 417,974 98,789 3,448,851
245 1,479 4,679 497,204 (6,356) 497,251
164 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(iii) Liquidity risk (continued)
Derivative financial liabilities (continued)
Derivative �nancial liabilities based on contractual undiscounted cash !ow:
The Group and The Bank
2013
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Total
RM’000
Derivatives settled on net basis
Interest rate derivatives (1,204) (1,472) (3,275) 2,242 6,142 2,433
Derivatives settled on gross basis
Foreign exchange derivatives:
Out!ow (509,833) (674,028) (911,963) (594,154) (96,030) (2,786,008)
In!ow 509,931 673,695 909,002 594,154 96,030 2,782,812
98 (333) (2,961) - - (3,196)
165Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(iii) Liquidity risk (continued)
Liquidity risk for assets and liabilities based on remaining contractual maturities
The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities,
commitments and counter-guarantees are important factors in assessing the liquidity of the Group and the Bank. The
table below provides analysis of assets and liabilities into relevant maturity tenures based on remaining contractual
maturities.
Maturities of assets and liabilities of the Group and the Bank by remaining contractual maturities pro�le are as follows:
The Group
2014
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Total
RM’000
Assets
Cash and short-term funds 6,938,912 - - - - 6,938,912
Deposits and placements with banks
and other �nancial institutions - - - 196,937 41,285 238,222
Financial assets held-for-trading 149,904 - - - - 149,904
Derivative �nancial assets 13,892 22,322 44,429 5,040 2,975 88,658
Financial investments available-for-sale 795,662 838,305 1,518,997 4,474,538 2,320,409 9,947,911
Financial investments held-to-maturity 70,359 75,807 16,064 70,331 243,594 476,155
Loans, advances and �nancing 3,014,294 1,867,264 2,305,986 10,573,753 21,694,875 39,456,172
Other assets 194,602 - 13,467 5,363 9,974 223,406
Amount due from joint ventures 14,855 - - - - 14,855
Statutory deposits with Bank Negara
Malaysia 1,696,550 - - - - 1,696,550
Other non-�nancial assets (1) 3,117 - 20 - 296,820 299,957
12,892,147 2,803,698 3,898,963 15,325,962 24,609,932 59,530,702
Liabilities
Deposits from customers 22,013,079 12,571,232 12,794,289 658,624 10,000 48,047,224
Deposits and placements of banks and
other �nancial institutions 2,058,948 2,325,072 465,656 - - 4,849,676
Derivative �nancial liabilities 35,500 42,356 100,581 45,569 13,420 237,426
Bills and acceptances payable 94,308 - - - - 94,308
Recourse obligation on loans sold to
Cagamas Berhad - 834 - 138,313 - 139,147
Subordinated term loan 2,940 1,370 - - 600,000 604,310
Other liabilities 359,644 - - - - 359,644
Provision for taxation - - 28,029 - - 28,029
24,564,419 14,940,864 13,388,555 842,506 623,420 54,359,764
Net liquidity gap (11,672,272)(12,137,166) (9,489,592) 14,483,456 23,986,512
(1) Other non-�nancial assets include tax recoverable, deferred tax assets, property and equipment and intangible
assets.
166 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(iii) Liquidity risk (continued)
Liquidity risk for assets and liabilities based on remaining contractual maturities (continued)
The Group
2013
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Total
RM’000
Assets
Cash and short-term funds 9,401,701 - - - - 9,401,701
Deposits and placements with banks
and other �nancial institutions - 201,906 41,668 197,738 41,285 482,597
Financial assets held-for-trading 149,544 - - - - 149,544
Derivative �nancial assets 8,965 22,884 8,136 4,566 11,723 56,274
Financial investments available-for-sale 190,150 797,941 1,450,706 3,088,400 2,087,340 7,614,537
Financial investments held-to-maturity 70,913 1,075 16,064 149,826 262,458 500,336
Loans, advances and �nancing 1,631,991 1,489,733 1,994,497 7,855,233 23,256,331 36,227,785
Other assets 186,368 - 12,277 5,341 16,111 220,097
Amount due from joint ventures 4,185 - - - - 4,185
Statutory deposits with Bank Negara
Malaysia 1,459,350 - - - - 1,459,350
Other non-�nancial assets (1) 9,944 - 17 - 310,746 320,707
13,113,111 2,513,539 3,523,365 11,301,104 25,985,994 56,437,113
Liabilities
Deposits from customers 21,256,343 10,056,459 14,615,566 149,714 10,000 46,088,082
Deposits and placements of banks and
other �nancial institutions 2,268,127 1,521,311 276,106 - - 4,065,544
Derivative �nancial liabilities 9,234 22,725 20,786 23,847 17,930 94,522
Bills and acceptances payable 90,208 - - - - 90,208
Recourse obligation on loans sold to
Cagamas Berhad 1,297 1,786 123,243 271,464 - 397,790
Subordinated term loan 2,756 302,208 - - 600,000 904,964
Other liabilities 391,977 - - - - 391,977
Provision for taxation - - 36,402 - - 36,402
24,019,942 11,904,489 15,072,103 445,025 627,930 52,069,489
Net liquidity gap (10,906,831) (9,390,950) (11,548,738) 10,856,079 25,358,064
(1) Other non-�nancial assets include tax recoverable, deferred tax assets, property and equipment and intangible
assets.
167Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(iii) Liquidity risk (continued)
Liquidity risk for assets and liabilities based on remaining contractual maturities (continued)
The Bank
2014
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Total
RM’000
Assets
Cash and short-term funds �nancial
institutions 3,777,042 - - - - 3,777,042
Deposits and placements with banks
and other �nancial institutions - 321,335 67,503 531,927 41,285 962,050
Financial assets held-for-trading 149,904 - - - - 149,904
Derivative �nancial assets 13,909 22,320 44,429 5,040 2,974 88,672
Financial investments available-for-sale 795,381 693,321 1,194,718 3,704,776 2,027,215 8,415,411
Financial investments held-to-maturity 70,359 75,807 16,000 44,000 187,235 393,401
Loans, advances and �nancing 2,481,164 1,715,450 1,996,504 9,212,519 16,886,914 32,292,551
Other assets 146,749 - 12,991 5,363 9,552 174,655
Amount due from subsidiaries 438 - - - - 438
Statutory deposits with Bank Negara
Malaysia 1,398,550 - - - - 1,398,550
Other non-�nancial assets (1) 218 - - - 680,795 681,013
8,833,714 2,828,233 3,332,145 13,503,625 19,835,970 48,333,687
Liabilities
Deposits from customers 16,224,566 10,796,817 10,727,106 421,723 10,000 38,180,212
Deposits and placements of banks and
other �nancial institutions 1,354,279 2,125,052 220,055 - - 3,699,386
Derivative �nancial liabilities 35,493 42,356 100,581 45,569 13,420 237,419
Bills and acceptances payable 94,308 - - - - 94,308
Recourse obligation on loans sold to
Cagamas Berhad - 834 - 138,313 - 139,147
Subordinated term loan 2,940 1,370 - - 600,000 604,310
Other liabilities 328,063 - - - - 328,063
Amount due to subsidiaries 296,781 - - - - 296,781
Provision for taxation - - 23,939 - - 23,939
18,336,430 12,966,429 11,071,681 605,605 623,420 43,603,565
Net liquidity gap (9,502,716) (10,138,196) (7,739,536) 12,898,020 19,212,550
(1) Other non-�nancial assets include deferred tax assets, investment in subsidiaries, property and equipment and
intangible assets.
168 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(iii) Liquidity risk (continued)
Liquidity risk for assets and liabilities based on remaining contractual maturities (continued)
The Bank
2013
Up to 1
month
RM’000
>1-3
months
RM’000
>3-12
months
RM’000
>1-5
years
RM’000
Over 5
years
RM’000
Total
RM’000
Assets
Cash and short-term funds 4,987,696 - - - - 4,987,696
Deposits and placements with banks
and other �nancial institutions - 441,606 104,090 417,622 143,438 1,106,756
Financial assets held-for-trading 149,544 - - - - 149,544
Derivative �nancial assets 8,965 22,884 8,136 4,566 11,723 56,274
Financial investments available-for-sale 189,331 724,763 1,034,393 2,498,445 1,884,482 6,331,414
Financial investments held-to-maturity 70,912 1,075 16,000 133,658 193,626 415,271
Loans, advances and �nancing 1,444,624 1,366,165 1,754,008 6,437,263 19,176,850 30,178,910
Other assets 143,359 - 12,166 5,341 15,689 176,555
Amount due from subsidiaries 60,723 - - - - 60,723
Statutory deposits with Bank Negara
Malaysia 1,226,350 - - - - 1,226,350
Other non-�nancial assets (1) 6,985 - - - 694,123 701,108
8,288,489 2,556,493 2,928,793 9,496,895 22,119,931 45,390,601
Liabilities
Deposits from customers 15,944,196 8,676,352 12,023,218 146,962 10,000 36,800,728
Deposits and placements of banks and
other �nancial institutions 957,882 1,521,311 180,342 - - 2,659,535
Derivative �nancial liabilities 9,234 22,725 20,786 23,847 17,930 94,522
Bills and acceptances payable 90,208 - - - - 90,208
Recourse obligation on loans sold to
Cagamas Berhad 1,297 1,786 123,243 271,464 - 397,790
Subordinated term loan 2,756 302,208 - - 600,000 904,964
Other liabilities 359,837 - - - - 359,837
Amount due to subsidiaries 53,559 - - - - 53,559
Provision for taxation - - 34,351 - - 34,351
17,418,969 10,524,382 12,381,940 442,273 627,930 41,395,494
Net liquidity gap (9,130,480) (7,967,889) (9,453,147) 9,054,622 21,492,001
(1) Other non-�nancial assets include deferred tax assets, investment in subsidiaries, property and equipment and
intangible assets.
169Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(iv) Operational risk management
Operational risk is the risk of loss arising from inadequate or failed internal processes, action on or by people,
infrastructure or technology or events which are beyond the Bank’s immediate control which have an operational
impact, including natural disaster, fraudulent activities and money laundering/�nancing of terrorism.
The Bank manages operational risk through a control based environment in which policies and procedures are
formulated after taking into account individual unit’s business activities, the market in which it is operating and
regulatory requirement in force.
The Bank adopts the Basic Indicator Approach for the purpose of calculating the capital requirement for operational
risk. The capital requirement is calculated by taking 15% of the Bank’s average annual gross income over the previous
three years.
Risk is identi�ed through the use of assessment tools and measured using threshold/limits mapped against risk matrix.
Monitoring and control procedures include the use of key control standards, independent tracking of risk, back-up
procedures and contingency plans, including disaster recovery and business continuity plans. This is supported by
periodic reviews undertaken by Group Internal Audit to ensure adequacy and effectiveness of the Group Operational
Risk Management process.
The Bank gathers, analyses and reports operational risk loss and ‘near miss’ events to Group Operational Risk
Management Committee and Board Risk Management Committee. Appropriate preventive and remedial actions are
reviewed for effectiveness and implemented to minimise the recurrence of such events.
As a matter of requirement, all Operational Risk Coordinators must satisfy an Internal Operational Risk (including
anti-money laundering/counter �nancing of terrorism and business continuity management) Certi�cation Program.
These coordinators will �rst go through an on-line self learning exercise before attempting on-line assessments to
measure their skills and knowledge level. This will enable Group Risk Management to prescribe appropriate training
and development activities for the coordinators.
170 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(v) Fair value of financial instruments
Fair value is de�ned as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The Group and the Bank measure fair values using the following fair value hierarchy that re!ects the signi�cance of
the inputs used in making the measurements:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations
in which inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly.
Level 3: Valuations derived from valuation techniques in which one or more signi�cant inputs are not based on
observable market data.
Financial instruments are classi�ed as Level 1 if their value is observable in an active market. Such instruments are
valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted
prices is readily available, and the price represents actual and regularly occurring market transactions. An active
market is one in which transactions occur with suf�cient volume and frequency to provide pricing information on an
on-going basis. These would include actively traded listed equities and actively exchange-traded derivatives.
Where fair value is determined using unquoted market prices in less active markets or quoted prices for similar assets
and liabilities, such instruments are generally classi�ed as Level 2. In cases where quoted prices are generally not
available, the Group and the Bank then determine fair value based upon valuation techniques that use as inputs,
market parameters including but not limited to yield curves, volatilities and foreign exchange rates. The majority of
valuation techniques employ only observable market data and so reliability of the fair value measurement is high.
Financial instruments are classi�ed as Level 3 if their valuation incorporates signi�cant inputs that are not based on
observable market data (unobservable inputs). Such inputs are generally determined based on observable inputs of a
similar nature, historical observations on the level of the input or other analytical techniques.
This category includes unquoted shares held for socio economic reasons. Fair values for shares held for socio economic
reasons are based on the net tangible assets of the affected companies. The Group’s and the Bank’s exposure to
�nancial instruments classi�ed as Level 3 comprised a small number of �nancial instruments which constitute an
insigni�cant component of the Group’s and the Bank’s portfolio of �nancial instruments. Hence, changing one or more
of the inputs to reasonable alternative assumptions would not change the value signi�cantly for the �nancial assets in
Level 3 of the fair value hierarchy.
The Group and the Bank recognise transfers between levels of the fair value hierarchy at the end of the reporting
period during which the transfer has occurred. Transfers between fair value hierarchy primarily due to change in the
level of trading activity, change in observable market activity related to an input, reassessment of available pricing
information and change in the signi�cance of the unobservable input. There were no transfers between Level 1, 2 and
3 of the fair value hierarchy during the �nancial year (2013: Nil).
171Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(v) Fair value of financial instruments (continued)
The following table presents assets and liabilities measured at fair value and classi�ed by level of the following fair
value measurement hierarchy:
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
The Group
2014
Assets
Financial assets held-for-trading - 149,904 - 149,904
Derivative �nancial assets - 88,658 - 88,658
Financial investments available-for-sale *
- Money market instruments - 5,880,119 - 5,880,119
- Equity securities 33 - 130,678 130,711
- Private debt securities - 3,937,081 - 3,937,081
Total 33 10,055,762 130,678 10,186,473
Liabilities
Derivative �nancial liabilities - 237,426 - 237,426
Total - 237,426 - 237,426
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
The Group
2013
Assets
Financial assets held-for-trading - 149,544 - 149,544
Derivative �nancial assets - 56,274 - 56,274
Financial investments available-for-sale *
- Money market instruments - 4,042,823 - 4,042,823
- Equity securities 150 - 119,003 119,153
- Private debt securities - 3,452,561 - 3,452,561
Total 150 7,701,202 119,003 7,820,355
Liabilities
Derivative �nancial liabilities - 94,522 - 94,522
Total - 94,522 - 94,522
* Net of allowance for impairment
172 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(v) Fair value of financial instruments (continued)
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
The Bank
2014
Assets
Financial assets held-for-trading - 149,904 - 149,904
Derivative �nancial assets - 88,672 - 88,672
Financial investments available-for-sale *
- Money market instruments - 4,869,393 - 4,869,393
- Equity securities 33 - 130,652 130,685
- Private debt securities - 3,415,333 - 3,415,333
Total 33 8,523,302 130,652 8,653,987
Liabilities
Derivative �nancial liabilities - 237,419 - 237,419
Total - 237,419 - 237,419
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
The Bank
2013
Assets
Financial assets held-for-trading - 149,544 - 149,544
Derivative �nancial assets - 56,274 - 56,274
Financial investments available-for-sale *
- Money market instruments - 3,269,484 - 3,269,484
- Equity securities 150 - 118,934 119,084
- Private debt securities - 2,942,846 - 2,942,846
Total 150 6,418,148 118,934 6,537,232
Liabilities
Derivative �nancial liabilities - 94,522 - 94,522
Total - 94,522 - 94,522
* Net of allowance for impairment.
173Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(v) Fair value of financial instruments (continued)
The following table present the changes in Level 3 instruments for the �nancial year ended:
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
At beginning of the �nancial year 119,003 106,444 118,934 106,375
Purchases 9,674 - 9,674 -
Sales (10,221) - (10,221) -
Exchange differences 548 - 548 -
Total gains recognised in other
comprehensive income 12,224 12,559 11,717 12,559
Allowance for impairment losses (550) - - -
At end of the financial year 130,678 119,003 130,652 118,934
Effect of changes in significant unobservable assumptions to reasonably possible alternatives
As at reporting date, �nancial instruments measured with valuation techniques using signi�cant unobservable inputs
(Level 3) mainly include unquoted shares held for socio economic purposes.
Qualitative information about the fair value measurements using signi�cant unobservable inputs (Level 3):
Description
Valuation
techniques
Unobservable
inputs
Inter-relationship
between significant
unobservable inputs and
fair value measurement
Fair value assets
2014
RM’000
2013
RM’000
Financial investments
available-for-sale
The Group
Unquoted shares 130,678 119,003
Net tangible
assets
Net tangible
assets
Higher net tangible assets
results in higher fair value
The Bank
Unquoted shares 130,652 118,934
Net tangible
assets
Net tangible
assets
Higher net tangible assets
results in higher fair value
In estimating its signi�cance, the Group and the Bank used an approach that is currently based on methodologies
used for fair value adjustments. These adjustments re!ects the values that the Group and the Bank estimate are
appropriate to adjust from the valuations produced to re!ect for uncertainties in the inputs used. The methodologies
used can be a statistical or other relevant approved techniques.
174 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(v) Fair value of financial instruments (continued)
The following tables analyse within the fair value hierarchy of the Group’s and the Bank’s assets and liabilities not
measured at fair value as at reporting date but for which fair value is disclosed:
Carrying
value
RM’000
Fair value
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
The Group
2014
Financial assets
Financial investments held-to-maturity 476,155 - 472,887 - 472,887
Loans, advances and �nancing 39,456,172 - 39,172,438 - 39,172,438
39,932,327 - 39,645,325 - 39,645,325
Financial liabilities
Deposits from customers 48,047,224 - 48,052,332 - 48,052,332
Deposits and placements of banks and other
�nancial institutions 4,849,676 - 4,849,314 - 4,849,314
Recourse obligation on loans sold to
Cagamas Berhad 139,147 - 140,764 - 140,764
53,036,047 - 53,042,410 - 53,042,410
Carrying
value
RM’000
Fair value
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
The Group
2013
Financial assets
Financial investments held-to-maturity 500,336 - 491,129 - 491,129
Loans, advances and �nancing 36,227,785 - 35,935,141 - 35,935,141
36,728,121 - 36,426,270 - 36,426,270
Financial liabilities
Deposits from customers 46,088,082 - 46,080,076 - 46,080,076
Deposits and placements of banks and other
�nancial institutions 4,065,544 - 4,066,031 - 4,066,031
Recourse obligation on loans sold to
Cagamas Berhad 397,790 - 406,113 - 406,113
50,551,416 - 50,552,220 - 50,552,220
175Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(v) Fair value of financial instruments (continued)
Carrying
value
RM’000
Fair value
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
The Bank
2014
Financial assets
Deposits and placements with banks and
other �nancial institutions 962,050 - 959,983 - 959,983
Financial investments held-to-maturity 393,401 - 391,821 - 391,821
Loans, advances and �nancing 32,292,551 - 32,042,730 - 32,042,730
33,648,002 - 33,394,534 - 33,394,534
Financial liabilities
Deposits from customers 38,180,212 - 38,183,560 - 38,183,560
Deposits and placements of banks and other
�nancial institutions 3,699,386 - 3,699,024 - 3,699,024
Recourse obligation on loans sold to
Cagamas Berhad 139,147 - 140,764 - 140,764
42,018,745 - 42,023,348 - 42,023,348
Carrying
value
RM’000
Fair value
Level 1
RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
The Bank
2013
Financial assets
Deposits and placements with banks and
other �nancial institutions 1,106,756 - 1,111,105 - 1,111,105
Financial investments held-to-maturity 415,271 - 409,049 - 409,049
Loans, advances and �nancing 30,178,910 - 29,916,913 - 29,916,913
31,700,937 - 31,437,067 - 31,437,067
Financial liabilities
Deposits from customers 36,800,728 - 36,795,136 - 36,795,136
Deposits and placements of banks and other
�nancial institutions 2,659,535 - 2,660,006 - 2,660,006
Recourse obligation on loans sold to
Cagamas Berhad 397,790 - 406,113 - 406,113
39,858,053 - 39,861,255 - 39,861,255
176 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(v) Fair value of financial instruments (continued)
Other than as disclosed above, the total fair value of each �nancial assets and liabilities presented on the statements
of �nancial position as at reporting date of the Group and the Bank approximates the total carrying amount.
The fair value estimates were determined by application of the methodologies and assumptions described below.
Short-term funds and placements with banks and other financial institutions
For short-term funds and placements with banks and other �nancial institutions with maturity of less than six months,
the carrying amount is a reasonable estimate of fair value.
For amounts with maturities of six months or more, fair values have been estimated by reference to current rates at
which similar deposits and placements would be made to banks with similar credit ratings and maturities.
Financial investments held-to-maturity
The fair values of �nancial investments held-to-maturity are reasonable estimates based on quoted market prices.
In the absence of such quoted prices, the fair values are based on the expected cash !ows of the instruments
discounted by indicative market yields for the similar instruments as at reporting date or the audited net tangible asset
of the invested company.
Loans, advances and financing
Loans, advances and �nancing of the Group comprise of !oating rate loans and �xed rate loans. For performing
!oating rate loans, the carrying amount is a reasonable estimate of their fair values.
The fair values of performing �xed rate loans are arrived at using the discounted cash !ows based on the prevailing
market rates of loans, advances and �nancing with similar credit ratings and maturities.
The fair values of impaired loans, advances and �nancing, whether �xed or !oating are represented by their carrying
values, net of individual and collective allowances, being the reasonable estimate of recoverable amount.
Other assets and liabilities
The carrying value less any estimated allowance for �nancial assets and liabilities included in other assets and other
liabilities are assumed to approximate their fair values.
Deposits from customers, banks and other financial institutions, bills and acceptances payable
The carrying values of deposits and liabilities with maturities of six months or less are assumed to be reasonable
estimates of their fair values. Where the remaining maturities of deposits and liabilities are above six months, their
estimated fair values are arrived at using the discounted cash !ows based on prevailing market rates currently offered
for similar remaining maturities.
The estimated fair value of deposits with no stated maturity, which include non-interest bearing deposits, approximates
carrying amount which represents the amount repayable on demand.
177Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
38 FINANCIAL RISK MANAGEMENT
(v) Fair value of financial instruments (continued)
Recourse obligation on loans sold to Cagamas Berhad
For !oating rate loans sold to Cagamas Berhad, the carrying value is generally a reasonable estimate of their fair
values.
The fair values of �xed rate loans sold to Cagamas Berhad are arrived at using the discounted cash !ow methodology
at prevailing market rates of similarly pro�led loans.
Subordinated term loan
For �xed rate borrowings, the estimate of fair value is based on discounted cash !ow model using prevailing lending
rates for borrowings with similar risks and remaining term to maturity.
For !oating rate borrowings, the carrying value is generally a reasonable estimate of their fair values.
39 OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
In accordance with MFRS 132 “Financial Instruments: Presentation”, the Group and the Bank report �nancial assets and
�nancial liabilities on a net basis on the statements of �nancial position only if there is a legally enforceable right to set
off the recognised amounts and there is intention to settle on a net basis, or to realise the asset and settle the liability
simultaneously. The following table shows the impact of netting arrangement on:
• All �nancial assets and liabilities that are reported net on statements of �nancial position; and
• All derivative �nancial instruments and reverse repurchase and repurchased agreements and other similar secured
lending and borrowing agreements that are subject to enforceable master netting arrangements or similar agreements,
but do not qualify for statements of �nancial position netting.
The table identi�es the amounts that have been offset in the statements of �nancial position and also those amounts that
are covered by enforeable netting arrangements (offsetting arrangements and �nancial collateral) but do not qualify for
netting under the requirements of MFRS 132 described above.
The “Net amounts” presented below are not intended to represent the Group’s and the Bank’s actual exposure to credit
risk, as a variety of credit mitigation strategies are employed in addition to netting and collateral arrangements.
Related amount not offset
Derivative financial assets and liabilities
The ‘Financial instruments’ column identi�es �nancial assets and liabilities that are subject to set off under netting
agreements, such as the ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby
all outstanding transactions with the same counterparty can be offset and close-out netting applied across all outstanding
transaction covered by the agreements if an event of default or other predetermined events occur.
Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure
between counterparties by enabling the collateral to be realised in an event of default or if other predetermined events
occur.
178 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
39 OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Effects of offsetting on the statements
of financial position Related amounts not offset
The Group
2014
Gross
amount
RM’000
Amount
offset
RM’000
Net amount
reported on
statement
of financial
position
RM’000
Financial
instruments
RM’000
Financial
collateral
RM’000
Net
amount
RM’000
Financial assets
Derivative �nancial assets 88,658 - 88,658 (33,932) - 54,726
Total assets 88,658 - 88,658 (33,932) - 54,726
Financial liabilities
Derivative �nancial liabilities 237,426 - 237,426 (33,932) - 203,494
Total liabilities 237,426 - 237,426 (33,932) - 203,494
Effects of offsetting on the statements
of �nancial position Related amounts not offset
The Group
2013
Gross
amount
RM’000
Amount
offset
RM’000
Net amount
reported on
statement
of �nancial
position
RM’000
Financial
instruments
RM’000
Financial
collateral
RM’000
Net
amount
RM’000
Financial assets
Derivative �nancial assets 56,274 - 56,274 (42,186) - 14,088
Total assets 56,274 - 56,274 (42,186) - 14,088
Financial liabilities
Derivative �nancial liabilities 94,522 - 94,522 (42,186) - 52,336
Total liabilities 94,522 - 94,522 (42,186) - 52,336
179Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
39 OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Effects of offsetting on the statements
of financial position Related amounts not offset
The Bank
2014
Gross
amount
RM’000
Amount
offset
RM’000
Net amount
reported on
statement
of financial
position
RM’000
Financial
instruments
RM’000
Financial
collateral
RM’000
Net
amount
RM’000
Financial assets
Derivative �nancial assets 88,672 - 88,672 (33,922) - 54,750
Total assets 88,672 - 88,672 (33,922) - 54,750
Financial liabilities
Derivative �nancial liabilities 237,419 - 237,419 (33,922) - 203,497
Total liabilities 237,419 - 237,419 (33,922) - 203,497
Effects of offsetting on the statements of
�nancial position Related amounts not offset
The Bank
2013
Gross
amount
RM’000
Amount
offset
RM’000
Net amount
reported on
statement
of �nancial
position
RM’000
Financial
instruments
RM’000
Financial
collateral
RM’000
Net
amount
RM’000
Financial assets
Derivative �nancial assets 56,274 - 56,274 (42,186) - 14,088
Total assets 56,274 - 56,274 (42,186) - 14,088
Financial liabilities
Derivative �nancial liabilities 94,522 - 94,522 (42,186) - 52,336
Total liabilities 94,522 - 94,522 (42,186) - 52,336
180 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
40 LEASE COMMITMENTS
The Group and the Bank have lease commitments in respect of rented premises and hired equipment, all of which are
classi�ed as operating leases. A summary of the future minimum lease payments under non-cancelable operating leases
commitments are as follows:
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Within one year 22,689 11,270 21,906 10,612
One year to �ve years 47,476 7,912 46,926 7,224
41 CAPITAL AND OPERATING COMMITMENTS
Capital commitments
Capital expenditure approved by the Directors but not provided for in the �nancial statements amounted to approximately:
The Bank
2014
RM’000
2013
RM’000
Authorised and contracted for 13,859 7,541
Analysed as follows:
Property and equipment 13,859 7,541
Operating commitments
Operating expenditure approved by the Directors but not provided for in the �nancial statements amounted to approximately:
The Bank
2014
RM’000
2013
RM’000
Authorised and contracted for 138,051 201,823
181Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
42 CAPITAL MANAGEMENT
With effect from 1 January 2013, the total capital and capital adequacy ratios of the Group and the Bank are computed in
accordance with Bank Negara Malaysia’s Capital Adequacy Framework (Capital Components) dated 28 November 2012.
The Group and the Bank are currently adopting Standardised Approach for Credit Risk and Market Risk, the Basic
Indicator Approach for Operational Risk. In line with the transitional arrangements under the Bank Negara Malaysia’s
Capital Adequacy Framework (Capital Components), the minimum capital adequacy requirement for Common Equity Tier
1 Capital Ratio (‘CET 1’) and Tier 1 Capital Ratio are 4.0% and 5.5% respectively for year 2014. The minimum regulatory
capital adequacy requirement remains at 8.0% (2013: 8.0%) for total capital ratio.
The Group and the Bank’s objectives when managing capital are:
• To comply with the capital requirements set by the regulators of the banking markets where the entities within the
Group and the Bank operates;
• To safeguard the Group and the Bank’s ability to continue as a going concern so that it can continue to provide returns
for shareholders and bene�ts for other stakeholders; and
• To maintain a strong capital base to support the development of its business.
The Group and the Bank maintain a ratio of total regulatory capital to its risk-weighted assets above a minimum level
agreed with the management which takes into account the risk pro�le of the Group and the Bank.
The table in Note 43 below summarises the composition of regulatory capital and the ratios of the Group and the Bank for
the �nancial year ended 31 December 2014.
43 CAPITAL ADEQUACY
The capital adequacy ratios are as follows:
The Group (#) The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Paid-up share capital 1,688,770 1,518,337 1,688,770 1,518,337
Share premium 858,904 529,337 858,904 529,337
Statutory reserves 1,469,794 1,317,376 1,263,470 1,144,350
Retained pro�ts 951,500 1,004,534 760,153 798,118
Unrealised gains and losses on AFS 23,163 (2,579) 30,893 6,533
4,992,131 4,367,005 4,602,190 3,996,675
Less:
Goodwill and other intangibles (147,688) (133,430) (150,690) (137,323)
Deferred tax assets (3,118) (9,326) (218) (8,553)
55% of cumulative unrealised gains of AFS (12,739) - (16,991) (3,593)
Investment in subsidiaries/joint ventures - - (77,815) -
CET1 capital 4,828,586 4,224,249 4,356,476 3,847,206
Tier I capital 4,828,586 4,224,249 4,356,476 3,847,206
182 Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
43 CAPITAL ADEQUACY
The Group (#) The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Subordinated term loan 480,000 810,000 480,000 810,000
Collective impairment @ 150,254 143,572 129,134 123,103
Regulatory adjustments 184,366 - 135,347 -
Less:
Investment in subsidiaries/joint ventures - (650) (311,259) (389,088)
Tier II capital 814,620 952,922 433,222 544,015
Total capital 5,643,206 5,177,171 4,789,698 4,391,221
CET1 capital ratio 11.936% 10.811% 12.510% 11.279%
Tier 1 capital ratio 11.936% 10.811% 12.510% 11.279%
Total capital ratio 13.950% 13.250% 13.754% 12.874%
CET1 capital ratio (net of proposed dividends)^ 11.773% 10.578% 12.320% 11.012%
Tier 1 capital ratio (net of proposed dividends)^ 11.773% 10.578% 12.320% 11.012%
Total capital ratio (net of proposed dividends)^ 13.786% 13.017% 13.564% 12.607%
Risk-weighted assets for:
Credit risk 37,845,580 36,529,227 32,586,612 31,911,266
Market risk 286,738 299,677 284,148 296,107
Operational risk 2,322,105 2,243,503 1,954,278 1,902,412
Total risk-weighted assets 40,454,423 39,072,407 34,825,038 34,109,785
@ Qualifying collective impairment is restricted to allowances on unimpaired portion of the loans, advances and
�nancing.
# The Group comprises the banking and non-banking subsidiaries.
^ Net proposed dividends of RM66,031,000 (2013: RM91,100,000).
The capital adequacy ratios of the AFFIN Islamic Bank Berhad is as follows:
Economic Entity The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
(Before and after deducting proposed dividend)
CET1 capital ratio 12.456% 13.876% 12.465% 13.889%
Tier 1 capital ratio 12.456% 13.876% 12.465% 13.889%
Total capital ratio 13.674% 14.269% 13.674% 14.281%
183Affin Bank Berhad Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTSfor the �nancial year ended 31 December 2014
44 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The Group and the Bank make estimates and assumptions concerning the future. The resulting accounting estimates
will, by de�nition, seldom equal the related actual results. To enhance the information content of the estimates, certain
variables that are anticipated to have material impact to the Group’s and the Bank’s results and �nancial position are
tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a signi�cant risk
of causing a material adjustment to the carrying amount of assets and liabilities within the next �nancial year are discussed
below.
Allowance for impairment losses on loans, advances and financing
The accounting estimates and judgments related to the impairment of loans and provision for off-balance sheet positions is
a critical accounting estimate because the underlying assumptions used for both the individually and collectively assessed
impairment can change from period to period and may signi�cantly affect the Group and the Bank’s results of operations.
In assessing assets for impairment, management judgment is required. The determination of the impairment allowance
required for loans which are deemed to be individually signi�cant often requires the use of considerable management
judgment concerning such matters as local economic conditions, the �nancial performance of the counterparty and the
value of any collateral held, for which there may not be a readily accessible market. The actual amount of the future cash
!ows and their timing may differ from the estimates used by management and consequently may cause actual losses to
differ from the reported allowances.
The impairment allowance for portfolios of smaller-balance homogenous loans, such as those to individuals and small
business customers of the private and retail business, and for those loans which are individually signi�cant but for which
no objective evidence of impairment exists, is determined on a collective basis. The collective impairment allowance is
calculated on a portfolio basis using statistical models which incorporate numerous estimates and judgments, and therefore
is subject to estimation uncertainty. The Group and the Bank perform a regular review of the models and underlying data
and assumptions as far as possible to re!ect the current economic circumstances. The probability of default, loss given
defaults, and loss identi�cation period, amongst other things, are all taken into account during this review.
Estimated impairment of goodwill
The Group performs an impairment review on an annual basis to ensure that the carrying value of the goodwill does not
exceed its recoverable amounts from cash generating units to which the goodwill is allocated. The recoverable amount
represents the present value of the estimated future cash !ows expected to arise from continuing operations. Therefore,
in arriving at the recoverable amount, management exercise judgment in estimating the future cash !ows, growth rate and
discount rate.
45 CREDIT EXPOSURES ARISING FROM TRANSACTIONS WITH CONNECTED PARTIES
The following credit exposures are based on Bank Negara Malaysia’s revised Guidelines on Credit Transaction and
Exposures with Connected Parties, which are effective 1 January 2008.
The Bank
2014 2013
(i) The aggregate value of outstanding credit exposures with connected parties
(RM’000) 2,660,459 3,013,895
(ii) The percentage of outstanding credit exposures to connected parties as a pro-
portion of total credit exposures 5% 6%
(iii) The percentage of outstanding credit exposures with connected parties which is
impaired or in default Nil Nil
46 APPROVAL OF FINANCIAL STATEMENTS
The �nancial statements have been approved for issue in accordance with a resolution of the Board of Directors on
6 March 2015.
184 Affin Bank Berhad Annual Report 2014
STATEMENT BY DIRECTORSPURSUANT TO SECTION 169 (15) OF THE COMPANIES ACT, 1965
STATUTORY DECLARATIONPURSUANT TO SECTION 169 (16) OF THE COMPANIES ACT, 1965
We, JEN TAN SRI DATO’ SERI ISMAIL BIN HAJI OMAR (BERSARA) and EN. MOHD SUFFIAN BIN HAJI HARON, two of the
Directors of AFFIN BANK BERHAD, state that, in the opinion of the Directors, the accompanying �nancial statements set
out on pages 60 to 183 are drawn up so as to give a true and fair view of the state of affairs of the Group and the Bank as at
31 December 2014 and of the results and cash !ows of the Group and the Bank for the �nancial year ended on the date in
accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements
of the Companies Act, 1965 in Malaysia.
In accordance with a resolution of the Board of Directors dated 6 March 2015.
JEN TAN SRI DATO’ SERI ISMAIL BIN HAJI OMAR (BERSARA)
Chairman
EN. MOHD SUFFIAN BIN HAJI HARON
Director
I, RAMANATHAN RAJOO, the of�cer of AFFIN BANK BERHAD primarily responsible for the �nancial management of the
Group and the Bank, do solemnly and sincerely declare that, in my opinion, the accompanying �nancial statements set out on
pages 60 to 183, are correct and I make this solemn declaration conscientiously believing the same to be true, by virtue of the
provisions of the Statutory Declarations Act, 1960.
RAMANATHAN RAJOO
Subscribed and solemnly declared by the abovenamed RAMANATHAN RAJOO at Kuala Lumpur in Malaysia on 6 March 2015,
before me.
Commissioner for Oaths
185Affin Bank BerhadAnnual Report 2014
INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF AFFIN BANK BERHAD (Incorporated in Malaysia)
REPORT ON THE FINANCIAL STATEMENTS
We have audited the �nancial statements of AFFIN Bank Berhad on pages 60 to 183 which comprise the statements of
�nancial position as at 31 December 2014 of the Group and of the Bank, and the statements of income, comprehensive
income, changes in equity and cash !ows of the Group and of the Bank for the year then ended, and a summary of signi�cant
accounting policies and other explanatory notes, as set out on Notes 1 to 46.
Directors’ Responsibility for the Financial Statements
The directors of the Bank are responsible for the preparation of �nancial statements so as to give a true and fair view in
accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements
of the Companies Act, 1965 in Malaysia. The directors are also responsible for such internal control as the directors determine
are necessary to enable the preparation of �nancial statements that are free from material misstatement, whether due to fraud
or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these �nancial statements based on our audit. We conducted our audit in
accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about whether the �nancial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the �nancial statements.
The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the �nancial
statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the
entity’s preparation of �nancial statements that give a true and fair view in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the �nancial statements.
We believe that the audit evidence we have obtained is suf�cient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the �nancial statements give a true and fair view of the �nancial position of the Group and of the Bank as of
31 December 2014 and of their �nancial performance and cash !ows for the year then ended in accordance with Malaysian
Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965
in Malaysia.
186 Affin Bank Berhad Annual Report 2014
INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF AFFIN BANK BERHAD (Incorporated in Malaysia)
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:
a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Bank and its
subsidiaries have been properly kept in accordance with the provisions of the Act.
b) We are satis�ed that the �nancial statements of the subsidiaries that have been consolidated with the Bank’s �nancial
statements are in form and content appropriate and proper for the purposes of the preparation of the �nancial statements
of the Group and we have received satisfactory information and explanations required by us for those purposes.
c) Our audit reports on the �nancial statements of the subsidiaries did not contain any quali�cation or any adverse comment
made under Section 174(3) of the Act.
OTHER MATTERS
This report is made solely to the members of the Bank, as a body, in accordance with Section 174 of the Companies Act, 1965
in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
PRICEWATERHOUSECOOPERS SOO HOO KHOON YEAN
(No. AF : 1146) (No. 2682/10/15 (J))
Chartered Accountants Chartered Accountant
Kuala Lumpur, Malaysia
6 March 2015
187Affin Bank BerhadAnnual Report 2014
BASEL II PILLAR 3 DISCLOSURES
1. Introduction
1.1 Background
1.2 Scope of Application
2. Risk Governance Structure
2.1 Overview
2.2 Board Committees
2.3 Management Committees
2.4 Group Risk Management Function
2.5 Internal Audit and Internal Control Activities
3. Capital Management
3.1 Internal Capital Adequacy Assessment Process (‘ICAAP’)
3.2 Capital Structure
3.3 Capital Adequacy
4. Risk Management Objectives and Policies
5. Credit Risk
5.1 Credit Risk Management Objectives And Policies
5.2 Application Of Standardised Approach For Credit Risk
5.3 Credit Risk Measurement
5.4 Risk Limit Control And Mitigation Policies
5.5 Credit Risk Monitoring
5.6 Impairment Provisioning
5.7 Credit Risk Culture
6. Market Risk
6.1 Market Risk Management Objectives and Policies
6.2 Application of Standardised Approach for Market Risk
6.3 Market Risk Measurement, Control and Monitoring
6.4 Value-At-Risk (‘Var’)
6.5 Foreign Exchange Risk
7. Liquidity Risk
7.1 Liquidity Risk Management Objectives and Policies
7.2 Liquidity Risk Measurement, Control and Monitoring
8. Operational Risk
8.1 Operational Risk Management Objectives and Policies
8.2 Application af Basic Indicator Approach for Operational Risk
8.3 Operational Risk Measurement, Control and Monitoring
8.4 Operational Risk Culture
9. Shariah Compliance
Appendices
188
188
188
188
188
189
190
191
192
192
192
192
194
194
194
194
195
195
196
197
197
203
203
203
203
203
204
204
204
204
205
205
205
205
206
206
206
207
188 Affin Bank Berhad Annual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
1 Introduction
1.1 Background
AFFIN Bank Berhad (‘the Bank’) adopts Basel II in January 2008 in line with the directive from Bank Negara Malaysia
(‘BNM’). The Basel II framework is structured around three fundamental Pillars.
- Pillar 1 de�nes the minimum capital requirement to ensure that �nancial institutions hold suf�cient capital to cover
their exposure to credit, market and operational risks.
- Pillar 2 requires �nancial institutions to have a process for assessing their overall capital adequacy in relation to
their risk pro�le and a strategy for maintaining their capital levels.
- Pillar 3 requires �nancial institutions to establish and implement an appropriate disclosure policy that promotes
transparency regarding their risk management practices and capital adequacy positions.
The Bank elected to adopt the following approaches under Pillar 1 requirements:
- Standardised Approach for Credit Risk
- Basic Indicator Approach for Operational Risk
- Standardised Approach for Market Risk
1.2 Scope of Application
This document contains the disclosure requirements under Pillar 3 for the Bank for the year ended 31 December 2014.
The disclosures are made in line with the Pillar 3 disclosure requirements under the Basel II framework as laid out by
BNM.
The disclosures should be read in conjunction with the Bank’s 2014 Annual Report for the year ended 31 December
2014.
The Group’s capital requirements are generally based on the principles of consolidation adopted in the preparation
of its �nancial statements. The Group’s consolidated entities comprises the Bank and the Bank’s subsidiary, AFFIN
Islamic Bank Berhad.
2 Risk Governance Structure
2.1 Overview
The Board of Directors of the Bank is ultimately responsible for the overall performance of the Bank. The Board’s
responsibilities remain within the framework of BNM Guidelines. The Board also exercises great care to ensure that high
ethical standards are upheld, and that the interests of stakeholders are not compromised. These include responsibility
for determining the Bank’s general policies and strategies for the short, medium and long term, approving business
plans, including targets and budgets, and approving major strategic decisions.
The Board has overall responsibility for maintaining the proper management and protection of the Bank’s interests
by ensuring effective implementation of the risk management policy and process, as well as adherence to a sound
system of internal control, and by seeking regular assurance on their effectiveness. The Board also recognises that
risks cannot be eliminated completely. As such, the inherent system of internal control is designed to provide a
reasonable though not absolute assurance against the risk of material errors, fraud or losses occurring. The system
of internal controls encompasses controls relating to �nancial, operational, risk management and compliance with
applicable laws, regulations, policies and guidelines.
189Affin Bank BerhadAnnual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
2 Risk Governance Structure
2.1 Overview (continued)
The terms of reference of the Board Committees as disclosed in the Annual Report provide an outline of its role and
functions. In carrying out its functions, the Board has delegated speci�c responsibilities to other Board Committees,
which operate under approved terms of reference, to assist the Board in discharging their duties. The Chairmen of
the various Committees report on the outcome of their Committee meetings to the Board and any further deliberation
is made at Board level, if required. These reports and deliberations are incorporated into the Minutes of the Board
meetings. The Board meets on a monthly basis.
The Board of the Bank has a balance composition with a strong independent element. It consists of representatives
from the private sector with suitable quali�cations ful�lling the �t and proper criteria as required by BNM/GP1, a
mixture of different skills, competencies, experience and personalities.
2.2 Board Committees
Board Remuneration Committee (‘BRC’)
The BRC is responsible for providing a formal and transparent procedure for developing the remuneration policy
for Directors, Managing Director/Chief Executive Of�cer and key senior management of�cers and ensuring that
compensation is competitive and consistent with the Bank’s culture, objectives and strategy.
The Committee obtains advice from experts in compensation and bene�ts, both internally and externally.
Board Nominating Committee (‘BNC’)
The BNC is responsible for providing a formal and transparent procedure for the appointment of Directors and
Managing Director/Chief Executive Of�cer, assessing the effectiveness of individual Directors, the Board as a whole
and the performance of the Managing Director/Chief Executive Of�cer and key senior management personnel.
Board Risk Management Committee (‘BRMC’)
The BRMC is responsible for overseeing management’s activities in managing credit, market, liquidity,
operational, legal and other risks and to ensure that the risk management process is in place and functioning.
It has responsibility for reviewing and approving all risk management policies and risk management methodologies.
BRMC also reviews guidelines and portfolio management reports including risk exposure information.
The Committee also ensures that the procedures and framework in relation to identifying, measuring, monitoring and
controlling risk are operating effectively.
Board Loan Review and Recovery Committee (‘BLRRC’)
The BLRRC is responsible in providing critical review of loans and other credit facilities with higher risk implications,
after due process of checking, analysis, review and recommendation by the Credit Risk Management function, and if
found necessary, exercise the power to veto loan applications that have been approved by the Group Management
Loan Committee (‘GMLC’). BLRRC also reviews the impaired loans reports presented by the Management.
190 Affin Bank Berhad Annual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
2 Risk Governance Structure
2.2 Board Committees (continued)
Audit and Examination Committee (‘AEC’)
The AEC is responsible for providing oversight on reviewing the adequacy and integrity of the internal control systems
and oversees the work of the internal and external auditors.
Reliance is placed on the results of independent audits performed primarily by internal auditors, the outcome of
statutory audits on �nancial statements conducted by external auditors and on representations by Management
based on their control self-assessment of all areas of their responsibility.
Minutes of Audit & Examination Committee meetings, which provide a summary of the proceedings, are circulated to
Board members for notation and discussion. The Bank has an established Group Internal Audit Division (GIA) which
reports functionally to the Audit Committee and administratively to the Managing Director/Chief Executive Of�cer.
Shariah Committee
AFFIN Islamic Bank Berhad’s business activities are subject to Shariah compliance and conformation by the Shariah
Committee. The Shariah Committee is formed as legislated under the Islamic Financial Services Act 2013 and as per
Shariah Governance Framework for Islamic Financial Institutions.
The duties and responsibility of the Shariah Committee are as follows:
(i) To advise the Board on Shariah matters in order to ensure that the business operations of the Bank comply with
the Shariah principles at all times;
(ii) To endorse and validate relevant documentations of the Bank’s products to ensure that the products comply with
Shariah principles; and
(iii) To advise the AFFIN Islamic Bank Berhad on matters to be referred to the Shariah Advisory Council.
2.3 Management Committees
Management Committee (‘MCM’)
MCM comprising the senior management team chaired by the MD/CEO, assists the Board in managing the day-to-
day operations and ensures its effectiveness. MCM formulates tactical plans and business strategies, monitors the
Bank’s overall performance, and ensures that the activities are in accordance with corporate objectives, strategies,
policies and annual business plan and budget.
Group Management Loan Committee (‘GMLC’)
GMLC is established within senior management chaired by the MD/CEO to approve complex and larger loans and
workout/recovery proposals beyond the delegated authority of the concerned individual senior management personnel
of the Bank.
Asset and Liability Management Committee (‘ALCO’)
ALCO comprising the senior management team chaired by the MD/CEO, manages the Bank’s asset liability position
and oversees the Bank’s capital management to ensure that the Bank is adequately capitalised on an economic and
regulatory basis.
191Affin Bank BerhadAnnual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
2 Risk Governance Structure
2.3 Management Committees (continued)
Liquidity Management Committee (‘LMC’)
LMC is a sub-committee of the ALCO and its role is to augment the functions of the ALCO by directing its focus
speci�cally to liquidity issues.
Group Operational Risk Management Committee (‘GORMC’)
GORMC is established within senior management chaired by MD/CEO to deliberate and manage operational risks. Its
responsibilities include:
(i) To evaluate operational risks issues of escalating importance/strategic risk exposure;
(ii) To review and recommend on broad operational risks management policies/best practices for adoption by the
Bank’s operating units;
(iii) To review the effectiveness of broad internal controls and make recommendation/approve on changes, if
necessary;
(iv) To review/approve recommendation of operational risk management groups set up to address speci�c area;
(v) To take the lead in inculcating an operational risks awareness culture;
(vi) To approve operational risk management methodologies/measurements tools;
(vii) To review and approve the strategic operational risk management initiatives/plans and to endorse for BRMC’s
approval if necessary;
(viii) To update BRMC on loss events and relevant key issues that may adversely impact core processes, system
defects and any changes to critical business or system related processes; and
(ix) To effectively manage reputational risk in relation to environmental, social, business and regulatory issues across
the Bank.
Group Early Alert Committee (‘GEAC’)
GEAC is established within senior management to monitor credit quality through monthly review of the Early Alert,
Watchlist and Exit Accounts and review the actions taken to address the emerging risks and issues in these accounts.
2.4 Group Risk Management Function
An integrated risk management framework is in place. The Group Risk Management (‘GRM’) function, headed by
Group Chief Risk Of�cer (‘GCRO’) and operating in an independent capacity, is part of the Bank’s senior management
structure which works closely as a team in managing risks to enhance stakeholders’ value.
GRM reports to BRMC. Committees namely BLRRC, MCM, GMLC, ALCO, LMC, GORMC and EAC assist BRMC
in managing credit, market, liquidity and operational risks. The responsibilities of these Committees include risk
identi�cation, risk assessment and measurement, risk control and mitigation; and risk monitoring.
192 Affin Bank Berhad Annual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
2 Risk Governance Structure
2.5 Internal Audit and Internal Control Activities
In accordance with BNM’s guidelines on Corporate Governance for Licensed Institutions, GIA conducts continuous
reviews on auditable areas within the Bank. The continuous reviews by GIA are focused on areas of signi�cant risks
and effectiveness of internal control in accordance to the audit plan approved by the AEC.
Based on GIA’s review, identi�cation and assessment of risk, testing and evaluation of controls, GIA will provide an
opinion on the effectiveness of internal controls maintained by each entity. The risks highlighted on the respective
auditable areas as well as recommendation made by the GIA are addressed at AEC and Management meetings on
bi-monthly basis. The AEC also conduct annual reviews on the adequacy of internal audit function, scope of work,
resources and budget of GIA.
3 Capital Management
3.1 Internal Capital Adequacy Assessment Process (‘ICAAP’)
In line with the BNM guideline on Risk-Weighted Capital Adequacy Framework - Internal Capital Adequacy Assessment
Process (Pillar 2), the Bank has put in place the ICAAP Framework to assess the capital adequacy to ensure the
level of capital maintained by the Bank is adequate at all times, taking into consideration the Bank’s risk pro�le and
business strategies.
The Bank’s capital management approach is focused on maintaining an appropriate level of capital to meet its business
needs and regulatory requirements as capital adequacy and risk management are closely aligned. The Bank operates
within an agreed risk appetite whilst optimising the use of shareholders’ funds to deliver sustainable returns.
3.2 Capital Structure
With effect from 1 January 2013, the total capital and capital adequacy ratios of the Group and the Bank are computed
in accordance with Bank Negara Malaysia’s Capital Adequacy Framework (Capital Components) dated 28 November
2012.
The Group and the Bank are currently adopting Standardised Approach for Credit Risk and Market Risk, the Basic
Indicator Approach for Operational Risk. In line with the transitional arrangements under the Bank Negara Malaysia’s
Capital Adequacy Framework (Capital Components), the minimum capital adequacy requirement for Common Equity
Tier 1 Capital Ratio (‘CET 1’) and Tier 1 Capital Ratio are 4.0% and 5.5% respectively for year 2014. The minimum
regulatory capital adequacy requirement remains at 8.0% (2013: 8.0%) for total capital ratio.
The following table sets forth details on the capital resources and capital adequacy ratios for the Group and the Bank
as at 31 December 2014.
193Affin Bank BerhadAnnual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
3 Capital Management
3.2 Capital structure (continued)
The Group The Bank
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Paid-up share capital 1,688,770 1,518,337 1,688,770 1,518,337
Share premium 858,904 529,337 858,904 529,337
Statutory reserves 1,469,794 1,317,376 1,263,470 1,144,350
Retained pro�ts 951,500 1,004,534 760,153 798,118
Unrealised gains and losses on AFS 23,163 (2,579) 30,893 6,533
4,992,131 4,367,005 4,602,190 3,996,675
Less:
Goodwill (147,688) (133,430) (150,690) (137,323)
Deferred tax assets (3,118) (9,326) (218) (8,553)
55% of cumulative unrealised gains of AFS (12,739) - (16,991) (3,593)
Investment in subsidiaries/joint ventures - - (77,815) -
CET1 capital 4,828,586 4,224,249 4,356,476 3,847,206
Tier I capital 4,828,586 4,224,249 4,356,476 3,847,206
Subordinated term loan 480,000 810,000 480,000 810,000
Collective impairment 150,254 143,572 129,134 123,103
Regulatory adjustments 184,366 - 135,347 -
Less:
Investment in subsidiaries/joint ventures - (650) (311,259) (389,088)
Tier II capital 814,620 952,922 433,222 544,015
Total capital 5,643,206 5,177,171 4,789,698 4,391,221
CET1 capital ratio 11.936% 10.811% 12.510% 11.279%
Tier 1 capital ratio 11.936% 10.811% 12.510% 11.279%
Total capital ratio 13.950% 13.250% 13.754% 12.874%
CET1 capital ratio (net of proposed dividends) 11.773% 10.578% 12.320% 11.012%
Tier 1 capital ratio (net of proposed dividends) 11.773% 10.578% 12.320% 11.012%
Total capital ratio (net of proposed dividends) 13.786% 13.017% 13.564% 12.607%
Risk-weighted assets for:
Credit risk 37,845,580 36,529,227 32,586,612 31,911,266
Market risk 286,738 299,677 284,148 296,107
Operational risk 2,322,105 2,243,503 1,954,278 1,902,412
Total risk-weighted assets 40,454,423 39,072,407 34,825,038 34,109,785
194 Affin Bank Berhad Annual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
3 Capital Management
3.3 Capital Adequacy
The Group and the Bank have in place an internal limit for its CET1 capital ratio, Tier I capital ratio and Total capital
ratio, which is guided by the need to maintain a prudent relationship between available capital and the risks of
its underlying businesses. The capital management process is monitored by senior management through periodic
reviews.
Refer to Appendix I.
4 Risk Management Objectives and Policies
The Bank is principally engaged in all aspects of banking and related �nancial services. The principal activities of the
Bank’s subsidiaries are Islamic banking business, property management services, nominee and trustee services. There
have been no signi�cant changes in these principal activities during the �nancial year.
The Bank’s business activities involve the analysis, measurement, acceptance, and management of risks but it operates
within well de�ned risk acceptance criteria covering customer segments, industries and products. The Bank does not
enter into risk it cannot administer, book, monitor or value, or deal with persons of questionable integrity.
The Bank’s risk management policies are established to identify all the key risks, assess and measure these risks, control
and mitigate these risks, and manage and monitor the risk positions.
The Bank regularly reviews its risk management policies and systems to re!ect changes in markets, products and best
practice in risk management processes. The Bank’s aim is to achieve an appropriate balance between risk and return and
minimise any potential adverse effects.
The key business risks to which the Bank is exposed are credit risk, liquidity risk, market risk and operational risk.
5 Credit Risk
5.1 Credit Risk Management Objectives and Policies
Credit risk is the potential �nancial loss resulting from the failure of the customer or counterparty to settle the �nancial
and contractual obligations to the Bank. Credit risk emanates mainly from loans and advances, loan commitments
arising from such lending activities, as well as through �nancial transactions with counterparties including interbank
money market activities, derivative instruments used for hedging and debt securities.
The management of credit risk in the Bank is governed by a set of approved credit policies, guidelines and procedures.
Approval authorities are delegated to Senior Management and GMLC to implement the credit policies and ensure
sound credit granting standards.
An independent GRM function, headed by Group Chief Risk Of�cer (‘GCRO’) with direct reporting line to BRMC is in
place to ensure adherence to risk standards and discipline.
Lending guidelines and credit strategies are formulated and incorporated in the Annual Credit Plan. New businesses
are governed by the risk acceptance criteria and customer qualifying criteria/�tness standards prescribed in the
Annual Credit Plan. The Annual Credit Plan is reviewed at least annually and approved by the BRMC.
195Affin Bank BerhadAnnual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
5 Credit Risk
5.2 Application of Standardised Approach for Credit Risk
The Bank uses the following External Credit Assessment Institutions (‘ECAIs’) to determine the risk weights for the
rated credit exposures:-
• RAM Rating Services Berhad
• Malaysian Rating Corporation Berhad
• Standard & Poor’s Rating Services
• Moody’s Investors Service
• Fitch Ratings
The external ratings of the ECAIs are used to determine the risk weights of the following types of exposure: sovereigns,
banks, public sector entities and corporates.
The mapping of the rating categories of different ECAIs to the risk weights is in accordance with the guidelines
provided by BNM. In cases where there is no issuer or issue rating, the exposures are treated as unrated and accorded
a risk weight appropriate for unrated exposure in the respective category.
The external ratings are updated in the core banking system, and extracted and matched by the risk system according
to the above rules to determine the appropriate risk weights.
Refer to Appendix II and Appendices III (i) to III (ii).
5.3 Credit Risk Measurement
Loans, advances and financing
Credit evaluation is the process of analysing the creditworthiness of the prospective customer against the Bank’s
underwriting criteria and the ability of the Bank to make a return commensurate to the level of risk undertaken. A
critical element in the evaluation process is the assignment of a credit risk grade to the counterparty. This assists in
the risk assessment and decision making process. The Bank has developed internal rating models to support the
assessment and quanti�cation of credit risk.
For consumer mass market products, statistically developed application scorecards are used by the Business to
assess the risks associated with the credit application. The scorecards are used as a decision support tool at loan
origination.
Over-the-Counter (‘OTC’) Derivatives
The OTC Derivatives credit exposure is computed using the Current Exposure Method. Under the Current Exposure
Method, computation of credit equivalent exposure for interest rate and exchange rate related contracts is derived
from the summation of the two elements; the replacement costs (obtained by marking-to-market) of all contracts and
the potential future exposure of outstanding contracts (Add On charges depending on the speci�c remaining tenor to
maturity).
196 Affin Bank Berhad Annual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
5 Credit Risk
5.4 Risk Limit Control and Mitigation Policies
The Bank employs various policies and practices to control and mitigate credit risk.
Lending limits
The Bank establishes internal limits and related lending guidelines to manage large exposures and avoid undue
concentration of credit risk in its credit portfolio. The limits include single customer groupings, connected parties, and
geographical and industry segments. These risks are monitored regularly and the limits reviewed annually or sooner
depending on changing market and economic conditions.
The credit risk exposure for derivative and loan books is managed as part of the overall lending limits with customers
together with potential exposure from market movements.
Collateral
Credits are established against borrower’s capacity to repay rather than rely solely on security. However, collateral
may be taken to mitigate credit risk. The main collateral types accepted and given value by the Bank are:
• Mortgages over residential properties;
• Charges over commercial real estate or vehicles �nanced;
• Charges over business assets such as business premises, inventory and account receivables; and
• Charges over �nancial instruments such as marketable securities
In order to be recognised as security, all items pledged must have value and the Bank must have physical control and/
or legal title thereto, together with the necessary documentation to enable the Bank to realise the asset without the
co-operation of the asset owner. Other items, such as personal or corporate guarantees, may be taken for comfort but
will not be treated as security for approval purposes. Valuations are updated on a regular basis.
Prior to acceptance of any item as security, veri�cation must be done to ensure that the security exists and an
accurate and up-to-date valuation can be placed upon it. A pre-facility disbursement site visit must be undertaken
in respect of landed security of signi�cant value. Where third parties are used to undertake a valuation they must be
taken from a list of approved valuers.
All assets which provide security to the Bank must be adequately insured with an insurer from the list of approved
insurers.
The security documentation process is centralised in an independent Security Documentation Section at Head Of�ce.
The Bank adopts standardised Letter of Offer and Legal Documents. Variations/amendments require the approval
from the relevant approving authority in the Bank.
Documentary and commercial letters of credit are collateralised by the underlying shipments of goods to which they
relate and therefore carry less risk than a direct loan.
197Affin Bank BerhadAnnual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
5 Credit Risk
5.4 Risk Limit Control and Mitigation Policies (continued)
Credit related commitments
Commitment to extend credit represents unutilised portion of approved credit in the form of loans, guarantees
or letters of credit. In terms of credit risk, the Bank is potentially exposed to loss in an amount equal to the total
unutilised commitments. However, the potential amount of loss is less than the total unutilised commitments, as most
commitments to extend credit are contingent upon customers maintaining speci�c minimum credit standards.
The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a
greater degree of credit risk than short-term commitments.
Refer to Appendix IV (a) to (b).
5.5 Credit Risk Monitoring
Retail credits are actively monitored and managed on a portfolio basis by product type. A collection management
system is in place to promptly identify, monitor and manage delinquent accounts at early stages of delinquency.
Corporate credits and large individual accounts are reviewed by the Business Units at least once a year against
updated information. This is to ensure that the credit grades remain appropriate and detect any signs of weaknesses
or deterioration in the credit quality. Remedial action is taken where evidence of deterioration exists.
Early Alert Process is in place as part of a means to pro-actively identify, report and manage deteriorating credit
quality. Watchlist accounts are closely reviewed and monitored with corrective measures initiated to prevent them
from turning impaired. As a rule, watchlist accounts are either worked up or worked out within a period of twelve
months.
Active portfolio monitoring enables the Bank to understand the overall risk pro�le and identify any adverse trends or
areas of risk concentrations affecting asset quality so that appropriate actions are adopted to manage and mitigate
risks.
5.6 Impairment Provisioning
Individual impairment provisioning
Signi�cant loans, with or without past due status, are subject to individual assessment for impairment when an
evidence of impairment surfaces or at the very least once annually during the annual review process.
If impaired, the amount of loss is measured as the difference between the asset’s carrying value and the present value
of estimated future cash !ows discounted at the �nancial assets original effective interest rate. The level of impairment
allowance on signi�cant loans is reviewed regularly, at least quarterly or more often when circumstances require.
Signi�cant loans that are deemed not impaired after individual assessment are included in a group of loans with similar
characteristics and collectively assessed for impairment.
198 Affin Bank Berhad Annual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
5 Credit Risk
5.6 Impairment Provisioning (continued)
Collective impairment provisioning
All loans are grouped in respective business segments according to similar credit risk characteristics and is generally
based on industry, asset or collateral type, credit grade and past due status grouped based on business segments.
Portfolio provisioning is determined for each segment based on its respective loss probabilities and other information
relevant to estimation of the future cash !ows of each segment.
Collective provisioning is applicable to all loans not covered under individual assessment as well as signi�cant loans
that are deemed not impaired after individual assessment.
Total loans, advances and financing - credit quality
All loans, advances and �nancing are categorised into “neither past due nor impaired”, “past due but not impaired”
and “impaired”. Past due loans refer to loans that are overdue by one day or more. Impaired loans are loans with
months-in-arrears more than 90 days or with impaired allowances.
199Affin Bank BerhadAnnual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
5 Credit Risk
5.6 Impairment Provisioning (continued)
Analysed by economic sectors
The Group The Bank
Past due loans
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Primary agriculture 12,158 23,698 11,564 23,032
Mining and quarrying 2,615 3,006 2,415 2,838
Manufacturing 43,019 26,317 40,237 24,935
Electricity, gas and water supply 1,100 606 588 476
Construction 141,821 108,384 132,880 100,862
Real estate 359,196 205,295 331,607 202,051
Wholesale & retail trade and restaurants
& hotels 77,511 70,751 73,123 65,734
Transport, storage and communication 50,250 51,635 47,026 49,356
Finance, insurance and business services 89,818 131,672 87,117 129,518
Education, health and others 67,577 18,530 57,444 16,543
Household 1,800,031 1,792,753 1,380,662 1,417,953
2,645,096 2,432,647 2,164,663 2,033,298
The Group The Bank
Individual impairment
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Primary agriculture 2,435 2,560 2,435 2,560
Manufacturing 18,663 15,925 16,305 10,052
Construction 180,242 133,186 151,749 106,396
Wholesale & retail trade and restaurants
& hotels 5,531 7,023 5,531 5,210
Transport, storage and communication 540 3,958 540 3,958
Finance, insurance and business services 27,483 37,628 27,483 37,628
Household 4,365 23,421 3,697 23,313
239,259 223,701 207,740 189,117
200 Affin Bank Berhad Annual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
5 Credit Risk
5.6 Impairment Provisioning (continued)
Analysed by economic sectors (continued)
The Group The Bank
Individual impairment charged
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Primary agriculture 211 1,116 211 1,116
Mining and quarrying 8 - 8 -
Manufacturing 11,177 7,892 11,131 7,708
Electricity, gas and water supply - 4 - 4
Construction 66,730 19,610 66,730 19,447
Real estate - 555 - 555
Wholesale & retail trade and restaurants
& hotels 4,996 3,656 4,996 3,463
Transport, storage and communication 640 797 640 797
Finance, insurance and business services 739 1,163 739 1,163
Household 3,110 13,110 1,647 12,960
87,611 47,903 86,102 47,213
The Group The Bank
Individual impairment written-off
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Mining and quarrying 7,226 - 7,226 -
Manufacturing 4,011 3,620 4,011 3,620
Electricity, gas and water supply - 1,119 - 1,119
Construction 21,032 2,582 21,032 2,582
Wholesale & retail trade and restaurants
& hotels 1,813 1,005 - 1,005
Transport, storage and communication 3,308 - 3,308 -
Finance, insurance and business services 3,509 4,648 3,509 4,648
Household 9,971 - 9,971 -
50,870 12,974 49,057 12,974
201Affin Bank BerhadAnnual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
5 Credit Risk
5.6 Impairment Provisioning (continued)
Analysed by economic sectors (continued)
The Group The Bank
Collective impairment
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Primary agriculture 2,838 2,809 2,191 2,686
Mining and quarrying 1,369 1,345 1,365 1,340
Manufacturing 11,393 15,100 10,227 13,886
Electricity, gas and water supply 823 594 669 485
Construction 26,496 31,761 24,540 29,800
Real estate 17,722 14,164 16,620 13,161
Wholesale & retail trade and restaurants &
hotels 16,246 14,151 15,448 13,419
Transport, storage and communication 8,461 7,762 7,924 7,499
Finance, insurance and business services 30,732 14,564 28,259 13,172
Education, health and others 5,890 5,269 4,410 3,802
Household 170,649 192,795 143,573 167,345
292,619 300,314 255,226 266,595
Analysed by geographical area
The Group The Bank
Past due loans
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Perlis 4,455 4,680 3,750 4,143
Kedah 109,040 101,606 84,534 86,965
Pulau Pinang 87,424 93,554 75,049 81,663
Perak 117,262 115,654 65,279 67,837
Selangor 937,151 585,105 794,410 454,868
Wilayah Persekutuan 388,066 389,532 343,415 352,379
Negeri Sembilan 82,301 98,615 67,935 84,127
Melaka 95,668 106,888 86,980 101,945
Johor 254,439 353,076 227,871 333,469
Pahang 64,691 65,105 41,614 43,859
Terengganu 61,163 59,488 5,791 8,303
Kelantan 45,729 40,920 6,465 4,535
Sarawak 135,361 142,309 133,311 139,579
Sabah 234,956 275,810 228,143 269,326
Labuan 18 59 18 54
Outside Malaysia 27,372 246 98 246
2,645,096 2,432,647 2,164,663 2,033,298
202 Affin Bank Berhad Annual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
5 Credit Risk
5.6 Impairment Provisioning (continued)
Analysed by geographical area (continued)
The Group The Bank
Individual impairment
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Kedah 884 6,114 884 6,114
Pulau Pinang 12,403 1,332 12,403 1,332
Selangor 97,494 114,281 94,494 107,167
Wilayah Persekutuan 29,906 39,442 29,880 38,762
Negeri Sembilan 2,245 2,560 2,245 2,560
Johor 10,368 15,051 10,368 15,051
Pahang 38,920 3,396 38,920 3,396
Terengganu 11,569 1,733 11,569 1,733
Kelantan - 18 - 18
Sarawak 101 - 101 -
Sabah - 82 - -
Outside Malaysia 35,369 39,692 6,876 12,984
239,259 223,701 207,740 189,117
The Group The Bank
Collective impairment
2014
RM’000
2013
RM’000
2014
RM’000
2013
RM’000
Perlis 833 487 413 320
Kedah 11,681 12,289 10,344 11,140
Pulau Pinang 11,735 11,565 10,890 10,744
Perak 13,706 12,545 9,907 9,562
Selangor 110,202 111,368 97,633 99,103
Wilayah Persekutuan 52,783 51,989 46,815 46,335
Negeri Sembilan 12,101 14,345 10,755 12,942
Melaka 8,879 8,337 8,555 8,006
Johor 23,967 28,347 22,364 26,828
Pahang 8,135 6,729 6,598 5,425
Terengganu 6,184 14,818 2,574 12,094
Kelantan 4,210 3,517 906 898
Sarawak 9,277 8,236 9,006 7,928
Sabah 15,219 14,598 14,815 14,126
Labuan 1,273 1,144 1,272 1,144
Outside Malaysia 2,434 - 2,379 -
292,619 300,314 255,226 266,595
203Affin Bank BerhadAnnual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
5 Credit Risk
5.7 Credit Risk Culture
The Bank recognises that learning is a continuous journey and is committed to enhance the knowledge and required
skills set of its staff. It places strong emphasis in creating and enhancing risk awareness in the organisation.
For effective and ef�cient staff learning, the Bank has implemented an E–Learning Program with an online Learning
Management System (‘LMS’). The LMS provides staff with a progressive self-learning alternative at own pace.
GRM implements an Internal Credit Certi�cation (‘ICC’) Programme for both Business Banking and Consumer Credit.
The aim of the ICCs is to assist the core credit related group of personnel in the Bank achieve a minimum level of
knowledge and analytical skills required to make sound corporate and commercial loans to customers.
6 Market Risk
6.1 Market Risk Management Objectives and Policies
Market risk is de�ned as the risk of losses to the Bank’s portfolio positions arising from movements in market factors
such as interest rates, foreign exchange rates and changes in volatility. The Bank is exposed to market risks from
its trading and investment activities. The Bank’s market risk management objective is to ensure that market risk is
appropriately identi�ed, measured, controlled, managed and reported.
The Bank’s exposure to market risk stems primarily from interest rate risk and foreign exchange rate risk. Interest rate
risk arises mainly from differences in timing between the maturities or repricing of assets, liabilities and derivatives.
The Bank is also exposed to basis risk when there is a mismatch between the change in price of a hedge and the
change in price of the assets it hedges. Foreign exchange rate risk arises from unhedged positions of customers’
requirements and proprietary positions.
6.2 Application of Standardised Approach for Market Risk
The Bank adopts the Standardised Approach for the purpose of calculating the capital requirement for market risk.
Refer to Appendix I.
6.3 Market Risk Measurement, Control and Monitoring
The Bank’s market risk management control strategy is established based on its risk appetite, market liquidity and
business strategies as well as macroeconomic conditions. These limits are reviewed at least on an annual basis.
Market risk arising from the Bank’s trading book is primarily controlled through the imposition of Cut-loss and Value-
at-Risk (‘VaR’) Limits.
The Bank quanti�es interest rate risk by analysing the repricing mismatch between the rate sensitive assets and rate
sensitive liabilities. It also conducts Net Interest Income simulations to assess the variation in earnings under various
rates scenarios. The potential long term effects of the Bank’s overall exposure is also tracked by assessing the impact
on economic value of equity (‘EVE’).
The Bank’s interest rate risk is managed through Earnings-at-Risk (‘EaR’) and Economic Value-at-Risk (‘EVaR’) limits.
In addition, the Bank conducts periodic stress test of its respective business portfolios to ascertain market risk under
abnormal market conditions.
The Bank’s Management, ALCO and BRMC are regularly kept informed of its risk pro�le and positions.
204 Affin Bank Berhad Annual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
6 Market Risk
6.4 Value-at-Risk (‘VaR’)
Value-at-Risk (‘VaR’) is used to compute the maximum potential loss amount over a speci�ed holding period of a
trading portfolio. It measures the risk of losses arising from potential adverse movements in interest rates and foreign
exchange rates that could affect values of �nancial instruments.
In May 2014, arising from the Bank’s Treasury Management System Upgrade project, the Bank changed its
methodology to compute potential loss amount or Value-at-Risk (VaR) to Historical Pricing Simulation Method (HPS)
from the current Variance Co-variance (VCV) approach. HPS was chosen because it is a robust methodology able to
cater for a spectrum of �nancial instruments.
The Historical Pricing Method uses the relative change of historical prices to estimate future potential changes in
the market value of outstanding positions. The Bank currently adopts 250 simulated business days for its HPS VaR
computation. After applying these price changes to the outstanding portfolios, 250 simulated market values for the
portfolio are generated and the change in the day-to-day market value is taken as simulated Pro�t & Loss (P&L) for the
portfolio. Since VaR calculates the worst expected loss over a given day horizon and con�dence level under normal
market condition, simulated 250 values are sorted from the lowest to the highest simulated P&L. The VaR focuses on
the tail of the distribution (i.e the loss �gures).
Other risk measures include the following:
(i) Mark-to-Market valuation tracks the current market value of the outstanding �nancial instruments.
(ii) Stress tests are conducted to attempt to quantify market risk arising from low probability, abnormal market
movements. Stress tests measure the changes in values arising from extreme movements in interest rates and
foreign exchange rates based on past experience and simulated stress scenarios.
6.5 Foreign Exchange Risk
The Bank takes on exposure to the effects of !uctuations in the prevailing foreign currency exchange rates on its
�nancial position and cash !ows. The Board sets limits on the level of exposure by currency and in aggregate for both
overnight and intra-day positions, which are monitored daily.
7 Liquidity Risk
7.1 Liquidity Risk Management Objectives and Policies
Liquidity risk is the current and prospective risk to earnings or capital arising from a bank’s inability to meet its
obligations when they fall due. Liquidity risk includes the inability to manage sudden decreases or changes in funding
sources. Liquidity risk also arises from the failure to recognise changes in market conditions that affect the ability to
liquidate assets quickly and with minimal loss in value.
Liquidity risk management is managed on Group basis. The objective of liquidity risk management is to ensure that
there are suf�cient funds to meet contractual and regulatory obligations without incurring unacceptable losses as
well as to undertake new transactions. The Group’s liquidity management process involves establishing liquidity risk
management policies and limits, liquidity risk limits monitoring, stress testing and establishing contingency funding
plans. These building blocks of liquidity risk management are subject to regular reviews to ensure relevance in the
context of prevailing market conditions.
205Affin Bank BerhadAnnual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
7 Liquidity Risk
7.2 Liquidity Risk Measurement, Control and Monitoring
Liquidity monitoring is performed via projection of contractual and behavioral cash !ows, which are built upon from
BNM’s Liquidity Framework (‘LF’). The LF ascertains the liquidity condition based on the contractual and behavioral
cash-!ow of assets, liabilities and off-balance sheet commitments, taking into consideration the realisable cash value
of the eligible lique�able assets. The LF is also supported by indicative ratios on the Bank’s funding structure to
monitor the reliance on particular funding sources. Liquid assets in excess of regulatory requirements are maintained
for contingency in the event of a liquidity crisis.
The Bank employs liquidity risk indicators as an early alert of any structural change for liquidity risk management.
Liquidity risk is tracked using internal and external qualitative and quantitative indicators. Liquidity positions in the
major currencies are being closely monitored by tracking the availability of medium to long term foreign currency
funding and adhering to the guiding principles for foreign currency assets creations
The Bank also conducts liquidity stress test to gauge its resilience in the event of a liquidity crisis. A Contingency
Funding Plan is in place to alert and enable Management to act effectively and ef�ciently in handling liquidity disruption.
The document encompasses early warning system, strategies, decision-making authorities, and courses of actions to
be taken in the event of liquidity crisis and emergencies.
Basel III Liquidity Standards
The Basel Committee developed the Liquidity Coverage Ratio (‘LCR’) and Net Stable Funding Ratio (‘NSFR’) with the
goal of strengthening the resilience of banking systems. The LCR and NSFR are tracked monthly to assess the short
term and long term liquidity risk pro�le of the Bank, in line with BNM observation period reporting for Basel III liquidity
ratios which commenced in June 2012.
The BRMC is responsible for the Bank’s liquidity policy although the strategic management of liquidity has been
delegated to the ALCO. The BRMC is informed regularly on the liquidity situation in the Bank.
8 Operational Risk
8.1 Operational Risk Management Objectives and Policies
Operational risk is the risk of loss arising from inadequate or failed internal processes, action on or by people,
infrastructure or technology or events which are beyond the Bank’s immediate control which have an operational
impact, including natural disaster, fraudulent activities and money laundering/�nancing of terrorism.
The Bank manages operational risk through a control based environment in which policies and procedures are
formulated after taking into account individual unit’s business activities, the market in which it is operating and
regulatory requirement in force.
8.2 Application of Basic Indicator Approach for Operational Risk
The Bank adopts the Basic Indicator Approach for the purpose of calculating the capital requirement for operational
risk. The capital requirement is calculated by taking 15% of the Bank’s average annual gross income over the previous
three years.
206 Affin Bank Berhad Annual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
8 Operational Risk
8.3 Operational Risk Measurement, Control and Monitoring
Risk is identi�ed through the use of assessment tools and measured using threshold/limits mapped against risk matrix.
Monitoring and control procedures include the use of key control standards, independent tracking of risk, back-up
procedures and contingency plans, including disaster recovery and business continuity plans. This is supported by
periodic reviews undertaken by Group Internal Audit to ensure adequacy and effectiveness of the Group Operational
Risk Management process.
The Bank gathers, analyses and reports operational risk loss and ‘near miss’ events to Group Operational Risk
Management Committee and Board Risk Management Committee. Appropriate preventive and remedial actions are
reviewed for effectiveness and implemented to minimize the recurrence of such events.
8.4 Operational Risk Culture
As a matter of requirement, all Operational Risk Coordinators must satisfy an Internal Operational Risk (including
anti-money laundering/counter �nancing of terrorism and business continuity management) Certi�cation Program.
These coordinators will �rst go through an on-line self learning exercise before attempting on-line assessments to
measure their skills and knowledge level. This will enable Group Risk Management to prescribe appropriate training
and development activities for the coordinators.
9 Shariah Compliance
Shariah compliance is the fundamental of Islamic banking and �nance. It gives legitimacy to the practices and business
operations of the Islamic �nancial institutions (‘IFIs’) concerned. Comprehensive compliance with Shariah principles would
also boosts con�dence of shareholders and public that all the practices and activities by the IFIs are in compliance with
the Shariah principles at all times.
Shariah Governance Framework for Islamic Financial Institutions (the ‘Framework’) issued by Bank Negara Malaysia
becomes the main reference to oversee the Shariah governance process within AFFIN Islamic Bank Berhad. In order to
comply with all the requirements in the Framework, Board of Directors of the Bank are very committed to ensure among
others all the required Shariah compliance and research functions include Shariah Risk Management, Shariah Review,
Shariah Research and Shariah Audit are properly established to effectively perform its respective functions.
Continuous training programs are provided to Shariah Committee members to equip them with better understanding
and exposure on banking operations and to Board of Directors, management members and staff for fundamental and
advanced knowledge on Shariah and Islamic commercial law matters.
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BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
The Group and the Bank have adopted Basel II - Risk Weighted Assets computation under the BNM’s Risk-Weighted Capital Adequacy Framework with effect from 1 January 2008. The Group
and the Bank have adopted the Standardised Approach for credit risk and market risk, and Basic Indicator Approach for operation risk computation.
The following information concerning the Group and the Bank’s risk exposures are disclosed as accompanying information to the annual report, and does not form part of the audited
accounts.
Disclosure on Capital Adequacy under the Standardised Approach (RM’000)
The Group
2014
Exposure Class
Gross
Exposures/EAD
before CRM
Net
Exposures/
EAD after
CRM
Risk
Weighted
Assets
Total Risk
Weighted
Assets after
Effects of PSIA
Minimum
Capital
Requirements
at 8%
1 CREDIT RISK
On Balance Sheet Exposures
Corporates 23,991,290 23,178,220 18,725,008 18,725,008 1,498,001
Regulatory Retail 12,212,450 12,096,823 9,078,068 9,078,068 726,245
Other Assets 2,837,198 2,837,198 475,704 475,704 38,056
Sovereigns/Central Banks 10,469,658 10,469,658 - - -
Public Sector Entities 4,562 1,149 230 230 18
Banks, Development Financial Institutions & MDBs 3,971,739 3,971,739 1,391,253 1,391,253 111,300
Insurance Companies, Securities Firms & Fund Managers 394,070 394,070 370,383 370,383 29,631
Residential Mortgages 4,636,437 4,615,808 1,807,635 1,807,635 144,610
Higher Risk Assets 256,200 256,200 384,300 384,300 30,744
Equity Exposure 23,472 23,472 23,472 23,472 1,878
Defaulted Exposures 989,177 986,117 1,374,946 1,374,946 109,996
Total for On-Balance Sheet Exposures 59,786,253 58,830,454 33,630,999 33,630,999 2,690,479
Off Balance Sheet Exposures
Off Balance Sheet Exposures other than OTC derivatives or credit derivatives 4,843,323 4,635,439 4,179,391 4,179,391 334,351
Defaulted Exposures 26,932 23,652 35,190 35,190 2,815
Total for Off-Balance Sheet Exposures 4,870,255 4,659,091 4,214,581 4,214,581 337,166
Total for On and Off-Balance Sheet Exposures 64,656,508 63,489,545 37,845,580 37,845,580 3,027,645
2 MARKET RISK Long Position Short Position
Interest Rate Risk 9,177,910 9,178,005 (95) 273,509 - 21,881
Foreign Currency Risk 12,713 10,664 2,049 13,229 - 1,058
3 OPERATIONAL RISK
Operational Risk 2,322,105 185,768
Total RWA and Capital Requirements 40,454,423 37,845,580 3,236,352
PSIA “Pro�t Sharing Investment Account”
OTC “Over The Counter”
Appendix I
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BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
Disclosure on Capital Adequacy under the Standardised Approach (RM’000)
The Group
2013
Exposure Class
Gross
Exposures/EAD
before CRM
Net
Exposures/
EAD after
CRM
Risk
Weighted
Assets
Total Risk
Weighted
Assets after
Effects of PSIA
Minimum
Capital
Requirements
at 8%
1 CREDIT RISK
On Balance Sheet Exposures
Corporates 21,462,063 20,621,684 17,186,171 17,186,171 1,374,894
Regulatory Retail 11,713,244 11,609,274 8,710,981 8,710,981 696,877
Other Assets 2,317,711 2,317,711 434,250 434,250 34,740
Sovereigns/Central Banks 10,907,154 10,907,154 - - -
Public Sector Entities 34,424 30,344 6,069 6,069 486
Banks, Development Financial Institutions & MDBs 3,591,180 3,591,180 1,107,499 1,107,499 88,600
Insurance Companies, Securities Firms & Fund Managers 504,303 504,303 465,598 465,598 37,248
Residential Mortgages 4,428,276 4,412,291 1,778,721 1,778,721 142,298
Higher Risk Assets 294,509 294,122 441,183 441,183 35,294
Equity Exposure 24,057 24,057 24,057 24,057 1,925
Defaulted Exposures 1,273,511 1,243,940 1,716,941 1,716,941 137,356
Total for On-Balance Sheet Exposures 56,550,432 55,556,060 31,871,470 31,871,470 2,549,718
Off Balance Sheet Exposures
Off Balance Sheet Exposures other than OTC derivatives or credit derivatives 5,235,993 5,044,178 4,474,930 4,474,930 357,994
Defaulted Exposures 123,834 121,935 182,827 182,827 14,626
Total for Off-Balance Sheet Exposures 5,359,827 5,166,113 4,657,757 4,657,757 372,620
Total for On and Off-Balance Sheet Exposures 61,910,259 60,722,173 36,529,227 36,529,227 2,922,338
2 MARKET RISK Long Position Short Position
Interest Rate Risk 5,236,771 4,512,369 724,402 278,703 - 22,296
Foreign Currency Risk 16,556 17,404 (848) 20,974 - 1,678
3 OPERATIONAL RISK
Operational Risk 2,243,503 179,480
Total RWA and Capital Requirements 39,072,407 36,529,227 3,125,792
PSIA “Pro�t Sharing Investment Account”
OTC “Over The Counter”
Appendix I
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Disclosure on Capital Adequacy under the Standardised Approach (RM’000)
The Bank
2014
Exposure Class
Gross
Exposures/EAD
before CRM
Net
Exposures/
EAD after
CRM
Risk
Weighted
Assets
Total Risk
Weighted
Assets after
Effects of PSIA
Minimum
Capital
Requirements
at 8%
1 CREDIT RISK
On Balance Sheet Exposures
Corporates 20,732,063 20,117,978 16,385,809 16,385,809 1,310,865
Regulatory Retail 9,995,757 9,892,610 7,424,787 7,424,787 593,983
Other Assets 2,449,423 2,449,423 439,722 439,722 35,178
Sovereigns/Central Banks 6,727,176 6,727,176 - - -
Public Sector Entities 4,562 1,149 230 230 18
Banks, Development Financial Institutions & MDBs 3,648,454 3,648,454 1,383,253 1,383,253 110,660
Insurance Companies, Securities Firms & Fund Managers 394,070 394,070 370,383 370,383 29,631
Residential Mortgages 2,936,526 2,924,655 1,105,458 1,105,458 88,437
Higher Risk Assets 245,386 245,386 368,079 368,079 29,446
Equity Exposure 23,472 23,472 23,472 23,472 1,878
Defaulted Exposures 911,711 908,662 1,271,391 1,271,391 101,711
Total for On-Balance Sheet Exposures 48,068,600 47,333,035 28,772,584 28,772,584 2,301,807
Off Balance Sheet Exposures
Off Balance Sheet Exposures other than OTC derivatives or credit derivatives 4,285,030 4,088,049 3,779,594 3,779,594 302,368
Defaulted Exposures 26,412 23,133 34,434 34,434 2,755
Total for Off-Balance Sheet Exposures 4,311,442 4,111,182 3,814,028 3,814,028 305,123
Total for On and Off-Balance Sheet Exposures 52,380,042 51,444,217 32,586,612 32,586,612 2,606,930
2 MARKET RISK Long Position Short Position
Interest Rate Risk 9,165,038 9,165,113 (75) 273,484 - 21,879
Foreign Currency Risk 10,147 10,664 (517) 10,664 - 853
3 OPERATIONAL RISK
Operational Risk 1,954,278 156,342
Total RWA and Capital Requirements 34,825,038 32,586,612 2,786,004
PSIA “Pro�t Sharing Investment Account”
OTC “Over The Counter”
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
Appendix I
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Disclosure on Capital Adequacy under the Standardised Approach (RM’000)
The Bank
2013
Exposure Class
Gross
Exposures/EAD
before CRM
Net
Exposures/
EAD after
CRM
Risk
Weighted
Assets
Total Risk
Weighted
Assets after
Effects of PSIA
Minimum
Capital
Requirements
at 8%
1 CREDIT RISK
On Balance Sheet Exposures
Corporates 19,071,729 18,305,396 15,317,142 15,317,142 1,225,371
Regulatory Retail 9,765,977 9,667,736 7,254,620 7,254,620 580,369
Other Assets 2,063,713 2,063,713 411,610 411,610 32,929
Sovereigns/Central Banks 5,891,212 5,891,212 - - -
Public Sector Entities 34,424 30,344 6,069 6,069 486
Banks, Development Financial Institutions & MDBs 3,381,310 3,381,310 1,122,157 1,122,157 89,772
Insurance Companies, Securities Firms & Fund Managers 394,054 394,054 370,388 370,388 29,631
Residential Mortgages 2,849,626 2,841,197 1,101,714 1,101,714 88,137
Higher Risk Assets 273,390 273,016 409,524 409,524 32,762
Equity Exposure 24,057 24,057 24,057 24,057 1,925
Defaulted Exposures 1,196,163 1,166,603 1,626,144 1,626,144 130,092
Total for On-Balance Sheet Exposures 44,945,655 44,038,638 27,643,425 27,643,425 2,211,474
Off Balance Sheet Exposures
Off Balance Sheet Exposures other than OTC derivatives or credit derivatives 4,758,428 4,582,963 4,086,054 4,086,054 326,884
Defaulted Exposures 123,140 121,241 181,787 181,787 14,543
Total for Off-Balance Sheet Exposures 4,881,568 4,704,204 4,267,841 4,267,841 341,427
Total for On and Off-Balance Sheet Exposures 49,827,223 48,742,842 31,911,266 31,911,266 2,552,901
2 MARKET RISK Long Position Short Position
Interest Rate Risk 5,236,771 4,512,369 724,402 278,703 - 22,296
Foreign Currency Risk 12,986 17,404 (4,418) 17,404 - 1,392
3 OPERATIONAL RISK
Operational Risk 1,902,412 152,193
Total RWA and Capital Requirements 34,109,785 31,911,266 2,728,782
PSIA “Pro�t Sharing Investment Account”
OTC “Over The Counter”
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
Appendix I
211Affin Bank BerhadAnnual Report 2014
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
Disclosure on Capital Adequacy under the Standardised Approach
Market risk is de�ned as the risk of losses in on and off-balance sheet positions arising from movements in market prices. The
Bank’s Capital-at-Risk (‘CaR’) is de�ned as the amount of the Bank’s capital that is exposed to the risk of unexpected losses
arising particularly from movements in interest and foreign exchange rates. A CaR Limit is set as a management trigger to
ensure that the Bank’s exposure to such movements do not compromise the Bank’s capital adequacy. The Bank is currently
adopting BNM’s Standardised Approach for the computation of market risk capital charges. The market risk capital charges
addresses among others, capital requirement for market risk which includes the interest rate risk pertaining to the Bank’s
exposure in the trading book as well as foreign exchange risk in the trading and banking books.
The computation of market risk capital charge covers the following outstanding �nancial instruments:
a) Foreign Exchange
b) Interest Rate Swap (‘IRS’)
c) Cross Currency Swap (‘CCS’)
d) Fixed Income Instruments (i.e. Private Debt and Government Securities)
Appendix I
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Disclosure on Credit Risk: Disclosures on Risk Weights under the Standardised Approach (RM’000)
The Group
2014
Exposures after Netting and Credit Risk Mitigation Total
Exposure
after
Netting &
Credit
Risk
Mitigation
Total Risk
Weighted
Assets
Risk
Weights
Sovereigns
& Central
Banks PSEs
Banks,
MDBs and
FDIs
Insurance
Companies,
Securities
Firms &
Fund
Managers Corporates
Regulatory
Retail
Residential
Mortgages
Higher
Risk
Assets
Other
Assets
Specialised
Financing /
Investment Securitisation Equity
0% 10,528,154 - 79,017 - 1,353,996 - - - 2,075,390 - - - 14,036,557 -
10% - - - - - - - - - - - - - -
20% 64,896 2,759 2,011,544 29,609 3,544,288 1,016 - - 357,630 - - - 6,011,742 1,202,348
35% - - - - - - 4,034,885 - - - - - 4,034,885 1,412,210
50% - - 2,166,784 - 656,010 1,534 371,907 - - - - - 3,196,235 1,598,118
75% - - - - - 12,466,131 12,503 - - - - - 12,478,634 9,358,976
90% - - - - - - - - - - - - - -
100% - - 6,592 370,305 21,480,888 41,588 319,597 - 404,178 - - 23,472 22,646,620 22,646,620
110% - - - - - - - - - - - - - -
125% - - - - - - - - - - - - - -
135% - - - - - - - - - - - - - -
150% - - - - 471,910 210,038 139,652 263,272 - - - - 1,084,872 1,627,308
270% - - - - - - - - - - - - - -
350% - - - - - - - - - - - - - -
400% - - - - - - - - - - - - - -
625% - - - - - - - - - - - - - -
938% - - - - - - - - - - - - - -
1250% - - - - - - - - - - - - - -
Average
Risk Weight- - -
Deduction
from
Capital Base
- - - - - - - - - - - - -
PSE “Public Sector Entities”
MDB “Multilateral Development Banks”
FDI “Financial Development Institutions”
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
Appendix II
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Disclosure on Credit Risk: Disclosures on Risk Weights under the Standardised Approach (RM’000)
The Group
2013
Exposures after Netting and Credit Risk Mitigation
Total
Exposure
after
Netting &
Credit Risk
Mitigation
Total Risk
Weighted
Assets
Risk
Weights
Sovereigns
& Central
Banks PSEs
Banks,
MDBs and
FDIs
Insurance
Companies,
Securities
Firms &
Fund
Managers Corporates
Regulatory
Retail
Residential
Mortgages
Higher
Risk
Assets
Other
Assets
Specialised
Financing /
Investment Securitisation Equity
0% 10,973,025 - 34,314 15,039 1,135,377 - - - 1,810,859 - - - 13,968,614 -
10% - - - - - - - - - - - - - -
20% 38,677 31,954 2,508,495 29,583 2,531,860 1,715 - - 90,753 - - - 5,233,037 1,046,607
35% - - - - - - 3,676,431 - - - - - 3,676,431 1,286,751
50% - - 1,531,449 - 641,063 757 481,539 - - - - - 2,654,808 1,327,404
75% - - - - - 12,027,148 26,692 - - - - - 12,053,840 9,040,380
90% - - - - - - - - - - - - - -
100% - - 15,819 498,017 20,335,468 50,336 406,723 3,640 416,100 - - 24,057 21,750,160 21,750,160
110% - - - - - - - - - - - - - -
125% - - - - - - - - - - - - - -
135% - - - - - - - - - - - - - -
150% - - - - 791,707 216,164 74,565 302,847 - - - - 1,385,283 2,077,925
270% - - - - - - - - - - - - - -
350% - - - - - - - - - - - - - -
400% - - - - - - - - - - - - - -
625% - - - - - - - - - - - - - -
938% - - - - - - - - - - - - - -
1250% - - - - - - - - - - - - - -
Average
Risk Weight - - -
Deduction
from Capital
Base
- - - - - - - - - - - - -
PSE “Public Sector Entities”
MDB “Multilateral Development Banks”
FDI “Financial Development Institutions”
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
Appendix II
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Disclosure on Credit Risk: Disclosures on Risk Weights under the Standardised Approach (RM’000)
The Bank
2014
Exposures after Netting and Credit Risk Mitigation Total
Exposure
after
Netting &
Credit
Risk
Mitigation
Total Risk
Weighted
Assets
Risk
Weights
Sovereigns
& Central
Banks PSEs
Banks,
MDBs and
FDIs
Insurance
Companies,
Securities
Firms &
Fund
Managers Corporates
Regulatory
Retail
Residential
Mortgages
Higher
Risk
Assets
Other
Assets
Specialised
Financing /
Investment Securitisation Equity
0% 6,727,176 - 59,732 - 1,100,162 - - - 1,728,433 - - - 9,615,503 -
10% - - - - - - - - - - - - - -
20% - 2,759 1,527,255 29,609 2,941,110 1,016 - - 351,586 - - - 4,853,335 970,667
35% - - - - - - 2,659,862 - - - - - 2,659,862 930,952
50% - - 2,342,784 - 656,009 1,391 179,099 - - - - - 3,179,283 1,589,642
75% - - - - - 10,188,567 12,138 - - - - - 10,200,705 7,650,529
90% - - - - - - - - - - - - - -
100% - - 6,592 370,305 18,932,341 37,900 176,926 - 369,405 - - 23,472 19,916,941 19,916,940
110% - - - - - - - - - - - - - -
125% - - - - - - - - - - - - - -
135% - - - - - - - - - - - - - -
150% - - - - 464,634 193,784 108,803 251,367 - - - - 1,018,588 1,527,882
270% - - - - - - - - - - - - - -
350% - - - - - - - - - - - - - -
400% - - - - - - - - - - - - - -
625% - - - - - - - - - - - - - -
938% - - - - - - - - - - - - - -
1250% - - - - - - - - - - - - - -
Average
Risk Weight- - -
Deduction
from Capital
Base
- - - - - - - - - - - - -
PSE “Public Sector Entities”
MDB “Multilateral Development Banks”
FDI “Financial Development Institutions”
BASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
Appendix II
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Disclosure on Credit Risk: Disclosures on Risk Weights under the Standardised Approach (RM’000)
The Bank
2013
Exposures after Netting and Credit Risk Mitigation
Total
Exposure
after
Netting &
Credit Risk
Mitigation
Total Risk
Weighted
Assets
Risk
Weights
Sovereigns
& Central
Banks PSEs
Banks,
MDBs and
FDIs
Insurance
Companies,
Securities
Firms &
Fund
Managers Corporates
Regulatory
Retail
Residential
Mortgages
Higher
Risk
Assets
Other
Assets
Specialised
Financing /
Investment Securitisation Equity
0% 5,952,212 - 15,152 - 941,848 - - - 1,534,725 - - - 8,443,937 -
10% - - - - - - - - - - - - - -
20% - 31,954 2,138,299 29,583 2,201,186 1,715 - - 146,721 - - - 4,549,458 909,892
35% - - - - - - 2,457,225 - - - - - 2,457,225 860,029
50% - - 1,705,649 - 625,906 757 277,171 - - - - - 2,609,483 1,304,741
75% - - - - - 10,027,146 20,574 - - - - - 10,047,720 7,535,790
90% - - - - - - - - - - - - - -
100% - - 15,819 382,880 18,209,564 47,448 237,959 3,435 382,267 - - 24,057 19,303,429 19,303,429
110% - - - - - - - - - - - - - -
125% - - - - - - - - - - - - - -
135% - - - - - - - - - - - - - -
150% - - - - 790,105 198,396 62,192 280,897 - - - - 1,331,590 1,997,385
270% - - - - - - - - - - - - - -
350% - - - - - - - - - - - - - -
400% - - - - - - - - - - - - - -
625% - - - - - - - - - - - - - -
938% - - - - - - - - - - - - - -
1250% - - - - - - - - - - - - - -
Average
Risk Weight - - - - - -
Deduction
from Capital
Base
- - - - - - - - - - - - -
PSE “Public Sector Entities”
MDB “Multilateral Development Banks”
FDI “Financial Development Institutions”
Appendix IIBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
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(i) Disclosures on Rated Exposures according to Ratings by ECAIs (RM’000)
The Group
2014
Exposure Class
Ratings of Corporate by Approved ECAIs
Moodys Aaa to Aa3 A1 to A3 Baa1 to Ba3 B1 to C Unrated
S&P AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
RAM AAA to AA3 A to A3 BBB1 to BB3 B to D Unrated
MARC AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
Rating &
Investment Inc AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
On and Off-Balance-Sheet Exposures
Credit Exposures (using Corporate Risk Weights)
Public Sector Entities (applicable for entities risk weighted based on their
external ratings as corporates) - - - - 6,187
Insurance Cos, Securities Firms & Fund Managers - - - - 399,914
Corporates 1,438,938 529,078 - - 26,528,052
Total 1,438,938 529,078 - - 26,934,153
Appendix IIIBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
2013
Exposure Class
Ratings of Corporate by Approved ECAIs
Moodys Aaa to Aa3 A1 to A3 Baa1 to Ba3 B1 to C Unrated
S&P AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
RAM AAA to AA3 A to A3 BBB1 to BB3 B to D Unrated
MARC AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
Rating &
Investment Inc AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
On and Off-Balance-Sheet Exposures
Credit Exposures (using Corporate Risk Weights)
Public Sector Entities (applicable for entities risk weighted based on their
external ratings as corporates) - - - - 36,049
Insurance Cos, Securities Firms & Fund Managers - - - - 543,311
Corporates 636,022 549,081 250 - 25,280,661
Total 636,022 549,081 250 - 25,860,021
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The Bank
2014
Exposure Class
Ratings of Corporate by Approved ECAIs
Moodys Aaa to Aa3 A1 to A3 Baa1 to Ba3 B1 to C Unrated
S&P AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
RAM AAA to AA3 A to A3 BBB1 to BB3 B to D Unrated
MARC AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
Rating &
Investment Inc AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
On and Off-Balance-Sheet Exposures
Credit Exposures (using Corporate Risk Weights)
Public Sector Entities (applicable for entities risk weighted based on their
external ratings as corporates) - - - - 6,187
Insurance Cos, Securities Firms & Fund Managers - - - - 399,914
Corporates 1,191,454 529,078 - - 23,158,384
Total 1,191,454 529,078 - - 23,564,485
Appendix IIIBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
2013
Exposure Class
Ratings of Corporate by Approved ECAIs
Moodys Aaa to Aa3 A1 to A3 Baa1 to Ba3 B1 to C Unrated
S&P AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
RAM AAA to AA3 A to A3 BBB1 to BB3 B to D Unrated
MARC AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
Rating &
Investment Inc AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
On and Off-Balance-Sheet Exposures
Credit Exposures (using Corporate Risk Weights)
Public Sector Entities (applicable for entities risk weighted based on their
external ratings as corporates) - - - - 36,049
Insurance Cos, Securities Firms & Fund Managers - - - - 412,462
Corporates 613,923 534,081 250 - 22,563,126
Total 613,923 534,081 250 - 23,011,637
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(ii) Disclosures on Rated Exposures according to Ratings by ECAIs (RM’000)
The Group
2014
Exposure Class
Ratings of Sovereigns and Central Banks by Approved ECAIs
Moodys Aaa to Aa3 A1 to A3 Baa1 to Baa3 Ba1 to B3 Caa1 to C Unrated
S&P AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
Rating &
Investment Inc AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to C Unrated
On and Off-Balance-Sheet Exposures
Sovereigns and Central Banks - 10,593,053 - - - -
Total - 10,593,053 - - - -
Exposure Class
Ratings of Banking Institutions by Approved ECAIs
Moodys Aaa to Aa3 A1 to A3 Baa1 to Baa3 Ba1 to B3 Caa1 to C Unrated
S&P AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
RAM AAA to AA3- A1 to A3 BBB1+ to BBB3 BB1 to B3 C1+ to D Unrated
MARC AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- C+ to D Unrated
Rating &
Investment Inc AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to C Unrated
On and Off-Balance-Sheet Exposures
Banks, MDBs and FDIs 691,236 214,489 82,430 6,592 - 3,445,194
Total 691,236 214,489 82,430 6,592 - 3,445,194
Appendix IIIBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
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(ii) Disclosures on Rated Exposures according to Ratings by ECAIs (RM’000)
The Group
2013
Exposure Class
Ratings of Sovereigns and Central Banks by Approved ECAIs
Moodys Aaa to Aa3 A1 to A3 Baa1 to Baa3 Ba1 to B3 Caa1 to C Unrated
S&P AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
Rating &
Investment Inc AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to C Unrated
On and Off-Balance-Sheet Exposures
Sovereigns and Central Banks - 11,011,702 - - - -
Total - 11,011,702 - - - -
Exposure Class
Ratings of Banking Institutions by Approved ECAIs
Moodys Aaa to Aa3 A1 to A3 Baa1 to Baa3 Ba1 to B3 Caa1 to C Unrated
S&P AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
RAM AAA to AA3- A1 to A3 BBB1+ to BBB3 BB1 to B3 C1+ to D Unrated
MARC AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- C+ to D Unrated
Rating &
Investment Inc AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to C Unrated
On and Off-Balance-Sheet Exposures
Banks, MDBs and FDIs 1,563,194 163,635 35,795 21,739 - 2,481,713
Total 1,563,194 163,635 35,795 21,739 - 2,481,713
Appendix IIIBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
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The Bank
2014
Exposure Class
Ratings of Sovereigns and Central Banks by Approved ECAIs
Moodys Aaa to Aa3 A1 to A3 Baa1 to Baa3 Ba1 to B3 Caa1 to C Unrated
S&P AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
Rating &
Investment Inc AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to C Unrated
On and Off-Balance-Sheet Exposures
Sovereigns and Central Banks - 6,727,179 - - - -
Total - 6,727,179 - - - -
Exposure Class
Ratings of Banking Institutions by Approved ECAIs
Moodys Aaa to Aa3 A1 to A3 Baa1 to Baa3 Ba1 to B3 Caa1 to C Unrated
S&P AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
RAM AAA to AA3- A1 to A3 BBB1+ to BBB3 BB1 to B3 C1+ to D Unrated
MARC AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- C+ to D Unrated
Rating &
Investment Inc AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to C Unrated
On and Off-Balance-Sheet Exposures
Banks, MDBs and FDIs 686,961 214,475 82,430 6,592 - 2,945,910
Total 686,961 214,475 82,430 6,592 - 2,945,910
Appendix IIIBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
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(ii) Disclosures on Rated Exposures according to Ratings by ECAIs (RM’000)
The Bank
2013
Exposure Class
Ratings of Sovereigns and Central Banks by Approved ECAIs
Moodys Aaa to Aa3 A1 to A3 Baa1 to Baa3 Ba1 to B3 Caa1 to C Unrated
S&P AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
Rating &
Investment Inc AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to C Unrated
On and Off-Balance-Sheet Exposures
Sovereigns and Central Banks - 5,952,212 - - - -
Total - 5,952,212 - - - -
Exposure Class
Ratings of Banking Institutions by Approved ECAIs
Moodys Aaa to Aa3 A1 to A3 Baa1 to Baa3 Ba1 to B3 Caa1 to C Unrated
S&P AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
Fitch AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to D Unrated
RAM AAA to AA3- A1 to A3 BBB1+ to BBB3 BB1 to B3 C1+ to D Unrated
MARC AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- C+ to D Unrated
Rating &
Investment Inc AAA to AA- A+ to A- BBB+ to BBB- BB+ to B- CCC+ to C Unrated
On and Off-Balance-Sheet Exposures
Banks, MDBs and FDIs 1,499,708 136,926 35,795 21,739 - 2,180,752
Total 1,499,708 136,926 35,795 21,739 - 2,180,752
Appendix IIIBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
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The Group
2014
Exposure Class Exposures
before
CRM
Exposures
Covered by
Guarantees/
Credit
Derivatives
Exposures
Covered by
Eligible
Financial
Collateral
Exposures
Covered by
Other
Eligible
Collateral
Credit Risk
On-Balance Sheet Exposures
Sovereigns/Central Banks 10,469,658 - 3 -
Public Sector Entities 4,562 - 3,428 -
Banks, Development Financial Institutions & MDBs 3,971,739 - 4 -
Insurance Cos, Securities Firms & Fund Managers 394,070 - - -
Corporates 23,991,290 134,021 983,423 -
Regulatory Retail 12,212,450 865 153,135 -
Residential Mortgages 4,636,437 - 20,631 -
Higher Risk Assets 256,200 - - -
Other Assets 2,837,198 - - -
Equity Exposure 23,472 - - -
Defaulted Exposures 989,177 152 6,340 -
Total for On-Balance Sheet Exposures 59,786,253 135,038 1,166,964 -
Off-Balance Sheet Exposures
Off-Balance Sheet exposures other than OTC derivatives or credit derivatives 4,843,323 - - -
Defaulted Exposures 26,932 - - -
Total for Off-Balance Sheet Exposures 4,870,255 - - -
Total On and Off-Balance Sheet Exposures 64,656,508 135,038 1,166,964 -
Appendix IVBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
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a) Disclosures on Credit Risk Mitigation (RM’000)
The Group
2013
Exposure Class Exposures
before
CRM
Exposures
Covered by
Guarantees/
Credit
Derivatives
Exposures
Covered by
Eligible
Financial
Collateral
Exposures
Covered by
Other
Eligible
Collateral
Credit Risk
On-Balance Sheet Exposures
Sovereigns/Central Banks 10,907,154 - - -
Public Sector Entities 34,424 - 4,094 -
Banks, Development Financial Institutions & MDBs 3,591,180 - - -
Insurance Cos, Securities Firms & Fund Managers 504,303 - 673 -
Corporates 21,462,063 131,752 998,947 -
Regulatory Retail 11,713,244 1,567 136,127 -
Residential Mortgages 4,428,276 - 15,988 -
Higher Risk Assets 294,509 - 387 -
Other Assets 2,317,711 - - -
Equity Exposure 24,057 - - -
Defaulted Exposures 1,273,511 149 31,470 -
Total for On-Balance Sheet Exposures 56,550,432 133,468 1,187,686 -
Off-Balance Sheet Exposures
Off-Balance Sheet exposures other than OTC derivatives or credit derivatives 5,235,993 - - -
Defaulted Exposures 123,834 - - -
Total for Off-Balance Sheet Exposures 5,359,827 - - -
Total On and Off-Balance Sheet Exposures 61,910,259 133,468 1,187,686 -
Appendix IVBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
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a) Disclosures on Credit Risk Mitigation (RM’000)
The Bank
2014
Exposure Class Exposures
before
CRM
Exposures
Covered by
Guarantees/
Credit
Derivatives
Exposures
Covered by
Eligible
Financial
Collateral
Exposures
Covered by
Other
Eligible
Collateral
Credit Risk
On-Balance Sheet Exposures
Sovereigns/Central Banks 6,727,176 - 3 -
Public Sector Entities 4,562 - 3,428 -
Banks, Development Financial Institutions & MDBs 3,648,454 - 4 -
Insurance Cos, Securities Firms & Fund Managers 394,070 - - -
Corporates 20,732,063 130,821 779,105 -
Regulatory Retail 9,995,757 865 135,083 -
Residential Mortgages 2,936,526 - 11,873 -
Higher Risk Assets 245,386 - - -
Other Assets 2,449,423 - - -
Equity Exposure 23,472 - - -
Defaulted Exposures 911,711 152 6,328 -
Total for On-Balance Sheet Exposures 48,068,600 131,838 935,824 -
Off-Balance Sheet Exposures
Off-Balance Sheet exposures other than OTC derivatives or credit derivatives 4,285,030 - - -
Defaulted Exposures 26,412 - - -
Total for Off-Balance Sheet Exposures 4,311,442 - - -
Total On and Off-Balance Sheet Exposures 52,380,042 131,838 935,824 -
Appendix IVBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
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a) Disclosures on Credit Risk Mitigation (RM’000)
The Bank
2013
Exposure Class Exposures
before
CRM
Exposures
Covered by
Guarantees/
Credit
Derivatives
Exposures
Covered by
Eligible
Financial
Collateral
Exposures
Covered by
Other
Eligible
Collateral
Credit Risk
On-Balance Sheet Exposures
Sovereigns/Central Banks 5,891,212 - - -
Public Sector Entities 34,424 - 4,094 -
Banks, Development Financial Institutions & MDBs 3,381,310 - - -
Insurance Cos, Securities Firms & Fund Managers 394,054 - - -
Corporates 19,071,729 128,552 911,180 -
Regulatory Retail 9,765,977 1,567 128,442 -
Residential Mortgages 2,849,626 - 8,430 -
Higher Risk Assets 273,390 - 375 -
Other Assets 2,063,713 - - -
Equity Exposure 24,057 - - -
Defaulted Exposures 1,196,163 149 31,459 -
Total for On-Balance Sheet Exposures 44,945,655 130,268 1,083,980 -
Off-Balance Sheet Exposures
Off-Balance Sheet exposures other than OTC derivatives or credit derivatives 4,758,428 - - -
Defaulted Exposures 123,140 - - -
Total for Off-Balance Sheet Exposures 4,881,568 - - -
Total On and Off-Balance Sheet Exposures 49,827,223 130,268 1,083,980 -
Appendix IVBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
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b) Disclosure on Off-Balance Sheet and Counterparty Credit Risk (RM’000)
Counterparty Credit Risk is the risk that the counterparty to a transaction could default before the �nal settlement of the transaction’s cash!ows. An economic loss could occur if the
transactions with the counterparty has a positive economic value for the Bank at the time of default.
In contrast to the exposure to credit risk through a loan, where the exposure to credit risk is unilateral and only the lending bank faces the risk of loss, Counterparty Credit Risk creates
a bilateral risk of loss where the market value for many types of transactions can be positive or negative to either counterparty.
In respect of off-balance sheet items, the credit risk inherent in each off-balance sheet instrument is translated into an on-balance sheet exposure equivalent (credit equivalent) by
multiplying the nominal principal amount with a credit conversion factor (‘CCF’) as prescribed by the Standardised Approach under the Risk Weighted Capital Adequacy Framework. The
resulting amount is then weighted against the risk weight of the counterparty. In addition, counterparty risk weights for over-the-counter (‘OTC’) derivative transactions will be determined
based on the external rating of the counterparty and will not be subject to any speci�c ceiling.
The Group
2014
Description
Principal Amount
Positive Fair Value
of Derivative
Contracts
Credit Equivalent
Amount
Risk Weighted
Amount
Direct Credit Substitutes 679,779 679,779 646,882
Transaction related contingent Items 2,043,704 1,021,852 929,517
Short Term Self Liquidating trade related contingencies 746,576 149,315 95,680
Foreign exchange related contracts
One year or less 5,110,352 64,957 151,954 96,708
Over one year to �ve years 451,955 1,195 41,516 13,374
Over �ve years 96,030 360 14,405 7,202
Interest/Pro�t rate related contracts
One year or less 1,256,279 6,041 4,641 1,350
Over one year to �ve years 1,781,125 11,383 47,984 13,161
Over �ve years 390,148 4,722 33,652 9,460
Other commitments, such as formal standby facilities and credit lines, with an original
maturity of over one year 2,022,026 1,011,013 921,555
Other commitments, such as formal standby facilities and credit lines, with an original
maturity of up to one year 8,361,676 1,672,335 1,448,611
Any commitments that are unconditionally cancelled at any time by the bank without
prior notice or that effectively provide for automatic cancellation due to deterioration
in a borrower’s creditworthiness 279,345 - -
Unutilised credit card lines 208,865 41,773 31,073
Total 23,427,860 88,658 4,870,219 4,214,573
Appendix IVBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
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The Group
2013
DescriptionPrincipal Amount
Positive Fair Value of
Derivative Contracts
Credit Equivalent
Amount
Risk Weighted
Amount
Direct Credit Substitutes 1,410,611 1,410,611 1,418,056
Transaction related contingent Items 1,974,804 987,402 864,908
Short Term Self Liquidating trade related contingencies 573,412 114,683 82,976
Foreign exchange related contracts
One year or less 3,636,267 24,125 73,219 33,250
Over one year to �ve years 594,154 2,514 57,307 16,657
Over �ve years 96,030 - 16,325 8,163
Interest/Pro�t rate related contracts
One year or less 809,068 4,592 2,271 820
Over one year to �ve years 2,442,222 10,637 53,133 15,745
Over �ve years 703,148 14,406 66,112 28,314
Other commitments, such as formal standby facilities and credit lines, with an original
maturity of over one year 2,181,286 1,090,643 992,549
Other commitments, such as formal standby facilities and credit lines, with an original
maturity of up to one year 7,263,403 1,452,681 1,169,480
Unutilised credit card lines 179,201 35,840 26,839
Total 21,863,606 56,274 5,360,227 4,657,757
Appendix IVBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
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b) Disclosure on Off-Balance Sheet and Counterparty Credit Risk (RM’000)
The Bank
2014
Description
Principal Amount
Positive Fair Value
of Derivative
Contracts
Credit Equivalent
Amount
Risk Weighted
Amount
Direct Credit Substitutes 669,843 669,843 639,188
Transaction related contingent Items 1,891,540 945,770 856,862
Short Term Self Liquidating trade related contingencies 345,057 69,011 67,464
Foreign exchange related contracts
One year or less 5,131,295 64,971 151,966 96,702
Over one year to �ve years 451,955 1,195 41,516 13,374
Over �ve years 96,030 360 14,405 7,202
Interest/Pro�t rate related contracts
One year or less 1,256,279 6,041 4,641 1,350
Over one year to �ve years 1,781,125 11,383 47,984 13,161
Over �ve years 390,148 4,722 33,652 9,460
Other commitments, such as formal standby facilities and credit lines, with an original
maturity of over one year 1,709,548 854,774 779,957
Other commitments, such as formal standby facilities and credit lines, with an original
maturity of up to one year 7,180,536 1,436,107 1,298,235
Any commitments that are unconditionally cancelled at any time by the bank without
prior notice or that effectively provide for automatic cancellation due to deterioration
in a borrower’s creditworthiness 247,693 - -
Unutilised credit card lines 208,865 41,773 31,073
Total 21,359,914 88,672 4,311,442 3,814,028
Appendix IVBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
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b) Disclosure on Off-Balance Sheet and Counterparty Credit Risk (RM’000)
The Bank
2013
DescriptionPrincipal Amount
Positive Fair Value of
Derivative Contracts
Credit Equivalent
Amount
Risk Weighted
Amount
Direct Credit Substitutes 1,402,157 1,402,157 1,411,181
Transaction related contingent Items 1,849,237 924,619 804,191
Short Term Self Liquidating trade related contingencies 353,020 70,604 69,871
Foreign exchange related contracts
One year or less 3,636,267 24,125 73,219 33,250
Over one year to �ve years 594,154 2,514 57,307 16,657
Over �ve years 96,030 - 16,325 8,163
Interest/Pro�t rate related contracts
One year or less 809,068 4,592 2,271 820
Over one year to �ve years 2,442,222 10,637 53,133 15,745
Over �ve years 703,148 14,406 66,112 28,314
Other commitments, such as formal standby facilities and credit lines, with an original
maturity of over one year 1,846,662 923,331 840,756
Other commitments, such as formal standby facilities and credit lines, with an original
maturity of up to one year 6,285,251 1,257,050 1,012,054
Unutilised credit card lines 179,201 35,840 26,839
Total 20,196,417 56,274 4,881,968 4,267,841
Appendix IVBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
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c) Disclosures on Market Risk - Interest Rate Risk/Rate of Return Risk in the Banking Book
Interest rate risk is the current and prospective impact to the Bank’s �nancial condition due to adverse changes in the interest rates to which the balance sheet is exposed. The objective
is to manage interest rate risk to achieve stable and sustainable net interest income in the long term which impact can be viewed from the perspectives of (1) earnings in the next 12
months, and (2) economic value.
(1) Next 12 months’ Earnings - Interest rate risk from the earnings perspective is the impact based on changes to the net interest income over the next 12 months. This risk is measured
monthly through sensitivity analysis including the application of an instantaneous 100 basis point parallel shock in interest rates across the yield curve. The prospective change to the
net interest income is measured using an Asset Liability Management simulation model which incorporates the assessment of both existing and new business.
(2) Economic Value - Measuring the change in the economic value of equity is an assessment of the long term impact to the earnings potential. This is assessed through the application
of relevant duration factors to capture the net economic value impact over the long term or total life of all balance sheet assets and liabilities to adverse changes in interest rates.
The above calculations do not take into account loan prepayments.
2014
Type of Currency (RM million)
The Group The Bank
Impact on Positions
(100 basis points) Parallel Shift
Impact on Positions
(100 basis points) Parallel Shift
Increase/(Decline)
in Earnings
Increase/(Decline)
in Economic Value
Increase/(Decline)
in Earnings
Increase/(Decline)
in Economic Value
Ringgit Malaysia (40.7) 292.8 (51.3) 248.1
US Dollar 8.0 7.1 8.4 7.1
Euro (0.4) - (0.4) -
Great Britain Pound (0.1) - (0.1) -
Australian Dollar (0.1) 2.0 (0.1) 1.9
Singapore Dollar 0.8 (0.6) 0.8 (0.6)
Japanese Yen - - - -
Others (#) 7.5 7.7 7.5 7.7
Total (25.0) 309.0 (35.2) 264.2
# Others comprise of CNH, NZD, HKD and AED currencies where the amount of each currency is relatively small.
Appendix IVBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
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c) Disclosures on Market Risk - Interest Rate Risk/Rate of Return Risk in the Banking Book
2013
Type of Currency (RM million)
The Group The Bank
Impact on Positions
(100 basis points) Parallel Shift
Impact on Positions
(100 basis points) Parallel Shift
Increase/(Decline)
in Earnings
Increase/(Decline)
in Economic Value
Increase/(Decline)
in Earnings
Increase/(Decline)
in Economic Value
Ringgit Malaysia (32.7) 488.0 (36.2) 386.4
US Dollar 12.3 10.7 12.7 10.7
Euro (0.4) - (0.4) -
Great Britain Pound 0.8 0.2 0.8 0.2
Australian Dollar 0.1 2.4 0.1 2.4
Singapore Dollar 0.5 0.8 0.5 0.8
Japanese Yen (0.1) - (0.1) -
Others (#) 1.0 1.5 1.1 1.5
Total (18.5) 503.6 (21.5) 402.0
# Others comprise of CNH, NZD, HKD and AED currencies where the amount of each currency is relatively small.
Appendix IVBASEL II PILLAR 3 DISCLOSURESfor the �nancial year ended 31 December 2014
AFFIN BANK BERHAD (25046-T)
17th Floor, Menara AFFIN,
80, Jalan Raja Chulan,
50200 Kuala Lumpur
T : 03 2055 9000
F : 03 2026 1415
www.af�nbank.com.my
AFFIN BANK BERHAD (25046-T)
AFFIN BANK BERHAD (25046-T)
17th Floor, Menara AFFIN,
80, Jalan Raja Chulan,
50200 Kuala Lumpur
T : 03 2055 9000
F : 03 2026 1415
www.affinbank.com.my