Company No.
965488-H
NATIONAL BANK OF ABU DHABI MALAYSIA BERHAD
(Incorporated in Malaysia)
BASEL II: PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2015
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 2
1. OVERVIEW
The Pillar 3 Disclosures attached herewith is governed under the Bank Negara
Malaysia’s (“BNM”) Risk-Weighted Capital Adequacy Framework (“RWCAF”) –
Disclosure Requirements (“Pillar 3”), which is the equivalent of that issued by the Basel
Committee on Banking Supervision entitled “International Convergence of Capital
Measurement and Capital Standards”(commonly referred to as Basel II).
This Pillar 3 Disclosures is to be read in conjunction with the Financial Statements as of
30 June 2015.
2. SCOPE OF APPLICATION
The Pillar 3 Disclosures relates to National Bank of Abu Dhabi Malaysia Berhad (“the
Bank”) only. The Bank does not have any subsidiary or associated company as at 30th
June 2015.
The Bank adopts the Standardised Approach in determining the capital requirements for
credit risk and market risk and applied the Basic Indicator Approach for operational
risk.
3. CAPITAL MANAGEMENT
The Bank’s capital management approach is driven by its desire to maintain appropriate
capital base and maintain adequate buffer in support of its business development and to
meet BNM regulatory capital requirements at all times. As such, implications on the
Bank’s capital position are taken into account by the Board and senior management prior
to implementing major business decisions in order to preserve the Bank’s overall capital
requirements.
Capital Plan
The Bank’s Capital Plan is drawn up annually in conjunction with the financial
budgeting exercise and approved by the Board for implementation at the beginning of
each financial year. The Capital Plan is the establishment of the Internal Capital Target
(“ICT”) of which takes into account, inter alia, the Bank’s strategic objectives and
business plans, regulatory capital requirements, views of key stakeholders such as the
parent company, regulators, development on BNM capital guidelines, available supply
of capital and capital raising options and performance of business sectors.
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 3
ALCO is responsible for the on-going assessment of the demand and usage of capital.
Capital Contingency Plan
In addition to the Capital Plan, the Bank has also developed a documented Board-
approved Capital Contingency Plan in December 2014. The Plan is intended to ensure
that capital is managed effectively in the event of a capital crisis.
The Capital Contingency Plan (“CCP”) is an extension of the Capital Plan. The CCP
provides a comprehensive approach to the management and restoration of capital in the
unlikely event of a capital crisis by:
Establishing policies and procedures for capital contingency planning;
Establishing governance for capital contingency planning;
Providing early warning signals and establish monitoring and escalation process;
and
Establishing strategies and action plans to ensure that capital is managed promptly.
In order to ensure healthy capital levels at all times, the minimum capital requirements
and capital adequacy ratios are monitored actively by the senior management and
relevant committees on a monthly basis. Appropriate trigger points are established
based on the minimum capital requirements and capital adequacy ratios computed in
accordance with BNM guidelines in order to facilitate reporting, monitoring and
escalation, decision-making and action planning.
Circumstances that could lead to deficiencies in capital position include, amongst others,
economic environment, market conditions and financial conditions. In this regard,
appropriate strategies and action plans have been developed so that, in the unlikely
event of a capital crisis, the Bank will be prepared to deal with the event promptly and
restore capital back to healthy levels.
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 4
Capital Structure
The components of the Bank’s capital structure are as follows:
30.06.2015
RM ‘000
31.12.2014
RM ‘000
CET 1 / Tier 1 Capital
Paid-Up Share Capital 330,000 330,000
Accumulated Loss (7,585) (7,585)
Other Reserve 3,002 55
Total CET1 / Tier 1 Capital before regulatory adjustments 325,417 322,470
Less: Regulatory Adjustments
- Revaluation reserve (1,612) (55)
- Hedging reserve (71) -
Total CET1 / Tier 1 Capital after regulatory adjustments 323,734 322,415
Tier 2 Capital
Allowance for Collective Assessment Impairment 3,376 3,598
Total Capital 327,110 326,013
Regulatory Capital Requirements
With effect from 1 January 2013, the Bank’s capital adequacy ratios have been computed
based on BNM’s Capital Adequacy Framework (Capital Components and Risk-
Weighted Assets). The capital adequacy ratios of the Bank are as follows:
30.06.2015 31.12.2014
Common Equity Tier 1 (“CET 1”) Capital Ratio 69.819% 74.311%
Tier 1 Capital Ratio 69.819% 74.311%
Total Capital Ratio 70.548% 75.141%
Implementation of Basel III
Under BNM’s Capital Adequacy Framework, banking institutions are required to
maintain higher minimum quantity and quality of capital but the requirements will be
subjected to a series of transitional arrangements, phase-in over a period of time,
commencing 2013 and to be fully effective by 2019.
The minimum regulatory capital adequacy ratios, as required by under BNM's Capital
Adequacy Framework (Capital Components) issued on 28th November 2012), which
includes transitional arrangements for year 2014 and 2015, are set out as follows:
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 5
2015 2014
Min CET 1 4.5% 4.0%
Min CET 1 + Conservation Buffer 4.5% 4.0%
Min Tier 1 6.0% 5.5%
Min Tier 1 + Conservation Buffer 6.0% 5.5%
Total Capital 8.0% 8.0%
Total Capital + Conservation Buffer 8.0% 8.0%
The Bank is poised to continue to remain healthy above the minimum capital
requirements. With active capital management, capital ratios will be maintained
comfortably well above the minimum as required by BNM.
Disclosure on Capital Adequacy under the Standardised Approach
Bank
30 June 2015
Exposure Class
Gross
Exposures
Net
Exposures
Risk
Weighted
Assets
Minimum
Capital
Requirements
at 8%
RM ‘000 RM ‘000 RM ‘000 RM ‘000
a) Credit Risk (Standardised Approach)
On-Balance Sheet Exposures
Sovereigns / Central Banks 218,251 218,251 39,885 3,191
Banks, DFIs & MDBs 555,046 555,046 111,009 8,881
Corporates 252,091 252,091 244,240 19,539
Others 16,088 16,088 15,877 1,270
Total On-Balance Sheet Exposures 1,041,476 1,041,476 411,011 32,881
Off-Balance Sheet Exposures
OTC Derivatives 12,363 12,363 2,473 198
Off balance sheet exposures other than OTC
derivatives 8,626 8,626 3,903 312
Total Off Balance Sheet Exposures 20,989 20,989 6,376 510
Total On and Off-Balance Sheet Exposures 1,062,465 1,062,465 417,387 33,391
b) Large Exposures Risk Requirement - - - -
c) Market Risk (Standardised Approach)
Foreign Currency Risk (Net Long Position) 4,263 341
d) Operational Risk (Basic Indicator Approach) 42,023 3,362
Total RWA & Capital Requirements 463,673 37,094
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 6
Bank
31 December 2014
Exposure Class
Gross
Exposures
Net
Exposures
Risk
Weighted
Assets
Minimum
Capital
Requirements
at 8%
RM ‘000 RM ‘000 RM ‘000 RM ‘000
a) Credit Risk (Standardised Approach)
On-Balance Sheet Exposures
Sovereigns / Central Banks 157,071 157,071 21,533 1,723
Banks, DFIs & MDBs 826,761 826,761 165,352 13,228
Corporates 202,379 202,379 199,320 15,946
Others 6,986 6,986 6,958 557
Total On-Balance Sheet Exposures 1,193,197 1,193,197 393,163 31,453
Off-Balance Sheet Exposures
OTC Derivatives 614 614 123 10
Off balance sheet exposures other than OTC
derivatives 16,715 16,715 10,593 847
Total Off Balance Sheet Exposures 17,329 17,329 10,716 857
Total On and Off-Balance Sheet Exposures 1,210,526 1,210,526 403,879 32,310
b) Large Exposures Risk Requirement - - - -
c) Market Risk (Standardised Approach)
Foreign Currency Risk (Net Long Position) 1,395 112
d) Operational Risk (Basic Indicator Approach) 28,596 2,288
Total RWA & Capital Requirements 433,870 34,710
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 7
4. RISK MANAGEMENT
The Bank adopts the parent company, NBAD PJSC (“the Group”) Risk Management
Framework. The Framework is practiced consistently across the Group’s global
operations, to support the Group’s strategic objectives and business plans. Risk
management is integrated in the business process through:
A clear governance structure, with framework of risk ownership, accountability,
standards and policy;
Alignment of risk strategy and business objectives, and integration of risk appetite
and risk-adjusted return on capital (“RAROC”) into business planning and capital
management;
Embedding risk culture as the foundation upon which a enterprise-wide risk
management framework is built on; and
Independent and integrated risk function.
Risk Governance
Ultimate responsibility for the effective management of risk rests with the Board of
Directors. The Board delegates the authority for the management of risk to several
committees, in particular:
Board Risk Management Committee (“BRMC”) is chaired by an independent non-
executive director. It is responsible to oversee the Bank's risk management policies,
systems, practices and procedures to ensure effectiveness of risk identification,
management and compliance with risk-related internal guidelines and regulatory
requirements.
Board Audit Committee (“BAC”) is chaired by an independent non-executive
director. It is responsible to oversee the integrity of the financial statements,
preparation of the consolidated accounts including changes to accounting policies
and practices and adherence to disclosure rules, overseeing relationship with
external auditors, overseeing internal audit, ensuring adequacy of financial controls
and internal control.
At the management level, acting through the delegated authority by the Board, the Bank
has put in place various management committees to ensure oversight of key risk areas.
Risk Management Committee (“RMC”) is responsible for the risk management and
control of all risk, except those for which ALCO have direct responsibilities. The
RMC is also responsible for the establishment of all risk policies and procedures.
Assets and Liability Management Committee (“ALCO”) is responsible for the
management of capital, and compliance with, risk policies and limits relating to the
managing of the balance sheet, capital adequacy, liquidity risk and market risk.
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 8
The Bank’s Risk Governance Approach has been structured to comply with BNM
Guideline on Risk Governance issued on 1st March 2013 and aligned with those
established at the Group.
Risk Management Approach
The Bank adopts the Group’s three lines of defence risk management approach.
The first line of defence is that all employees are required to ensure the effective
management of risks within the scope of their direct organizational responsibilities.
The second line of defence comprises the Risk Control Owners, supported by their
respective control functions. Risk Control Owners are responsible for ensuring that
the risks within the scope of their responsibilities remain within appetite. The second
line is independent of the origination, trading and sales functions, is to ensure that
the necessary balance and perspective is brought to risk/return decisions.
The third line of defence comprises the independent assurance provided by the
internal audit (“IA”) function which has no responsibilities for any of the activities it
examines. IA provides independent assurance of the effectiveness of the
management’s control of its own business activities (first line) and of the processes
maintained by the Risk Control Functions (the second line). As a result, IA provides
assurance that the overall system of control effectiveness is working as required
within the Risk Management Framework.
Risk Appetite
The Bank has in place a documented Board-approved Risk Appetite Statement. The Risk
Appetite Statement is the Bank’s articulation of the amount of risk that the Bank is
willing to take in the pursuit of its strategic and/or business objectives. The Risk Appetite
Statement is defined in terms of Risk Appetite Parameters, which are circumscribed by
self-imposed constraints and tolerance levels around them. These constraints are limits
and triggers to avoid adverse outcomes which would be out of line with internal and
external expectations, and may lead to unexpected losses of a scale that would be
detrimental to the stability of the relevant business units or of the Bank as a whole.
The Bank’s Risk Appetite Statement is aligned with those established at the Group.
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 9
5. CREDIT RISK
Credit risk is the risk that a customer or counterparty to a financial asset fails to meet its
contractual obligations and causes the Bank to incur a financial loss. It arises principally
from the Bank’s loans and advances, due from banks and financial institutions including
reverse repo, off balance sheet contingent liabilities and non-trading debt investments
and certain other assets.
Management of Credit Risk
The Credit Risk Management Framework includes policies and procedures to monitor
and manage these risks. The Bank adopts the Group’s approach of credit risk
management. This includes:
Establishment of authorization structure and limits for the approval and renewal of
credit facilities;
Reviewing and assessing credit exposures in accordance with authorization structure
and limits, prior to facilities being committed to customers. Review and renewal of
facilities are subject to the same process;
Diversification of lending and investment activities;
Limiting concentrations of exposure to industry sectors, geographic locations and
counterparties; and
Reviewing compliance, on an ongoing basis, with agreed exposure limits relating to
counterparties, industries and countries and reviewing limits in accordance with risk
management strategy and market trends.
The Bank adopts the Group’s uses of an internal risk rating system to assess the credit
quality of borrowers and counterparties. Each counterparty is assigned a rating,
including classified accounts that are either Watch List or Non-Performing. The internal
risk rating system plays a significant role in efficient use of credit risk measurement and
management including:
Risk based pricing and determination of RAROC;
Risk based monitoring (frequency and intensity of monitoring);
Determining risk based delegation of powers at various sanction authority levels;
and
Internal estimation of capital.
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 10
Credit Risk Monitoring
The Bank adopts the Group’s approach of credit risk monitoring:
a) Monitoring of risk quality (Obligor level): Periodic review of credit is based on the
internal rating grades. More frequent reviews are made for the weaker credits and
less frequent reviews for the superior credits.
b) Monitoring of risk quality (Portfolio Level): Existing portfolios are monitored based
on the economic sectors, industry, geography, ratings and business lines. These
portfolio reports are prepared monthly and the senior management is informed on
the same.
c) Monitoring of past dues on principal and interest: Past dues accounts (if any) are
reported monthly to the senior management. Measures to realize such past dues are
initiated with stringent follow up thereafter.
d) Monitoring of excess over limits: The monitoring reports are submitted to the senior
management and processes are initiated to realize and regularize such excesses.
e) Monitoring of potential loss accounts (Watch List): This category comprises accounts
where either contractual principal or interest are past due or when the accounts show
weakness in the borrower’s financial position and creditworthiness, and requires
more than normal attention. Such weakness is specifically monitored to ensure that
the quality of the asset does not further deteriorate.
f) Collateral management: The Bank has in place system of controls, reviews and
approvals to ensure effective collateral management. This includes minimum loan to
value requirement for each facility, specific collateral requirement for lending
specific portfolio, margin calls for treasury products and ensuring legal
enforceability of contracts including perfection of security interests.
Concentration Risk
Credit concentration risk refers to the level of exposure to any individual or related
group of customers, specific industry or sector, country or geographical locations. The
first level of protection against concentration risk is through country and industry
thresholds limits.
a) Single Name Concentration
Single name concentration is monitored on an individual basis with the top
exposures being reported on a weekly basis. The Bank abides by BNM Single
Counterparty Exposure Limit (“SCEL”). The SCEL represents a non-risk adjusted
back-stop measure to ensure that exposures to a single counterparty and persons
connected to it shall not exceed 25 percent of the Bank’s Total Capital.
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 11
b) Sector Concentration
The Bank adopts the Group’s measures to diversify the exposures to various sectors.
The Group has established industry limits to ensure portfolio diversification and
employs stringent lending guidelines in conjunction with close portfolio monitoring
for vulnerable portfolios prone to systematic downturns. The following table
presents the Bank’s gross credit exposures of financial assets analysed by the
economic sector:
Bank
30 June 2015
Exposure Class
Government
and Central
Bank
Financial
Services
Corporate Total
RM ‘000 RM ‘000 RM ‘000 RM ‘000
On Balance Sheet Exposures
Cash and Short-Term Funds 219 514,672 - 514,891
Deposits and Placements with
Banks and FIs
- - - -
Investment Securities 174,400 40,000 12,578 226,978
Loans and Advances 41,952 - 239,408 281,360
Derivatives Financial Assets - 3,346 - 3,346
Other Assets (Net of Prepayment) 1,480 672 7,459 9,612
Total On Balance Sheet Exposures 218,051 558,690 259,445 1,036,186
Commitments and Contingencies 6,258 109,991 5,747 121,996
Total Credit Exposures 224,309 668,681 265,192 1,158,182
Bank
31 December 2014
Exposure Class
Government
and Central
Bank
Financial
Services
Corporate Total
RM ‘000 RM ‘000 RM ‘000 RM ‘000
On Balance Sheet Exposures
Cash and Short-Term Funds 209 289,011 - 289,220
Deposits and Placements with
Banks and FIs
- 367,206 - 367,206
Investment Securities 112,629 169,329 6,994 288,952
Loans and Advances 43,962 - 195,365 239,327
Derivatives Financial Assets - 55 - 55
Other Assets (Net of Prepayment) - 2,423 - 2,423
Total On Balance Sheet Exposures 156,800 828,024 202,359 1,187,183
Commitments and Contingencies 7,032 18,108 36,864 62,004
Total Credit Exposures 163,832 846,132 239,223 1,249,187
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 12
c) Geographic Concentration
Although the Bank is domiciled in Malaysia, the Bank is part of the Group’s strategy
to facilitate client transactions within Asia and across the West-East Corridor, which
will facilitate, inter alia, connecting targeted Malaysian corporates with its targeted
counterparts in the Group’s global network. This exposes the Bank to legal, transfer
and sovereign risk. Exposures against these limits are monitored periodically to
ensure compliance. The following tables present the Bank’s gross credit exposures of
financial assets analysed by the geographical location on where the credit risk
resides:
Bank
30 June 2015
Exposure Class
Malaysia Other
Countries
Total
RM ‘000 RM ‘000 RM ‘000
On Balance Sheet Exposures
Cash and Short-Term Funds 513,507 1,384 514,891
Deposits and Placements with Banks and FIs - - -
Investment Securities 226,978 - 226,978
Loans and Advances 202,504 78,856 281,360
Derivatives Financial Assets - 3,346 3,346
Other Assets (Net of Prepayment) 9,611 - 9,611
Total On Balance Sheet Exposures 952,600 83,586 1,036,186
Commitments and Contingencies 5,366 116,629 121,996
Total Credit Exposures 957,966 200,215 1,158,182
Bank
31 December 2014
Exposure Class
Malaysia Other
Countries
Total
RM ‘000 RM ‘000 RM ‘000
On Balance Sheet Exposures
Cash and Short-Term Funds 288,570 650 289,,220
Deposits and Placements with Banks and FIs 367,206 - 367,206
Investment Securities 288,952 - 288,952
Loans and Advances 195,365 43,962 239,327
Derivatives Financial Assets - 55 55
Other Assets (Net of Prepayment) 2,423 - 2,423
Total On Balance Sheet Exposures 1,142,516 44,667 1,187,183
Commitments and Contingencies 37,406 24,598 62,004
Total Credit Exposures 1,179,922 69,265 1,249,187
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 13
d) Residual Contractual Maturity Concentration
The following tables present the Bank’s gross credit exposures of financial assets
analysed by the residual contractual maturity breakdown:
Bank
30 June 2015
Exposure Class
Up to one
year
One to five
years
Over five
years
Total
RM ‘000 RM ‘000 RM ‘000 RM ‘000
On Balance Sheet Exposures
Cash and Short-Term Funds 514,891 - - 514,891
Deposits and Placements with
Banks and FIs
-
Investment Securities 120,414 5,032 101,532 226,978
Loans and Advances 129,280 48,477 103,603 281,360
Derivatives Financial Assets - - 3,346 3,346
Other Assets (Net of Prepayment) - - 9,611 9,611
Total On Balance Sheet Exposures 764,585 53,509 218,092 1,036,186
Commitments and Contingencies 114,771 967 6,258 121,996
Total Credit Exposures 879,356 54,476 224,350 1,158,182
Bank
31 December 2014
Exposure Class
Up to one
year
One to five
years
Over five
years
Total
RM ‘000 RM ‘000 RM ‘000 RM ‘000
On Balance Sheet Exposures
Cash and Short-Term Funds 289,220 - - 289,220
Deposits and Placements with
Banks and FIs
367,206 - - 367,206
Investment Securities 281,958 - 6,994 288,952
Loans and Advances 91,302 72,731 75,294 239,327
Derivatives Financial Assets - - 55 55
Other Assets (Net of Prepayment) - - 2,423 2,423
Total On Balance Sheet Exposures 1,029,686 72,731 84,766 1,187,183
Commitments and Contingencies 47,761 3,510 10,733 62,004
Total Credit Exposures 1,077,447 76,241 95,499 1,249,187
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 14
Credit Risk Policy
Credit risk policies are an integral part of the Bank’s risk management framework.
Policies govern all activities related to credit appraisal and underwriting. Business
segments specific policies and procedures are established to manage the risks that are
unique to their operations.
The Bank has in place Board-approved Local Credit Policy Manual (“LCPM”). The
LCPM governs the credit risk activities and has been aligned with the Group’s CPM. The
LCPM is supported by the following Board-approved key policies.
a) Single Counterparty Exposure Policy;
b) Credit Transactions and Exposures with Connected Parties Policy;
c) Risk Appetite Statement; and
d) Business Underwriting Standards for Corporates and Financial Institutions.
All of the above policies are subjected to annual review.
Disclosure for Portfolios under the Basel II Standardised Approach
For BNM regulatory reporting purposes, the Bank refers to the credit ratings assigned by
credit rating agencies in its calculation of credit risk weighted assets. The External Credit
Assessment Institutions ("ECAI") ratings accorded to the following counterparty
exposure classes are used in the calculation of risk weighted assets for capital adequacy
purposes:
Sovereigns and Central Bank;
Banks, Multi-Lateral Development Banks (“MDB”) and Development Financial
Institutions (“DFI”): and
Corporates.
Assessments provided by approved ECAI are mapped to credit quality steps as
prescribed by BNM. Where a counterparty or exposure is rated by more than one ECAI,
the second highest rating is used to determine the risk weight.
The following is a summary of the rules governing the assignment of risk weights under
the Standardised Approach. Each exposure must be assigned to one of the five credit
quality rating categories defined in the tables below.
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 15
Sovereigns and Central Banks
Rating Category S&P Moody’s Fitch Risk Weight
1 AAA to AA- Aaa to Aa3 AAA to AA- 0%
2 A+ to A- A1 to A3 A+ to A- 20%
3 BBB+ to BBB- Baa1 to Baa3 BBB+ to BBB- 50%
4 BB+ to B- Ba1 to B3 BB+ to B- 100%
5 CCC+ to D Caa1 to C CCC+ to D 150%
Unrated - - - 100%
Banks, MDBs and DFIs
Rat
ing
Cat
ego
ry
S&P Moody’s Fitch RAM MARC Risk
Weight
Risk
Weight
(original
maturity
of 6
months
or less)
Risk
Weight
(original
maturity
of 3
months
or less)
1 AAA to
AA-
Aaa to
Aa3
AAA to
AA-
AAA to
AA3
AAA to
AA- 20% 20%
20%
2 A+ to A- A1 to A3 A+ to A- A1 to A3 A+ to A- 50% 20%
3 BBB+ to
BBB-
Baa1 to
Baa3
BBB+ to
BBB-
BBB1 to
BBB3
BBB+ to
BBB- 50% 20%
4 BB+ to
B-
Ba1 to
B3
BB+ to
B-
BB1 to
B3
BB+ to
B- 100% 50%
5 CCC+ to
D
Caa1 to
C
CCC+ to
D C1 to D C+ to D 150% 150%
Unrated - - - - - 50% 50%
Corporates
Rat
ing
Cat
ego
ry
S&P Moody’s Fitch RAM MARC Risk
Weight
1 AAA to AA- Aaa to Aa3 AAA to AA- AAA to AA3 AAA to AA- 20%
2 A+ to A- A1 to A3 A+ to A- A1 to A3 A+ to A- 50%
3 BBB+ to BB- Baa1 to Ba3 BBB+ to BB- BBB1 to BB3 BBB+ to BB- 100%
4 B+ to D B1 to C B+ to D B1 to D B+ to D 150%
Unrated - - - - - 100%
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 16
The following tables present the on- and off balance sheet credit exposures:
Bank
Exposure
Class
RM ‘000
Rating of Sovereigns and Central Banks by Approved ECAI
S&P AAA to
AA- A+ to A-
BBB+ to
BBB- BB+ to B-
CCC+ to
D Unrated
Moody’s Aaa to
Aa3 A1 to A3
Baa1 to
Baa3 Ba1 to B3 Caa1 to C Unrated
Fitch AAA to
AA- A+ to A-
BBB+ to
BBB- BB+ to B-
CCC+ to
D Unrated
30 Jun 2015 - 94,544 45,081 - - -
31 Dec 2014 - 40,010 54,934 - - -
Bank
Exposure
Class
RM ‘000
Rating of Banks, DFIs and MDBs by Approved ECAI
S&P AAA to
AA- A+ to A-
BBB+ to
BBB- BB+ to B-
CCC+ to
D Unrated
Moody’s Aaa to
Aa3 A1 to A3
Baa1 to
Baa3 Ba1 to B3 Caa1 to C 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
30 Jun 2015 477,823 93,351 - - - -
31 Dec 2014 13,681 599,734 176,332 3,250 - 80,813
Bank
Exposure
Class
RM ‘000
Rating of Corporates by Approved ECAI
S&P AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
Moody’s Aaa to Aa3 A1 to A3 Baa1 to Ba3 B1 to C Unrated
Fitch AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
RAM AAA to AA3 A1 to A3 BBB1 to BB3 B1 to D Unrated
MARC AAA to AA- A+ to A- BBB+ to BB- B+ to D Unrated
30 Jun 2015 5,031 7,651 - - 240,848
31 Dec 2014 - 6,422 - - 188,736
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 17
a) Credit Risk Exposures
The following tables set out the analysis of risk weights under the Standardised
Approach:
Bank
30 Jun 2015
Supervisory
Risk Weight
Sovereigns
and
Central
Banks
Banks, MDBs
and DFIs
Corporates Other
Assets
Total
Exposure
after Credit
Risk
Mitigation
Total
Risk
Weighted
Assets
RM ‘000 RM ‘000 RM ‘000 RM ‘000 RM ‘000 RM ‘000
0% 81,755 - - 211 81,966 -
20% 94,544 571,174 5,031 - 670,749 134,150
50% 45,081 293 7,651 - 53,025 26,513
100% - - 240,530 15,877 256,725 256,725
Total 221,380 571,467 253,530 16,088 1,062,465 417,387
RWA 41,449 114,381 245,680 15,877 417,387
Average RW 18.7% 20.0% 96.9% 98.7% 39.3%
Bank
31 Dec 2014
Supervisory
Risk Weight
Sovereigns
and
Central
Banks
Banks, MDBs
and DFIs
Corporates Other
Assets
Total
Exposure
after Credit
Risk
Mitigation
Total
Risk
Weighted
Assets
RM ‘000 RM ‘000 RM ‘000 RM ‘000 RM ‘000 RM ‘000
0% 113,109 - - 28 113,137 -
20% - 832,660 - - 832,660 166,532
50% 47,478 272 7,014 - 54,764 27,382
100% - - 203,007 6,958 209,965 209,965
Total 160,587 832,932 210,021 6,986 1,210,526 403,879
RWA 23,739 166,668 206,514 6,958 403,879
Average RW 14.8% 20.0% 98.3% 99.6% 33.4%
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 18
b) Credit Quality of the Gross Loans and Advances
The following tables set out the analysis of the credit quality of the Gross Loans
and Advances.
30.06.2015
RM ‘000
31.12.2014
RM ‘000
Neither past due nor impaired 281,360 239,327
Past due but not impaired, comprise:
Less than 30 days - -
Impaired - -
Gross Loans and Advances 281,360 239,327
Less: Allowance for Impaired Loans and Advances
Individual Assessment Allowance - -
Collective Assessment Allowance (3,376) (3,598)
Net Loans and Advances 277,984 235,729
Gross Impaired Loans as a percentage of Gross Loans 0.0% 0.0%
Collective Assessment Allowance Ratio 1.20% 1.5%
Past due but not impaired are accounts where either contractual principal or
interest are past due or when the accounts show some potential weakness in the
borrower's financial position and creditworthiness, and requires more than
normal attention. The Bank did not have any past due but not impaired accounts
as of 30 June 2015.
The following tables set out the analysis of the outstanding balances, which were
past due but not impaired by sector and geographic distribution respectively:
Bank
By Sector
30.06.2015
RM ‘000
31.12.2014
RM ‘000
Finance, insurance real estate and business activities - -
Bank
By Geographic Distribution
30.06.2015
RM ‘000
31.12.2014
RM ‘000
Other Countries - -
Impaired loans and advances are financial assets for which the Bank determines
that it is probable that it will be unable to collect all principal and interest due
according to the contractual terms of the loan agreement. The Bank did not have
any impaired loans as of 30 June 2015.
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 19
c) Off Balance Sheet Exposures and Counterparty Credit Risk
Counterparty credit risk is the risk that the counterparty to a transaction could
default before the final settlement of the transaction's cash flows. Such
transactions relate to contracts for financial instruments including derivative
contracts and unsettled securities. The following table presents the Bank’s off-
balance sheet exposure and counterparty credit risk.
Bank
30 June 2015
Exposure Class
Principal
Amount
Positive
Fair Value
of
Derivatives
Contracts
Credit
Equivalent
Amount
Risk
Weighted
Assets
RM ‘000 RM ‘000 RM ‘000 RM ‘000
Transaction related contingent items 8,115 4.058 899
Other commitments, such as formal
standby credit facilities and credit
lines, with an original maturity of:
Up to one year 4,780 956 956
Over one year 7,225 3,613 2,048
Interest / profit rate related contracts
Less than 1 year -
One year to less than 5 years -
Over 5 years 101,876 12,363 2,473
Total 121,996 20,989 6,376
Bank
31 December 2014
Exposure Class
Principal
Amount
Positive
Fair Value
of
Derivatives
Contracts
Credit
Equivalent
Amount
Risk
Weighted
Assets
RM ‘000 RM ‘000 RM ‘000 RM ‘000
Transaction related contingent items 11,114 5,557 1,193
Other commitments, such as formal
standby credit facilities and credit
lines, with an original maturity of:
Up to one year 7,928 3,964 3,964
Over one year 35,968 7,194 7,194
Interest rate related contracts
Less than 1 year - - - -
One year to less than 5 years - - - -
Over 5 years 6,994 55 614 123
Total 62,004 55 17,329 12,474
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 20
6. MARKET RISK
Market risk is the risk that the Bank’s income and / or value of its financial instruments
will fluctuate adversely because of changes in market factors such as interest rates
foreign exchange rates, and equity, commodity and option prices.
The Bank segregates all its positions, which can be either in Trading Book or Banking
Book.
Trading Book
Trading Book refers to financial instruments held either with trading intent or to hedge
other elements of the Trading Book. Positions held with trading intent are those held
intentionally for short-term resale and/or with the intent of benefiting from actual or
expected short-term price movements or to lock in arbitrage profits. These positions may
include for example, proprietary positions, positions arising from client servicing and
market making. The Bank does not have any Trading Book positions due to proprietary
trading and market making activities.
All Trading Book positions arising from client servicing are fully hedged and are
subjected to net open position limits. The Bank’s Trading Book positions consist entirely
of foreign exchange instruments. The financial impact of 1 percent movement for each
foreign currency exposure would result in a post-tax profit/loss of RM 8,068 (31
December 2014: RM 10,463) to the Bank.
The Bank does not have any interest rate risk exposure in the Trading Book.
Banking Book
The Banking Book exposure is defined as all other exposures that are not defined as
Trading Book positions. This will include both on and off-balance sheet positions.
Financial instruments held under the Banking Book are considered as investment
positions.
The Bank mitigates interest rate risk exposure in the Banking Book by hedging the long
term fixed rate assets. This is being done via interest rate swap with the parent company
and the hedge effectiveness is being monitored to ensure it is fall between the ranges of
80 to 125 percent as stipulated in Board-approved Trading Book Policy Statement.
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 21
The Bank also monitors and reports its interest rate risk exposure on regular basis using
the Economic Value Equity (“EVE”), which is being supported by a comprehensive
limits structure e.g. EVE Limit, Earning-at Risk Limit, Investment Securities Position,
Investment Securities Tenor Limit, Investment Securities PV01 Limit, etc., as articulated
in the Board-approved Asset and Liability Management Policy.
The impact to the Bank’s interest rate sensitive assets and liabilities in Banking Book to a
25 basis points movement in benchmark interest rates shall be RM 0.04 million (31
December 2014: RM 0.09 million). The treatment and assumptions applied are based on
the contractual repricing maturity and remaining maturity of the products, whichever is
earlier. Items with indefinite repricing maturity are treated based on the earliest possible
repricing date or pre-defined by regulator.
7. LIQUIDITY RISK
Liquidity risk is the risk that the Bank, though solvent, either does not have sufficient
financial resources available to meet its obligations as they fall due, or can secure them
only at excessive costs.
The Bank has in place a documented Board-approved Asset and Liability Management
Policy in October 2014. In the Policy, it is the Bank’s intention that the following are met:
To maintain adequate liquidity at all times and for all currencies;
To meet all obligations, to repay depositors and to fulfil commitments to provide
loans and advances, in the normal course of business;
To avoid having to liquidate assets or to raise funds at unfavourable terms;
The liquidity risk position are reviewed periodically and managed within approved
liquidity risk parameters; and
The liquidity risk limits and Management Action Triggers to be monitored and
reported periodically.
The Bank manages and mitigates the risk of its liquidity risk through a set of liquidity
risk limits, including regulatory Liquidity Framework and Liquidity Coverage Ratio as
per BNM requirements. Other liquidity risk measurement methods and risk mitigation
tools that are place are the traditional loan-to-deposit ratio and structural liquidity gap
limits.
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 22
The Bank has in place a documented and approved Contingency Funding Plan. The Plan
is the process whereby one or more pre-determined trigger events that could cause a
liquidity crisis are triggered and describes the actions to be taken to manage the highly
potential adverse funding liquidity events and restore the Bank to business-as-usual.
Implementation of Basel III
On 31 March 2015, BNM issued a Guideline on Liquidity Coverage Ratio (“LCR”), which
is intended to further strengthen the existing liquidity standards for banking institutions
in Malaysia.
The LCR is a quantitative requirement which seeks to ensure that banking institutions
hold sufficient high-quality liquid assets to withstand an acute liquidity stress scenario
over a 30-day horizon. The LCR requirements will be subject to a series of transitional
arrangements, phase-in over a period of time, commencing from 1st June 2015 and to be
fully effective by 1st January 2019.
The minimum LCR, as required by under BNM Guideline on the LCR, which includes
transitional arrangements for year 2015 to 2019, are set out as follows:
Minimum LCR 2015 2016 2017 2018 2019
All Currencies 60% 70% 80% 90% 100%
MYR only 60% 70% 80% 90% 100%
The Bank is poised to continue to remain healthy above the minimum LCR requirement.
With active liquidity management, the LCR will be maintained comfortably well above
the minimum as required by BNM. The Bank’s All Currencies and MYR LCR as at 30th
June 2015 stood at 175.37 percent and 160.80 percent.
8. OPERATIONAL RISK
Operational risks arise from all of the Bank’s operations and are faced by all lines of
business. This is the risk of direct or indirect loss arising from a wide variety of causes
associated with the Bank’s processes, people, and systems and from external factors
other than credit, market and liquidity risks. This includes legal and regulatory
requirements and generally accepted standards of corporate behaviour but excludes
strategic and reputational aspects. However, reputational risk is addressed via various
Operational Risk Management (“ORM”) Tools.
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 23
The Bank’s objective is to manage operational risk so as to balance the avoidance of
financial losses resulting from operational risk events and any damage to the Bank’s
reputation. The Bank is continually improving its operating environment that will
ensure the businesses to operate in an environment to be creative and be enabled.
The Bank adopts the Group’s Operational Risk Framework. This Framework is used to
identify, assess, monitor, control, manage and report risks. This includes a unique and
effective process of assessing associated risks and approving residual risks of new and /
or significant change initiatives within the Bank and an Internal Loss Data Collection
Process. The Internal Loss Data Collected is reconciled with the General Ledger.
The Framework also sets out the interrelation with other risk categories that includes but
is not limited to regulatory requirements, Anti Money Laundering and Counter Terrorist
Financing. These functions come directly under the oversight and supervision by the
Bank’s Compliance function.
To further strengthen the Bank’s outsourcing arrangements with third parties, the Bank
has in place Board-approved Outsourcing Policy. The Policy is intended to be line with
BNM guideline on the same nature and is targeted to meet the following main objectives:
To outline the criteria of outsourcing operational functions and process flow
involved in outsourcing;
To provide a guiding principle that needs to be taken into consideration to identify
issues associated with each outsourcing arrangement;
To address some factors that needs to be considered upon renewal of outsourcing
service contract; and
To ensure that the implementation of outsourcing is in line with BNM and Group
requirements.
The Bank adopts the Group’s Information Security Policies and requirements are
intended to conform to internationally accepted IT Governance standards. More
specifically, IT security is governed by explicit security related policies based on
international standards such as ISO27001.
The Bank’s Internal Audit function conducts continuous audits and reviews of the
Bank’s critical functions and compliance to the regulatory requirements. Audit reports
are circulated once every quarter. In addition, the Group Internal Audit conducts
periodic audits and reviews so as to provide assurance to the Management on the
compliance with corporate policies and guidelines.
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 24
9. BUSINESS CONTINUITY MANAGEMENT
Business Continuity Management (“BCM”) is a management process that identifies
potential impacts that threaten an organisation and provides a framework for building
resilience and the capability for an effective response which safeguards its reputation
along with the interests of its key stake holders and customers. BCM is responsible for
assuring operational resilience to the Group’s key business processes under adverse
circumstances.
The Bank adopts the Group’s BCM Framework, which:
Identify key processes (and their dependencies) essential to ensure the delivery of
the Bank’s services;
Identify and define time frames for the recovery of those key processes;
Establish cost effective strategies and solutions to achieve the recovery time frames of
the key processes; and
Validate the selected solutions.
The Bank conducts periodic business impact analysis to identify their critical business
processes and recovery time objectives. Business continuity plans are developed and
tested annually. The Bank maintains a local IT and business operations contingency site
to ensure uninterrupted banking operations.
National Bank of Abu Dhabi Malaysia Berhad
(Company No. 965488-H)
Incorporated in Malaysia
Basel II: Pillar 3 Disclosure as at 30th June 2015
Page | 25
CHIEF EXECUTIVE OFFICER'S ATTESTATION
I, Susan Yuen Su Min, being the Chief Executive Officer of National Bank of Abu Dhabi
Malaysia Berhad, hereby state that, the Pillar 3 Disclosures are to my knowledge and
opinion is correct and have been prepared in accordance to requirements stipulated in Bank
Negara Malaysia Capital Adequacy Framework - Disclosure Requirements (Pillar 3)
guidelines.
~signed~
………………………………………
SUSAN YUEN SU MIN
CHIEF EXECUTIVE OFFICER 20th August 2015