THE COMPARATIVE ANALYSIS OF RISK MANAGEMENT

between

(based on the Basel 3 pillar disclosure of 2014 and financial statement of year 2014)

INTRODUCTION

Ocbc Al-amin

•1 Dec 2008

•8 branches

Am islamic •1 May 2006

•3 branches

OCBC Al-amin• Risk appetite• Risk frameworks• Holistic risk

management• Qualitative and

quantitative evaluations

Am Islamic• Enhancing Risk Governance• Upgrading risk infrastructure• Developing a more

comprehensive• risk appetite strategy,

execution and monitoring framework

• Improving funding and liquidity risk management

• Improving underlying asset quality and enhancing portfolio diversification

• Materially lowering loan loss provisions

• Developing robust risk/reward pricing models

• Ensuring International Financial Reporting Standard (“IFRS”) readiness; and

• Positioning AmBank for advanced status under Basel II

TYPES OF

RISK CreditMarketLiquidityOperational

Risk management processes

Credit Risk Process

identification

Assesment

Measurement

Control &monitorin

gReporting

• Identify credit risk of transaction

• Select asset & portfolio mix

• Internal credit rating models PD, LGD, EAD

• A-IRB • F-IRB • Standardis

ed approach for other.

• Portfolio limits , counterparty limits, benchmark returns

• Collateral and tailored structures

• Report to the Board of Directors

• Internal credit rating system

• Probability of default (PD)

• Loss given default (LGD)

• Exposure at default (EAD)

• Monitor and report portfolio mix

• Review customer under Watchlist

• Undertake post morterm review

Market Risk Process

identification

Assesment

Measurement

Control &monitorin

gReporting

• Identify market risk within existing and new products

• Review market related information such as market trends and economic data

• Value At Risk (VaR)

• Other risk measures (PV01)

• Stress testing & scenario analysis

• VaR limits • Model &

valuation controls

• Periodical review & reporting

• VaR• Annual lost

limit (ALL)• Historical

stress lost (HSL)

• Other detail management control.

• Var limit• Hsl limit• Loss limit• Concentratio

n limits • Greek limits• Present

value of one basis point limits (PV01)

• Stealth limits • Others

• Monitor limits

• Periodical review & reporting

Traded-market

risk

identification

Assesment

Measurement

Control &monitorin

gReporting

Non Traded-market

risk

• Identify IRR/RORBB within existing and new products

• Review market-related information such as market trend and economic data

• VaR• Earnings-at-Risk (“EaR”)• PV01• Other Detailed Management Controls

• VaR Limits• EaR Limits• PV01 Limits• Other Deailed Management Limits

• Monitor limits• Periodical review and reporting

Liquidity Risk Process

identification

Assesment

Measurement

Control &monitorin

gReporting

• Identify liquidity risk within existing and new business activities

• Review market related information such as market trends and economic data

• Liquidity risk limit• Stress testing & scenario

analysis• Contingency funding plan

• Regular review & reporting

• New liquidity framework (NLF) limit

• Liquidity concentration ratios

• Liquidity coverage ratios (LCR)

• Financing to deposit ratio mn(FDR)

• Other detail

• Monitor limits

• Periodical review & reporting

Operational Risk Process

identification

Assessment

Measurement

Control &monitorin

gReporting

• Identify and analyse risk in key processes/ activities within line of business

• Incident management & data collection

• Risk and control self assessment

• Key risk indicators

• Key control testing

• Policies addressing control and governance requirements to mitigate specific operational risk

• Advisory establishment of internal control

• Contingency planning

• Monitoring & reporting of loss incidents by event type, portfolio and line of business and entity, reporting of GRAF management triggers, risk profile status, key risk indicator breaches and key control testinf exceptions.

• Periodical review of risk profile within line of business

Strategy For Managing Operational Risk in The Group

1st LOD

• Accountable for implementing the operational risk framework and policies, embedding appropriate internal controls into processes and maintaining business resilience for key activities.

• The responsibility for managing day-to-day operational risk rests with each Line of Business.

2nd LOD

• Group Operational Risk is responsible for exercising governance over operational risk through the management of the operational risk framework, policy development, quality assurance of internal controls, operational risk measurement and capital allocation, fraud strategy and reporting of operational risk issues to Group Operational and Legal Risk Management Committee (“GOLRC”)/ Group CEOs Committee, Chief Executive Officer Committee (“CEO Committee”) and Risk Management Committee of Directors (“RMCD”).

3rd LOD

• Group Internal Audit acts as the third and final line of defence by providing independent assurance on the internal control effectiveness through periodic audit programme.

Operational Risk Process Cont.

During the financial year 2014, there is no record of shariah non-compliant event reported, therefore no shariah non-compliant income declared. During the financial year ended 2014, the Bank had received Shariah non-compliant income. The Shariah non-compliant income will be channelled to charitable organisations as determined by the Bank's Shariah Committee.

Shariah Non-compliant Income

Corporate governance

BANK EXECUTIVE DIRECTOR

DIRECTORSTOTAL

INDEPENDENT

NON-INDEPENDE

NT

OCBC Al-Amin 1 5 3 9

AmIslamic 1 4 7 12

OCBC

AL-

AMIN• Board

Composition and Independence

• Board Conduct and Responsibilities

• Board and Individual Director Performance

• Board Audit Committee

AMIS

LAM

IC • Board

Responsibility And Oversight

• Committees Of The Board - Group Nomination And Remuneration - Audit And Examination Committee - Risk Management Committee

CORPORATE GOVERNANCE

Shariah Advisors' Attendance at Shariah Committee Meetings in 2014

Number Of Meetings Attended By Shariah Committee In Financial Year 2014

Shariah Governance

The SGF stipulates that all new products, services and collateral are to be endorsed by the Shariah Committee. All product approvals must be backed by adequate research to ensure that the appropriate Shariah concepts are applied in the product structuring and design. In order to ensure a robust and comprehensive Shariah governance process throughout the Bank, Shariah review is conducted to assess the level of compliance of the activities and operations to Shariah requirements post product launch. Any non-Shariah compliant findings resulting from the review will be rectified,monitored and tracked until closure. Internal Audit will also conduct Shariah audit to provide an independent assessment and objective assurance designed to add value and improve the Bank’s Shariah compliance with the main objective of ensuring a sound and effective internal control system for Shariah compliance.

Shariah Governance Structure

Shariah Committee Report