NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2023 288 WE ARE KENANGA LEADERSHIP MESSAGE VALUE CREATION MODEL KENANGA INVESTMENT BANK BERHAD ANNUAL REPORT 2023 51. FINANCIAL RISK MANAGEMENT (CONT’D.) (a) Credit risk (cont’d.) Collateral and other credit enhancements The amount and type of collateral required depend on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters. The main types of collateral obtained are as follows: (i) Cash; (ii) Charges over financial instruments; (iii) Securities; (iv) Charges over real estate properties, inventory and trade receivables; (v) Mortgages over properties; or (vi) Financial guarantees. Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequacy of the allowance for impairment losses. (i) Internal Credit Risk Ratings The table below provides a mapping of the Group’s and of the Bank’s internal credit risk grades to external ratings: Notches KIBB Obligor Rating External Rating Classification of Credit Risk Grade Description 1 AAA AAA Investment Grade Superior capacity to meet its financial obligation. 2 3 4 AA1 AA2 AA3 AA Strong capacity to meet its financial obligations. The entity is resilient against adverse changes in circumstances, economic conditions and/or operating environments. 5 6 7 A1 A2 A3 A Adequate capacity to meet its financial obligations. The entity is more susceptible to adverse changes in circumstances, economic and/or operating environments. 8 9 10 BBB1 BBB2 BBB3 BBB Moderate capacity to meet its financial obligations. The entity is more likely to be weakened by adverse changes in circumstances, economic conditions and/or operating environments than those in higherrated categories.
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