NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2023 290 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.) (ii) Credit quality by class of financial assets The credit quality of financial assets is managed by the Group and the Bank using internal credit ratings. The table below shows the credit quality by class of asset for all financial assets exposed to credit risk, based on the Group’s and the Bank’s internal credit rating system. Credit quality of financial assets neither past due nor impaired The credit quality of financial assets is managed by the Group and the Bank using internal ratings which aim to reflect the relative ability of counterparties to fulfill, on time, their credit-related obligations, and is based on their current probability of default. Internal rating grade Strong credit profile Customers that have demonstrated superior stability in their operating and financial performance over the long-term, and whose debt servicing capacity is not significantly vulnerable to foreseeable events. This rating broadly corresponds to ratings “AAA” to “AA” of RAM Rating Services Berhad (“RAM”) and Malaysian Rating Corporation Berhad (“MARC”) respectively. Satisfactory risk Customers that have consistently demonstrated sound operational and financial stability over the medium to long term, even though some may be susceptible to cyclical trends or variability in earnings. This rating broadly corresponds to ratings “A” to “BBB” of RAM and MARC respectively. Substandard Customers that have demonstrated some operational and financial instability, with variability and uncertainty in profitability and liquidity projected to continue over the short and possibly medium term. This rating broadly corresponds to ratings “BB” to “C” of RAM and MARC respectively.
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