KENANGA INVESTMENT BANK BERHAD INTEGRATED ANNUAL REPORT 2024 WE ARE KENANGA OUR SUSTAINABILITY APPROACH LEADERSHIP STATEMENT HOW WE ARE GOVERNED SHAREHOLDERS’ INFORMATION NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2024 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2024 FINANCIAL STATEMENTS ADDITIONAL INFORMATION OUR VALUE CREATION APPROACH 277 276 48. CAPITAL MANAGEMENT AND CAPITAL ADEQUACY (CONT’D.) Capital adequacy (cont’d.) (i) Components of Tier 1 and Tier 2 capital (cont’d.): ^ Refers to loss allowances measured at an amount equal to 12-month and lifetime expected credit losses and regulatory reserve, to the extent they are ascribed to non-credit impaired exposures, determined under Standardised Approach for credit risk. * The portion of regulatory adjustments not deducted from Tier 2 (as the Group and the Bank do not have enough Tier 2 to satisfy the deduction) is deducted from the next higher level of capital; as per paragraph 31.1 of the BNM’s Capital Adequacy Framework (Capital Components). Breakdown of risk weighted assets in the various categories of risks are as follows: 2024 2023 Notional RM’000 Risk- weighted RM’000 Notional RM’000 Risk- weighted RM’000 Group Credit risk 7,160,027 1,911,823 5,444,902 1,390,445 Market risk - 284,753 - 216,865 Operational risk - 927,031 - 887,613 Large exposure risk - 86,524 - 13,108 Total Risk Weighted Assets 7,160,027 3,210,131 5,444,902 2,508,031 Bank Credit risk 6,275,954 1,798,236 4,962,905 1,376,948 Market risk - 282,104 - 215,327 Operational risk - 549,963 - 569,376 Large exposure risk - 86,524 - 13,108 Total Risk Weighted Assets 6,275,954 2,716,827 4,962,905 2,174,759 (ii) Transitional arrangements for regulatory capital treatment of accounting provisions The Bank has elected to apply the transitional arrangements for regulatory capital treatment of accounting provisions for four financial years beginning on 1 January 2020 and apply the transitional arrangements with 31 December 2020 as the first reporting period. These transitional arrangements were concluded at the end of the financial year 2023. 48. CAPITAL MANAGEMENT AND CAPITAL ADEQUACY (CONT’D.) Capital adequacy (cont’d.) (ii) Transitional arrangements for regulatory capital treatment of accounting provisions (cont’d.) Under the transitional arrangements, the Bank is allowed to add back the amount of loss allowance measured at an amount equal to 12-month and lifetime expected credit losses to the extent they are ascribed to non-credit-impaired exposures (“Stage 1 and Stage 2 provisions”) to CET 1 Capital. The capital adequacy ratios of the Group and of the Bank are as follows: With transitional arrangement Group Bank 2024 2023 2024 2023 CET 1 capital ratio N/A 21.543% N/A 22.474% Tier 1 capital ratio N/A 21.543% N/A 22.474% Total capital ratio N/A 29.433% N/A 31.565% In 2024, the transitional arrangements previously permitted by Bank Negara Malaysia (“BNM”) regarding Expected Credit Loss (“ECL”) provisions have been fully phased out. Without transitional arrangement Group Bank 2024 2023 2024 2023 CET 1 capital ratio 16.671% 21.482% 17.264% 22.427% Tier 1 capital ratio 16.671% 21.482% 17.264% 22.427% Total capital ratio 22.967% 29.372% 24.736% 31.518%
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