HSBC BANK MALAYSIA BERHAD

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2 (a) Introduction (b) Basel II HSBC BANK MALAYSIA BERHAD (Company No.) (Incorporated in Malaysia) Risk Weighted Capital Adequacy Framework (Basel II) Pillar 3 Disclosures at 31 December 2014 HSBC Bank Malaysia Berhad ('the Bank') is principally engaged in the provision of banking and other related financial services. The subsidiaries of the Bank are principally engaged in the businesses of Islamic Banking and nominee services. Islamic Banking operations refer generally to the acceptance of deposits and granting of under the principles of Shariah. The Bank and its subsidiaries are herein referred to as 'the Group' in this document. The Group s lead regulator, Bank Negara Malaysia ('BNM') sets and monitors capital requirements for the Group as a whole. The Group is required to comply with the provisions of the Basel II framework in respect of regulatory capital. The Bank adopts the Standardised approach for Credit, Operational and Market Risk. Its fully owned subsidiary, HSBC Amanah Malaysia Berhad, adopts the Standardised approach for Credit and Market Risk and Basic Indicator Approach for Operational Risk. Basel II is structured around three pillars : minimum capital requirements, supervisory review process and market discipline. Pillar 3 aims to encourage market discipline by developing a set of disclosure requirements which allow market participants to assess certain specific information on the capital management processes, and risk assessment processes, and hence the capital adequacy of the Group. Disclosures consist of both quantitative and qualitative information and are provided at the Group and the Bank level. Banks are required to disclose all their material risks as part of the Pillar 3 framework. All material and nonproprietary information required by Pillar 3 is included in the Risk Weighted Capital Adequacy Framework ('Basel II') Pillar 3 Disclosures at 31 December BNM permits certain Pillar 3 requirements to be satisfied by inclusion within the financial statements. Where this is the case, references are provided to relevant sections in the Financial Statements at 31 December (c) Consolidation basis The basis of consolidation for financial accounting purposes is described in Note 3(a) of the financial statements at 31 December 2014 and it is the same basis of consolidation that is used for regulatory purposes. The Bank's subsidiary companies are listed in Note 14 of the financial statements, and are fully consolidated for both financial accounting and regulatory purposes. (d) Transferability of capital and funds within the Group The Bank is the primary provider of equity capital to its subsidiaries. Each subsidiary manages its own capital to support its planned business growth. During 2014, none of the Group s subsidiaries were subject to any significant restriction on paying dividends or repaying inter-company loans and advances. (e) Internal assessment of capital adequacy The Group assesses the adequacy of its capital by considering the resources necessary to cover unexpected losses arising from discretionary risks, such as credit risk and market risk, or non-discretionary risks, such as operational and reputational risk. The key objective of Internal Capital Adequacy Assessment Process ('ICAAP') is to ensure that sufficient capital is maintained, given the risk profile of the bank on an ongoing and forward looking basis. The ICAAP permits the setting of target amounts for internal capital consistent to the Group s risk profile and the environment in which it pursues business. The ICAAP is an internal assessment of the Group s capital adequacy given its risk appetite, risk profile and regulatory minimum requirements. The Group assesses the adequacy of its capital by considering the resources necessary to cover unexpected losses arising from discretionary risks, such as credit risk and market risk, or non-discretionary risks, such as operational and reputational risk. On a forward looking basis, the ICAAP ensures that the Group s capital position: exceeds the minimum regulatory capital requirements as prescribed by the Bank Negara Malaysia (BNM); remains sufficient to support the Group s Risk Appetite and business strategies; remains sufficient to support the underlying and projected risk profile; and remains sufficient to sustain business growth and in adverse business or economic conditions. 2

3 (e) Internal assessment of capital adequacy (Cont d) In order to achieve this, the Group has a robust ICAAP framework in place which underlines the foundation of its risk and capital management process. It has the following key features: a strong and encompassing governance framework; a forward-looking risk appetite framework to ensure our business and risk profiles are in line with the Board of Directors (BOD) expectations; a robust capital management, planning and forecasting framework; an internal risk assessment process based on the economic capital and stress testing frameworks to support the Group's capital adequacy positions. Refer to Note 37 of the financial statements at 31 December 2014 for the total capital ratio and Tier 1 capital ratio, and risk weighted assets and capital requirements for credit risk, market risk and operational risk. Stress Testing Stress testing is a key risk management tool used to assess a variety of risks to which the Group is exposed, including credit risk, market risk, operational risk, etc. Stress testing should be conducted on entity level and on a bank-wide basis. Stress testing and scenario analysis form an integral part of ICAAP to demonstrate that the Group can maintain risk capital sufficient enough to sustain operations during an economic downturn. Essentially, stress testing is to make risks more transparent by estimating potential losses on exposures under abnormal market or economic conditions. It will also assess specifically the extent by which risk-weighted assets and capital requirements will increase, and how profit and loss as well as liquidity levels will change. The results of the analysis will facilitate informed financial and capital management whilst supporting business lines to manage their business through various measures such as establishing triggers and devising mitigation actions which can be readily implemented should the adverse scenarios materialise. In line with BNM s Guideline on Stress Testing and the Group's Policy Paper for Stress Testing, a Stress Test Steering Committee ('STSC') has been established. A key objective of stress testing is to make risk more transparent by estimating the potential losses on the Group s exposure and impacts on its capital adequacy ratio, capital requirements and profit and loss under abnormal conditions. It plays a particularly important role in: Providing forward-looking assessments of risk. Overcoming limitations of models and historical data. Supporting internal and external communication. Feeding into capital and liquidity planning process. Informing the setting of a banks risk tolerance. Facilitating the development of risk mitigation or contingency plans across a range of stressed conditions. Building upon business and strategic planning to the Risk Appetite of the institution. Strengthening the Group s corporate governance and the resilience of the financial system. Using the experiences of the past held in local operations in addition to the wider experiences that can be obtained from the diversified operation and management. Stress testing is considered as the collective quantitative and qualitative techniques used to assess all facets to the risks faced by the Group. Stress testing is done in collaboration across all customer groups and funtions such as Risks and Finance. Stress testing will be carried out subject to regulatory and internal management demands as and when needed. At a minimum, a complete stress testing for the entire Group should be completed on a semi-annual basis. Stress testing results are reviewed by STSC, Risk Management Committee (RMC) and BOD prior to submission to BNM. Governance The STSC is delegated the power to design the stress testing, including the determination of stress events, risk factors and assumptions applied, deliberation on the results of stress testing and proposed actions to be taken. Based on the STSC recommendations, RMC and BOD can then endorse the stress testing results and propose mitigating actions. 3

4 (e) Internal assessment of capital adequacy (Cont d) Risk Appetite Risk Appetite is a central component of an integrated approach to risk, capital and value management and an important mechanism to realise the Group s strategic vision and corporate strategy. Risk Appetite forms an integral part of the Group s ICAAP to ensure sufficient capital resources for the risk profile across customer groups. The Risk Appetite Framework describes the quantum and types of risk that the Group is prepared to take in executing its strategy. It aims to introduce a more explicit and consistent consideration of risk and capital into the Group s strategy formulation, business planning, target setting, execution and measurement/ reporting processes throughout the Group. It applies to the Group's planning activities, strategic investments and running of the Group's operations across all regions and group businesses. The Risk Appetite Framework as well as the Consolidated Risk Appetite Statement (RAS) will be reviewed by all relevant stakeholders namely Risks, Finance and customer groups. It is tabled to the RMC for endorsement, and subsequently tabled to the Board Risk Commitee (BRC) for recommendation to the BOD for approval. (f) Capital structure For regulatory purposes, the Group s regulatory capital is divided into two categories, or tiers. These are Tier 1 and Tier 2. The main features of capital securities issued by the Group are disclosed below: * Tier 1 capital is divided into Common Equity Tier 1 (CET1) Capital and Additional Tier 1 Capital. CET1 Capital includes ordinary share capital*, share premium, retained earnings, reserves and other regulatory adjustments relating to items that are included in equity but are treated differently for capital adequacy purposes. The Group does not have any Additional Tier 1 Capital as at 31 December (Refer to Note 37 of the financial statements at 31 December 2014 for the amount of Tier 1 capital and a breakdown of its components). Refer to Note 24 of the financial statements at 31 December 2014 for further details on ordinary share capital. All ordinary shares in issue confer identical rights in respect of capital, dividends and voting. Tier 2 capital includes qualifying subordinated liabilities**, collective impairment allowances (excluding collective impairment allowances attributable to loans classified as impaired), regulatory reserve and the element of the fair value reserve relating to revaluation of property which are disclosed as the regulatory adjustments. (Refer to Note 37 of the financial statements at 31 December 2014 for the amount of Tier 2 capital and a breakdown of its components). ** Refer to Note 23 of the financial statement at 31 December 2014 for terms and conditions of the subordinated liabilities. (g) Risk management policies All of the Group s activities involve analysis, evaluation, acceptance and management of some degree of risk or combination of risks. The Group has exposure to the following risks from financial instruments: credit risk liquidity risk market risk (includes foreign exchange and interest/profit rate risk) operational risk Refer to Note 4 of the financial statements at 31 December 2014 for the Group's risk managements policies on the above mentioned risks. 4

5 1) RWA and Capital Requirement The tables below disclose the gross and net exposures, risk weighted assets ('RWAs') and capital requirements for credit risk, market risk and operational risk of the Group at the balance sheet date. At 31 December 2014, the RWA risk absorbent profit sharing investment account in the Bank amounted to RM415,740,000. Both the principal amount and risk weighted asset are the same. This amount is reported as asset under management in the books of the Bank's Islamic Subsidiary. At the group level, the effect of the RWA risk absorbent profit sharing investment is eliminated. (RM'000) Exposure Class Group Gross Exposures Net Exposures Risk Weighted Assets (RWA) Capital Requirement Credit Risk On-Balance Sheet Exposures Sovereigns/Central Banks 27,411,534 27,411, Public Sector Entities 642, , ,070 47,045 Banks, Development Financial Institutions & MDBs 5,816,337 5,816,337 1,343, ,471 Corporates 17,282,158 16,509,405 15,863,531 1,269,082 Regulatory Retail 6,625,915 6,454,873 4,688, ,052 Residential Mortgages 18,946,764 18,923,044 7,509, ,733 Higher Risk Assets 11,743 11,743 17,614 1,409 Other Assets 842, , ,535 41,962 Equity Exposure 16,908 16,908 16,908 1,353 Defaulted Exposures 556, , ,685 45,415 Total for On-Balance Sheet Exposures 78,152,323 77,174,986 31,119,042 2,489,522 Off-Balance Sheet Exposures OTC Derivatives 4,545,966 4,545,966 2,141, ,358 Off balance sheet exposures other than OTC derivatives or credit derivatives 14,758,694 14,476,240 12,132, ,589 Defaulted Exposures 81,199 69, ,870 8,309 Total for Off-Balance Sheet Exposures 19,385,859 19,092,054 14,378,200 1,150,256 Total On and Off-Balance Sheet Exposures * 97,538,182 96,267,040 45,497,242 3,639,778 Market Risk (Standardised approach) Long Position Short Position Interest/Profit Rate Risk 68,742,191 67,173,042 1,569,149 1,409, ,735 Foreign Currency Risk 99,696 61,238 99,696 99,696 7,976 Options Risk ,423 18,354 68,841,887 67,234,280 1,668,845 1,738, ,065 Operational Risk (Standardised approach) ,711, ,899 Total RWA and Capital Requirement ,946,791 4,235,742 5

6 1) RWA and Capital Requirement (Cont'd) At 31 December 2013, the RWA risk absorbent profit sharing investment account in the Bank amounted to RM629,760,000. Both the principal amount and risk weighted asset are the same. This amount is reported as asset under management in the books of the Bank's Islamic Subsidiary. At the group level, the effect of the RWA risk absorbent profit sharing investment is eliminated. (RM'000) Exposure Class Group Gross Exposures Net Exposures Risk Weighted Assets (RWA) Capital Requirement Credit Risk On-Balance Sheet Exposures Sovereigns/Central Banks 25,541,207 25,541, Public Sector Entities 88,283 88,283 19,216 1,537 Banks, Development Financial Institutions & MDBs 7,461,858 7,461,858 1,763, ,111 Corporates 17,243,190 16,537,877 15,661,549 1,252,924 Regulatory Retail 6,763,053 6,592,947 4,976, ,093 Residential Mortgages 17,492,155 17,467,280 6,965, ,273 Higher Risk Assets Other Assets 1,141,014 1,141, ,278 65,862 Equity Exposure 16,908 16,908 16,908 1,353 Defaulted Exposures 565, , ,322 46,186 Total for On-Balance Sheet Exposures 76,313,643 75,401,498 30,804,309 2,464,345 Off-Balance Sheet Exposures OTC Derivatives 4,157,766 4,157,766 1,862, ,038 Off balance sheet exposures other than OTC derivatives or credit derivatives 12,917,612 12,624,568 10,694, ,561 Defaulted Exposures 192, , ,702 20,776 Total for Off-Balance Sheet Exposures 17,268,091 16,956,725 12,817,196 1,025,375 Total On and Off-Balance Sheet Exposures * 93,581,734 92,358,223 43,621,505 3,489,720 Market Risk (Standardised Approach) Long Position Short Position Interest/Profit Rate Risk 74,737,558 74,066, ,556 1,666, ,291 Foreign Currency Risk 68,331 61,926 68,331 68,331 5,467 Options Risk ,417 26,833 74,805,889 74,127, ,887 2,069, ,591 Operational Risk (Standardised Approach) ,632, ,625 Total RWA and Capital Requirement ,324,205 4,105,936 Note: MDBs - Multilateral Development Banks OTC - Over the counter * The variance between Gross Exposures and Net Exposures, represents the 'Total On and Off-Balance Sheet Exposures covered by Eligible Collateral'. Refer to Note (g) (3) (ii) within this disclosure document. Refer to Note 38 of the financial statements at 31 December 2014 for disclosure of off-balance sheet and Note 37 for disclosure of counterparty credit risk. 6

7 1) RWA and Capital Requirement ( Cont'd) (RM'000) Exposure Class Bank Gross Exposures Net Exposures Risk Weighted Assets (RWA) Capital Requirement Credit Risk On-Balance Sheet Exposures Sovereigns/Central Banks 22,504,296 22,504, Public Sector Entities 266, , ,563 16,925 Banks, Development Financial Institutions & MDBs 8,061,886 8,061,886 1,787, ,979 Corporates 13,122,518 12,412,408 11,949, ,934 Regulatory Retail 4,558,059 4,416,672 3,154, ,325 Residential Mortgages 15,105,258 15,084,307 5,939, ,124 Higher Risk Assets 11,743 11,743 17,614 1,409 Other Assets 634, , ,337 33,307 Equity Exposure 16,908 16,908 16,908 1,353 Defaulted Exposures 451, , ,652 36,452 Total for On-Balance Sheet Exposures 64,732,378 63,851,066 23,947,603 1,915,808 Off-Balance Sheet Exposures OTC Derivatives 4,761,093 4,761,093 2,133, ,706 Off balance sheet exposures other than OTC derivatives or credit derivatives 12,009,235 11,784,637 10,078, ,294 Defaulted Exposures 74,927 63,671 94,604 7,568 Total for Off-Balance Sheet Exposures 16,845,255 16,609,401 12,307, ,568 Total On and Off-Balance Sheet Exposures * 81,577,633 80,460,467 36,254,715 2,900,376 Market Risk (Standardised Approach) Long Position Short Position Interest/Profit Rate Risk 64,475,175 62,317,660 2,157,515 1,308, ,700 Foreign Currency Risk 89,787 58,603 89,787 89,787 7,183 Options Risk ,423 18,354 64,564,962 62,376,263 2,247,302 1,627, ,237 Operational Risk (Standardised Approach) ,079, ,325 Total RWA and Capital Requirement ,961,733 3,436,938 7

8 1) RWA and Capital Requirement ( Cont'd) (RM'000) Exposure Class Bank Gross Exposures Net Exposures Risk Weighted Assets (RWA) Capital Requirement Credit Risk On-Balance Sheet Exposures Sovereigns/Central Banks 20,828,670 20,828, Public Sector Entities 21,131 21,131 5, Banks, Development Financial Institutions & MDBs 8,154,604 8,154,604 1,899, ,924 Corporates 13,582,723 12,938,972 12,107, ,574 Regulatory Retail 4,662,902 4,514,468 3,413, ,073 Residential Mortgages 14,219,122 14,196,607 5,587, ,971 Higher Risk Assets Other Assets 1,627,583 1,627,583 1,392, ,410 Equity Exposure 16,908 16,908 16,908 1,353 Defaulted Exposures 453, , ,984 36,719 Total for On-Balance Sheet Exposures 63,567,567 62,741,994 24,881,159 1,990,493 Off-Balance Sheet Exposures OTC Derivatives 4,363,965 4,363,965 1,948, ,879 Off balance sheet exposures other than OTC derivatives or credit derivatives 11,027,198 10,796,155 9,092, ,386 Defaulted Exposures 158, , ,746 16,940 Total for Off-Balance Sheet Exposures 15,549,191 15,302,536 11,252, ,205 Total On and Off-Balance Sheet Exposures * 79,116,758 78,044,530 36,133,710 2,890,698 Market Risk (Standardised Approach) Long Position Short Position Interest/Profit Rate Risk 71,602,314 70,490,779 1,111,535 1,595, ,668 Foreign Currency Risk 60,371 55,432 60,371 60,371 4,830 Options Risk ,417 26,833 71,662,685 70,546,211 1,171,906 1,991, ,331 Operational Risk (Standardised Approach) ,033, ,697 Total RWA and Capital Requirement ,159,062 3,452,726 Note: MDBs - Multilateral Development Banks OTC - Over the counter * The variance between Gross Exposures and Net Exposures, represents the 'Total On and Off-Balance Sheet Exposures covered by Eligible Collateral'. Refer to Note (g) (3) (ii) within this disclosure document. Refer to Note 38 of the financial statements at 31 December 2014 for disclosure of off-balance sheet and Note 37 for disclosure of counterparty credit risk. * The variance between Gross Exposures and Net Exposures, represents the 'Total On and Off-Balance Sheet Exposures covered by Eligible Coll 8

9 2) Risk Weight Profile and RWA The tables below are disclosures on risk weights profile and RWA of the Group at balance sheet date. (RM'000) Group Exposures after Netting and Credit Risk Mitigation Risk Weights Sovereigns & Central Banks PSEs Banks, MDBs and DFIs Corporates Regulatory Retail Residental Mortgages Higher Risk Assets Other Assets Equity Total Exposures after Netting & Credit Risk Mitigation Total Risk Weighted Assets 0% 27,411, ,447 12, ,665-27,747,335-20% - 203,515 7,496,770 1,310, , ,375,658 1,875,131 35% ,184, ,184,185 5,664,465 50% - 26,115 2,842, ,125 6,225 1,222,646-1,872-4,727,688 2,363,843 75% ,366 7,904,237 2,919, ,830,698 8,123, % - 996, ,913 23,788, ,644 1,434, ,491 16,908 27,263,055 27,263, % - 1,908 16,803 54,395 41,735 8,930 14, , , % Total 96,267,040 45,497,242 Average Risk Weight 0% 86% 29% 95% 74% 46% 150% 62% 100% 47% (RM'000) Group Exposures after Netting and Credit Risk Mitigation Risk Weights Sovereigns & Central Banks PSEs Banks, MDBs and DFIs Corporates Regulatory Retail Residental Mortgages Higher Risk Assets Other Assets Equity Total Exposures after Netting & Credit Risk Mitigation Total Risk Weighted Assets 0% 25,551, ,299 17, ,735-25,894,899-20% - 92,104 9,281,178 1,302,431 49, ,725,313 2,145,063 35% ,881, ,881,558 5,208,545 50% - - 2,015, ,844 11,938 1,133, ,746,779 1,873,390 75% ,528 8,287,389 3,072, ,361,762 8,521, % - 3, ,515 22,896, ,666 1,140, ,278 16,908 25,497,363 25,497, % , ,745 12,769 8, , ,823 Total 92,358,224 43,621,505 Average Risk Weight 0% 23% 27% 95% 76% 46% 150% 72% 100% 47% (RM'000) Bank Exposures after Netting and Credit Risk Mitigation Risk Weights Sovereigns & Central Banks PSEs Banks, MDBs and DFIs Corporates Regulatory Retail Residental Mortgages Higher Risk Assets Other Assets Equity Total Exposures after Netting & Credit Risk Mitigation Total Risk Weighted Assets 0% 22,504, ,662 10, ,195-22,734,195-20% - 133,683 9,946, , , ,104,789 2,220,958 35% ,037, ,037,459 4,563,111 50% - 26,115 2,771, ,696 5, ,131-1,872-4,268,674 2,134,337 75% ,032 5,550,930 2,588, ,142,278 6,106, % - 587,114 57,463 18,678, , , ,293 16,908 21,060,200 21,060, % - 1,908 13,467 51,676 23,696 7,475 14, , , % Total 80,460,467 36,254,715 Average Risk Weight 0% 84% 27% 96% 73% 45% 150% 66% 100% 45% (RM'000) Bank Exposures after Netting and Credit Risk Mitigation Risk Weights Sovereigns & Central Banks PSEs Banks, MDBs and DFIs Corporates Regulatory Retail Residental Mortgages Higher Risk Assets Other Assets Equity Total Exposures after Netting & Credit Risk Mitigation Total Risk Weighted Assets 0% 20,838, ,619 15, ,956-21,093,910-20% - 20,326 9,907,384 1,233,557 32, ,193,487 2,238,697 35% ,375, ,375,573 4,331,451 50% - - 2,197, ,464 11, , ,500,747 1,750,373 75% ,528 6,009,278 2,657, ,668,637 6,501, % - 3, ,826 18,292, , ,230-1,392,626 16,908 21,013,111 21,013, % - - 7, ,869-8, , ,600 Total 78,044,533 36,133,709 Average Risk Weight 0% 30% 27% 94% 76% 45% 150% 86% 100% 46% Note: MDBs - Multilateral Development Banks DFIs - Development Financial Institutions 9

10 3) Credit Risk Refer to Note 4 b) of the financial statements at 31 December 2014 for definitions of past due and impaired loans. The approaches for the determination of individual and collective impairment provisions are detailed in Note 3 m) of the financial statements at 31 December Table 1: Geographical distribution of loans/ breakdown by type Group (RM'000) Northern Southern Central Eastern Total Overdrafts 173, , , ,469 1,145,597 Term loans/ Housing loans/ 3,339,055 2,789,600 10,329,434 1,066,542 17,524,631 Syndicated term loan/ Factoring 23,354 14, ,974 46, ,751 Hire purchase 55,179 45,354 99,297 34, ,709 Lease - - 5,373-5,373 Other term loans/ 1,795,059 1,725,209 7,543,964 1,359,113 12,423,345 Bills receivable 197, ,131 1,869, ,049 2,311,721 Trust receipts 282, ,795 1,126, ,798 2,051,102 Claims on customers under acceptance credits 824, ,315 1,231, ,742 2,679,153 Staff loans/ 39,995 23, ,726 20, ,104 Credit/charge cards 536, ,445 1,557, ,759 2,761,988 Revolving credit 246, ,628 3,624, ,342 4,226,563 Other loans/ 2, , ,240 7,516,532 6,363,471 28,340,052 3,663,222 45,883,277 Group (RM'000) Northern Southern Central Eastern Total Overdrafts 192, , , ,770 1,369,460 Term loans/ Housing loans/ 3,324,901 2,612,973 9,061,045 1,043,791 16,042,710 Syndicated term loan/ ,077-45,077 Factoring 20,392 14, ,474 23, ,206 Hire purchase 51,243 42, ,328 50, ,743 Lease 27-2,415-2,442 Other term loans/ 1,872,690 1,645,038 7,386,362 2,110,816 13,014,906 Bills receivable 105, ,793 3,168, ,810 3,499,558 Trust receipts 175, , , ,111 1,704,541 Claims on customers under acceptance credits 710, ,494 1,043, ,779 2,640,571 Staff loans/ 39,638 23, ,981 24, ,218 Credit/charge cards 569, ,419 1,583, ,101 2,849,038 Revolving credit 226, ,147 2,871,567 75,580 3,459,069 Other loans/ 2,531 1,961 4, ,793 7,291,747 6,376,203 27,029,963 4,662,419 45,360,332 The Northern region consists of the states of Perlis, Kedah, Penang, Perak, Pahang, Kelantan and Terengganu. The Southern region consists of the states of Johor, Malacca and Negeri Sembilan. The Central region consists of the state of Selangor and the Federal Territory of Kuala Lumpur. The Eastern region consists of the states of Sabah, Sarawak and the Federal Territory of Labuan. Concentration by location for loans, advances and is based on the location of the borrower. 10

11 Table 1: Geographical distribution of loans/ breakdown by type Bank (RM'000) Northern Southern Central Eastern Total Overdrafts 159, , , ,530 1,052,389 Term loans/ Housing loans/ 2,881,839 2,304,956 8,130, ,293 14,215,572 Syndicated term loan/ Factoring 23,354 14, ,974 46, ,751 Hire purchase Other term loans/ 1,292, ,011 4,154,956 1,125,142 7,533,131 Bills receivable 197, ,131 1,869, ,049 2,311,721 Trust receipts 160, , , ,837 1,692,511 Claims on customers under acceptance credits 737, , , ,687 2,059,895 Staff loans/ 35,724 19, ,122 16, ,215 Credit/charge cards 436, ,289 1,259, ,860 2,262,168 Revolving credit 221, ,608 3,034, ,179 3,608,324 Other loans/ 2, , ,240 6,147,695 4,833,934 21,044,201 3,181,266 35,207,096 Bank (RM'000) Northern Southern Central Eastern Total Overdrafts 180, , , ,540 1,279,184 Term loans/ Housing loans/ 2,840,209 2,135,208 7,538, ,970 13,382,715 Syndicated term loan/ 45,077 45,077 Factoring 20,392 14, ,474 23, ,206 Hire purchase Other term loans/ 1,353, ,397 3,946,033 1,892,523 8,155,998 Bills receivable 105, ,793 3,168, ,810 3,499,558 Trust receipts 158, , , ,111 1,649,502 Claims on customers under acceptance credits 547, , , ,100 1,979,888 Staff loans/ 34,503 20, ,138 20, ,703 Credit/charge cards 471, ,902 1,306, ,295 2,378,204 Revolving credit 173, ,524 2,692,926 75,408 3,220,720 Other loans/ 2,531 1,961 4, ,793 5,888,394 4,962,327 21,033,874 4,140,136 36,024,731 11

12 Table 2: Geographical distribution of impaired loans/ breakdown by type Group (RM'000) Northern Southern Central Eastern Total Overdrafts 6,844 1,665 19,957 10,062 38,528 Term loans/ Housing loans/ 66,560 54, ,114 12, ,742 Factoring Hire purchase 6, ,735 11,938 Other term loans/ 46,075 17, ,042 25, ,366 Bills receivable 308 7, ,038 Trust receipts 1,547-6,744 2,667 10,958 Claims on customers under acceptance credits 387 1,633 14,627 7,126 23,773 Staff loans/ , ,573 Credit/charge cards 12,777 8,405 30,084 4,285 55,551 Revolving credit - - 4,372-4,372 Other loans/ , ,255 91, ,431 67, ,245 Group (RM'000) Northern Southern Central Eastern Total Overdrafts 7,861 7,002 10,195 1,786 26,844 Term loans/ Housing loans/ 74,104 73, ,790 11, ,002 Factoring ,356-10,383 Hire purchase 4,171 2, ,853 Other term loans/ 54,447 37, ,666 32, ,040 Bills receivable 490 8,028 14,144-22,662 Trust receipts 157 4,040 4,979 2,548 11,724 Claims on customers under acceptance credits 10,785 22,131 4,360 6,443 43,719 Staff loans/ 181-3, ,716 Credit/charge cards 13,440 9,038 31,225 3,890 57,593 Revolving credit - - 4,101-4,101 Other loans/ 2,528 1,959 4, , , , ,485 59, ,365 12

13 Table 2: Geographical distribution of impaired loans/ breakdown by type Bank (RM'000) Northern Southern Central Eastern Total Overdrafts 6,606 1,665 19,343 10,062 37,676 Term loans/ Housing loans/ 52,936 46, ,463 11, ,835 Factoring Hire purchase Other term loans/ 35,719 6,435 88,892 23, ,227 Bills receivable 308 7, ,038 Trust receipts 1,547-6,744 2,667 10,958 Claims on customers under acceptance credits 285 1,030 13,912 7,126 22,353 Staff loans/ , ,573 Credit/charge cards 9,239 6,484 21,971 3,707 41,401 Revolving credit - - 4,372-4,372 Other loans/ , ,391 70, ,451 58, ,018 Bank (RM'000) Northern Southern Central Eastern Total Overdrafts 7,438 7,002 9,740 1,786 25,966 Term loans/ Housing loans/ 57,165 59, ,650 9, ,072 Factoring ,356-10,383 Hire purchase Other term loans/ 41,725 30,317 93,094 30, ,188 Bills receivable 490 8,028 14,144-22,662 Trust receipts 157 4,040 4,979 2,548 11,724 Claims on customers under acceptance credits 9,706 22,131 4,054 6,443 42,334 Staff loans/ 181-3, ,716 Credit/charge cards 10,166 6,768 23,228 3,240 43,402 Revolving credit - - 4,101-4,101 Other loans/ 2,528 1,959 4, , , , ,703 54, ,459 13

14 Table 3: Residual contractual maturity of loans/ breakdown by type Group (RM'000) Maturing within one year One year to three years Three years to five years Over five years Total Overdrafts 1,145, ,145,597 Term loans/ Housing loans/ 55,135 76, ,856 17,193,620 17,524,631 Syndicated term loan/ Factoring 202, ,751 Hire purchase 12,287 89, , ,709 Lease - 1,696 3,677-5,373 Other term loans/ 3,379,744 2,281,022 2,203,084 4,559,495 12,423,345 Bills receivable 2,311, ,311,721 Trust receipts 2,051, ,051,102 Claims on customers under acceptance credits 2,679, ,679,153 Staff loans/ 3,928 14,660 36, , ,104 Credit/charge cards 2,761, ,761,988 Revolving credit 4,226, ,226,563 Other loans/ 5, ,240 18,835,209 2,462,824 2,575,614 22,009,630 45,883,277 Group (RM'000) Maturing within one year One year to three years Three years to five years Over five years Overdrafts 1,369, ,369,460 Term loans/ Housing loans/ 73,184 83, ,648 15,700,024 16,042,710 Syndicated term loan/ - 45, ,077 Factoring 160, ,206 Hire purchase 17, , , ,743 Lease 28-2,414-2,442 Other term loans/ 3,705,531 2,095,019 1,963,262 5,251,094 13,014,906 Bills receivable 3,499, ,499,558 Trust receipts 1,704, ,704,541 Claims on customers under acceptance credits 2,640, ,640,571 Staff loans/ 3,589 14,932 34, , ,218 Credit/charge cards 2,849, ,849,038 Revolving credit 3,459, ,459,069 Other loans/ 8, ,793 19,491,559 2,342,115 2,316,503 21,210,155 45,360,332 Total 14

15 Table 3: Residual contractual maturity of loans/ breakdown by type Bank (RM'000) Maturing within one year One year to three years Three years to five years Over five years Total Overdrafts 1,052, ,052,389 Term loans/ Housing loans/ 38,175 74, ,387 13,916,284 14,215,572 Syndicated term loan/ Factoring 202, ,751 Hire purchase Other term loans/ 1,059,810 1,972,006 1,481,144 3,020,171 7,533,131 Bills receivable 2,311, ,311,721 Trust receipts 1,692, ,692,511 Claims on customers under acceptance credits 2,059, ,059,895 Staff loans/ 3,799 13,993 34, , ,215 Credit/charge cards 2,262, ,262,168 Revolving credit 3,608, ,608,324 Other loans/ 5, ,240 14,296,962 2,060,725 1,702,259 17,147,150 35,207,096 Bank (RM'000) Maturing within one year One year to three years Three years to five years Over five years Total Overdrafts 1,279,184 1,279,184 Term loans/ Housing loans/ 52,515 82, ,959 13,070,800 13,382,715 Syndicated term loan/ - 45, ,077 Factoring 160, ,206 Hire purchase Other term loans/ 1,437,470 1,628,683 1,441,123 3,648,722 8,155,998 Bills receivable 3,499,558 3,499,558 Trust receipts 1,649,502 1,649,502 Claims on customers under acceptance credits 1,979,888 1,979,888 Staff loans/ 3,542 14,566 32, , ,703 Credit/charge cards 2,378,204 2,378,204 Revolving credit 3,220,720 3,220,720 Other loans/ 8,793 8,793 15,669,765 1,770,767 1,650,358 16,933,841 36,024,731 15

16 3) Credit risk (Cont'd) Table 4: Distribution of loans/ by sector, breakdown by type Overdraft Housing loans/ Syndicated term loans/ Factoring Hire purchase Lease Group (RM'000) Other term Bills loans/ receivable Trust receipts Claims on customers under acceptances credits Staff loans/ Credit/ charge cards Agricultural, hunting, forestry and fishing 43, , , ,452 8,786 62, , ,059,841 Mining and quarrying 6, ,559 8, ,674-16, , ,246 Manufacturing 420, , ,233-2,068, ,493 1,359,605 1,571, , ,944,964 Electricity, gas and water 3, , ,261 14, ,000-85,730 Construction 57, ,574 14,931-1,782,568 56,534 20,800 76, , ,329,628 Real estate 16, ,351 44, , ,698,471 Wholesale & retail trade and restaurants & hotels 201, ,859 30, , , , , , ,154,948 Transport, storage and communication 25, ,921 20, ,505 42,243 1,725 9, , ,263 Finance, insurance/takaful and business services 120, ,373 16,059 5,373 1,650,504 10, , , ,100, ,149,171 Household-retail 222,108 17,524, ,621, ,104 2,761, ,441,387 Others 28, ,327 27, ,083 1,249,423 1,808 14, ,517 3,743 2,241,628 1,145,597 17,524, , ,709 5,373 12,423,345 2,311,721 2,051,102 2,679, ,104 2,761,988 4,226,563 5,240 45,883,277 Overdraft Housing loans/ Syndicated term loans/ Factoring Hire purchase Lease Group (RM'000) Other term Bills loans/ receivable Agricultural, hunting, forestry and fishing 69, ,887-1,033, ,014 14, , , ,633,395 Mining and quarrying 5, , ,068 2,844 93, , ,303 Manufacturing 336, , ,013-1,813, ,777 1,007,064 1,514, ,347 2,065 6,365,423 Electricity, gas and water 8, ,963 1,038 2,030 20, , ,127 Construction 70, ,843-1,974,303 43,444 12,520 74, , ,509,216 Real estate 17, ,162, ,058-1,776,310 Wholesale & retail trade and restaurants & hotels 223, ,900 30, , , , , , ,773,077 Transport, storage and communication 29, ,808 22, ,506 6,796 1,578 11, , ,873 Finance, insurance/takaful and business services 171,171-45,077 14,094 19,532 2,442 1,338,728 6, ,070 72, , ,782,322 Household-retail 413,356 16,042, ,913, ,218 2,849, ,530,114 Others 22, ,823 24, ,470 2,363, , ,236 6,198 3,025,172 1,369,460 16,042,710 45, , ,743 2,442 13,014,906 3,499,558 1,704,541 2,640, ,218 2,849,038 3,459,069 8,793 45,360,332 Trust receipts Claims on customers under acceptances credits Staff loans/ Credit/ charge cards Revolving credit Revolving credit Other loans/ Other loans/ Total Total 16

17 3) Credit risk (Cont'd) Table 4: Distribution of loans/ by sector, breakdown by type ( Cont'd) Overdraft Housing loans/ Syndicated term loans/ Factoring Hire purchase Lease Bank (RM'000) Other term Bills loans/ receivable Trust receipts Claims on customers under acceptances credits Staff loans/ Credit/ charge cards Agricultural, hunting, forestry and fishing 40, , ,452 8,786 61, , ,502 Mining and quarrying 5, , ,036-16, , ,451 Manufacturing 395, , ,495, ,493 1,166,931 1,274, , ,711,852 Electricity, gas and water 2, , ,261 1, ,540 Construction 47, , ,223,020 56,534 17,810 43, , ,627,031 Real estate 16, ,764 44, , ,460,445 Wholesale & retail trade and restaurants & hotels 188, , , , , , , ,361,583 Transport, storage and communication 20, , ,281 42,243 1,126 5, , ,821 Finance, insurance/takaful and business services 92, , ,107,342 10, ,811 77, ,030, ,460,050 Household-retail 216,451 14,215, ,956, ,215 2,262, ,913,944 Others 27, , ,613 1,249,423 1,715 13, ,917 3,743 1,472,877 1,052,389 14,215, , ,533,131 2,311,721 1,692,511 2,059, ,215 2,262,168 3,608,324 5,240 35,207,096 Overdraft Housing loans/ Syndicated term loans/ Factoring Hire purchase Lease Bank (RM'000) Other term Bills loans/ receivable Agricultural, hunting, forestry and fishing 59, , ,014 14, , , ,266,036 Mining and quarrying 3, ,675 2,844 93, , ,615 Manufacturing 319,850-88, ,241, , ,860 1,160, ,707 2,065 5,246,909 Electricity, gas and water 7, ,349 1,038 2,030 3, ,559 Construction 60, ,425,291 43,444 9,319 42, , ,844,232 Real estate 17, , ,358-1,521,834 Wholesale & retail trade and restaurants & hotels 212,820-41, , , , , , ,115,250 Transport, storage and communication 20,696-12, ,626 6, ,143 42, ,614 Finance, insurance/takaful and business services 151,651 45,077 14, ,906 6, ,711 66, , ,206,259 Household-retail 406,895 13,382,715-2,097, ,703 2,378, ,530,442 Others 18,805-1, ,797 2,363, ,355 99,636 6,198 2,796,981 1,279,184 13,382,715 45, , ,155,998 3,499,558 1,649,502 1,979, ,703 2,378,204 3,220,720 8,793 36,024,731 Trust receipts Claims on customers under acceptances credits Staff loans/ Credit/ charge cards Revolving credit Revolving credit Other loans/ Other loans/ Total Total 17

18 3) Credit risk (Cont'd) Table 5: Distribution of impaired loans/ by sector, breakdown by type Overdraft Housing loans/ Factoring Hire purchase Other term loans/ Bills receivable Group (RM'000) Trust receipts Claims on customers under acceptances credits Staff loans/ Credit/ charge cards Revolving credit Other loans/ Agricultural, hunting, forestry and fishing Mining and quarrying Manufacturing 1, ,644 27,608-5,383 6, ,174 Electricity, gas and water Construction 1, ,306-2, ,512 Real estate Wholesale & retail trade and restaurants & hotels 30, ,356 7,201 8,038 2,908 17, , ,742 Transport, storage and communication ,124 1, ,440 Finance, insurance/takaful and business services ,596 Household-retail 3, , , ,573 55, ,716 Others ,090 38, , , ,366 8,038 10,958 23,773 3,573 55,551 4,372 1, ,245 Total Overdraft Housing loans/ Factoring Hire purchase Other term loans/ Bills receivable Group (RM'000) Trust receipts Claims on customers under acceptances credits Staff loans/ Credit/ charge cards Revolving credit Other loans/ Agricultural, hunting, forestry and fishing Mining and quarrying Manufacturing 5,221-8,230 6,291 41, ,661 32, , ,060 Electricity, gas and water Construction 4, ,659-2, ,318 Real estate Wholesale & retail trade and restaurants & hotels 9,187-2, ,567 21,653 3,515 11, , ,238 Transport, storage and communication , ,767 Finance, insurance/takaful and business services , ,871 Household-retail 6, , , ,716 57, ,711 Others ,387 1,766 26, ,002 10,383 7, ,040 22,662 11,724 43,719 3,716 57,593 4,101 8, ,365 Total 18

19 3) Credit risk (Cont'd) Table 5: Distribution of impaired loans/ by sector, breakdown by type ( Cont'd) Overdraft Housing loans/ Factoring Hire purchase Other term loans/ Bills receivable Bank (RM'000) Trust receipts Claims on customers under acceptances credits Staff loans/ Credit/ charge cards Revolving credit Other loans/ Agricultural, hunting, forestry and fishing Mining and quarrying Manufacturing 1, ,090-5,383 5, ,582 Construction 1, ,695-2, ,730 Real estate Wholesale & retail trade and restaurants & hotels 30, ,433 8,038 2,908 16, , ,801 Transport, storage and communication Finance, insurance/takaful and business services Household-retail 3, , , ,573 41, ,699 Others , , ,227 8,038 10,958 22,353 3,573 41,401 4,372 1, ,018 Total Overdraft Housing loans/ Factoring Hire purchase Other term loans/ Bills receivable Bank (RM'000) Trust receipts Claims on customers under acceptances credits Staff loans/ Credit/ charge cards Revolving credit Other loans/ Agricultural, hunting, forestry and fishing Mining and quarrying Manufacturing 5,216 8, , ,661 32,023-6, ,702 Construction 4, ,386-2, ,863 Real estate Wholesale & retail trade and restaurants & hotels 9,187 2,153-7,969 21,653 3,515 10,311 4, ,146 Transport, storage and communication Finance, insurance/takaful and business services , ,525 Household-retail 6, ,894 98,057 3,716 43, ,207 Others ,387 1,575 25, ,072 10, ,188 22,662 11,724 42,334 3,716 43,402 4,101 8, ,459 Total 19

20 Table 6: All past due loans/ breakdown by sector * Group (RM'000) Bank (RM'000) Agricultural, hunting, forestry and fishing 5,237 2,127 5,237 2,127 Mining and quarrying Manufacturing 259, , , ,713 Electricity, gas and water Construction 241, , , ,699 Real estate Wholesale & retail trade and restaurants & hotels 389, , , ,070 Transport, storage and communication 34,227 7,939 4,183 3,644 Finance, insurance/takaful and business services 8,587 8,434 5,275 6,886 Household-retail 2,772,342 2,534,434 2,041,015 1,843,231 Others 5,841 7,966 2,678 7,112 3,717,246 3,570,905 2,857,634 2,824,219 Table 7: All past due loans/ breakdown by geographical location* Group (RM'000) Bank (RM'000) Northern region 768, , , ,002 Southern region 495, , , ,334 Central region 2,086,211 1,795,293 1,567,032 1,362,320 Eastern region 367, , , ,563 3,717,246 3,570,905 2,857,634 2,824,219 * Of which the portion of impaired loans breakdown by sector and geographical location is disclosed in Note 11 (iii) and 11 (v) of the financial statements at 31 December 2014 respectively. Table 8: Individual impairment allowance breakdown by sector Group (RM'000) Bank (RM'000) Agricultural, hunting, forestry and fishing Manufacturing 28,996 67,959 23,636 62,524 Construction 15,464 40,194 15,122 39,388 Real estate Wholesale & retail trade and restaurants & hotels 46,968 39,012 45,846 37,820 Transport, storage and communication 4, Finance, insurance/takaful and business services Household-retail 138, , , ,680 Others , , , ,975 Table 8a: Collective impairment allowance breakdown by sector Group (RM'000) Bank (RM'000) Agricultural, hunting, forestry and fishing 3,127 4, Mining and quarrying 1,970 1, Manufacturing 50,814 54,209 36,401 39,923 Electricity, gas and water 5,917 7,821 5,023 6,659 Construction 11,858 12,172 3,614 3,648 Real estate 22,516 35,400 19,722 32,134 Wholesale & retail trade and restaurants & hotels 14,637 10,273 5,337 1,845 Transport, storage and communication 3,117 4, Finance, insurance/takaful and business services 8,089 7, Household-retail 235, , , ,724 Others 31,002 23,314 21,977 20, , , , ,026 20

21 Table 9: Individual impairment allowance breakdown by geographical location Group (RM'000) Bank (RM'000) Northern region 13,984 25,101 9,947 19,058 Southern region 8,236 42,187 7,499 41,374 Central region 185, , , ,906 Eastern region 27,224 21,063 22,382 20, , , , ,975 Table 9a: Collective impairment allowance breakdown by geographical location Group (RM'000) Bank (RM'000) Northern region 64,589 64,352 48,567 46,418 Southern region 55,284 54,988 37,337 36,852 Central region 239, , , ,351 Eastern region 28,859 34,103 23,258 27, , , , ,026 Table 10: Charges for individual impairment allowance during the year breakdown by sector Group (RM'000) Bank (RM'000) (Restated) (Restated) Agricultural, hunting, forestry and fishing 3, , Manufacturing 37,008 24,913 17,078 17,915 Electricity, gas and water 1,784-1,784 - Construction 4,434 39,586 3,164 38,779 Real estate 2, , Wholesale & retail trade and restaurants & hotels 17,370 30,317 16,635 29,902 Transport, storage and communication 4, Finance, insurance/takaful and business services Household-retail 50,830 67,540 43,564 48,710 Others , ,223 88, ,638 Table 10a: Charges for write-offs of individual impairment allowance during the year breakdown by sector Group (RM'000) Bank (RM'000) Agricultural, hunting, forestry and fishing 56 1, ,059 Manufacturing 30,120 11,221 26,672 10,086 Real estate 5 13, ,449 Wholesale & retail trade and restaurants & hotels 12,749 17,818 12,118 15,196 Transport, storage and communication Finance, insurance/takaful and business services Household-retail 17,038 13,205 13,012 12,257 Others ,502 56,778 52,354 52,073 The reconciliation of changes in loan impairment provisions is disclosed in Note 11(ii) of financial statements at 31 December

22 i) External Credit Assessment Institutions ('ECAIs') The standardised approach requires banks to use risk assessments prepared by External Credit Assessment Institutions ('ECAIs') to determine the risk weightings applied to rated counterparties. ECAIs are used by the Group as part of the determination of risk weightings for the following classes of exposure: Sovereigns and Central Banks Multilateral development banks ('MDBs') Public sector entities Corporates Banks Securities firms For the purpose of Pillar 1 reporting to the regulator, the Group uses the external credit ratings from the following ECAIs: Standard & Poor s Rating Services (S&P) Moody s Investors Services (Moody s) Fitch Ratings (Fitch) Rating and Investment Information, Inc (R&I) RAM Rating Services Berhad (RAM) Malaysian Rating Corporation Berhad (MARC) Data files of external ratings from the nominated ECAIs are matched with the customer records in the Group s centralised credit database. When calculating the risk-weighted value of any exposure under the standardised approach, the customer in question is identified and matched to a rating, according to BNM s selection rules. The relevant risk weight is then derived using the BNM s prescribed risk weights and rating categories. All other exposure classes are assigned risk weightings as prescribed in the BNM s framework. 22