CHINA CONSTRUCTION BANK (MALAYSIA)BERHAD(Company No: 1203702-U)(Incorporated In Malaysia)

Risk-Weighted Capital Adequacy Framework (Basel II)
Pillar 3 Disclosure
30 June 2018
(Revised)

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

Table of Contents
1.0 Introduction................................................................................................................................... 3
2.0 Scope of Application .................................................................................................................. 3
3.0 Capital ............................................................................................................................................ 3
3.1 Capital Adequacy .................................................................................................................... 4
3.2 Capital Structure...................................................................................................................... 6
4.0 Risk Management ........................................................................................................................ 7
5.0 Credit Risk ..................................................................................................................................... 8
5.1 Geographical Analysis ......................................................................................................... 10
5.2 Industry/Sector Analysis ..................................................................................................... 11
5.3 Maturity Analysis (Residual Contractual Maturity)....................................................... 13
5.4 Impaired loans and impairment provision by economic sector ............................... 14
5.5 Impaired loans and impairment provision by geographical area ............................. 16
5.5 Impaired loans and impairment provision by geographical area (continued) ...... 17
5.6 Reconciliation of changes to loan impairment provisions ........................................ 18
6.0 Credit Rating ............................................................................................................................... 19
6.1 Disclosure on Credit Risk: Disclosure on risk weights under Standardised
Approach ........................................................................................................................................ 21
6.2 Rated Exposures according to Ratings by ECAIs ........................................................ 23
7.0 Credit Risk Mitigation ............................................................................................................... 29
7.1 Disclosure on Credit Risk Mitigation ............................................................................... 30
8.0 Off-balance sheet exposures and counterparty credit risk (CCR) ............................... 33
9.0 Securitisation ............................................................................................................................. 36
10.0 Market Risk ............................................................................................................................... 37
10.0 Market Risk (continued) ........................................................................................................ 38
11.0 Liquidity risk ............................................................................................................................. 38
11.0 Liquidity risk (continued) ...................................................................................................... 39
12.0 Operational Risk ...................................................................................................................... 39
12.0 Operational Risk (continued) ............................................................................................... 40
13.0 Interest Rate Risk in the Banking Book ............................................................................ 40
13.0 Interest Rate Risk in the Banking Book (continued) ..................................................... 41
14.0 Internal Capital Adequacy Assessment Process (“ICAAP”) ....................................... 41
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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

1.0 Introduction
China Construction Bank (Malaysia) Berhad (“CCBM” or “the Bank”) computes capital
adequacy ratios pursuant to the requirements of the Bank Negara Malaysia‟s (“BNM”) Risk Weighted Capital Adequacy Framework (“RWCAF”) , and provide Pillar 3 disclosure forfinancial reporting twice a year (i.e. semi-annual and annual), which is equivalent to theBasel II issued by the Basel Committee on Banking. The following information is provided inorder to highlight CCBM capital adequacy and details of risk exposures.

2.0 Scope of Application
CCBM is a wholly-owned subsidiary of China Construction Bank, Corporation., China(“CCB”). The Bank is mainly engaged in commercial banking and related financial services
in Malaysia. The Bank does not offer Islamic financial services nor involved in Islamicbanking operations.
The Bank Negara Malaysia‟s (“BNM”) disclosure requirement (“Pillar 3”) is applicable to allbanking institutions licensed under the Financial Services Act 2013 (“FSA”) and Islamic
Financial Services Act 2013 (“IFSA”). The purpose of Pillar 3 disclosure requirements is toenhance the transparency of banks‟ risk management practices and capital adequacy.
CCBM adopts the Standardised Approach (“SA”) in computing the capital requirement for
credit risk and market risk while adopting Basic Indicator Approach (“BIA”) in computing theoperational risk of the Pillar 1 under BNM‟s RWCAF.
Standard risk weights under SA are used to assess the capital requirements for credit risk
and market risk exposures. The capital requirement for operational risk under BIA iscomputed based on the fixed percentage over average gross income.
The following information have been reviewed by the independent party, i.e. internal auditorsand certified by the Bank‟s Chief Executive Officer.

3.0 Capital
CCBM uses stress testing and scenario analysis to assess capital adequacy under wide
range of extreme but plausible scenarios. This exercise provides insight into potential
vulnerabilities and allows CCBM implement mitigation measures.
CCBM risk appetite is closely integrated with its strategy, business planning and capitalassessment processes. CCBM risk appetite incorporates senior management‟s views on thelevel of capital required to support business activities.
The Bank uses a capital model to assess the capital requirements for each material risk.
Each material risk is assessed to identify relevant mitigation actions and appropriate levelsof capital determined.
The Bank has in place processes and controls to monitor and manage capital adequacy
across the organisation.
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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

3.1 Capital Adequacy
The Bank‟s capital adequacy ratio is computed in accordance with the BNM‟s Capital
Adequacy Framework. The following information shows the capital adequacy ratio of the
Bank and the breakdown of RWA as of 30 June 2018.
30 June201835.095%35.095%35.623%

Before/after payment of dividends
CET1 Ratio
Tier 1 Capital Ratio
Total Capital Ratio

31 December
2017
51.598%51.598%52.013%

The risk-weighted asset (“RWA”) by exposures break down based on the following major risk
category:
30 June 2018
Risk TypeGross exposure/
EAD before CRM

Net exposures/
EAD after CRM(RM’000)

Riskweighted
Assets(RM’000)

Capitalrequirement
at 8%(RM’000)(RM’000)

Sovereigns & central banks
Banks, development financial
1
institutions & MDBs
Corporates
Other assets
Total on-balance sheet
exposure
Off-balance sheet exposures
OTC derivatives
Credit-related off-balance sheet
exposure
Total off-balance sheet
exposure359,377
1,195,660

359,377
1,195,660

281,125

22,4901,865,340
11,687

1,823,263
11,687

1,740,988
11,687139,279935

3,432,064

3,389,987

2,033,800

162,704

39,655
191,445

39,655
179,652

10,660157,053853
12,564

231,100

219,307

167,713

13,417

Total credit risk

3,663,164

3,609,294

Credit Risk
On-balance sheet exposure

1

Multilateral Development Banks

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

3.1 Capital Adequacy (continued)
Gross exposure/
EAD before CRM(RM’000)
Market Risk
Interest rate risk
Foreign currency risk

Capitalrequirement
at 8%(RM’000)

longposition
405,857

short
position
367,378

9,268

741

10,567170

10,567845-

73,474

5,878

2,294,822

183,585

Capitalrequirement
at 8%(RM’000)

Operational Risk
Total RWA and capitalrequirement

31 December 2017
Risk Type

Riskweighted
Assets(RM’000)

Gross exposure/
EAD before CRM

Net exposures/
EAD(RM’000)(RM’000)

Riskweighted
Assets(RM’000)

467,419994,523

467,419994,523

227,101

18,1681,203,814
26,3682,692,124

1,134,911
26,3682,623,221

1,049,603
26,3681,303,072

83,9682,109
104,245

27,073
183,597

22,409170,580

6,694
147,592

535
11,807

210,670

192,989

154,286

12,3422,902,795

2,816,210

Credit Risk
On-balance sheet exposure
Sovereigns & central banks
Banks, development financial
2
institutions & MDBs
Corporates
Other assets
Total on-balance sheet
exposure
Off-balance sheet exposures
OTC derivatives
Credit-related off-balance sheet
exposure
Total off-balance sheet
exposure
Total credit risk

2

Multilateral Development Banks

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

3.1 Capital Adequacy (continued)
Gross exposure/
EAD before CRM(RM’000)
Market Risk
Interest rate risk
Foreign currency risk

Riskweighted
Assets(RM’000)

Capitalrequirement
at 8%(RM’000)

longposition
1,709,093

shortposition
1,719,277

16,954

1,356

4,862

0

4,862

389

-

91,672

7,334

1,570,846

125,666

Operational Risk
Total RWA and capitalrequirement

3.2 Capital Structure
Paid-up ordinary share capital is the capital issued by an entity to an investor, which is fullpaid-up where the proceeds of issue are available and received immediately by the entity.
The entity has no obligation to pay a coupon or dividend to the equity holder of ordinary
shares. The capital is available for unrestricted and immediate use to cover risks and losses,
and enable the entity to continue operation.
The Bank‟s total capital according to BNM‟s Capital Adequacy Framework (Capital
Components) are as follows:
30 June2018(RM’000)

31
December
2017(RM’000)

CET1 capital
Paid-up ordinary share capital
Accumulated losses
FVOCI reserves

822,600(6,755)
206

822,600(4,535)840

Less:- Intangible assets- Total gross value of deferred tax assets- 55% of cumulative gains of FVOCI financial instruments- Regulatory reserve attributable to loans/financing
Total CET I Capital
Total Tier I Capital(5,013)(5,558)(113)
805,367
805,367(5,013)(2,911)(462)
810,519
810,519

Tier 2 Capital
Collective impairment allowance and regulatory reserve
Total Tier II Capital

12,116
12,116

6,520
6,520

Total Capital

817,483

817,039

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

4.0 Risk Management
The Bank‟s risk management framework sets the overarching principles to enable theidentification, measurement, and continuous monitoring of all relevant and material risks ona bank wide basis, supported by robust management information systems that facilitate
timely and reliable reporting of risks and the integration of information across the Bank.
The Bank‟s risk management framework emphasizes on strong risk culture and a welldeveloped risk appetite. Effective and efficient risk management safeguards the Bank‟scontinued existence and enables it to achieve its long term corporate goals.
The Board of Directors (“BOD”) has overall responsibility for the establishment and oversightof the Bank‟s risk management framework. BOD has established the Board Risk
Management Committee which is responsible for developing risk management strategies
and policies, monitoring the implementation and evaluating the Bank‟s overall risk profile ona regular basis.
The Senior Management is responsible for establishing the risk management framework andprovides input to assist the BOD in discharging its oversight responsibilities. Management
Committees i.e. Assets and Liabilities Committee (“ALCO”) and the Management Risk
Management Committee (“MRMC”) play a significant role in reviewing the development ofrisk management policies, defining the strategies and ensuring the risk management results
are align with the Bank‟s business strategies.
The Bank is exposed to the following risks:Credit risk
Market risk
Operational risk
Credit concentration risk (“CCR”)
Interest rate risk in banking book (“IRRBB”)
The Internal Audit Division provides an independent review on Risk Management
Framework and to evaluate the reliability of risk management process and internal control of
the Bank. The Risk Management Division (“RMD”) provides support to the BOD and MRMC
by monitoring, reviewing and reporting associated risks and implementing and coordinating
the risk management policies. RMD is also responsible to ensure, and the Bank‟s risk
management objectives are aligned to the current business operating environment.

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

5.0 Credit Risk
The credit risk management process is depicted as follows,

Identification

Assessment/
Measurement

Control/ Mitigation

Monitoring/ Review

 Identify credit risk on transactions
and positions
 Internal credit rating Probability of default (“PD”)
 Loss give default (“LGD”)
 Exposure at default (“EAD”)
 Portfolio limits, counterparty limits
 Pricing Collateral and facility structures
 Reporting and monitoring Periodic risk profile review

Credit risk is the risk of loss that arises from the failure of a debtor or counterparty todischarge its contractual obligations or commitments to the Bank. The Bank‟s exposure tocredit risk arises primarily from the Bank‟s lending, trade finance and its funding, investment
and trading activities from both on- and off- balance sheet transactions.
The Bank has established the Management Risk Management Committee (“MRMC”) tomonitor on credit risk exposure trends, asset quality, portfolio concentration analysis andcredit related limits controls. The MRMC ensures that the Bank practices prudent
underwriting standards that are consistent with the Bank‟s risk appetite and lending
strategies.
The Bank has also established the Credit Committee to review and evaluate the borrowers‟
credit ratings based on internal rating criteria and the suitability of credit risk mitigation suchas specific types of collaterals. Pre-emptive risk management tool such as collateralmanagement, watch list and management-action-triggers have been put in place toproactively monitor for signs of possible credit deterioration.
The Bank‟s credit risk management process is independent of the business to protect
integrity of the risk assessment process and decision making. Credit risk in respect of
exposures to corporate borrowers is measured and managed at both individual counterparty
level as well as at a portfolio level.
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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

5.0 Credit Risk (continued)
The Bank controls its concentration risk by means of appropriate structural limits andborrower limits based on creditworthiness. The exposures to individual clients or group arebased on the internal rating of the borrower as well as group-wide borrowing limits andcapped by the regulatory ceiling.
In addition, the Bank has established limits to mitigate concentration risk within different
industry sectors so that the Bank‟s exposures are evenly spread over various sectors withrefrain to undesirable sectors.
A loan is considered past due when the counterparty has failed to make a principal orinterest payment when contractually due, where Individual loan of more than 90 days pastdue is classified as impaired and any other events occurred as per the policies. The
classification of impaired loans/financing and provision of the Bank for loans/financing
impairment is consistent with the standard under Malaysian Financial Reporting Standards.
Where individual loans are impaired, the individual impairment provision is set aside where
the estimated recoverable amount is lower than the net book value of the loan. Additionally,
the Bank has applied the Collective Impairment Provision based on local regulatory
requirements.
BOD plays a crucial role in ensuring the proper oversight of the credit risk management in
CCBM, in line with the Bank‟s capital strength, management expertise, risk appetite,business strategies and lending strategies. The BRMC assists BOD in evaluating andassessing the adequacy of strategies to manage the risk management associated with
CCBM‟s activities. The BRMC is also responsible to review and evaluate the credit products
engaged by CCBM to ensure that it is conducted within the standards and policies set by the
BOD.
The MRMC is responsible in reviewing the development of credit risk management policies,
defining the strategies and ensuring the results are align with the Bank‟s business strategies.
The RMD constantly monitor the credit limit and assess the risks within credit proposals, aswell as preparing credit risk management related reporting to BOD/management, China
Construction Bank Head Office (CCB HO) and BNM as required.
The Internal Audit Division is responsible to provide ongoing focus on the internal control
system and periodic reviews, i.e. regular review on the credit risk management processes
and in compliance with approved policies.
The effective credit monitoring and review process is vital to ensure that CCBM is current in
its understanding of the condition of its credit exposures via-a-vis its approved risk appetiteand to facilitate early identification of potential problem credits on a timely basis. All credit
exposures will go through a review process at least once a year. The RMD may initiate an
ad-hoc review on any existing borrower if the market conditions associated with the borrowerchange in a way that may affect the borrower‟s risk profile.

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

5.1 Geographical Analysis
The gross credit exposures of financial assets are broken down based on the geographical location where the credit risk resides, as follows:
30 June 2018
Credit Exposure

Malaysia(RM’000)
359,377

Hong Kong(RM’000)

PR China(RM’000)-

The Philippines(RM’000)-

UAE(RM’000)-

Indonesia(RM’000)-

Others(RM’000)--

866,850-

411,351

-

-

-

871

Corporates

870,219

232,796

540,569

161,608

61,856145,979-

Other assets

11,687

-

-

-

-

-

-

2,108,133

232,796

951,920

161,608

61,856145,979

817

Malaysia(RM’000)
467,419

Hong Kong(RM’000)

PR China(RM’000)--

The Philippines(RM’000)-

UAE(RM’000)-

Indonesia(RM’000)-

Others(RM’000)-

761,657-

300,644

-

-

-

1

Corporates

640,823

330,533

79,388

162,155

64,24869,559-Other assets

26,368

-

-

-

-

-

-

1,896,267

330,533

380,032

162,155

64,24869,5591

Sovereigns/Central
Banks
Banks,
development
financial institutions and
MDBs

Total

31 December 2017
Credit Exposure
Sovereigns/Central
Banks
Banks,
development
financial institutions and
MDBs

Total

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

5.2 Industry/Sector Analysis
Distribution of exposures by industry/sector, broken down by the following gross credit
exposures.
30 June 2018
Credit Exposure
SectorCategory
Sovereigns &Central Banks(RM’000)
Agriculture, hunting,forestry and fishing
Construction
Education, health andothersElectricity, gas and water
Finance, insurance andbusiness services
Government
Manufacturing
Mining and quarrying
Sector N.E.C
Other business activities
Real estate
Wholesale & retail tradeand restaurant & hotel
Total

Banks,
development
financial
institutions &MDBs(RM’000)

Total
Corporates

Other
assets(RM’000)(RM’000)(RM’000)--

101,010-

101,010--217,657-

217,657--

73,302-73,302--

69,442-

69,442359,377

1,279,073

490,126-

2,128,576--

61,856
129,363-

61,856
129,363--

170,686
104,763
11,744
192,951

11,687-

170,686
116,450
11,744
192,951--

390,127-

390,127

359,377

1,279,073

2,013,027

11,687

3,663,164

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

5.2 Industry/Sector Analysis (continued)
31 December 2017
Credit Exposure
SectorCategory
Sovereigns &Central Banks

Banks,
development
financial
institutions &MDBs(RM’000)(RM’000)
Agriculture, hunting,forestry and fishing
Electricity, gas and water
Construction
Real estate
Wholesale and retailtrade, and restaurant andhotelsFinance, insurance, realestate and businessactivities
Government andgovernment agencies
Education, health &othersManufacturing
Others
Total

Total
Corporates

Other
assets(RM’000)(RM’000)(RM’000)--

79,388-79,388--69,559160,263
123,895
435,732-

69,559160,263
123,895
435,732

467,419

1,062,302

330,533-

1,860,254

64,24864,24875,16275,162

7,926
467,419

1,062,302

1,346,706

26,36826,368

7,926
26,3682,902,795

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

5.3 Maturity Analysis (Residual Contractual Maturity)
Contractual maturity breakdown by the following types of gross credit exposures:
30 June 2018
Credit Exposure
Category
Sovereigns/Central
Banks
Banks,
development
financial
institutions and
MDBs
Corporates
Other assets
Total

Up to one year
(RM’000)
2,183

Maturity
1-5 years(RM’000)
357,194

1,233,876

Total> 5 years(RM’000)-(RM’000)
359,377

45,197-

1,279,072

662,780
11,687945,962-404,285-

2,013,027
11,6871,910,526

1,348,353

404,285

3,663,164

Up to one year
(RM’000)
312,120

Maturity
1-5 years(RM’000)
155,300

1,016,982

31 December 2017
Credit Exposure
Category
Sovereigns/Central
Banks
Banks,
development
financial
institutions and
MDBs
Corporates
Other assets
Total

Total
> 5 years(RM’000)-(RM’000)
467,420

45,321-

1,062,303

491,984
26,368604,168-

250,552-

1,346,704
26,368

1,847,454

804,789

250,552

2,905,795

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

5.4 Impaired loans and impairment provision by economic sector
The tables below breakdown impairment and provision industry/sector,a) Impaired loans by sector
30 June 2018
(RM‟000)
Finance, insurance, real estate and business activities
Manufacturing
Construction
Wholesale and retail trade, and restaurant and hotels
Government and government agencies
Education, health & others
OthersTotal-

31 December 2017
(RM‟000)
Finance, insurance, real estate and business activities
Manufacturing
Construction
Wholesale and retail trade, and restaurant and hotels
Government and government agencies
Education, health & others
OthersTotal-b) Past due loans by sector
30 June 2018
(RM‟000)
Finance, insurance, real estate and business activities
Manufacturing
Construction
Wholesale and retail trade, and restaurant and hotels
Government and government agencies
Education, health & others
Others
Total--

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

5.4 Impaired loans and impairment provision by economic sector (continued)
31 December 2017
(RM‟000)
Finance, insurance, real estate and business activities
Manufacturing
Construction
Wholesale and retail trade, and restaurant and hotels
Government and government agencies
Education, health & others
OthersTotal--c) Individual impairment provisions by sector
30 June 2018
(RM‟000)
Finance, insurance, real estate and business activities
Manufacturing
Construction
Wholesale and retail trade, and restaurant and hotels
Government and government agencies
Education, health & others
OthersTotal-

31 December 2017
(RM‟000)

Finance, insurance, real estate and business activities
Manufacturing
Construction
Wholesale and retail trade, and restaurant and hotels
Government and government agencies
Education, health & others
Others
Total--

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

5.4 Impaired loans and impairment provision by economic sector (continued)d) Collective impairment provisions by sector
30 June 2018
(RM‟000)
Agriculture, hunting, forestry and fishing
Real estate
Finance, insurance and business services
Government
Wholesale & retail trade and restaurant & hotel
Electricity, gas and water
Construction
Manufacturing
Education, health and others
Mining and quarrying
Other business activities
Sector NEC
Total

1,075
2,461
3,094
282
1,366
316
811
881
778
155
97
2,076
13,39231 December 2017
(RM‟000)

Finance, insurance, real estate and business activities
Manufacturing
Construction
Agriculture, hunting, forestry and fishing
Wholesale and retail trade, and restaurant and hotels
Government and government agencies
Education, health & others
Real estateElectricity, gas and water
Total

1,777
434
547
1,377
262
699
1,353
71
6,520

5.5 Impaired loans and impairment provision by geographical areaa) Impaired loans by geographical area
30 June 2018
(RM‟000)
Malaysia
Hong Kong
PR China
The Philippines
UAE
Indonesia
Others
Total-

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

5.5 Impaired loans and impairment provision by geographical area (continued)
31 December 2017
(RM‟000)
Malaysia
UAE
OthersTotal-b) Past due loans by geographical area
30 June 2018
(RM‟000)
Malaysia
Hong Kong
PR China
The Philippines
UAE
Indonesia
OthersTotal

31 December 2017
(RM‟000)

Malaysia
UAE
OthersTotal-c) Individual provision by geographical area
30 June 2018
(RM‟000)
Malaysia
Hong Kong
PR China
The Philippines
UAE
Indonesia
Others
Total-

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 201831 December 2017
(RM‟000)
Malaysia
UAE
OthersTotal-d) The table breakdown the collective impairment provision by geographic location
30 June 2018
(RM‟000)
Malaysia
Hong Kong
PR China
The Philippines
UAE
Indonesia
The USA
Total

6,530
2,003
3,372
319
282
885
1
13,39231 December 2017
(RM‟000)
Malaysia
Hong Kong
PR China
The Philippines
UAE
Indonesia
Others
Total

3,576
1,649
675
287
262
71
6,520

5.6 Reconciliation of changes to loan impairment provisions
30 June 2018
(RM‟000)
Impaired loans and advances
At the beginning of the financial year
Classified as impaired during the financial year
Amount recovered
Amount written-off
Amount reclassified as performing-

At end of the financial year
Individual impairment allowance-

Net impaired loans and advances-

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018
Individual impairment allowance
At the beginning of the financial year
Allowance made during the financial year
Allowance written back during the financial year
At the end of the financial year-

Collective impairment allowance
At the beginning of the financial year
Allowance made during the financial year
Allowance written back during the financial year
At the end of the financial year

8,740
4,652
13,39231 December 2017
(RM‟000)
Impaired loans and advances
At the beginning of the financial year
Classified as impaired during the financial year
Amount recovered
Amount written-off
Amount reclassified as performing-

At end of the financial year
Individual impairment allowance-

Net impaired loans and advances-

Individual impairment allowance
At the beginning of the financial year
Allowance made during the financial year
Allowance written back during the financial year
At the end of the financial year-

Collective impairment allowance
At the beginning of the financial year
Allowance made during the financial year
Allowance written back during the financial year
At the end of the financial year

6,520
6,520

6.0 Credit Rating
CCBM applies the credit ratings assigned by the External Credit Assessment Institutions(“ECAIs”), i.e. Standard & Poor‟s Rating Services (S&P) and Moody‟s Investors Service(Moody‟s), that are recognized by BNM in its calculation of credit risk weighted assets forcapital adequacy purposes. The Bank applies the use of external ratings for capital
adequacy purposes on a consistent basis as stipulate in BNM‟s Capital Adequacy
Framework (Basel II – Risk-weighted Assets).

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018
In addition, CCBM uses internal rating model which is the Credit Risk Rating system toassist with the credit decision process. The Credit Risk Rating system has been developed
by CCB HO and is used across its global operations. It uses a combination of quantitativeand qualitative measures to determine the applicant‟s credit rating.

Page 20 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

6.1 Disclosure on Credit Risk: Disclosure on risk weights under Standardised Approach
30 June 2018

Risk
Weights

0%
20%
35%
50%
75%
100%
150%
Average
Risk
Weights
Deduction
from
CapitalBase

Sovereigns &Central Banks(RM‟000)
359,377--

Exposures after Netting and Credit Risk Mitigation
Banks,
Corporates Regulatory
Residential
development
Retails
mortgages
financial
institutions& MDBs(RM‟000)(RM‟000)
53,871
164,552
1,794,604-

1,088,637
190,436---(RM‟000)

Other
assets(RM‟000)
-

-

-

-

(RM‟000)
11,687-

Total
Exposures
after Netting&
Credit Risk
Mitigation(RM‟000)
413,248
1,088,637
354,988
1,806,291
3,663,164

Total Risk Weighted
Assets(RM‟000)
217,727
177,495
1,808,393
2,201,513-

Page 21 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

6.1 Disclosure on Credit Risk: Disclosure on risk weights under Standardised Approach (continued)
31 December 2017

Risk
Weights

0%
20%
35%
50%
75%
100%
150%
Average
Risk
Weights
Deduction
from
CapitalBase

Sovereigns &Central Banks(RM‟000)
467,419--

Exposures after Netting and Credit Risk Mitigation
Banks,
Corporates Regulatory
Residential
development
Retails
mortgages
financial
institutions& MDBs(RM‟000)
916,580
145,722-(RM‟000)
86,585
170,617
1,089,504---(RM‟000)

Other
assets(RM‟000)
-

-

-

-

(RM‟000)
26,368-

Total
Exposures
after Netting&
Credit Risk
Mitigation(RM‟000)
554,004
916,580
316,339
1,115,872
2,902,795

Total Risk Weighted
Assets(RM‟000)
183,316
158,170
1,115,872
1,457,358-

Page 22 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

6.2 Rated Exposures according to Ratings by ECAIs
30 June 2018
Exposure Class
Moodys
S&P
Fitch

Ratings of Sovereigns and Central Banks by approved ECAIs
Aaa to Aaa3
A1 to A3
Baa1 to Baa3
Ba1 to B3
Caa1 toC
AAA to AAA+ to ABBB+ to BBBBB+ to BCCC+ to
D
AAA to AAA+ to ABBB+ to BBBBB+ to BCCC+ to
D(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)

Unrated
Unrated
Unrated(RM’000)

On and Off Balance Sheet Exposures
Sovereigns/Central Banks-

359,377

-

-

-

-

Total

-

359,377

-

-

-

-

Page 23 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

6.2 Rated Exposures according to Ratings by ECAIs (continued)
30 June 2018
Exposure Class
Moodys
S&P
Fitch
RAM
MARC

Ratings of Banking Institutions and Corporate by approved ECAIs
Aaa
to A1 to A3
Baa1 to Baa3
Ba1
to Caa1 to C
Aaa3
B3
AAA to AA- A+ to ABBB+ to BBBBB+ to B- CCC+ to D
AAA to AA- A+ to ABBB+ to BBBBB+ to B- CCC+ to D
AAA to AA3 A to A3
BBB+ to BBBBB1
to C1 to D
B3
AAA to AA- A+ to ABBB+ to BBBBB+ to B- C+ to D
(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)

Unrated
Unrated
Unrated
Unrated
Unrated(RM’000)

On and Off Balance Sheet Exposures
Banks, MDBs and FDIs

865,332

68,981

344,760

-

-

-

Total

865,332

68,981

344,760---

Page 24 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

6.2 Rated Exposures according to Ratings by ECAIs (continued)
30 June 2018
Exposure Class
Moodys
S&P
Fitch
RAM
MARC

Ratings of Banking Institutions and Corporate by approved ECAIs
Aaa
to A1 to A3
Baa1 to Baa3
Ba1
to Caa1 to
Aaa3
B3
C
AAA to AA- A+ to ABBB+ to BBBBB+ to B- CCC+ to
D
AAA to AA- A+ to ABBB+ to BBBBB+ to B- CCC+ to
D
AAA to AA3 A to A3
BBB+ to BBBBB1
to C1 to D
B3
AAA to AA- A+ to ABBB+ to BBBBB+ to B- C+ to D
(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)

Unrated
Unrated
Unrated
Unrated
Unrated(RM’000)

On and Off Balance Sheet Exposures
Corporates

41,162----

1,971,865

Total

41,162----

1,971,865

Page 25 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

6.2 Rated Exposures according to Ratings by ECAIs (continued)
31 December 2017
Exposure Class
Moodys
S&P
Fitch

Ratings of Sovereigns and Central Banks by approved ECAIs
Aaa
to A1 to A3
Baa1 to Baa3
Ba1
to Caa1 to C
Aaa3
B3
AAA to AA- A+ to ABBB+ to BBBBB+ to B- CCC+ to D
AAA to AA- A+ to ABBB+ to BBBBB+ to B- CCC+ to D
(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)

Unrated
Unrated
Unrated(RM’000)

On and Off Balance Sheet Exposures
Sovereigns/Central Banks-

467,419

-

-

-

-

Total

-

467,419

-

-

-

-

Page 26 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

6.2 Rated Exposures according to Ratings by ECAIs (continued)
31 December 2017
Exposure Class
Moodys
S&P
Fitch
RAM
MARC

Ratings of Banking Institutions and Corporate by approved ECAIs
Aaa to Aaa3
A1 to A3
Baa1 to Baa3
Ba1 to B3
Caa1 to C
AAA to AAA+ to ABBB+ to BBBBB+ to BCCC+ to D
AAA to AAA+ to ABBB+ to BBBBB+ to BCCC+ to D
AAA to AA3
A to A3
BBB+ to BBBBB1 to B3
C1 to DAAA to AAA+ to ABBB+ to BBBBB+ to BC+ to D
(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)

Unrated
Unrated
Unrated
Unrated
Unrated(RM’000)

On and Off Balance Sheet Exposures
Banks, MDBs and FDIs

256,011570,096

236,195

-

-

-

Total

256,011570,096

236,195---

Page 27 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

6.2 Rated Exposures according to Ratings by ECAIs (continued)
31 December 2017
Exposure Class
Moodys
S&P
Fitch
RAM
MARC

Ratings of Banking Institutions and Corporate by approved ECAIs
Aaa to Aaa3 A1 to A3
Baa1 to Baa3
Ba1 to B3
Caa1 to C
AAA to AAA+ to ABBB+ to BBBBB+ to BCCC+ to D
AAA to AAA+ to ABBB+ to BBBBB+ to BCCC+ to D
AAA to AA3 A to A3
BBB+ to BBBBB1 to B3
C1 to DAAA to AAA+ to ABBB+ to BBBBB+ to BC+ to D
(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)

Unrated
Unrated
Unrated
Unrated
Unrated(RM’000)

On and Off Balance Sheet Exposures
Corporates

-

-

-

-

-

1,346,705

Total

-

-

-

-

-

1,346,705

Page 28 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

7.0 Credit Risk Mitigation
The Bank has established sound internal processes and procedures that support reliablevaluation, adequate monitoring of the collateral‟s allocation and utilization, and timely
liquidation, marketability as well as identify any potential encumbrances in securing control
over the collateral. All processes and procedures are reviewed at least annually.
Credit risk identified during the risk identification process must be adequately mitigated tocontrol the risk of loss. CCBM established a few methods in order to mitigate credit risks,such as lending criteria, collateral acceptance criteria, limits setting and loan covenants.
The repayment ability of the borrower is of paramount importance. The acceptance of
acceptable collateral/securities must never be regarded as a substitute for repayment ability
and collaterals are taken as secondary source of repayment in case counterparty cannot
meet its contractual obligations.
The acceptable collaterals/securities for CCBM are, but not limited to,•
Cash security•
Freely tradable Malaysia Quoted Shares•
Freely tradeable Malaysia Government Securities•
Freely tradeable Corporate Bonds•
Residential, Commercial or Industrial Property•
Plant and machineries•
Motor vehicles, planes and vessel
Financing or loan may also be granted by the Bank on clean basis if the customer risk profileis acceptable within the risk appetite of the Bank.
Guarantee support
Guarantee support is accepted as risk mitigating measure to improve the risk profile of theborrower and to mitigate inherent risk. The Bank ensures proper assessment on thecorrelation between the value of collateral and the strength of the guarantor, vis-à-vis thecreditworthiness of the original counterparty.
Guarantees that are recognised by the Bank include personal guarantee, corporate
guarantee and bank guarantee. The strength of the guarantor is subject to the financial
standing and internal credit rating model. The Bank has in place sound and well-defined
credit acceptance criteria for the guarantee support.

Page 29 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

7.0 Credit Risk Mitigation (continued)
Loan structuring techniques to mitigate identified credit risks
Apart from the collateral requirement and guarantee support, the Bank emphasizes soundstructuring techniques to fulfil the financing requirements of the borrower while
simultaneously attempting to protect the Bank against loss resulting from the failure of theborrower in repayment. These include but not limited to loan/financing covenant, repayment
schedule and the type of loan.
Simple Approach
CCBM adopts Simple Approach within the banking book on a consistent basis in granting
credit facilities to customers. As at the reporting date, the main types of collateral obtained tomitigate credit risks are in the form of cash deposit and bank guarantee.
In applying the credit risk mitigation, CCBM adopts clear and robust procedures for timely
liquidation of collateral to ensure it meets minimum conditions for the Recognition of Credit
Risk Mitigation Techniques, as guided by the BNM‟s guideline “Capital Adequacy
Framework (Basel II – Risk-Weighted Assets)”.

7.1 Disclosure on Credit Risk Mitigation
The tables below illustrates the credit mitigation condition,
30 June 2018
Exposure Class

Gross Exposure
before CRM(RM’000)
Credit Risk
On-Balance Sheet
Exposure
Sovereigns/Central
Banks
Banks, development
financial institutions
and MDBs
Corporates

Exposurescovered byguarantees/creditderivatives(RM’000)

Exposurescovered byeligible financial
collateral

Exposurescovered byother eligible
collateral(RM’000)(RM’000)

359,377---

1,195,660---

1,865,340

164,552

42,077

Page 30 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

7.0 Credit Risk Mitigation (continued)
Exposure Class

Gross Exposure
before CRM(RM’000)
Credit Risk
Regulatory retails
Residential
mortgages
Higher risk assets
Other assets
Specialised
Financing/Investment
Equity exposures
Securitisation
exposures
Defaulted exposures
Total On-Balance
Sheet exposure
Off-Balance sheet
exposure
OTC derivatives
Credit derivatives
Off-balance sheet
exposures other thanOTC derivatives or
credit derivatives
Defaulted exposures
Total Off-Balance
Sheet exposure
Total On and Off
balance sheet
exposure

Exposurescovered byguarantees/creditderivatives(RM’000)

Exposurescovered byeligible financial
collateral

Exposurescovered byother eligible
collateral(RM’000)(RM’000)

-

-

-

-

11,687
-

-

-

-

-

-

-

-

-

-

-

-

3,432,064

164,552

42,077-39,655
191,445-

11,793

-

-

-

-

-

231,100-

11,793-

3,663,164

164,552

53,870-Page 31 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

7.0 Credit Risk Mitigation (continued)
31 December 2017
Exposure Class

Gross Exposure
before CRM(RM’000)
Credit Risk
On-Balance Sheet
Exposure
Sovereigns/Central
Banks
Banks, development
financial institutions
and MDBs
Corporates
Regulatory retails
Residential
mortgages
Higher risk assets
Other assets
Specialised
Financing/Investment
Equity exposures
Securitisation
exposures
Defaulted exposures
Total On-Balance
Sheet exposure
Off-Balance sheet
exposure
OTC derivatives
Credit derivatives
Off-balance sheet
exposures other thanOTC derivatives or
credit derivatives
Defaulted exposures
Total Off-Balance
Sheet exposure
Total On and Off
balance sheet
exposure

Exposurescovered byguarantees/creditderivatives(RM’000)

Exposurescovered byeligible financial
collateral

Exposurescovered byother eligible
collateral(RM’000)(RM’000)

467,419---994,523---

1,203,815-

170,617-

68,903--26,368
-

-

-

-

-

-

-

-

-

-

-

-

2,692,125

170,617

68,903-27,073
183,597-

4,664
13,017

-

-

-

-

-

210,670-

17,681-

2,902,795

170,617

86,584-

Page 32 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

8.0 Off-balance sheet exposures and counterparty credit risk (CCR)
Off-Balance sheet exposures are granted according to counterparty credit limit granted. In
the event where credit limit is insufficient or not granted, the Bank will require counterparty toprovide collateral, typically cash.
Off-Balance Sheet exposures of the Bank are mainly composed of the following: Bank Guarantee and Standby Letter of Credit Documentary Letter of Credit Commitments to extend credit including the unutilized or undrawn portion of credit
facilities Derivative financial instruments e.g. FX contracts
To mitigate the CCR, the creditworthiness of the counterparty is thoroughly assessed,
coupled with the establishment and monitoring of credit limits for counterparty credit
exposure that are in line and consistent with CCBM‟s overall credit risk strategy and appetite.
However, the Bank engages in netting and margining agreements with major trading
counterparties to mitigate CCR. Under these agreements CCBM levies on collateral (cashonly) from counterparty whenever the exposures exceed the threshold.
Off-balance sheet and CCR – 30 June 2018
Description

Principal
AmountGross
Positive Fair
Value ofContracts(RM’000)(RM’000)

CreditEquivalent
AmountRisk
Weighted
Assets(RM’000)(RM’000)

Direct credit substitutes
Transaction related
contingent items
Short term self-liquidating
trade related contingencies

10,308

-

2,062

2,062

Foreign exchange related
contracts
One year or lessOver one year to five years
Over five years

2,163,722-

19,077-39,655-

6,694-Interest/Profit rate related
contracts
One year or lessOver one year to five years
Over five years

-

-

-

-

-

-

-

-

-

-

-

-

Equity related contracts
One year or lessOver one year to five years

Page 33 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018
Description

Principal
AmountGross
Positive Fair
Value ofContracts(RM’000)(RM’000)

CreditEquivalent
AmountRisk
Weighted
Assets(RM’000)(RM’000)

Over five years

-

-

-

-

Credit Derivatives contracts
One year or lessOver one year to five years
Over five years

-

-

-

-

-

-

-

-

27,526

-

5,505

5,505

Other commitments, such asformal standby facilities andcredit lines, with an original
maturity of over to one year

367,756-

183,878

161,280

Any commitments that areunconditionally cancelled at
any time by the bank without
prior notice or that effectively
provide for automatic
cancellation due todeterioration in a borrower’s
creditworthiness

70,116---

Unutilised credit card lines

-

-

-

-

Off-balance sheet items forsecuritisation exposures

-

-

-

-

Off-balance sheet exposuresdue to early amortization
provisions

-

-

-

-

2,639,428

19,077

231,100

175,541

OTC derivative transactions
and credit derivatives
contracts subject to valid
bilateral netting agreements
Other commitments, such asformal standby facilities andcredit lines, with an original
maturity of up to one year

Total

Page 34 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018
Off-balance sheet and CCR – 31 December 2017
Description

Principal
AmountGross
Positive Fair
Value ofContracts(RM’000)(RM’000)

CreditEquivalent
AmountRisk
Weighted
Assets(RM’000)(RM’000)

Direct credit substitutes
Transaction related
contingent items
Short term self-liquidating
trade related contingencies

61,390-12,2781,590

Foreign exchange related
contracts
One year or lessOver one year to five years
Over five years

1,728,996-

14,222-

27,073-

6,694-

Interest/Profit rate related
contracts
One year or lessOver one year to five years
Over five years

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Equity related contracts
One year or lessOver one year to five years
Over five years
Credit Derivatives contracts
One year or lessOver one year to five years
Over five years
OTC derivative transactions
and credit derivatives
contracts subject to valid
bilateral netting agreements

Page 35 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

8.0 Off-balance sheet exposures and counterparty credit risk (CCR) (continued)
Off-balance sheet and CCR – 31 December 2017
Description

Principal
AmountGross
Positive Fair
Value ofContracts

CreditEquivalent
AmountRisk
Weighted
AssetsOther commitments, such asformal standby facilities andcredit lines, with an original
maturity of up to one year

39,534

-

7,907

5,494

Other commitments, such asformal standby facilities andcredit lines, with an original
maturity of over to one year

326,825-

163,412140,507

Any commitments that areunconditionally cancelled at
any time by the bank without
prior notice or that effectively
provide for automatic
cancellation due todeterioration in a borrower’s
creditworthiness

152,694---

Unutilised credit card lines

-

-

-

-

Off-balance sheet items forsecuritisation exposures

-

-

-

-

Off-balance sheet exposuresdue to early amortization
provisions

-

-

-

-

2,309,439

14,222

210,670

154,285

Total

9.0 Securitisation
The Bank does not engage in securitisation activities.

Page 36 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 201810.0 Market Risk

Identification

Assessment

Identify market risks within existing andnew products

Daily mark-to-market and annual loss limit

Mitigation

 Maximum position limit Dollar value 01 (DV01) limit
 Maximum tenure limit

Monitoring

Reporting and review

Market risk is the risk of loss in respect of the Bank‟s on- and off- balance sheet activities
arising from adverse movements in market rates including interest rates, foreign exchange
rates, commodity prices and stock prices. Market risk arises from both trading and nontrading business.
The MRMC is responsible for leading the establishment of market risk management policies
and rules, developing market risk measurement tools, monitoring and reporting the market
risk. In addition, the Assets and Liabilities Committee (ALCO) is responsible for managing
interest rate risk, exchange rate risk and the size and structure of the Bank‟s assets andliabilities in response to structural market risk.
The Bank‟s interest rate risk mainly comprises repricing risk and basis risk arising frommismatch of term structure and pricing basis of assets and liabilities. The Bank uses multiple
tools such as repricing gap analysis, sensitivity analysis, scenario analysis and stress testing,
etc to monitor the interest rate risk on regular basis.
The Bank‟s foreign exchange exposure mainly comprises exposures from customers driven
portfolios and manages this risk by entering into back-to-back transactions with other banks
and non-bank financial institutions.
The BOD has the ultimate responsibility to ensure that market risks are properly governedand managed within CCBM, as well as deciding on the overall framework for management
and controlling market risks. The ALCO and RMC are responsible in reviewing thedevelopment of market risk management policies, defining the strategies and ensuring theresults are align with the Bank‟s business strategies.
Page 37 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 201810.0 Market Risk (continued)
The RMD plays a key role in supporting and guiding the business units in the implementationof CCBM‟s market risk management policy and tools, particularly in promoting andinculcating market risk awareness culture across the Bank.
Financial Markets Division is responsible for daily managment of the interest rate and foreign
currency position of CCBM within the predetermined limits and is responsible for initiating all
required hedging transactions. The internal audit office is responsible to provide ongoing
focus on the internal control system and periodic reviews, i.e. regular review of the market
risk management processes, in compliance with approved policies.
Among the methods adopted in the monitoring and management of market risk is portfolio
analysis, limits setting, open positions monitoring and stress testing. Any anomalies
observed will be discussed with the front office and where relevant escalated to Senior
Management for exception management.
For capital requirement, the Bank has adopted the Standardised Approach.
Capital Charge Requirement
for:Interest rate risk
Equity position risk
Foreign exchange risk
Commodity risk
OthersTotal RWA for Market Risk

Capital Charge Requirement
for:Interest rate risk
Equity position risk
Foreign exchange risk
Commodity risk
OthersTotal RWA for Market Risk

30 June 2018 (RM‟000)
741
845
19,83531 December 2017 (RM‟000)
1,356
389
21,81611.0 Liquidity risk
Liquidity risk is the risk that occurs when the Bank cannot obtain sufficient funds in time andat a reasonable cost to repay debts when they are due, fulfil other payment obligations, ormeet the other funding needs in its regular business.

Page 38 of 42

CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

11.0 Liquidity risk (continued)
The Bank‟s objective for liquidity risk management is to ensure the Bank‟s payment andsettlement security and maintain an optimal balance between liquidity position andprofitability.
The Bank‟s ALCO takes the lead in managing the Bank‟s liquidity risks and works alongsideprimarily with Financial Markets Division to ensure proper execution of liquidity risk
management actions. ALCO is responsible to ensure the formulation of liquidity risk
management guidelines including limit management and contingency planning. Stresstesting are conducted periodically to gauge the Bank‟s risk tolerance in adverse situations
including extreme scenarios. The Bank uses a variety of liquidity risk measurement tools
including liquidity coverage ratio (“LCR”), cashflow analysis, remaining contractual maturities
and deposits concentration analysis

12.0 Operational Risk
Operational risk is the risk of loss due to inadequate or flawed internal processes, people,
systems or external events. Operational risk is inherent in each of the Bank‟s business andoperational activities.
The MRMC is responsible to develop the operational risk management policies, frameworkand methodologies, and put in place operational risk management tools such as Key Risk
Indicators, and incident and loss event management. The Bank adopts the 3-lines ofdefence model for holistic oversight operational risk oversight.
The Bank carries out periodical risk and business impact analysis through its material risk
assessment and established its Business Continuity and Disaster Recovery plans which are
subject to regular testing.
The Bank has established risk appetite to monitor and control operational risk lapses
including those related to system availability.
The BOD is responsible for the management of all risks of CCBM including any operationalrisk that arises and ensure that operational risks are properly governed and managed within
CCBM. The BRMC is responsible for, and provides the overall direction and supervision forthe operational risk management of CCBM. Senior Management is responsible to ensurethat all necessary risk management tools, methodologies, policies, operational manuals andtechnology infrastructure are in place and applied through the combination of top-down andbottom-up approach in risk identification and assessment methodologies.
The RMD plays a key role in supporting and guiding the business/ support units in theimplementation of CCBM‟s operational risk management policy and tools, particularly inpromoting and inculcating operational risk awareness culture across the Bank. Regular
operational risk reporting is submitted to Senior Management and BOD on timely basis.

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 201812.0 Operational Risk (continued)
The internal audit office is responsible to provide ongoing focus on the internal control
system and periodic reviews, i.e. regular review of the operational risk management
processes, in compliance with approved policies, applicable laws and regulation. The review
by internal audit must include an assessment of the effectiveness of risk management
activities undertaken by business and functional lines and bank wide operational risk
management function.
The Bank currently adopts Basic Indicator Approach (BIA) for the computation of Operational
Risk is in line with BNM‟s guidelines.

13.0 Interest Rate Risk in the Banking Book
Interest rate risk in the Banking Book (IRRBB) is the risk to earnings or capital arising frommovement of interest rates. In order to maintain interest rate risk at prudent level, it isessential for CCBM to maintain an effective measurement system.
The Bank‟s Interest Rate Risk is managed through the Board Risk Management Committee
which is developing risk management strategies and policies, monitoring the implementationand evaluating the Bank‟s overall risk profile on a regular basis.
The Senior Management is responsible for establishing the Interest rate risk framework andprovides input to assist the BOD in discharging its oversight responsibilities. Management
Committees i.e. Assets and Liabilities Committee (“ALCO”) and the Management Risk
Management Committee (“MRMC”) reviewed the development of risk management policies,
defining the strategies and ensuring the risk management results are aligns with the Bank‟sbusiness strategies.
In monitoring the Bank‟s earnings resulting from interest rate risk framework, the Bank‟sused the re-pricing gap analysis as the primary tool. The rate sensitive assets and liabilities
are compared based on the re-price dates. The monitoring is focused on the risk arises ifinterest rates are settled on liabilities for periods which differ from those on offsetting assets.
In addition, the Bank‟s also monitoring the re-pricing risk arise from timing differences in thematurity for fixed-rate and repricing for floating-rate bank assets, liabilities and off-balancesheet positions.
The primary tool is also used to monitor the interest rate risk impact on the net assets value
is the economic value of equity (EVE) analysis.
Interest rate risk in the banking book is computed based on the projection made with theassumption that interest rate moves up and down parallel by 100 basis points (“bps”) acrossall maturities buckets for all the interest bearing assets and liabilities. The loan profile wasprojected based on earlier of its repricing or final maturity date.

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 201813.0 Interest Rate Risk in the Banking Book (continued)
30 June 2018
Currency

MYR
USD
CNY
EUR

Increase/ (Decrease) in Economic
Value+100 bps-100 bps
RM „000
RM „000
6,139(6,139)
249
(249)
(80)
80
-

Total

6,308

(6,308)

Increase/ (Decrease) in Earnings+100 bps
RM „000
5,155
(456)
671
1

-100 bps
RM „000(5,155)
456
(671)
(1)

5,371

(5,371)31 December 2017
Currency

MYR
USD
CNY
Total

Increase/ (Decrease) in Economic
Value+100 bps-100 bps
RM „000
RM „000
172
(172)
246
(246)
(1,193)
1,193
(775)

775

Increase/ (Decrease) in Earnings+100 bps
RM „000
7,878
129
(143)

-100 bps
RM „000(7,878)
(129)
143

7,864

(7,864)14.0 Internal Capital Adequacy Assessment Process (“ICAAP”)
ICAAP is a Pillar 2 process where CCBM conducts internal capital adequacy requirements
under 3-year forward looking scenarios. The Bank‟s ICAAP is guided by the ICAAP manual
detailing the roles and responsibilities, approaches, and methodologies for identifying andmeasuring risks. Stress testing, governance and capital planning are also part of the process.
In addition, an independent party is appointed to review the process.
The stress testing scenarios are baseline, exceptional but plausible and worst case. These
scenarios incorporate the Bank 3 year business plan and forward looking macro-economic
conditions. This exercise enables the Bank to have an insight into its risk profile and allows it
to implement mitigation measures. ICAAP is conducted annually.

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CHINA CONSTRUCTION BANK (MALAYSIA) BERHAD(Company No. 1203702-U)(Incorporated in Malaysia)
PILLAR 3 DISCLOSURE
30 JUNE 2018

CHIEF EXECUTIVE OFFICER ATTESTATION
In accordance with Bank Negara Malaysia‟s Risk Weighted Capital Adequacy Framework(Basel II) – Disclosure Requirements (Pillar 3), I hereby attest that to the best of myknowledge, the disclosures contained in China Construction Bank (Malaysia) Berhad Pillar 3
Disclosure report for the financial period ended 30 June 2018 are consistent with the manner
the Bank assesses and manages its risk, accurate, complete and not misleading in any
particular way.

Felix Feng Qi
Chief Executive Officer
Date:

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