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

Risk-Weighted Capital Adequacy Framework (Basel II)
Pillar 3 Disclosure as at 30 June 2017

Table of Contents
1.0 Introduction ............................................................................................................................................ 1
2.0 Scope of Application .............................................................................................................................. 1
3.0 Capital ..................................................................................................................................................... 1
3.1 Capital Adequacy ................................................................................................................................. 1
3.2 Capital Structure .................................................................................................................................. 3
4.0 Risk Management................................................................................................................................... 4
5.0 Credit Risk ............................................................................................................................................... 4
5.1 Geographical Analysis .......................................................................................................................... 6
5.2 Industry/Sector Analysis ....................................................................................................................... 7
5.3 Maturity Analysis (Residual Contractual Maturity) ............................................................................... 8
5.4 Impaired loans and impairment provision by economic sector ............................................................ 8
5.5 Impaired loans and impairment provision by geographical area .......................................................... 9
5.6 Reconciliation of changes to loan impairment provisions ................................................................... 10
6.0 Credit Rating ......................................................................................................................................... 10
6.1 Disclosure on Credit Risk: Disclosure on risk weights under Standardised Approach .................. 11
6.2 Rated Exposures according to Ratings by ECAIs.................................................................................. 12
7.0 Credit Risk Mitigation........................................................................................................................... 14
7.1 Disclosure on Credit Risk Mitigation ................................................................................................... 14
8.0 Off-balance sheet exposures and counterparty credit risk (CCR) ...................................................... 16
9.0 Market Risk........................................................................................................................................... 18
10.0 Operational Risk ................................................................................................................................. 18
11.0 Interest Rate Risk in the Banking Book ............................................................................................. 19

1.0 Introduction
In pursuant to the requirements of the Bank Negara Malaysia’s (“BNM”) Risk-Weighted Capital
Adequacy Framework (“RWCAF”), the banking institutions are required to make available Pillar 3
disclosure for financial reporting twice a year (i.e. semi-annual and annual), which is equivalent to theBasel II issued by the Basel Committee on Banking.
China Construction Bank (Malaysia) Berhad (“CCBMY” or “The Bank”) adopts the Standardised Approach(“SA”) in computing the capital requirement for credit risk and market risk while adopting Basic Indicator
Approach (“BIA”) in computing the operational 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 is computed based on the fixed
percentage over average gross income.

2.0 Scope of Application
CCBMY is a wholly-owned subsidiary of China Construction Bank, Corporation., China (“CCB”). The Bankis mainly engaged in commercial banking and related financial services in Malaysia. The Bank does notoffer Islamic financial services nor involved in Islamic banking operations.
The Bank’s Pillar 3 Disclosures information have been reviewed by the independent party, i.e. internal
auditors and certified by the Bank’s Chief Executive Officer.

3.0 Capital
A revised guidelines on the Capital Adequacy Framework (Capital Components) was issued by the BNM
on 13 October 2015 and CCBMY’s capital management is guided by the guidelines which sets out theminimum policies and procedures that the Bank is required to put in place.
The Bank adopts a practical and more forward-looking capital management approach, aims to ensurethat the Bank has adequate capital to support their operations at all times. In order to further
strengthen the capital position of CCBMY though a progressive and systematic building up of the reserve
fund, CCBMY has established an Internal Capital Target (“ICT”) and Management Action Trigger (“MAT”)
that is above the BNM CAR requirements. A Capital Management Policy has been put in place where
actions to be taken have been specified to address the capital adequacy issue in case the capital ratio
falls below the ICT and MAT ratios.
The Management is responsible to monitor closely the Bank’s capital adequacy and regulatory capital at
all times.

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 breakdownof RWA as of 30 June 2017.

Page 1 of 19

Before/after payment of dividends

30 June 2017

CET1 Ratio

139.595%

Tier 1 Capital Ratio

139.595%

Total Capital Ratio

140.197%

The risk-weighted asset (“RWA”) by exposures break down based on the following major risk category:
Risk Type

30 June 2017
Gross exposure/ EAD
before CRM

Net exposures/
EAD after CRM

Risk-weighted
AssetsCapitalrequirement at 8%(RM’000)(RM’000)(RM’000)(RM’000)

Credit Risk
On-balance sheet
exposure
Sovereigns & central
banks

134,092

134,092--

Banks, development
financial institutions &1
MDBs

718,354

718,354

143,671

11,494

Corporates

294,112272,664

271,058

21,685

Other assets

9,631

9,631

9,631

770

1,156,189

1,134,741

424,360

33,949OTC derivatives

10,245

6,795

1,359

109

Credit-related offbalance sheet
exposure

31,31913,046

12,402992

Total off-balance
sheet exposure

41,564

19,841

13,761

1,101

Total credit risk

1,197,753

1,154,582

Total on-balance
sheet exposure
Off-balance sheet
exposures

1

Multilateral Development Banks

Page 2 of 19

Gross exposure/ EAD
before CRM

Risk-weighted
Assets(RM’000)(RM’000)

Capitalrequirement at 8%(RM’000)

Market Risk

longpositionshort
positionInterest rate risk

1,129,416

749,699

6,087

487

10,576

93,79093,790

7,503

48,5053880

586,503

46,920Foreign currency risk
Operational Risk-

Total RWA and capitalrequirement-

3.2 Capital Structure
The bank’s total capital according to BNM’s Capital Adequacy Framework (Capital Components) are as
follows:
30 June 2017
(RM’000)
CET1 capital
Paid-up ordinary share capital
Retained profits (interim unaudited profits)
Minority interests in subsidiaries
Innovative instruments
Non-innovative instruments
Other reserves
Regulatory reserves
Unrealised gains and losses on ‘available-for-sale’ financial instruments
Less: Regulatory adjustments applied in the CET1 capital- Total gross value of other intangibles- 55% of cumulative gains of AFS financial instruments (other than loans/financing andreceivables)- Regulatory reserve attributable to loans, advances and financing

822,600
6,047

103(1,992)(57)(1,923)

Total CET1 Capital

818,731

Total Tier 1 Capital

818,731

Page 3 of 19

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

3,529
3,529
822,260

4.0 Risk Management
Risk management policies were established to understand the nature of the Bank’s risk profile and therisk drivers, aligned with the Bank’s business strategies and risk appetites.
The Board of Directors (“BOD”) is the principal board committee that oversees the Bank’s risk
management, in line with the Bank’s risk appetite. The BOD is supported by the Board Risk Management
Committee (“BRMC”) who is responsible for evaluating and assessing the adequacy of strategies tomanage the risk management associated with CCBMY’s activities.
The Senior Management is responsible for reviewing the risk management framework and provide input
to assist the BOD in discharging its oversight responsibilities. Management Committees i.e. Assets andLiabilities Committee (“ALCO”) and the Risk Management Committee (“RMC”) play a significant role inreviewing the development of risk management policies, defining the strategies and ensuring the risk
management results are align with the Bank’s business strategies.
The Internal Audit Department provides an independent review on Risk Management Framework and toevaluate the reliability and adequacy of risk management process and internal control of the Bank. The
Risk Management Division (“RMD”) provides support to the BOD and RMC on implementing andcoordinating the risk management policies. RMD is also responsible on continuously monitoring andreviewing the risk management reporting to ensure the Bank’s objectives are aligned to the current
business operating environment.
The Bank’s current capital structure is being developed to include other risks which align with the BNM’s
Internal Capital Adequacy Assessment Process (“ICAAP”) Pillar 2 requirement. The Pillar 2 aims to ensure
the Bank has adequate capital to support its banking operations at all times. The Bank has identified the
key risks and preventive controls have been put in place to mitigate those risks. 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”)

5.0 Credit Risk
Credit risk is the risk of financial loss to the Bank arising from customers’ or counterparties’ failure tofulfill their financial and contractual obligations in accordance with the agreed terms. It stems mainly

Page 4 of 19

from the Bank’s lending or financing, trade finance and its funding, investment and trading activities
from both on and off balance sheet transactions.
A loan is considered to be past due when the counterparty has failed to make a principal or interest
payment when contractually due, where Individual loan of more than 90 days past due is classified as
impaired and any other events occurred as per the policies. The classification of impairedloans/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 theestimated recoverable amount is lower than the net book value of the loan. Additionally, the Bank has
applied the Collective Impairment Provision (CIP) based on individual assessment. CIP is computed
based on customers’ probability of default (PD), Loss-given-default (LGD) and eligible collateral provided.
The BOD plays a crucial role in ensuring the proper oversight of the credit risk management in CCBMY, inline with the Bank’s capital strength, management expertise, risk appetite, business strategies andlending strategies. The BRMC assists the BOD in evaluating and assessing the adequacy of strategies tomanage the risk management associated with CCBMY’s activities. The BRMC is also responsible toreview and evaluate the credit products engaged by CCBMY to ensure that it is conducted within thestandards and policies set by the BOD.
The RMC is responsible in reviewing the development of credit risk management policies, defining thestrategies and ensuring the results are aligned with the Bank’s business strategies. The RMD constantly
monitor the credit limit and assess the risks within credit proposals, as well as preparing credit risk
management related reporting to BODs/management, Head Office and BNM as required.
The internal audit office is responsible to provide an ongoing focus on the internal control system andperiodic reviews, i.e. regular review of the credit risk management processes, in compliance withapproved policies.
The effective credit monitoring and review process is vital to ensure that CCBMY is current in its
understanding of the condition of its credit exposures via-a-vis its approved appetite and to facilitate
early identification of potential problem credits on a timely basis. All the credits will go through a review
process at least once a year. The RMD may initiate an ad-hoc review on any existing borrower if themarket conditions associated with the borrower change in a way that may affect the borrower’s risk
profile.
The main considerations in the credit assessment process are full credit risk evaluation on all credit
proposals, assessing credit approval process and assessing credit proposals based primarily on thestrength of the borrower’s repayment capacity (e.g. the purpose of credit and source of repayment, theintegrity and reputation of the borrower, the current risk profile, the borrower’s repayment history etc.).

Page 5 of 19

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 2017
Credit Exposure

Malaysia

UAE

Others(RM’000)(RM’000)(RM’000)

134,092--

724,585-1,852

Corporates

250,276

77,317-

Other assets

9,631

-

-

1,118,584

77,317

1,852

Sovereigns/Central Banks
Banks,
development
institutions and MDBs

Total

financial

Page 6 of 19

5.2 Industry/Sector Analysis
Distribution of exposures by industry/sector, broken down by the following gross credit exposures:
30 June 2017
Credit Exposure
SectorFinance, insurance, real estate andbusiness activities
Manufacturing
Construction
Wholesale and retail trade, andrestaurant and hotels
Government and government agencies
Education, health & others
Others
Total

Category
Sovereigns &Central Banks(RM’000)

Total

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

Corporates

Other assets(RM’000)(RM’000)(RM’000)

134,092

726,437--

860,529--

15,67020,217
136,990-

15,67020,217
136,990--

77,317-77,317--

77,399-9,631

77,3999,631

134,092

726,437

327,593

9,631

1,197,753

Page 7 of 19

5.3 Maturity Analysis (Residual Contractual Maturity)
Contractual maturity breakdown by the following types of gross credit exposures:
30 June 2017
Credit Exposure
Category
Sovereigns/Central
Banks
Banks, development
financial institutions
and MDBs
Corporates
Other assets

Up to one year
(RM’000)
35,070Maturity
1-5 years(RM’000)
99,022

726,437

Total

Total
> 5 years(RM’000)-(RM’000)
134,092--

726,437

116,3229,631

180,911-30,360-327,593
9,631

887,460

279,933

30,3601,197,754

5.4 Impaired loans and impairment provision by economic sectora) Impaired loans by sector
30 June 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 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--

Page 8 of 19c) Individual impairment provisions by sector
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

30 June 2017
(RM’000)--d) Collective impairment provisions by sector
30 June 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

143
418
313
731
1,606

5.5 Impaired loans and impairment provision by geographical area
30 June 2017
(RM’000)
Malaysia
UAE
Others
Total

1,293
313
1,606

Page 9 of 19

5.6 Reconciliation of changes to loan impairment provisions
30 June 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

1,606
1,606

6.0 Credit Rating
CCBMY uses 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 recognizedby BNM in its calculation of credit risk weighted assets for capital adequacy purposes in calculating thecredit risk-weighted assets. 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).
In addition, CCBMY uses internal rating model which is the Credit Risk Rating system to assist with thecredit decisioning process. The Credit Risk Rating system has been developed by the China Construction
Bank Head Office (CCB HO) and is used across its global operation. It uses a combination of quantitativeand qualitative measures to determine the applicant’s credit rating.

Page 10 of 19

6.1 Disclosure on Credit Risk: Disclosure on risk weights under Standardised Approach
30 June 2017
Risk Weights

Exposures after Netting and Credit Risk Mitigation
Sovereigns &Central Banks(RM’000)

Banks,
development
financial
institutions &MDBs

Corporates(RM’000)(RM’000)

Regulatory
Retails

Total Exposures

Residential
mortgages

Otherassetsafter Netting &Total Risk
Weighted Assets

Credit Risk
Mitigation(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)0%

134,092-

43,170---177,262-20%-

725,150

-

-

-

-

725,150

145,030

35%

-

-

-

-

-

-

-

-

50%

-

1,288

-

-

-

-

1,288

644

75%

-

-

-

-

-

-

-

-

100%

-

-

282,816

-

-

9,631

292,447

292,447

150%

-

-

-

-

-

-

-

-

1,196,147

438,121

Average Risk
Weights
Deductionfrom Capital
Base

-

-

-

-

-

-

Page 11 of 19

6.2 Rated Exposures according to Ratings by ECAIs
30 June 2017
Exposure Class

Ratings of Sovereigns and Central Banks by approved ECAIs
MoodysAaa to Aaa3

A1 to A3

Baa1 to Baa3

Ba1 to B3

Caa1 to C

Unrated

S&P

AAA to AA-

A+ to A-

BBB+ to BBB-

BB+ to B-

CCC+ to D

UnratedFitch

AAA to AA-

A+ to A-

BBB+ to BBB-

BB+ to B-

CCC+ to D

Unrated(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)

On and Off Balance Sheet Exposures
Sovereigns/Central Banks--

134,092

-

-

-

-

Total

-

-

134,092

-

-

-

-

Exposure Class

Ratings of Banking Institutions and Corporate by approved ECAIs
MoodysAaa to Aaa3

A1 to A3

Baa1 to Baa3

Ba1 to B3

Caa1 to C

Unrated

S&P

AAA to AA-

A+ to A-

BBB+ to BBB-

BB+ to B-

CCC+ to D

UnratedFitch

AAA to AA-

A+ to A-

BBB+ to BBB-

BB+ to B-

CCC+ to D

UnratedRAM

AAA to AA3

A to A3

BBB+ to BBB-

BB1 to B3

C1 to D

UnratedMARC

AAA to AA-

A+ to A-

BBB+ to BBB-

BB+ to B-

C+ to D

Unrated(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)

On and Off Balance Sheet Exposures
Banks, MDBs and FDIs-

609,015

117,422

-

-

-

-

Total

-

609,015

117,422

-

-

-

-

Page 12 of 19

Exposure Class

Ratings of Banking Institutions and Corporate by approved ECAIs
MoodysAaa to Aaa3

A1 to A3

Baa1 to Baa3

Ba1 to B3

Caa1 to C

Unrated

S&P

AAA to AA-

A+ to A-

BBB+ to BBB-

BB+ to B-

CCC+ to D

UnratedFitch

AAA to AA-

A+ to A-

BBB+ to BBB-

BB+ to B-

CCC+ to D

UnratedRAM

AAA to AA3

A to A3

BBB+ to BBB-

BB1 to B3

C1 to D

UnratedMARC

AAA to AA-

A+ to A-

BBB+ to BBB-

BB+ to B-

C+ to D

Unrated(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)(RM’000)

On and Off Balance Sheet Exposures
Credit Exposure (using Corporate Risk
Weights)
Corporates

-

-

-

-

-

-

327,593

Total

-

-

-

-

-

-

327,593

Page 13 of 19

7.0 Credit Risk Mitigation
Credit risk identified during the risk identification process must be adequately mitigated to control therisk of loss. CCBMY established a few methods in order to mitigate the credit risks, such as lending
criteria, collateral acceptance criteria, limits setting and loan covenants.
CCBMY 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 to mitigate credit risks arein the form of cash deposit and property.
In applying the CRM, CCBMY adopts clear and robust procedures for timely liquidation of collateral toensure 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
30 June 2017
Exposure Class

Gross Exposure
before CRM

Exposures coveredby guarantees/credit derivatives

Exposures coveredby eligible financial
collateral

Exposures coveredby other eligible
collateral(RM’000)(RM’000)(RM’000)(RM’000)

Credit Risk
On-Balance Sheet
Exposure
Sovereigns/Central
Banks

134,092---

Banks, development
financial institutions
and MDBs

718,354---

Corporates

293,520

21,448Regulatory retails

-

-

-

-

Residential
mortgages

-

-

-

-

Higher risk assets

-

-

-

-

9,631

-

-

-

Specialised
Financing/Investment

-

-

-

-

Equity exposures

-

-

-

-

Securitisation
exposures

-

-

-

-

Defaulted exposures

-

-

-

-

1,155,598-

21,448-Other assets

Total On-Balance
Sheet exposureExposure Class

Gross Exposure
before CRM

Exposures coveredby guarantees/credit derivatives

Exposures coveredby eligible financial
collateral

Exposures coveredby other eligible
collateral(RM’000)(RM’000)(RM’000)(RM’000)

Off-Balance sheet
exposure
OTC derivatives

10,245

-

3,450

-

-

-

-

-

Off-balance sheet
exposures other thanOTC derivatives or
credit derivatives

31,319-18,273-

Defaulted exposures

-

-

-

-

Total Off-Balance
Sheet exposure

41,564---

Total On and Off
balance sheet
exposure

1,197,162-

43,170-Credit derivatives

Page 15 of 19

8.0 Off-balance sheet exposures and counterparty credit risk (CCR)
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 theestablishment and monitoring of credit limits for counterparty credit exposure that are in line andconsistent with CCBMY’s overall credit risk strategy and appetite.
However, the Bank does levy on collateral (cash only) from counterparty and establish credit reserve foroff balance sheet transactions.
Off-balance sheet and CCR – 30 June 2017
Description

Principal
AmountGross Positive
Fair Value ofContracts

Credit Equivalent
AmountRisk Weighted
Assets(RM’000)(RM’000)(RM’000)(RM’000)

Direct credit substitutes

-

-

-

Transaction related contingent
items

-

-

-

69,251

13,850

1,598

10,245

1,359

Short term self-liquidating
trade related contingencies
Foreign exchange related
contracts
One year or less

776,118

3,185Over one year to five years

-

-

-

Over five years

-

-

-

Interest/Profit rate related
contracts---

One year or less

-

-

-

Over one year to five years

-

-

-

Over five years

-

-

-

Equity related contracts

-

-

-

One year or less

-

-

-

Over one year to five years

-

-

-

Over five years

-

-

-

Credit Derivatives contracts

-

-

-

One year or less

-

-

-

Over one year to five years

-

-

-

Over five years

-

-

-

-

Page 16 of 19

Description

Principal
AmountGross Positive
Fair Value ofContracts

Credit Equivalent
AmountRisk Weighted
Assets(RM’000)(RM’000)(RM’000)(RM’000)

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

6,542

-

1,308

664

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

32,322-

16,161

10,140

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

-

-

-

-

Unutilised credit card lines

-

-

-

-

Off-balance sheet items forsecuritisation exposures

-

-

-

-

Off-balance sheet exposuresdue to early amortization
provisions

-

-

-

-

41,564

13,761

Total

884,233

Page 17 of 19

9.0 Market Risk
Market risk is the risk of losses in on and off balance sheet positions arising from movement in market
prices. The Bank adopts Standardised Approach for market risk capital requirement and the current
market risk capital charge arises mainly from the Bank’s exposures to the foreign exchange risk.
Currently, CCBMY does not take any proprietary trading in trading book.
The BOD has the ultimate responsibility to ensure that market risks are properly governed and managed
within CCBMY, as well as deciding on the overall framework for management and controlling market
risks. The ALCO and RMC are responsible in reviewing the development of market risk management
policies, defining the strategies and ensuring the results are align with the Bank’s business strategies.
The RMD plays a key role in supporting and guiding the business units in the implementation of CCBMY’s
market risk management policy and tools, particularly in promoting and inculcating market risk
awareness culture across the Bank.
Financial Markets is responsible for daily management of interest rate, foreign currency position of
CCBMY within the predetermined limits and is responsible for initiating all required hedging transactions.
The internal audit office is responsible to provide an ongoing focus on the internal control system andperiodic reviews, i.e. regular review of the market risk management processes, in compliance withapproved 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 discussedwith 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

30 June 2017
(RM’000)
487
7,503
7,990

10.0 Operational Risk
Operational risk is defined as the risk of incurring losses arising from inadequate or failed internal
processes, people and systems or from external events. Operational risk is inherent in all activities,
products and services of CCBMY, and can transverse across multiple activities and business lines within
CCBMY.
The BOD is responsible for the management of all risks of CCBMY including any operational risk thatarises, and ensure that operational risks are properly governed and managed within CCMY. The BRMC isPage 18 of 19

responsible for, and provides the overall direction and supervision for the daily operational risk
management of CCBMY. Senior Management is responsible to ensure that all necessary risk
management tools, methodologies, policies, operational manuals and technology infrastructure are inplace and applied through the combination of top-down and bottom-up approach in risk identification
and assessment methodologies.
The RMD plays a key role in supporting and guiding the business/ support units in the implementation of
CCBMY’s operational risk management policy and tools, particularly in promoting and inculcating
operational risk awareness culture across the Bank.
The internal audit office is responsible to provide an ongoing focus on the internal control system andperiodic reviews, i.e. regular review of the operational risk management processes, in compliance withapproved policies, applicable laws and regulation. The review by internal audit must include anassessment of the effectiveness of risk management activities undertaken by business and functionallines and bank wide operational risk management function.
Operational risk is managed using key risk management tools and methodologies, such as incident
management and loss data collection, risk control self-assessment, key risk indicators and scenario
analysis to address identified major operational risks (e.g. internal fraud, external fraud, employment
practices and workplace safety, damage to physical assets, business disruptions and system failures etc.)
as stipulated by Bank of International Settlement (“BIS”). Adequate documentation on BusinessContinuity Management are in place to ensure the sustainability of CCBMY in the event of disaster.
The Bank currently adopts Basic Indicator Approach (BIA) for the computation of Operational Risk and isin line with BNM’s guidelines. Given the Bank’s operational model i.e. a single branch of operations, theBank has relatively less significant operational risk exposure; which is adequately managed with theexisting robust risk management framework and protected with the operation risk capital buffer under
Pillar 1.

11.0 Interest Rate Risk in the Banking Book
The projection made with the assumption that interest rate moves up and down parallel by 100 basis
points (“bps”) across all maturities buckets for all the interest bearing assets and liabilities. The loan
profile was projected based on earliest of its repricing or final maturity date.
Currency

MYR
USD
CNY
Total

Increase/ (Decrease) in Economic Value

Increase/ (Decrease) in Earnings+100 bps
RM ‘000
2,769
(701)

-100 bps
RM ‘000(2,769)701+100 bps
RM ‘000
6,769
1,513

-100 bps
RM ‘000(6,769)(1,513)(1,053)

1,053

(337)

337

1,015

(1,015)

7,944(7,944)

Page 19 of 19

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

Risk-Weighted Capital Adequacy Framework (Basel II) Pillar 3 Disclosure
as at 30 June 2017

CHIEF EXECUTIVE OFFICER ATTESTATIONI hereby attest that, in my opinion, China Construction Bank (Malaysia) Berhad’s Pillar 3
disclosure report for the financial period ended 30 June 2017 have been prepared inaccordance with the Bank Negara Malaysia’s Risk Weighted Capital Adequacy
Framework (Basel II) - Disclosure Requirements (Pillar 3) and are consistent with themanner the Bank assesses its risk, accurate and complete.

Feng Qi
Chief Executive Officer