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FINANCIAL REPORTS
181
Bursa Malaysia •
Annual Report 2015
NOTES TO THE
FINANCIAL STATEMENTS
31 DECEMBER 2015
36. Financial risk management objectives and policies (cont’d.)
(d) Liquidity risk (cont’d.)
(ii) Clearing and settlement related risk
The clearing house subsidiaries of the Group acts as a counterparty to eligible trades concluded on the securities and derivatives markets
through the novation of obligations of the buyers and sellers. The Group mitigates this exposure by establishing financial criteria for
admission as participants, monitoring participants’ position limits and requiring that margins and collaterals on outstanding positions be
placed with the clearing houses. CGF and DCF, as disclosed in Note 26(d), were set up to further mitigate this risk.
The liabilities and corresponding assets in relation to clearing and settlement risk as at the financial year end are shown below:
On demand
Group
Note
2015
2014
RM’000
RM’000
Current assets
Cash for trading margins and security deposits
22
1,083,886
715,815
Cash and bank balances of Clearing Funds:
- Participants’ contribution
23
35,568
36,261
Current liabilities
Trade payables
(1,083,886)
(715,815)
Participants’ contribution to Clearing Funds
(35,568)
(36,261)
-
-
(e) Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group and
the Company are exposed to credit risk primarily from investment securities, staff loans receivable, trade receivables, other receivables which
are financial assets, and cash and bank balances with financial institutions.
As at the current and previous financial year ends, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying
amount of each class of financial assets recognised in the statements of financial position.
For investment securities and cash and bank balances with financial institutions, the Group and the Company minimise credit risk by adopting
an investment policy which allows dealing with counterparties with good credit ratings only. Receivables are monitored to ensure that exposure
to bad debts are minimised.