KENANGA ANNUAL REPORT 2017

47. CAPITAL MANAGEMENT AND CAPITAL ADEQUACY Capital management The Bank maintains an actively managed capital base to cover risks inherent in the business. The adequacy of the Bank’s capital is monitored using, among other measures, the rules and ratios established by the Basel Committee on Banking Supervision and adopted by BNM in supervising the Bank. The primary objectives of the Bank’s capital management are to ensure that the Bank complies with regulatory capital requirements and the Bank maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholders’ value. The Bank manages its capital structure and makes adjustments to it in light of changes in the economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Bank may adjust the amount of dividend payments to its shareholders, return capital to its shareholder or issue capital securities. Nevertheless, it is under constant scrutiny of the Board. Capital adequacy The capital adequacy ratios of the Bank are computed in accordance with BNM’s revised Risk-Weighted Capital Adequacy Framework (“RWCAF”). The Bank has adopted the Standardised Approach for Credit Risk and Market Risk, and the Basic Indicator Approach for Operational Risk (Basel II). The minimum regulatory capital adequacy requirements for Common Equity Tier 1 (“CET 1”), Tier 1 and Total Capital are 4.5%, 6.0% and 8.0% of total risk weighted assets. (i) Components of Tier 1 and Tier 2 capital: Group Bank 2017 RM’000 2016 RM’000 2017 RM’000 2016 RM’000 The capital adequacy ratios of the Group and Bank are as follows: Before deducting proposed dividend: CET 1 capital ratio 29.898% 28.176% 28.390% 26.199% Tier 1 capital ratio 29.898% 28.176% 28.390% 26.199% Total capital ratio 30.102% 28.176% 28.390% 26.199% After deducting proposed dividend: CET 1 capital ratio 28.677% 27.295% 27.052% 25.250% Tier 1 capital ratio 28.677% 27.295% 27.052% 25.250% Total capital ratio 28.881% 27.295% 27.052% 25.250% CET 1 capital/Tier 1 capital Paid-up share capital 246,137 180,637 246,137 180,637 Share premium – 65,500 – 65,500 Retained earnings 520,345 47,857 513,726 20,209 Other reserves 124,984 591,962 174,300 636,160 Less: Goodwill (208,754) (208,754) (252,909) (252,909) Deferred tax assets (10,006) (9,841) (7,798) (7,554) Other intangibles (57,660) (58,168) (52,500) (52,500) Regulatory reserve (25,277) (23,929) (25,277) (23,929) Deduction in excess of Tier 2* (58,927) (65,313) (130,118) (116,876) Kenanga Investment Bank Berhad 31 December 2017 168 notes to the financial statements