KENANGA ANNUAL REPORT 2018

NOTES TO THE FINANCIAL STATEMENTS 31 December 2018 145 ANNUAL REPORT 2018 3. ACCOUNTING POLICIES (CONT’D.) 3.4 Summary of significant accounting policies (cont’d.) (k) Impairment of financial assets (cont’d.) (Policy applicable from 1 January 2018) (cont’d.) (ix) Forborne and modified loans The Group and the Bank sometimes make concessions or modifications to the original terms of loans as a response to the borrower’s financial difficulties, rather than taking possession or otherwise enforce collection of collateral. The Group and the Bank consider a loan forborne when such concessions or modifications are provided as a result of the borrower’s present or expected financial difficulties and the Group and the Bank would not have agreed to them if the borrower had been financially healthy. Indicators of financial difficulties include defaults on covenants, or significant concerns. Forbearance may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated, any impairment is measured using the original EIR as calculated before the modification of terms. It is the Group’s and the Bank’s policy to monitor forborne loans to help ensure that future payments continue to be likely to occur. The Group’s and the Bank’s policy is to monitor forborne loans to help ensure that future payments continue to be likely to occur. Derecognition decisions and classification between Stage 2 and Stage 3 are determined on a case-by-case basis. If these procedures identify a loss in relation to a loan, it is disclosed and managed as an impaired Stage 3 forborne asset until it is collected or written off. From 1 January 2018, when the loan has been renegotiated or modified but not derecognised, the Group and the Bank also reassess whether there has been a significant increase in credit risk, as set out in Note 50(a). The Group and the Bank also consider whether the assets should be classified as Stage 3. Once an asset has been classified as forborne, it will remain forborne for a minimum 6 months probation period. In order for the loan to be reclassified out of the forborne category, the customer has to meet all of the following criteria: • All of its facilities have to be considered performing; • The probation period of half year has passed from the date the forborne contract was considered performing; • Regular payments of more than an insignificant amount of principal or interest have been made during at least half of the probation period; and • The customer does not have any contract that is more than 30 days past due.