KENANGA ANNUAL REPORT 2019

264 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2019 50. FINANCIAL RISK MANAGEMENT (CONT’D.) (a) Credit risk (cont’d.) (i) Internal Credit Risk Ratings The table below provides a mapping of the Group’s and the Bank’s internal credit risk grades to external ratings: Notches KIBB Obligor Rating External Rating Classification of Credit Risk Grade Description 1 AAA AAA Investment Grade Superior capacity to meet its financial obligation. 2 3 4 AA1 AA2 AA3 AA Strong capacity to meet its financial obligations. The entity is resilient against adverse changes in circumstances, economic conditions and/or operating environments. 5 6 7 A1 A2 A3 A Adequate capacity to meet its financial obligations. The entity is more susceptible to adverse changes in circumstances, economic and/or operating environments. 8 9 10 BBB1 BBB2 BBB3 BBB Moderate capacity to meet its financial obligations. The entity is more likely to be weakened by adverse changes in circumstances, economic conditions and/or operating environments than those in higher-rated categories. 11 12 13 BB1 BB2 BB3 BB Non- Investment Grade Weak capacity to meet its financial obligations. The entity is highly vulnerable to adverse changes in circumstances, economic conditions and/or operating environments. 14 15 16 B1 B2 B3 B Very weak capacity to meet its financial obligations. The entity has a limited ability to withstand adverse changes in circumstances, economic conditions and/or operating environments. 17 18 19 C1 C2 C3 C High likelihood of defaulting on its financial obligations. The entity is highly dependent on favourable changes in circumstances, economic conditions and/or operating environments, the lack of which would likely result in it defaulting on its financial obligations. 20 D D Default Currently in default on either all or a substantial portion of its financial obligations, whether or not formally declared. The D rating may also reflect the filing of bankruptcy and/or other actions pertaining to the entity that could jeopardize the payment of financial obligations.