KENANGA ANNUAL REPORT 2020

135 ANNUAL REPORT 2020 // KENANGA INVESTMENT BANK BERHAD 2. CHANGES IN ACCOUNTING POLICIES AND REGULATORY REQUIREMENT (CONT’D.) 2.3 Transitional arrangements for regulatory capital treatment of accounting provisions On 9 December 2020, BNM issued revised Policy documents on Capital Adequacy Framework (Capital Components) which came into effect immediately and shall be applied prospectively, subject to the transitional arrangements if elected by the financial institution. The revised Policy documents apply to financial institutions in Malaysia which covers licensed banks, licensed investment banks and financial holding companies. The revised Policy documents superseded Policy documents issued by BNM previously, namely Capital Adequacy Framework (Capital Components) dated 5 February 2020. The Bank has elected to apply the transitional arrangements for regulatory capital treatment of accounting provisions. The impact of the application of the revised Policy documents do not have any significant impact to the financial statements of the Group and of the Bank other than the impacts disclosed in Note 47(ii). 2.4 Measures to assist individuals, SMEs and corporates affected by COVID-19 announced by BNM On 25 March 2020, BNM had announced that banking institutions will offer an automatic deferment of all loans/financing repayment for six months to all individual and small-medium enterprise (“SME”). Banks will also facilitate requests by corporations to defer or restructure their loans/financing repayments to support viable corporations to preserve jobs and resume economic activities when conditions improve. The automatic moratorium applies to ringgit-denominated loans or financing that are not in arrears exceeding 90 days as of 1 April 2020. In the absence of other factors relevant to the assessment, the moratorium does not automatically result in stage transfer under MFRS 9. The financial impact of the moratorium is reflected at the interest/profit income of the Group and the Bank. To further support lending/financing activities, banking institutions are allowed to draw down on the capital conservation buffer of 2.5%, to operate below the minimum liquidity coverage ratio of 100% and to reduce the regulatory reserves held against expected losses to 0%. The implementation of the Net Stable Funding Ratio (“NSFR”) will continue to be effective on 1 July 2020, but with a lower ratio of 80%. Banks is expected to restore their buffer to the minimum regulatory requirements and comply with a 100% NSFR ratio from 30 September 2021.