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224 KUMPULAN WANG PERSARAAN (DIPERBADANKAN) FoR BEttER REtURNS

notes to the
financial statements
for the year ended 31 december 2022

33. FINANCIAL RISK (CONTINUED)
(d) Credit risk (continued)

(iii) Credit quality

Various tools are utilised for the measurement of credit risk including third party solutions employed to
compute the credit Value-at-risk (Var) as well as the internal credit rating scoring model for the provision of
internal rating for corporate and financial institutions.
the group and KWap may invest in domestic bonds with the minimum rating of a3 (ram), a- (marc) as well
as in international bonds with the minimum rating of bbb- (s&p or fitch), baa3 (moody’s) or the equivalent
rating from other recognized international rating agencies. in relation to the private debt securities portfolio,
the weighted average credit quality of the private debt securities portfolio is aa.
the internal credit rating scoring model is utilised as a tool to complement the existing credit evaluation
process as well as to assist in the monitoring of the credit development. the methodology for the scoring
model is based on the approach of rating agencies whereby the implementation is based on a set of scoring
methodology for domestic and international credits. the model provides an internal rating for unrated bonds
or loans, as well as identification of the discrepancy between the internal rating and the external ratings by the
rating agencies for the rated bonds, if any.
debt securities are classified into an internal rating scale which is consistent with the rating agencies.
the credit quality classification is as follows:
i. long term rating for payment of long term financial obligations

Domestic Credit Rating Definition Of Quality Classifications
sovereign sovereign issued/guaranteed by the government
strong aaa and aa superior/strong ability to meet financial obligations
moderate a adequate abilitiy to meet financial obligations
Weak bbb and below moderate/weak ability to meet financial obligations

International Credit Rating Definition Of Quality Classifications
sovereign sovereign issued/guaranteed by the government
strong aaa and aa superior/strong ability to meet financial obligations
moderate a adequate abilitiy to meet financial obligations
Weak bbb and below moderate/weak ability to meet financial obligations