Investor Presentaiton
MORGAN STANLEY BANK ASIA LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2020
24.
FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk (continued)
Expected credit loss allowance
Financial instruments subject to the impairment requirements of HKFRS 9
There have been no changes made to estimation techniques or significant assumptions for estimating
impairment during the year. There were no modifications to financial assets during the year or since
origination and therefore modifications have not impacted ECL staging.
ECL on cash and short-term deposits, loans and advances and trade and other receivables is de minimis
owing to their short term tenure and the collateralised nature of loans and advances. For investment
securities, the gross carrying amount on which no ECL is recognised because they have an investment
grade internal credit rating, corresponding to a low risk of default.
Liquidity risk
Liquidity risk refers to the risk that the Company will be unable to finance its operations due to a loss of
access to the capital markets or difficulty in liquidating its assets. Liquidity risk encompasses the
Company's ability (or perceived ability) to meet its financial obligations without experiencing significant
business disruption or reputational damage that may threaten the Company's viability as a going concern.
Liquidity risk also encompasses the associated funding risks triggered by the market or idiosyncratic
stress events that may cause unexpected changes in funding needs or an inability to raise new funding.
Generally, the Company incurs liquidity risk as a result of its trading, lending, investing and client
facilitation activities.
The Morgan Stanley Group's Liquidity Risk Management Framework is critical to helping ensure that
the Company maintains sufficient liquidity resources and durable funding sources to meet its daily
obligations and to withstand unanticipated stress events. The Liquidity Risk Department is a distinct area
in Risk Management, which oversees and monitors liquidity risk. The Liquidity Risk Department ensures
transparency of material liquidity risks, compliance with established risk limits and escalation of risk
concentrations to appropriate senior management. To execute these responsibilities, the Liquidity Risk
Department:
•
•
Establishes limits in line with the Morgan Stanley Group's risk appetite;
Identifies and analyses emerging liquidity risks to ensure such risks are appropriately mitigated;
Monitors and reports risk exposures against metrics and limits; and
Reviews the methodologies and assumptions underpinning the Morgan Stanley Group's Liquidity
Stress Tests to ensure sufficient liquidity under a range of adverse scenarios.
The liquidity risks identified by these processes are summarised in reports produced by the Liquidity
Risk Department that are circulated to and discussed with the Company's Asset & Liability Committee
("ALCO") and regional ALCO and risk committees, as appropriate.
The Treasury Department and applicable business units have primary responsibility for evaluating,
monitoring and controlling the liquidity risks arising from the Morgan Stanley Group's business activities,
and for maintaining processes and controls to manage the key risks inherent in their respective areas. The
Liquidity Risk Department coordinates with the Treasury Department and these business units to help
ensure a consistent and comprehensive framework for managing liquidity risk across the Morgan Stanley
Group.
The Company's liquidity risk management policies and procedures are consistent with those of the
Morgan Stanley Group. The Board of Directors of the Company is ultimately responsible for establishing
the liquidity risk tolerance and ensuring the Company's liquidity risk is appropriately managed. In
addition to the internal liquidity risk management framework, the Company is locally subject to the
liquidity regulations prescribed by the HKMA. The Company has daily monitoring and reporting
processes in place to ensure compliance with its regulatory requirements
42View entire presentation