Investor Presentaiton
MORGAN STANLEY BANK ASIA LIMITED
UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION
Year ended 31 December 2020
H. PILLAR 3 DISCLOSURE
The capital adequacy ratios of the Company were calculated in accordance with Banking (Capital) Rules
of the Banking Ordinance. The Company uses the following approaches to calculate its capital charge for:
(a) credit risk: Standardised (Credit Risk) Approach ("STC approach"); and
(b) operational risk: Basic Indicator Approach ("BIA approach").
There was no risk-weighted amount ("RWA") for market risk for the Company because the Company
was exempted by the HKMA from the calculation of market risk.
The following templates and tables show the standard disclosure templates and tables specified by the
HKMA in relation to the Pillar 3 disclosures required under the Banking (Disclosure) Rules. Other Pillar
3 templates or tables not disclosed below either are not applicable to the Company or have no reportable
amount for the period.
Table OVA: Overview of risk management
Risk Management Framework
The Company has established a risk governance framework ("RGF"), which is vital to the success of the
Company's business activities. The RGF integrates the diverse roles of the Business Units, Support and
Control Functions, Firm Risk Management, and Compliance into a holistic enterprise structure and
facilitates the incorporation of risk assessment into decision-making processes across the Company. The
Company's RGF affirms to Morgan Stanley's firm-wide risk governance framework.
RGF recognises that risks are often interrelated and therefore should be managed firm-wide on an
aggregate and individual basis. RGF encompasses the Company's risk management culture, principles
and practices that support risk identification, measurement, monitoring, escalation and decision-making
processes. RGF views risk in a broad context and considers the risk to earnings and capital adequacy in a
stressed market environment, as well as the risks to future earnings due to reputational damage.
The principal risks involved in the Company's business activities include market, interest rate, credit,
operational, liquidity, compliance, conduct and reputational risk. Strategic risk is integrated into the
Company's business planning, embedded in the evaluation of all principal risks and overseen by the
Company's Board of Directors (or a committee thereof).
The Company's articulation of the aggregate level and types of risk that it is willing to accept in order to
achieve its business objectives is established, communicated and monitored in accordance with the
Company's Risk Appetite Statement. The combination of Risk Tolerance Statements, quantitative risk
limits, and Key Risk Indicators ("KRIS") aims to ensure the Company's businesses are carried out in line
with the risk appetite established by the Company's Board, and to protect the Company's capital and
reputation in both normal and stressed environments. There are regular reporting, including reporting on
breaches, to the both management and Board committees.
Risk Management Culture
The Company's risk management culture requires the Company to seek acceptable risk-adjusted returns
through prudent risk- taking that protects the Company's capital base and franchise, and is faithful to the
Company's risk appetite and core values. The Company's three lines of defense, its Business Units,
Independent Risk Management and Compliance functions, and the Internal Audit Department, shall play
an integral role in enabling the Company's to achieve the objectives of the RGF.
The Company's risk management culture is based on the following five key principles:
Integrity: critical to Morgan Stanley Group's approach to Enterprise Risk Management ("ERM") is
strong risk culture and risk governance. Developing the Morgan Stanley Group's risk culture is a
continuous process and builds upon the Morgan Stanley Group's commitment to "doing the right
thing" and its values that make managing risk each employee's responsibility;
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