CIMB Market risks include the following: 1. Interest rate risk Interest rate risks of transactions in the trading book are under the supervision of RMC under the framework prescribed by the BOD. The calculation of fair value for trading transactions is performed on a daily basis in order to monitor the mark-to-market profits and losses. Daily risk status reports are also independently produced by Risk Management work unit. The one basis point shift (PV01) limit, Greek Limit, Value-at-Risk (VaR) limit and stop loss limit are set to control the risks associated with movements in interest rates which might affect the revenue and capital reserves of the Bank. 2. Foreign exchange risk In managing risk from changes in foreign exchange and maintaining risk at the level prescribed by the Banks policy, the Bank tries to match the currency of the funding source with that of loans, or to employ derivative instruments for foreign exchange risk hedging. Risk limits are CIMB THAI Bank Public Company Limited 60 determined by product and risk type using approaches such as FX net open position limit, Greek Limit, Value-at-Risk (VaR) limit and stop loss limit. Daily mark-to-market on the foreign exchange is also conducted. Furthermore, stress testing is periodically conducted the results of which are thoroughly analysed. 3. Market risk of equity securities and commodity related transactions The Bank does not invest in trading equity securities other than investments in subsidiaries or affiliated companies, common shares as resulted from loan restructuring, and certain property funds which have high potential return and sound management. For commodity derivatives, the Bank fully hedges against the commodity risk on a back-to-back basis, thereby market risk exposure on trading equity securities or commodities has never been materialised. 4. Market risk of other market risk underlyings The Bank offers structured products to be alternative investments for clients. However, if the market risk underlyings are not interest rate risk or foreign exchange risk, the Bank will fully hedge against such market risk underlyings. Therefore, the market risk exposure from other market risk underlying has never been materialised.

Kbank

Market Risk Management Market risk may arise from changes in interest rate, foreign exchange, equity and commodity prices, as well as credit spreads. These changes affect KBanks and K Companies present and future income, capital, the value of financial assets and liabilities as well as off-Statement of Financial Position transactions. KBank engages in a consolidated risk management framework through development of essential infrastructures and processes for timely and appropriate management of the market risk of financial products. In addition, we have established market risk management processes for new financial products, and improved related processes for existing products. In 2019, global financial markets were quite volatile due mainly to the unresolved US-China trade war and Brexit. These two factors contributed to risk-off sentiment in financial markets. Investors therefore increased their holding of safe-haven assets. This led to greater capital inflows into Thailand thanks to its economic stability, as evidenced by an ongoing current account surplus albeit at a decelerating rate amid the global trade slowdown, as well as the relentless rise of the Thai Baht. Meanwhile, major risk factors remained in the global market. As market sentiment was plagued by downbeat economic indicators of core economies, most investors focused mainly on debt instruments. Therefore, Thai bond and US Treasury yields saw a decline across all maturities. Regarding the outlook for 2020, the protracted US-China trade negotiations will remain a major concern, which may cause volatility in both money and capital markets at any time. This is despite the success of an agreement to Phase One of the trade deal, reached in January 2020. Market Risk in Trading Book Activities KBanks trading activities are exposed to risks of interest rate, foreign exchange, equity and credit spreads. Moreover, KBank has chosen not to retain any position when dealing with commodity prices by managing market risk through a backto-back policy. Our equity risk stems from equity underwriting and non-directional trading business, which we undertake only for serving customer needs. KBank has processes in place to measure and control risks within the established limits, under the supervision and control of the Enterprise Risk Management Division. Market Risk in Banking Book Activities KBank is exposed to interest rate, equity price and foreign exchange risks in banking book transactions, i.e.: Interest Rate Risk in Banking Book Activities Interest rate risk refers to risk incurred from changes in interest rates of assets and liabilities, as well as off-Statement of Financial Position transactions that are susceptible to interest rate fluctuations. These may, therefore, have an adverse impact on net interest income and economic value of KBank. KBank manages its financial position to increase net interest income and underlying economic value, based on adequacy of liquidity position. Therefore, KBank has established an interest rate risk management framework to ensure that our financial position is within the pre-specified risk appetite, and that the impact of interest rate changes on net interest income or underlying economic value of KBank is under control. KBank continually monitors interest rate risk in banking book activities by assessing interest rate risk gap and net interest income sensitivity over the next 12 months, based on an assumption of a 1.00-percent change in interest rates on all types of assets and liabilities at their re-pricing periods. The results of that risk assessment are shown below:

Equity Risk in Banking Book Activities KBank has no policy to increase investments on equity that are not related to our financial business operations. Data analyses and close assessments of relevant events have been employed in order to managing equity investment to ensure maximum benefit of KBank. Foreign Exchange Risk in Banking Book Activities KBank is exposed to foreign exchange risk incurred from our overseas operations and investment. KBank has chosen not to retain foreign currency position stemming from such activities, except where there is market limitation of risk hedging, or for the purpose of appropriate cost management in risk hedging during certain periods. KBank has a monitoring process and control measures in place to ensure that risk is within an acceptable level. Foreign exchange risk management is under supervision of the Assets and Liabilities Management Sub-committee, with the goal of obtaining the highest returns under the risk limits approved by the Risk Oversight Committee and the Board of Directors.

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