Mega Bank Annual Report 2017

98 Mega Bank -98- K. Risk management for equity securities Due to needs of proprietary, make market and tactic, etc., the Bank held equity securities within the regulations of the law. That market risk comprises the risk of individual equity security arising from the security’s market price changes and the general market risk arising from overall equity securities market price changes. The investment operating group mainly selects blue chip stocks which have high liquidity and sets the investment price according to fundamentals and market transactions. After the investment has been approved by the investment deliberation committee, the operational personnel purchase the stock within the maximum percentage of the approved price, as the case may be. Daily trading records, details of investment portfolios and overview of profit or loss shall report to the management and measurement of the extent of the impact of systematic risk on investment portf olios using β value monthly. The Bank and subsidiaries generally set a stop loss, stop interest, pre-warning and exception handling requirements, and limit control to held individual stock and industry concentration. L. Sensitivity analysis Sensitivity analys is of the Bank and subsidiaries’ financial instruments (including trading book and non -trading book): December 31, 2017 UNIT Ǻ In NT Thousand Dollars Risks Extent of Variation Effect on Profit or Loss Effect on Equity Foreign exchange risk Exchange rate of NTD to USD, to JPY, to EUR and to each of other currencies appreciated by 1% ( $ 51,576 ) $ - Foreign exchange risk Exchange rate of NTD to USD, to JPY, to EUR and to each of other currencies depreciated by 1% 51,576 - Interest rate risk Major increases in interest rates 1BPS 3,293 ( 58,801 ) Interest rate risk Major declines in interest rates 1BPS ( 3,293 ) 58,801 Equity securities risk TAIEX declined by 1% ( 43,918 ) ( 30,452 ) Equity securities risk TAIEX increased by 1% 43,918 30,452 December 31, 2017 UNIT Ǻ In US Thousand Dollars Risks Extent of Variation Effect on Profit or Loss Effect on Equity Foreign exchange risk Exchange rate of NTD to USD, to JPY, to EUR and to each of other currencies appreciated by 1% ( $ 1,740 ) $ - Foreign exchange risk Exchange rate of NTD to USD, to JPY, to EUR and to each of other currencies depreciated by 1% 1,740 - Interest rate risk Major increases in interest rates 1BPS 111 ( 1,983 ) Interest rate risk Major declines in interest rates 1BPS ( 111 ) 1,983 Equity securities risk TAIEX declined by 1% ( 1,481 ) ( 1,027 ) Equity securities risk TAIEX increased by 1% 1,481 1,027 December 31, 2016 UNIT Ǻ In NT Thousand Dollars Risks Extent of Variation Effect on Profit or Loss Effect on Equity Foreign exchange risk Exchange rate of NTD to USD, to JPY, to EUR and to each of other currencies appreciated by 1% ( $ 33,095 ) $ - Foreign exchange risk Exchange rate of NTD to USD, to JPY, to EUR and to each of other currencies depreciated by 1% 33,095 - Interest rate risk Major increases in interest rates 1BPS 5,912 ( 34,424 ) Interest rate risk Major declines in interest rates 1BPS ( 5,912 ) 34,424 Equity securities risk TAIEX declined by 1% ( 28,860 ) ( 51,504 ) Equity securities risk TAIEX increased by 1% 28,860 51,504 M. Disclosure requirements in the “Regulations Governing the Preparation of Financial Reports by Public Banks” Interest rate sensitivity analysis on assets and liabilities (NT Dollars) December 31, 2017 UNIT Ǻ In NT Thousand Dollars, % Item 1-90 days 91-180 days 181 days to 1 year Over 1 year Total Interest rate sensitive assets $ 529,230,345 $ 940,173,141 $ 19,231,002 $ 93,939,541 $ 1,582,574,029 Interest rate sensitive liabilities 498,686,298 689,370,550 90,374,554 19,925,814 1,298,357,216 Interest rate sensitive gap $ 30,544,047 $ 250,802,591 ( $ 71,143,552 ) $ 74,013,727 $ 284,216,813 Net worth $ 251,183,190 Ratio of interest rate sensitive assets to interest rate sensitive liabilities 121.89% Ratio of interest rate sensitivity gap to net worth 113.15%