Siam Commercial Bank : Basel III Pillar 3 Market Disclosure

THE SIAM COMMERCIAL BANK PCL	i

	Contents
1.	INTRODUCTION..............................................................................................................................................................	1
2.	SCOPE OF APPLICATION..............................................................................................................................................	3
3.	KEY PRUDENTIAL METRICS.........................................................................................................................................	5
	Highlight of changes to the Bank's capital and key drivers ............................................................................................	6
4.	REGULATORY CAPITAL.................................................................................................................................................	7
	4.1Capital Management...................................................................................................................................................	7
	4.2 Capital Structure and Adequacy ................................................................................................................................	7
5.	LIQUIDITY COVERAGE RATIO (LCR).........................................................................................................................	17
	LCR report......................................................................................................................................................................	18
Appendix.................................................................................................................................................................................	20

PILLAR 3 DISCLOSURE JUNE 2022

THE SIAM COMMERCIAL BANK PCL	1

1. INTRODUCTION

Siam Commercial Bank PCL (SCB) and its Financial Group have adopted Basel III, the latest global regulatory

framework for assessing bank capital adequacy and liquidity, on January 1, 2013 to further strengthen its risk management practices. The Bank's implementation of Basel III strictly follows the Basel Committee on Banking Supervision's guidelines and the Bank of Thailand (BOT)'s regulations.

In September 2017, the Bank was designated as one of the Domestic Systemically Important Banks (D-SIBs) by the BOT. This status resulted in a requirement to maintain an additional Common Equity Tier 1 (CET1) of 1.0% on top of the capital conservation buffer of 2.5%.

Following the TFRS 9 adoption in January 2020, commercial banks are required to hold minimum provisions relative to a defined list of performing and under-performing assets and off-balance sheet items according to the following schedules: 0.33% in 2020, 0.67% in 2021, and 1.0% for 2022 onwards. If available provisions fall short of the required minimum, banks must adjust for such differences in the capital fund items starting from January 1, 2020.

To implement the strategy for enhancing the competitiveness of SCB Group, according to the Extraordinary General Meeting of Shareholders of The Siam Commercial Bank Public Company Limited No. 1/2021, SCB Financial Group

Restructuring Plan was approved, in which the Bank arranged for the establishment of SCB X Public Company Limited ("SCBX") to be a parent company of the companies in the financial group in order to broaden its vision and aspire to become "the most admired financial technology group in ASEAN" amid rapidly changing consumer behavior and

business landscape upon technological development and intense competition from both existing and new players.

The tender offer by SCBX for the Bank's shares had been successfully completed with a 99.06% acceptance rate, followed by SCBX listing and SCB delisting on the Stock Exchange of Thailand on April 22, 2022. In addition, on September 2, 2022, the Bank of Thailand approved the Bank to distribute 61 billion baht in dividends from retained earnings to SCBX and other shareholders of the Bank. Such dividend will facilitate SCBX to complete the restructuring process while the Bank, after paying these dividends, will continue to maintain a strong capital position and the ability to operate the business efficiently.

SCBX Financial Group and SCB are still subject to BOT regulations and are required to maintain the minimum capital requirements including additional buffers as prescribed by the BOT. The policy of maintaining capital levels well above the minimum regulatory requirements, as well as adequate loan loss provisions, remains in place to allow the Financial Group to absorb unexpected events and new types of risks that may arise from new businesses under SCBX Financial Group in the future.

PILLAR 3 DISCLOSURE JUNE 2022

THE SIAM COMMERCIAL BANK PCL	2

The current Basel Capital Accord comprises three pillars,

each of which is essential for promoting the stability of

financial institutions:

Pillar I provides guidelines on minimum capital requirements for credit risk, market risk and operational risk.

Pillar II addresses the key principles of supervisory review processes and risk management guidelines beyond Pillar I, with an emphasis on internal capital adequacy assessment process (ICAAP).

Pillar III leverages market mechanism for bank supervision by requiring public disclosure of key information on capital adequacy and risk assessment.

This Pillar III report presents both qualitative and

quantitative information on capital adequacy and

measurement of credit risk, market risk in the trading book, and operational risk for both SCB (referred to as 'Bank- only') and SCBX Financial Group (referred to as 'Consolidated'). The report also provides information on

risk management guidelines and frameworks, risk

components, risk monitoring and reporting, and

methodologies used to assess capital adequacy.

Qualitative information is updated annually, or whenever there is any material policy change. The Pillar III reports are published twice a year to disclose half-year and full- year information within four months of the report date (i.e.,

end of June 30 and December 31) as required by the BOT. A copy of the report can be found on the Bank's website and SCBX's website under Investor Relations at

https://www.scb.co.th/en/investor-relations/financial-information.htmlandhttps://www.scbx.com/en/investor-relations/pillar-iii-disclosure.html

Beginning January 1, 2020, the BOT's disclosure requirement has been revised to include key prudential metrics to reflect the provisioning impact from TFRS 9 . Moreover, the BOT also revised disclosure of general provision, which is eligible as Tier 2 capital, amended terminology to be in line with financial statements and updated capital disclosure during a transitional period according to the Basel III framework.

Although external audit is not required for this report, the Bank and SCBX have an internal verification and approval process to ensure that contents of the report adhere to the Pillar III disclosure policy. In addition to following the Basel

1. framework in disclosure principles, information in this report is the same as that used internally by management and for reports submitted to the BOT.

PILLAR 3 DISCLOSURE JUNE 2022

THE SIAM COMMERCIAL BANK PCL	3

2. SCOPE OF APPLICATION

Standardized Approach

SCB and SCBX Financial Group use the Standardized Approach (SA), which follows the BOT's guidelines on

credit risk, market risk, and operational risk measurement,

as a computational framework for regulatory capital

requirements.

Regulatory Consolidation 1/

Regulatory consolidation consists of solo consolidation,

which considers only financial entities of which SCB owns more than 75% , and full consolidation (referred to as 'Consolidated'), which encompasses all entities within the

Financial Group, including those under solo consolidation,

other subsidiaries in finance or support businesses. Under

Basel III, investment in life insurance businesses or other

financial entities in which SCB holds more than 10% but less than 50% of issued shares is considered 'investment outside the scope of consolidation' and will be treated separately according to the BOT's guidelines.

Treatment of investment outside the scope of

consolidation such as life insurance companies, depends

on how much of issued common shares are held by the

Bank with 10% being the threshold level:

• The Bank's investment does not exceed 10% of issued common shares:
  The BOT requires that calculation be split into two parts. The portion of investment that exceeds 10% of the Bank's net common equity Tier 1 capital (net CET1) must be deducted from the corresponding tier
  of capital (Corresponding Approach). The remaining portion under 10% of net CET1 is assigned a risk weight according to the BOT's guidelines.
• The Bank's investment exceeds 10% of issued common shares:
  In this case which is considered a significant investment based on the threshold approach, the BOT
  requires calculation to be split into two parts. The portion of investment that exceeds 10% of the Bank's
  net CET1must be deducted from the corresponding tier of capital. Any shortfall must be deducted from the
  next higher tier of capital. The remaining portion under 10% of net CET1 will be assigned a risk weight of
  250%.

This report presents quantitative information for both bank-

only and consolidated basis.

1/ See more details on regulatory consolidation in the Appendix.

PILLAR 3 DISCLOSURE JUNE 2022