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Pillar3Disclosureasat30June2017 PDF
Pillar3Disclosureasat30June2017 PDF
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Overview
This document discloses Bank Islam Groups (the Group) quantitative disclosures in accordance with the
disclosure requirements as outlined in the Capital Adequacy Framework for Islamic Banks (CAFIB)
Disclosure Requirements (Pillar 3) issued by Bank Negara Malaysia (BNM).
The Group has adopted the Standardised Approach in determining the capital requirements for credit and
market risk and has applied the Basic Indicator Approach for operational risk for the Pillar 1 since January
2008. Under the Standardised Approach, standard risk weights are used to assess the capital requirements for
exposures in credit and market risk whilst the capital required for operational risk under the Basic Indicator
Approach is computed based on a fixed percentage over the Groups average gross income for a fixed number
of quarterly periods.
In compliance with the Pillar 3 Disclosure Policy, the Pillar 3 Disclosure for the Group is being regularly
prepared for two periods: 30 June and 31 December. The Groups Pillar 3 Disclosure will be made available
under the Corporate Info section of the Banks website at www.bankislam.com.my, attached to its annual
and the half-yearly financial reports after the notes to the financial statements.
The following tables show the minimum regulatory capital requirement to support the Groups and the Banks
risk weighted assets.
30.06.2017 31.12.2016
MINIMUM MINIMUM
RISK- CAPITAL RISK- CAPITAL
WEIGHTED REQUIREMENT WEIGHTED REQUIREMENT
Group ASSETS AT 8% ASSETS AT 8%
RM000 RM000 RM000 RM000
30.06.2017 31.12.2016
MINIMUM MINIMUM
RISK- CAPITAL RISK- CAPITAL
WEIGHTED REQUIREMENT WEIGHTED REQUIREMENT
Bank ASSETS AT 8% ASSETS AT 8%
RM000 RM000 RM000 RM000
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
The Group does not have any capital requirement for Large Exposure Risk as there is no amount in excess of
the lowest threshold arising from equity holdings as specified in the BNMs CAFIB.
1. Scope of Application
The Pillar 3 Disclosure is prepared on a consolidated basis and comprises information on the Bank
(including the offshore banking operations in the Federal Territory of Labuan) and its subsidiaries.
There are no significant restrictions or impediments on the transfer of funds or regulatory capital within
the Group. There were no capital deficiencies in any of the subsidiary companies of the Group as at the
financial half-year.
Effective 1 January 2016, total capital and capital adequacy ratios of the Group have been computed
based on the updated BNMs CAFIB - Capital Components issued on 13 October 2015. The minimum
regulatory capital adequacy ratios requirement for Common Equity Tier 1 (CET 1) capital ratio, Tier 1
capital ratio and total capital ratio are 5.75%, 7.25% and 9.25% respectively for year 2017.
The capital adequacy ratios of the Group and Bank are set out below:
(a) The capital adequacy ratios of the Group and of the Bank:
GROUP BANK
30.06.2017 31.12.2016 30.06.2017 31.12.2016
RM000 RM000 RM000 RM000
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
(b) CET 1, Tier I, and Tier II capital components of the Group and of the Bank:
30.06.2017
Group Bank
RM000 RM000
Tier I Capital
Paid-up share capital 2,803,341 2,803,341
Share Premium - -
Retained earnings 2,046,930 2,046,928
Other reserves (153,284) (153,468)
Less: Deferred tax assets (38,775) (38,775)
Less: 55% of fair value - -
Less: Investment in subsidiaries - (15,525)
Total Common Equity Tier I Capital 4,658,212 4,642,501
Total Additional Tier I Capital - -
Total Tier I Capital 4,658,212 4,642,501
^ Collective assessment allowance on non-impaired financing subject to maximum of 1.25% of total credit risk-
weighted assets.
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
(b) CET 1, Tier I and Tier II capital components of the Group and of the Bank (continued):
31.12.2016
Group Bank
RM000 RM000
Tier I Capital
Paid-up share capital 2,404,384 2,404,384
Share Premium 264,790 264,790
Retained earnings 523,247 523,959
Other reserves 1,193,045 1,192,822
Less: Deferred tax assets (48,378) (48,378)
Less: Investment in subsidiaries - (15,525)
Total Common Equity Tier I Capital 4,337,088 4,322,052
Total Additional Tier I Capital - -
Total Tier I Capital 4,337,088 4,322,052
^ Collective assessment allowance on non-impaired financing subject to maximum of 1.25% of total credit
risk-weighted assets.
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
MINIMUM
RISK- CAPITAL
GROSS NET WEIGHTED REQUIREMENT
30 JUNE 2017 EXPOSURE EXPOSURE ASSET AT 8%
EXPOSURE CLASS RM000 RM000 RM000 RM000
Credit Risk
Note: As at 30 June 2017, the Group did not have any exposures under securitisation.
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
(c) The breakdown of risk-weighted assets by exposures in each major risk category is as follows
(continued):
MINIMUM
RISK- CAPITAL
GROSS NET WEIGHTED REQUIREMENT
31 DECEMBER 2016 EXPOSURE EXPOSURE ASSET AT 8%
EXPOSURE CLASS RM000 RM000 RM000 RM000
Credit Risk
Note: As at 31 December 2016, the Group did not have any exposures under securitisation.
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
(c) The breakdown of risk-weighted assets by exposures in each major risk category is as follows
(continued):
(ii) Bank
MINIMUM
RISK- CAPITAL
GROSS NET WEIGHTED REQUIREMENT
30 JUNE 2017 EXPOSURE EXPOSURE ASSET AT 8%
EXPOSURE CLASS RM000 RM000 RM000 RM000
Credit Risk
Note: As at 30 June 2017, the Bank did not have any exposures under securitisation.
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
(c) The breakdown of risk-weighted assets by exposures in each major risk category is as follows
(continued):
MINIMUM
RISK- CAPITAL
GROSS NET WEIGHTED REQUIREMENT
31 DECEMBER 2016 EXPOSURE EXPOSURE ASSET AT 8%
EXPOSURE CLASS RM000 RM000 RM000 RM000
Credit Risk
Note: As at 31 December 2016, the Bank did not have any exposures under securitisation.
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
3. Credit Risk
The table below presents the Groups and the Banks gross financing and advances analysed by
credit quality:
GROUP AND BANK
30.06.2017 31.12.2016
RM000 RM000
41,176,651 39,872,443
Financings classified as neither past due nor impaired are financings of which the customer
has not missed a contractual payment (profit or principal) when contractually due and is not
impaired as there is no objective evidence of impairment of the financing.
The credit quality of gross financing and advances which are neither past due nor impaired is
as follows:
40,061,643 38,788,825
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Financings classified as past due but not impaired are financings of which its contractual
profit or principal payments are past due, but the Group and the Bank believe that impairment
is not appropriate on the basis of the level of collateral available and/or the stage of collection
amounts owed to the Group and the Bank.
Analysis of the past due but not impaired financing and advances by aging analysis:
694,263 694,173
Analysis of the past due but not impaired financing and advances by sector:
694,263 694,173
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
A financing is classified as impaired when the principal or profit or both are past due for three
months or more, or where a financing is in arrears for less than three months, but the financing
exhibits indications of significant credit weakness.
420,745 389,445
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
OF WHICH:
PAST DUE BUT
30 JUNE 2017 GROSS NOT IMPAIRED IMPAIRED INDIVIDUAL COLLECTIVE
RM 000 FINANCING FINANCING FINANCING ALLOWANCES ALLOWANCES
Central Region 19,274,438 362,836 147,235 21,383 276,885
Eastern Region 6,847,989 108,318 120,996 42,105 74,478
Northern Region 5,981,259 99,499 39,588 1,388 78,298
Southern Region 5,890,472 85,576 27,133 1,001 58,782
East Malaysia Region 3,182,493 38,034 85,793 66,764 52,064
Grand Total 41,176,651 694,263 420,745 132,641 540,507
OF WHICH:
PAST DUE BUT
31 DECEMBER 2016 GROSS NOT IMPAIRED IMPAIRED INDIVIDUAL COLLECTIVE
RM 000 FINANCING FINANCING FINANCING ALLOWANCES ALLOWANCES
Central Region 18,853,925 334,621 142,841 24,400 283,895
Eastern Region 6,534,376 110,505 92,848 32,750 72,174
Northern Region 5,864,200 89,741 36,299 1,433 79,118
Southern Region 5,499,121 89,657 31,329 758 64,112
East Malaysia Region 3,120,821 69,649 86,128 68,857 55,672
Grand Total 39,872,443 694,173 389,445 128,198 554,971
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Credit Risk
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Credit Risk
16
BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Credit Risk
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Credit Risk
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Wholesale &
Finance,
Electricity, Retail Trade
Primary Mining and Construction Transport, Insurance Education,
Manufacturing Gas and and Real Household Other
Agriculture Quarrying Storage & and Health and Total
Water Restaurant Estate Sector Sectors
30 JUNE 2017 Communication Business Others
& Hotels
Services
Exposure Class
RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000
Credit Risk
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Credit Risk
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Credit Risk
24
BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Credit Risk
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Credit Risk
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
3.3 Assignment of Risk Weights for Portfolios Under the Standardised Approach
The following presents the credit exposures by risk weights after the effect of credit risk mitigation of the Group:
(i) As at 30 June 2017
Total
Sovereigns / Public Banks, Higher Exposures Total Risk
Central Sector DFIs Regulatory Residential Risk Other after Netting & Weighted
Risk Weights Banks Entities & MDBs Corporate Retail Mortgages Assets Assets CRM Asset
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
0% 3,737,366 84,505 - 3,941,640 7,624 - - 2,214,057 9,985,192 -
20% - 30,267 397,839 3,200,421 1,865 - - - 3,630,392 726,078
35% - - - - - 4,802,463 - - 4,802,463 1,680,862
50% - 396,399 138,284 3,501,958 419,534 3,130,972 - - 7,587,147 3,793,574
75% - - - 576,833 2,681,949 4,098,983 - - 7,357,765 5,518,324
100% - 268,463 - 7,151,015 12,894,246 3,333,721 - 232,879 23,880,324 23,880,324
150% - - - 91,764 76,343 67,332 19,715 - 255,154 382,731
Total Exposures 3,737,366 779,634 536,123 18,463,631 16,081,561 15,433,471 19,715 2,446,936 57,498,437 35,981,893
RWA by
- 472,716 148,710 10,112,349 15,230,363 9,755,305 29,572 232,878 35,981,893
Exposures
Average Risk
0.0% 60.6% 27.7% 54.8% 94.7% 63.2% 150.0% 9.5% 62.6%
Weight
Deduction from
Capital Base
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
3.3 Assignment of Risk Weights for Portfolios Under the Standardised Approach (continued)
The following presents the credit exposures by risk weights after the effect of credit risk mitigation of the Group (continued):
(ii) As at 31 December 2016
Total
Sovereigns / Public Banks, Higher Exposures Total Risk
Central Sector DFIs Regulatory Residential Risk Other after Netting & Weighted
Risk Weights Banks Entities & MDBs Corporate Retail Mortgages Assets Assets CRM Asset
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
0% 5,390,725 2,341,996 197,011 1,979,280 7,162 - - 2,230,523 12,146,697 -
Total Exposures 5,390,725 2,721,829 1,356,768 15,639,071 14,843,158 14,334,561 75,920 2,542,628 56,904,660 33,908,778
RWA by
- 251,194 297,009 9,737,119 14,160,333 9,037,137 113,880 312,105 33,908,778
Exposures
Average Risk
0.0% 9.2% 21.9% 62.3% 95.4% 63.0% 150.0% 12.3% 59.6%
Weight
Deduction from
Capital Base
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
3.3 Assignment of Risk Weights for Portfolios Under the Standardised Approach (continued)
The following presents the credit exposures by risk weights after the effect of credit risk mitigation of the Bank (continued):
(i) As at 30 June 2017
Total
Sovereigns / Public Banks, Higher Exposures Total Risk
Central Sector DFIs Regulatory Residential Risk Other after Netting & Weighted
Risk Weights Banks Entities & MDBs Corporate Retail Mortgages Assets Assets CRM Asset
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
0% 3,737,366 84,505 - 3,941,640 7,624 - - 2,215,498 9,986,633 -
Total Exposures 3,737,366 779,634 535,744 18,463,631 16,081,561 15,433,471 19,715 2,444,558 57,495,680 35,977,999
RWA by
- 472,716 148,634 10,112,349 15,230,363 9,755,304 29,573 229,060 35,977,999
Exposures
Average Risk
0.0% 60.6% 27.7% 54.8% 94.7% 63.2% 150.0% 9.4% 62.6%
Weight
Deduction from
Capital Base
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
3.3 Assignment of Risk Weights for Portfolios Under the Standardised Approach (continued)
The following presents the credit exposures by risk weights after the effect of credit risk mitigation of the Bank (continued):
(ii) As at 31 December 2016
Total
Sovereigns / Public Banks, Higher Exposures Total Risk
Central Sector DFIs Regulatory Residential Risk Other after Netting & Weighted
Risk Weights Banks Entities & MDBs Corporate Retail Mortgages Assets Assets CRM Asset
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
0% 5,390,725 2,341,996 197,011 1,979,280 7,162 - - 2,231,271 12,147,445 -
Total Exposures 5,390,725 2,721,829 1,356,620 15,639,071 14,843,158 14,334,562 75,920 2,538,939 56,900,824 33,904,311
RWA by
- 251,194 296,979 9,737,119 14,160,333 9,037,138 113,880 307,668 33,904,311
Exposures
Average Risk
0.0% 9.2% 21.9% 62.3% 95.4% 63.0% 150.0% 12.1% 59.6%
Weight
Deduction from
Capital Base
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
* These exposures refer to exposures to Federal Government of Malaysia and Bank Negara Malaysia which are
accorded a preferential sovereign risk weight of 0%.
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Note: There are no exposures under Short-term ratings for the period under review.
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BANK ISLAM MALAYSIA BERHAD
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BANK ISLAM MALAYSIA BERHAD
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AS AT 30 JUNE 2017
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BANK ISLAM MALAYSIA BERHAD
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3.6 Off-Balance Sheet and Counterparties Credit Risk for the Group and the Bank
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
3.6 Off-Balance Sheet and Counterparties Credit Risk for the Group and the Bank (continued)
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
4. Market Risk
Profit rate risk in the non-trading portfolio is managed and controlled using measurement tools
known as Economic Value of Equity (EVE) and Earnings-at-Risk (EaR). EVE and EaR limits
are approved by the BRC and independently monitored by MRMD.
The Group manages market risk in non-trading portfolios by monitoring the sensitivity of projected
EVE and EaR under varying profit rate scenarios (simulation modeling). For simulation modeling, a
combination of standard scenarios and non-standard scenarios relevant to the local market are used.
The standard scenarios monitored monthly include a 100 basis points parallel fall or rise in profit
rate and historical simulation. The scenario assumes no management action. Hence, it does not
incorporate actions that would be taken by Treasury to mitigate the impact of the profit rate risk. In
reality, depending on the view on future market movements, Treasury would proactively seek to
change the profit rate exposure profile to minimise losses and to optimise net revenues. The nature
of the hedging and risk mitigation strategies corresponds to the market instruments available.
These strategies range from the use of derivative financial instruments, such as profit rate swaps, to
more intricate hedging strategies to address inordinate profit rate risk exposures.
The table below shows the projected sensitivity to a 100 basis points parallel shift to profit rates
across all maturities applied on the Banks profit rate sensitivity gap as at reporting date.
Other controls to contain profit rate risk in the non-trading portfolio include applying sensitivity
limits to the Available for Sale (AFS) financial assets. Sensitivity is measured by the present value
of a 1 basis point change (PV01).
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Market risk in the trading portfolio is monitored and controlled using Value-at-Risk (VaR). VaR
is a technique that estimates the potential losses that could occur on risk positions as a result of
movements in market rates over a specified time horizon and to a given level of confidence. The
VaR model used by the Group is based on historical simulation. The model derives plausible future
scenarios from past series of recorded market rates.
The historical simulation model used by the Group incorporates the following features:
Potential market movements are calculated with reference to data from the past four years;
Historical market rates are calculated with reference to foreign exchange rates and profit rates;
VaR is calculated to a 99 per cent confidence level and for a one-day holding period. The nature
of the VaR model means that an increase in observed market volatility will lead to an increase in
VaR without any changes in the underlying positions; and
The dataset is updated on daily basis.
Statistically, the Group would expect to see losses in excess of VaR only 1 per cent of the time over
a one-year period. The actual number of excesses over this period can therefore be used to gauge
how well the model is performing.
A summary of the Banks VaR position for the trading portfolios as at the reporting date is as
follows:
30 June 2017 1 January 2017 to 30 June 2017
Bank Average Maximum Minimum
RM million RM million RM million RM million
Profit Rate Risk 2.44 1.68 3.29 0.59
Foreign Exchange risk 0.15 0.18 0.55 0.01
Overall 2.58 1.87 3.67 0.62
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Although a valuable guide to risk, VaR should always be viewed in the context of its limitations. For
example:
The use of historical data as a proxy for estimating future events may not encompass all
potential events, particularly those which are extreme in nature;
The use of a one-day holding period assumes that all positions can be liquidated or hedged in
one day. This may not fully reflect the market risk arising at times of severe illiquidity, when a
one-day holding period may be insufficient to liquidate or hedge all positions fully;
The use of a 99 per cent confidence level, by definition, does not take into account losses that
might occur beyond this level of confidence;
VaR is calculated on the basis of exposures outstanding at the close of business day and
therefore does not necessarily reflect intra-day exposures; and
VaR is unlikely to reflect the loss potential on exposures that might arise under significant
market movements.
The Group recognises these limitations by augmenting the VaR limits with other limits such as
maximum loss limits, position limits and PV01 limits.
Trading Positions
The Group controls the trading portfolio foreign exchange risk by limiting the non-Ringgit open
exposure to individual currencies and on an aggregate basis.
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BANK ISLAM MALAYSIA BERHAD
PILLAR 3 DISCLOSURE
AS AT 30 JUNE 2017
Sensitivity Analysis
Assuming that other risk variables remain constant, the foreign currency sensitivity for the Bank as
at reporting date is summarised as follows (only net open position for major currencies are shown in
its specific currency in the table below. For other currencies, these exposures are grouped as
Others):
The above amount consists of commissions from mixed halal/Shariah non-compliant merchants of
card business, interest received as well as rental purification from the Groups land that is being
used to facilitate bai inah based transaction. The income was channelled to charitable causes upon
approval by the Shariah Supervisory Council.
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