Bank Islam Malaysia Berhad: Integrated Annual Report 2021

Transcription

2. C O V E R R AT I O N A L E As the first full-fledged pure-play Islamic financial institution in the country , Bank Islam Malaysia Berhad (“BIMB”) is committed to advancing prosperity and progress for all our customers. Despite the unprecedented challenges presented by COVID-19, BIMB demonstrated its leadership by mobilising resources, leveraging on digitalisation to ensure business continuity, as well as reaching out to provide solutions to help those most impacted. From enhancing access to our services, providing f inancial help to SMEs as well as restructuring financings, we helped to alleviate f inancial diff iculties and ensured livelihoods were preserved. BIMB is also embarking on a five-year strategy roadmap, LEAP25 to deliver the promise of technology, redefine growth by fortifying our f ive business drivers: Social Finance, Wealth Management, Enterprises and Wholesale Banking, and Digital Bank. This will enable us to achieve organic growth as well as provide leadership in digital banking and social finance. Moving forward, BIMB will continue to focus on integrating the principles of Shariah, Value-based Intermediation (“VBI”) and ESG considerations to remain resilient in its pursuits. The cover design highlights BIMB’s reach – advancing prosperity to customers across all walks of life and economic segments. It also reflects BIMB’s foray into digitalisation of its products and services.
3. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 THE BANK THAT ADVANCES PROSPERITY FOR ALL As part of our efforts to create greater accessibility through technology , and in line with environmental efforts to go paperless, scan the QR Code with your smartphone to view this integrated annual report online. DEAR SHAREHOLDERS, WELCOME TO BANK ISLAM M A L AY S I A B E R H A D ’ S 2 0 2 1 I N T E G R AT E D R E P O R T
4. ABOUT THIS REPORT SCOPE AND BOUNDARY OF REPORTING This Integrated Annual Report (IAR) is produced and published annually and covers our financial and non-financial performance for the reporting period of 1 January 2021 to 31 December 2021 unless otherwise stated. CORPORATE BOOK CONTENTS •Provides a comprehensive overview of the Group’s performance for 2021 and the outlook for 2022 The report provides a complete and balanced review of primary activities of the Group, namely our overall performance and the delivery of initiatives towards achieving our goals, providing material information relating to our strategy and business model, operating environment, material risks, stakeholder interests, performance, governance and prospects. R E G U L AT I O N S C O M P L I E D • Malaysian Financial Reporting Standard • Companies Act 2016 • Bursa Malaysia’s Sustainability Reporting Guide • FTSE4Good Bursa Malaysia • Global Reporting Initiative G4 • Malaysian Code on Corporate Governance (MCCG 2021) The boundary of the report extends beyond financial reporting and includes non-financial performance, opportunities, risks and outcomes attributable to/or associated with our key stakeholders, which have a significant influence on our ability to create value. REPORTING FRAMEWORKS BIMB’s integrated reporting process, as well as the contents of this report are guided by the principles and requirements of the following: • International Integrated Reporting Framework (IIRF) • Malaysian Code on Corporate Governance (MCCG 2021) by Securities Commission Malaysia • Companies Act 2016 • Bank Negara Malaysia Corporate Governance Policy Our f inancial s tatement s for the Financial Year Ended 31 December 2021 have been prepared in accordance with: • Malaysian Financial Reporting Standards (MFRS) • International Financial Reporting Standards (IFRS) • Companies Act 2016 • Bank Negara Malaysia Policy Documents and Guidelines • Islamic Financial Services Act 2013 This report is supplemented by disclosures that can be accessed online via www.ba nkisla m.com CAPITALS STRATEGIC PILLARS MATERIAL MATTERS SP RE CC Financial Manufactured Sustainable Prosperity Real Economy CustomerCentricity Human Intellectual VBC CE D Values-based Culture Community Empowerment Digitalisation Natural Social and Relationship Responsible Finance Talent Enrichment Ethical Practice & Reporting Inclusive Growth Islamic Finance & Knowledge Sharing
5. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 MATERIALITY AND MATERIAL MATTERS FORWARD-LOOKING STATEMENTS This report aims to disclose information about matters that substantively affect our ability to create value over the short , medium and long-term and to deliver on our core purpose. A thorough assessment on material issues to BIMB was conducted in 2019. Material issues were identified based on an evaluation of how we create value, the impact of the external operating context on the value creation, the material interests of our stakeholders and the principal risks facing the Group. This IAR contains certain forward-looking statements relating to BIMB’s future performances and prospects. These statements and forecasts are based on current assumptions, judgements and involve uncertainties as circumstances may change. Various factors may cause actual results to differ materially from those expressed or implied by these forward-looking statements such as a number of emerging risks as well as other factors that could adversely impact our business and financial performance. As such, these forward-looking statements should not be construed as guarantees to BIMB’s future performance. The content of this report focuses on the issues, opportunities and challenges that are material to both our stakeholders and our business, which consequently impacts our performance. By applying the principle of materiality into our reporting disclosures, we present vital topics that influence the Group’s strategy in creating long-term value for our key stakeholders. APPROVAL BY THE BOARD BIMB’s Board acknowledges its responsibility in ensuring the integrity of this IAR, which in the Board’s opinion addresses material issues to the Group’s ability to create value and fairly presents BIMB’s performance for the year 2021. COMBINED ASSURANCE The report development process is supported by our robust internal control and good governance practices. Assurance for this report is provided by our Board of Directors (Board), supported by external verification by PwC Malaysia, our auditors for financial information and providers of limited assurance on selected non-financial information. This Annual Report for the year ended 31 December 2021 was approved by the Board on 15 April 2022, and signed on its behalf by: Tan Sri Dr. Ismail Haji Bakar Chairman H o w To N a v i g a t e O u r R e p o r t KEY RISK Credit Risk Information Technology (IT) Risk Market Risk Shariah NonCompliance (SNC) Risk Liquidity Risk Regulatory/ Compliance Risk STAKEHOLDERS Operational Risk Climate Risk Investors Employees Customers Government & Regulators Local Communities
6. inside this report 01 KEY MESSAGES 6 Message from the Chairman 12 Message from the Group Chief Executive Officer 02 OVERVIEW OF BANK ISLAM 22 23 24 25 Vision | Mission | TAAT Values Who We Are Our Presence How We Are Structured: Group Corporate Structured 26 What We Do: Core Businesses 28 2021 Key Highlights 28 Financial Highlights 29 Business Highlights 30 Awards & Recognition 32 Our Competitive Advantage 34 Significant Events 2021 03 VALUE CREATION AT BANK ISLAM 36 Our Approach to Value Creation 38Realising VBI 39 Harnessing Capitals 42 Our Value Creating Business Model 44 Stakeholder Engagement
7. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 04 07 A . STRATEGIC REVIEW 160 Corporate Governance Overview Statement 186 Additional Compliance Information 187 Board Audit & Examination Committee Report 193 Statement on Risk Management and Internal Control 209 Statement on Directors’ Responsibility MANAGEMENT DISCUSSION AND ANALYSIS 46Operating Environment & Key Market Trends 54 Material Matters 58 Key Risks and Opportunities 62 Strategic Roadmap: LEAP25 64 Strategic Performance Review B. PERFORMANCE REVIEW 72Financial Review from the Group Chief Financial Officer 76 5-Year Financial Summary 77 5-Year Financial Highlights 78 Financing by Contract 79 Financing by Segment 80 Simplified Statements of Financial Position 81 Statement of Value Added & Distribution 82 Quarterly Performance 83 Financial Calendar C. BUSINESS REVIEW 84 87 90 93 96 97 100 103 Consumer Banking Deposits and Cash Management Commercial Banking SME Banking Treasury and Markets Corporate Banking BIMB Investment Management BIMB Securities 05 SUSTAINABILITY 106 Sustainability Statement 06 LEADERSHIP 134 Corporate Information 136 Board Composition 137 Board of Directors’ Profile 143 Shariah Supervisory Council’s Profile 146 Management Team’s Profile 155 Heads of Subsidiaries’ Profile 156 Regional Managers’ Profile 158 Organisation Structure ACCOUNTABILITY 08 FINANCIAL STATEMENTS 211 Directors’ Report 218 Statement by Directors 219 Report of the Shariah Supervisory Council 225 Statutory Declaration 226 Independent Auditors’ Report 230 Statements of Financial Position 231 Statements of Profit or Loss 232 Statements of Other Comprehensive Income 233 Consolidated Statement of Changes in Equity 237 Statements of Cash Flow 241 Notes to the Financial Statements 375 Pillar 3 Disclosure 09 ADDITIONAL INFORMATION 435 Shareholdings’ Analysis 438 Properties Owned by BIMB Group 439 Directory 439 Directory of Main and Regional Offices 446 Ar-Rahnu Branches 447 SME Hub 448 Bureau De Change 449 Vehicle Financing Sales Hub 450 Subsidiaries of BIMB Group 10 ANNUAL GENERAL MEETING 451 Notice of the 39th Annual General Meeting 458 Statement Accompanying Notice of the 39th Annual General Meeting 459 Administrative Guide • Proxy Form
8. B A N K I S L A M M A L AY S I A B E R H A D Message from the Chairman 6
9. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability  Financial   Additional Information I N T H E N AM E O F AL L A H MOS T G R AC I O U S AN D M O S T MER C IFUL . AN D S ALAM S EJ A HTER A IN 2021, WE BECAME THE ONLY PUBLIC-LISTED, FULL-FLEDGED ISLAMIC FINANCIAL INSTITUTION IN MALAYSIA. TAN SRI DR. ISMAIL HAJI BAKAR Chairman 7
10. B A N K I S L A M M A L AY S I A B E R H A D MESSAGE FROM THE CHAIRMAN Dear Shareholders , On behalf of the Board of Directors, it gives me great pleasure to present to you Bank Islam Malaysia Berhad’s (BIMB) first Integrated Annual Report. This is my first statement for BIMB as a listed entity, since the completion of our restructuring exercise from our former parent company, BIMB Holdings Berhad (BHB). BIMB is now accorded full autonomy in undertaking and pursuing our corporate and business strategies, as Malaysia’s first full fledged pure-play Islamic financial institution on the Main Market of Bursa Malaysia. This is an exciting moment for BIMB as the listing provides an advantageous position for BIMB to capitalise on the growth in Islamic finance and the Islamic capital market, and reinforces our efforts to expand our customer base. With a market capitalisation of RM6.2 billion, we are well positioned to deliver our five-year business strategy roadmap, LEAP25, which would redefine our growth and enable us to work in new ways to create stakeholder value. 2021 was a year of renewed optimism, as well as uncertainties. What was expected to be a year of recovery has brought the world to a halt with new waves of COVID-19 variants weighing down on the crucial veins of the economy. From uneven economic recovery to unequal access to vaccines, from widening income inequalities to disruptions in education, the pandemic had a disproportionate impact on the vulnerable in 2021. Aligned with our vision as a Bank that Advances Prosperity for All, BIMB responded to the challenges faced by our customers and the community by going beyond financial performance, standing alongside each of them, offering them aid to ease their difficulties. ADVANCING PROSPERITY FOR ALL At BIMB, we are confident of our ability to create sustainable value for all our stakeholders. Central to this are our clear focus on meeting customers’ expectations, our strong market position and a full suite of Shariah-compliant product offerings. We have taken a considered approach in the development and delivery of products and services, taking into account societal needs, while ensuring the efficiency of our operations to continuously improve customer experience. We continue to enhance our offerings and services, in line with the evolving banking landscape. In 2021, we launched the DuitNow QR function on BIMB’s GO Mobile Banking App and GO Biz by Bank Islam, an app targeted at Small and Medium Enterprise (SME) and Micro, Small and Medium Enterprise (MSME) customers. Sharp shifts in consumer preference to transact online have prompted us to further accelerate our ongoing digitalisation initiatives. Our efforts were recognised when we were awarded the Most Helpful Bank during COVID-19 in Malaysia and fifth in Asia Pacific, by The Asian Banker in May 2021. We also ranked fourth out of 55 Malaysian brands on KPMG’s Customer Experience Excellence Survey 2021. DEFERMENT AND ASSISTED REPAYMENT SCHEMES PEMULIH COMMENDABLE FINANCIAL PERFORMANCE During the year under review, BIMB delivered a commendable performance on the back of higher fund based income and lower impairment losses. We recorded a Group Profit Before Zakat and Taxation (PBZT) of RM704.2 million, a decline of 3.3% mainly due to lower non-fund-based income and higher operating expenses. The Group has declared an interim dividend of 10.93 sen per share for the year. Our performance translates into an Earnings Per Share (EPS) of 21.87 sen and a Net Return on Equity (ROE) of 8.4% (after tax and zakat). Our sustained dividend payout is reflective of our unwavering efforts to withstand the year’s challenges, as we continue to leverage on our strong fundamentals to achieve significant milestones. 8 URUS Prihatin Flood Relief Programme Targeted Repayment Assistance PROVIDED ASSISTANCE TO OVER 154,000 RM23 CUSTOMERS INVOLVING BILLION
11. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability  Financial   Additional Information Throughout 2021, to facilitate recovery from the pandemic, BIMB also provide assistance to its affected customers through various deferment and assisted repayment schemes, such as PEMULIH, Targeted Repayment Assistance, URUS and our Prihatin Flood Relief Programme. Through these various deferment schemes and measures, BIMB supported over 154,000 customers, involving RM23 billion, to help them get back on their feet. BIMB also continued its focus on the socio-economic wellbeing of the country by sustaining income generation and the financial resilience of the B40 segment and asnaf-owned businesses facing the effects of the COVID-19 pandemic via our iTEKAD and BangKIT micro financing programmes. I am proud to highlight that we have exceeded our initial goal under LEAP25 helping 4,765 beneficiaries through our Islamic social finance initiatives within the first year. BIMB’s Sadaqa House has continued to make inroads among the public and its participating partners with more than RM3.3 million collected for the benefit of various causes and social projects. In 2021, we disbursed more than RM3.6 million in aid to 4,905 beneficiaries. To this end, we have played our role in helping Malaysians bounce back from a challenging climate, and we stand ready to do more in 2022 and beyond. KEEPING CUSTOMERS SAFE ONLINE BIMB’s continued focus on digitalisation and automation of its banking operational processes means that information security remains our priority. It gained particular urgency during the COVID-19 pandemic, when the use of digital platforms for banking transactions became a necessity. While we work to enhance our systems’ capability and stability, as well as making inroads into improving our customers’ access to our digital platforms, we have also taken measures to prevent unauthorised access to our customers’ personal information, ensuring they stay protected from unwarranted actions by undesirable parties. BIMB constantly reviews its security implementation to assess the vulnerabilities and control effectiveness, in addition to monitoring the latest developments in the information security threat landscape. We have made significant investments in updating our technology systems and platforms, and taken steps to establish the necessary policies, processes and procedures to enhance our general effectiveness in providing a truly secure banking experience for our customers. We also took the necessary steps to inculcate strong security awareness among our employees through frequent information security training programmes as an essential part of BIMB’s security effort. For BIMB to remain relevant and competitive in this digital age, we have been proactive in addressing the concerns of our customers and eliminating any threats that might compromise their interest. We continue to keep abreast of the latest local and global trends, as we seek to become a digitally-enabled bank, capable of providing innovative yet secure digital banking solutions, and superior customer experience. GREEN FINANCING OUTLOOK UNDER LEAP25 STRATEGY, WE AIM TO RAISE GREEN FINANCING TO 10 - 12% OF TOTAL PORTFOLIO BY 2025. 9
12. B A N K I S L A M M A L AY S I A B E R H A D MESSAGE FROM THE CHAIRMAN COMMITTING TO SUSTAINABILITY Building on our core strength as a pioneer in the Islamic banking and finance industry , we have been on a journey incorporating principles of Shariah, Value-based Intermediation (VBI) and ESG considerations in our products and service offerings. We are committed in the mobilisation of our six strategic objectives of Sustainable Prosperity, Values-based Culture, Community Empowerment, Customer Centricity, Real Economy and Digitalisation to position us in our next phase of growth and transformation. During the year, we took major steps to cement our leadership in the areas of Green Financing and Shariahcompliant ESG Investing, both identified as growth-drivers for our business. BIMB already has one of the highest exposures to Green Financing within the Malaysian banking industry, with Green Financing accounting for approximately 4% of our total financing, which is well above the 1-2% recorded by most Malaysian banks. We are working to further build on this strength under our LEAP25 strategy, to raise this to 10-12% of our current portfolio by 2025, establishing BIMB as a dominant player in Malaysia’s growth in Green Financing. We are also helping our customers to transition to greener lifestyles, by increasing financing to areas not within the conventional definition of Green Financing, ranging from the purchase of electric vehicles to financing for households and small businesses that are switching to solar power. Our approach to sustainability, Green Financing ESG-compliant financing and investing is part of comprehensive approach to growth, which recognises embracing ESG is not just the right thing to do, but also good for business. and our that it is ENHANCING CORPORATE GOVERNANCE BIMB is committed to upholding the highest standards of corporate governance, in line with the strong values that we hold as a company. During the year, we implemented several key policies and measures to not only align with regulatory requirements but also to meet the high expectations of our stakeholders. As part of Board’s commitment to effective stewardship, we undertook a comprehensive review of the Board Charter and the Terms of Reference of the Board and the Board Committees to ensure that they are up-to-date and in line with the latest recommendation of the Securities Commission’s Malaysian Code of Corporate Governance (MCCG). We welcome the 2021 update of the MCCG for companies to integrate sustainability considerations into their strategy, which is very much in line with our commitment to strengthen our sustainability governance, our corporate strategy and our determination to play a larger role as a responsible corporate citizen. We carried out a review of the Board succession-planning for the Group to ensure we meet the recommended best practices on the tenure of Independent Directors and the composition of Independent Directors. We also recently signed up as a Corporate Advocate of the Malaysian chapter of the 30% Club, a network of corporations that are working together to increase women’s participation in the boardroom. Our corporate advocacy in the Club will help us to leverage on best practices in implementing new diversity, equity, and inclusion (DEI) policies, in knowledge sharing and setting diversity targets, while contributing to the larger plan of promoting DEI in the Malaysian Islamic finance industry. PEOPLE AT THE CORE OF OUR TRANSFORMATION JOURNEY Our colleagues, from those in our head office to those at the frontlines of serving our customers and communities, remain our most valuable asset. BIMB’s Live Well programme which was introduced to promote our colleagues’ mental & 10
13. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability  Financial   Additional Information emotional wellness in 2020, was expanded to include physical, spiritual and financial wellness last year. The programme was established to assist employees in addressing their personal and work-related challenges that may adversely affect their job performance and personal well-being. By providing all 4,731 BIMB employees access to Naluri, a digital and customisable health solution, we have empowered our colleagues to manage their own mental and physical health in the most effective ways. BIMB has also offered support by providing employees the solutions, insights, tools, and access to relevant experts for them to seek professional help for their problems. The prolonged pandemic also presented us with an opportunity to embrace a hybrid workplace model that seamlessly combines remote and office work. We are committed to investing in technology to enable better efficiency and accessibility to services that will produce a more conducive working environment. HUMANE, our human capital management system introduced in 2021 has accommodated our evolving workforce needs. Being cloud based, it allows efficient access to data and information, streamlining our human capital management process, contributing to better talent recruitment, and improved learning and development experience for employees. The Group’s efforts to improve internal capabilities have been continuous. Our current focus on developing internal digital, leadership and professional certification aims to fill our people development gaps, helping to upskill and reskill them to keep abreast with the latest requirements of the finance industry. We accelerated digital literacy and adoption through an in-house Digital Upskilling Programme with the intention of nurturing our talent pool. With the establishment of our Digital Academy in 2021, we will continue to identify and build capabilities among our high potential talents, which will contribute to our succession planning and internal talent mobility efforts. All these are supported with continuous learning programmes of blended learning modules that go beyond the classroom. ACKNOWLEDGEMENTS At the end of a highly eventful year for BIMB, I would like to take this opportunity to express my deepest gratitude to BHB’s Board members and employees for their service and contribution over the years. They have played a vital role in maintaining BHB’s position as the premier and successful Islamic financial holding company in Malaysia, before handing over the torch to BIMB in October 2021. BHB’s investments and pioneering legacy have left an indelible mark in the Islamic financial industry, which has been the stepping-stone for BIMB to shape its future as a leading Islamic financial institution. My sincere appreciation to my colleagues on the Board and to BIMB’s senior leadership team. I speak for the entire Group that we are saddened by the loss of our beloved member of the Board, Puan Noraini Che Dan. Her contributions to BHB and BIMB were invaluable and integral to the successful listing of the Group. My gratitude also goes out to Encik Zahari @ Mohd Zin Idris who retired from the Board during the year, for his service and unwavering commitment. To all our stakeholders who have been an important part of our journey thus far, I thank you for your continued support and trust. And finally, my deepest appreciation goes to all our employees for the remarkable commitment they have shown to BIMB, living our TAAT values and setting us in a good position for our exciting journey ahead. Tan Sri Dr. Ismail Haji Bakar Chairman 11
14. B A N K I S L A M M A L AY S I A B E R H A D Message from the Group Chief Executive Officer BUILDING ON OUR CORE STRENGTHS , BIMB AIMS TO BE A CHAMPION IN OFFERING SHARIAH ENVIRONMENTAL, SOCIAL AND GOVERNANCE (SHARIAH-ESG) TOTAL FINANCIAL SOLUTIONS MOHD MUAZZAM MOHAMED Group Chief Executive Officer 12
15. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability  Financial   Additional Information 13
16. B A N K I S L A M M A L AY S I A B E R H A D MESSAGE FROM THE GROUP CHIEF EXECUTIVE OFFICER Dear Shareholders , THE MALAYSIAN ECONOMY EXPANDED BY 3.1%; SUPPORTED BY BNM MAINTAINING THE INTEREST RATE AT A RECORD LOW OF 1.75% THROUGHOUT THE YEAR, WITH THE LOW COST OF FUNDING SUPPORTING A REBOUND IN CONSUMPTION AND BUSINESS INVESTMENT Bank Islam Malaysia Berhad (“BIMB or “the Group”) continues to evolve as a business and 2021 was a pivotal year for us. In October, we became a public-listed company, giving the Malaysian public their first opportunity to invest in Malaysia’s only public-listed, full-fledged Islamic banking group. 2021 also marked the completion of the first year of our LEAP25 corporate strategy that sets-out our goals and pathway for delivering sustainable value for our shareholders as we navigate what is increasingly being called the Next Normal. OPERATING ENVIRONMENT Our transformation journey in 2021 continued against a challenging backdrop, as the Malaysian economy faced renewed headwinds f rom the resurgence of COVID-19 cases and the banking industry itself continuing to undergo a fundamental transformation. The year began with forecasts of robust economic growth at the domestic and international levels. Bank Negara Malaysia (“BNM”) projected that Malaysia’s GDP would grow by 6% 7.5%, in 2021, a marked turnaround f rom the 5.6% contraction in 2020. The recovery was underpinned by rising vaccination rates, the easing of movement restrictions, the rebound in economic activity and the continued impact of the government’s stimulus spending. This favourable scenario was projected to support the performance of the Malaysian banking sector. However, the strong growth in the domestic economy was undermined by the emergence of the highly-infectious Delta and Omicron variants of COVID-19 in the second-half of the year. The resulting restrictions on movement and economic activity led to softer economic conditions. Despite these challenges, the Malaysian economy expanded by 3.1% for the year as a whole. The expansion was supported by BNM maintaining the interest rate at a record low of 1.75% throughout the year, with the low cost of funding supporting a rebound in consumption and business investment. However, the low-rate environment has also led to compressed interest rate margins across the banking industry, which has negatively impacted the banking sector’s profitability. Notwithstanding these challenges, the Malaysian banking industry showed remarkable resilience during the year. Financing growth in 2021 returned to pre-pandemic levels, rising by 4.1%, up from the 3% financing growth the year 14
17. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability  Financial   Additional Information Sustainable Prosperity Values-based Culture SIX PILLARS OF LEAP25 Digitalisation Real Economy before. At the same time, the ratio of non-performing financings in the Malaysian banking sector also declined to 1.4% in 2021, from the 1.6% recorded the year before. The improvement was driven by the household segment as banks continued to support viable borrowers facing temporary financial diff iculties by offering repayment assistance packages. BIMB continued to outperform the banking sector as a whole in both key areas. Our non-performing financing ratio for the year stood at 0.96%, even as our financing growth for the year rose by 6.4%. The strength of our performance in these areas reflects the effectiveness of the LEAP25 growth strategy that we have implemented. Community Empowerment CustomerCentricity Alongside the unique challenges caused by the COVID-19 pandemic, we have seen the acceleration of larger trends that are reshaping the banking industry itself. The shift to digital banking, the disruption caused by the rise of FinTech firms and the growing pressure for financiers to incorporate ESG considerations into their lending practices are reshaping the banking landscape itself. STRATEGY AND TRANSFORMATION At the heart of our strategy is our commitment to our values and purpose as an Islamic banking institution. The strong ethical framework gives us a major asset as the world embraces values-based f inancing. Building on our core strengths, BIMB aims to be a champion in offering Shariah Environmental, Social and Governance (“Shariah-ESG”) total financial solutions and to establish its leadership in social finance and digital banking. Our roadmap for delivering these goals is laid-out in our LEAP25 corporate strategy plan, which was launched at the end of 2020. LEAP25 sets clear targets for the next f ive years, of growing our asset size to over RM100 billion, doubling our ESG-rated financing, sustaining superior industry Return-on-Equity, increasing our nonfund-based income contribution, creating a positive social impact and retaining high-performing talent. These targets are anchored by the six pillars of Sustainable Prosperity, Values-based Culture, Community Empowerment, Customer-Centricity, Real Economy and Digitalisation. To achieve this aim, we are configuring our business around delivering cuttingedge products, enhancing customers’ experience, accelerating our digital initiatives and deepening our strategic collaborations. As we navigated the challenging backdrop of 2021, we actively executed growth strategies that are aligned with our LEAP25 targets. During the year, we expanded our Green Financing portfolio, actively pursued the non-Muslim consumer market and accelerated digitalisation across all areas of our business and operations. The effective execution of our strategy had a visible impact on our business performance and we aim to pick up the pace of transformation going forward. While we have now entered a new phase of our growth strategy, our intention remains the same – to create sustainable value for our shareholders and delivering on our aim of being the Bank that Advances Prosperity for All. 15
18. B A N K I S L A M M A L AY S I A B E R H A D MESSAGE FROM THE GROUP CHIEF EXECUTIVE OFFICER OUR PERFORMANCE I am pleased to share with you that BIMB delivered a commendable set of operational and f inancial results , despite the challenging operating environment and growing digital disruption in the banking landscape. Total revenue for the year stood at RM3,167.8 million. This marked a decline of 5.2% from 2020, reflecting the subdued economic environment and the continued impact of low interest rates. For 2021, we achieved a Profit Before Tax and Zakat (PBZT) of RM704.2 million, which was 3.3% lower than the previous year. The decrease in PBZT during the year was mainly due to lower non-fund-based income, which was attributable to lower net gain from the sale of investment securities, and higher operating expenses. The higher operating expenses were inevitable as we increased our investment in technological inf rastructure for our digitalisation agenda. This was offset by a lower modification loss arising from the financing moratorium granted to customers. SEGMENTAL PERFORMANCE The impact of our transformation strategy was visible across all areas of our business segments during the year, as we continue to focus on capturing new markets, delivering a truly engaging customer experience and leveraging on technology to drive growth. Our Consumer Banking business grew strongly, despite the challenging environment. Consumer Banking remains our biggest earner and we have continued to innovate in this area, driving its continued growth. Net income for the segment rose by 13.4% to RM1.2 billion in 2021. The rise was 16 SEGMENTAL NET INCOME CONSUMER BANKING: RM1.2 billion CORPORATE & COMMERCIAL RM415.6 million TREASURY RM241.4 million driven, mainly, by higher net fund-based income during the year. Our Consumer Banking business continued to build on its core strengths, with our market share rising from 4.7% to 4.8%. Growth in our Consumer Banking financing portfolio was driven, mainly, by the rise in home financing and this trend is set to continue. Malaysia has a young, favourable demographic that supports continued household formation, which will underpin demand for our Islamic home financing products. Our strategy for Consumer Banking recognises that we need to continue diversifying our offerings to keep delivering growth. Among the key strategies that we implemented in 2021 was to expand our targeting of the nonMuslim market segment and actively work to grow our Green Financing portfolio. Competition for these markets remains intense and we implemented key measures to drive growth, including simplifying our financing process by implementing the Consumer Financing Process Review. We also intensif ied digitalisation for lead generation via digital platforms to deliver more convenient and personalised services to customers. Our Consumer Banking saw minimal demand for assistance under the Financial Management and Resilience Programme (“URUS”) programme during the year. As massive floods hit the country in late November 2021, BIMB responded by launching its Prihatin Programme for Flood and Disaster Relief Facility (“DRF”) to assist flood-affected individuals and business f inancing customers in need of help. In line with our values, we will continue to offer financial support to customers in need, as parts of society continue to feel the strain from the impact of COVID-19. Our Corporate and Commercial Banking business delivered a strong performance as our customer-centric approach, strong commercial relationships and focus on growth sectors allowed us to capitalise on improvements in the national economy. Net income for the year rose by 6.5% to RM415.6 million. Throughout the year, Commercial Banking acted decisively to support our existing customers affected by the pandemic, including through assistance in instalment deferment, as well as by the rescheduling and restructuring of facilities. These measures were in line with the f inancial assistance programm es introduced by th e Government to support the national economy. The performance of our Commercial business was negatively impacted by the overhang in the property market in 2021. However, we continued to develop new opportunities in property f inancing by targeting growing sectors, such as affordable housing. We also expanded our Green
19. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability  Financial   Additional Information Financing initiatives beyond renewable energy and towards the wider green technology and green economy ecosystem. These will remain key growth areas for our Corporate and Commercial Banking business as we move forward. Commercial Banking will continue to build on our existing strengths while executing strategies to capture market share in selected high-value and highgrowth target segments. Our Treasury business registered net income of RM241.4 million for the period. The f igure was 47.1% lower than the previous year, reflecting the impact of the challenging economic environment. The decline in Treasury’s net income for 2021 was attributable to lower net gain f rom the sale of investment securities. Going forward, Treasury will maintain a cautious approach to trading activities and remain prudent in its investment portfolio management and rebalancing activities. Our focus will be on growing fund-based income potential and implementing strategies to enhance yield pick-up. ACCELERATING DIGITAL TRANSFORMATION Digitalisation is one of the six pillars supporting our LEAP25 growth strategy and we are focused on enhancing our digital offerings, so that we are not just on par with our peers and competitors but emerge as a clear leader in digital banking. Central to our digital strategy is the effective leveraging of the vast amounts of data that we generate, in order to deliver a seamless and hyperpersonalised customer experience across all our channels. GO by Bank Islam NUMBER OF ACTIVE USERS 849,000 79% TOTAL NUMBER OF FINANCIAL TRANSACTIONS 47 million The banking landscape is evolving rapidly with the growth of online banking, e-payment systems and the rise of the FinTech companies, as consumers embrace online banking and e-commerce. The shift towards online transactions has been greatly accelerated by the pandemic and is forcing businesses to develop new strategies that adapt to and anticipate the changes, and BIMB has taken decisive action to capitalise on this opportunity. This shift in consumer preference and the enhancements that we have already made to our digital offerings have driven rapid growth in our digital operations, with more than 90% of our transactions now conducted through electronic channels. The number of customers using our internet banking rose by 22% during the year, to 1.5 million, while the number of internet banking transactions grew even faster, rising by 50%. 17
20. B A N K I S L A M M A L AY S I A B E R H A D MESSAGE FROM THE GROUP CHIEF EXECUTIVE OFFICER The growth in our mobile banking services has been even more impressive . Our multiple award-winning GO by Bank Islam mobile banking app saw massive growth as we continued to rollout new features. The number of active users on GO by Bank Islam increased by 79% in 2021, to reach 849,000. At the same time, the total number of transactions on GO by Bank Islam tripled to reach 47 million, far exceeding our target of 21 million transactions for the year. As we move forward, we will continue to build on this momentum by accelerating the roll-out of new features on GO by Bank Islam. We further extended our mobile banking offerings with the launch of the GO Biz by Bank Islam mobile app in July, which is targeted at SMEs and micro businesses. The app allows small merchants to manage their day-to-day business quickly and securely f rom their mobile devices. The app has been well-received and we on-boarded more than 7,000 merchants by the end of the year. Even as we have grown our digital banking services, we have seen the traditional banking and financial model face serious disruption from the rise of the FinTech start-ups. The FinTech’s have rapidly leveraged on their greater agility and an accommodating regulatory landscape to drive innovation in the industry. At BIMB, we see this as an opportunity and we have actively embraced collaboration with selected FinTech’s in order to sharpen our own digital delivery. We aim to amplify the impact of these collaborations by leveraging on our unique advantages, credibility, large customer base, access to huge amounts of data and financial resources. Above all, we aim to enhance the impact of these collaborations by leveraging on the unique branding and position that we hold as Malaysia’s leading Islamic bank. 18 Our digital growth strategy goes far beyond collaborations and enhancements. In 2020, we established the Centre of Digital Experience, or CDX, to drive innovation by experimenting with new business models and technology, and to assess the feasibility of their adoption by BIMB. CDX has embraced the opportunities for disruptive innovation that have arisen during the pandemic. We recognise that the shift to new technologies carries execution and security risks and we have acted to minimise these risks by ring-fencing CDX from the rest of BIMB. We have also continued to leverage on digitalisation to drive operational efficiency across our company through increased process automation. A key initiative during the year was the accelerated implementation of Robotics Process Automation, which has allowed our staff to automate business processes on their own, cutting down on the number of work hours spent on routine tasks.
21. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability  Financial   Additional Information LOOKING AFTER OUR PEOPLE AND THEIR DEVELOPMENT Our ability to effectively execute our growth and transformation strategy is dependent on having the right people in our workforce. To deliver on this, we have aligned our overall workforce strategy with the aspirations of the Group’s LEAP25 strategic plan. For BIMB to progress and remain relevant in the face of the ever-challenging environment and increasingly competitive marketplace, developing our peoples’ capabilities, as well as creating the appropriate culture and values are of utmost importance. Digitalisation is at the heart of our corporate transformation and to ensure that our people are armed with the right skills to continue contributing to the continued growth of the bank, we have stepped-up investment in digital training. In 2021 we established our inhouse Digital Academy and expanded our Digital Upskilling Programme, which offers training and certification, as we work to build a workforce that is both customer-focused and digitally-savvy. and keep the right people. To that end, we continue to work hard on positioning BIMB as an employer of choice and our success in this area is seen in the consistently high rankings that BIMB receives in graduate employment surveys. EMBEDDING SUSTAINABILITY INTO OUR BUSINESS Our commitment to sustainability is deeply embedded in our business model as an Islamic bank and value-based intermediary. Islamic finance and ESG investing offer complementary capital-raising and investment approaches with many shared principles, such as being a good steward to society and the environment. This strong confluence of principles allows us to use a market-based approach to supporting our sustainability goals. As a key part of delivering this goal, BIMB is working to integrate a comprehensive ESG framework into our credit assessment process, which we aim to implement in 2022. One of the key drivers for our business growth and achieving our sustainability goals is our focus on growing our Green Financing portfolio, which stood at more than RM2 billion at the end of 2021. Much of this financing has been directed to the Renewable Energy Green Building sector, thus far. As we move forward, we are now actively aiming to expand our presence in the wider green economy ecosystem, with a focus on mini-hydro and solar farm projects. Digitalisation is also the key in us being able to better serve our employees. The implementation of HUMANE is specifically geared towards fulfilling our human capital needs via a cloud-based self-service digital platform. With a userfriendly interface, the platform gives our employees the ability to manage their training progression as well as access career-related details such as payroll information, benefits and leave entitlements. Competition for top talent remains fierce, and BIMB continues to refine our recruitment and reward structures to ensure that we are able to attract 19
22. B A N K I S L A M M A L AY S I A B E R H A D MESSAGE FROM THE GROUP CHIEF EXECUTIVE OFFICER A key concern of Islamic finance is to eliminate poverty and serve human welfare , which aligns strongly with the objectives of the UN’s Sustainable Development Goals (“UNSDG”). We took a landmark step in this direction during the year, when BIMB Investment launched Malaysia’s first Waqf Featured Unit Trust Fund in March 2021. The Fund is an inclusive economic instrument based on philanthropic principles that aims to provide underserved members of society with access to quality essential services and is recognised as a Qualified Sustainable and Responsible Investment (“SRI”) Fund under the Securities Commission (SC) Guidelines on Sustainable and Responsible Investment Funds. With its launch, BIMB Investment became the first fund management company to structure and design a waqf unit trust fund following the introduction of the Waqf-Featured Fund Framework by the SC in November 2020. As we move forward, we will continue to innovate in the area of social finance, not just because it makes good business sense, but also because it is an essential part of our identity as an Islamic banking and financial group. Alongside integrating ESG considerations into our business, we are also working to reduce the negative environmental impact of our operations. We have launched a green branch initiative that will see the introduction of solar panels, rainwater harvesting, energy efficient lighting systems and auto sensors at selected BIMB branches. The concept will be trialled at our Temerloh branch. OUTLOOK BIMB anticipates a stronger performance in the year ahead, supported by a rebound in the Malaysian economy and higher growth in our targeted financing areas and we have actively positioned ourselves to capitalise on the continuing recovery. 20 BNM forecasts the Malaysian economy to grow at 5.5% - 6.5% in 2022. The growth of the economy will be supported by the pump-priming impact of Budget 2022. The total budget of RM332.1 billion, which includes targeted spending programmes, will have a strong multiplier effect across key sectors of the economy. Additionally, the further reopening of international borders will also boost Malaysia’s vital tourism industry, with strong positive spillover effects on other key sectors of the economy. In addition, the launch of the government’s 12th Malaysian Plan will further catalyse growth over the period 2021 to 2025. The plan emphasises growth in high impact projects in infrastructure, technology, and efforts towards greening the economy. Under the Plan, the contribution of renewable energy within the national energy mix is set to increase, which will support our push to expand our Green Financing portfolio. The national economy will also continue to benefit from the prevailing low interest rate environment. Many analysts expect BNM to maintain its Overnight Policy Rate (“OPR”) at the current record low of 1.75% throughout the first-half of 2022, and see the growing possibility of a rate-hike in the second half of the year, in line with the global trend towards monetary tightening.
23. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability  Financial   Additional Information The projected rebound, however, will not mean a return to the status-quoante and BIMB is actively positioning itself to capitalise on key trends that will define the next normal. Sustainability considerations will continue to move to the centre of business and f inance, with the SC integrating them into their latest updates to the Malaysian Code of Corporate Governance and BNM placing the transition to a greener economy at the heart of its new five-year Financial Services Blueprint 2022 – 2026. We welcome these initiatives as they play to our strengths and are aligned with our own business strategy. Competition in the area of Green Financing will intensify as banks increase the target size of their green portfolios. However, we believe that our strong track record in Green Financing, deep network of relationships in the Malaysian corporate world and our established position as a values-based lender gives us a competitive edge in this area. Malaysia’s economic rebound will also be supported by continued global growth, with the International Monetary Fund (IMF) projecting that world economy will grow by 4.4% in 2022. Key domestic industries, such as manufacturing and services, are set to benefit from the global economic recovery as Malaysia is highly integrated into global supply chains. Questions about the strength of the global recovery persist, though. The ongoing disruption in global supply chains, rising inflation and energy prices, and growing geopolitical tensions centred on Eastern Europe all add elements of uncertainty to the global growth projections. Notwithstanding these risks, 2022 looks set to be a year of continued recovery. One of the most lasting impacts of the COVID-19 pandemic has been the growth of digitalisation. The digital economy accounted for 22.6% of Malaysia’s GDP by the end of 2021, but is projected to grow to 25.5% of GDP by 2025, driven by a rise in e-commerce and digital finance. To capitalise on this opportunity we will continue to invest in ensuring that we have the right people, the right technology and the right strategy to deliver the customised solutions that digital customers demand. customer-centricity at the heart of our business, widening our offerings and embedding digitalisation into all areas of our business and operations. This is how we will unlock new growth opportunities and this is how we will continue building sustainable value for our stakeholders. ACKNOWLEDGEMENTS Firstly, I wish to thank our customers for the support that they have shown us as we continue our transformation journey. I would also like to express my appreciation to our shareholders, who have placed their trust in us. We will continue working to be worthy of their confidence. I wish to express my particular gratitude to our Chairman and Board of Directors for their effective stewardship of our company as we navigated the challenges of the last year. I also wish to thank my colleagues in the BIMB leadership team for the excellent job that they have done. I look forward to continuing to work with you in the year ahead. Finally, I wish to express my gratitude to all members of our extraordinary workforce. It is your dedication that drives our success. MOHD MUAZZAM MOHAMED Group Chief Executive Officer In conclusion, as we move forward, BIMB is focused on our goal of being The Bank that Advances Prosperity for All. To deliver on this, we will continue to accelerate the transformation of our company in line with our LEAP25 strategy by putting 21
24. B A N K I S L A M M A L AY S I A B E R H A D VISION THE BANK THAT ADVANCES PROSPERITY FOR ALL OUR BRAND PROMISE MISSION TO PROVIDE SOLUTIONS THAT DELIVER VALUE ASSURING TRUST DELIVERING VALUE TAAT Values Think Customer •• We ensure customer value is central to all the decisions we make •• We serve our customers with integrity, care and consideration •• We aim to exceed our customers’ expectations 22 Act with Integrity •• We adhere to our religious, moral and ethical principles •• We strive to do what is right at all times in accordance with laws and regulations •• We treat each other with respect and honesty Advance Beyond •• We strive to constantly improve and innovate all parts of our business •• We respond and adapt quickly to possibilities •• We embrace curiosity, learning and new ideas Take Charge •• We are self-driven and will always step up to overcome any challenges •• We work as one and make things happen together •• We act responsibly and with courage
25. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Message     Overview    Value Creation   MDNA  Sustainability  Leadership  Accountability  Financial   Additional Information WHO WE ARE BIMB is Malaysia’s first public listed Islamic Bank on the Main Market of Bursa Malaysia Berhad. Established in July 1983 as Malaysia’s first Islamic Bank, BIMB has 141 branches and more than 900 self-service terminals nationwide. As a fullfledged and pure-play Islamic bank, BIMB provides banking and financial solutions that strictly adhere to the Shariah rules and principles and are committed to the ideals of sustainable prosperity and ESG values. The core subsidiaries of the BIMB Group are pioneers in various Islamic financial services, including investment and stockbroking, namely BIMB Investment Management Berhad and BIMB Securities Sendirian Berhad. At BIMB, we are driven by our purpose to create opportunities and make lives better for everyone. We do this by offering end-to-end financial solutions that fulfil our customers’ diverse needs and provide the platform for our stakeholders, including our people, investors and communities, to prosper. As the leading and pioneering Islamic Bank in Malaysia, we bring a unique perspective to the financial landscape, with a commitment to nurturing responsible growth and progress. Using our capability, expertise and experience, we help those we serve achieve success and ultimately build a sustainable future for all. TOTAL EMPLOYEES MARKET CAPITALISATION RM6.2 billion REVENUE RM3.2 billion 4,731 employees TOTAL CUSTOMERS 4.4 million DIVIDEND PAID 10.93 sen PROFIT BEFORE ZAKAT & TAX RM704.2 million 23
26. B A N K I S L A M M A L AY S I A B E R H A D OUR PRESENCE The first Islamic Bank established in Malaysia and Southeast Asia Northern Region 29 Branches Eastern Region 27 Branches 141 Branches Southern Region 26 Branches Central Region 46 Branches East Malaysia 13 Branches Total of Self-service Terminals (SST) Nationwide 947 24 Cash Recycler Machines 496 Automated Teller Machines 451
27. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Message     Overview    Value Creation   MDNA  Sustainability  Leadership  Accountability  Financial   Additional Information HOW WE ARE STRUCTURED AS AT 31 MARCH 2022 48.28% 13.52% 6.63% 4.40% 27.17% TABUNG HAJI LEMBAGA TABUNG HAJI EMPLOYEES PROVIDENT FUND BOARD AMANAH SAHAM BUMIPUTERA OTHER SHAREHOLDERS PERMODALAN NASIONAL BERHAD BANK ISLAM MALAYSIA BERHAD 100% 100% BIMB INVESTMENT MANAGEMENT BERHAD 100% AL-WAKALAH NOMINEES (TEMPATAN) SENDIRIAN BERHAD 100% BIMB HOLDINGS SDN BHD 100% BANK ISLAM TRUST COMPANY (LABUAN) LTD FARIHAN CORPORATION SDN BHD 100% 100% BIMB SECURITIES (HOLDINGS) SDN BHD SYARIKAT AL-IJARAH SENDIRIAN BERHAD (11 2 3 3 0 -P ) 51.0% 100% securities BIMB SECURITIES SDN BHD 49.0% 100% 100% BIMSEC NOMINEES (ASING) SDN BHD BIMSEC NOMINEES (TEMPATAN) SDN BHD BIMB OFFSHORE COMPANY MANAGEMENT SERVICES SDN BHD 25
28. B A N K I S L A M M A L AY S I A B E R H A D WHAT WE DO CORE BUSINESSES CONSUMER BANKING Comprehensive suite of services that include deposit and personal investment products , bank card solutions, financing products including personal, home and vehicle, and transactional banking services. Strengths and Differentiation: Competitive financing rates in the market Convenience for financing customers through our “Doorstep Banking” service COMMERCIAL AND SME BANKING A wide range of business financing facilities, catering to commercial vendors and SMEs, which include vendor financing, business premises financing and contract financing service. 26 Substantial public impression for Al-Awfar product that generates good returns through attractive prizes. Award-winning debit card solutions with appealing co-branding initiative. Strengths and Differentiation: Customised financing facilities that cater to Strong rapport with strategic partners for Innovative offers for different Provision of special programmes to nurture SME entrepreneurs differing client needs customer appetite. comprehensive financial solutions
29. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Message     Overview    Value Creation   MDNA  Sustainability  Leadership  Accountability  Financial   Additional Information CORPORATE BANKING AND TREASURY Full range of wholesale banking solutions including investment banking and financing facilities, money and capital markets, currency conversion and advisory services. BIMB INVESTMENT MANAGEMENT (SUBSIDIARY) A full-fledged fund management company with a comprehensive range of investment solutions, including advisory. Sustainable and responsible investment solutions that are fully compliant with Shariah rules and regulations, and in accordance with ESG principles. Strengths and Differentiation: Highly ranked team of qualified professionals with required competency to deliver the desired financial results Solid experience in facilitating projects as the Lead Arranger and Book Runner Technical expertise in structured and project financing, especially in the green and renewable energy sector. Strengths and Differentiation: bank-backed asset management company in Malaysia to offer comprehensive Shariah-ESG funds and investment solutions. The only BIMB Arabesque-i Global Dividend Fund 1 consistently ranked first for the past three years in terms of Total Overall Returns and Consistent Return, and currently the largest Shariah-ESG Global Equity fund in Malaysia. advanced AI technology and Big Data analytics methodology makes for efficient management of funds, leading to consistently better returns and responsible investment portfolio. Adoption of 27
30. B A N K I S L A M M A L AY S I A B E R H A D 2021 KEY HIGHLIGHTS FINANCIAL HIGHLIGHTS PROFIT BEFORE ZAKAT AND TAX RM704 .2 million RM80.2 RETURN ON EQUITY CASATIA RATIO (2020: RM 728.2 million) billion (2020: RM 74.6 Billion) 11.1% (2020: 12.1%) 39.6% GROSS IMPAIRED FINANCING RATIO ASSET GROWTH 0.96% (2020: 0.67%) REVENUE CONTRACTION -5.2% (2020: -8.3%) 28 TOTAL ASSETS (2020: 36.1%) 7.4% (2020: 10.4%) FINANCING GROWTH 6.4% (2020: 10.5%)
31. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Message     Overview    Value Creation   MDNA  Sustainability  Leadership  Accountability  Financial   Additional Information BUSINESS HIGHLIGHTS cloud -based HUMANE, became the first bank in Malaysia to implement a cloud-based self-service human capital management solution Launch of GO Biz by Bank Islam app for business users Crowned as the Strongest Islamic Retail Bank in Malaysia 2021 by Cambridge IFA Expansion of BangKIT microfinancing facility to youth and university students entrepreneurs First bank in Malaysia to deploy mobile onboarding (MOB) channel for retail customers 29
32. B A N K I S L A M M A L AY S I A B E R H A D BUSINESS /SUSTAINABILITY/CORPORATE SOCIAL RESPONSIBILITY (CSR) RELATED •Halal Financial Excellence Award, World Halal Excellence Awards 2021 • Best Islamic Finance Awards 2021 • Best Islamic Asset & Fund Manager •Best Risk-Adjusted Returns (ESG Principle Investments Only) • Malaysia National Business Awards 2021 • Global Finance - World’s Best Islamic Digital Banks 2021 •Global Banking & Finance - Most Innovative Islamic Retail Banking App Malaysia 2021 30
33. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Message     Overview    Value Creation   MDNA  Sustainability  Leadership  Accountability  Financial   Additional Information AWARDS & RECOGNITION • Payments Network Malaysia (PayNet) 2021 • Best FPX Bank • Best FPX Acquirer • Best JomPAY Acquirer EMPLOYER/EMPLOYEE RELATED • 2021 Most Preferred Graduate Employer, Graduates’ Choice Award • Top 5 in Banking •Best FinTech Robo Mobile Applications Malaysia, The Asset ASEAN Awards • Best Invest Mobile Application • Malaysia’s Most Preferred Employer, Graduan Brand Awards 2021 •2nd Runner Up, Banking & Finance • Lead Manager Award 2020, RAM Ratings • Most Inspiring Leader, Employee Experience Awards 2021 •The Company of The Year Awards for Outstanding Community Support 2021, CSR Malaysia 31
34. B A N K I S L A M M A L AY S I A B E R H A D Banking on Shared Success : Advancing Prosperity for All OUR COMPETITIVE ADVANTAGE The Region’s First FullFledged Islamic Banking Institution Robust Shariah Governance Framework 32
35. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Message     Overview    Value Creation   MDNA  Sustainability  Leadership  Accountability  Financial   Additional Information Sizeable Green Financing Portfolio, targeted to double Shariah-ESG assets by 2025 Dedicated Centre of Social Finance - Group Financial Inclusion Malaysia’s Strongest Islamic Retail Bank for 2021 (accorded by Cambridge IFA) World’s 3rd Largest Global Shariah-ESG Equity Fund Values-based Culture, with emphasis on Shariah Goals and VBI Principles Malaysia’s Largest Network of Dedicated Islamic Banking Channels Strong balance sheet and performance track record, with a AA3/Stable/P1 rating by RAM Ratings 33
36. B A N K I S L A M M A L AY S I A B E R H A D SIGNIFICANT EVENTS 2021 11 Jan Contribution of RM400 ,000 from Sadaqa House’s fund for humanitarian and flood relief efforts in several affected states. 24 Aug Virtual MoU signing ceremony on the collaboration between BIMB and SME Corporation Malaysia. 34 8 Feb 14 Feb 17 Feb Deployment of end-to-end mobile onboarding channel to provide door-step banking experience. MoU signing ceremony with Noor Luminous to offer banking facilities through digital application called TheNoor. Appointment of TM ONE as digital partner to accelerate BIMB’s digital transformation. 8 Oct 2 Dec 6 Dec BIMB became the first pure-play, full-fledged Islamic financial institution listed on the Main Market of Bursa Malaysia, taking over the listing status from BHB. Launch of “Pay & Win with DD (DirectDebit)” campaign in collaboration with PTPTN. MoU signing ceremony with the Bumiputera Agenda Steering Unit (“TERAJU”) for the Awqaf Ummah Financing Programme for the provision of waqf project’s financing.
37. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Message     Overview    Value Creation   MDNA  Sustainability  Leadership  Accountability  Financial   Additional Information 25 Mar 22 Mar 5 Apr MoU signing ceremony with Malaysian Youth Council to extend BangKIT microfinance facility to the youth entrepreneur segment. Launch of BIMB–ARABESQUE Global Shariah Sustainable Equity Fund (BGSEF). 9 Apr Launch of BIMB Investment’s Makmur MyWakaf Fund. Launch of JKMPay, a cashless payment assistance project by Social Welfare Department (“JKM”). 29 June 9 May 22 Apr MoU Signing Ceremony with Halal Development Corporation Berhad for the introduction of GO Halal Fund. Contribution of 11 housing units to selected asnaf in Kuala Lumpur through Baiti Jannati (My Home, My Paradise) programme in collaboration with Kuala Lumpur City Hall (“DBKL”) and the Ministry of Federal Territories. Media briefing on the progress of the Group’s restructuring plan and LEAP25 fiveyear business strategy. 31 Dec Collaboration with Universiti Teknologi Malaysia (UTM) to provide solar-powered electric supply to a fishing community in Johor. 31 Dec MoU signing ceremony with Malaysia External Trade Development Corporation (MATRADE) for the provision of customised solutions for SMEs and exporters in conjunction with Malaysia International Halal Showcase (“MIHAS”) 2021. 35
38. B A N K I S L A M M A L AY S I A B E R H A D OUR APPROACH TO VALUE CREATION 1 ANALYSE OPERATING ENVIRONMENT See pages 46 to 53 We constantly monitor and evaluate our operating environment to understand what is needed to enable us to thrive in today ’s dynamic banking environment. Key market trends affecting BIMB’s business are: STAKEHOLDER ENGAGEMENT to 45 We conduct regular engagements with stakeholders in order to gain insights into their key needs and interests and to respond accordingly. •Moderate Economic Recovery • Interest Rates and Other Financial Consequences •Digitalisation • Workforce Challenges Customers Local Communities Employees Investors  Government & Regulators • Sustainability Concerns and Climate Change •Geopolitics 2 See pages 44 FORMULATE MATERIAL MATTERS See pages 54 to 57 We apply the principle of materiality by focusing on the issues, challenges and opportunities that materially impact our business and our ability to create value for our stakeholders. Responsible Finance Ethical Practice and Reporting Inclusive Growth Islamic Finance and Knowledge Sharing Talent Enrichment 3 EXECUTE CAPITAL RESOURCES 36 See pages 42 to 43 Financial We drive capital appreciation for sustainable growth by reinvesting income and earnings that we generate back into our core business. Intellectual We promote a values-driven culture and develop knowledge-based intangible assets that sustain our competitive edge in the market. Manufactured We develop and manage a broad range of physical assets and channels that enable us to deliver financial services and meet our stakeholders’ needs. Human Our people are at the heart of our organisation. We nurture the skills and knowledge of our employees and have built an inclusive culture that enables them to drive our growth.
39. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability  Financial   Additional Information Our success as a business is closely linked to the progress of the people, communities and businesses we serve; and as a stakeholder-centric organisation, BIMB strives to create value for everyone impacted by our business. We deliver this through our integrated model that recognises the connectivity and interdependency of the many factors that impact our ability to create stakeholder value, both now and into the future. This section describes our value creation story, which encompasses a range of factors, including our operating environment, stakeholder expectations, the capitals we utilise, our responses to the risks and opportunities that arise, and the overarching strategy that we have implemented. RISKS & OPPORTUNITIES See pages 58 to 61 We maintain a robust risk management framework that enables us to mitigate risks and capitalise on the opportunities that we encounter in the course of business, and which underpins our effective value creation model. Risks identified: Credit Information Technology (IT) Market Shariah Non-Compliance (SNC) Liquidity Regulatory/Compliance Operational Climate STRATEGY See pages 62 to 71 We have develop e d a comprehensive corporate strategy that incorporates our b u s in e s s o b j e c t i v e s an d stakeholder needs, as well as clear performance benchmarks, to drive our growth and create sustainable value. Sustainable Prosperity Values-based Culture CustomerCentricity Community Empowerment CE SP VBC RE CC D 4 Social and Relationship We build strong stakeholder relationships that are critical to our business success, while contributing meaningfully to the communities in which we operate Natural We work to minimise our environmental impact by optimising the use of the natural resources required for our operations. Real Economy Digitalisation VALUE CREATION WE CREATE SUSTAINED VALUE FOR ALL OUR STAKEHOLDERS, ENABLING US TO REALISE OUR STRATEGIC VISION OF LEAP25. 37
40. B A N K I S L A M M A L AY S I A B E R H A D SUSTAINABLE PROSPERITY DIGITALISATION • Emphasis on strong financial results across the board • Focus on fee-based business activities and growing wholesale banking portfolio • Implementation of Integrated Wealth Management Business Model • Grow green economy portfolio with incorporation of ESG considerations • Enforce cost management, optimisation and savings Initiatives • Active digitalisation through various programmes covering channel, data governance and business growth • Enhance mobile banking proposition with GO by Bank Islam mobile app to incorporate additional functions to cater to the broadening customers’ need and segments • Strengthen the core enabler and IT infrastructure • Centre of Digital Excellence to provide novel digital banking proposition • Engaging and adopting new ways of working through deployment of new and emerging technologies CUSTOMERCENTRICITY REALISING VBI VALUES-BASED CULTURE COMMUNITY EMPOWERMENT • Uplift social finance nurturing through application of waqf, zakat, sadaqah and other related instruments within the financial landscape • Focus on communitybased projects • Increase strategic alignment and impact of BIMB’s CSR initiatives • Emphasis on partnerships with beneficial organisations and institutions to effect positive socio-economic impact 38 • Promote proactive service culture with focus on customers’ satisfaction at all points • Transformation journey towards superior customer experience • Emphasis on allencompassing wealthcreation solutions for retail customers • Deliver operational excellence • Develop analytics capability • Communicating with empathy, reinforcing trust and establishing credibility with customers during challenging times REAL ECONOMY • Promote programmes and collaborations to make inroads in the focus areas • Grow financing portfolio in the Halal economy • Enhance growth enablers through expansion of the businesses’ reach and touch points as well as improved processes • Delivery of platforms that provide business insights as well as training for the lead generation • Agility and adaptation to new ways of working in light of current environment • Strengthening the talent pool and leadership bench • Reinforcing risk and compliance culture • Organisational construct to deliver through widening of the workforce capability, from conceptualisation and execution of business strategies and deliverables • Create holistic development programmes for the employees in line with the mission and vision • Inspiring new ways of business and conducts through a process of unlearning and relearning
41. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability  Financial   Additional Information HARNESSING CAPITALS Capitals are stocks of value we depend on as the inputs to our business model, and which are increased, decreased or transformed through our business activities and outputs. Our capitals are the resources and relationships that are essential to our business. We create value and deliver on our strategy by transforming the various capitals. We seek to operate and grow inclusively, responsibly and sustainably, thereby maximising value creation and minimising any negative impacts. Hence, our long-term relevance as a business depends on these capitals’ availability, utilisation, and consequent value delivered. When deciding how to manage our business, we consider the trade-offs between capitals: we aim to maximise positive outputs and outcomes and limit negative impacts. Capitals key to our long-term value creation include Financial Capital, Manufactured Capital, Intellectual Capital, Human Capital, Social & Relationship Capital and Natural Capital. FINANCIAL CAPITAL To stay resilient within the current banking landscape, strong financial capital is necessary. Our financial capital enables us to sustain business operations, create and manage shareholder value and give back to our nation and society. HOW WE CREATE VALUE: HIGHLIGHTS Common Equity Tier-1 Ratio – 13.2% Total Equity – RM6.4 billion Total Deposit – RM67.4 billion BIMB depends on robust equity and revenue to sustain and grow its business. We have in place prudent strategies to mitigate risks and meet industry liquidity requirements. We provide savings, investment and other forms of client-specific products. We manage and execute all our client interactions with the highest professionalism, ethics and transparency. MANUFACTURED CAPITAL Our manufactured capital allows us to grow financial value through an expanded reach and uplift societal value by catalysing inclusivity of underserved communities. HOW WE CREATE VALUE: We provide several access points and banking methods to facilitate options and to improve customer experience. We strive to introduce new operation channels adopting latest advances in technology. HIGHLIGHTS 141 Bank Islam branches nationwide with 451 ATMs 17 SME Hubs 7 Bureau de Change outlets 9 Ar-Rahnu outlets RM15.7 million investment in IT infrastructure 39
42. B A N K I S L A M M A L AY S I A B E R H A D HARNESSING CAPITALS INTELLECTUAL CAPITAL Our intellectual capital enables us to advance industry value through the creation of new Islamic banking possibilities and sustain Malaysia ’s standing as an Islamic financial services hub. HOW WE CREATE VALUE: Our reputation as a pioneering leader in Islamic banking and finance has been a product of Islamic knowledge expertise and continuous product innovations over the years coupled with effective risk management and strong governance framework. We have built a strong brand franchise as a result. As one of the flagbearers, we lead industry best practices and provide technical assistance in the shaping of Islamic financial institutions globally. We also share market-leading knowledge on Islamic finance with the industry and public to ensure increased understanding. HIGHLIGHTS Strong franchise value as the nation’s only public-listed, full-fledged Islamic banking group with reputation as a pioneer in the field and the industry’s source of reference, and provider of an extensive suite of diversified and fully Shariah-compliant products and services. Enhanced value propositions through growing strategic partnerships with key institutions, organisations and public agencies In addition to Sadaqa House, the introduction of Waqf House Financing facility and microfinancing initiatives have strengthened BIMB’s role as a major player within the social finance sphere. Continuous growth of ESG-compliant fund that incorporated the novel Artificial Intelligence (AI) features HUMAN CAPITAL Our success is determined by the quality of our human capital. Our human capital is vital in delivering financial value and enhancing social value by serving our community better. HOW WE CREATE VALUE: To maintain a conducive working environment with performance-based culture, we have incorporated the TAAT values in all of our employees’ working aspects. We invest in our people with training and development programmes to attract, cultivate and retain talent. We implement initiatives to grow internal talent for upward mobility. 40 HIGHLIGHTS Diversified composition of 4,731 employees More than RM8.8 million invested in employees’ capability and capacity enhancement Highly qualified professionals certified to operate in the field of Islamic finance Strong governance and compliance culture with emphasis on Islamic values that promote trust, integrity and acceptable working culture
43. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability  Financial   Additional Information SOCIAL AND RELATIONSHIP CAPITAL A social license to operate ensures smooth business operations and sustainability. Our social and relationship capital delivers value to our nation, people and the marginalised communities. HOW WE CREATE VALUE: We are committed to build positive relationships with our network of partners, vendors, customers and the community at large through effective products and services, policies, and contributions. Through our AMAL and Sadaqa House initiatives, we aim to become a force of good to realise positive impact for all of our stakeholders. HIGHLIGHTS More than 4.4 million customers Proponent of enterprises for societal wellbeing with strong CSR and social finance initiatives Commitment towards sustainability with compliance with the principles of ESG and UN SDG NATURAL CAPITAL Our focus on natural capital impacts our operational costs as well as sustains business value and environmental wellbeing. HOW WE CREATE VALUE: As a financial institution, we can positively impact the environment in the communities and ecosystems where we operate through our operations as well as businesses that utilise our product and service innovations. We promote environmental principles, alongside social and governance aspects in our customer screening. We have an increasing Green Financing portfolio to ensure sufficient financial support to the renewable energy market. We also adopt sustainable practices as far as possible both internally and externally reducing our overall carbon footprint. HIGHLIGHTS Continued focus on facilitating financing for corporations inves ting in green and renewable energy solutions with more than RM2.2 billion of financing approved under Green Financing BIMB Invest Management achieved a total ESG-compliant fund size of RM1.43 billion (Asset Under Management) Continuous commitment in realising the Sustainability and VBI agenda that include the preservation of the planet’s biodiversity for the good of all Climate change and resource use strategies that guide both BIMB and our customers to positively manage the environmental impacts from business and operations 41
44. B A N K I S L A M M A L AY S I A B E R H A D OUR VALUE CREATING BUSINESS MODEL O U R C A P I TA L S . . . Our business model demonstrates how we leverage our six capitals to create value in the form of outputs and outcomes and how we ensure the sustainability of our business for our stakeholders. . . . E N A B L E V A L U E - A D D I N G INPUTS FINANCIAL CAPITAL • • • • • • Total Assets: RM80.2 billion Total Equity: RM6.4 billion Total Customer Deposit: RM67.8 billion Total Asset Under Management: RM1.43 billion Liquidity Coverage Ratio: 180.1% Market Capitalisation: RM6.2 billion ... ACTIVITIES MARKET TRENDS Stringent Regulations Market Competition Global Uncertainties Economic Slowdown INTELLECTUAL CAPITAL • S  trong brand value with almost 40 years of sustained success as the pioneering, pure, full-fledged Islamic financial institution • Strong reputation as the GLOBAL source of reference for the Islamic financial industry • Strong value proposition through partnerships with key organisations, institutions, and public agencies HUMAN CAPITAL • A  diversified workforce of 4,731 employees nationwide, made-up of 2,437 males and 2,294 females • An agile, performance-based, purpose-led culture driven by TAAT values • Over RM8.8 million invested in upskilling employees through training and development programmes MANUFACTURED CAPITAL • D  edicated network of 141 branches and 947 self-service terminals nationwide • Concentrated effort to enhance delivery of digital solutions and deployment of automated processes through major investment in IT development and infrastructure, including cyber-security • Continuous investment in promoting mobile applications and online channels including GO mobile banking app, Sadaqa House and Internet Banking SOCIAL AND RELATIONSHIP CAPITAL • M  ore than 4.4 million customers served • Beneficial engagements with government, regulators and NGOs to strengthen relationships and contribute to the betterment of the industry and society • Adoption of sustainable practices based on realising the UN SDGs and ESG objectives NATURAL CAPITAL • C  ontinued commitment to Green Financing effort, which focuses on financing within the renewable energy, green technology, and waste management sectors • Emphasis on corporate and social initiatives that promote positive environmental impact • Electricity usage of 1,900,000 kWh (reduction of 80,000 kWh from 2020) • 10,363 reams of paper (reduction of 8,721 reams from 2020) 42 Digitalisation S T R AT E G I C P R I O R I T I E S BUSINESS ACTIVITIES 1 Sustainability Prosperity Values-based Culture Customer-Centricity Community Empowerment CONSUMER BANKING 2 Digitalisation Real Economy KEY RISKS Credit Risk Market Risk Liquidity Risk Operational Risk IT Risk Regulatory / Compliance Risk Shariah NonCompliance (SNC) DEPOSITS AND CASH MANAGEMENT 3 COMMERCIAL BANKING Climate Risk M AT E R I A L M AT T E R S Responsible Finance Inclusive Growth Talent Enrichment Ethical Practice & Reporting Islamic Finance & Knowledge Sharing 4 SME BANKING VBI Community Empowerment Entrepreneurial Mindset
45. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability  Financial   Additional Information VISION The Bank that Advances Prosperity for All MISSION To provide solutions that deliver value . . .VA L U E F O R O U R S TA K E H O L D E R S . T H AT C R E AT E . . . OUTCOMES TA AT VA L U E S Think Customer Act with Integrity Advance Beyond Take Charge OUTPUTS 5 TREASURY AND MARKETS 6 CORPORATE BANKING 7 BIMB INVESTMENT MANAGEMENT 8 BIMB SECURITIES ◆ Providing solutions that deliver value ◆ Serving individuals, we improve access to financial services and enhance quality of life ◆ Serving SMEs and large corporations, we contribute to economic growth, job creation and industry innovation ◆ Serving the nation, we support national goals and ensure stability and progress of the nation’s financial standing ◆ Serving the community, we improve financial literacy, promote inclusiveness and contribute towards a sustainable future CUSTOMERS • RM979 million in profits paid to depositors and investment account holders • More than RM5 billion provided for new personal financing • More than RM3 billion provided in new home financing • More than RM209.7 million provided in new vehicle financing • More than RM2.2 billion approved in new Green Financing projects • Ranked 4th in customers experience score within the banking industry as conducted by KPMG Malaysia EMPLOYEES • RM698 million paid in salaries and benefits • 423 employees promoted with 258 obtaining professional certifications • Employee retention rate of 96.62% • Flexible working arrangement to enable remote and virtual engagements that prioritise workers’ safety • Most preferred employer in Malaysia awards (Graduan Brand Awards 2021) INVESTORS • RM366.5 million paid out in dividend • 8.4% return on equity • Earnings per share of 21.87 cents COMMUNITIES • A total of RM2.8 million invested in AMAL activities • A total of RM11.8 million of Zakat paid out to 14 Zakat authorities • More than RM3.6 million disbursed through Sadaqa House for the well-being of the beneficiaries • RM1.6 million worth of BangKIT micro financing distributed to help the micro-entrepreneurs in addition to training programmes REGULATORS & GOVERNMENT DRIVERS • Compliance with all regulatory requirements • Guidance and alignment towards industryled sustainability practices with continuous commitment towards VBI • Participation in the creation of ESG book as commitment towards ESG incorporation in all business initiatives • Contribution of RM228 million in corporate tax Good SelfGovernance Best Conduct UNDERPINNED BY OUR OVERARCHING GOVERNANCE Premised on the Shariah Principles, we commit to upholding the highest level of integrity in our everyday decisions and actions, in our efforts to uplift our communities and our nation. 43
46. B A N K I S L A M M A L AY S I A B E R H A D STAKEHOLDER ENGAGEMENT Regular engagements with our keys stakeholders help us understand . We gain insights that help us shape sound strategies and effectively implement initiatives by having discussions and collaborating with them. CUSTOMERS Stakeholders We interact with customers to better understand their needs and find the right financial solutions for them. Topics of Relevance Products and services viability and access  Ef fe c tivene s s of s olutions in addressing needs especially during the pandemic Financial assistance in coping with tough times Quality of service delivery Solutions’ security Rollout of digital solutions How We Engage Myriad of channels that include Digital touchpoints: Contact centre Internet Banking Brick and mortar: Corporate Website 141 branch networks Mobile applications 17 SME Hubs 12 Vehicle Financing Sales Hub including GO by Bank 9 Ar-Rahnu branches Islam; GO Biz by Bank 7 Bureau De Change Islam; SMExpert; BEST 947 Self-service Terminals Invest and BISOnline; Social media platforms including Facebook, Instagram, YouTube and Twitter Customer surveys and focus groups Webinars and online discussion forums Value Created RM979 million in profits paid to depositors and investment account holders Disbursed more than RM5 billion in new personal financing; more than RM3 billion in new home financing and more RM209.7 million in new vehicle financing Expansion of iTEKAD (iTEKAD 2.0) and BangKIT micro financing Formed strategic partnerships with Universiti Malaysia Kelantan (UMK) and Majlis Belia Malaysia (MBM) to support youth entrepreneurs. Launched Makmur myWakaf fund, a multi-currency, Shariah-compliant global mixed asset fund Financial assistance packages rendered via various packages including Enhanced Targeted Repayment Assistance (ETRA), Targeted Repayment Assistance (TRA), PEMULIH Repayment Assistance (PRA), Financial Management and Resilience Programme (URUS), Flood Relief Assistance, etc. Continuous improvement and addition of new features to GO Mobile Banking app EMPLOYEES Stakeholders How We Engage We keep our employees informed of our strategic priorities and guiding principles, and engage with them to learn of their concerns. Internal communication channels including the internal portal, HUMANE portal (Online Human Capital Management System), SAPJAM platform and e-mail communication Digital town hall and discussion sessions with the senior management Online training and development programmes Internal activities and initiatives among the Group’s workforce Employee Engagement Survey Topics of Relevance Career-planning and advancement Concerns on the pandemic effect on the Group’s performance Personal development initiatives to for addressing work-life balance Knowledge of the Group’s strategic direction during this volatile period 44 Value Created Paid more than RM698 million in employee remuneration Delivered more than 264,530 training hours for employees Created more than 26 new employment opportunities Promoted 423 employees Sponsored more than 258 employees to obtain Professional Certificates Recorded an employee retention rate of 96.62% Proclamation of a clear policy commitment on workforce diversity
47. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability  Financial   Additional Information GOVERNMENT & REGULATORS Stakeholders How We Engage We contribute to the nation’s economy and help advance the industry through a combination of b e s t busine s s practices and sound governance. Industry meetings, discussions and dialogues with relevant agencies Provision of thought leadership and insights within the industry Participation in government-led as well as global initiatives and programmes Topics of Relevance Business resiliency that ensures the stability of the financial system Regulation and reporting updates Support for the national agenda  Value Created Continued commitment towards economic recovery efforts and socioeconomic progress via roll-out of various initiatives designed to help businesses and people impacted by the pandemic.  Continuous commitment towards VBI implementation so as to realise the sustainability and ESG objectives Involved in JKMPay as pioneer partner to the solution  Payment gateway provider for MyBayar Saman with Royal Malaysian Police (PDRM)  MATRADE, HDC and SME Corp partnerships to enhance support for SMEs.  S upporting BNM’s initiatives including financial assistance and micro financing. Facilitated the social finance agenda Paid RM228 million in corporate taxes to the Government LOCAL COMMUNITIES Stakeholders How We Engage We seek to engage with communities to effectively address their issues and needs, and better understand our role in contributing to the society’s health and wealth. Maintaining relationships with the Non-governmental organisations (NGOs) and other relevant organisations Reaching out to the marginalised communities to gather information and better understand their plights Partnerships with relevant institutions and organisations to gain insight in tackling current concerns or issues for better sustainability efforts CSR initiatives Topics of Relevance   Growing expectation on the Group’s contribution to the overall well-being of the marginalised communities Economic concerns and social issues Financial education and knowledge Value Created 1,000 tablets distribution to underprivileged students nationwide. Flood relief efforts Solar panel installation at Tg Surat, Johor RM1.6 million financing for entrepreneurs via BangKIT micro financing Wacana Selasa webinar on Facebook Live, every Tuesday, discussing various issues with esteemed panelists. Handed over 11 housing units to selected asnaf under the “Baiti Jannati” or “My Home, My Paradise” programme, in partnership with the Kuala Lumpur City Hall (DBKL) and the Ministry of Federal Territories. INVESTORS Stakeholders How We Engage We provide updated and detailed disclosures that allow investors to make informed investment decisions, and seek their input on our performance and strategic decisions. Annual General Meetings, Extraordinary General Meeting, Court Convened Meeting and Analysts Briefings Participated in relevant conferences, roadshows, e-conferences, e-forums and webinars Constant meetings and discussions with business analysts and fund managers Topics of Relevance  The pandemic impact on the Group’s f inancial per formance including its business outlook Deliverance of the expected financial performance in light of the listing exercise Addressing the wider sustainability and ESG concerns Value Created 11.1% Return On Equity 0.9% Return On Asset 18.56% total capital ratio RM366.5 million of dividends paid to shareholders 45
48. B A N K I S L A M M A L AY S I A B E R H A D OPERATING ENVIRONMENT & KEY MARKET TRENDS BIMB’s ability to continue creating value for our stakeholders is strongly tied to our ability to navigate the fast-evolving operating environment. Our external operating context has a direct impact on our profitability, the risks that we face and our strategic decision-making. TRENDS Trend 1 MODERATE ECONOMIC RECOVERY DESCRIPTION IMPACT The Malaysian economy returned to growth in 2021, despite the ongoing challenges arising from the pandemic. The recovery came with a high degree of uncertainty, though, as the government imposed various measures throughout the year to halt a resurgence in the number of COVID-19 cases. The government’s reimposition of a total lockdown in the middle of the year hit economic growth, undermining BNM’s original forecast of a 6% to 7.5% expansion in GDP for the year. The gradual lifting of movement restrictions and the resumption of most economic activity, as well as the acceleration of the National COVID-19 Immunisation Programme, continued government stimulus and the spillover effect of the global economic recovery, supported a pick-up in growth, and the country saw a GDP expansion of 3.1% for the year. GDP Growth (%) 6 5 4 3 4.4 5.8 48 4.4 3.1 2 1 0 -1 -2 -3 -4 -5 -6 Trend 2 INTEREST RATES AND OTHER FINANCIAL CONSEQUENCES 46 -5.6 ‘16 ‘17 ‘18 ‘19 ‘20 ‘21 In direct response to the pandemic, BNM progressively reduced the interest rate to a record low of 1.75% in 2020 and maintained it at that level all through 2021. The record low rate supported a rebound in consumption and business investment but also led to compressed interest rate margins across the banking industry, which has negatively impacted the banking sector’s profitability. BNM’s sharp rate cuts and decision to maintain low interest rates is in line with the actions of central banks around the world. The low rate environment has supported a global economic recovery but has also led to growing inflationary pressure in the international financial system. • The subdued economic growth in 2021 and weak consumer sentiment in the first half of the year resulted in a less-supportive environment for the banking industry than had originally been forecast. • The shifting economic outlook throughout the year had a strong impact on consumer sentiment and behaviour. The Consumer Sentiment Index (CSI) remained below the 100-point threshold level, which indicates optimism, throughout the first half of the year, as consumers remained cautious due to the continued impact of COVID-19. The CSI fell to a low of 64.3 points in the second quarter of the year, following the reimpositon of the Movement Control Order (MCO) in May. The gradual reopening of the economy led to a rebound in consumer conf idence in the second half of the year, with the CSI rising to 101.7 in the third quarter of 2021. This marked the first time the index had risen above the 100-point optimism threshold since the third quarter of 2018. • Low interest rates led to margin compression, which has impacted top line performance throughout the banking sector. • Conversely, the low cost of funding encouraged businesses and consumers to seek new loans. Financing growth in Malaysia rose to 4.1% in 2021, similar to the prepandemic figure in 2019. • Inflationary pressure rose in 2021 and became more prominent in the second half of the year due to a combination of easy-money policies, rebounding consumer demand and growing production and logistics bottlenecks.
49. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information STRATEGIC REVIEW The impact of the COVID-19 pandemic remained pervasive across all areas of our operating environment in 2021, but society and businesses have effectively adapted to the new reality. At BIMB, the robust measures that we instituted in response to COVID-19 in 2020 proved adequate to allowing us to manage the continued impact of the pandemic in 2021. As always, the new year offered both new challenges and new opportunities. This section sets-out how we managed the former and worked to capitalise on the latter in 2022. HOW WE RESPONDED • We targeted our business towards areas of the economy that offered strong growth prospects during the year. Our Consumer Banking business continued to focus on demand from the household sector. Our Corporate and Commercial business expanded in areas including finance for affordable housing and Green Financing. • We worked closely with our customers and clients to ensure that they had the necessary support, including by offering financing deferrals and the restructuring of facilities. • We continued to provide social finance and forms of direct support to vulnerable segments of society that remained affected by the challenging economic conditions. • BIMB continued to diversify our noninterest income as a hedge against interest rate movements. • We tapped into the growing demand for financing from consumers and businesses eager to take advantage of lower interest rates, resulting in our f inancing book growing by 6.4% in 2021, which is considerably above the industry average. OUTLOOK LINK TO BNM projects that the Malaysian economy will grow by 5.5% in 2022, driven by a recovery in domestic demand and stronger growth in the external sector. The recovery will be supported by the shift to the endemic phase of COVID-19, the pump-priming impact of Budget 2022, a stronger labour market, the gradual reopening of international borders and strong global growth, all of which will be supportive of a stronger performance by BIMB. The growth prospects for the economy come with downside risk, though. Disruption to global supply chains, rising inflation and energy prices, and growing geopolitical tensions add a high degree of uncertainty and BIMB will maintain a prudent stance as we move forward. Capital We expect BNM to maintain the current record low interest rate of 1.75% throughout the first half of 2022. We see a higher possibility of a rate hike in the second-half of the year, in order to curb inflationary pressure, but the timing or actual occurrence of any rate hike will be subject to prevailing economic conditions. Capital Stakeholders Material Matters Stakeholders Material Matters 47
50. B A N K I S L A M M A L AY S I A B E R H A D OPERATING ENVIRONMENT & KEY MARKET TRENDS TRENDS Trend 3 DIGITALISATION DESCRIPTION IMPACT The banking and financial services landscape is rapidly being reshaped by digital technology with the growth of online banks, e-payment systems and the rise of the FinTech companies, as consumers embrace online banking and e-commerce. The COVID-19 pandemic has rapidly accelerated the shift towards online transactions as consumers demanded non-touch options and movement restrictions made online shopping a more convenient option. The traditional banking model also continued to face disruption from the rise of the FinTech’s start-ups, which have continued to drive innovation in the industry by leveraging on their greater agility and a regulatory landscape that has fast-evolved to accommodate them. Rapid digitalisation has also seen a rise in cybersecurity risks, with the total number of cyber-attacks reaching a new global all-time high in 2021, as criminals developed new attack tools and exploited the rapid shift to online services. Total Non-Financial Transaction Volume (Million) INTERNET BANKING 484 584 GO BY BANK ISLAM MOBILE BANKING APP 20’ 14 47 21’ INTERNET BANKING 98 147 Total Financial Transaction Value (Billion) GO BY BANK ISLAM MOBILE BANKING APP 20’ 5.7 5.7 16.5 21’ INTERNET BANKING 20’ 21’ 28.8 40.1 Note: 1. Non-Financial Transaction involves no monetary movement e.g. balance enquiry, add favourite account, change password, change transaction limit, download e-statement, etc. 2.Financial Transaction involves monetary movement e.g. transfer to own account, DuitNow Transfer, TH transfer, SSPN transfer, etc. 48 • The rapid shift to digital f inance drove strong demand for our online and mobile offerings. More than 90% of BIMB’s transactions are now conducted through electronic channels. The number of our Internet Banking users rose by 22%, to 1.5 million during the year, with the total number of internet banking transactions rising by 50%. • Malaysia, like many other countries, saw a rise in the number and intensity of cyber threats during the year. National cybersecurity agency, MyCert, received more than 10,000 reports of cybersecurity incidents in 2021, with 71% of them related to fraud. Total Financial Transaction Volume (Million) 20’ 21’ Banks have had to respond to the surge in demand f o r o n l i n e s e r v i c e s by developing new strategies and products and increasing their capacity to handle digital transactions. • Our GO by Bank Islam mobile banking app saw a 79% surge in user numbers, to reach 849,000 users, and the total number of transactions on the app tripled to reach 47 million. GO BY BANK ISLAM MOBILE BANKING APP 20’ 167 454 21’ 20’ 21’ •
51. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information STRATEGIC REVIEW HOW WE RESPONDED • Digitalisation is one of the six pillars supporting our LEAP25 growth strategy and we continued to invest heavily in our digital infrastructure and services in 2021. This included spending to harden our cybersecurity defences in order to ensure the integrity of our systems and to safeguard our customers’ data. • We rolled-out a range of enhancements to our GO by Bank Islam app and online banking services to meet the evolving needs of our customers. • We introduced GO Biz by Bank Islam app to capture growth in the small and micro-entrepreneur market and launched a collaborative effort with target microentrepreneur groups to help them migrate their transactions online. • OUTLOOK • Malaysia’s digital economy is projected to grow from 22.6% of GDP at the end of 2021 to 25.5% of GDP by 2025 and banks will have to continue adapting to the accelerating shift by governments, businesses and consumers towards online and digital transactions. This fundamental shift will continue driving demand for our digital services. • LINK TO Capital Stakeholders Material Matters The award of five (5) digital banking licenses by BNM in 2022 will drive innovation and excite the industry as consumers will soon have a breadth of options to choose from in how they transact and manage their finances. In 2020, BIMB Invest launched its Shariah Sustainability Robo-Intelligence digital investment platform called "BEST Invest" to help investors build their portfolios, offering a range of Shariah-ESG unit trust funds. The award-winning app has garnered more than 15,000 users at the end of 2021. BIMB Invest shall continue to enhance the app from time to time for better user experience. 49
52. B A N K I S L A M M A L AY S I A B E R H A D OPERATING ENVIRONMENT & KEY MARKET TRENDS TRENDS Trend 4 WORKFORCE CHALLENGES Trend 5 SUSTAINABILITY CONCERNS AND CLIMATE CHANGE DESCRIPTION IMPACT It is essential that we have the right people in our workforce in order to deliver on our growth strategy and execute our corporate transformation plans. Competition for talent remains intense, though, and the labour market has also faced disruption as a result of the COVID-19 pandemic, which has seen many qualified individuals opt for gig jobs and remote working, rather than traditional corporate careers. As a values-based financier, we face the added dimension of ensuring that our people are aligned with our strong corporate values. No. of Employees 4,758 4,731 4,568 4,489 4,635 17’ 18’ 19’ 20’ ‘17 4 5 Corporate Commercial 7 7 ‘18 SME Treasury 10 ‘19 1 19 2 15 ‘20 3 4 15 ‘21 3 50 21’ Concerns around sustainability matters and environmental stewardship continue to move to the centre, as awareness about the threat from climate change continues to grow. This has led to the lending practices of banks, including BIMB, coming under increased scrutiny, with growing demand for transparency about their environmental impact from regulators, clients, investors and other stakeholders. On the domestic regulatory front, both the SC and BNM released rules and guidelines during the year that emphasised the need for companies to integrate sustainability considerations into corporate strategy and corporate governance. This marks another step towards the emergence of a green economy framework for the nation. Number of Green Technology Customers 8 30 31 • The massive changes in the operating environment since the beginning o f t h e pa n d e m i c h ave revealed gaps in skills and preparedness in the human resources base across the economy, as businesses were forced to adapt to labour disruptions, new ways of working and increased digitalisation. • A key development over the last several years has been the strong growth in appetite for climate-aligned and net-zero investment opportunities across Asia, with many investors now conducting carbon footprint analysis. This mirrors the global growth in demand for ESG-compliant investments. • T i g h te r e n v i r o n m e n t a l regulations are gradually changing lending practices as banks start to incorporate ESG considerations into their f inancing evaluation processes.
53. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information STRATEGIC REVIEW HOW WE RESPONDED OUTLOOK LINK TO • We strengthened our human resources policy to align it closely with our LEAP25 growth and transformation strategy. To build the workforce that we need, we intensif ied investment in our human capital to ensure that we are able to recruit and retain the right people, and continued upskilling our existing workers. We sharpened digital skills training across our workforce so that our people can better deliver on our goal of customer-centricity, as well as to achieve productivity gains in a tight labour market. The challenge of being able to attract and retain the right people will remain constant, as the nature of the skills needed by BIMB and our peers and competitors will continue to evolve as we seek to stay ahead of the rapid changes that are reshaping the business and banking landscape. Accordingly, we will continue to look at our recruitment and reward practices to ensure that we remain an employer of choice for the people that we are seeking to attract. Capital • As the global effort to tackle climate change grows, BIMB is moving rapidly to take a leading role in contributing to Malaysia’s transition to a lower-carbon economy. Under our LEAP25 strategy, we aim to double our Shariah-ESG financing from the current 4% of total financing by 2025. Moving forward, we are optimistic about the growing opportunities the transition to a low-carbon economy will present for BIMB, including through increased green and sustainable infrastructure finance capabilities. Capital Stakeholders Material Matters Stakeholders Material Matters • Additionally, we continued to expand our range of Shariah-ESG investment products to capitalise on growing demand for sustainable investments. • We are also working to integrate a comprehensive ESG framework and deeper climate change analysis into our credit evaluation process by mid-2022. 51
54. B A N K I S L A M M A L AY S I A B E R H A D OPERATING ENVIRONMENT & KEY MARKET TRENDS TRENDS Trend 6 GEOPOLITICS DESCRIPTION The banking industry is strongly affected by geopolitical developments, which have implications for our operating environment. Beyond the regulatory and policy changes and other direct impacts that might result from political changes, political volatility also influences customer and client needs and behaviour. On the domestic front, Malaysia saw a change of government in September, with a period of uncertainty leading-up to that change. On the international stage, the biggest development was the inauguration of the new Biden administration in the United States, which has led to a series of changes in economic and strategic policies that have had global ramifications. IMPACT • In Malaysia, the change of government and the accompanying changes in various policies, including the easing of movement restrictions and continued pump-priming were supportive of economic growth, and the new government’s more clearly def ined policies to grow the green economy play to BIMB's strengths. • Globally, the economy and wider operating environment continued to be impacted by a range of issues including the continuing trade tensions between the US and China, the decision to restrict oil production by the OPEC+ group and rising tensions in Eastern Europe. 52
55. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information STRATEGIC REVIEW HOW WE RESPONDED • BIMB continuously ref ines our risk management f ramework, which has allowed us to mitigate the impact of geopolitical risks that manifest through various channels. This includes the use of currency hedging strategies to manage the effects of volatility in international exchange rates. • We embraced the opportunity to further grow our Green Financing portfolio offered by the new Malaysian government’s increased emphasis on the green economy under Budget 2022 and the 12th Malaysia Plan. OUTLOOK The geopolitical outlook for the year ahead and the medium-term beyond remains highly unpredictable. Geopolitical tensions centred on Eastern Europe have the potential to be highly disruptive to the economic recovery that had been projected to gather pace in 2022. On the domestic front, investors and businesses will continue to take note of political developments ahead of a general election that must be called by May 2023. As we move forward, BIMB will continue to monitor and strengthen the prudential safeguards that we have in place. LINK TO Capital Stakeholders Material Matters 53
56. B A N K I S L A M M A L AY S I A B E R H A D MATERIAL MATTERS Our material issues are those that matter most to our stakeholders and have an impact on our sustainability and ability to create value in the short , medium and long-term. These Material Matters influence how the Board and Management steer the Group forward. Our ability to create value is impacted by a multitude of factors, including the operating environment, our responses to the risks and opportunities presented by these material matters and our strategy. With an in-depth understanding of our material matters, we can better define our strategies and resource allocation plans, thereby positioning our Group to implement meaningful actions and anticipate sustainability challenges. Identifying the Group’s material issues is the first step toward understanding the internal and external factors that affect our business. while promoting the alignment of our strategy with the interests of our stakeholders. The Group identified five material matters, namely, Responsible Finance, Inclusive Growth, Talent Enrichment, Ethical Practice and Reporting and Islamic Finance and Knowledge Sharing. Developing ethical products and services that bring positive economic, social and environmental benefits. Anchoring our practices and decisions on Islamic rules and principles and contributing to a hub of expertise and knowledge that will drive our nation’s standing as a leader in the Islamic financial industry. Ensuring that our practices are governed by our core values, and that social and environmental considerations are consistently our top priorities. 54 Ensuring that all layers of community grow along with us through inclusive offerings. Responsible Finance Islamic Finance and Knowledge Sharing Inclusive Growth Ou r M aterial M atters Ethical Practice and Reporting Talent Enrichment Growing our employees to become valuable assets and be the best they can be.
57. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information STRATEGIC REVIEW In championing the Group’s Material Matters, we designed various programmes and initiatives at the organisation level based on relevant business and stakeholder issues and expectations. Where possible and necessary, we engaged our stakeholders to drive clear outcomes. Such outcomes are also aligned to local regulations and industry best practices. We have mapped the outcomes to our organisational strategies and VBI principles and the globally recognised United Nations Sustainable Development Goals or the UN SDGs. MATERIAL MATTERS IDENTIFICATION PROCESS: At BIMB, we believe that the role of Banks as intermediaries go beyond access and affordability of finance, including catalysing financing solutions to mitigate universal problems such as poverty, inequalities and social justice, and environmental well-being. Our process includes raising awareness of how our customers and our network of stakeholders can address some of these issues through responsible business practices and responsible investments. Through VBI and Shariah-compliant financing, we will continue to strengthen our orientation to the SDGs relevant to Malaysia and where our local industry and leaders can meaningfully make a difference. IDENTIFICATION We identify matters that may impact the execution of our strategy. This is a group-wide effort taking into account input from all business and support units, and incorporating feedback from stakeholders. PRIORITISATION From the list of identified matters, we prioritise those that most significantly impact our ability to successfully execute our strategy and deliver long-term value to our stakeholders. VALIDATION Those matters that are material to value creation are integrated into our balanced scorecard, which is used to set objectives, drive behaviours, measure performance and determine the remuneration of our people. Responsible Finance We commit ourselves to upholding societal and environmental responsibilities by bringing to the market solutions that promote economic and social benefits. We make a conscious decision to design ethical products and incorporate integrity into our services for the good of all. We support ethical projects and customers in catalysing a multiplier effect to the positive impact they bring. UN SDGs 55
58. B A N K I S L A M M A L AY S I A B E R H A D MATERIAL MATTERS Inclusive Growth We believe in equal opportunity for all by empowering the community . We invest in making our financial products and services accessible to all. We ensure that our social initiatives can reach out to the disadvantaged and underserved communities and, in the process, enhance our relationships and contribute to socio-economic progress for the long term. UN SDGs Talent Enrichment We are focused on supporting our employees throughout their professional lives by conducting various training sessions and development programmes, as well as promoting values that engender conducive working environment and performance-based culture. We listen to our staff to determine their needs, and value their skills and contributions through fair remuneration and career advancement initiatives. 56 UN SDGs
59. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information STRATEGIC REVIEW Ethical Practice and Reporting We are committed to doing the right thing and stand by our stakeholders in almost any circumstances. We are accountable and serve their best interest through good business practices that uphold integrity, transparency and responsible products. UN SDGs Islamic Finance and Knowledge-Sharing We have an intrinsic objective to grow knowledge and awareness of the Islamic banking and finance industry. We are also committed to advance the industry, and increase the uptake of our brand of Islamic banking and finance solutions beyond the region. UN SDGs 57
60. B A N K I S L A M M A L AY S I A B E R H A D KEY RISKS AND OPPORTUNITIES 1 CREDIT RISK Definition Risk of loss of revenue and /or principal arising from the inability of an obligor to fulfil its financial obligation in accordance with agreed terms. Mitigation • Maintain a robust and prudent credit risk policy and limits to ensure credit default and losses are within the approved Risk Appetite. • Credit evaluation by the business is independently reviewed and constructively challenged by credit analysts prior to submission to Management and Board Committees for approval. • Independent post-credit review and post-mortem analysis is conducted regularly to assess and ensure asset quality standards are maintained. • Proactive and vigilant management at account level to prevent deterioration in asset quality. This includes granular portfolio risk reviews and monitoring. • All exposure and non-compliances, including emerging risk, are reported to Management & Board Committees. 2 MARKET RISK Definition Risk of losses in on-and off-balance sheet positions arising from adverse movements in market prices/rates. Mitigation • Maintain a robust market risk policy and limits based on best practices. • Proactive monitoring, analysis and reporting to ensure that management of market risk is within the approved Risk Appetite. • Proactive review of all market risk parameters in line with the current economic environment. • Market Risk Limits/Management Action Triggers are reviewed regularly to ensure effective management of the risk. • All exposures and non-compliances are reported to Management & Board Committees promptly. 58
61. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information STRATEGIC REVIEW 3 LIQUIDITY RISK Definition Risk of adverse impact to the financial condition of the Group, or the soundness of the Group being adversely affected by an inability (or perceived inability) to meet its contractual obligations. Mitigation • Maintain a comprehensive liquidity risk policy and limits based on best practices. • Proactive monitoring, analysis and reporting to ensure the management of liquidity risk is within the approved Risk Appetite. • Liquidity risk limits are reviewed regularly to ensure effective management of this risk factor. • Proactive review of all liquidity risk parameters in line with regulatory requirements and current economic environment. • Preserve high quality liquid assets and well-diversified sources of funds as liquidity risk buffer under both business-as-usual (“BAU”) and stress conditions. • All exposures and non-compliances are promptly reported to Management & Board Committees. 4 OPERATIONAL RISK Definition The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, which includes legal risk and Shariah Non-Compliance risk. Mitigation • Maintain and actively manage operational risk in line with the Group’s operational risk policy and approved Risk Appetite. • Risk & Compliance Units are established within significant activities and risk controllers are appointed in every division to enhance and ensure active monitoring of operational risks in the Group. • Proactive review of critical business operations’ resilience to risks arising from challenges posed by COVID-19 pandemic. • Operational risk is embedded as a key area in the assessment of risks within the Group’s products, services, processes, and systems. • Various ORM tools, comprising proactive and reactive tools, are applied to provide a robust and consistent approach in managing Group-wide operational risk. • All operational risk issues and incidents are reported to Management and Board Committees with detailed root cause analysis and action plan. 59
62. B A N K I S L A M M A L AY S I A B E R H A D KEY RISK AND OPPORTUNITIES 5 INFORMATION TECHNOLOGY (IT) RISK Definition Any potential adverse outcome, damage, loss, violation, failure, disruption, theft or breach arising from the use of or reliance on computer hardware, software, electronic devices, systems, applications and networks or the existence of vulnerabilities such as software defects, capacity inadequacies, network vulnerabilities and control weaknesses. Mitigation • Establish internal process and controls, which include among others, proper systems development and project management approach and methodology, change management, security tool implementation, proactive security monitoring and system backup & recovery. • Continuous assessment and review of security vulnerabilities and security control effectiveness. • Enhanced monitoring of cybersecurity arising from challenges posed by the COVID-19 pandemic. • Close monitoring of rectification progress by the relevant working-level and management committees. • Where relevant, IT-related issues and incidents are escalated to the Board Risk Committee or Board IT Committee. 6 SHARIAH NON-COMPLIANCE (SNC) RISK Definition Risk of legal or regulatory sanctions, financial loss or non-financial implications, including reputational damage, which the Group may suffer arising from failure to comply with the rulings of BNM’s Shariah Advisory Council (SAC), standards on Shariah matters issued by BNM, or decisions or advice of the Group’s Shariah Supervisory Council. Mitigation • Ensure the soundness of Shariah governance framework through four dedicated functions - Shariah Research & Advisory, Shariah Risk Management, Shariah Compliance and Shariah Audit - as required under BNM Shariah Governance Framework. • All policies, products, services and processes are subject to Shariah assessment. • Operational risk management tools such as Risk Control Self-Assessment (including validation), Key Risk Indicators and Loss Event Management are extended and enhanced for the management of SNC risk. • All SNC issues and incidences are reported to the Management, Board and Shariah Committee with detailed root cause analysis and action plans. 60
63. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information STRATEGIC REVIEW 7 REGULATORY/COMPLIANCE RISK Definition Risk of legal or regulatory sanctions, material financial loss, or reputational loss suffered as a result of failure to comply with the laws, regulations, rules, related self-regulatory organisation standards, and codes of conduct applicable to BIMB’s banking activities. Mitigation • The deployment of Business Compliance Officers at Business and Support Units to facilitate the identification and management of Compliance Risks. • Formulation of Compliance Risk Assessment (CRA) methodology to assist in identifying and measuring the Compliance risks level, i.e. Critical, High, Medium and Low. • Formulation of Compliance Review Plan for both Compliance Monitoring & Testing and Shariah Compliance Review to prioritse the resources. • Implementation of the Institutional Risk Assessment (IRA) to strengthen and address the ML/TF risks at branches and business units. • Adoption of Robotic Processing Automation in managing the AML System alert. • Formulation of Corruption Risk Management (CRM) to identify potential corruption risks, and assess the identified risks in terms of likelihood and impact. • Establish internal threshold limits for monitoring of customer transactions. 8 CLIMATE RISK Definition Risk of losses resulting from adverse climate change impacts arising from physical and transition risk including extreme weather events, sea level rise, droughts and floods, and policy changes such as carbon taxes. Mitigation • Develop and implement an ESG Risk Framework covering identification, mitigation and monitoring of climate change risk. • Implementation of the BNM Climate Change Principles-based Taxonomy (CCPT) to classify financing exposures according to severity of climate risk. • Conducting ESG due diligence of new and existing financing customers that carry elevated climate risk indicators based on sector and business activity. • Maintain robust and prudent climate risk policy and limits in-order to reduce and minimise exposure to sectors with the highest climate risk exposure, i.e. coal power generation and mining. • Climate risk exposures and mitigation efforts are reported to the Management and Board Committees. 61
64. B A N K I S L A M M A L AY S I A B E R H A D STRATEGIC ROADMAP : LEAP25 BIMB aims to be a champion in offering Shariah Environmental, Social and Governance (Shariah ESG) total financial solutions and to establish its leadership in social finance and digital banking. Our roadmap for delivering on these goals is laid-out in our new LEAP25 corporate strategy, which sets clear targets to be reached by 2025 of: Growing our asset size to over RM100 billion Doubling our ESG-rated financing Reducing our cost-to-income ratio below 50% Sustaining superior industry Return-on-Equity of above 15% Increasing our non-fund-based income contribution Creating a positive social impact Nurturing and retaining high-performing talent The LEAP25 strategy is anchored on six strategic pillars that are rooted in and reinforce BIMB’s status as a Values-Based Intermediary (VBI). The strategies aligned with these six pillars provide us with the resilience to navigate the uncertain post-pandemic operating environment that is increasingly being referred to as the next normal. 62
65. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information STRATEGIC REVIEW OUR SIX PILLARS Ensuring the long-term sustainability of the Group and creating value for our stakeholders. Upholding Shariah goals and the principles of VBI. Sustainable Prosperity Values-based Culture Spearheading the development of a Halal digital community and empowering our customers to engage with us in the way that they want to. Digitalisation CustomerCentricity Real Economy Growing wealth in the economy on equitable terms. Placing our customers at the heart of all our planning and decision-making. Community Empowerment Becoming the community ’s preferred Islamic finance provider and delivering on our responsibilities as a committed corporate citizen. Our strategic pillars are tightly integrated and their components are complementary, with benefits from improvements in one reinforcing progress across the others. For example, to better meet our clients’ needs, we increased our focus on digitalisation and expanded our product offerings. This, in turn, improves the Group’s resilience, supports diversification, drives efficiency and reduces cost and operational risk, while providing an improved experience for our customers. Our continued growth will be driven by our transformation as we implement the strategies defined by these six pillars, cementing our aspiration towards leadership in digital banking and social finance. 63
66. B A N K I S L A M M A L AY S I A B E R H A D STRATEGIC PERFORMANCE REVIEW STRATEGIC PILLARS 1 : SUSTAINABLE PROSPERITY BIMB’s commitment to delivering sustainable prosperity is both a growth opportunity and a values-based obligation. The pillar encompasses both the actions that we take to strengthen the financial position of the Group and our commitment to growing sustainable finance business. The effectiveness of the strategies implemented to strengthen our financial position saw us sustaining performance on a range of key targets, including Return on Equity (ROE), Return on Assets (ROA) and above-industry growth in our deposits, financing and assets. A fuller discussion of our strong performance across our key financial metrics can be found in our GCFO’s Statement on pages 72 to 75. Our sustainable prosperity initiatives are closely tied to our LEAP25 targets of growing our non-fund-based income contribution and doubling our ESG-rated f inancing by 2025. Despite the continued challenges of the operating environment in 2021, we took substantial steps towards delivering on these targets during the year, both in terms of diversifying our income streams and on growing our Green Financing. 64 With the impact of the record-low interest rate environment being felt on the performance of the entire Malaysian banking industry, we continued to pursue strategies to grow our fee-based income as an effective hedge and to strengthen future income streams, resulting in a sustained non-fund-based income ratio of 11.1% for the year. Across the Group, we implemented effective strategies to diversify our revenue streams and build a more sustainable income model. This includes strategies to embark on an Integrated Wealth Management Business model, such as developing capabilities in big data, customer segmentation and group cross-selling synergy. Since the SME division was carved out and established in 2018, the Bank has stayed the course to advance from a financing-centric to ecosystem play in terms of its Enterprises portfolio, leveraging on the Halal platform. Through its Wholesale Banking proposition, the Bank intends to promote purposeful mobilisation of capital to help clients achieve sustainable growth. This means a higher business portfolio growth f rom Corporate and
67. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information STRATEGIC REVIEW Commercial Banking of RM324.9 million (2.36% growth) and correspondingly higher net income of RM415.6 million (6.5% y-o-y). Initiatives have been put in place for greater business synergy such as account planning and synchronisation of digital capabilities. Our Consumer Banking Division continued to strengthen collaboration with various professional associations, as well as running targeted promotions aimed at government servants. By offering products and services tailored to these specific segments, we aim to grow our market penetration of the more resilient mass-affluent sector. At the same time, our Corporate Banking Division continued to pursue growth by focusing on supporting the essential economic areas of Healthcare, Food, Infrastructure, Plantations, Green Technology and Renewable Energy. By maintaining a focus on strategic partnerships and strong customer service, it aims to cultivate, nurture and grow high-quality new customers in the targeted sectors in order to maintain the strength of its asset quality and income streams. The examples above are just some of the many measures that BIMB is taking in-order to increase our resilience and ensure the sustainability of our business. A fuller description of the specific actions in this direction taken by our various business divisions can be found in the Business Review section of this report on pages 84 to 105. The continued evolution of the Malaysian economy will be impacted by advances in sustainable technologies and the rising demand for sustainable financing options. This will require BIMB, and the Malaysian banking sector, to keep adapting to be able to support new, emerging, industries and help customers in impacted industries transition. BIMB has already taken substantial steps in this direction and our success in these areas is measurable. Under our LEAP25 strategy, we aim to double our ShariahESG rated financing assets by 2025, establishing us as a dominant player in Malaysia’s Green Financing industry. We have already made substantial progress towards this goal. At the end of 2021, our Green Financing stood at RM2.2 billion, accounting for 4% of our total financing portfolio, and about 2.8% of our total assets. Analysts see this well above the 1% to 2% of most other banks in the country. With the Malaysian government giving greater priority to the green economy under the 12th Malaysia Plan (2022-2026), the degree of competition in the Green Financing market is set to intensify. BIMB believes that we will maintain a strong competitive advantage though, backed by our sustained track record in Green Financing, our strategic relationships in the Malaysian corporate world and our leading position as a values-based financier. It is not just demand for Green Financing that is set to drive growth in our sustainable finance operations; the appetite for ESG-compliant investments has also risen sharply. Building on our strength as a global leader in Shariah-ESG investment funds, we have continued to grow the number and size of sustainable investment products that we offer. As of 2021, Shariah-ESG funds accounted for more than 65% of our total RM1.43 billion in assets under management, and we have continued to drive innovation in this area. In 2021, for example, we launched Malaysia’s first Waqf Featured Unit Trust Fund in March 2021. We also continued to capitalise on the demand for ethical and Shariah-compliant financing instruments by serving as lead manager or joint lead manager on 15 sukuk issues that qualified for an ESG rating in 2021. Moving forward, we will continue to push the frontiers in the Shariah-ESG investments industry in line both with our growth strategy and with our values as an Islamic bank. 65
68. B A N K I S L A M M A L AY S I A B E R H A D STRATEGIC PERFORMANCE REVIEW STRATEGIC PILLARS 2 : VALUES-BASED CULTURE At BIMB, our growth strategy and corporate culture are underpinned by our strong values as an Islamic banking institution and VBI. Our Shariah governance framework establishes our form as an Islamic Bank, but it is our commitment to our values that enables us to achieve the intended outcomes of Islamic Finance. We believe that our robust ethical framework will be a major asset as the world increasingly embraces values-based financing and investment practices, and us embedding them it into every aspect of our business and operations and at the very heart of our growth strategy. Accordingly, we have aligned our overall Human Resources strategy with our LEAP25 strategy, where our people’s capabilities, culture and values are of the utmost importance. Putting these values into action, as part of the restructuring exercise that has seen BIMB emerge as an independent and public listed company in 2021, we are undertaking a concerted effort to ensure that the BIMB Group develops a cohesive common culture centred around our core values. In March, we introduced the 8 Conducts Behavioural Competencies to employees bank-wide. These are eight fundamental traits and behaviours that will serve as a moral compass for our people as we seek to build a high- 66 performance workforce. The 8 Conducts are anchored by our TAAT (Think Customer, Act with Integrity, Advance Beyond, Take Charge) values, integrated into the Group’s policies, guidelines and frameworks. To inculcate the 8 Conducts in the Group’s work culture, we have carried-out awareness and engagement programmes continuously throughout the year, and integrated these behavioural competencies into our employees’ annual performance reviews. We have also acted to strengthen the risk and compliance culture at BIMB through a series of programmes to drive the internalisation of compliance culture amongst our workforce at all levels. Recognising the very human side of the work experience, we established the Bank Islam Live Well Programme, which offers our people a holistic wellness programme that supports their physical, emotional, mental, spiritual, and financial well-being. We also provide employees with education, tools and access to relevant experts, enabling them to receive professional help for their issues confidentially. The value and effectiveness of the programme was proven by the crucial support provided to many of our employees during the COVID-19 pandemic and it will remain a key part of our approach to strengthening the values-based-corporate culture as we move forward.
69. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information STRATEGIC REVIEW STRATEGIC PILLARS 3: CUSTOMER-CENTRICITY Our customers are at the very heart of our business and our ability to keep growing depends on our ability to meet not just their needs, but their ever-increasing expectations. Strengthening customer-centricity is, therefore, at the very core of our LEAP25 strategy. For BIMB, this means embedding a customer first mind-set in all our planning and configuring our business around a customer-centric approach. With more than 90% of our transactions now going through electronic channels, increased digitalisation will be critical to delivering on this goal, but our approach goes well beyond that, encompassing the customer experience at our physical branches, the quality of our client relationships and integrating customer-centricity into our corporate culture. Our digital initiatives have included the development of specific apps that are tailored to the needs of individual customer segments, such as the GO by Bank Islam mobile banking app for our retail customers, BEST Invest for mutual fund investors and GO Biz by Bank Islam mobile app for SME/ MSME customers. To ensure that we continue to deliver a high level of service, we have continued to enhance the functionality of these apps to deliver greater convenience for our customers and keep-up with their evolving needs. To further integrate digitalisation into our customer-centric approach, we are also leveraging on developing our data analytics capability to provide customers with more personalised and satisfying services and experiences. Even as we accelerate the rollout of our digital customer solutions, we have maintained our focus on improving customer experience at our branches. We have continued to invest in training frontline staff and new technology to improve customer experience and deliver a seamless service between our physical and digital channels. We also continued to strengthen services for our business customers at branches, with the launch of five new SME Hubs. The new launches bring the number of Hubs to 16, covering all regions, thus increasing the number of customer touchpoints and allowing us to better-serve our customers’ needs. Commitment to delivering on customer-centricity is a key part of our HR strategy and we have continued to invest in ensuring that our people understand, and have the skills to deliver on our customer first approach. Our digital upskilling programme, which we are expanding across our company, includes a strong customer-focused component. We have also continued investing in training and upskilling the staff at our SME Banking Division, enabling them to provide our business customers with the heightened level of service they require in the fast-evolving business landscape. The steps we took during the year are key to our goal of enhancing customers’ experience. However, our focus on customer-centricity goes beyond any particular initiative; rather it represents a major shift in the way that we will approach our business as we move forward. 67
70. B A N K I S L A M M A L AY S I A B E R H A D STRATEGIC PERFORMANCE REVIEW STRATEGIC PILLARS 4 : COMMUNITY EMPOWERMENT In a year when society and the country continued to feel the impact of the global pandemic, BIMB continued to raise the bar on our community empowerment initiatives, both through our social finance initiatives and by maintaining our focus on financing community-based projects. During the year, we raised a total of RM3.31 million through Sadaqa House, our principal social f inance vehicle, and disbursed a total of RM2.0 million in 2021, to more than 4.700 beneficiaries among the more vulnerable sections of society. Sadaqa House has continued to innovate in the way that it works to empower communities, and in the way that it allows donors to extend their support, by strengthening digital channels, continuing to forge strategic partnerships and developing new structures. Additionally, we expanded our iTEKAD and BangKIT affordable micro-f inance programmes to assist small and microentrepreneurs through one of the most difficult periods they have faced by providing them with start-up capital or financing for business expansion. The schemes continue to provide a pathway for unbanked and underbanked microentrepreneurs to move into the formal banking sector, thus building longer-term prosperity. 68 Staying true to our values as an Islamic bank, we also continued to provide repayment assistance for our customers in need, under the Financial Management and Resilience Programme (URUS) during the year. However, the demand for assistance under the scheme declined sharply during the year as the economy gradually recovered. In addition to our direct social f inance initiatives, we continued to support national development and community empowerment through increased financing for affordable home projects in strategic locations that are targeted at the B40 and M40 segments by providing bridging financing for the developments. In 2021, we approved RM138.9 million in financing for five affordable housing projects, which far exceeded our target for the year of two projects with total financing of RM50 million. Likewise, we also surpassed our financing target for infrastructure and public facility projects by approving a total of RM111.9 million for eight projects in 2021, which, once again, exceeded our target of RM50 million for the year.
71. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information STRATEGIC REVIEW STRATEGIC PILLARS 5: REAL ECONOMY Through building strategic partnerships, sharing knowledge and providing our clients with customised financial solutions, BIMB continues to play a catalytic role in the development of Malaysia’s economy, particularly in the SME segment and the Halal Industry. During the year, we continued to build new strategic partnerships and strengthen existing ones, including with key government agencies, such as the Halal Development Corporation (HDC), SME Corporation Malaysia (SME Corp. Malaysia), Malaysia External Trade Development Corporation (MATRADE). Our collaboration with these agencies allows us to leverage on their strengths and offerings to build the capacity of our clients in the SME and Halal industry sectors, including by helping them access governmentbacked credit guarantee schemes like the SJPP and CGC Guarantee Scheme. As the Malaysian business landscape adapted to the new reality during the pandemic, we continued to help our clients build the resilience needed to navigate the post-pandemic next normal, by providing them with access to financing and resources to embrace digital and technological solutions to remain competitive. To support their growth, we introduced a range of new financing programmes specifically catering to the needs of SMEs, including the Go Halal SME Financing, with a portfolio size of RM100 million; the SME Automation & Digitalisation Facility (ADF); and the All Economic Sectors Facility (AES) schemes. As we move forward, BIMB will continue to support the development of the SMEs and the Halal Industry in accordance with the national economic agenda and as key growth-drivers for the Bank under our LEAP25 strategy. The Malaysian economy has, repeatedly, proven its resilience but many entrepreneurs in the SME segment and the Halal Industry remain unaware of the opportunities and support available to them. To raise awareness and help them build capacity as they adapted to the pandemic conditions, we organised a series of webinars with our strategic partners to provide information and insights on growth opportunities and financial management. 69
72. B A N K I S L A M M A L AY S I A B E R H A D STRATEGIC PERFORMANCE REVIEW STRATEGIC PILLARS 6 : DIGITALISATION Digitalisation will be a critical driver in allowing us to achieve our targets under the LEAP25 growth strategy and emerge as a leader in Malaysia’s digital banking landscape. To that end, throughout 2021, we continued to invest in developing new digital products and services, forged strategic collaborations with digital innovators and re-oriented our work culture to embrace digitalisation at every level. At the heart of digital strategy is our aim of delivering a seamless and hyper-personalised customer experience across all of our physical and digital assets. 2021 was a year of major accomplishments for us in these areas as we accelerate a bank-wide transformation of the way that we work and deliver our services. The banking landscape continued to evolve rapidly during the year, as the ongoing pandemic continued to see customers shift to online banking and e-commerce as they embraced contactless options. The investments made in our digital services and infrastructure over the last two years left us well-positioned to capitalise on this shift. Throughout 2021, we saw strong growth in user numbers and transactions across all our key digital platforms, with more than 90% of transactions being conducted through electronic channels by the end of 2021. Our Internet Banking users recorded a more than 20% rise to 1.5 million users, during the year, with the total number of Internet Banking transactions rising by 50%. Even more encouraging was the growth in numbers for our GO by Bank Islam mobile banking app. The number of active users for the app surged by 79% to reach 849,000 and the total number of transactions almost tripled to reach 47 million, which far exceeded our goal of 21 million transactions for the year. The growth in the number of users and transactions was driven not only by the changing consumer behaviour caused by the pandemic but also by the roll-out of new features on the platform to meet customers' rapidly changing needs. GO by Bank Islam is central to our digital growth strategy and as we move forward, we will accelerate the rollout of additional features and functionality to position it as a super app. 70
73. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information STRATEGIC REVIEW As part of our increasingly ref ined digital strategy, we also developed specialised and carefully targeted apps for different areas of our business. We continued to drive digital innovation in Islamic finance with BIMB Investment’s award-winning BEST Invest App that utilises robo-intelligence to assist investors in goals-based investing and has now garnered more than 15,000 transacted users. We also took a step to strengthen our position in another key market area with the launch of the Halal Digital Ecosystem for SMEs, or SMEXpert mobile app, to support their growth by enabling wider networking and knowledge enhancement. During the year, we also laid the groundwork to disrupt the Malaysian Islamic banking market with the planned launch of our new digital banking proposition for 2022. The digital infrastructure for the new digital banking proposition is developed and tested by our dedicated Centre of Digital Experience Division, demonstrating the capacity that we have built to undertake large and complex digital projects with accelerated timelines. The launch of the new digital banking proposition will mark a major push by BIMB into establishing our leading position in Malaysia’s digital Islamic Financial Industry. We further extended our mobile banking offerings for SMEs and micro businesses by launching the GO Biz by Bank Islam mobile app in July. The app allows small merchants to manage their day-to-day business quickly and securely through their mobile devices and we successfully onboarded more than 7,000 active users. We see vast potential for expanding the GO Biz by Bank Islam user base and during the year we initiated a project to tie-up with small traders at the famous Pasar Besar Siti Khadijah market in Kota Bharu, which has seen some 400 of the market's 1,300 traders migrating from cash to digital payments via the DuitNow QR offered through GO Biz by Bank Islam. We aim to migrate the remaining traders in the market in successive phases and the project will serve as a blueprint for our focused expansion into the micro-business market. Achieving our digital ambitions will also require us to integrate technology more thoroughly into all our operations in order to drive efficiencies and remain competitive. During the year, we took measures to strengthen our digital core by digitalising our HR and recruitment processes and upgrading key infrastructure, such as our cheque clearing system and our Digital Vendor Financing Platform (VFP) that services our customers under Petronas and Sarawak Energy Bhd. Critically, we also accelerated the digital upskilling of our workforce with the launch of our in-house Digital Academy and by expanding our digital training and certification programme. The banking sector continues to face potential disruption f rom other increasingly digital intermediaries such as FinTech’s. BIMB has embraced the challenge and the opportunity that this provides. In 2021, BIMB initiated collaboration with selected FinTech’s in order to leverage on their agility and innovation while utilising our credibility as a leading Islamic bank, our customer base and our financial resources to scale-up the results. These initiatives form the first steps of our digital strategy under LEAP25. As we move forward, digitalisation is set to emerge as a key engine of our future growth and for delivering on our goal of becoming a customer-centric organisation. 71
74. B A N K I S L A M M A L AY S I A B E R H A D Financial Review from the Group Chief Financial Officer BIMB DELIVERED A COMMENDABLE SET OF RESULTS FOR THE FINANCIAL YEAR 2021 . OUR PROFIT BEFORE ZAKAT AND TAX STANDS AT RM704.2 MILLION AND THE GROUP HAS DECLARED AN INTERIM DIVIDEND OF 10.93 SEN PER SHARE FOR THE YEAR. Dear Shareholders, 2021 remained a year of challenges as the economy continued to feel the impact of the COVID-19 pandemic and faced new headwinds from global supply chain disruptions and rising inflationary pressure. As we navigated the challenges of the year, we stayed true to our values as an Islamic bank by extending support to our customers in need, while maintaining an effective balance between financial prudence and investing in our future growth. PROFIT BEFORE ZAKAT AND TAX (PBZT) The operating environment remained challenging, with the Malaysian banking sector continuing to face margin compression as BNM maintained its benchmark OPR rate at a record-low of 1.75% in order to support the economy. However, the overall economy also continued to benefit from the government’s RM530 billion in stimulus measures which supported a rebound in business activity and financing growth. At the same time, the banking sector as a whole also continued to raise provisions against potential credit losses as the financing moratoriums introduced over the last two years begin to winddown in the first half of 2022. Industrywide provisions stood at 1.9% of total banking system financing at the end of 2021 (2020: 1.7%). 2020: RM728.2 million The year under review was also a pivotal one for BIMB as we assumed listed status on 8 October 2021. The relentless effort at garnering both existing and potential investors resulted in a highly-successful bookbuilding exercise at BIMB Holdings Berhad in April 2021, with our shares being oversubscribed, which underscores investors’ confidence in the future of our Group as they look beyond the short-term challenges. 72 RM704.2 Million 3.3% EARNINGS PER SHARE 21.9 Sen 2020: 22.0 sen
75. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information PERFORMANCE REVIEW OUR FINANCIAL YEAR IN REVIEW Our Performance Bank Islam Malaysia Berhad (“BIMB” or “the Group”) recorded revenue of RM3.2 billion for the year under review, which is 5.2% lower than in 2020. The lower figure reflects the impact of the subdued economic environment, the slowdown in the property sector and margin compression. Through the effective execution of operational and financial measures, the Group was able to deliver a Profit Before Zakat and Tax (PBZT) of RM704.2 million for the financial year ended 31 December 2021. This represents a 3.3% decline from the previous financial year and translates to earnings per share of 21.87 sen for 2021. Our softer performance is attributable to a combination of lower non-fund based income and increased expenses during the year. The Group’s non-fund based income declined by RM175.5 million, mainly due to lower investment income, particularly a lower net gain from the sale of investment securities. These reductions were offset by a lower modification loss arising from the financing moratorium granted to customers. The Group recognised a significantly lower modification loss of RM48.9 million in 2021, compared to RM136.4 million in the previous year. Our Net Income Margin (NIM) declined slightly to 2.38% from 2.41% in 2020, reflecting the impact of the low interest-rate environment that prevailed throughout the financial year. SEGMENTAL PERFORMANCE BIMB has three operating segments, which are Consumer Banking; Corporate and Commercial Banking; and Treasury. Our Consumer Banking segment encompasses retail. Our Corporate and Commercial Banking encompasses non-retail. Treasury encompasses trading and investment book. Consumer Banking reported a net income of RM1.2 billion for the financial year ended 31 December 2021, 13.4% higher than the previous year, attributed mainly to a higher net fund-based income. Gross financing for Consumer Banking as at end December 2021 stood at RM44.5 billion. This marks a year-on-year growth of 7.5% which was driven, mainly, by growth in house financing. Corporate and Commercial Banking recorded a net income of RM415.6 million, a rise of 6.5% from the previous year, with the increase mainly due to higher net fund-based income. Total gross financing for the segment stood at RM14.7 billion. Treasury registered a net income of RM241.4 million for the period, which is 47.1% lower than the previous year. The softer performance was, mainly, due to a lower net gain from sale of investment securities. Treasury assets stood at RM20.0 billion. 73
76. B A N K I S L A M M A L AY S I A B E R H A D FINANCIAL REVIEW FROM THE GROUP CHIEF FINANCIAL OFFICER Maintaining Our Focus on Growth Despite the volatile operating environment , the Group’s Total Assets increased by 7.4% during the year, to reach a record high of RM80.2 billion. Growth in total assets was underpinned by encouraging growth in our consumer banking segment. Net Financing grew by 6.4% (2020: 10.5%), which was well-above the industry’s average of 4.1% in 2021. Our financing growth continues to be driven by our attractive products and customer preference for our differentiated offerings. The Group’s total deposits and investment accounts grew by 6.8% to RM67.8 billion during the year. Total current, savings accounts and transactional investment accounts (CASATIA) reached a record high ratio of 39.6% of total deposits and investment accounts, up from the 36.1% recorded in 2020, and above the industry average of 32.4%. The total value of our CASATIA stood at RM26.8 billion at the end of 2021. Maintenance of High Asset Quality By effectively managing our credit risk, BIMB has consistently maintained one of the lowest Gross Impaired Financing (GIF) ratios in the industry. Our GIF ratio stood at 0.96% at the end of 2021, up from 0.67% in 2020, but still well below the industry average of 1.44% for the year under review. The rise in our GIF ratio is mainly due to the pre-emptive provisions TOTAL ASSETS INCREASED TO RM80.2 Billion (2020: RM74.6 Billion) that we have made in response to the challenging credit environment. Our total impaired financing rose from RM373 million in 2020, to RM568 million in 2021. Additionally, we have continued to maintain our Financing Loss Coverage ratio at well above industry levels. Our ratio stood at 187.2% at the end of 2021, in contrast to the industry average of 129.0%. Effective Liquidity Management We continued to strengthen our liquidity buffers during the year, with our Liquidity Coverage Ratio (LCR) rising by 35.2% to 180.1%, which is significantly above the industry average of 153.7%. At the same time, our Net Stable Fund Ratio rose to 113.1% as at December 2021, up from 110.4% the year before. This year-on-year increase in long-term liquidity was, mainly, the result of a RM2.5 billion increase in retail and SME deposits. While the Group has maintained its existing stance on credit management, we have also adopted a more cautious and selective approach, with more granular forward-looking assessments that incorporate ESG considerations. In addition, we recalibrated our credit scorecard to factor-in the heightened risks from the pandemic. We have also stepped-up client engagements and monitoring to reduce the likelihood of credit risk incidents materialising. TOTAL DEPOSITS AND INVESTMENT ACCOUNTS ROSE TO RM67.8 Billion (2020: RM63.4 Billion) NET FINANCING GREW TO RM58.2 Billion (2020: RM54.7 Billion) 74 TOTAL CAPITAL RATIO LOWER AT 18.6% (2020: 19.8%)
77. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information PERFORMANCE REVIEW Strong Capital Position BIMB maintains a strong capital base. Our total capital ratio of 18.6% (2020: 19.8%) provides an ample buffer for loss absorption and business growth. Pre-tax Return-on-Equity (ROE) for the year stood at 11.1% (2020: 12.1%). Our ROE after zakat and tax stands at 8.4% for 2021. Return on Assets (ROA) before zakat and tax declined slightly from 1.0% in 2020 to 0.9% in the year under review. Investing in Growth and Optimising Costs Our cost-to-income ratio (CIR) rose to 57.0% (2020: 53.8%). The rise in CIR reflects the higher operating expenses we have incurred as we invest in our workforce and infrastructure. Among the expenses are the improvements that we are making to digital infrastructure. Cost optimisation remains a key priority as we move forward, in line with our LEAP25 strategy which sets a clear target of bringing our cost-to-income ratio down. In the year ahead, our expenditure will, increasingly, be directed to earningsaccretive targets. EFFECTIVE RISK MANAGEMENT BIMB conducts its business in accordance with the principle of al-ghunm bi al-ghurm, or that one is entitled to a gain if one is willing to bear the loss. Accordingly, we maintain a robust risk management framework that addresses both the general risks inherent in the operating environment and those that are particular to our core business. In the current operating environment, we recognise credit risk due to the uncertainty in the current economic environment and operational risk arising from changes in consumer behaviour, with a shift to digital banking, as the key risks that the Group faces. Additionally, we recognise that cyber risk is a growing challenge as we embrace an increasingly digital future and we have invested in hardening our systems and providing our people with the necessary skills to mitigate the threat from cyber risk. A full discussion on our key risks and risk management policy can be found on pages 58 to 61 and 193 to 208 of this report. OUTLOOK The outlook for the year ahead is projected to be more supportive of our performance. BIMB forecasts that the Malaysian economy will grow by 5.3% in 2022, almost double the rate achieved in 2021. Our optimism for the year ahead comes with a degree of caution though, as the evolving economic and geo-political scenario carries considerable downside risk. Nevertheless, as we move forward, we are confident that our ample pre-emptive provisions, the high quality of our assets and our healthy capital level leave us well-positioned to navigate through challenging market conditions and continue delivering value for our shareholders. Notwithstanding the continued challenges, the business environment in the year ahead presents a more favourable prospect, with rising expectations of an economic recovery helping spur growth in the Malaysian business sector. These strong growth expectations are underpinned by BNM’s continued maintenance of low interest rates, the move to the endemic phase of COVID-19 and the reopening of Malaysia’s borders. We believe that BIMB is well-positioned to capitalise on these opportunities. Moving forward, our growth will continue to be driven by our principles as a VBI. This commitment aligns us with the growth strategy for the Malaysian financial sector laid-out in BNM’s Financial Sector Blueprint (FSB) 2022-2026. The FSB sets out the development priorities for Malaysia’s financial industry to promote a smooth transition to green economy and integrate climate risk management into banks’ internal functions & operations. The FSB aims to deliver on these goals through five key thrusts: Fund Malaysia’s economic transformation; Elevate the financial well-being of households & businesses; Advance digitalisation of the financial sector; Position the financial system to facilitate an orderly transition to a greener economy; and Advance value-based finance through Islamic finance leadership. These five thrusts, which will now set the direction for the Malaysian financial industry, are aligned with BIMB’s LEAP25 roadmap which places VBI at the heart of our business model. AZIZAN ABD AZIZ Group Chief Financial Officer 75
78. B A N K I S L A M M A L AY S I A B E R H A D 5-YEAR FINANCIAL SUMMARY Financial Year Ended 31 December Operating Results (RM'000) Total Revenue Income Attributable to Depositors and Investment Account Holders Profit Before Zakat and Tax ("PBZT") Profit After Zakat and Tax ("PAZT") Key Statements of Financial Position Items (RM'000) Total Assets Total Financing of which: Gross Impaired Financing Investment in Securities Deposits from Customers Investment Accounts of Customers CASATIA Shareholders' Equity of which: Share Capital Ratio Analysis Return on Equity (based on PBZT) (%) Return on Assets (based on PBZT) (%) Return on Equity (based on PAZT) (%) Return on Assets (based on PAZT) (%) Cost Income Ratio (%) Financing to Available Fund Ratio (%) CASATIA Ratio (%) Gross Impaired Financing Ratio (%) Financing Loss Coverage (%) Total Capital Ratio (%) Earnings Per Share (sen) Gross Dividend Per Share (sen) Net Assets Per Share (RM) 76 2021 2020 2019 2018 2017 3,167,757 3,342,202 3,644,696 3,336,502 3,008,181 978,815 704,221 534,305 1,228,505 728,213 564,954 1,551,945 843,480 627,609 1,383,834 810,258 593,887 1,208,337 767,053 566,118 80,156,214 58,153,769 74,637,022 54,670,635 67,593,802 49,472,522 63,938,733 45,680,680 57,742,914 42,113,420 568,383 15,535,542 57,338,834 10,452,902 26,845,680 6,399,938 373,234 13,739,191 51,077,262 12,368,528 22,907,392 6,285,699 433,001 12,809,708 47,408,738 10,240,373 18,860,995 5,714,453 425,937 11,719,258 49,895,232 5,176,819 17,668,839 5,276,407 398,277 9,633,608 46,192,910 4,260,185 17,466,618 4,959,704 3,445,757 3,306,118 3,012,368 3,012,368 2,869,498 11.10 0.91 8.42 0.69 57.01 79.00 39.60 0.96 187.19 18.56 21.87 10.93 3.08 12.14 1.02 9.42 0.79 53.81 79.24 36.11 0.67 248.63 19.82 22.19 10.92 2.42 15.35 1.28 11.42 0.95 53.56 78.99 32.72 0.86 179.32 18.66 25.00 12.45 2.28 15.83 1.33 11.60 0.98 52.97 77.71 32.08 0.92 187.75 17.77 23.96 11.86 2.10 16.42 1.35 12.12 1.00 57.26 81.41 34.62 0.93 159.98 16.44 23.27 11.50 2.01
79. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information 5-YEAR PERFORMANCE REVIEW FINANCIAL HIGHLIGHTS Total Revenue (RM Million) 3,008 3,337 3,645 Income attributable to depositors and investment account holders (RM Million) Profit before Zakat and Tax (RM Million) 1,552 3,342 3,168 1,384 767 1,229 1,208 810 843 728 704 ‘20 ‘21 979 ‘17 ‘18 ‘19 ‘20 ‘21 ‘17 ‘18 Total Assets (RM Million) 57,743 ‘17 63,939 ‘18 67,594 74,637 ‘20 80,156 ‘21 ‘17 45,681 49,473 ‘18 ‘19 47,409 ‘18 ‘19 Gross Impaired Financing (RM Million) 58,154 568 398 ‘21 ‘20 ‘17 426 433 373 ‘18 ‘19 51,077 10,453 10,240 ‘21 ‘20 Shareholders’ Equity (RM Million) 12,369 57,339 49,895 54,671 ‘17 Investment Accounts of Customers (RM Million) Deposits from Customers (RM Million) 46,193 ‘21 ‘20 Total Financing (RM Million) 42,113 ‘19 ‘19 5,276 5,714 6,286 6,400 ‘20 ‘21 4,960 4,260 ‘17 ‘18 ‘19 ‘20 ‘21 ‘17 5,177 ‘18 ‘19 ‘20 ‘21 ‘17 ‘18 ‘19 77
80. B A N K I S L A M M A L AY S I A B E R H A D FINANCING BY CONTRACT 2021 0 .2% 0.1% 5.6% 3.6% 0.2% Bai’ Bithaman Ajil Murabahah Bai’ Al-Dayn Bai’ Al-Inah (0%) At-Tawarruq Ijarah Muntahiah Bit-Tamleek Istisna’ 90.3% 2020 0.2% 0.2% 6.8% 3.7% 0.1% Bai’ Bithaman Ajil Murabahah Bai’ Al-Dayn Bai’ Al-Inah (0%) At-Tawarruq Ijarah Muntahiah Bit-Tamleek Istisna’ Ar-Rahnu (0%) 89% 78
81. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information FINANCING PERFORMANCE REVIEW BY SEGMENT 2021 3.7% 12.1% Consumer 9.2% Commercial Corporate SME 75.1% 2020 3.2% 12.5% Consumer 9.9% Commercial Corporate SME 74.4% 79
82. B A N K I S L A M M A L AY S I A B E R H A D SIMPLIFIED STATEMENTS OF FINANCIAL POSITION as at 31 December 2021 TOTAL ASSETS 0 .3% 1.2% 6.5% 0.3% 1.1% 7.0% 19.4% 18.4% Cash and short-term funds Investment in securities RM80.2 billion as at 31 December RM74.6 billion as at 31 December 2021 Financing, advances and others Statutory deposits with Bank Negara Malaysia 2020 Other assets 72.6% 73.2% TOTAL LIABILITIES AND EQUITY 2.4% 2.5% 2.5% 8.0% 8.4% 2.3% 2.3% 2.0% RM80.2 billion as at 31 December Customers' deposits & investment accounts Recourse obligations on financing sold to Cagamas RM74.6 billion as at 31 December 2021 Subordinated Sukuk Murabahah 2020 Other liabilities Equity 84.6% 80 85.0%
83. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information STATEMENT OF PERFORMANCE REVIEW VALUE ADDED & DISTRIBUTION STATEMENT OF VALUE ADDED Net income derived from investment of depositor’s funds Net income derived from investment account funds Net income derived from investment of shareholder’s funds Net allowance for impairment on financing and advances, net of recoveries Loss on modification of financial assets Net allowance for impairment on other financial assets Direct expenses Finance cost Overhead expenses excluding personnel and depreciation 2021 RM’000 2020 RM’000 1,441,384 337,411 459,058 (190,738) (48,911) (7,406) (10,938) (89,887) (402,697) 1,497,534 291,908 460,635 (208,671) (136,380) 2,757 (13,660) (91,458) (354,539) 1,487,276 1,448,126 2021 RM’000 2020 RM’000 723,830 663,367 169,916 163,259 226,893 281,536 59,225 307,412 56,546 283,418 1,487,276 1,448,126 DISTRIBUTION OF VALUE ADDED To employees: Personnel expenses To the government and zakat authority: Taxation and zakat To providers of capital: Dividend to shareholders To reinvest to the Group: Depreciation Retained earnings 81
84. B A N K I S L A M M A L AY S I A B E R H A D QUARTERLY PERFORMANCE Financial year ended 31 December 2021 RM million Q1 Q2 Q3 Q4 Year Total revenue 771 834 746 817 3 ,168 Net income before impairment 532 591 501 565 2,189 Profit before overheads, zakat and tax 521 557 460 453 1,991 Profit before zakat and tax 214 261 153 76 704 Profit after zakat and tax 159 194 102 79 534 Earnings per share (sen) 6.10 7.44 4.08 3.84 21.87 Dividend per share (sen) – – 10.93 – 10.93 Financial year ended 31 December 2020 RM million Q1 Q2 Q3 Q4 Year Total revenue 924 783 876 759 3,342 Net income before impairment 546 466 591 511 2,114 Profit before overheads, zakat and tax 516 442 436 514 1,908 Profit before zakat and tax 222 167 137 202 728 Profit after zakat and tax 164 121 103 177 565 Earnings per share (sen) 6.55 4.82 3.99 6.81 22.19 Dividend per share (sen) – 5.55 – 5.37 10.92 82
85. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information FINANCIAL PERFORMANCE REVIEW CALENDAR Transfer of Listing 8 OCTOBER 2021 (Friday) Bank Islam – Listed And First Trading Day Extraordinary General Meeting 19 NOVEMBER 2021 (Friday) Extraordinary General Meeting 39th Annual General Meeting Financial Results Announcements 29 NOVEMBER 2021 (Monday) Quarterly report on consolidated results for the financial period ended 30 September 2021 28 FEBRUARY 2022 (Monday) VENUE FULLY VIRTUAL At Broadcast Venue Level 10 Menara Bank Islam 22 Jalan Perak 50450 Kuala Lumpur Quarterly report on consolidated results for the financial period ended 31 December 2021 Analyst Briefing DATE 23 MAY 2022 (Monday) 10.00 a.m. 1 MARCH 2022 (Tuesday) Briefing on FY2021 Financial Results Dividend Interim Dividend of 10.93 Sen Per Share Notice Entitlement Payment 10 December 2021 (Friday) 24 December 2021 (Friday) 20 January 2022 (Thursday) 83
86. B A N K I S L A M M A L AY S I A B E R H A D CONSUMER BANKING WHO WE ARE Consumer Banking is the largest division within Bank Islam and we accounted for 56 % of the Group’s net income in 2021. We offer a full range of consumer banking products and services, distinguished by our status as a full-fledged Islamic bank. The range and quality of our products and services saw our share of the competitive Malaysian consumer banking market rise from 4.66% to 4.79% in 2021. Our Total Assets increased by 7.5% to RM44.6 billion during the year, exceeding our target of 6% growth. KEY INITIATIVES Sustainable Prosperity We grew our sustainable revenue streams by expanding our reach and offerings, and by pursuing strategic collaborations with targeted bodies and organisations. •Engaged in continuous collaborative engagements with Professional Associations to promote our financial solutions. •Launched the WinBig campaign targeted at Government & Package Employers. •Established a strategic partnership with Managepay in PLUS through deployment of our terminals •Opened four new sales hubs under our Farihan business. •Established a new merchant acquiring business model, called STAR (Strategic Acquiring Partner) which acquired PDRM as an e-Commerce merchant. •Launched the My Dream Home campaign and Ar-Rahnu Jom Tambah Duit Campaign to accelerate the growth of our financing portfolio. •Extended our Professional Programme to Home Financing. Customer-Centricity We continued to enhance customer experience by deploying digital solutions and simplifying processes across a range of services. • Increased convenience in the Amanah Saham Bumiputera (ASB) financing process by accepting documentation via digital image • Improved Consumers’ risk appetite by revising the financing amount eligibility and removing the imposition of capping against monthly income for Personal Financing, as well as revision of DSR and the submission of application documents via digital platform. • Expanded payment channels for Ar-Rahnu to include ATM/CDM and Internet Banking options. Digitalisation We applied digital solutions to pursue new customer acquisition and improve operational efficiency. •Utilised a sales gamification campaign to mobilise for a customer lead generation campaign through the Leads2Win app. •Pursued customer leads online via the EzXcess digital platform. •Expanded our digital marketing through key social media platforms, such as Facebook, Instagram and via Google Search under our Digital First initiative. •Automated reporting across seven areas through Robotic Process Automation (RPA). 84
87. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information BUSINESS REVIEW CHALLENGES IN 2021 OPPORTUNITIES IN 2021 •We pursued a promising new growth market by increasing financing for the Non-Bumiputera customer segment. •Effectively utilised digital channels for customer lead generation, both through online platforms and through virtual engagements with the Packaged Employer segment. •We improved operational efficiency and raised employee productivity at Consumer Banking by implanting Robotic Task Automation for a range of routine tasks. •The prolonged nationwide MCO required branches to remain closed during the lockdowns and also saw the closure of various offices that are vital to the efficient functioning of the banking system, such as lawyers’ offices and government Land Offices, which impacted the speed and number of transactions. •A range of customers showed diminished appetite for our financial product offerings as they faced financial pressure, with some seeking support under the Repayment Assistance programme. FINANCIAL HIGHLIGHTS Asset Growth: 7.5% 41,459.23 44,583.46 2,207.52 1,964.03 1,956.43 37,230.69 (2020: 11.4%) Fee-Based Income: 5.2% (2020: -4.1%) Total Income: RM1,956.43 million (2020: RM1,964.03 million) 19’  20’ 21’ Total Outstanding (RM Million) 19’  20’ 21’ Total Income (RM Million) 85
88. B A N K I S L A M M A L AY S I A B E R H A D CONSUMER BANKING PRODUCT HIGHLIGHTS Grew our non-national vehicle financing portfolio to 16.4%, up from 14.3% the year before. Implemented a Consumer Financing Process Review, Extended the target market for the removal of capping & revised DSR in Oct 2021 Switched our Ar-Rahnu contracts Tawarruq Structure in March 2021, to improve efficiency to a Personal Cash Line-i personal financing to professionals in Oct 2021 our StraightThrough-Processing (STP) mechanism to ten Expanded our Package Employers, simplifying the loan application process. OUTLOOK AND STRATEGIC PLANS FOR 2022 Competition will remain intense in the consumer banking market as banks target high-growth and higher net worth consumer segments. Uncertainties still remain as the Malaysian economy continues to recover, with the impact of the pandemic still ongoing and many retail customers facing financial challenges once finance repayment moratoriums end. The consumer banking landscape has also evolved with customers shifting to online and other self-service channels. Despite the challenges, BIMB aims to grow our financing by 8% to RM47.5 billion in 2022 through implementing a range of strategies, including: •Growing our Green Financing portfolio through ESG initiatives such as hybrid & electric vehicle financing and financing for home solar panels. •Sustaining growth in our Packaged Segment and Secured Financing portfolios. •Growing our customer base of young graduates through our GradONE programme. •Broadening our market presence by opening 20 new Ar-Rahnu branches, 10 new Vehicle Sales Hubs and 4 new Farihan Sales Hubs •Leveraging on digitalisation in key areas, including deploying analytical tools for customer insights, improving customer communications and offering more efficient card management via Internet Banking and our GO mobile banking app. •Improving loan applicants’ experience by simplifying our consumer financing process review and vehicle flow process review. •Maximising productivity by automating daily tasks and analytical tools for business insights, allowing us to focus on and deliver a better customer experience. 86
89. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information DEPOSITS AND BUSINESS REVIEW CASH MANAGEMENT WHO WE ARE Deposits & Cash Management drives Bank Islam’s strategic initiatives to achieve sustainable deposits growth. By developing viable strategies suited to the evolving business and economic environment, we reduce BIMB’s cost of funds by achieving the right balance between short-term and long-term funding strategies. We have a particular focus on growing CASATIA, which forms one of the essential sources of funds that contributes to a stable liquidity adequacy ratio for the Bank. To drive deposit growth we develop innovative new products and customer solutions suited to the contemporary economic and business environment. During the year, we continued to develop strategies to capture new customer segments, and have increasingly leveraged on the power of digitalisation, utilising social media to reach new target markets. We have also developed a range of new financial solutions suited to the current economic environment, with distinct solutions for particular market segments. KEY INITIATIVES Sustainable Prosperity • Increase individual and non-individual CASATIA through a range of marketing initiatives, campaigns and promotions. • Executed product campaigns to push for deposits growth for existing products and attract new customer segments such as non-Bumiputera, SMEs and corporate bodies. • Increase collaboration with government agencies and universities to promote Bulk Account Opening for their employees and students. Other collaborative efforts include co-branding debit cards with targeted partners to increase new account subscriptions. • Offering Cash Management solutions to cooperatives, mosques, healthcare companies, schools and legal firms, as well as enhancement of eBanker through Soft Token for conglomerates and companies. • Introduced the iGain Corporate transactional investment account for new corporate customers. • Increased lead generation from social media to enhance marketing reach and increase growth of CASATIA • Leveraged on SnapNPay platform to cater for e-contributions relating to State Religious Council/Zakat/ NGOs, for local authorities and for mosques. Customer-Centricity We undertook a range of new initiatives to introduce new products and simplify transactions for our customers • Providing ePayment and eCollection services to State Religious Council and Zakat Collections agency • Promotion of Charity Link and special campaigns • Encouraged companies to switch to online transactions by promoting subscriptions to SnapNPay via SnapNPay Campaign/Package. Real Economy Continued to support the growth of the national economy and SME sector by offering solutions that widen financial access and improve transactional efficiency. • Introduced our Cashline for Awfar and SME Hybrid products to widen customers’ financing options and drive growth in our Al Awfar & iGain offerings, as part of our retention strategy for high net worth customers. Digitalisation • Implemented Robotic Process Automation digital initiatives to increase efficiency. 87
90. B A N K I S L A M M A L AY S I A B E R H A D DEPOSITS AND CASH MANAGEMENT CHALLENGES IN 2021 OPPORTUNITIES IN 2021 • Continued uncertainty due to the COVID-19 pandemic and the transition to a new government in Malaysia impacted economic performance and household incomes and dampened deposit growth. •Against the evolving backdrop, we faced the challenge of ensuring that we had the right infrastructure to meet customers’ changing needs and expectations and remained on par with our peers and competitors. •The economic environment increased the challenge of penetrating new market segments and we adopted a strategy of strengthening Best Fit Delivery Channels to reach target groups. We also strove to retain customer loyalty by managing customer’s expectation through effective marketing platforms. •We explored strategies to tap the non-Bumi segment in-order to grow deposits. •To capture higher deposits from SMEs, we initiated a dedicated team focusing on SMEs at Head Office and in the Regions. •Strengthened collaboration with government agencies to secure their main account, as well as their staff salary transfer and cash management solutions. FINANCIAL HIGHLIGHTS Overall Deposit & Investment: grew by RM4,401.6 million in 2021 (up by 12.2% against Dec 20) Overall CASATIA grew by Overall Non-CASATIA grew by in 2021( up 17.5% against Dec 20) (3.1% against Dec 20) RM3,984.8 million TOS (RM Million) RM416.8 million GROWTH (RM Million) 5,482 40,572 36,170 30,688 22,795, 3,694 26,780 18,863 11,825 3,933 4,402 3,985 2,378 13,375 13,792 1,550 1,316 417 19’ 20’ CASATIA 88 19’ 21’ Non CASATIA 20’ Overall 21’
91. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information BUSINESS REVIEW AWARDS •Bank Islam was the Gold Winner in ‘Anugerah Pilihan Pengguna Majlis Tindakan Pengguna Negara 2020/21’ through collaboration between Deposit & Cash Management and Austin Height Branch. •Bank Islam received 3 awards at the ‘Malaysian e-Payments Excellence ≠Awards 2021’: i. Best FPX Bank ii. Best JomPay Acquirer iii.Best FPX Acquirer (Bank). OUTLOOK AND STRATEGIC PLANS FOR 2022 The outlook for the year ahead is more positive, as economic growth accelerates. However, real challenges will remain. The SME and micro-enterprise sectors look set to benefit from higher growth and increased employment, but also face risks from labour shortages and rising inflationary pressure. Larger corporations, with more than RM100 million in earnings also face the additional prospect of higher taxes from the one-off Cukai Makmur, which may result in a slight decline in savings. While households will start rebuilding their savings, a considerable number of individuals and micro-enterprises may face pressure as the finance moratoriums end in March 2022. Consumers’ investment preference may also be more restrained and skewed towards mutual funds, insurance savings and property. Against this backdrop, we are focused on maintaining a strong liquidity position through increasing deposits. To continue growing in 2022 and beyond, we are implementing a series of strategic plans to: • Drive growth in the Individual market and SME segments • Maintain the Individual CASATIA ratio at above 80% of the overall portfolio. • Continue to strengthen and promote our products & business solutions. • Implement continuous process improvements to raise operational efficiency. • Strengthen collaboration with business partners. • Continue supporting BIMB’s VBI initiatives 89
92. B A N K I S L A M M A L AY S I A B E R H A D COMMERCIAL BANKING WHO WE ARE Our mission is to provide a wide range of Shariah-based financial solutions to Commercial Banking customers . We are committed to promoting best practices and ensuring efficient service delivery to all customers, guided by our principles as a values based intermediary. Our greatest strength is our Business Team, that maintains nationwide coverage, offering our clients the support that they need, whenever and wherever necessary. KEY INITIATIVES Sustainable Prosperity We aim to increase our fee-based business activities in order to improve profitability. Our key growth drivers will include: •Trade fee-based products, such as our ez Bank Guarantee (ezBG), which is an irrevocable written obligation issued by BIMB to assure payment on demand by the beneficiary, and that offers an easy approval process for clients. •Focus on growing our bancatakaful products, both by penetrating new markets segments and onboarding new clients, as well as by increasing takaful contributions from existing customers. •Expanding our Green Financing in key growth areas, including green energy, waste management, water management and other ESG-aligned industries. Community Empowerment Contributing to the well-being of the nation. •Focus on financing of affordable home projects by providing bridging finance for developments in strategic locations, and which offer a promising take-up rate. This is in line with the Government’s initiative to provide more affordable homes for the B40 and M40 segments. •Financing of infrastructure and public facility projects: We will leverage on the Contract Financing structure to provide working capital to private sector developers who have been awarded infrastructure and other public projects by the government and government-linked companies. Real Economy Support national development goal and catalyse growth in the Halal Industry SME sector. •We will support our clients’ growth and operations by providing vital structured financing services, including contract financing, vendor financing and bridging financing. Payment risk to BIMB will be mitigated by maintaining effective control mechanisms. •Continue to leverage on the government-backed SJPP/CGC Guarantee Scheme to provide our SME clients with the liquidity and financial credibility that supports their growth. Digitalisation Leveraging on digitalisation to deliver efficiencies and increased customer convenience. •Development of our Digital Vendor Financing Platform and our Digital BG 1:1 platform to facilitate and simplify transactions for customers, including by enabling digital submissions and faster service delivery by BIMB. •Optimising our credit processing and assessment via our Digital Credit Assessment tool. 90
93. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information BUSINESS REVIEW CHALLENGES IN 2021 OPPORTUNITIES IN 2021 Repayment Assistance Improved Asset Quality •We channelled extensive financial assistance to our existing customers who were affected by the pandemic, by tapping the various relief schemes introduced by the government. • In total we assisted 191 customers, with total exposure of RM2.0 billion. This included assistance through instalment deferment, as well as the rescheduling and restructuring of facilities. •To avoid deterioration in our asset quality position, we continued diligent monitoring to ensure that any potential loan distress issues were duly addressed during the repayment assistance period. •As a result, our delinquent and impaired loan position has been lower than the industry averages, at 0.49% and 1.99% respectively as at Dec’21 Property Overhang •The soft economic conditions resulting from the COVID-19 pandemic saw a continued overhang in the property market. The overall value of overhang property, which includes those unsold and under construction, increased by 7.4% as at end of H1 2021 to RM109 billion in the space of just six months. (source: NAPIC). •Excess supply of non-residential & commercial property e.g. office space & shopping complex remains uncertain. Selective Project Financing In funding affordable home development projects, we worked only with reputable developers with strong track records under established schemes, such as PR1MA, PPA1M, RUMAWIP. In addition we maintained tight pre-sale conditions prior to disbursement and focused only on projects in strategic locations. Restrictions on SCEL with TNB •We face difficulties in growing our exposure in renewable energy despite the huge opportunity, due to nearly reaching our Single Counterparty Exposure Limit (SCEL) with TNB Group •We pursued additional green opportunities by shifting our focus to the wider green technology and the green economy ecosystem. 91
94. B A N K I S L A M M A L AY S I A B E R H A D COMMERCIAL BANKING OUTLOOK AND STRATEGIC PLANS FOR 2021 FINANCIAL HIGHLIGHTS 6 .56 7.00 7.14 Income from trade fee based products: RM14.9 million Income from bancatakaful products: 19’ 20’ 21’ RM1.15 million Asset Growth (RM Billion) Green Financing approved: 394 332.9 306.7 RM31.8 million (5 projects) Financing of affordable home projects approved: 19’ 20’ 21’ Income Growth (RM Million) 2.7 2.3 1.99 RM138.9 million (5 projects) Financing of Infrastructure & Public Facility projects approved: RM111.9 million (8 projects) 19’ 20’ 21’ Asset Quality Position (%) 92 Structured Financing approved: RM284.6 million (46 contracts/projects) As the economy resumes its growth trajectory, we will not be returning to business as usual. The operating environment has changed, and Commercial is evolving to stay ahead of the changes. On the operational front, much of our current focus is on leveraging on digitalisation. This will involve strengthening our digital backbone to improve operational efficiency; employing data monetisation strategies; and developing advanced digital assets to betterserve our clients. On the business front, our key objective in 2022 will be to grow sustainable assets in our financing book by targeting the following segments: •Green Financing: Focus on increasing Green Financing and the financing of ESG-aligned sectors, such as renewable energy, and socially and environmentally responsible businesses. •Property Development: Our focus will be on financing affordable home developments in strategic areas, undertaken by reputable developers. •Government Public Projects: Financing the capital requirements of private sector corporates that have been awarded development contracts by the government and government-linked companies (GLCs). •Oil and Gas: Continue collaborating with Petronas by offering financing and assistance to their vendors. To date, we have approved a total of RM411.8 million to 100 vendors under the Petronas Vendor Financing Program. We aim to remain the preferred bankers of Petronas’ vendors. •Telecommunications: Increase our exposure in ICT above the RM44 million achieved by the end of 2021 by focusing on the Capex requirements of telcos, in order to support the National Digitalisation Agenda. •Healthcare: Providing financing for capex, as well as offering supply chain financing, in the wider ecosystem that supports the healthcare system. This includes the hospital, pharmaceutical and medical devices industries.
95. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information SME BUSINESS REVIEW BANKING WHO WE ARE As the Small and Medium Enterprises (SME) arm of Bank Islam, SME Banking provides comprehensive Shariah-compliant financing solutions with the mission to support the growth of SMEs and the SME sector. We offer a wide range of products and services that can be tailored to meet individual customers’ needs at every stage of their growth journey. With our comprehensive range of products and services and established track-record, we aim to be the partner of choice for SMEs in the Halal Economy sector. KEY INITIATIVES Sustainable Prosperity Increase reach to targeted and untapped segments to grow our business and strengthen the Malaysian SME ecosystem. Strengthening our market presence by growing our financing portfolio in the Halal economy. •Introduced the Go Halal SME Financing programme, exclusively for SMEs registered under the Halal Integrated Platform, to enable them to embark on Halal certified businesses. The scheme has a total portfolio of RM100 million. •Forged strategic collaborations with business associations, government agencies and the private sector to assist SMEs in capacity building, provide financial guidance and relief, and to grow the number of Malaysian SME exporters. •Engaged with universities, business associations and the private sector to raise awareness of available SME financing and BNM-initiated funds targeted at these specific sectors. •Forging partnerships with non-Bumiputera business associations in order to introduce and promote Islamic financing solutions to the non-Bumiputera segment. Customer-Centricity Bridge and strengthen customer relationships through deeper engagement with stakeholders. •Expanding SME Banking footprint with 5 new Hubs, for a total of 16 SME Hubs across all regions nationwide, to increase customer touchpoints and improve customers’ experience. •Conduct campaigns to promote engagement between customers and consumers. •Conduct staff training exercises to produce well-informed staff capable of delivering exceptional customer service and improved customer experience. Real Economy Support the national agenda of developing the Small and Medium Enterprises (SME) sector and the Halal Industry. •Roll-out of new programmes to meet SMEs’ needs, including the Go Halal SME Financing, the SME Automation & Digitalisation Facility (ADF) and the All Economic Sectors Facility (AES). •Widened outreach and offerings to SMEs by forging strategic partnerships with business associations and key government agencies, thus developing synergies and supporting the growth of the SME sector. •Conducted joint webinar sessions with Strategic Partners to provide business insights and knowledge on financial management and solutions. Digitalisation Establishing the Halal Digital Ecosystem for Small and Medium Enterprises. •Launched the SMEXpert mobile app to facilitate business growth, knowledge enhancement and wider networking among Malaysian SMEs. •Optimised digital marketing tools to improve customer reach, increase product awareness and accelerate lead acquisition. 93
96. B A N K I S L A M M A L AY S I A B E R H A D SME BANKING CHALLENGES IN 2021 OPPORTUNITIES IN 2021 COVID-19 Movement Restrictions •Deployment of digital avenues and platforms to Limited or total absence of physical interactions with customers and target markets impacted the quality of customer engagement and acquisition, requiring innovative new ways to reach target audiences. improve communications with customers, strengthen market outreach and deepen support for SMEs. • Strengthened partnerships with government agencies, business and professional associations, and a wide range of private sector players to increase outreach to targeted and untapped market segments. Disruptions to SME Businesses SMEs faced various disruptions arising from the COVID-19 Movement Restrictions and natural disasters, which impacted their business performance including workers’ and proprietors’ livelihoods. •Implemented various financial assistance programmes to help relieve customers’ financial burden, thus forging stronger long-term relationships. •Introduced new financing programmes and business development initiatives, including targeted sectorspecific programmes, to promote the growth and sustainability of SMEs and to grow our client base. FINANCIAL HIGHLIGHTS 101.8 28.6 20’ Non-Fund Based Income 2020: 5.3% 2020: 5.8% 414% 21’ Net Asset Growth (%) 94 Fund-Based Income 202% Gross Impaired Financing 1.46% 2020: 3.24%
97. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information BUSINESS REVIEW PRODUCT HIGHLIGHTS New Financing Programmes introduced in 2021 included: GO HALAL SME FINANCING PROGRAMME (GHF) ALL-ECONOMIC SECTOR FACILITY (AES) – a BNM- SME AUTOMATION AND DIGITALISATION FACILITY (ADF) – a BNM-initiative fund that DISASTER RELIEF FACILITY (DRF) Tapping into the Halal Segment by providing a multi-financing product package tailored to SMEs’ needs. aims to encourage SMEs to automate processes and digitalise operations. AWARDS World Halal Excellence Awards 2021 - Halal Financial Excellence Award initiative fund that aims to enhance access to financing for SMEs across various sectors to support growth. – a BNM-initiative fund aimed at alleviating the financial burden on SMEs affected by the recent floods. OUTLOOK AND STRATEGIC PLANS FOR 2022 As Malaysia moves to the endemic phase of COVID-19, many SMEs are looking to move beyond the survival stage and have shown increased desire to pursue growth and expansion. The rapid digital acceleration and technological advancements during the pandemic have opened up new markets, and created new business opportunities for SMEs, both locally and internationally. To meet the evolving needs of SMEs as they seek to capitalise on these opportunities, SME Banking will focus on: •Introduction of more attractive SME financing products and programmes that are tailored to the evolving needs of SMEs, including targeted financing to promote digitalisation. •Expanding and strengthening our strategic collaborations with key government agencies, GLCs, private sector corporates, and various Bumiputera and Non-Bumiputera business associations to support the growth of the SME Halal ecosystem. •Deepening engagement with SMEs, particularly through the resumption of face-to-face meetings facilitated by our strategic partners. •Develop attractive product bundling packages that add value for our clients. 95
98. B A N K I S L A M M A L AY S I A B E R H A D TREASURY AND MARKETS WHO WE ARE The Treasury & Markets (T&M) Division provides Shariah-compliant treasury solutions to meet the business needs of our clients across multiple segments. Our products and services include Money Market, Foreign Exchange (FX), Fixed Income Markets, and structured products. The year under review saw continued volatility in global financial markets as well as disruptive business conditions from multiple pandemic lockdowns. Enhancements in internal risk metrics and compliance also added rigour to the day to day management of the Bank’s profit rate, FX, and liquidity risk. We nevertheless remained focused and consistent in meeting our clients’ requirements and expectations in providing reliable and quality services, products and solutions. Despite restrictions in corporate activity and cross border funds flows, FX sales volume in 2021 continued to grow from the previous year, but intense competition has resulted in significant margin erosion. The US Dollar maintained its strength throughout 2021 on the back of expectations that the US Federal Reserve (Fed) will raise interest rates aggressively in 2022 and into 2023. The Dollar Index increased by 6.4% in 2021. Against this index, the Ringgit fared better, weakening by 4.1%. Against the Euro and Japanese Yen, however, the Ringgit emerged stronger by 4.2% and 6.7% respectively. This was supported by improved sentiment from the easing of COVID-19 restrictions and accelerated COVID-19 vaccine booster inoculations. The Ringgit was weaker against most Asian currencies with exception of the Thai Baht in 2021. There was steady and significant growth in total deposits for the Bank throughout the year. However, wholesale funding costs continued to be elevated due to intense competition, contributing to margin compression for both Treasury investments and Financing assets. The Bank’s liquidity metrics, nevertheless, improved further in 2021. Bank Negara Malaysia (BNM) maintained the Overnight Policy Rate (OPR) at 1.75% throughout 2021, maintaining an accommodative stance in support of business activities whilst cushioning the negative impact on household incomes affected by the pandemic. Short term Islamic interbank rates were capped within a steady range with overnight rates trading between 1.68% to 1.77%, 1 week between 1.76% to 1.79% and 1 month between 1.85% to 1.91%. Fixed income investments continued to deliver on both fund based and trading income whilst Sukuk distribution activities were commendable for the year despite a steepening in the Ringgit yield curve and tepid secondary trading liquidity conditions. The Bank was appointed as Lead Manager/Joint Lead Manager for 15 ESG-rated sukuk distribution deals and continued to perform an active role as Islamic Principal Dealer (iPD). The fixed income team achieved a Top 5 ranking in Bloomberg’s Malaysian Ringgit Islamic Sukuk League Table for 2021. T&M’s contribution to the Bank’s profitability from Asset Liability Management/Money Market, FX Sales and Trading, and Fixed income investment activities was much lower compared to the previous year but still significant at just below 30%. OUTLOOK AND STRATEGY FOR 2022 We expect volatility in the financial markets and the challenging business operating environment to persist in 2022 due to the continued uncertainties around COVID-19, rising oil prices, supply chain disruptions and geopolitical risks. Growing inflationary pressures will pressure the Fed to hasten rate normalisation and balance sheet reduction. On the local front, BNM is expected to remain cautious in its rate normalisation path in view of the growing external risk factors and market uncertainties. Most forecasts anticipate one hike in the OPR in 2022 and a likelihood of 4 hikes in 2023. We believe that it will take some time for the FX and Rates markets to stabilise. Continued improvements in the overall liquidity metrics of the Bank and generation of non-volatile trading income from sales and distribution will be the main focus areas for T&M in 2022. This will entail strategies of short-duration investments, further diversification of the Bank’s wholesale funding base and emphasis on customer service excellence. 96
99. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information CORPORATE BUSINESS REVIEW BANKING WHO WE ARE We are a reliable Corporate Banking Team providing comprehensive financing solutions guided by Shariah principles, which are central to our VBI approach, in catering to corporates, government agencies and GLCs. We offer strong branding and technical expertise, coupled with value-added advisory propositions in structured and project financing, especially in green technology and the renewable energy sector. We focus on offering fully Shariah-compliant financing products and bring strong competencies in both products coverage and service delivery. KEY INITIATIVES Sustainable Prosperity •Leverage on existing strong and established relationships with preferred customers, with mutual prospects for growth. • Cultivated, nurtured and grew new-to-bank customers via sectorial focus, in order to preserve asset quality and income contribution. Our focus is, principally, on the Healthcare, Food, Infrastructure, Plantation, Green Technology and Renewable Energy sectors. • Maintained anti-attrition strategy via: -Defending assets by maintaining close professional relationships built on trust and delivering excellent customer service -Encouraging clients’ utilisation of revolving facilities by offering competitive rates and elevated services levels. •Grew product offerings and developed new revenue source via the purchase of Unrated Sukuk, driven by a new team of professionals. •Capitalised on potential synergies with Bank Islam’s major shareholders to increase financing activity and explore other cross-selling opportunities within the Group. Customer-Centricity “Think Customer” is central to the culture of the Corporate Banking team. •Provided customised financing solutions and banking services tailored to clients’ needs, which support the growth of their businesses. •Cultivated long term business relationships by building trust and delivering excellent customer service. •Responded swiftly to customers’ requests for finance moratoriums and financial assistance to weather the COVID-19 pandemic. 97
100. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE BANKING CHALLENGES IN 2021 • Challenging operating environment marked by subdued economic growth due to lower government spending and continued uncertainties arising from the COVID-19 pandemic. The prevailing record low interest rates (OPR) in Malaysia also led to net income margin compression across the banking industry. The challenging operating environment in 2021 had a strong impact on our performance: -We experienced Negative Fund-Based Income Growth in 2021, due to the low-yield environment across the globe and the massive cost-cutting measure businesses undertook to survive the pandemic. -Non-fund-based Income declined due to low use of Bank Guarantees and Letters of Credit during the year. Additionally, income from processing & arrangement fees is still pending due to the high number of Pending Acceptance, Pending Documentation and Pending Disbursement cases. -Our Impairment increased by RM228.6m as at Dec 2021, due to a new account being classified as impaired in Dec 2021. This raised our impairment ratio to 3.52%. •Higher business operating costs due to implementation of the minimum wage, additional taxes, delayed subsidy claims, renegotiation of concessions contracts and disruptions in the supply chain. 98 OPPORTUNITIES IN 2021 • Grew our unrated Sukuk activity to facilitate financing assets growth and generate fund-based and fee-based income for the Bank. •Continued refinancing opportunities due to the low interest rate environment. •Supporting existing customers impacted by the pandemic through repayment moratoriums, rescheduling and restructuring, as well as minimising expected credit losses of customers by reducing unutilised facility lines. •Exploring financing opportunities with potential customers under the Government’s Prihatin programmes. • Supplementing Non-Fund-Based Income with advisory services and operational charges. •Expanding the reach of Green Financing beyond the utilities and energy sectors, to areas including the green building segment of the property sector, sustainable plantations and ESG-aligned industries, such as the installation of solar panels. •Improving our asset composition ratio in favour of term facilities, as a buffer against fluctuating assets such as trade and revolving facilities.
101. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information BUSINESS REVIEW FINANCIAL HIGHLIGHTS 6.8 296.0 7 6.1 14.9 14.8 266.9 240.3 8.9 19’ 20’ 19’ 21’ Asset (TOS) Growth (RM Billion)  20’ 19’ 21’ There is no Past Due Non Impaired recorded as at Dec 2021. 21’ Total Actual Non-Fund-Based Income (RM Million) Total Actual Fund-Based Income (RM Million) Asset Quality: 20’ Asset Quality: Overall Impaired Ratio as at Dec 2021 stood at 3.52% OUTLOOK AND STRATEGIC PLANS FOR 2022 The outlook for 2022 is marked by uncertainty, even as the country enters the endemic phase of COVID-19. Markets will remain volatile as economies return to growth but face headwinds from geopolitical factors, supply chain disruptions and other uncertainties. The prevailing low interest rate has continued to compress margins but is expected to encourage corporate refinancing exercises. We will also continue to monitor credit markets for signs of fragility as the prolonged repayments assistance measures begin to wind-down. Moving forward, we will continue to build upon the strategies and initiatives that we began in 2021: •We will support the growth of ESG-aligned businesses by providing responsible financing. Our sectorial focus will remain on infrastructure, construction, green energy and power, plantations, healthcare, oil & gas and property development. •Acquiring new-to-bank customers and refinancing via Unrated Sukuk Programme. •Maintain our client coverage approach under the Wholesale Banking initiative. •Leveraging on existing customers and growing deposits from our portfolio customers. •Increase our participation in syndicated financing & refinancing of large exposure. •Strengthening our customer relationships by providing proactive banking services to support their growth potential. 99
102. B A N K I S L A M M A L AY S I A B E R H A D BIMB INVESTMENT MANAGEMENT WHO WE ARE BIMB Investment is the fund management arm of BIMB and a United Nations Principles of Responsible Investment (UNPRI) signatory. With a track record of more than 28 years in Islamic Fund Management, we have been a pioneer in the industry on Shariah-ESG investing since 2015 and we continue to push the boundaries of innovation. In 2021, we launched Malaysia’s first SRI Waqf fund, the Makmur MyWakaf fund. Our global shariah-ESG equity fund and the global ESG Sukuk fund continue to be the largest global shariah ESG equity fund and global Sukuk fund in Malaysia respectively. We are a leader in Shariah-ESG investment in Malaysia, with Shariah-ESG funds now making-up 65% of our assets under management with the the widest shariah-ESG funds across asset classes. BIMB Investment currently manages 27 Shariah Funds across various strategies, geographical locations and asset classes. These account for 15% to the total net asset value of the SRI Fund Management Industry and 34% of the total net asset value of Islamic SRI Funds in Malaysia. Additionally, we have continued our pioneering role with the growing integration of artificial intelligence (AI) into our investment strategies. As we move forward, BIMB Investment is set to emerge as global leader in Shariah-ESG asset management through our strategic partnership with London-based, Arabesque Asset Management. On 15 April 2022, the Securities Commission Malaysia approved Arabesque Asset Management’s 49% equity shareholding in BIMB Investment. KEY INITIATIVES Sustainable Prosperity BIMB Investment continues to be a leader in the growing Shariah-ESG space. In 2021, we launched three new Shariah-ESG funds. Our excellence in this space has led to multiple international awards and recognitions, including a string of wins in 2021. We have also been used as a case study on Shariah-ESG by the United Kingdom Islamic Finance Council (UKIFC). Additionally, our prowess in building sustainable prosperity led to an invitation for BIMB Investment to speak at the Islamic Finance and SDGs Global Summit in conjunction with the 76th United Nations General Assembly, New York, in September 2021. Customer-Centricity We aim to deliver seamless and exceptional customer service, both in-person and through the digital platforms that play an increasingly important role in our business. As part of that commitment, we launched the BEST Invest App in April 2020. The robo-intelligence app made goals-based investing, easily available and affordable to retail investors. The app garnered more than 15,000 investors and continues to see strong growth, proving that it meets the evolving needs of our customers. Digitalisation • • 100  igital acceleration and the effective execution of our digital strategy are keys to driving our growth, both D by offering customers a seamless investing experience and by using AI and Big Data to provide better investment insights. To ensure that our digital strategy is in line with global best practices, we have established a strategic partnership with London-based, Arabesque Asset Management. We see almost unlimited growth potential for our digital business. Our award-winning BEST Invest App captured a total of RM13.88 million sales in 2021, exceeding its target of RM10 million, despite only having scratched the surface of its potential market.
103. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information BUSINESS REVIEW CHALLENGES IN 2021 COVID-19 Pandemic The continuing COVID-19 pandemic affected market performance and impacted the fund management industry by limiting the opportunities for physical meetings between managers and clients, and between consultants and potential clients. Removal of Tax Exemptions for Money Market Funds and for Foreign Income • Under the Finance Bill 2021, the Malaysian Government has made changes with regards to the way tax is imposed on Retail Money Market Funds (RMMF). With the exception of individuals receiving income from RMMF, unit holders will be subject to a withholding tax of 24% with effect from 1 January 2022. The change affects the entire unit trust industry. For BIMB Investment, the change will be felt, specifically, on our BIMB Dana Al-Fakhim fund. • Additionally, the Finance Bill 2021 will also remove the current exemption on Foreign Source Income (FSI) over the course of 2022. FSI will now be taxed at 3% from 1 January 2022 and at 24% from 1 July 2022. This change will impact some of our funds invested in foreign securities. The precise impact it will have on our performance and growth remains uncertain. OPPORTUNITIES IN 2021 Growing Private Mandates BIMB Investment is focused on building-up its private mandate business to complement its strength in the retail sector, and the range and sophistication of our Shariah-ESG products makes this a natural growth area for us. In 2021, we successfully secured our first private mandate, with its first tranche of USD10 million being invested in August 2021. Moving forward, we will leverage on this strong start to pursue further expansion. Unique Value Proposition Through Strategic Partnership Our strategic partnership with Arabesque Asset Management has allowed us to develop a unique value proposition for the Shariah-ESG market, powered by AI and Machine Learning. By leveraging on Arabesque’s AutoCIO and ESG Book platforms, we will have access to ESG data on over 25,000 companies globally and be able to develop and back-test an almost unlimited number of investment strategies, with the support of advanced AI. Collaboration will be a key growth driver for BIMB Investment by putting us ahead of our peers in investment strategies creation, product development and portfolio management. Going forward, we aim to offer customised investment strategies and services to high net-worth individuals and institutions with a strong ESG appetite. Strengthened Risk Management and Compliance We continued to take steps to strengthen our risk management framework, both through enhancing BIMB Investments’ internal policies and by adopting the Group’s policies. Robust risk management framework provides a strong foundation to protect BIMB Investment’s capital base and earnings while promoting sustainable growth. 101
104. B A N K I S L A M M A L AY S I A B E R H A D BIMB INVESTMENT MANAGEMENT AWARDS FINANCIAL HIGHLIGHTS Total Assets Under Management of RM1 .43 billion Total Number of Shariah-Esg Funds: 27 BEST INVEST APP: RM13.8 MILLION IN SALES/ 40% GROWTH Revenue: RM24.3 million 2020: RM22.9 million •Alpha Southeast Asia Awards - Best Risk-adjusted Returns: ESG Principle Investment 2021 - Best Islamic Asset & Fund Manager 2021 •The Asset Triple A Islamic Finance Awards - Best FinTech Robo Mobile Application 2021 (BEST Invest) •Annual Global Business Outlook 2021 - Best Islamic ESG Practices – Malaysia 2021 OUTLOOK AND STRATEGIC PLANS FOR 2022 The year ahead is an exciting one, as we prepare to rebrand as BIMB-Arabesque as part of our transformation strategy that will see us emerge as a leading, global, Shariah-ESG fund house. The new brand, BIMB-Arabesque is set to become the hub for Islamic, sustainable and quantitative investment solutions globally. The company will be a pioneer in Big Data analytics and deep Machine Learning capability in fund construction and investment process. At the local level, this will position BIMB-Arabesque as Malaysia’s first Shariah Robo-Advisory platform and allow us to accelerate the mainstreaming of Shariah-ESG investments across all investor groups. To deliver on these goals we will: •Enhance collaboration with Bank Islam Wealth Management through alignment in sales targets and marketing, as well as developing exclusive client-centred products. We will work with BIMB’s other business units to tap into their large client base to cross-sell products and services and pursue other synergies. •Strengthen collaboration with Malaysia’s 12 existing Institutional Unit Trust Advisors by providing additional, unique, solutions to fill their product gaps. •Strengthen the agency business by enhancing its infrastructure. •Step-up focus on digital business in 2022, targeting growth in AUM from the current RM10 million and implement our Growth Acceleration Plan for the BEST Invest App. 102
105. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information BIMB BUSINESS REVIEW SECURITIES WHO WE ARE BIMB Securities is a full-fledged Shariah-compliant stockbroking company that has distinguished itself in the market through offering personalised services at competitive rates. We provide an avenue for clients to invest in Shariah-compliant listed companies, based on the List of Approved Shariah Compliant Securities issued by the Shariah Advisory Council of the SC. We offer a range of services, including stockbroking services to institutional and retail clients, Shariah Advisory Services, share margin financing and investment research. KEY INITIATIVES Sustainable Prosperity Reducing our over-reliance on Institutional Dealing by growing other business segments, including retail dealing and fee-based income to sustain our long-term growth. •We upgraded our offerings to retail investors and expanded our Share Margin Financing facility, which has led to a steady increase in both our retail brokerage and profit margin. •Garnered Underwriting and Placement income as part of our plan to increase fee-based income. Customer-Centricity We continued to focus on digital solutions and improved customer outreach in order to support our retail and institutional clients. •Developed a new mobile application that will offer retail clients online trading beginning in Q12022 and launched a Chatbox helpdesk to support retail clients. •Our Research teams utilised social media platforms to reach-out to our retail clients in order to provide thematic investment updates and enable live interaction. •Ensured that we maintained a minimum Tier-2 rating with Institutional Platinum clients and also extended our Shariah advisory services to include a wider range of fund management products. •Our Retail and Institutional divisions conducted webinars directed at their respective clients throughout the year, providing information and insights into the volatile markets. Digitalisation The COVID-19 pandemic has accelerated our digital initiatives to facilitate clients’ online trading and provide them with increased levels of service and convenience. •We integrated the FPX internet payment gateway into our Online Trading platform, enabled digital signing capability for retail clients and simplified the procedure for new clients to open accounts digitally with us. •Rolled out BISonline, our new online trading mobile app with advanced features, to selected clients in the fourth-quarter and it will be available to all clients by Q12022. 103
106. B A N K I S L A M M A L AY S I A B E R H A D BIMB SECURITIES CHALLENGES IN 2021 OPPORTUNITIES IN 2021 •Our income remains under pressure as Institutional clients move away from domestic capital markets to fixed income and international markets. • Cost increment as we invest in the systems, technological advancements and maintenance necessary to support our digitally-driven growth. •Attracting new talent and retaining high performers will remain difficult as our company is constrained by losses and rising costs. •We will pursue higher fee-based income through our share margin financing facilities and through IPO financing opportunities. •Pursuing underwriting and placement income opportunities through collaborations and networking with investment banks and stockbroking companies with boutique corporate finance services. •Widening our Shariah Advisory Services offerings to a broader client range. FINANCIAL HIGHLIGHTS Retail Dealing Income was up Institutional Dealing Income down by in 2021 Commissioned Dealers Income down by in 2021 Share Margin Financing Income up Other fee-based, Shariah Advisory and Underwriting/Placement up by Money Market Placement down by 9% in 2021 183% compared to 2020 104 16% 134% in 2021 47% 39% in 2021
107. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation    MD&A   Sustainability  Leadership  Accountability  Financial   Additional Information BUSINESS REVIEW OUTLOOK AND STRATEGIC PLANS FOR 2022 The outlook for 2022 remains challenging but we will maintain our focus on the growth opportunities that have been identified and leverage on the strength of the BIMB Group as a whole. Going forward, we aim to expand our revenue base, defend our institutional business, and implement a comprehensive growth strategy for our retail business. Our focus is increasingly on higher margin businesses, including strengthening our position within the equity capital markets (ECM) industry as we work to grow fee-based income. To deliver on these targets, we will pursue deeper Group-wide collaboration to build synergies between our complementary products, services and client bases, including through the following key initiatives: •Cultivating BIMB’s high net worth client base with the goal of acquiring 200 – 300 of them as new clients for our brokerage business. •Co-servicing GLC clients together with other units of the Group to offer a wider range of securities, financial and advisory services. •Commencing our foreign equity brokerage business in collaboration with BIMB Invest and onboarding Lembaga Tabung Haji (LTH) as an anchor foreign brokerage client. •Strengthening ESG coverage and developing ESG-compliant products in alignment with the Group-wide ESG approach. 105
108. B A N K I S L A M M A L AY S I A B E R H A D 106
109. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information Introduction to Sustainability at BIMB AT BIMB, WE BELIEVE THAT WE CAN AND SHOULD MAKE A POSITIVE DIFFERENCE TO THE SOCIETY AND ENVIRONMENT. PUTTING OUR IDEALS INTO ACTION, BIMB HAS COMMITTED TO SUSTAINABLE BANKING PRACTICES IN LINE WITH OUR SHARIAH BANKING COMMITMENTS AS THE FIRST PURE-PLAY, FULL-FLEDGED ISLAMIC FINANCIAL INSTITUTION LISTED ON BURSA MALAYSIA’S MAIN MARKET. BIMB has practised sustainable finance through its long-standing products and services that encourage Shariah-compliant banking for businesses and consumers. The Value-based Intermediation Assessment Framework (“VBIAF”) has been a core reference for BIMB in developing its products and services and providing sustainable banking for all its customers. In 2021, BIMB committed to further strengthening its sustainable finance implementation by initiating the development of the ESG Risk Framework. The key aim of the Framework is to incorporate climate-related risks and impacts into the Group’s overall Risk Management Framework. This project is being carried out over two phases, beginning in 2021 where we carried out an ESG assessment and gap analysis of the existing ESG risk management framework. The project continues into 2022 where we aim to have a comprehensive ESG Risk Framework that embeds climate risk management into all aspects of banking including how we extend financing and encourage sustainable banking opportunities towards all our customer segments. 107
110. B A N K I S L A M M A L AY S I A B E R H A D SUSTAINABILITY GOVERNANCE BIMB has developed and implemented a sustainability governance structure to provide oversight and strategic direction over the Group ’s sustainable finance initiatives. While the ESG Risk Framework allows us to effectively identify, manage, and monitor ESG risk across our business, the Framework is part of an overall Sustainability Plan and Roadmap that guides our actions as a financial institution in implementing sustainable finance. The highest implementation committee for BIMB is the Management Sustainability Committee (“MSC”) where the Group CEO and senior management members are permanent members who are entrusted to implement the Group Sustainability Plan and Roadmap internally and externally across the various business segments. The MSC reports to the Board Strategic & Sustainability Committee (“BSSC”) that provides strategic direction and oversight on sustainability. The Board Risk Committee (“BRC”) and Management Risk Control Committee (“MRCC”) provides oversight and strategic direction on the Group’s ESG Risk Framework that focuses on how BIMB manages and mitigates key ESG risks and impacts including climate change, environmental and social risks across its portfolio. In 2022, further enhancements to the governance structure are planned including the formalisation of Board-level committees and working groups to ensure implementation of our sustainability commitments are carried out efficiently across the various business segments. STAKEHOLDER ENGAGEMENT BIMB values all its stakeholders and has made significant efforts to engage its various stakeholders to understand the material areas of interest and align our sustainability actions and strategy towards areas of sustainable finance that bring most nearterm and long-term impact. To this end, we have engaged regulators, customers, investors, NGOs and civil society in terms of ESG through various methods including meetings, responding to queries and annual surveys as well as participating in collaborative efforts on sustainable finance. 108 MATERIAL ESG ASPECTS BIMB aspires to align our business operations and growth with the UN Sustainable Development Goals (“UN SDGs”). The UN SDGs were matched to our, i.e. BIMB’s material matters with the purpose of serving the best interest of our stakeholders, and ensure that our actions are leaving no one behind and will create impact that leads to socioeconomic progress of our business, the nation and society while ensuring the protection of the natural environment and biodiversity. For a discussion on how the Group’s material matters are identified, please see pages 54 to 57 of this report
111. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information SUSTAINABILITY STRATEGY BIMB views climate change as a high priority area of impact that needs to be tackled by businesses in all sectors, including banking and finance. BIMB has put in place an overarching sustainability strategy by considering areas of sustainable finance including climate risk management, internal sustainability actions, training and capacity building, and external engagement. The initial building blocks of our sustainability strategy focused on managing the direct climate and ESG risk arising from our business activities including the provision of banking and financing services for business and consumers. BIMB’s LEAP25 strategy includes consideration of sustainability through our targets and priority areas. BIMB’s strategic direction is anchored by a five (5) year plan. Premised on our alignment to VBI, namely, Sustainable Prosperity, Values-based Culture, Community Empowerment, Customer Centricity, Real Economy and Digitalisation. a. The first pillar, Sustainable Prosperity, is to focus on “Responsibly Create Value to Shareholders and Other Stakeholders in Ensuring Sustainable Strength” while “Diversifying revenue streams and sustaining growth momentum”. b. The fifth pillar, Real Economy, envisions how BIMB is focused on making a positive difference to the Real Economy (“RE”), by responsibly growing our SME banking portfolio; assisting MSMEs and promoting RE programmes as a responsible financial intermediary. The 6 strategic objectives continue to support and govern the Bank’s agenda and shape its key priorities and building blocks as a direct focused effort towards the Bank’s 5-year aspiration Our Vision & Mission Vision THE BANK THAT ADVANCES PROSPERITY TO ALL Mission TO PROVIDE SOLUTIONS THAT DELIVER VALUE Assuring Trust Delivering Value 6 Strategic Pillars Its Meaning Sustainable Prosperity Continuous sound financial performance Values-based Culture Doing the right thing Community Empowerment Communities thriving with us Customer Centricity Providing the best experience for our customers Real Economy Producing goods and services Digitalisation Technology helps us in realising our purpose BIMB Sustainability Plan E ENVIRONMENTAL Champion in ShariahESG total financial solution with leadership in digital banking and social financing • More than double ESGrated financing assets S SOCIAL G GOVERNANCE • Impact creation to 3000 beneficiaries through social finance • Employee engagement score at par with Malaysia’s Best Employer norm • Achieve ROE of above 20% • Sustain non-fund based income (NFBI) contribution of 10% • ROE and Capital Investment (CI) ratio of 40% 109
112. B A N K I S L A M M A L AY S I A B E R H A D SUSTAINABILITY STRATEGY In developing a framework for managing ESG risk , we engaged with recognised partners to implement a range of activities to better provide clarity on our ESG risk exposures and determine the most effective ways to monitor and mitigate these risks. In 2021, we completed Phase 1 of key activities in implementing the ESG risk framework. By utilising the gap assessments conducted internally and through our engagement with external stakeholders including investors, NGOs, civil society and specialised subject matter experts, we have identified the key ESG risks in our internal operations and those that arise from external customers and vendors. CONVERGING SHARIAH VALUES AND ESG Since 2018, the Value-based Intermediation (“VBI”) checklist has been used to guide our businesses and operations on the broad compliance of activities that covers Shariah principles, environmental impact, workforce equality and corporate governance during the credit evaluation for on-boarding of financing and also used annual review of existing financing. The VBI checklist for preliminary financing assessment covers broad compliance to: • Workforce equality that ensures a conducive working environment and fair opportunities for all employees. • Our businesses and • Ethical activities that promote operations are to adhere strictly the principles and values of Shariah where we do not engage in activities that are related to weapons, liquor and gambling. our values and the trust of our stakeholders. 03 01 02 04 • Corporate 05 06 • Focus on minimising environmental impact through our businesses, as well as promoting activities that lead to environmental awareness and conservation. 110 • Complete non-participation in non-ethical activities such as human trafficking and child labour, and those that result in adverse labour relations. Governance that ensures the integrity of our businesses and operations.
113. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information SUSTAINABLE FINANCE BIMB views sustainable finance as a key priority for the Group and has aimed to increase financing of sustainable and green products and services, while implementing robust controls to manage potential climate and sustainability risk arising from our provision of banking products and services. BIMB understands the role that banks need to play in ensuring that positive climate and sustainability outcomes are realised through our business activities. As key implementers of Shariah-based banking principles, we understand that long-term sustainability includes caring for the environment and society while supporting businesses and consumers to achieve their financial goals. Overview: Holistic Implementation of Sustainable Finance ESG Framework: Holistic Approach to Sustainability Managing Risk and Expanding Opportunities Governance and Oversight Board-level Sustainability Sponsor, Working Groups, Approval of Sustainability Policy Long term aspiration: Embed and Operationalise Sustainable Practices Raising Awareness and Developing Champions Onboard and include Product Owners and Business Units in development of ESG Framework Core ESG Phases Stakeholder Engagement Identify and engage with key stakeholders, assess material sustainability issues Risk Identification and Baseline Metrics Identify key risks tied to the Bank, establish baseline metrics for performance monitoring Risk Mitigation and Creating Opportunities Develop sustainability risk mitigation controls, sector-specific requirements Disclosure and Reporting Position the Bank as a Islamic Banking leader in Sustainable Finance Measure and report progress based on internationallyrecognised standards and benchmarks Target leadership position for sustainable products and services In delivering on our sustainable finance goals, we have prioritised managing and mitigating sustainability risk while expanding on current and future opportunities for financing of climate-positive and environmentally and socially-conscious economic activities and projects. 111
114. B A N K I S L A M M A L AY S I A B E R H A D SUSTAINABLE FINANCE ESG Value Creation : Mitigating Risks and Creating Opportunities Creating Value through ESG Key to the effective implementation of the ESG Framework is ensuring Risk Management is complementary to development of ESG-Linked Products and Services Internal Engagement ESG Risk Controls Working Groups ESG Value Creation • Ensure key internal stakeholders are engaged in implementing ESG Framework • Onboarding enhancement and sector-specific risk mitigation policies • Working Groups on sectors and products • Enhance current offerings • Expand offerings to encourage commitment towards sustainability • Establish sustainability as key value driver and KPI for product owners BIMB’S KEY SUSTAINABLE FINANCE OBJECTIVES 1. To align our financing portfolio towards the targeted RM4 billion in Green Financing by FY2025 We intend to achieve this by prioritising climate-positive financing across corporate, commercial, SME and retail financing products and services, including but not limited to areas such as renewable energy, green buildings, electric and hybrid vehicles, sustainable public transportation, sustainable agriculture, low-carbon power generation, low-emission manufacturing, and others. 2. To manage and limit financing towards carbon-intensive sectors, where we have started by committing to phase out and end financing of coal-related activities by 2030 We intend to achieve this by identifying carbon-intensive exposures through our financing activities and develop mitigation plans that will include an orderly transition to improve the climate risk profile of our financing portfolio. This will include engaging clients to improve their climate policies and commitments to reduce carbon emissions in sectors including but not limited to oil & gas, mining and quarrying, agriculture, manufacturing, real estate and construction, and others. 3. To encourage climate-positive initiatives, commitments and projects through our ESG roadmap and stakeholders engagement 112 We intend to achieve this by continuing to engage with various stakeholders, including regulators, government, customers, industry bodies and NGOs on sustainable practices, climate-friendly commitments and targets and supporting climate-positive projects. This may include engaging with progressive proponents of climatefriendly strategies including efforts to reduce forest and biodiversity impacts, encourage marine conservation, improve social outcomes, reduce carbon emissions and align with stronger ESG commitments and practices by corporates and SMEs.
115. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information BIMB ESG RISK FRAMEWORK BIMB has developed and is currently at the early phase of implementation of its overall ESG Risk Framework that is targeted to enable us to better identify, monitor and manage its ESG risk exposures across its areas of business. ESG Risk Area ESG Impacts Mitigation Strategies Internal Operations Internal material impacts including carbon emissions from electricity, travel, paper and water usage A s s e s sing our carb on fo otprint , planning carbon mitigation strategies, implementing energy ef f icienc y, adopting best practices, and technology External Environmental and Social Footprint (i.e. Financing customers, investment advisory, vendors, fund management) Environmental and social risk including deforestation, waste management, fossil fuel usage, displacement of indigenous people ESG risk management framework, sector guidelines, onboarding checklist, portfolio mapping, stress testing and CCPT External Governance Risk Ethical business, Anti-Money Laundering Act (AMLA), Politically Expased Personas (PEPs) Policies and controls on ethics and governance (i . e . R et ail cu s to m e r s , ve n d o r s , depositors, investment advisory, fund management) Phase 1: Where we are now in our journey In 2021, BIMB embarked on a multi-phase plan to develop and implement a comprehensive ESG risk management framework covering all aspects of our sustainable finance activities. The implementation plan covers two (2) phases, where Phase 1 was completed in 2021 and Phase 2 is currently ongoing. Key Milestones: BIMB has measured and assessed its ESG performance against best practices in sustainable finance, including reference to the UN SDG, and global standards on sustainable finance. The assessment of our baseline ESG performance was guided by a detailed exercise with our key knowledge partner, and was complemented by other assessments and benchmarks including the widely-accepted FTSE4Good, WWF Sustainable Banking Assessment, and other queries raised through our stakeholder engagement activities with investors and regulators. ESG Assessment Portfolio Profiling and Physical Risk Identification Through the activities with our knowledge partners, BIMB has gained insight into the climate vulnerability of our internal and external assets and operations and better identified the key ESG risks that exist in our financing portfolio. These risks are varied in nature, including the physical and transition risk arising from long-term climate impacts, as well as the business and operational risks arising from our business relationships with customers. Knowledge of these risks has enabled us to better understand key priorities in managing our direct and indirect climate impacts. Scenario Analysis and Stress Testing In Phase 1 of the project implementation, BIMB obtained an initial view of the potential climate scenarios and its impacts to the Group. The key output was utilising forward-looking climate adjusted scenarios to determine impacts to the Bank’s portfolio under different Network for Greening the Financial System (“NGFS”) baseline scenarios. These serve as building blocks towards a more comprehensive view of various climate scenarios and how the Bank may adapt and prioritise actions in view of long-term transition risk. 113
116. B A N K I S L A M M A L AY S I A B E R H A D SUSTAINABLE FINANCE Phase 2 : Planned Expansion of ESG Risk Framework By Q3 2022, BIMB will incorporate more details into its Framework, including the development of ESG Scorecards and further implementation of portfolio profiling and stress testing. IDENTIFYING AND ASSESSING CLIMATE AND ESG RISK BIMB has undertaken a set of gap assessments through its engagement with knowledge partners internally, and through external responses to regulators, investors and by participating in recognised sustainability benchmarks and indices. Through these assessments, BIMB has determined certain areas where risk management systems and controls are currently being developed and improved upon. Due Diligence of Customers BIMB performs due diligence of business financing as part of pilot initiatives in line with BIMB’s ESG Risk Framework that is currently in development. These due diligence assessments are carried out to determine environmental, social and governance risk related to new and existing customers that may affect the bank in terms of climate and sustainability impact. Customers that are subjected to the ESG due diligence process are prioritised based on the following factors: Exposure to sectors with relatively high environmental or social impact including power generation, mining, oil & gas, forestry, palm oil, heavy manufacturing, water supply, and others deemed high risk at time of customer onboarding. High materiality to the Bank in terms of financing exposure (RM value) Extreme outliers i.e. companies that score in the top or bottom 10% of customers based on the ESG scoring Companies with known or detected ESGrelated controversies or grievances in the last 12 months 114
117. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information The following is a summary of the key data and metrics used to validate the ESG performance of our business customers: Entity Information: Customer Disclosures Sustainability reports, roadmaps, strategy, action plans, ESG-related press releases, media statements, announcements Main Operating Locations The company’s headquarters and main areas of operations i.e. factories, plantations, sites, facilities Nature of Business The main and subsidiary economic activities or sectors the company is involved in Project Being Financed Applicable if the financing is for a specific project by the company i.e. a new manufacturing facility or new development Controversies and grievances in last Any involvement by the company in issues including environmental, social or 12 months governance-related negative coverage. Information on this is obtained through online searches on specialised ESG news providers, general media, social media, financial news outlets, and others. Financing Type and Amount Overview of the company’s financing facilities with BIMB including financing type and RM value. Overview of ESG risks and controls: Governance License to Operate Does the company have the necessary government and/or regulatory approvals required to carry out business activities, especially those related to environmentally and socially sensitive aspects, i.e. plantations, construction, mining, oil & gas, forestry, and others. ESG Policies Does the company have policy commitments to monitor and mitigate ESGrelated risks, i.e. safety and health, waste management, biodiversity, community impacts, etc. Certifications and Standards Does the company possess general or industry-specific certifications? Examples include RSPO, CIDB, FSC, PEFC, ISO, OHSAS, etc. Social Health and Safety Does the company have systems and controls to ensure workplace safety and health? Labour Does the company have systems and controls to ensure labour standards are upheld i.e. on minimum wages, working hours, no forced, bonded or child labour? Community Impacts Does the company have systems and controls to monitor and mitigate impacts of the operations on nearby communities? 115
118. B A N K I S L A M M A L AY S I A B E R H A D SUSTAINABLE FINANCE Environmental Forest Risk Does the company have systems and controls to ensure no illegal deforestation takes place in the course of their operations ? Biodiversity Risk Does the company have systems and controls to ensure biodiversity is protected in areas of their operations? Waste Management Does the company have systems and controls to monitor and dispose of waste in accordance with regulatory requirements? Post-operations Remediation Does the company have systems and controls to ensure their facilities are properly dismantled and no harmful or hazardous waste is left on site post-operations? MANAGEMENT AND MITIGATION OF ESG RISK BIMB is currently in the process of developing detailed sector guidelines and assessment criteria for all sectors that it may be exposed to. As part of this, further requirements for high sustainability risk sectors will be defined in FY2022. While the development of the ESG Framework is in progress, we begun to assess new financing applications for ESG risks where there are elevated concerns on ESG based on industry-specific context. Key sectors where ESG due diligence would be carried out include large-scale agriculture, oil & gas, forestry, large-scale manufacturing projects, large-scale residential and industrial developments, mining and quarrying, among others. 6% 5% Financial Services 23% 6% Construction Real Estate Public Administration 7% Water, Sewerage and Waste Electricity, Gas, Steam Supply 7% Information and Communication 19% 8% Agriculture 8% BIMB Sector Exposure (as of Dec 2021) 116 Manufacturing Wholesale and Retail Trade 11%
119. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information In FY2021, BIMB has committed to phase out and end financing of coal-related activities by 2030. BIMB also carried out deep-dive validation of certain financing cases that were deemed highly material or carrying relatively higher environmental or social risks. Sector Key Highlights Agriculture (Palm Oil) Clients involved in agriculture may be involved in specific activities, such as plantation development or in the entire value chain of palm oil production, including refining and distribution. BIMB has undertaken ESG due diligence of these customers in view of known risks in terms of environmental impacts related to potential illegal deforestation, development on peatland, use of chemicals, loss of biodiversity, and social impacts including labour practices, health and safety of workers and impacts on local communities and smallholders. In FY2021, BIMB did not detect major violations relating to environmental and social risks among the customers assessed. In some cases, there were legacy risks identified but these were sufficiently managed through time-bound action plans carried out by the customer. Oil & Gas Clients involved in oil & gas include those that are focused on extractive activities, such as upstream and those that are involved in downstream refining and distribution. BIMB has undertaken ESG due diligence of these clients in view of known risks in terms of environmental impacts on marine biodiversity and resources, carbon emissions, and release of potentially hazardous waste; and social impacts including health and safety of workers and impacts on local communities in coastal areas. In FY2021, BIMB did not detect major violations relating to environmental and social risks among the customers assessed in this sector. Heavy Manufacturing Clients involved in heavy manufacturing were chosen based on several material factors including the environmental impact of the manufactured end-product and the scale and vicinity of the operations to environmental features including forest, rivers and marine areas, and its impacts to biodiversity and local communities. In FY2021, BIMB did not detect major violations relating to environmental and social risks among the customers assessed in this sector. Real Estate Development Clients involved in real estate or construction were chosen based on the scale of development & Construction projects and location of the projects based on vicinity to environmental features including forest, rivers and marine areas, and its impacts to biodiversity and local communities. In FY2021, BIMB did not detect major violations relating to environmental and social risks among the customers assessed in this sector. Other Sectors Various other sectors were selected based on material value of exposure to BIMB, including education and financial services providers. In general, these customers were assessed for environmental and social impacts internal to their operations and externally in their supply chain and in terms of end-consumer dealings. In FY2021, BIMB did not detect major violations relating to environmental and social risks among the customers assessed in this sector. 117
120. B A N K I S L A M M A L AY S I A B E R H A D SUSTAINABLE FINANCE BIMB ’S IMPLEMENTATION OF THE CLIMATE CHANGE PRINCIPLES-BASED TAXONOMY (CCPT) Introduction The CCPT Classification exercise enables financial institutions to understand the extent of their portfolio exposure to climatic impacts and risks. In line with this, BIMB has obtained an initial view of climatic risk exposure based on the classification guidance provided by Bank Negara Makaysia. As per the Guiding Principles as stated in the CCPT Guidance Document, the data is intended to be used to determine areas where opportunities for sustainable financing may arise as well as sectors or market segments that may be risk-weighted in future to manage and mitigate negative climatic impact. BIMB is using a combined methodology utilising data and references from multiple sources to form a basis for application of the CCPT guidelines. Excerpt from the CCPT (BNM, April 2021) The CCPT aims to introduce a principle-based taxonomy for Financial Institutions (FIs) to assess and categorise economic activities according to the extent to which the activities meet climate objectives and promote the transition to a low-carbon economy. The taxonomy also incorporates the consideration of broader environmental outcomes through the principle of no significant harm, with specific regard to how business operations affect pollution, biodiversity and resource efficiency. In supporting an orderly transition, the taxonomy recognises remediation measures and introduces a progressive system of transition categories to acknowledge concrete efforts and commitments by businesses to adopt sustainable practices. The CCPT also aims to facilitate standardised classification and reporting of climate-related exposures to support risk assessments at the institution and systemic levels, strengthen accountability and market transparency, and encourage financial flows towards supporting climate objectives. FIs can also leverage on the taxonomy in the design and structuring of green finance solutions and services to accelerate development of green sectors and activities, and decarbonisation efforts. BIMB recognises that sustainability data is currently not fully comprehensive and does not cover the entire financing portfolio for all segments. These limitations are mainly concerning the SME and retail segments where current data on climate and sustainability impacts are lacking. BIMB views the CCPT exercise as a promising and useful endeavour for financial institutions to apply and contribute towards continual improvement of the financial industry in terms of ESG and will continue to implement this as part of the Bank’s sustainability practice. 118 BIMB’s Interpretation of the CCPT Guidance Document BIMB recognises the impacts of climate change on the environment and society as well as the importance of ESG-related governance systems to enable businesses to improve on and implement robust systems and controls over their sustainability footprint. The role of banks in financing businesses and consumers contribute them to participate in various economic activities that may impact the environment and society in terms of climate change and sustainability. The implementation of CCPT enables BIMB to obtain an overview of how key financing assets are tied to climate risk and identify opportunities for more sustainable financing channelled towards climate-positive economic activities.
121. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information The CCPT details the assessment of existing and prospective customers by applying Guiding Principles (GPs) through dual perspectives. The GPs applied are in accordance with the CCPT Guidance Document and are summarised below. Overview of Classification Exercise for Companies: CCPT Classification CLASSIFICATION OVERVIEW ENTITYLEVEL ESG POLICIES AND PRACTICES TRANSACTIONLEVEL ESG IMPACT C1 C2 Climate Supporting C3 C4 Transitioning C5 Watchlist Company has ESG policies and action plans and the transaction is climate positive. Company has implemented ESG-related remedial actions and the transaction is climate positive. Company has implemented ESG-related remedial actions however, the transaction is climate negative. GP3 GP4 GP4 None Negative OR GP5 GP1/2 GP1/2 Negative GP1/2 Negative Company has not implemented ESG-related policies but the transaction is climate positive. Company has no significant ESG policies and the transaction is climate negative. 119
122. B A N K I S L A M M A L AY S I A B E R H A D SUSTAINABLE FINANCE 1 . At a transactional level Including upon origination and extension of credit, investment in financial assets, and structuring of capital market transactions. In assessing the climate risk of a transaction, BIMB conducts due diligence of the potential use of proceeds of a new or existing financing facility. The use of proceeds may be tied to certain GPs based on the climate impact of the economic activity. Broad Limitations: For company (corporate, commercial or SME) financing, this is generally clear for term financing. For certain financing products where the use of proceeds is tied to working capital requirements that are not clearly defined at the onset, continuous monitoring at annual review intervals are required to ensure that the Bank has knowledge on the use of proceeds. For retail financing, there is generally no provision to limit the use of personal financing, for example, to certain use cases. Where the Bank has structured certain products, i.e. solar financing for a specific use case, this may be tied to GP1. In cases where there are no specific use limitations, the financing is tied to GP3 if no clear environmental harm is identified. 2. At an entity level Including an overall assessment of a business customer’s sustainability policies, action plans, implementation of sustainability roadmaps, and issues or incidents related to ESG. In assessing the climate impact of a business entity, BIMB assesses the customer’s disclosures including, but not limited to, the following; Sustainability Roadmaps 120 Grievances and Complaints related to the Entity/Group Certification and Third-party Verified Action Plans Sustainability Policies Carbon Emissions Reporting and Reduction Targets
123. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information The assessment is conducted based on industry-specific norms and standards especially pertaining to certification but also including ESG action plans that address the industry-specific impacts of the company’s activities. The assessment enables BIMB to obtain an overview of the climate impacts of the customer in terms of GP1, 2 and 3 and any remedial activities the customer may carry out in terms of GP4. Broad Limitations: For company (corporate, commercial or SME) financing, entity-level policies and action plans are generally made available by companies with large asset sizes or are public-listed entities that are required to disclose on sustainability as per regulatory and stakeholder requirements. However, for most SME and commercial-scale entities, these disclosures may not be visible. Collating data for these segments entail a much bigger resource-intensive challenge and thus a proxy and model-based assessment is conducted to determine the applicable GPs. For retail financing, there is generally little to no data on the personal profile of a customer to apply the GPs on a similar basis as a business entity. As such, the main assessment conducted on retail customers is to monitor engagement in prohibited activities and encourage environmentally-friendly uses where applicable. 121
124. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 1 : POSITIVE IMPACT FINANCING BIMB aims to deploy finance responsibly, supporting people and businesses that contribute to the common good and social, economic and environmental sustainability. To that end, we have continued to increase the amount of financing that we have dedicated to ESG-rated projects and have set even more ambitious financing targets as we move forward. We will also continue to innovate in the solutions that we offer to borrowers and investors, to ensure that we continue to meet their evolving needs and demands as they seek to transition to more sustainable models of business and investing. 122
125. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information SUSTAINING LEADERSHIP IN GREEN FINANCING BIMB has continued to strengthen its position as a leader in sustainable financing. At the end of 2021, Green Financing accounted for RM2.2 billion, or 4%, of our total financing portfolio. This puts us well ahead of the Malaysian banking industry’s average of 1% to 2%. As we move forward under our LEAP25 strategy, we aim to double the Green Financing book to RM4 billion by 2025. Achieving this target will require us to broaden the range of financing areas beyond the Renewable Energy Green Building sector that we have focused on, towards the wider green economy, which finances not just renewable energy but sustainable agriculture, low-carbon power generation and low-emission manufacturing, electric and hybrid vehicles, sustainable public transportation and the necessary infrastructure. We also aim to expand Shariah-ESG financing to between 12% and 15% of our total financing, thus offering complete Islamic solutions across the Malaysian economy. We have also cemented our leading position in the fast-growing area of green sukuk. The potential for ESG-rated sukuk goes well beyond the market for green sukuk, with the emergence of new products such as blue sukuk and transition sukuk. As companies and governments, increasingly, embrace the sustainability agenda, demand for transition sukuk that help fund their shift to a decarbonised economic model is expected to grow. With the ASEAN region continuing to dominate global issuance of ESG sukuk, the Group sees strong potential for further growth in this area. DRIVING INNOVATION IN SHARIAH-ESG INVESTING In line with both our commitment to ESG principles and our goal of growing our wealth management business, we have continued to launch new funds that offer new asset classes and investment strategies to attract new investors into our SESG funds. In March 2021, for example, we launched Malaysia’s first Waqf Featured Unit Trust, helping bring essential services to marginalised sections of society. We are also leveraging on digitalisation and our strategic partnership with Arabesque Asset Management to vastly expand the investible universe for our SEGS funds, which will provide a much wider range of options to investors with a strong ESG appetite. 123
126. B A N K I S L A M M A L AY S I A B E R H A D POSITIVE IMPACT FINANCING FOR THE COMMON GOOD : OUR COMMITMENT TO SOCIAL FINANCE BIMB has worked hard to play its part in helping our customers and society bounce back after the challenges of the last two years, but we want to do more. Social finance has always been one of the Group’s key strengths and we aim to expand our reach and impact as we move forward. Under the LEAP25 strategy, BIMB set a target of reaching 3,000 social finance beneficiaries by 2025. The strength of demand for our social finance services and the effectiveness of our delivery, however, have already seen us exceed that target in 2021 and we have now revised the goal for 2025 to 5000 recipients. One of the most impactful ways in which we have been able to support vulnerable or financially underserved members of society has been through our iTekad and BangKIT microfinance programmes. The innovative iTEKAD programme, which was established by BNM in 2020, combines social finance instruments, microfinancing and capacity building assistance to help B40 micro-entrepreneurs generate a sustainable income. During the year, we launched BangKIT, BIMB’s own microfinance and capacity building programme. These schemes provide an important pathway for unbanked micro-entrepreneurs to move into the formal banking sector. We have also continued to strengthen Sadaqa House, our platform for philanthropic social finance through zakat and waqf, by diversifying and magnifying the channels through which it can positively impact the community. In 2021, we continued to diversify collection channels through digitalisation and strengthened strategic partnerships with government bodies and private sector players. Sadaqa House collected RM3.3 million in new funds during the year, and disbursed a total of RM3.6 million, to 4,765 beneficiaries. Since its launch in 2018, Sadaqa House has collected more than RM9.0 million and we aim to raise the figure to RM40 million by 2025. We are also working to strengthen our contribution to the waqf, or Islamic endowments, sector. Our Makmur MyWakaf investment fund contributed RM80,000 to the myWakaf initiative of the Association of Islamic Banking and Financial Institutions Malaysia (“AIBIM”). This collaboration will be strengthened in the year ahead with the launch of myWakaf 2.0. Additionally, we launched the Awqaf Ummah Financing Programme to provide financing for affordable housing schemes in cooperation with the various State Islamic Religious Councils (“SIRCs”). As BIMB moves forward, we aim to build on our strength in social finance, both through expanding the quantum of funding and widening the channels and products through which we are able to reach the underserved. 124
127. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information Social Finance at BIMB BIMB established the Centre of Social Finance in January 2020 to provide clearer direction and more effective implementation of our social finance agenda by connecting existing banking products, services and initiatives with traditional Islamic social finance instruments. Prior to its establishment, our social finance agenda was nurtured within the Shariah Division of the Group. Our clear approach to social finance is defined as follows: “SOCIAL FINANCE IS AN APPROACH TO STRATEGICALLY OFFER BANKING PRODUCTS, SERVICES AND INITIATIVES BEYOND TRADITIONAL BANKING WHICH DELIVER SOCIAL IMPACTS AND ECONOMIC RETURNS, WITH THE UNDERLYING FOCUS TO NURTURE THE UNBANKED TO BECOME BANKABLE.” 125
128. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 2 : DELIVERING ON OUR COMMITMENT TO PEOPLE AND THE PLANET: CORPORATE SOCIAL RESPONSIBILITY AT BIMB Our success is judged not only by our financial performance but by the impact that we have on society, the environment and the actions that we take for the common good over the long-term. In order to deliver on these commitments, BIMB established its AMAL arm to institutionalise the Group’s Corporate Social Responsibility initiatives. Through our initiatives and programmes, and through our collaborations with strategic partners, we work to further the goals of social inclusion and environmental well-being. Our commitment to these goals reflects our values as an Islamic bank and values-based institution. In working to support the betterment of the society, we utilise funds from our AMAL CSR allocations, our zakat funds, and the contributions that we raise through our Sadaqa House social finance vehicle. The impact of our initiatives is amplified by the strategic partnerships and collaborations that we establish and by the commitment of our own people. Throughout 2021, we continued to build on existing, successful programmes, responded to needs and worked to establish new initiatives that will allow us to keep contributing to the society and the environment. This section shares some of the key initiatives we undertook during the year and the outcomes that they produced. 126
129. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information CONTINUING OUR COVID-19 RELIEF EFFORTS As society continued to feel the impact of the COVID-19 pandemic for a second year, BIMB continued to offer support to a wide range of organisations and bodies to which we were able to make a positive contribution. Over the course of the year, BIMB found opportunities to make contributions which benefitted more than 19,600 people in total. Supporting Hospitals The resurgence of COVID-19 cases during the year tested the resilience of the public healthcare system and BIMB acted to support these vital medical facilities and our frontliners. We supported the immediate needs of COVID-19 hospitals by contributing RM200,000 worth of supplies of vital items such as Personal Protective Equipment (“PPE”), isolation gowns, hand sanitisers, face masks, boots and head covers to five hospitals across the nation, which benefitted more than 16,000 individuals. Additionally, we supported a group of five COVID-19 hospitals in different parts of the country by providing them with the much-needed oxygen regulators as they dealt with the sharp rise in the number of patients being admitted. Each of the five selected hospitals received 10 oxygen regulators under our Prihatin COVID-19 initiative. BIMB also donated RTK COVID-19 test kits to Hospital USM in Kubang Kerian, Kelantan, which benefitted 300 members of B-40 families who needed to remain at the hospital to look after loved ones. 127
130. B A N K I S L A M M A L AY S I A B E R H A D FOR THE COMMON GOOD Supporting the Vulnerable Throughout what remained a challenging year for many , Bank Islam actively worked to share benefits with those in society who are less fortunate and with those who continue to serve on the frontlines of the pandemic. In the holy month of Ramadan, we distributed Iftar packed food for 750 frontliners from the police force, the fire brigade, the National Cancer Institute and the armed forces as an expression of our gratitude for their service. We also channelled contributions to other groups in society that had been affected by the pandemic: • BIMB’s Sadaqa House social finance vehicle continued to play its part in supporting the vulnerable by making collections from the public that were channelled to asnaf who are directly affected by COVID-19. In total, Sadaqa House distributed RM201,262 in partnership with JAKIM and PERKIM. • A total of RM50,000 from Sadaqa House and our CSR fund was contributed to the Ministry of Defence (“MINDEF”) Prihatin Fund to support members of the B-40 group and military veterans who were impacted by COVID-19. A total of 300 food baskets were distributed to needy armed forces families across Malaysia. • We contributed RM100,000 to a joint initiative between Kelab Bank Islam (“KBI”) and YADIM to provide support to 366 asnaf, both Muslim and non-Muslim, nationwide. The beneficiaries included a wide range of people whose livelihoods had been impacted by the pandemic, including taxi drivers, buskers, artists and trishaw drivers. We also provided support to vulnerable groups like single mothers, the disabled, and mualaf. Each of them received a food basket worth RM100 and RM150 in cash. • We donated RM12,000 to provide packs of essential food items to 150 B-40 families residing at the PPR Seri Mulia flats to ease their burden during the pandemic. RM1,562,562 WAS CONTRIBUTED TO COVID-19 RELIEF EFFORTS IN 2021 128
131. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information SUPPORTING STUDENTS AND EDUCATION We worked closely with a range of partners to support students whose education was disrupted due to the shift to online lessons during the national lockdown or when their schools were forced to close as a result of COVID-19 outbreaks. As part of our Prihatin COVID-19 initiatives during the year, we provided 1,000 asnaf students nationwide, of all races, with electronic devices such as tablets and free internet access (4 months Celcom Data Plan), ensuring that these students from underprivileged families would not be left behind. A total of RM627,000 was contributed towards the project. Our former parent company, BHB, also acted to support the Government’s effort by supplying 150,000 tablet computers to 500 schools across the country through the Ministry of Finance. BHB supplied laptops to 166 underprivileged students at two schools in the state of Sarawak, complete with a 12 month data plan, under the Cerdik CSR project, with our total contribution being RM300,000. We continued with the implementation of our flagship ‘Jom Ke Sekolah’ programme, an annual initiative where children from the B40 segment are provided with schooling supplies and essentials. We provided school necessities to 62 underprivileged children from Rumah Kebajikan Anak Yatim Mary, KL, Pertubuhan Kebajikan Rumah Anak Anak Yatim dan Miskin Al-Taqwa, Baling and vulnerable members of the community from PPR Mulia in Batu Caves. Each child was given school essentials, including new school uniforms, school shoes, socks, a stationery set, pencil case, school bag and colour pencils. Priority was given to families with children starting primary school in 2022. 129
132. B A N K I S L A M M A L AY S I A B E R H A D FOR THE COMMON GOOD OUR FLOOD RELIEF EFFORTS Malaysia experienced its most devastating floods in decades in December of 2021 , with more than 70,000 people being displaced. Bank Islam recognised our obligations to society and the nation, making a variety of contributions that benefitted more than 6,400 people through our AMAL Prihatin Flood Relief Programme. We provided a range of basic necessities to 5,000 flood victims in the states of Pahang, Johor, Sabah, Terengganu and Perak, in areas that had experienced some of the worst flooding. We also contributed to repairing the surau and musolla of schools that had been damaged by the floodwaters. A total of RM362,640 in aid was channelled in cooperation with MINDEF, and Pertubuhan Dakwah Islamiah Sekolah-sekolah Malaysia (“PEKDIS”). Focusing on the immediate needs of those displaced by the flooding, we made contributions of essential items and dry food supplies to flood victims being housed at the temporary flood relief centres (“PPS”) in a variety of locations. Working with MINDEF, we channelled RM41,572 in relief supplies to seven PPS in Pahang, which benefitted 1,000 people. We carried-out a similar effort at the PPS SK Bukit Changgang and 130 SK Labohan Dagang in Kuala Langat, Selangor, where we provided relief to 400 flood victims. With the Group’s nationwide presence, it was inevitable that some members of our own staff and their families would also be affected by the floods and BIMB took measures to provide them with the needed relief and support. A total of 49 people, comprising staff and their family members each received RM3,000 from BIMB’s CSR fund. We also engaged our customers and provided various digital channels for our customers to donate directly to those in need through the Sadaqa House crowdfunding platform via BangKIT microfinancing. RM570,000 IN TOTAL WAS CONTRIBUTED TO FLOOD RELIEF EFFORTS IN 2021
133. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information INVESTING IN THE ENVIRONMENT Our AMAL untuk Alam initiative to support environmental causes and sustainable farming continues to show good progress. For the second year in a row, we collaborated with the Jasin Correctional Prison in Melaka and Farmers’ Organisation Authority (Lembaga Pertubuhan Peladang) on a sustainable urban farming project run by prison inmates in Jasin, Melaka. The project has been a success, benefitting approximately 600 inmates and 40 families in the area. Inmates grow a range of produce using hydroponic techniques, which require no soil, less water and reduced chemicals, making them safer to eat. To put the project on a more sustainable basis, in 2021 we expanded the range of produce being cultivated, adding the higher-end options of rock melons and Japanese cucumber in addition to the leafy green vegetables that we started in 2020. Under our Jejak AMAL initiative which supports sustainable agriculture, we made an essential contribution to a farmer to help him start a hydroponic & fertigation project with Pertubuhan Peladang Kawasan Maras Batu Rakit. BIMB provided the seeds, saplings, fertiliser and farm equipment, with the training and coaching provided by LPP Terengganu. We carried out the project in cooperation with Pertubuhan Peladang Kawasan Maras Batu Rakit. Additionally, on the island community of Tanjung Surat in Johor, we successfully worked to provide a community of underprivileged fishermen families with access to renewable solar energy for their boat houses. We have also continued to raise public awareness of environmental issues through social media and direct engagement. In January, for example, our ‘Interesting Facts about Hydroponics’ post on Facebook and Instagram rapidly gained attention, crossing the 40,000 views mark. We also continued to use our social media presence to raise awareness of events like Earth Day and World Environment Day. On the direct engagement front, we distributed 1,500 AMAL reusable tote shopping bags to the community during our CSR events in an effort to raise public awareness of the need to reduce single use plastic waste. 131
134. B A N K I S L A M M A L AY S I A B E R H A D FOR THE COMMON GOOD SHARING BENEFITS AND GOODWILL Providing Better Living BIMB ’s ‘Projek Bantuan Rumah, Baiti Jannati’ programme, which was launched in 2008, sees us working with a network of stakeholders to identify vulnerable members of society who are in need of proper housing infrastructure. In 2021, we worked with Dewan Bandaraya Kuala Lumpur (“DBKL”) to provide better living conditions for 11 families in the capital by providing the funds for home ownership and repair costs. BIMB contributed a total of RM600,000 in zakat and AMAL funds towards the project. Since its launch in 2008, the programme has provided more than 300 houses, accommodating poor families across the country, with our total contribution exceeding RM9 million. AMAL Ihtimam Ramadan As many members of society continued to feel the impact of the COVID-19 pandemic, BIMB continued to support our frontliners and vulnerable members of society, both through direct donations and by working to share benefits and goodwill. Under our AMAL Ihtimam Ramadan 2021, we made cash contributions to 20 asnaf during a bubur lambuk distribution event at the Masjid Jamek Kampung Baru, as well as making a RM5,000 zakat contribution to the mosque itself. We also distributed a further 4,500 packets of bubur lambuk to frontliners, members of the public, BIMB staff and members of the media during the holy month. Additionally, we shared the joy with 1,500 students and staff at the Islamic Centre of USM by contributing to an Iftar event at the university. We also facilitated the provision of canopies and other needed equipment to the Surau Ahmad Dawjee Dhadabhoy (“SWADD”) during the month of Ramadan. The Group had supported the Iftar Fest @ SWADD since 2018. Due to the strict COVID-19 related SOPs, a total of 300 Iftar food packs were distributed daily to KL city workers to break their fast. 132
135. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information AMAL Ihtimam Korban HELPING WHERE WE CAN In 2021 we, once again, organised an AMAL Ihtimam Korban programme in conjunction with Hari Raya Korban. We distributed a total of RM23,000 in zakat funds at the Kem Kementah, army camp in Kuala Lumpur. This included contributing RM20,000 to 100 asnaf and a RM3,000 contribution to the Masjid Al Fatih mosque at the camp. Additionally, BIMB contributed three heads of cattle for sacrifice as Lembu Korban, with the meat being distributed to 250 recipients. In all, BIMB made a contribution of RM38,000 in zakat and AMAL funds for the event. Beyond our contributions to targeted programmes and collaborations, BIMB continues to look for ways to support the betterment of society in general. In 2021, we made contributions to a variety of events and programmes, including a RM10,000 donation to the Tabung Kebajikan Jabatan Siasatan dan Penguatkuasaan Trafik (“JSPT”) benefitting those who help ensure road and traffic safety. We also collaborated with the Kuantan Municipal Council on a CSR project that benefitted 250 homeless people. Raising Awareness Additionally, we contributed approximately RM30,000 to support the MYLady Assistance Scheme to empower single mothers and young women living with HIV and to Malaysian AIDS Foundation’s (“MAF”) 100,000 Steps to End AIDS virtual walk event last year. The initiative provided a platform for 100 of our staff participants to not only maintain a healthy lifestyle but also to directly advocate for the HIV cause through social media. The funds raised through the charity walk will help MAF to expand their life-saving efforts by providing more people living with HIV with access to treatment. Additionally, to raise awareness and understanding of the Islamic religion, we made a contribution of RM5,000 towards the contest to create an animated video to raise understanding of Islam (Pertandingan Merekacipta Video Animasi Kefahaman Islam), thereby also supporting the local content-creation and creative industries. 133
136. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE INFORMATION AS AT 31 MARCH 2022 BOARD OF DIRECTORS Chairman TAN SRI DR . ISMAIL HAJI BAKAR Independent Non-Executive Director Members •AZIZAN AHMAD Senior Independent Non-Executive Director • MOHAMED RIDZA MOHAMED ABDULLA Non-Independent Non-Executive Director • DATUK NIK MOHD HASYUDEEN YUSOFF Non-Independent Non-Executive Director • DATO’ SRI KHAZALI AHMAD Independent Non-Executive Director • MOHD YUZAIDI MOHD YUSOFF Independent Non-Executive Director • MASHITAH HAJI OSMAN Independent Non-Executive Director • DATO’ SRI AMRIN AWALUDDIN Non-Independent Executive Director BOARD AUDIT AND EXAMINATION COMMITTEE Chairman Chairman Datuk Bazlan Osman Dato’ Sri Khazali Ahmad (Appointed w.e.f. 7 January 2022) (Appointed w.e.f. 3 September 2021) Members Members • Mohd Yuzaidi Mohd Yusoff • Azizan Ahmad (Appointed as interim Chairman w.e.f. 3 September 2021 until 7 January 2022) • Mohamed Ridza Mohamed Abdulla • Dato’ Sri Khazali Ahmad • Nuraini Ismail (Appointed w.e.f. 7 January 2022) Independent Non-Executive Director (Appointed w.e.f. 1 October 2021) • DATUK BAZLAN OSMAN Independent Non-Executive Director (Appointed w.e.f. 7 January 2022) • NURAINI ISMAIL Independent Non-Executive Director (Appointed w.e.f. 7 January 2022) • NORAINI CHE DAN (Deceased on 26 August 2021) • ZAHARI @ MOHD ZIN IDRIS (Retired w.e.f. 20 September 2021) (Deceased on 26 August 2021) • Zahari @ Mohd Zin Idris (Retired w.e.f. 20 September 2021) • Mashitah Haji Osman (Appointed w.e.f. 3 September 2021 and ceased to be a member on 7 January 2022) • Datuk Nik Mohd Hasyudeen Yusoff (Appointed w.e.f. 20 September 2021) • Noraini Che Dan (Deceased on 26 August 2021) • Zahari @ Mohd Zin Idris (Retired w.e.f. 20 September 2021)  OARD FINANCING B REVIEW COMMITTEE Chairman Datuk Nik Mohd Hasyudeen Yusoff (Appointed w.e.f. 1 June 2021 and re-designated as Chairman w.e.f. 20 September 2021) (Appointed w.e.f. 20 September 2021 Members and ceased to be a member on • Azizan Ahmad 7 January 2022) BOARD RISK COMMITTEE Chairman Azizan Ahmad Members • Mohd Yuzaidi Mohd Yusoff • Mashitah Haji Osman • Datuk Nik Mohd Hasyudeen Yusoff (Appointed w.e.f. 1 June 2021) • Mohd Asri Awang (Appointed w.e.f. 1 October 2021) • Noraini Che Dan (Deceased on 26 August 2021) • Zahari @ Mohd Zin Idris (Retired w.e.f. 20 September 2021) 134 • Datuk Nik Mohd Hasyudeen Yusoff • Noraini Che Dan (Appointed w.e.f. 10 September 2021) • MOHD ASRI AWANG  OARD NOMINATION AND B REMUNERATION COMMITTEE • Mashitah Haji Osman • Mohd Asri Awang (Appointed w.e.f. 1 October 2021) • Zahari @ Mohd Zin Idris (Retired w.e.f. 20 September 2021)
137. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A   Sustainability   Leadership  Accountability  Financial   Additional Information  OARD STRATEGIC & B SUSTAINABILITY COMMITTEE Chairman Mohd Yuzaidi Mohd Yusoff Members • Mohamed Ridza Mohamed Abdulla • Mashitah Haji Osman • Datuk Nik Mohd Hasyudeen Yusoff (Appointed w.e.f. 26 January 2021) • Noraini Che Dan SHARIAH ADVISORY COMMITTEE, BIMB INVESTMENT MANAGEMENT BERHAD Chairman Ustaz Dr. Ahmad Shahbari @ Sobri Salamon Members • Associate Professor Dr. Asmak Ab Rahman • Dr. Shamsiah Mohamad (Deceased on 26 August 2021)  OARD INFORMATION B TECHNOLOGY COMMITTEE Chairman Mohamed Ridza Mohamed Abdulla SHARIAH ADVISORY COMMITTEE, BIMB SECURITIES SDN BHD Chairman Ir. Dr. Muhamad Fuad Abdullah • Dato’ Sri Khazali Ahmad Members • Professor Dr. Asmadi Mohamed Naim • Azizan Ahmad • Dr. Shamsiah Mohamad Members • Mohd Yuzaidi Mohd Yusoff  HARIAH SUPERVISORY S COUNCIL, BANK ISLAM MALAYSIA BERHAD Chairman Professor Dato’ Dr. Ahmad Hidayat Buang Members • Associate Professor Dr. Yasmin Hanani Mohd Safian • Professor Dr. Asmadi Mohamed Naim • Dr. Shamsiah Mohamad • Sahibus Samahah Datu Haji Kipli Haji Yassin CHIEF EXECUTIVE OFFICERS IN THE GROUP • Mohd Muazzam Mohamed Group Chief Executive Officer Bank Islam Malaysia Berhad • Najmuddin Mohd Lutfi Chief Executive Officer BIMB Investment Management Berhad AUDITORS PricewaterhouseCoopers PLT (LLP0014401-LCA & AF 1146) Level 10, 1 Sentral Jalan Rakyat, Kuala Lumpur Sentral PO Box 10192 50706 Kuala Lumpur Tel : 03-2173 1188 Fax : 03-2173 1288 REGISTERED OFFICE Bank Islam Malaysia Berhad (Registration No. 198301002944 [98127-X]) 32nd Floor, Menara Bank Islam No 22, Jalan Perak 50450 Kuala Lumpur Tel : 03-2088 8000 Fax : 03-2088 8033 Web: www.bankislam.com SHARE REGISTRAR Boardroom Share Registrars Sdn. Bhd. (Registration No: 199601006647 [378993-D]) 11th Floor, Menara Symphony No. 5, Jalan Prof. Khoo Kay Kim Seksyen 13 46200 Petaling Jaya Selangor Darul Ehsan Tel : 03-7890 4700 Fax : 03-7890 4670 • Kamaruzaman Abdullah Chief Executive Officer BIMB Securities Sdn Bhd • Masdayana Md Setamam Chief Executive Officer Bank Islam Trust Company (Labuan) Ltd COMPANY SECRETARIES STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad Listing Date : 8 October 2021 Stock Name : BIMB Stock Code : 5258 • Maria Mat Said (LS0009400) (SSM Practicing Certificate No. 202008002449) • Norhidayati Mohamat Salim (MIA 27364) (SSM Practicing Certificate No. 202008002356) 135
138. B A N K I S L A M M A L AY S I A B E R H A D BOARD COMPOSITION TENURE 9 % 27% < 3 YEARS 3 TO 9 YEARS > 9 YEARS 64% BOARD COMPOSITION 73% INDEPENDENT DIRECTORS AGE 45% 50 TO 60 YEARS OLD 61 TO 70 YEARS OLD 27% NONINDEPENDENT DIRECTORS 55% DIVERSITY 18% MALE FEMALE 82% 136
139. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability   Leadership   Accountability  Financial   Additional Information BOARD OF DIRECTORS’ PROFILE Academic and Professional Qualifications • Bachelor of Economics, B. Econs (Hons) in Applied Economics, University of Malaya • Diploma in Public Administration, National Institute of Public Administration (INTAN) • Masters of Business Administration, University of Hull, United Kingdom • PHD, University of Hull, United Kingdom Areas of Expertise • Economic and Financial Management Work Experience & Positions Present • Company Director Previous • Chief Secretary to the Government of Malaysia • Secretary General of the Ministry of Agriculture & Agro Based Industry • Secretary General of the Ministry of Transport • Director of National Budget, National Budget Office, Treasury, the Ministry of Finance • Director of National Strategic Unit, Treasury, the Ministry of Finance • Deputy Secretary General (Policy), the Ministry of Defence • Senior Advisor to the Executive Director (SEA Group), the World Bank • Head of Section, Government Procurement, the Ministry of Finance • Head of Planning, Research and Policy, Government Procurement, the Ministry of Finance • Principal Assistant Secretary, Economic and International Division (Public Finance Section), the Ministry of Finance • Assistant Secretary, Economic and International Division (Capital Market, Money Market and Banking Section), the Ministry of Finance • Assistant Secretary, Economic and International Division (External Trade and Balance and Payment), the Ministry of Finance • Assistant Director, Anti Narcotic Task Force • Assistant Secretary, Contract and Supply Division, the Ministry of Finance Directorship in Other Public Companies • Nil Membership of Board Committees in BIMB • Nil Meeting Attendance 14 of 14 Board Meetings held in the Financial Year Ended 31 December 2021 Declaration of Interest He has no conviction for offences within the past five years. He has no family relationship with any director and/or major shareholder of BIMB and no conflict of interest in BIMB. Tan Sri Dr. Ismail Haji Bakar Chairman/Independent Non-Executive Director Nationality Malaysian Age/Gender 62, Male Date of Appointment 1 August 2020
140. B A N K I S L A M M A L AY S I A B E R H A D BOARD OF DIRECTORS ’ PROFILE Academic and Professional Qualifications • LLB (First Class Honours), International Islamic University Malaysia • Institute of Chartered Secretaries and Administrators (London) (ICSA) • Fellow, Institute of Chartered Secretaries and Administrators (FCIS) • Fellow, Malaysian Society of Adjudicators • Associate Member, Chartered Institute of Arbitrators (ACI Arb) Areas of Expertise • Legal, Corporate, Islamic Finance and FinTech Mohamed Ridza Mohamed Abdulla Non-Independent Non-Executive Director Nationality Malaysian Age/Gender 53, Male Date of Appointment 1 December 2010 Work Experience & Positions Present • Managing Partner, Mohamed Ridza & Co • Chairman, BIMB Investment Management Berhad • Member of YAPEIM Governance Committee • Advocate & Solicitor High Court of Malaya • Member of Bar Council Malaysia • Fellow Member ICDM • Board Member, OIC Arbitration Centre (Istanbul) Previous • Partner, Zaid Ibrahim & Co • General Legal Counsel, Technip Asia Pacific Academic and Professional Qualifications •M e m b e r, M a l a y s i a n I n s t i t u t e o f Accountants (MIA) • Fellow, CPA Australia • Ad v ance d B u s ine s s Managem ent Program, IMD International, Switzerland • Bachelor of Business, Curtin University of Technology, Australia Areas of Expertise • Accounting Datuk Nik Mohd Hasyudeen Yusoff Non-Independent Non-Executive Director Nationality Malaysian Age/Gender 57, Male Date of Appointment 1 October 2016 138 Work Experience & Positions Present • Director, Malaysian Professional Accountancy Centre (Limited by Guarantee) Previous • Group Managing Director and Chief Executive Officer, Lembaga Tabung Haji • Executive Director, Market and Corporate Supervision, Securities Commission Malaysia • Executive Chairman, Audit Oversight Board, Securities Commission Malaysia • Chief Executive Officer, Inovastra Sdn. Bhd. • Chairman, Khairuddin, Hasyudeen & Razi, Chartered Accountants • Group Legal Advisor, Arab Malaysian Corporation Berhad • Advocate and Solicitor, Corporate Department, Messrs. Rashid & Lee Directorship in Other Public Companies • BIMB Investment Management Berhad • KPJ Healthcare Berhad • Sime Darby Property Berhad Membership of Board Committees in BIMB • Chairman, Board Information Technology Committee • Member, Board Audit and Examination Committee • Member, Board Strategic & Sustainability Committee Meeting Attendance 14 of 14 Board Meetings held in the Financial Year Ended 31 December 2021 Declaration of Interest He has no conviction for offences within the past five years. He has no family relationship with any director and/or major shareholder of BIMB and no conflict of interest in BIMB. Directorship in Other Public Companies • Al Hijrah Media Corporation • USAS Berhad • Petron Malaysia Refining & Marketing Bhd. Membership of Board Committees in BIMB • Chairman, Board Financing Review Committee • Member, Board Risk Committee • Member, B oard Nomination and Remuneration Committee • Member, Board Strategic & Sustainability Committee Meeting Attendance 14 of 14 Board Meetings held in the Financial Year Ended 31 December 2021 Declaration of Interest He has no conviction for offences within the past five years. He has no family relationship with any director and/or major shareholder of BIMB and no conflict of interest in BIMB.
141. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability   Leadership   Accountability  Financial   Additional Information Academic and Professional Qualifications • Diploma in Agriculture, Universiti Putra Malaysia Areas of Expertise • Banking and Credit Management Work Experience & Positions Present • Company Director Previous • Principal Consultant for School of Credit, Agrobank • Executive Vice President, President/CEO Office, Agrobank • Chief Credit Officer, Agrobank Azizan Ahmad Senior Independent Non-Executive Director • Chief Commercial Officer, Agrobank •E xe cu ti ve V i c e Pre s i d e nt , Cre di t Management Division, Bank Muamalat Nationality Malaysian Malaysia Berhad • General Manager, Human Resource Age/Gender 67, Male Division, Maybank Berhad • General Manager, Credit Control Division, Date of Appointment 2 January 2018 Maybank Berhad • Regional Manager, Maybank Berhad Academic and Professional Qualifications • Master Degree (Econs) (Oklahoma), University of Central of Oklahoma, USA • Bachelor of Economy (Hons) (Agricultural Economy), Universiti Kebangsaan Malaysia • Diploma in Public Administration, National Institute of Public Administration (INTAN) Areas of Expertise • Economy, Finance and Tax Management Work Experience & Positions Present • Company Director Dato’ Sri Khazali Ahmad Independent Non-Executive Director Nationality Malaysian Age/Gender 67, Male Date of Appointment 2 January 2018 Previous • Director General of Customs, Royal Malaysia Customs • Sabah Federal Secretary, Prime Minister’s Department • Deputy General of Customs (Management), Royal Malaysia Customs • Special Functions Officer to Chief Secretary to the Government of Malaysia, Prime Minister’s Department • Section Chief, Tax Analysis Division, Ministry of Finance • Principal Assistant Director, Tax Analysis Division, Ministry of Finance • Malaysia Trade Commissioner to Beijing, Ministry of International Trade and Industry • Principal Assistant Director, International Trade Division, Ministry of International Trade and Industry • Credit Manager/Senior Credit Manager, Maybank Berhad • Credit Officer/Senior Credit Officer, Maybank Berhad Directorship in Other Public Companies •Nil Membership of Board Committees in BIMB • Chairman, Board Risk Committee • Member, Board Nomination and Remuneration Committee • Member, Board Information Technology Committee • Member, Board Financing Review Committee Meeting Attendance 14 of 14 Board Meetings held in the Financial Year Ended 31 December 2021 Declaration of Interest He has no conviction for offences within the past five years. He has no family relationship with any director and/or major shareholder of BIMB and no conflict of interest in BIMB. • Assistant Director, International Trade Division, Ministry of International Trade and Industry • Principal Assistant Secretary, Ministry of Health • Education Attache, Malaysia Student Department, High Commission of Malaysia, London • A s sis tant Dire c tor, Public S er vice Department Directorship in Other Public Companies • Shangri-La Hotels (Malaysia) Berhad • Favelle Favco Berhad • Muhibbah Engineering (M) Berhad • Cuscapi Berhad (Executive Director) Membership of Board Committees in BIMB • Chairman , B oard Nomination and Remuneration Committee • Member, Board Audit and Examination Committee • Member, Board Information Technology Committee Meeting Attendance 14 of 14 Board Meetings held in the Financial Year Ended 31 December 2021 Declaration of Interest He has no conviction for offences within the past five years. He has no family relationship with any director and/or major shareholder of BIMB and no conflict of interest in BIMB. 139
142. B A N K I S L A M M A L AY S I A B E R H A D BOARD OF DIRECTORS ’ PROFILE Academic and Professional Qualifications • M Sc. Business Administration, San Diego State University, USA • B Sc. Computer Science, Northern Illinois University, USA Areas of Expertise • Digital Economy • Strategic Planning • Risk and Quality Management • Business Process Management Mohd Yuzaidi Mohd Yusoff Independent Non-Executive Director Nationality Malaysian Age/Gender 59, Male Date of Appointment 1 July 2019 Mashitah Haji Osman Independent Non-Executive Director Nationality Malaysian Age/Gender 64, Female Date of Appointment 1 October 2020 140 Work Experience & Positions Present • Company Director • Member ICDM Previous • Independent Non-Executive Director, Malaysia Digital Economy Corporation Sdn. Bhd. • Group Chief Strategy and Corporate Governance Officer, PST Ventures Sdn. Bhd. • Co-Founder and Managing Director, Clear Minds Sdn. Bhd. • Senior Manager, Accenture Directorship in Other Public Companies • Chairman, Muslim Professionals Forum Berhad • Board of Trustee, PADU Corporation Membership of Board Committees in BIMB •C h a i r m a n , B o a r d S t r a t e g i c & Sustainability Committee • Member, Board Audit and Examination Committee • Member, Board Risk Committee • Member, Board Information Technology Committee Meeting Attendance 14 of 14 Board Meetings held in the Financial Year Ended 31 December 2021 Declaration of Interest He has no conviction for offences within the past five years. He has no family relationship with any director and/or major shareholder of BIMB and no conflict of interest in BIMB. Academic and Professional Qualifications • Bachelors of Business Administration (Hons), Universiti Kebangsaan Malaysia • Master of Business Administration, University College of Wales Aberystwyth, United Kingdom • Unit Head of Institutional and Islamic Financing, Corporate Banking, RHB Sakura Merchant Bankers Bhd. • Officer to Senior Manager, Corporate Banking, RHB Sakura Merchant Bankers Bhd. Areas of Expertise •Corporate and Corporate Investment Banking Directorship in Other Public Companies • Radiant Globaltech Berhad Work Experience & Positions Present • Company Director Previous • Chief Operating Officer in Business, Bank Muamalat Malaysia Berhad • Director/Head, Corporate Investment Banking, Bank Islam Malaysia Berhad • First Senior Vice President/Senior General Manager, RHB Sakura Merchant Bankers Bhd. • General Manager/Head, Islamic Finance (Islamic Capital Markets), RHB Sakura Merchant Bankers Bhd. • Member of RHB Capital Syariah Council, RHB Sakura Merchant Bankers Bhd. Membership of Board Committees in BIMB • Member, Board Risk Committee • Member, Board Strategic & Sustainability Committee • Member, Board Financing Review Committee Meeting Attendance 14 of 14 Board Meetings held in the Financial Year Ended 31 December 2021 Declaration of Interest She has no conviction for offences within the past five years. She has no family relationship with any director and/or major shareholder of BIMB and no conflict of interest in BIMB.
143. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability   Leadership   Accountability  Financial   Additional Information Academic and Professional Qualifications • BA (Economics), Macquaire University Sydney, Australia Areas of Expertise • Treasury, Banking and Enterprise Risk Management Work Experience & Positions Present • Company Director Mohd Asri Awang Independent Non-Executive Director Nationality Malaysian Age/Gender 66, Male Date of Appointment 1 October 2021 Previous • Chief Operating Officer, Bank Muamalat Malaysia Berhad • Chief Risk Officer, Bank Muamalat Malaysia Berhad • Executive Vice President, Wholesale Banking, Bank Muamalat Malaysia Berhad • Head, Special Projects, Bank Muamalat Malaysia Berhad • Chief Executive Officer, Malaysian Rating Corporation Berhad • Head, Group Corporate Services, Amanah Capital Partners Berhad/MIDF Berhad • CEO Designate, Malaysian Financial Guarantee Insurance, Amanah Capital Partners Berhad • General Manager, Treasury and Southern Region, BSN Commercial Bank (M) Berhad Academic and Professional Qualifications • Fellow, the Association of Chartered Certified Accountants (ACCA), United Kingdom Areas of Expertise •Finance • Corporate Finance • Audit and Governance • Financial Risk Management •Treasury Work Experience & Positions Present • Company Director Nuraini Ismail Independent Non-Executive Director Nationality Malaysian Age/Gender 59, Female Date of Appointment 7 January 2022 Previous • Vice President Treasury, Finance, Petronas • Senior General Manager, Group Treasury, Petronas • General Manager, Finance and Accounts Services, Malaysian International Trading Company • General Manager, Commercial Services, Malaysian International Trading Company • Senior Manager Finance and Accounts Services, Malaysian International Trading Company • Manager Value Based Management, Petronas • Chief Executive Officer, Kewangan Bersatu Berhad • General Manager, Treasury Division, BSN Commercial Bank (M) Berhad • Vice President/Treasurer, Chase Manhattan Bank, Kuala Lumpur • A s sis tant General Manager, Funds Management, Amanah Merchant Bank Berhad • Senior Manager, Treasury, Amanah Chase Merchant Bank Berhad • Money Market & Foreign Exchange Trader, Bank Bumiputra Malaysia Berhad Directorship in Other Public Companies Nil Membership of Board Committees in BIMB • Member, Board Risk Committee • Memb er, B oard Financing Rev iew Committee Meeting Attendance 3 of 3 Board Meetings held in the Financial Year Ended 31 December 2021 Declaration of Interest He has no conviction for offences within the past five years. He has no family relationship with any director and/or major shareholder of BIMB and no conflict of interest in BIMB. • Manager Planning and Budgeting, Petronas • Manager Group Budget, Petronas • Manager Accounts Services, Petronas • Senior Executive, Accounts Services, Petronas • Corporate Planning Executive, Maybank Finance • Loans Rehabilitation Executive, Bank Bumiputera Berhad • Corporate Finance Executive, Bumiputera Merchant Bankers • Audit Team Leader, Azman Wong & Salleh • Executive, Accountants General Office Directorship in Other Public Companies • GDEX Berhad Membership of Board Committees in BIMB • Member, Board Audit and Examination Committee Declaration of Interest She has no conviction for offences within the past five years. She has no family relationship with any director and/or major shareholder of BIMB and no conflict of interest in BIMB. 141
144. B A N K I S L A M M A L AY S I A B E R H A D BOARD OF DIRECTORS ’ PROFILE Academic and Professional Qualifications • Fellow, Association of Chartered Certified Accountants (ACCA), United Kingdom • Chartered Accountant, Malaysian Institute of Accountants (MIA) • Diploma in Accounting, Polytechnic of North London, United Kingdom Areas of Expertise • Finance and Accounting Datuk Bazlan Osman Independent Non-Executive Director Nationality Malaysian Age/Gender 57, Male Date of Appointment 7 January 2022 Work Experience & Positions Present •D i r e c t o r, M a l a y s i a n P r o f e s s i o n a l Accountancy Centre (Limited by Guarantee) • Vice President, MIA • Chair, ACCA Malaysia Advisory Committee Previous • Non-Executive Chairman/Director, GITN Sdn Bhd • Independent Non-Executive Director, Citibank Berhad • Director, Universiti Utara Malaysia • Director, VADS Berhad • Director, Malaysia Digital Economy Corporation Sdn Bhd •N o n - E x e c u t i v e D i r e c t o r, L a b u a n Reinsurance (L) Ltd • Commissioner, PT XL Axiata Tbk • Independent Non-Executive Director, Nationwide Express Holdings Berhad • Executive Director, Telekom Malaysia Berhad Academic and Professional Qualifications • Char tered Institute of Management Accountants (CIMA), United Kingdom • Malaysian Institute of Accountants, Malaysia (MIA) • Masters of Business Administration, University of Hull, United Kingdom • Bachelor of Business Administration (Hons), Acadia University, Nova Scotia, Canada Areas of Expertise •Accounting Dato’ Sri Amrin Awaluddin Non-Independent Executive Director Nationality Malaysian Age/Gender 56, Male Date of Appointment 10 September 2021 142 Work Experience & Positions Present • Group Managing Director and Chief Executive Officer, Lembaga Tabung Haji Previous • Executive Officer, Armed Forces Fund Board • Executive Director/Group Managing Director, Boustead Holdings Berhad • Group Managing Director and Executive Director, Media Prima Berhad • Chief Executive Officer, Sistem Televisyen Malaysia Berhad • Acting Group Chief Executive Officer, Telekom Malaysia Berhad • Deputy Group Chief Executive Officer, Telekom Malaysia Berhad • Group Chief Financial Officer, Telekom Malaysia Berhad • Chief Financial Officer, Celcom (Malaysia) Berhad • Senior Vice President, Finance/Company Secretary, Kumpulan FIMA Berhad • Manager, Accounting and Financial Control, American Express (M) Sdn. Bhd. • Project Accountant, Sime Engineering Sdn. Bhd., PETRONAS 2nd Refinery Melaka • Acting Accounts and Administration Manager, Sime Hogg Robinson (S) Pte Ltd • Accountant, Sime Darby Berhad • Auditor, Hanafiah Raslan & Mohamad Directorship in Other Public Companies • Bursa Malaysia Berhad • FIMA Corporation Berhad • Glomac Berhad • Syarikat Takaful Malaysia Keluarga Berhad Membership of Board Committees in BIMB • Chairman, Board Audit and Examination Committee Declaration of Interest He has no conviction for offences within the past five years. He has no family relationship with any director and/or major shareholder of BIMB and no conflict of interest in BIMB. • Group Chief Financial Officer, Media Prima Berhad • Chief Financial Officer, Sistem Televisyen Malaysia Berhad • Chief Operating Officer, Putera Capital Berhad • Head of Corporate Finance, Malaysia Resources Corporation Berhad Directorship in Other Public Companies • Al Hijrah Media Corporation • Taliworks Corporation Berhad • TH Plantations Berhad Membership of Board Committees in BIMB •Nil Meeting Attendance 4 of 4 Board Meetings held in the Financial Year Ended 31 December 2021 Declaration of Interest He has no conviction for offences within the past five years. He has no family relationship with any director and/or major shareholder of BIMB and no conflict of interest in BIMB except by virtue of being a nominee Director of Lembaga Tabung Haji.
145. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability   Leadership   Accountability  Financial   Additional Information SHARIAH SUPERVISORY COUNCIL’S PROFILE Professor Dato’ Dr. Ahmad Hidayat Buang Chairman 60, Male, Malaysian Date of Appointment: 1 April 2015 • • • Professor at Department of Shariah and Law, Academy of Islamic Studies, University of Malaya and also a Senate Member of the University Chairman, Shariah Supervisory Council, Amanah Raya Berhad Shariah Lawyer, Federal Territories Shariah Courts Qualifications • Doctor of Philosophy (Laws), School of Oriental and African Studies, London University, UK • Master of Law (LLM), School of Oriental and African Studies SOAS, London University, UK • Bachelor of Shariah, University Malaya, Kuala Lumpur Experience • Director, Academy of Islamic Studies, University of Malaya (October 2006 to January 2011) • Deputy Director (Research and Development), Academy of Islamic Studies, University of Malaya in 2006 as well as Head of Department of Shariah and Law from 1997 to 1999 and from 2016 to 2019 • Shariah Advisor, CIMB Bank Berhad, OCBC Bank, Commerce Tijari Bank, Amanah Raya Unit Trust Management Sdn. Bhd., ASM MARA Unit Trust Management Berhad, I-Free Capital Pte Ltd (Singapore), Bumiputra Commerce Trustee Sdn. Bhd. and Perbadanan Usahawan Nasional Berhad • Member, Shariah Working Committee of Islamic Banking and Takaful for Bank Negara Malaysia • Member, Islamic Education Coordination Advisory Council for the Council of Rulers Malaysia Directorship in Other Public Companies •Nil Professor Dr. Asmadi Mohamed Naim Member 52, Male, Malaysian Date of Appointment: 3 February 2020 • Vice Chancellor/Chief Executive of Universiti Islam Antarabangsa Sultan Abdul Halim al-Mu’adzam Shah (UniSHAMS) and Professor at the Islamic Business School (IBS), UUM College of Business, Universiti Utara Malaysia (secondment to UniSHAMS) • Member, Shariah Advisory Council Securities Commission of Malaysia since 2014 • Chairman, Sun Life Takaful Malaysia Berhad, since 1 April 2021 • Member, Fatwa Committee of Kelantan (Jamaah Ulama Kelantan) since 2018 • Member, Shariah Expert Panel, JAKIM since 2019 • Member, Wakaf Council of Pahang since October 2020 • Member, Lembaga Zakat Negeri Kedah since July 2021 • Member, Royal Commission of Inquiry on TH w.e.f. January 2022 (6 months) Qualifications • Chartered Islamic Finance Professional • PhD (Fiqh and Usul Fiqh), International Islamic University Malaysia • Master (Fiqh and Usul Fiqh), International Islamic University Malaysia • Bachelor of Shariah (Hons) (al-Fiqh wa al-Tasyri’) University of Jordan Experience • Member, Shariah Advisory Council Bank Negara Malaysia (2013-2019) • Member, Kedah Zakat Council from 2013 to 2015 • Professor, Islamic Business School, Universiti Utara Malaysia, College of Business • Member, Muamalat Expert Panel JAKIM (2016-2018) • Board Member, Sintok Agro Sdn. Bhd. (2018-2019) • Internal Consultant, Hong Leong Islamic Bank (2008-2010) • Member, Shariah Council, Hong Leong Islamic Bank (20112013) • Grand Council Member, Chartered Institute of Islamic Finance Professional (2018-2020) • Member of various councils such as Ministry of Higher Education Committee of Malaysia for Islamic Finance, Takaful and Muamalat Administration Curriculum Directorship in Other Public Companies •Nil 143
146. B A N K I S L A M M A L AY S I A B E R H A D SHARIAH SUPERVISORY COUNCIL ’S PROFILE Associate Professor Dr. Yasmin Hanani Mohd Safian Member 45, Female, Malaysian Date of Appointment: 1 April 2015 • Associate Professor, Faculty of Shariah and Law, Universiti Sains Islam Malaysia • Member, Majlis Agama Islam Selangor (MAIS) • Member, Federal Territories Syarak Consultative Committee • Member, Economic Development Committee, MAIS • Deputy Chairman, Dakwah Committee, MAIS • Board Member, Teraju Ekonomi Asnaf Sdn. Bhd. • Member, Shariah Committee Universiti Sains Islam Malaysia • Member, Shariah Committee Co-opbank Pertama Qualifications • Doctor of Philosophy in Islamic Studies, University of Exeter, United Kingdom • Master in Islamic Studies, University of Birmingham, United Kingdom • Bachelor of Shariah Islamiyyah, Al-Azhar University, Egypt Experience • Chairman, Committee of Non-Government Islamic Organisation, MAIS (2017-2020) • Member, Aqidah Restriction Committee MAIS (2017-2020) • Panel Member Standards Development Committee on the National Occupational Skill Standard Islamic Banking (2017) • Member of Shariah Committee Affin Islamic (2011-2015) • Committee of Malaysian Halal Certification Advisory • International Professional Halal Trainer for the United States Agency for International Development (USAID)/IHRAM • Dean, Faculty of Shariah and Law, Universiti Sains Islam Malaysia (2012-2014) • Deputy Dean, Postgraduate School, Universiti Sains Islam Malaysia (2011-2012) • Halal Certified Trainer, JAKIM Directorship in Other Public Companies • Teraju Ekonomi Asnaf Sdn. Bhd. 144 Dr. Shamsiah Binti Mohamad Member 55, Female, Malaysian Date of Appointment: 3 February 2020 • Shariah adviser and Shariah Committee Member of various institutions including Association of Islamic Banking Institutions Malaysia, Pertubuhan Peladang Kebangsaan, Lembaga Zakat Selangor, Bursa Malaysia, Medic IG Holdings and Shariah Advisory Council Member for Securities Commission Malaysia Qualifications • Doctor of Philosophy in Foundation of Jurisprudence (Fiqh and Usul Fiqh), University of Jordan • Master of Shariah, University of Malaya • Bachelor of Shariah (First Class Honors), University of Malaya Experience • Senior Researcher, International Shari’ah Research Academy for Islamic Finance • Associate Professor, Department of Fiqh and Usul, Academy of Islamic Studies, University of Malaya • Shariah Specialist, Islamic Capital Market Department, Securities Commission, Malaysia • Member, Shariah Advisory Council Bank Negara Malaysia • Member, Shariah Expert Panel, JAKIM • Published several books and articles on Islamic Economics, Banking and Finance, Profit on Islamic Jurisprudence, Pawn Broking in Islam. Her areas of expertise include Islamic Jurisprudence (Shariah) and Islamic Finance Directorship in Other Public Companies •Nil
147. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability   Leadership   Accountability  Financial   Additional Information Sahibus Samahah Datu Haji Kipli Haji Yassin Member 55, Male, Malaysian Date of Appointment: 1 January 2021 • • • • • • • • • • • • • • • State Mufti of Sarawak Member of Majlis Kebangsaan Hal Ehwal Ugama Islam Malaysia Member, Muzakarah of the Fatwa Committee, National Council of Islamic Religious Affairs Malaysia Member, Fatwa Research and Management Committee, JAKIM Member, Board of Control and Licensing for al-Quran Text Printing, Ministry of Home Affairs Steering Committee Member of National Human Rights Action Development Plan Ex-Officio, Majlis Islam Sarawak Member, Board of Baitulmal and Wakaf Chairman, Malaysian Shariah Committee of Islamic Accounting Standards Member, Baitulmal Finance and Investment Committee, Sarawak Islamic State Council Member, Audit Committee in Sarawak Islamic State Council Member, Sarawak’s Welfare Trust Board Member, Board of Sarawak’s Institute of Islamic Skills Fellow, Panel Advisor Islamic Information Centre Member, National Council for Islamic Affairs Malaysia (MKI) Qualifications • Certificate In Training and Assessment, Australia • Certificate In Special Islamic Course (Muslim College), London • Master of Usuluddin (Islamic Thought), University of Malaya • Bachelor of Islamic Studies (Usuluddin) (Hons.), University of Malaya Ustaz Saiful Anuar Hambali Secretary 49, Male, Malaysian Date of Appointment: 23 January 2017 Qualifications • Certified Shari’a Adviser and Auditor, Accounting and Auditing Organisation for Islamic Financial Institutions, Bahrain • Certified Shariah Advisor, Association of Shariah Advisors in Islamic Finance, Malaysia • Certificate in Commercial Credit, Moody’s Analytics • Certificate (Distinction) in Internal Auditing for Financial Institutions, Asian Institute of Chartered Bankers • Certified Qualification in Islamic Finance, Islamic Banking & Finance Institute Malaysia • Master of Business Administration (MBA) in Islamic Banking & Finance from International Islamic University Malaysia • Bachelor of Shariah (Hons) from University of Malaya Experience • Has over 24 years of experience in the banking and Islamic financial industry • Appointed as Head of Shariah on 1 January 2020 • He is also the Secretary of Shariah Supervisory Council of Bank Islam since 23 January 2017 • Prior to joining Bank Islam, he was the Head of Shariah Supervisory Department, Affin Islamic Bank Berhad Directorship in Other Public Companies •Nil Experience • Tutor, Islamic Philosophy, University of Malaya (1992-1993) • Assistant Secretary, Sarawak Islamic State Council (1993-2006) • Head, Deputy Director (Human Resources) (2007) • Deputy Mufti, Sarawak Mufti Office (2007-2008) • Director, Kipli Yassin Resources (2009-2010) Directorship in Other Public Companies •Nil 145
148. B A N K I S L A M M A L AY S I A B E R H A D MANAGEMENT TEAM ’S PROFILE Academic and Professional Qualifications • Member of the Chartered Institute of Islamic Finance Professionals (CIIF) • Member of the Malaysian Institute of Accountants (MIA) • Member of the Malaysian Institute of Certified Public Accountants (MICPA) • Member of the Chartered Institute of Public Fi nance and Accountancy (CIPFA) • Bachelor of Accounting, International Islamic University Malaysia Area of Expertise Finance, Audit and Consulting Work Experience & Position Present • Group Chief Executive Officer, Bank Islam Malaysia Berhad • Council Member, Association of Islamic Banking and Financial Institutions Malaysia • Council Member, Malaysian Institute of Certified Public Accountants • Chairman, Islamic Finance Committee, Malaysian Institute of Accountants Previous • Chief Executive Officer, BIMB Holdings Berhad • Chief Financial Officer, Bank Islam Malaysia Berhad • Director, BIMB Securities Sdn. Bhd. • Director, BIMB Securities (Holdings) Sdn. Bhd. • Alternate Director, Amana Bank PLC (Sri Lanka) • Director, Al-Wakalah Nominees (Tempatan) Sdn. Bhd. • Partner, KPMG Malaysia • Executive Director, KPMG Management Consulting Mohd Muazzam Mohamed Group Chief Executive Officer Bank Islam Malaysia Berhad Nationality Malaysian Age/Gender 48, Male Date of Appointment 5 December 2018 146 Directorship in Other Public Companies Nil Declaration of Interest He has no convinction for offences within the past five years. He has no family relationship with any director and/or major shareholder of BIMB, and has no conflict of interest in BIMB.
149. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability   Leadership   Accountability  Financial   Additional Information BUSINESS UNITS Mizan Masram Zamree Mohamed Rizal Mohd Yusof Qualifications • Diploma in Business Studies majoring in Business, Association of Business Executives, United Kingdom (UK) Qualifications • Master in Business Administration (MBA) UiTM • Bachelor of Business Administration (Marketing) (Hons), (BBA) UiTM Experience • H a s m o r e t h a n 2 5 y e a r s o f experience in the finance industry • Joined Bank Islam in 2009 as Head, Recovery & Rehabilitation Division before being appointed as Chief Business Officer on 1 January 2020 • Appointed as the Group CBO Retail on 7 February 2022 upon the listing of Bank Islam • Currently responsible for the overall positioning and strategic formulation of three (3) main business divisions, namely Consumer Banking, Deposit & Cash Management and SME Banking Experience • Has 27 years of experience in the banking industry • At Regional Office Level as the Regional Consumer Business Manager in Johor for eight (8) years • Joined Bank Islam in 2004 and has served in various positions at Branches including Branch Manager • Appointed as the Head of Consumer Banking on 1 August 2018 Qualifications • Master’s in Business Administration, Strategic Management, Universiti Teknologi Malaysia, Cranfield School of Management • Bachelor of Business Administration, Multimedia University Group Chief Business Officer – Retail 49, Male, Malaysian Date of Appointment: 1 January 2020 Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 Head, Consumer Banking 55, Male, Malaysian Date of Appointment: 1 August 2018 Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 Head, SME Banking 44, Male, Malaysian Date of Appointment: 13 July 2020 Experience • Has over 20 years of experience in the banking industry particularly in the areas of Strategic Planning, SME and Commercial Banking • Held several capacities at the Regional and Head Office for SME and Commercial Banking Sales Distribution at various banking institutions, including in Sales and Business Execution • Joined Bank Islam in 2020 as Head of SME Banking on 13 July 2020 • He also serves as the Adjunct Professor in University Malaysia Terengganu in Faculty of Business, Economics & Social Development and Centre of Foundation & Continuing Education Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 147
150. B A N K I S L A M M A L AY S I A B E R H A D MANAGEMENT TEAM ’S PROFILE BUSINESS UNITS Mohd Noor Jab Adi Asri Baharom Ahmad Haliman Abdul Halim Qualifications • Bachelor’s Degree (Honours) in Business Administration (Finance) Universiti Utara Malaysia Qualifications • Master of Business Administration (Finance), San Francisco State University, USA Experience • Has served in various positions at Branch and Regional Office levels, primarily in Retail Sales • Was Head of Credit Administration for Northern Region for two (2) years, Regional Consumer Business Manager Perak for (six) 6 years and Regional Manager Southern Region for five (5) years • A p p o i n t e d H e a d o f B r a n c h Operation & Supervision in 2018 • Appointed Head Deposit & Cash Management on 18 April 2019 Experience • H a s m o r e t h a n 3 0 y e a r s o f experience in commercial/ investment banking and corporate advisory encompassing Treasury and Debt Capital Markets, Risk Management, Investments, Corporate Finance, Project Finance and Strategic Planning • Has held various senior management positions at Malaysian Rating Corporation Berhad PT Bank Bumiputera Indonesia Tbk, PT Danareksa, and Perwira Affin Bank Berhad. Started his career at Amanah Merchant Bank Berhad • Was the Executive Vice President, Treasury and Capital Markets at Bank Muamalat Malaysia Berhad prior to joining Bank Islam • Appointed as the Head of Treasury & Markets on 2 January 2018 Qualifications • Certified Business Credit Professional by Asian Institute of Chartered Banker • Master in Business Administration, Winthrop University, South Carolina, USA • Bachelor’s Degree in Finance, University of North Carolina, USA Head, Deposits & Cash Management 53, Male, Malaysian Date of Appointment: 18 April 2019 Directorship in Other Public Companies • Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 148 Head, Treasury & Markets 60, Male, Malaysian Date of Appointment: 2 January 2018 Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 Head, Commercial Banking 50, Male, Malaysian Date of Appointment: 1 April 2019 Experience • Has 23 years of experience in the banking industry • Joined Bank Islam in 2014 as Head of Business in Commercial Banking • A p p o i n t e d a s t h e H e a d o f Commercial Banking on 1 April 2019 Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021
151. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability   Leadership   Accountability  Financial   Additional Information Zaharin Mohd Ali Head, Corporate Banking 52, Male, Malaysian Date of Appointment: 1 January 2015 Qualifications • Bachelor of Accountancy, University of Central England, UK Experience • Has 25 years of experience in the banking industry • Has served in various departments primarily in sales and servicesrelated functions • Joined Bank Islam in 2010 as Head of Business in Commercial Banking where he was entrusted to drive the performance-based sales culture within the division • Appointed as the Head of Corporate Banking on 1 January 2015 Directorship in Other Public Companies • B I M B O f f s h o r e C o m p a n y Management Services Sdn. Bhd. • Bank Islam Trust Company (Labuan) Ltd. Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 149
152. B A N K I S L A M M A L AY S I A B E R H A D MANAGEMENT TEAM ’S PROFILE CORPORATE SERVICES & SUPPORT UNITS Mohd Nazri Chik Mohamed Iran Moriff Mohd Shariff Azizan Abd Aziz Qualifications • Member of Institute of Corporate Directors Malaysia • Member of the Chartered Institute of Islamic Finance Professionals (CIIF) • Certified Shariah Advisor (ASAS) • Certified Shariah Advisor and Auditor (AAOIFI) • Certified Professional Shariah Auditor • Master Degree in Shariah, University of Malaya Qualifications • Chartered Banker (AICB) • Member, Association of Chartered Certified Accountants (ACCA) • Masters in Business Administration, Strathclyde Business School, Glasgow, Scotland, UK • Bachelor in Accountancy, University of East Anglia, Norwich, UK Qualifications • Member, Malaysian Institute of Accountants (Chartered Accountant) • Fellow, Association of Chartered Certified Accountants (ACCA) • Bachelor of Accounting and Finance, University of Plymouth, UK Group Chief Financial Inclusion Officer 44, Male, Malaysian Date of Appointment: 1 January 2020 Experience • Has over 19 years of experience in Shariah management of an Islamic bank • Joined Bank Islam in June 2004 before leaving in 2009 to take up another position at an investment arm of Dubai government. He rejoined Bank Islam in January 2011 to lead the Shariah Division and subsequently the Strategic Relations Division on 1 January 2020 • Appointed as Group Chief Financial Inclusion Officer on 1 October 2021 Directorship in Other Public Companies • Terengganu Incorporated Sdn. Bhd. • TEKUN Nasional • Amana Bank PLC, Sri Lanka Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 150 Group Chief Operating Officer 49, Male, Malaysian Date of Appointment: 1 June 2017 Experience • Started his career at Messrs. PriceWaterhouse, specialising in the audit of banks and financial institutions before furthering his studies and subsequently working in the UK for ten (10) years • Joined the Consumer Banking Division of Bank Islam in October 2009 • Appointed as the Chief Internal Auditor in May 2014 and as Chief Operating Officer on 1 June 2017 • Appointed as the Group Chief Operating Officer on 1 February 2022 upon the listing of Bank Islam Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 Group Chief Financial Officer 46, Male, Malaysian Date of Appointment: 27 May 2019 Experience • Before working in Malaysia, he was attached with KPMG United Kingdom and Channel Islands, holding a position of Senior Manager in KPMG’s Financial Services Division • Prior to joining Bank Islam, he was an Equity Partner in Deloitte Southeast Asia, leading the M&A Transaction Services practice for Deloitte Malaysia • Joined Bank Islam on 27 May 2019 as the Chief Financial Officer and also served as the Group Chief Financial Officer for BIMB Holdings Berhad • Appointed as the Group Chief Financial Officer on 8 October 2021 upon the listing of Bank Islam Directorship in Other Public Companies • BIMB Investment Management Berhad Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021
153. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability   Leadership   Accountability  Financial   Additional Information Iskandar Shah Zulkarnain Zainal Azlan Zainudin Noor Farilla Abdullah Qualifications • Masters in Business Administration, Universiti Utara Malaysia • Bachelor of IT, Multimedia University, Malaysia Qualifications • Chartered Professional in Islamic Finance (CPIF) accorded by the Chartered Institute of Islamic Finance Professionals (CIIF) • INSEAD Leadership Programme • Bachelor’s Degree in Computer Science (Honours), Universiti Kebangsaan Malaysia Qualifications • Bachelor’s Degree in Economics, University of Warwick, UK Group Chief Human Resources Officer 40, Male, Malaysian Date of Appointment: 14 October 2019 Experience • Has over 15 years of experience in managing human resources for corporations and banks • Prior to joining Bank Islam, he was the Director of Human Resources of Al Rajhi Bank Malaysia • He brings with him professional experience in strategic human resources management and has delivered many key HR projects during his tenures at Al Rajhi, HSBC Amanah, Maybank, Shell and Telekom Malaysia • Joined Bank Islam on 14 October 2019 as the Chief Human Resources Officer and also served as the Head of Group Human Capital for BIMB Holdings Berhad • Appointed as the Group Chief Human Resources Officer on 8 October 2021 upon the listing of Bank Islam Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 Group Chief Technology Officer 52, Male, Malaysian Date of Appointment: 1 August 2016 Group Chief Strategy Officer 45, Female, Malaysian Date of Appointment: 22 January 2019 Experience • Has over 22 years of experience in the banking industry • Has worked at leading financial institutions in Malaysia including Maybank, CIMB Bank, Phileo Allied Bank prior to joining Bank Islam • Joined Bank Islam in August 2016 and has held various leadership p os i t i on s i n I T S t rat e g y an d Operations • Appointed as the Group Chief Technology Officer on 8 October 2021 upon the listing of Bank Islam Experience • Started her career in Accenture, a leading global professional services company where she consulted with agencies and organisations involved in the Multimedia Super Corridor implementation • Has more than 15 years of experience in the financial services industry including with a leading bank, driving work in merger integration, strategy formulation and implementation • Has spent most of her professional career in business transformation, programme management and complex project implementation • Joined Bank Islam as Chief Strategy Officer on 22 January 2019 • Appointed as the Group Chief Strategy Officer on 8 October 2021 upon the listing of Bank Islam Directorship in Other Public Companies •Nil Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has she been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 151
154. B A N K I S L A M M A L AY S I A B E R H A D MANAGEMENT TEAM ’S PROFILE CORPORATE SERVICES & SUPPORT UNITS Maria Mat Said Group Chief Legal Officer & Company Secretary 55, Female, Malaysian Date of Appointment: 29 January 2009 Qualifications • Licensed Company Secretary, Companies Commission of Malaysia • Bachelor of Law, University of Malaya Mohd Ariff Moideen Kutty Head, Recovery & Rehabilitation 50, Male, Malaysian Date of Appointment: 1 January 2020 Qualifications • Associate Member, Asian Institute of Chartered Bankers • Bachelor’s Degree in Business Administration, Universiti Utara Malaysia Experience • Has 30 years of experience in the banking industry performing mainly legal functions and 23 years as a company secretary • Joined Bank Islam in August 2005 and has served the Bank as the Company Secretary since 29 January 2009 • Subsequently appointed as the Group Company Secretary of BIMB Holdings Berhad on 31 December 2009 • Appointed as the Group Chief Legal Officer & Company Secretary on 8 October 2021 upon the listing of Bank Islam Experience • Has over 22 years of experience in the Islamic banking industry • Served as Head, Corporate Recovery Department responsible for managing and overseeing the Bank’s overall collection and recovery activities for Corporate, Commercial, SME including Labuan Offshore and Treasury portfolio before assuming his current position • Appointed as the Head of Recovery & Rehabilitation on 1 January 2020 Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has she been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 152 Directorship in Other Public Companies •Nil
155. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability   Leadership   Accountability  Financial   Additional Information INDEPENDENT UNITS Khairul Muzamel Perera Alina Sylvia Appoo Qualifications • Associate Member of the Institute of Chartered Secretaries & Administrators, London • Chartered member of the Chartered Institute of Islamic Finance Professionals, Malaysia. Qualifications • Certificate in Business and Climate Change: Towards Net Zero Emission, University of Cambridge Institute for Sustainability Leadership • Certified Professional in Islamic Finance accorded by the Chartered Institute of Islamic Finance Professionals • Bachelor’s Degree in Mathematics (Honours), Universiti Sains Malaysia Group Chief Credit Officer 63, Male, Malaysian Date of Appointment: 1 January 2015 Experience • Has over 35 years of banking related experience including stints at a debt rating agency and a national asset management institution • Joined the Risk Management Division of the Bank in April 2009, heading the Credit Risk Management unit. He sits as a Bank nominated Director on the Board of Amana Bank Ltd (Sri Lanka) and also serves as the Chairman of the Underwriting and Investment Committee at the Bank and the Investment Committee at BIMB Investment Management Berhad • Appointed as the Group Chief Credit Officer on 8 October 2021 upon the listing of Bank Islam, and is currently overseeing the Credit Management Division which covers Credit Analysis, Credit Analytics, Valuation, the Central Financing Processing function and in 2021 a newly formed ESG Unit in Bank Islam Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 Group Chief Risk Officer 48, Female, Malaysian Date of Appointment: 1 August 2017 Experience • Has over 22 years of banking experience focusing predominantly on Market Risk in Malaysia and the Asian region • Has held key leadership and management positions in related fields at various local banks prior to joining Bank Islam • Joined Bank Islam in 2012 as Head of Market & Operational Risk and was appointed as Chief Risk Officer on 1 August 2017 • Appointed as the Group Chief Risk Officer on 8 October 2021 upon the listing of Bank Islam Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has she been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 Nik Azmir Nik Anis Group Chief Compliance Officer and Group Chief Integrity & Governance Officer 49, Male, Malaysian Date of Appointment: 1 January 2015 Qualifications • Attended the Advance Compliance Academy Certification Programme offered by University of California, Berkeley, USA • Certified Professional in Anti-Money Laundering/Counter Financing of Terrorism by the International Compliance Association, UK • Certified Professional in Islamic Finance (CPIF) accorded by the Chartered Institute of Islamic Finance Professionals • Masters in Business Administration, Nottingham Trent University, UK • Bachelor of Arts in Economics, University of Pittsburgh, USA Experience • Has over 25 years of banking experience in the areas of Compliance, Integrity & Governance, Anti-Money Laundering, Banking Operations and Operational Risk Management • Assumed the role of Chief Compliance Officer in Bank Islam on 1 January 2015 • Appointed as the Group Chief Compliance Officer and Group Chief Integrity & Governance Officer on 8 October 2021 upon the listing of Bank Islam Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 153
156. B A N K I S L A M M A L AY S I A B E R H A D MANAGEMENT TEAM ’S PROFILE INDEPENDENT UNITS Zalfitri Abd Mutalip Group Chief Internal Auditor 51, Male, Malaysian Date of Appointment: 1 January 2019 Group Chief Information Security Officer 46, Male, Malaysian Date of Appointment: 1 March 2017 Azmi Samuri Saiful Anuar Hambali Qualifications • Certificate in Internal Auditing for Financial Institutions (CIAFIN) • Chartered Professional in Islamic Finance (CPIF) accorded by the Chartered Institute of Islamic Finance Professionals (CIIF) • Bachelor of Science in Business Administration (Finance), Denver University, USA Qualifications • Certified Information Security Manager (CISM) from ISACA • Bachelor’s Degree in Computer Science, University of Manchester, Institute of Science and Technology, UK Qualifications • Certified Shari’a Adviser and Auditor, Accounting and Auditing Organisation for Islamic Financial Institutions, Bahrain • Certified Shariah Advisor, Association of Shariah Advisors in Islamic Finance, Malaysia • Certificate in Commercial Credit, Moody’s Analytics • Certificate (Distinction) in Internal Auditing for Financial Institutions, Asian Institute of Chartered Bankers • Certified Qualification in Islamic Finance, Islamic Banking & Finance Institute Malaysia • Master of Business Administration (MBA) in Islamic Banking & Finance from International Islamic University Malaysia • Bachelor of Shariah (Hons) from University of Malaya Experience • Has over 26 years of audit experience in the banking industry • Started his career in 1994 and has gained extensive audit experience in management, operations and credit involving the branches, regional offices, automobile financing centres and head office departments/divisions including investigation audit • Joined Bank Islam in October 2007 and has served as the Head of Branch Audit, Head of Head Office Audit and Head of Credit Audit prior to his current appointment • Assumed the role of Chief Internal Auditor on 1 January 2019 • Appointed as the Group Chief Internal Auditor on 8 October 2021 upon the listing of Bank Islam Experience • Has over 22 years of experience in the field of Information Technology and Information Security • Worked at several technology companies, including a regional IT service provider and has had stints at Bank Negara Malaysia (BNM) serving multiple departments, including Technology Risk Specialist Unit, Banking Supervision and IT Supervision prior to joining Bank Islam • Joined Bank Islam in May 2015 and has served the Bank as the Chief Information Security Officer since 1 March 2017 • Appointed as the Group Chief Information Security Officer on 8 October 2021 upon the listing of Bank Islam Directorship in Other Public Companies •Nil Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 154 Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 Group Chief Shariah Officer 49, Male, Malaysian Date of Appointment: 1 January 2020 Experience • Has over 24 years of experience in the banking and Islamic financial industry • Prior to joining Bank Islam, he was the Head of Shariah Supervisory Department, Affin Islamic Bank Berhad • Appointed as Head of Shariah on 1 January 2020 • He is also the Secretary of Shariah Supervisory Council of Bank Islam since 23 January 2017 • Appointed as the Group Chief Shariah Officer on 8 October 2021 upon the listing of Bank Islam Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021
157. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability   Leadership   Accountability  Financial   Additional Information HEADS OF SUBSIDIARIES’ PROFILE Najmuddin Mohd Lutfi Masdayana Md Setamam Kamaruzaman Abdullah Qualifications • Master in Business Administration, University of Missouri-St. Louis, United States of America • Bachelor of Science in Business Administration, University of Missouri-St. Louis, United States of America • Alumni of the Judge Business School Advanced Leadership Program of the University of Cambridge, United Kingdom • Registered with the Federation of Investment Managers Malaysia • S e c u r i t i e s C o m m i s s i o n ’ s Capital Markets Services Representative’s License Holder Qualifications • Bachelor’s Degree in International Business, University Malaysia Sabah • A certified Trust Officer licensed by Labuan Financial Services Authority • A certified Anti-Money Laundering & Counter Financing of Terrorism Compliance Officer by the Asian Institute of Chartered Bankers Qualifications • ACCA from Emile Woolf College, London Chief Executive Officer BIMB INVESTMENT MANAGEMENT BERHAD 47, Male, Malaysian Date of Appointment: 27 April 2015 Concurrent Roles • D i r e c t o r , B I M B I n v e s t m e n t Management Berhad since 2015 Experience • Has 20 years of experience in the financial services industry • Was formerly with a central bank and local and foreign asset management companies Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any other Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 Chief Executive Officer/Principal Officer BANK ISLAM TRUST COMPANY (LABUAN) LTD 40, Female, Malaysian Date of Appointment: 13 October 2017 Concurrent Roles • CEO, Bank Islam Trust Company (Labuan) Ltd • Head, Labuan Offshore Business, Bank Islam Malaysia Berhad • Manager and authorised officer, BIMB Offshore Company Management Services Experience • Over 17 years of experience in Offshore Trust and financial industry and holds various positions including Compliance Manager, Business Continuity Management Division Coordinator as well as Business Risk Officer. Well versed in the areas of strategic planning, sales & marketing, cashflow management, regulatory compliance, product development, risk management and relationship management coupled with a vast network of high net worth clients Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any other Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has she been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 Chief Executive Officer/Executive Director BIMB SECURITIES SDN. BHD. 56, Male, Malaysian Date of Appointment: 12 November 2020 Concurrent Roles • Chief Executive Officer/Executive Director, BIMB Securities Sdn. Bhd. Experience • Head of Dealing, BIMB Securities Sdn. Bhd. • Head of Equity Market Dealing, MIDF Amanah Investment Bank Berhad • H e a d o f D e a l i n g , M a y b a n k Investment Berhad • Manager, Mayban Securities Sdn. Bhd. • Fund Manager, Abrar Unit Trust Management Berhad • Research Analyst, UMBC Securities (later known as Sime Securities) • Assistant Accountant, Wayss & Freytag • Corporate Banking Executive, Bank of Commerce (M) Berhad (now known as CIMB Bank) • Internal Auditor, Mayban Finance Bhd. Directorship in Other Public Companies •Nil Declaration • Does not have any conflict of interest or any family relationship with any other Director and/or major shareholders of the Bank • Has not been convicted of any offence within the past five (5) years nor has he been imposed any public sanction or penalty by any relevant regulatory bodies during the financial year ended 2021 155
158. B A N K I S L A M M A L AY S I A B E R H A D REGIONAL MANAGERS ’ PROFILE Rosmawati Mohamed Zin Regional Manager, Eastern Region Qualification • Bachelor in Resources Economic from Universiti Putra Malaysia (UPM) Experience • Started career in banking industry in 1992 at D&C Bank • Joined Bank Islam since January 2010 and served as Branch Manager • Moved to Commercial Banking division from 2015-2017 • Served the Deposit & Cash Management division for about 3 years Eastern Region • 27 branches Abdullah Ibrahim Regional Manager, Southern Region Qualification • Master of Business Administration (MBA) from University Utara Malaysia Experience • >35 years of experience in banking • Joined Bank Islam in January 1987 • Held Branch Manager positions at Batu Pahat, Pasir Gudang, Johor Bahru and Shah Alam • Appointed as Regional Consumer Manager from 2011 until 2017 Southern Region • 27 branches Abdul Malek Abdullah Regional Manager, East Malaysia Region Qualification • Diploma in Banking Studies from Universiti Teknologi MARA Experience • >34 years of experience in banking • Joined Bank Islam in 2006 East Malaysia Region • 13 branches 156
159. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability   Leadership   Accountability  Financial   Additional Information Mohd Fadzil Ajmain Regional Manager, Northern Region Qualification • Diploma in Accountancy, Universiti Teknologi MARA Experience • 28 years in Banking & Auto Finance Industry Northern Region • 29 branches Zameran Jusoh Regional Manager, Central Region 1 Qualification • Master’s Degree in Business Administration (International Management) from RMIT University, Melbourne, Australia Experience • >16 years of experience in banking and >15 years in the Oil and Gas industry • Joined Bank Islam in 2004 as a Commercial Business Development Manager • Appointed as Kemaman Branch Manager and Regional Consumer Business Manager (Terengganu) in 2006 and 2013 respectively • Promoted as Head of Central Regional Office in October 2019 Central Region 1 • 22 branches Mohamed Zaki Atip Regional Manager, Central Region 2 Qualification • B achelor of Business Administration (Marketing) from Universiti Teknologi MARA (UiTM) • Diploma in Public Administration from Institut Teknologi MARA (ITM) Experience • >30 years of experience in banking • Began career with Mayban Finance Berhad (wholly-owned subsidiary of Malayan Banking Berhad) in August 1990 • Joined BBMB Leasing Berhad (wholly-owned subsidiary of Bank Bumiputra Malaysia Berhad) in February 1996 • Joined CIMB Bank Berhad in 2002 • Joined Bank Islam as Branch Manager of Muar Branch in June 2012 • Appointed as State Deposit Manager (Negeri Sembilan/Melaka) in March 2016 Central Region 2 • 24 branches 157
160. B A N K I S L A M M A L AY S I A B E R H A D ORGANISATION STRUCTURE SHARIAH SUPERVISORY COUNCIL BOARD STRATEGIC & SUSTAINABILITY COMMITTEE BOARD RISK COMMITTEE BOARD FINANCING REVIEW COMMITTEE GROUP RISK MANAGEMENT Group Chief Risk Officer GROUP CREDIT MANAGEMENT Group Chief Credit Officer GROUP COMPLIANCE Group Chief Compliance Officer and Group Chief Integrity & Governance Officer GROUP INFORMATION SECURITY & GOVERNANCE Group Chief Information Security Officer GROUP SHARIAH Group Chief Shariah Officer RETAIL Group Chief Business Officer - Retail Head CONSUMER BANKING CORPORATE BANKING Head Head SME BANKING TREASURY & MARKETS Head DEPOSITS & CASH MANAGEMENT Head BUSINESS MARKETING Head 158 COMMERCIAL BANKING Head
161. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability   Leadership   Accountability  Financial   Additional Information BOARD OF DIRECTORS BOARD INFORMATION TECHNOLOGY COMMITTEE BOARD NOMINATION & REMUNERATION COMMITTEE BOARD AUDIT & EXAMINATION COMMITTEE GROUP CHIEF EXECUTIVE OFFICER Mohd Muazzam Mohamed GROUP FINANCIAL INCLUSION GROUP INTERNAL AUDIT Group Chief Financial Inclusion Officer Group Chief Internal Auditor PRODUCT MANAGEMENT Head Group Chief Operating Officer e-CHANNELS Head GROUP FINANCE Group Chief Financial Officer GROUP LEGAL & SECRETARIAL Group Chief Legal Officer & Company Secretary GROUP TECHNOLOGY Group Chief Technology Officer GROUP HUMAN RESOURCES Group Chief Human Resources Officer BRANCH OPERATIONS & SUPERVISION Head GROUP STRATEGIC MANAGEMENT Group Chief Strategy Officer GROUP CORPORATE COMMUNICATIONS Head BUSINESS SUPPORT Head RECOVERY & REHABILITATION Head CORPORATE SUPPORT Head 159
162. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE GOVERNANCE OVERVIEW STATEMENT GOVERNANCE , ETHICS AND INTEGRITY Good corporate governance is key to the Group value creation and business excellence. The Group upholds the highest standards of integrity and ethics in the conduct of its business. Its continuous commitment to embed a culture of integrity and ethical behaviour underpins its ability to remain a resilient organisation. Guided by our best practices, we aim to create continued sustainable value for our stakeholders. Good governance in the Group is about ethical and effective leadership of the Board. The Board promotes and embraces value-creating governance to ensure sustainable long-term performance, long-term economic value and growth of the Group. The Board acknowledges that good governance is a critical component of strong financial institutions and plays a key role in maintaining public confidence in the financial system. Sound governance practices form the cornerstone of an effective and responsible organisation. Driven by its responsibility to shareholders and a broader group of stakeholders, the Board provides judicious leadership and strategic guidance to safeguard value-creation within a framework of rigorous and vigorous controls. In this regard, the Board is responsible in ensuring that the Group maintains effective governance on risk, internal controls and compliance with applicable laws and regulations. On 8 October 2021, BIMB achieved a significant milestone, where it took over the listing status of its parent company, BIMB Holdings Sdn Bhd (Formerly known as BIMB Holdings Berhad) (BHB). As a listed entity, our governance processes will continue to be strengthened so that we are aligned with the principles of good governance and recommended best practices and that our approach to disclosure remains timely and transparent. The Board has ultimate accountability and responsibility for the performance and affairs of the Group and ensures that its employees, shareholders, regulators, clients, suppliers, the environment and communities in which the Group operates, adhere to high standards of ethical behaviour. The financial year under review has been marked by unprecedented challenges. 2021 was another disruptive year as the world grappled with the COVID-19 pandemic that fundamentally changed the way businesses operate globally. The crisis has posed extraordinary risks and further revealed 160 social inequities and economic insecurities. It brought to the fore the importance of good governance and a resilient Board leadership where focus is placed on business resilience, ability to manage the crisis, facilitate recovery, rebound and leverage on the opportunities to be ahead of competitors. We are pleased to present this Corporate Governance Overview Statement (CG Statement) for the financial year ended 31 December 2021. The CG Statement has made reference to the three (3) key Corporate Governance Principles in the Malaysian Code on Corporate Governance 2021 (MCCG 2021) which saw the introduction of new best Practices and further guidance to strengthen corporate governance culture of listed issuers. The Board considers that this CG Statement has also complied with the statutory requirements, principles and best practices set out in the Companies Act 2016, Bank Negara Malaysia (BNM) Corporate Governance Policy (BNM CG Policy) and following its listed status, with the Main Market Listing Requirements (MMLR) of Bursa Malaysia Securities Berhad (Bursa Malaysia). This CG Statement shall be read together with the Corporate Governance Report (CG Report) published on BIMB’s website at www.bankislam.com. The CG Report provides the details of how BIMB has applied each Practice as well as departures and alternative measures in place within BIMB during the financial year 2021. This CG Statement takes into consideration the features of the MCCG 2021 and the adoption by BIMB of the new best Practices and how they have been applied, explains departures if any and alternative Practices implemented.
163. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information CORPORATE GOVERNANCE FRAMEWORK As an organisation driven by its responsibility to shareholders and a broader group of stakeholders, good governance practices are integrated across the Group and are imperative to its long-term success. BIMB’s governance structure and practices create value for all its stakeholders by: accentuating greater transparency, accountability and responsibility; balancing the autonomy of various operating entities within BIMB with the appropriate checks and balances; and  inculcating ethical business conduct and desired behaviours based on our core values. The Board is accountable to the shareholders in creating and delivering sustainable value through oversight of the management of the Group’s business, approving strategic plans, monitoring their implementation and providing the necessary support for their successful execution. The Board discharges its responsibilities within a clearly defined governance framework and robust mechanisms in place. Through this framework, the Board, without abdicating its responsibilities, delegates its governance responsibilities to key committees of the Board and other Management committees. The effective functioning of the Board relies on the clarity of the various roles and responsibilities of the committees. There is a clear division of responsibilities between the leadership of the Board and the executive leadership of BIMB’s business. The Board retains ultimate accountability and responsibility from the performance and affairs of BIMB and ensures that BIMB adheres to high standards of ethical behaviour. In executing its governance responsibility, the Board has embraced the following best governance practices: Board Charter that sets out the roles of the Chairman, Chief Executive Officer, and Non-Executive Directors (NEDs). Board Charter that sets out the principles on the Code of Ethics, Conflicts of Interest, External Professional Commitment and Whistle-blowing Policy. The positions of the Chairman and the Chief Executive Officer are held by two (2) different individuals. A formal and transparent process for the appointment of new Directors and re-appointment of Directors.  Annual Independent Directors’ Review to appraise independence of Independent NEDs. The Chairman of the Board does not sit on any Board Committees. The Chairman of the Board and key Board Committees1 is an Independent NED.  The composition of the Board and key Board Committees1 comprised majority independent NEDs.  The number of directors with common directorship within the Group is kept at the minority.  Ongoing training and development for directors to ensure they are equipped with the necessary skills and knowledge to discharge their duties and responsibilities.  Regular review of the Board succession plan. 1 Refers to Board Audit & Examination Committee, Board Risk Committee and Board Nomination & Remuneration Committee. The table below illustrates BIMB’s governance structure, an overview of the Board, Board Committees and Management Executive Committees. SHAREHOLDERS Engagement Board Oversight and Engagement Engagement and Reporting Shariah Supervisory Council BOARD OF DIRECTORS Board Audit & Examination Committee Board Nomination & Remuneration Committee Board Risk Committee Board Financing Review Committee Board Strategic & Sustainability Committee Board Information Technology Committee GROUP CHIEF EXECUTIVE OFFICER MANAGEMENT EXECUTIVE COMMITTEES 161
164. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE GOVERNANCE OVERVIEW STATEMENT SECTION A : HOW THE BOARD OPERATES PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS Within a framework of prudent and effective controls, the Board is collectively responsible for the overall BIMB leadership, for promoting long-term sustainable growth, financial soundness, providing direction and oversight to the Management of the business and operations. The Board safeguards value-creation and plays a critical role in setting the right tone at the top. The Board ensures that the strategic plan of the Group supports long-term value creation and includes strategies on economic, environmental, social and governance (ESG) considerations thereby strengthening the integration of sustainability in the Group’s operations. The Board Charter The Board is guided by the Board Charter in discharging its duties and responsibilities effectively. The Board Charter sets out the principles and guidelines that are to be applied by the Board. The Board Charter authorises the Board to delegate the exercise of its powers to Board Committees. The delegation of authority as set out in the Board Charter is clear and ensures that the line of authority is in line with the legal and regulatory requirements. The delegation does not absolve the Directors from their duty to supervise the discharge of the delegated acts. The Board Charter is reviewed and updated from time to time to reflect relevant changes to the policies, procedures and processes as well as amendments to rules and regulations to ensure the document remains relevant and consistent with the applicable rules and regulations and recommended best practices. Aside from clearly identifying the respective roles and responsibilities of the Board, its Committees and Management and what is expected of them in terms of commitment, the Board Charter outlines the issues and decisions reserved for the Board. The Board Charter and the Terms of Reference (TORs) of the Board and the Board Committees are available on BIMB’s corporate website, www.bankislam.com. Matters Reserved for the Board The Board Charter and the Board of Directors’ TOR prescribe that the following matters are specifically reserved for the Board:  Strategic policy matters; Major acquisition of capital expenditure; Financial results and declaration of dividends; A ppointment and remuneration of Directors, Shariah Supervisory Council (SSC) members, the Group Chief Executive Officer (Group CEO) and key Senior Management officers; Significant operating and credit policies; Risk appetite setting; Capital management plan; Authority limits; Any corporate exercise which involves acquisition or divestment or strategic interest; 162 Entry into any related party transaction; and Any new outsourcing proposals.
165. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information The Board’s 2021 Activities and Priorities The table below shows the key areas of focus and strategic matters considered by the Board which appear as items on the Board’s agenda at the respective meetings throughout the financial year under review. Area of Focus STRATEGY, FINANCIAL AND BUSINESS PERFORMANCE Strategic Directions, Business Plan and Budget of BIMB for the next five (5) years – 2022 to 2026 Corporate Exercise proposal in relation to the internal reorganisation and the listing of BIMB Corporate scorecards and Key Performance Indicators (KPI) Audited financial statements for the financial year ended 31 December 2020 as well as the quarterly and half yearly unaudited interim financial statements Forecast for the financial year ending 31 December 2021 BIMB’s business performance based on the financial reports presented to the Board Establishment of Dividend Reinvestment Plan post listing Payment of final dividend for shareholder’s approval Re-appointment of external auditors Digitalisation initiatives Proposals for new and review of products and services to ensure BIMB’s offering remains relevant and competitive Outsourcing related proposals and Outsourcing Plan for 2021 The development of Phase 2 of the IT Blue Print RISK MANAGEMENT & COMPLIANCE Group Risk Appetite Statement Policy 2022 Risk management related policies, credit policies and other significant operational policies which include review of Stress Testing Policy and Authority Limit Policy Review the implementation of Internal Capital Adequacy Assessment Process (ICAAP) Response to BNM Composite Risk Rating 2020 Risk Management and Credit Management Dashboard Compliance related policies which include Group Compliance Policy, Group Compliance Risk Assessment Policy, Group Anti-Bribery Policy, Group Corruption Risk Management Policy and Group AML/CFT Policy Rectification Plan for Shariah Non-Compliance events 163
166. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE GOVERNANCE OVERVIEW STATEMENT Area of Focus GOVERNANCE Harmonisation of Group Governance practices to ensure alignment of governance practices within the Group pursuant to the listing of BIMB , where BIMB became the Bank Holding company Board Succession Plan for the Group to ensure an effective board is in place to support the Group strategic direction Harmonisation of Remuneration for Directors and SSC members of the Group Review of Nominee Directors and Principal Officers in BIMB subsidiaries in line with the harmonisation of group governance Board Evaluation and SSC Evaluation for 2020 Review of Board Charter and TORs of the Board and Board Committees to incorporate the Group oversight function as well as the requirements of Bursa Malaysia and recommendations of the MCCG 2021 Adoption of new Constitution for BIMB to align with the MMLR of Bursa Malaysia following the listing of BIMB Corporate Governance Disclosure in BIMB Integrated Annual Report 2020 Gap Analysis on the status of compliance with the MCCG 2021 recommendations Appointment of three (3) new Independent Non-Executive Directors (INEDs) to fill the vacancy following the retirement and demise of existing directors Re-designation of one (1) Non-Independent Executive Director (NIED) to Non-Independent NonExecutive Director (NINED) and appointment of one (1) new NIED following the change in leadership in the ultimate holding company Appointment of one (1) new SSC member to fill potential vacancy in 2022 and re-appointment of two (2) SSC Members Review of the Board Committees’ composition Review of Approval Authority Limits for Financing Committees HUMAN CAPITAL Review of Human Resources Policy Continuous Development plan and succession plan Introduction of 8 Conducts as Key Behavioural Indicator Assessment for Performance Management Recruitment and Appointment of new Heads of Division for key positions Renewal of contract of service of Senior Management and their remuneration Performance review of Corporate KPIs for 2020 Annual reward for Senior Management based on their performance and KPIs 164
167. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information Key Focus Areas and Future Priorities The Board has identified the following key areas for future priority:1.Effective delivery of key strategic priorities which are developed based on the six (6) strategic pillars; namely Sustainable Prosperity, Values-based Culture, Community Empowerment, Customer Centricity, Real Economy and Digitalisation. 2. Addressing sustainability risks in an integrated and strategic manner to support BIMB’s long-term strategy. 3. Implementing effective succession planning for the NEDs and Senior Management within the Group. 4. Strengthening the Group culture and governance. Board Leadership An effective Board is key to the establishment and delivery of a company’s strategy. The Board therefore continually seeks to improve its effectiveness by providing direction to the Management, demonstrating ethical stewardship and creating a performance culture that drives value-creation among others. Through effective leadership and overall oversight of Management, the Board ensures robust monitoring of performance and conformance capabilities in the organisation. All Board members discharge their duties and responsibilities at all times as fiduciaries in the best interest of BIMB. They act with integrity, led by example, exercise their powers for a proper purpose and in good faith. In directing or managing BIMB’s business and affairs, they exercise reasonable care, skill and diligence by applying their knowledge, skill and experience. Imperative to the Board’s oversight responsibility is its commitment to the Group’s long-term strategy and agenda for the integration of sustainability into the Group’s corporate strategy governance and decision-making. Together with Management, the Board takes responsibility for the governance of sustainability in the Group. Board’s Responsibilities and Duties The Board is entrusted with the overall governance of BIMB, the responsibility to exercise reasonable and proper care of BIMB’s resources in the best interests of its shareholders as well as to safeguard its assets. The Board directs and oversees the business and affairs of the Group by periodically reviewing and approving the overall strategies and significant policies of the Group. In discharging its collective responsibilities, the Board provides BIMB with stewardship, counsel and a broad range of expertise to the Management, champions good governance, high ethical standards and practices. The Directors are aware of their collective and individual responsibilities to the shareholders for the manner in which the affairs of BIMB are managed, controlled and operated. Based on the results of the Board Effectiveness Evaluation 2021, the Board is satisfied that it has fulfilled these duties and obligations during the financial year under review. The Board acknowledges that the long-term success of the Group and continued relevance hinge on the prosperity and trust of the communities it serves and the well-being of the environment it operates in. This is crucial to the Board due to the increasing impact of sustainability and the ability of the Group to create sustainable value and maintain the confidence of its stakeholders. The Board remains committed to improving the Group’s sustainability practices beyond the minimum regulatory requirements. The Board has been closely monitoring the impact of COVID-19 on the global economy and the Group’s financial performance since its onset in 2020. The pandemic presents to the Board a complex new reality that changes the governance model which has guided the Board and Management through the years. New pressures and demands from stakeholder groups together with the general welfare of the Group’s employees were some of the challenges the pandemic presented. 165
168. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE GOVERNANCE OVERVIEW STATEMENT The key roles and responsibilities of the Board are as follows : Oversee the implementation of BIMB’s governance framework, risk and internal control framework, and periodically review whether these remain appropriate and relevant Ensure that there is an appropriate succession plan for members of the Board and the Senior Management. Promote sustainability through appropriate environmental, social and governance considerations in the Group’s business strategies Oversee BIMB’s compliance with any regulatory requirements as imposed by the relevant regulatory authorities  romote a sound corporate P culture within the Group which reinforces high level of integrity and ethical practices, prudent and professional behaviour and cultivate a transparent culture towards anti-bribery and corruption The above roles and responsibilities are clearly set out in the Board Charter. Board Balance and Composition The Board comprises eleven (11) Directors as of the date of this Statement. An effective Board is important to the long-term prospects and strategic objectives of BIMB. This is made possible through a strong, transparent and open working relationship between the Directors. The Board’s size ensures that the purpose, involvement and participation of the Directors are not jeopardised and that it achieves the correct balance to realise BIMB’s strategic objectives. Additionally, it ensures diversity and inclusiveness in views and perspectives as well as facilitates sound decision-making and constructive deliberation during meetings. The balance on the Board ensures that no individual or small group of Directors can dominate the decision-making process and that the interests of the shareholders are protected. During the financial year 2021, the Board also approved the policy on the maximum age of director, which is capped at 70 years. This is to preserve the effectiveness of a director in discharging his/her duties and responsibilities. The Board saw changes to its composition during the financial year under review with four (4) new appointments to the Board. The Board welcomed Dato’ Sri Amrin Awaluddin as a Non-Independent Executive Director on 10 September 2021, Mohd Asri Awang as an Independent Non-Executive Director on 1 October 2021, Nuraini Ismail and Datuk Bazlan Osman as Independent Non-Executive Directors on 7 January 2022. 166
169. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information During the financial year also, Zahari @ Mohd Zin Idris retired as a Non-Independent Non-Executive Director on 20 September 2021, after serving BIMB for 19 years. During his tenure with BIMB, Zahari @ Mohd Zin Idris demonstrated his dedication and commitment in discharging his role as BIMB’s director. It was with sadness that the Board bade farewell to Noraini Che Dan who passed away on 26 August 2021. The late Noraini Che Dan, who joined BIMB on 1 October 2016, was a valuable member of the Board. She had served the Board with great commitment and was a strong advocate of good governance. Following the above new appointments, the Board now comprises as follows: Eight (8) Independent NEDs including the Chairman;  Two (2) Non-Independent NEDs; and  One (1) Non-Independent ED. All Board members are persons of high integrity and calibre with diverse professional backgrounds, sound knowledge and understanding of BIMB’s business and provide a diversity of breadth in demographics, skills and experience. Eight (8) of the NEDs, including the Chairman, are independent, in line with the requirements of the BNM CG Policy. The Independent NEDs play a significant role in bringing objectivity and scrutiny to the Board’s deliberations and decisionmaking. All Directors must exercise their judgement independently at all times, irrespective of status. Whilst there are three (3) non-independent directors, i.e., two (2) being non-executive and one (1) an Executive Director, the two (2) NINED were initially Independent Directors but one (1) was re-designated due to long tenure beyond nine (9) years and the other was re-designated due to an executive position that he held and subsequently relinquished in a related company. The NIED does not hold an executive position in BIMB. He is designated as a NIED by virtue of the Islamic Financial Services Act 2013. Hence these NINED and NIED similarly serve the Board and play a role to ensure decisions are made in the best interest of BIMB. The profile of each member of the Board is presented on pages 137 to 142 of this Integrated Annual Report. Board Committees As part of its efforts to ensure the effective discharge of its duties, the Board has delegated certain functions to Board Committees with their TOR. The delegation of power does not absolve the Directors from the duty to supervise the discharge of the delegated acts. The Directors are aware that they cannot leave the management of BIMB’s affairs to these Committees without committing a breach of duty and that they remain responsible for the exercise of such powers. The functions and TORs of Board Committees as well as authority delegated by the Board to these Committees are reviewed from time to time to ensure that they remain relevant and are up-to-date. The six (6) Board Committees are as follows: BAEC : Board  BRC : Board BNRC: Board  BFRC : Board  BSSC : Board  BITC : Board Audit & Examination Committee Risk Committee Nomination and Remuneration Committee Financing Review Committee Strategic & Sustainability Committee Information Technology Committee The activities of the BAEC, BRC, BNRC, BFRC, BSSC and BITC during the financial year under review can be found in the CG Report. 167
170. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE GOVERNANCE OVERVIEW STATEMENT Board Diversity The Board recognises the importance of diversity and inclusivity and hence will continue to leverage differences in thought , perspective, knowledge, skill, regional and industry experience and gender, to ensure that BIMB retains its competitive advantage. Diversity is equally important to ensure BIMB remains relevant, resilient and sustainable in the evolving and competitive business environment. The Board currently has two (2) women Directors or 18% of the total Board composition. The Board is committed to bringing the number of women directors close to 30% of the total Board composition by 2023 to meet the MCCG 2021 recommendation. COMPOSITION The oversight of the overall composition of the Board and Board Committees resides within the BNRC. The BNRC is guided by the following criteria when assessing the suitability of Directors for nomination:  Appropriate size and the balance between INEDs and NINEDs  Skills, background and experience  Diversity The BNRC is empowered to review and evaluate the composition and performance of the Board annually, as well as to assess qualified candidates to occupy Board positions. The following diagram provides an overview of the Board’s diversity in terms of independence, gender, age, tenure and skills/expertise and composition: GENDER DIVERSITY NonIndependent Director 27% AGE DIVERSITY Female 18% 61 to 70 years 45% Male 82% Independent Director 73% Independent Director NonIndependent Director 8 Male 3 50 to 60 years 55% Female 9 2 50 to 60 years 6 61 to 70 years 5 BOARD SKILLS/AREA OF EXPERTISE BOARD TENURE Above 9 years 9% 11 Legal (9%) Banking (27%) Risk Management (36%) Treasury (18%) 3 to 9 years 27% Less than 3 years 64% 5 Accounting, Audit & Tax (45%) 5 4 Economy & Finance (45%) 3 2 Less than 3 years 7 168 3 to 9 years 3 Above 9 years 1 1 1 Information Technology/ Digitalisation (9%) Management, Leadership & Strategy (100%)
171. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information The BNRC’s 2021 Activities The BNRC consists of a majority INEDs and was chaired by Noraini Che Dan who is an INED, until her demise on 26 August 2021. Thereafter, Dato’ Sri Khazali Ahmad, who is an INED assumed the role of the BNRC Chairman. The BNRC assists the Board in the process of nomination, remuneration and succession plan of the Board, Board Committees, SSC, the Group CEO and key Senior Management personnel of BIMB. The BNRC also provides oversight on the Group succession plan and appointment of directors and CEO of BIMB subsidiaries. The detailed roles and responsibilities of the BNRC are set out in its TOR, which was last reviewed on 5 October 2021 and is available on the Company’s website at www. bankislam.com. The BNRC composition and the members’ meeting attendance can be found in the CG Report. Among the key activities of the BNRC during the financial year 2021 include the following: Board Composition and Succession Plan R e v i e w e d t h e B o a r d succes sion plan of BIMB taking into consideration the size of the Board composition, the number of women directors and the maximum age of directors R e v i e w e d t h e B o a r d succession plan for the Group taking into consideration the existing skillsets and tenure of the INED R e v i e w e d t h e B o a r d Committees’ composition Reviewed the Nominee Direc tors and Principal Officers in BIMB subsidiaries Remuneration & Benefits R e v i e w e d t h e H u m a n Resources Policy which covers the employees’ benefits and code of conduct Reviewed and recommended the bonus payout and salary increment for the employees Appointment of Directors and SSC Member Assessed the fit and proper status of potential candidates for appointments on the Board of BIMB and the Board of its subsidiaries Conduc ted engagement sessions to assess the suitability of potential candidates to be appointed to the Board of BIMB and the Board of its subsidiaries Assessed the fit and proper status of a potential candidate for appointment as the SSC member of BIMB Considered the re-appointment of SSC members of BIMB Board and SSC Evaluation Reviewed the results of the Board Evaluation exercise for FY2020 and FY2021 and recommended the proposed action items for improvement Reviewed the results of the SSC Evaluation exercise for FY2020 and FY2021 and recommended the proposed action items for improvement Reviewed the action plans arising from the Board engagement sessions Appointment and Succession Planning for Senior Management Reviewed the succession plan framework and potential successor for key critical senior positions in BIMB Reviewed the suitability of potential candidates for the appointment of key senior positions in BIMB Reviewed the proposals to renew the contract of employment of the Group CEO and the Senior Officers Reviewed the development plan for individuals identified for the Senior Management succes sion plan and the Group CEO Performance Management R ev iewe d th e Co rp o r ate Scorecard for 2020 Reviewed and recommended to the Board the introduction of 8 Conduc t s as Key Behavioural Indicator Assessment for Performance Management Reviewed performance appraisal for 2020 on the d i v i s i o n a n d b a n k- w i d e performance as well as the individual Head of Division. 169
172. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE GOVERNANCE OVERVIEW STATEMENT Board Commitment The Board commits itself and its Directors to ethical and lawful conduct , including proper use of authority and appropriate decorum when acting as Board members. The Board is of the view that the provisions of the Companies Act 2016 are adequate to ensure commitment by the Directors to perform their duties responsibly and that each Director is able to commit his/her time sufficiently to the Company. The Board Charter stipulates that the maximum number of external professional commitments of each Director must not exceed ten (10), of which the number of directorships in listed companies should not exceed five (5) unless with prior approval of the Board. As of the date of this report, all Directors have complied with these requirements and the Board is satisfied that the total number of professional commitments held by the Directors have not impaired their ability or judgement in discharging their roles and responsibilities. The Directors’ commitment in discharging their duties and responsibilities is further reflected by their attendance at meetings of the Board and Board Committees held during the financial year under review. The Board is satisfied with the level of commitment given by the Directors towards fulfilling their roles and responsibilities. Separate roles of Chairman and Group Chief Executive Officer (Group CEO) The Board is helmed by Tan Sri Dr. Ismail Haji Bakar, who is an INED. The Board delegates responsibility for the overall business and day-to-day management of BIMB to the Group CEO, Mohd Muazzam Mohamed. The roles and responsibilities of the Chairman and the Group CEO are separated by a clear division of responsibilities which are defined and approved by the Board in line with best practices to ensure the appropriate supervision of management. The clear hierarchical structure with its focused approach facilitates efficiency and expedites informed decision-making. The Chairman does not sit on any Board Committees. The Chairman is primarily responsible for the stewardship and smooth functioning of the Board and the fulfilment of its obligations to BIMB. In fulfilling this role, the Chairman must:- Ensures appropriate procedures are in place to govern the Board’s operation, decisions are taken on a sound and well-informed basis including discussions on all strategic and critical issues;  Leads the Board to achieve the key objectives; Encourages healthy discussion and ensure that dissenting views can be freely expressed and discussed; and  Leads efforts to address the Board’s development needs. The Chairman will have an annual one-to-one engagement session with each Director to solicit their views and suggestions for improvement and effectiveness of the Board and generally the sustainability and growth of BIMB’s business. The Group CEO is responsible for the overall operations of BIMB’s business, its day-to-day management, organisational effectiveness and the implementation of BIMB’s policies and strategies. Key roles and responsibilities of the Group CEO include:  Develops, formulates, implements and oversees BIMB’s long-term strategy, strategic direction, corporate policies and business plan; Ensures that the Board’s decisions are implemented and the Board’s decisions are responded to; Ensures that the Board is fully informed of all important aspects of BIMB’s operations and sufficient information is provided to the Board members; and Provides strong leadership and effectively communicates BIMB’s vision and management strategies to the employees. The respective roles and responsibilities of the Chairman and Group CEO can be viewed under the Board Charter on BIMB’s website, www.bankislam.com. 170
173. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information Separation of Powers between the Board and Management The Group CEO is assisted by various management executive committees which include the Management Committee, Management Risk Control Committee and Asset & Liability Management Committee in managing the business of BIMB on a day-to-day basis. The management executive committees ensure that effective systems, controls and resources are in place to execute business strategies and decisions taken by the Board and/ or the Group CEO. Board Independence The INEDs play a significant role in bringing objectivity and scrutiny to the Board’s deliberations and decision-making. The Board acknowledges the important contributions that INEDs make to good corporate governance. All Directors, regardless of their independent status, are required to act in the best interests of BIMB and to exercise unfettered and independent judgement. To date, all eight (8) INEDs satisfy the following criteria: a)ability to act independently in character and judgement and free from any association or circumstances that may interfere with or impair his/her independent judgement or the ability to act in the best interests of BIMB; b)tenure of not more than nine (9) years; and c)not involved in any significant business or contractual relationship with a value of above RM1.0 million. The assessment of the independence of INEDs is undertaken in the following circumstances: Prior to the appointment of NEDs The independence of each candidate is reviewed and determined by the Board based on the recommendation of the BNRC. Annual review Every INED has to provide an annual declaration to confirm the status of his/her independence. Notice of change in circumstances In line with the recommendation of the MCCG 2021, BIMB has adopted a tenure policy whereby an INED’s total tenure on the Board is capped at nine (9) years. The Board may decide to retain a member as an INED beyond the nine (9) years, subject to the approval of the shareholders and BNM. During the financial year under review, all INEDs had declared and affirmed their independence. Each INED has also an ongoing obligation to inform the Board of any circumstances which could impair his or her independence. Appointment of new Directors In considering new appointments to the Board, the Board through the BNRC, takes into account corporate leadership skills, experience and expertise required to advance the strategic direction of BIMB. Consideration is given to the current composition of the Board and the tenure of each Director on the Board to determine whether there is a need to bring new skills and perspectives to the board as well as whether the Director can act independently of Management. The BNRC ensures that the Board has the right balance of skills, experience, independence and business knowledge necessary to discharge its responsibilities in keeping with the highest standards of governance while providing meaningful contributions to the business of BIMB. BIMB maintains a formal and transparent procedure for the appointment of new Directors. The search for potential NEDs may also be made through the engagement of an independent recruitment firm or recommendations from existing Board members or Management and through external sources such as the Directors’ Register by FIDE FORUM, BNM and PIDM in identifying suitably qualified candidates to fill the vacant positions. In its selection of suitable candidates, the BNRC determines whether the candidates satisfy the requisite skills and core competencies in accordance with BIMB’s Policy on Fit and Proper Criteria, BNM CG Policy, MMLR of Bursa Malaysia, MCCG 2021 and BNM’s Policy Document on Fit and Proper Criteria. Once a potential candidate has been shortlisted for a recommendation, the Company Secretary will conduct comprehensive background checks, including checks on financial and character integrity. Every INED has an obligation to notify the BNRC of any change in circumstances that may affect his/her independence status. Once the notification is given, the Board reviews and determines the INED’s independence status based on the recommendation of the BNRC. 171
174. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE GOVERNANCE OVERVIEW STATEMENT All potential candidates are first considered by the BNRC , taking into account the mix of skills, competencies, experience, integrity, personal attributes and time commitment required to effectively discharge his or her role as a director. The BNRC will have an interview session with the candidate to gauge the suitability of the candidate before making a recommendation to the Board. Following selection by the Board, an application for the proposed appointment as a Director is submitted to BNM for approval and the term of appointment shall be as specified by BNM. Directors’ Re-appointment and Re-election Succession Planning The Board has a Board succession plan to assist them in particular, the BNRC, in ensuring the orderly identification and selection of new NEDs in the event of an opening on the Board, whether such opening exists by reason of an anticipated retirement, an unanticipated departure, the expansion of the size of the Board, or otherwise. Such a structured succession plan addresses the composition and effectiveness of the Board. In addition to the succession plan for Directors, the BNRC also oversees the appointment and succession planning for key Senior Management of BIMB. The BNRC is responsible for assessing the performance of Directors whose current term of appointment as approved by BNM is due to expire and for forwarding its recommendation to the Board for the decision to submit the application to BNM on the proposed re-appointment of the respective Directors. During the financial year under review, the Board has also reviewed the Board Succession Plan for the Group as part of the group harmonisation initiatives. This exercise was carried out to ensure that an effective Board is put in place at all subsidiaries to support the Group’s strategic direction. In assessing the candidates’ eligibility for re-appointment, the BNRC considers their competencies, commitment, contribution and performance based on the Board Effectiveness Evaluation (BEE) and their ability to act in the best interest of BIMB. Following the Board’s approval, a submission is made to BNM for approval three (3) months prior to the expiry of the Director’s tenure. The Board schedules its meetings at least six (6) times a year. Additional meetings are held to discuss specific issues that require deliberation in between the scheduled meetings. The Board may also consider and approve matters via written resolutions. All Directors’ written resolutions passed by the Board are tabled at the next Board meeting for notation. In accordance with Article 133 of BIMB’s Constitution, onethird of the Directors for the time being shall retire by rotation at an Annual General Meeting (AGM) of BIMB provided always that all Directors, shall retire from office at least once in every three (3) years but shall be eligible for re-election at the AGM. A Director retiring at the AGM shall retain office until the close of the meeting whether adjourned or not. According to Article 142 of BIMB’s Constitution and the Companies Act 2016, Directors appointed to fill a casual vacancy or as an addition to the Board of Directors shall hold office only until the conclusion of the next AGM and shall be eligible for re-election. For the forthcoming AGM, the Board has agreed for Datuk Nik Mohd Hasyudeen Yusoff and Mohd Yuzaidi Mohd Yusoff to be considered for re-election pursuant to Article 133 of BIMB’s Constitution. Meanwhile, Dato’ Sri Amrin Awaluddin, Mohd Asri Awang, Nuraini Ismail and Datuk Bazlan Osman will be considered for re-election pursuant to Article 142 of BIMB’s Constitution. These Directors have given their consent for the re-election. 172 Board Meetings and Attendance The meetings of the Board and its Committees for the financial year 2021 were pre-scheduled at the end of 2020 to facilitate the Directors in planning ahead and ensure full attendance of the Board meetings. The Board ensures that key transactions or critical decisions are deliberated and decided by the Board in a meeting. The Board also ensures that decisions, including any dissenting views, are made known and properly minuted. The Board practices active and open discussions at Board meetings to ensure that opportunities are given to all Directors to participate and contribute to the decisionmaking process. Robust discussions and vigorous deliberations at Board and Board Committee meetings ensure that constructive and healthy dialogues are satisfactorily achieved and quality decision making. Due to the COVID-19 crisis, all the Board and Board Committee meetings were conducted online during the financial year under review. The papers of the Board meetings are disseminated via an online platform and accessed via the devices provided to the Directors. Although the minimum quorum for a Board meeting is 50% of the total number of directors, all directors (save for Noraini Che Dan) have recorded 100% attendance for all Board and Board Committees meetings in 2021.
175. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information All proceedings of the Board meetings are duly recorded in the minutes of meeting and the signed minutes of each Board meeting are properly kept by the Company Secretary. The minutes of each Board meeting are circulated in a timely manner to all Directors for their perusal prior to the minutes being tabled for confirmation at the next Board meeting. In ensuring the transparency and integrity of decision-making, Directors are required to immediately declare if they have any interest in transactions that are to be entered into directly or indirectly with BIMB. They must disclose the extent and nature of their interest at a Board meeting or as soon as practicable after they become aware of the conflict of interest. They must abstain from participating in the deliberation and Board decision on the matter as he/she is an interested parties. Directors are also required to declare their interest annually in line with the requirements on the disclosure of Director’s interest in BIMB’s Audited Financial Statements. The Chairman of the SSC attends the Board meeting as a permanent invitee to facilitate and assist the Board when deliberating issues relating to Shariah. Meanwhile, the Group CEO also attends the Board meeting as a permanent invitee and if required, relevant members of the Senior Management and external advisers are invited to attend the Board meetings to report and advise the Board on matters pertinent to their respective areas of responsibility. In the event a Director is unable to attend a meeting, his/her views are sought in advance and put to the meeting to facilitate a comprehensive discussion. Essentially, each Director, therefore, makes himself/herself available to fellow Directors and may contribute to all major decisions that the Board has to make. BOARD Number of meetings in 2021 Total Meeting Hours 14 36.6 hours BAEC Average Time Spent on Each Meeting 2.6 hours Number of meetings in 2021 Total Meeting Hours 8 25.7 hours BRC Number of meetings in 2021 Total Meeting Hours 13 50.3 hours BNRC Average Time Spent on Each Meeting 3.9 hours Number of meetings in 2021 Total Meeting Hours 9 11.6 hours BFRC Number of meetings in 2021 Total Meeting Hours 14 22.9 hours Average Time Spent on Each Meeting 3.2 hours Average Time Spent on Each Meeting 1.3 hours BSSC Average Time Spent on Each Meeting 1.6 hours Number of meetings in 2021 Total Meeting Hours 11 34.7 hours Average Time Spent on Each Meeting 3.2 hours 173
176. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE GOVERNANCE OVERVIEW STATEMENT BITC Number of Meetings in 2021 Total Meeting Hours 7 18 .5 hours TOTAL BOARD AND BOARD COMMITTEES Average Time Spent on Each Meeting 2.6 hours Total Board & Board Committees Meetings in 2021 76 Total Meeting Hours Average Time Spent on Each Meeting 200.3 hours 2.6 hours All Directors complied with the minimum attendance requirement of at least 75% of Board and Board Committees’ meetings held during the financial year under review pursuant to the BNM CG Policy. The Board is satisfied with the level of commitment given by the Directors during the financial year under review towards fulfilling their roles and responsibilities. This is reflected in the 2021 Board Effectiveness Evaluation results as disclosed in the CG Report. The composition of the Board and Board Committees and the meeting attendance of each member can be found in the CG Report. Directors’ Indemnity BIMB continues to provide and maintain indemnification for its Directors throughout the financial year as allowed under the Companies Act 2016 to the extent it is insurable under the Directors’ and Officers’ Liability Insurance (D&O). Directors and Officers are indemnified against any liability incurred by them in discharging their duties while holding office as Directors and Officers of BIMB. Sustainability Commitment BIMB has in place a Sustainability Governance Framework which defines the roles and responsibilities of the Board and Management in fulfilling the Group’s responsibility to ensure that sustainability-related risks are effectively identified, assessed and managed in a timely manner, while enhancing transparency through disclosures and reporting to promote accountability. The Board acknowledges that BIMB’s long-term success and continued relevance are dependent on the prosperity and trust of the communities we serve and the environment we operate in. Our financial outcomes are inexorably linked to our ability to manage ESG risks and opportunities. 174 The Board believes that the ESG agenda is critical to our brand marketability as investors and stakeholders have become insistent that ESG practices are subsumed into an organisation’s investment decision-making process. The Board together with Management takes the responsibility for the governance of sustainability in BIMB. Performance against sustainability strategies, priorities and targets are communicated to the BIMB’s external and internal stakeholders. The Board has designated senior personnel who is tasked with managing the Group’s sustainability governance and integrating sustainability considerations into our operations. The Board will take into account BIMB’s performance in managing material sustainability risks and opportunities when determining the appropriate level of remuneration for Directors and Senior Management. The Board will also ensure that performance evaluations of the Board and Senior Management will include a review of their performance in addressing BIMB’s material matters, including the risks and opportunities. Our sustainability agenda aims to make us more resilient to disruptions, flexible to change and accountable to the ‘triple bottom line’ principle of benefitting the People and Planet while ensuring Prosperity for all stakeholders. We view sustainability as an ongoing journey where the Group is committed to continuously delivering value to its stakeholders. Professional Development and Continuous Education for Directors All new Directors appointed to the Board receive a comprehensive induction programme with the Management, covering key areas of the business and operations, including among others, an overview of BIMB’s financial risk management processes, its strategies, business segments, the internal audit function, innovation and technology and
177. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information the corporate governance structure within BIMB and key risks. The induction programme will take about 20 hours (five (5) sessions) and it provides the opportunity for the newly onboarded Director to be familiar with the business, operations, governance, culture and strategic direction of BIMB. This helps to facilitate the Director to contribute to the Board and BIMB in general in an effective manner. The Board recognises the importance of ensuring that Directors are continuously being developed to acquire or enhance the requisite knowledge and skills to discharge their duties effectively. Similarly, Directors acknowledge the importance and value of attending conferences, training programmes and seminars to keep themselves abreast with the development and changes in the industry in which BIMB operates, as well as to update themselves on new legislative and regulatory requirements. All directors are required to complete a core training programme under the Financial Institutions Directors’ Education Program (FIDE Forum), Mandatory Accreditation Programme (MAP) pursuant to MMLR and Islamic Finance for Board of Directors under the International Shari’ah Research Academy (ISRA) within two (2) years upon their appointment to the Board. In addition, each director is required to complete their Individual Development Plan (IDP) which consists of a minimum of three (3) training on technical knowledge and one (1) training on leadership/soft skills. During the financial year under review, the Directors attended and participated in seminars, conferences and workshops that covered areas of corporate governance, leadership, ESG, Shariah, anti-money laundering/counter financing terrorism (AML/CFT), relevant industry updates and global business developments. Most of these training programmes were conducted virtually. A list of training attended by the Directors in 2021 can be found in the CG Report. The BNRC will review the training and development needs of the Directors on an annual basis, taking into consideration the Group’s strategy for the next several years and the current combined skills on the Board. During the period under review, all Directors (save for newly appointed directors) have fulfilled their IDP as well as the mandatory training. Qualified and Competent Company Secretary The Company Secretary, Maria Mat Said, is qualified to act as a company secretary in accordance with Section 235 of the Companies Act 2016. The Company Secretary has 23 years of experience in handling corporate secretarial and legal matters. The Company Secretary acts as an advisor to the Board, particularly with regard to BIMB’s Constitution, policies and procedures and its compliance with regulatory requirements, codes, guidelines and legislations. The Company Secretary ensures that discussions and deliberations at the Board and Board Committee meetings are well documented and subsequently communicated to the relevant Management for appropriate actions. The Board is satisfied with the performance and support rendered by the Company Secretary to the Board in discharging their functions in the financial year under review. This is reflected in the outcome of the 2021 BEE which is disclosed in the CG Report. The Company Secretary constantly keeps herself abreast with the evolving regulatory changes and developments in corporate governance through continuous training. List of trainings attended by the Company Secretary in 2021 can be found in the CG Report. Board Effectiveness Evaluation The Group conducts an annual BEE to assess the objective of assessing the performance of the Board as a whole, Board Committees, members of the Board and Board Committees as well as identifying any gaps or areas of improvement, where required. Under the purview of the BNRC, a formal evaluation is undertaken to assess the effectiveness of the following: (a) The Board as a whole and the Board Committees; (b) Contribution of each individual Director; and (c) Independence of Independent Directors. The BEE for year 2021 was conducted internally and focused on maximising the effectiveness and performance of the Board and Board Committees in the best interests of BIMB. The BEE also assessed the fitness and properness, contribution and performance, calibre and personality of the Directors. The BEE for year 2021 also took into consideration evaluation made by some Senior Management. Results of the 2021 BEE can be found in the CG Report. Going forward, the Board may engage an independent expert/consultant to assess the performance of the Board, for greater objectivity. The Board, through the BNRC reviewed the results of the 2021 BEE and was satisfied with the overall conduct of the Board and Board Committees, participation by the members, the effectiveness of the Chairman of the Board and Board Committees as well as the performance of the INEDs. Pursuant to the feedback from the BEE, the Management also arranged for a one-to-one engagement session between the Chairman and individual Board members, with the presence of the Group CEO and the Company Secretary. The outcome from this session was presented to the Board together with the action plans. 175
178. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE GOVERNANCE OVERVIEW STATEMENT Directors ’ Remuneration BIMB’s remuneration structure for Directors which is aligned with our strategic objectives, allows us to attract, motivate and retain high calibre talent. The design of our fees architecture complies with regulatory requirements, and embraces market practices and trends. The Board has established a formal and transparent Directors’ Remuneration Framework which comprises directors’ fees, sitting fees and benefits-in-kind. A review of the Directors’ remuneration is carried out every three (3) years to ensure that it remains relevant and competitive with the industry. During the period under review, there was no revision to the Directors’ remuneration of BIMB. The remuneration framework for the NEDs is as follows:TOTAL AMOUNT OF DIRECTORS’ FEES (PER ANNUM) (RM) Chairman Member BOARD BRC BAEC BNRC BFRC 144,000.00 90,000.00 48,000.00 18,000.00 24,000.00 72,000.00 72,000.00 36,000.00 12,000.00 18,000.00 Benefits-inkind6 (RM) Total (RM) SITTING FEES (PER MEETING) (RM) Chairman Member 5,000.00 3,000.00 OTHER EMOLUMENTS (PER ANNUM) (RM) Allowance Medical Leave Passage Chairman 120,000.00 18,000.00 30,000.00 Member 24,000.00* 18,000.00 25,000.00 *only for Senior INED Details of Directors’ remuneration during the year under review are as follows: Non-Executive Directors Directors’ Fees (RM) Other Emoluments5 (RM) Tan Sri Dr. Ismail Haji Bakar 144,000.00 195,000.00 20,833.00 359,833.00 Azizan Ahmad 198,000.00 200,000.00 75,000.00 473,000.00 298,000.00 Mohamed Ridza Mohamed Abdulla 108,000.00 140,000.00 50,000.00 Datuk Nik Mohd Hasyudeen Yusoff 130,000.00 136,000.00 25,000.00 291,000.00 Dato’ Sri Khazali Ahmad 114,000.00 105,000.00 65,000.00 284,000.00 Mohd Yuzaidi Mohd Yusoff 184,000.00 190,000.00 89,413.00 463,413.00 Mashitah Haji Osman 156,000.00 168,000.00 35,000.00 359,000.00 24,000.00 15,000.00 – 39,000.00 Dato’ Sri Amrin Awaluddin1 Mohd Asri Awang 36,000.00 27,000.00 25,000.00 88,000.00 Zahari @ Mohd Zin Idris3 162,000.00 180,000.00 134,793.00 476,793.00 Noraini Che Dan4 140,000.00 124,000.00 100,000.00 364,000.00 1,396,000.00 1,480,000.00 620,039.00 3,496,039.00 TOTAL 2 Notes: 1 Appointed as NIED on 10 September 2021 2Appointed as INED on 1 October 2021 3Retired as NINED on 20 September 2021 4Deceased as INED on 26 August 2021 5Other Emoluments include Sitting Fees and Vehicle Allowance for Chairman 6Benefits-in-kind include token of appreciation, leave passage and farewell gift. The remuneration received by the Directors in the financial year 2021 at the Group level can be found in Note 32 on page 305 of BIMB’s Financial Statements. 176
179. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information Remuneration Policy for Senior Management Team (SMTs) and Material Risk Takers (MRTs) The Board is of the view that the disclosure of the remuneration of the top five (5) Senior Management on a named basis in bands of RM50,000 as required under Practice 8.2 of MCCG 2021 is not in BIMB’s best interest considering the competitive market for talent in the industry. The top five (5) remuneration of SMTs and MRTs (including the Group CEO) during the financial year 2021 falling within the following bands are as follows: Bands (RM) – Total Remuneration (Basic salary, fixed allowances and bonus) No of SMTs and MRTs (Top 5) 1,000,001 up to 1,250,000 3 1,250,001 up to 1,500,000 1 1,500,001 and above 1 The remuneration policy for SMTs/MRTs applies to all SMTs and MRTs within BIMB promotes transparent and adequate remuneration. The Policy sets forth appropriate governance around the Total Rewards of BIMB’s SMTs/MRTs for their contributions to BIMB, taking into account their roles and responsibilities from the perspective of performance excellence, risk management, compliance and sustainability. Components of Remuneration Remuneration Component Approach Base Salary Basic wage paid to an employee as a guarantee for service/work rendered to the company. Fixed Allowance(s) Guaranteed cash paid under various classifications to compensate for miscellaneous job-related expenses. Benefits Non-wage remuneration provided in addition to other cash compensation. Variable Pay Annual non-guaranteed, performance-based cash payments/bonus and profit sharing awards. Long-Term Incentive Rewards system designed to enhance individual longterm performance by providing rewards tied to BIMB’s annual performance and/or growth. 177
180. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE GOVERNANCE OVERVIEW STATEMENT Deferred Cash Mechanism & Pool Setting Approach Mechanism Approach Total Cash Benchmark Variable Pay in the form of Performance Bonus or equivalent Short-Term Incentive may be awarded to BIMB’s SMTs/MRTs as compensation for driving superior performance throughout the performance year or term of employment (FullTerm Contract or otherwise gainfully employed). Determination of Amount Deferred The deferment of payment of a portion of variable pay will be adopted in view of managing any financial risk associated with SMTs/MRTs compensation, while adhering to necessary compliance with legislations set forth by BNM. Pool Setting Approach Funding of the BIMB’s determined Variable Pay and the subsequent Cash Deferral for the SMTs/MRTs, where applicable, is simulated taking into account market competitiveness, funding rates and overall affordability. Mandatory deferral – Bonuses (short-term incentives) can be deferred over time subject to forfeiture or adjustment. Bonus Malus – Refers to the part of the deferred bonus that has not yet been paid out and can be ‘reclaimed’ because, for example, an acquisition’s due diligence is not carried out thoroughly. Clawback – This is applied to a bonus that has already been paid out. It can be reclaimed by the employer in, for example, cases of gross negligence or non-compliance. The breakdown of the total amount of remuneration awards in respect of SMTs and MRTs (including the Group CEO) in 2021 is as follows: Element No of SMTs and MRTs Total Amount Basic Salary, Fixed Allowance & Bonus 39 RM30.31 million Benefits-in-Kind and Other Emolument 39 RM6.25 million Percentage Fixed vs Percentage Variable 29.18% Fixed Remuneration 70.82% 178 Variable income (Bonus)
181. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT The Board is responsible for determining both the nature and extent of the Group’s risk management and internal control framework to ensure the Group remains resilient and sustainable. The Board Audit & Examination Committee and the Board Risk Committee assist the Board in discharging these duties. Accountability and Audit The Board is committed to providing a fair and objective assessment of the financial position and prospects of BIMB in the quarterly financial results, annual financial statements, Annual Reports and all other reports or statements to shareholders, investors and applicable regulatory authorities. Board Audit & Examination Committee (BAEC) The BAEC is established by the Board and comprises five (5) members, a majority of whom are INEDs. The Chairman of the BAEC is Datuk Bazlan Osman, who is appointed by the Board and is not the Chairman of the Board. None of the BAEC members is a former key audit partner. Collectively, the BAEC members have a wide range of relevant skills, knowledge and industry experience in discharging their duties. They provide sound advice to the Board on financial reporting, internal audits and the state of the Group’s risk and internal control environment. The BAEC also assists the Board, among others, to oversee the Group’s external and internal audit functions, and the relevant procedures to ensure compliance with the MMLR of Bursa Malaysia. Further details on the BAEC, its key activities and focus areas during the financial year under review are set out under the BAEC Report on pages 187 to 192 of this Integrated Annual Report. Risk Management and Internal Control Framework The Board acknowledges its responsibility to maintain a sound risk management and internal control system to manage and mitigate significant risks across the Group. To this end, the Board continues to be involved in determining the Group’s level of risk appetite and identifying, assessing and monitoring key risks to safeguard shareholders’ investments and the Group’s assets in a manner that enables the Group to meet its strategic objectives. Whilst it is not possible to completely eliminate risks of failure in achieving the Group’s objectives, the system of internal controls is designed to mitigate these risks by identifying, managing and controlling risks, including operational risks. Board Risk Committee (BRC) The Board has established an effective risk management and internal control framework within the Group. The BRC and the Management Risk Control Committee (MRCC) are responsible for ensuring the adequacy and effectiveness of the Group’s risk management framework and policies. The BRC is established by the Board and comprises five (5) members, four (4) of whom are INEDs. The BRC is chaired by Azizan Ahmad, who is an INED. Two (2) members of the SSC of BIMB also attend the BRC as permanent invitees. The BRC assists the Board in meeting the expectations on risk management as set out by BNM and oversees the Management activities in managing the various risks the Group is subjected to and ensuring the effectiveness of the risk management process. Further details on BRC’s key activities during the financial year 2021 can be found in the CG Report. The Statement on Risk Management and Internal Control provides an overview of the Group’s risk management and internal control framework as well as the adequacy and effectiveness of the framework. Further details can be found on pages 193 to 208 of this Integrated Annual Report. PRINCIPLE C: BOARD INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIPS WITH STAKEHOLDERS Communicating effectively with Stakeholders BIMB acknowledges the importance of conducting effective and open communication with stakeholders to improve disclosure and transparency. The corporate website provides easy access to comprehensive and updated information on BIMB. As a listed issuer, the focus of BIMB’s engagement efforts will be on building confidence and maintaining strong transparent relationships with the investing community. This is done via the corporate website, half yearly briefings as well as other regular engagements and general meetings. For this purpose, the Board has established governance and processes for reviewing the effectiveness, adequacy and integrity of the Group’s internal controls and risk management. 179
182. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE GOVERNANCE OVERVIEW STATEMENT General Meetings Authority The Board ensures that shareholders are given sufficient notice to consider resolutions that will be discussed and decided at the General Meetings . The General Meeting notice includes details of the resolutions proposed along with any relevant information and reports. Upon its listing in October 2021, BIMB held its first Extraordinary General Meeting (EGM) as a listed company on 19 November 2021. The EGM was held fully virtual as per the Guidance and FAQs on the Conduct of General Meetings for Listed Issuers issued by the Securities Commission. The SSC has the authority to do the following: The Chairman of the EGM provided fair opportunity and time to all shareholders to exercise their rights to raise questions and make recommendations. The proceedings of the EGM were recorded in the minutes of the meeting and made available on BIMB’s website at www.bankislam.com. THE SHARIAH SUPERVISORY COUNCIL (SSC) The SSC forms an important part of the governance structure of BIMB, and functionally reports to the Board. Composition The SSC has five (5) members until 31 December 2021, in compliance with the requirement of paragraph 13.2 of the Shariah Governance Policy Document (SGPD) which requires an Islamic financial institution to have at least five (5) members. Members of the SSC have diverse backgrounds, experience and knowledge. Each SSC member is an expert in his/her respective specialised field such as Islamic law, Islamic banking, capital market, takaful, waqf, zakat, fatwa, halal industry etc. Their qualification in Islamic jurisprudence (usul al-fiqh) and Islamic commercial laws (fiqh al-mu’amalat), expertise and vast experience in the academia as well as in the industry support the depth and breadth of the SSC deliberations on Shariah related matters. Duties and Responsibilities In addition to the Board’s oversight accountability on Shariah compliance, the SSC was established to perform an oversight role on all Shariah matters and to advise BIMB in ensuring its business affairs and activities comply with Shariah. The SSC’s primary duties and responsibilities are outlined in the Charter and Terms of Reference which are available on www.bankislam.com. 180 Decide on Shariah related matters referred to the SSC by taking into consideration of the published rulings of the Shariah Advisory Council (SAC) of BNM. In the event where the decision given by the SSC is different from the ruling given by the SAC, the rulings of the SAC shall prevail. However, the SSC is allowed to adopt a more stringent Shariah decision; Decide on Shariah related matters referred to the SSC without undue influence that would hamper the SSC from exercising objective judgment in deliberating issues brought before them; Ensure that decisions made by the SSC are duly observed and implemented by BIMB. Decisions made by the SSC should not be set aside or modified without its consent; Access to accurate, timely and complete information from the Management including but not limited to all relevant records, transactions, or manuals as required by them in performing their duties. If the information provided is insufficient, the SSC may request for additional information which shall be duly provided by BIMB; and Inform the Board of any case that the SSC has reason to believe that BIMB has been carrying on Shariah non-compliant activities and to recommend suitable measures to rectify the situation. In cases where Shariah non-compliant activities are not effectively or adequately addressed or no rectification measures are made by BIMB, the SSC shall inform BNM of the fact. In this case, the SSC will not be regarded as breaching the confidentiality and secrecy code if the confidential information is disclosed to BNM in good faith.
183. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information Code of Conduct In accordance with its Code of Conduct, SSC members are expected to possess good character, competence, diligence and capability of making sound judgment. To ensure the quality and consistency of the decisions, the SSC has formulated the Methodology and Means of Decision Making to arrive to a decision on a given issue by applying the usul fiqh discipline and making reference to Shariah standards, fatwa and resolutions of Shariah authority councils and fiqh academies. It also enables the SSC and BIMB to review previous decisions at the request of BIMB or on its own initiative. Responsibilities of BIMB Towards Shariah Compliance The Management works with the SSC to ensure that all business activities, products, services and operations of BIMB are in compliance with Shariah rules and principles. While the SSC is responsible for forming and expressing decisions on BIMB’s compliance with Shariah, the ultimate responsibility for compliance rests with the Management. Therefore, it is the responsibility of BIMB to perform including but not limited to the following: establish a management structure and reporting arrangement that provides a clear scope of accountability between the business lines and the internal control functions that are involved in managing Shariah non-compliance risks, including the accountability of the senior officer’s leading Shariah related functions; implement effective Shariah governance policies, procedures and practices; implement the rulings of the SAC of BNM and the decision or advice of the SSC; implement an effective communication policy that supports a sound understanding of Shariah matters across BIMB; conduct regular assessment to evaluate the quality of operational support provided to the SSC and address any inadequacies arising thereof; and report to the Board and SSC on a timely basis any potential or actual Shariah non-compliance events. Appointment and Re-Appointment of Members The Board, on the recommendation of the BNRC, decides on the appointment and re-appointment of the SSC members, subject to BNM’s written approval. The Board ensures that the SSC members have the necessary credibility, integrity and calibre and the required skills and knowledge. The appointment and re-appointment of the SSC members is subject to the Fit and Proper Criteria adopted by BIMB as required by paragraph 12 of the SGPD and Fit and Proper policy document issued by BNM. 181
184. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE GOVERNANCE OVERVIEW STATEMENT SSC Meetings Summary of SSC meetings attendance and time spent in 2021 are set out below : SHARIAH SUPERVISORY COUNCIL (SSC) Number of Meeting held in 2021 9 Meeting Attendance % Professor Dato’ Dr. Ahmad Hidayat Buang (Chairman) 9/9 100 Associate Professor Dr. Yasmin Hanani Mohd Safian 9/9 100 Professor Dr. Asmadi Mohamed Naim 9/9 100 Dr. Shamsiah Mohamad 9/9 100 Sahibus Samahah Datu Haji Kipli Haji Yassin 9/9 100 Name Existing Members SSC Number of Meetings in 2021 Total Meeting Hours 9 32.2 hours Average Time Spent on Each Meeting 3.6 hours All SSC members have complied with the attendance requirement under the BNM Shariah Governance Framework of not less than 75% Nine (9) meetings were held during the financial year ended 31 December 2021, in compliance with the requirement of paragraph 11.2 of the SGPD that requires the meeting to be held at least once in every two (2) months. The meetings are also attended by one (1) Director, the Group CEO, the Group Chief Financial Officer, the Group Chief Internal Auditor, the Group Chief Compliance Officer, the Group Chief Financial Inclusion Officer, Head of Operational Risk and Head of Product Management as permanent invitees. Their presence at the meetings improves the quality of engagement between the Board and Management members with SSC members, and increases their appreciation towards Shariah deliberations and decisions. However, the Board members’ presence does not affect the independent deliberation by the SSC members in their informed decision making. The Board receives regular updates on significant matters deliberated during the SSC meetings and minutes of the SSC meetings are circulated to the Board. Training In line with Section 6 of the SSC Charter, SSC members undergo continuous training to keep abreast with the development in the banking industry and enhance their skills and knowledge in discharging their responsibilities effectively. During the financial year under review, two (2) SSC members were participating in the Certified Shariah Advisor program (CSA) awarded by the Association of Shariah Advisors in Islamic Finance Malaysia (ASAS). The certification is commissioned by BNM to motivate professionalism among Shariah advisors. This initiative by ASAS was mentioned in the Malaysian Financial Blueprint 2011-2020 under Agenda 3.2 to develop Malaysia as reference centre for Islamic financial transactions. 182
185. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information Trainings attended by the SSC members in 2021 are as follows: Name of SSC Members Organiser Training Programme Professor Dato’ Dr. Ahmad Hidayat Buang BIMB 1. Emerging Risk Trends & Integrated Risk Management 2. Culture Journey 3. Dinamika Dalam Fiqh Muamalat 4. Analytics and Agiles for Banks by Boston Consulting Group (BCG) 5. Anti Money Laundering and Countering the Financing for Terrorism (AML/CFT) Associate Professor Dr. Yasmin Hanani Mohd Safian KLIFF ISRA BIMB 1.16th Kuala Lumpur Islamic Finance Forum 2021 2. Muzakarah 2021 : Industri Kewangan Islam Pasca Pandemik 3. Emerging Risk Trends & Integrated Risk Management 4. Maqasid Shariah Professor Dr. Asmadi Mohamed Naim KLIFF ISRA BIMB 1.16th Kuala Lumpur Islamic Finance Forum 2021 2. Muzakarah 2021 : Industri Kewangan Islam Pasca Pandemik 3. Culture Journey 4. Analytics and Agiles for Banks by Boston Consulting Group (BCG) 5. Anti Money Laundering and Countering the Financing for Terrorism (AML/CFT) Dr. Shamsiah Mohamad KLIFF ASAS 1.16th Kuala Lumpur Islamic Finance Forum 2021 2. CSA Module : Module Legal Regulatory Framework 3. CSA Module : Principles of Economics 4. Emerging Risk Trends & Integrated Risk Management 5. Culture Journey 6. Maqasid Shariah 7. Analytics and Agiles for Banks by Boston Consulting Group (BCG) 8. Anti Money Laundering and Countering the Financing for Terrorism (AML/CFT) BIMB Sahibus Samahah Datu Haji Kipli Haji Yassin KLIFF ASAS BIMB 1.16th Kuala Lumpur Islamic Finance Forum 2021 2. CSA Module : Principles of Accounting & Finance 3. CSA Module : Principles of Economics 4. CSA Module : Code of Ethics & Professional Conduct 5. Emerging Risk Trends & Integrated Risk Management 6. Analytics and Agiles for Banks by Boston Consulting Group (BCG) 183
186. B A N K I S L A M M A L AY S I A B E R H A D CORPORATE GOVERNANCE OVERVIEW STATEMENT Remuneration The remuneration structure for the SSC members is sufficient to attract , retain and remunerate for their contribution to BIMB. The remuneration structure takes into consideration the relevant factors which include the function, workload, responsibilities and time spent for the preparation of the SSC meetings. A higher rate (premium) is given to the Chairman of the SSC in view of his additional role in guiding and managing the SSC. The remuneration includes monthly fees, meeting allowances and other benefits such as training fund. SSC Evaluation In line with paragraph 9.6 of the SGPD and Section 7 of the SSC Charter, SSC evaluation is carried out annually to assess the performance and effectiveness of the SSC members whether they deliver and support a sound Shariah governance system. This includes the SSC Peer Evaluation, SSC Collective Assessment and Internal Evaluation by the appointed management members being permanent invitees to the SSC meeting. The assessment looks into among others at aspects such as SSC composition, meeting operations, training adequacy, accessibility, understanding of roles and responsibilities, interaction, productivity and quality in contribution, etc. The results of the assessments are tabled and reviewed in the BNRC meeting prior to deliberation in the Board meeting. CONCLUSION The Board considers that BIMB has complied and applied the Principles of the MCCG 2021 during the financial year, except for the following:- Practice 4.4 :Performance evaluations of the board and senior management include a review of the performance of the board and senior management in addressing the company’s material sustainability risks and opportunities. Practice 5.9 :The board comprises at least 30% women directors. Practice 8.2 :The board discloses on a named basis the top five senior management’s remuneration component including salary, bonus, benefits-in-kind and other emoluments in bands of RM50,000. Practice 13.1 :Notice for an Annual General Meeting should be given to the shareholders at least 28 days prior to the meeting. The Board has identified those Practices where there is a departure and this departure will be addressed as follows: An explanation for the departure; Disclosure of alternative practice adopted and how the alternative practice achieves the intended outcome; Actions which BIMB has taken or intends to take; and The timeframe required to achieve application of the prescribed Practice. 184
187. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information Practice 4.4 BIMB is just embarking upon our sustainability journey. BIMB in its 5-year strategic direction has put in place a plan to embed ESG incorporating climate risk in credit assessment process and endeavors to put in place a broad-based framework before the end of 2022. BIMB has also embarked to put in place a bankwide Sustainability Plan. Practice 5.9 The Board currently comprises eleven (11) Directors, of whom two (2) is a woman, or 18% female representation. The Board is mindful of appointing Directors who have diverse skills, experience, age and gender, and remains committed to achieving at least 30% female representation on the Board whilst ensuring that overall diversity remains a central feature. The Board is taking the necessary steps to have at least 30% woman directors. The succession plan include consideration to achieve more representation of woman directors. Practice 8.2 The Board decided not to disclose on a named basis, the top five (5) Senior Management’s remuneration components including salary, bonus, benefit-in-kind and other emoluments in bands of RM50,000. The Board viewed that such disclosure would be disadvantageous to the Group’s business interests, in which the disclosure of that sensitive information may result in excessive competition for talent in the banking industry. The Company will closely monitor developments in the market in respect of such disclosure for future consideration. Practice 13.1 BIMB’s 38th Annual General Meeting (38th AGM) was held on 31 May 2021. The Notice of the 38th AGM was issued to the shareholders on 7 May 2021, i.e., 21-days before the AGM. The Notice was in line with the 21-days requirement under the Companies Act 2016 and the Company’s Constitution. The Company endeavours and is taking the necessary steps to ensure that the Notice of the AGM is issued 28-days prior to the date of the AGM. For the 39th AGM in 2022, the Notice of the 39th AGM is issued 28-days prior to the AGM. This Corporate Governance Overview Statement was approved by the Board of Directors of BIMB on 15 April 2022. Further information in the application of the practices captured in the Principles of MCCG 2021 during the financial year, please refer to the Corporate Governance Report 2021 which can be found in the Company’s website www.bankislam.com 185
188. B A N K I S L A M M A L AY S I A B E R H A D ADDITIONAL COMPLIANCE INFORMATION 1 . SHARE BUYBACKS BIMB did not purchase any of its own shares during the financial year ended 31 December 2021. 2. OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES BIMB did not issue any Options, Warrants or Convertible Securities in respect of the financial year ended 31 December 2021. 3. AMERICAN DEPOSITORY RECEIPT (ADR) OR GLOBAL DEPOSITORY RECEIPT (GDR) BIMB did not sponsor any ADR or GDR programme in the financial year ended 31 December 2021. 4. LIST OF PROPERTIES The list of BIMB’s properties is set out on page 438 of the Integrated Annual Report 2021. 5. MATERIAL CONTRACTS INVOLVING DIRECTORS, CHIEF EXECUTIVE OFFICER AND MAJOR SHAREHOLDERS Save for the related party transactions disclosed in Note 44 of the Financial Statements, no other material contract entered into by BIMB or its subsidiary companies involving Directors and/or major shareholders’ interest was still subsisting at the end of the financial year or entered into since the end of the previous financial year. 6. IMPOSITION OF SANCTIONS AND/OR PENALTIES There was no public sanctions and/or penalties imposed on the Company or its subsidiaries, Directors or Management arising from any significant breach of rules/guidelines/legislations by the relevant regulatory bodies during the financial year under review. 7. UTILISATION OF PROCEEDS RAISED FROM CORPORATE PROPOSALS Net proceeds raised from the Dividend Reinvestment Plan (DRP) (after deducting estimated expenses of the DRP) during FY2021 were utilised for the purpose of funding the continuing growth and expansion of the BIMB Group. 186
189. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information BOARD AUDIT & EXAMINATION COMMITTEE REPORT CHAIRMAN Datuk Bazlan Osman Independent Non-Executive Director (appointed w.e.f. 7 January 2022) MEMBERS Mohd Yuzaidi Mohd Yusoff Independent Non-Executive Director (appointed as Interim Chairman w.e.f. 3 September 2021 until 7 January 2022) Dato’ Sri Khazali Ahmad Independent Non-Executive Director Nuraini Ismail Independent Non-Executive Director (appointed w.e.f. 7 January 2022) Mohamed Ridza Mohamed Abdulla Non-Independent Non-Executive Director FORMER MEMBERS WHO SERVED IN 2021 Noraini Che Dan Independent Non-Executive Director (Deceased on 26 August 2021) Zahari @ Mohd Zin Idris Non-Independent Non-Executive Director (retired w.e.f. 20 September 2021) Mashitah Haji Osman Independent Non-Executive Director (appointed w.e.f. 3 September 2021 and ceased to be a member on 7 January 2022) Datuk Nik Mohd Hasyudeen Yusoff Non-Independent Non-Executive Director (appointed w.e.f. 20 September 2021 and ceased to be a member on 7 January 2022) MEMBERSHIP In 2021, the BAEC was chaired by Noraini Che Dan, an Independent Non-Executive Director until her demise on 26 August 2021. Subsequently, Zahari @ Mohd Zin Idris, a Non-Independent Non-Executive Director also retired on 20 September 2021. Pursuant to this, the BAEC composition was reviewed to ensure compliance with the Main Market Listing Requirements (MMLR) of Bursa Malaysia Securities Berhad (Bursa Malaysia) which prescribes that the BAEC must consist of at least three (3) members with the Chairman and a majority of the members being independent nonexecutive directors. Mohd Yuzaidi Mohd Yusoff, who is an existing BAEC member was elected by the Board to assume the Chairman position on an interim basis pending the appointment of a new Chairman with qualified accounting background. Datuk Nik Mohd Hasyudeen Yusoff, a Non-Independent Non-Executive Director, who is a member of the Malaysian Institute of Accountants and Fellow CPA Australia, was appointed as an interim member to provide support on any financial accounting related matters. In addition, Mashitah Haji Osman was also appointed as a BAEC member on an interim basis to comply with the requirement for majority Independent Non-Executive Directors in the BAEC. On 7 January 2022, Datuk Bazlan Osman was appointed as the new Chairman of the BAEC. He is a member of the Malaysian Institute of Accountants and Fellow ACCA, United Kingdom. Nuraini Ismail, a newly appointed director was also appointed as a new BAEC member. With the appointment of Datuk Bazlan Osman and Nuraini Ismail, both Datuk Nik Mohd Hasyudeen Yusoff and Mashitah Haji Osman ceased to be the BAEC members whilst Mohd Yuzaidi Mohd Yusoff remains as a member of the BAEC. 187
190. B A N K I S L A M M A L AY S I A B E R H A D BOARD AUDIT & EXAMINATION COMMITTEE REPORT Roles and Responsibilities The BAEC assists the Board in ensuring a reliable and transparent financial reporting process and internal control system are in place within the Group and provides an independent oversight on the effectiveness of the internal and external audit functions. The detailed roles and responsibilities of the BAEC are set out in its Terms of Reference, which was last reviewed on 5 October 2021 and is available on BIMB’s website at www.bankislam.com. The BAEC of BIMB is committed to its role of ensuring strong corporate governance practices and providing independent oversight on the Group’s financial reporting and internal control system. This report provides an insight into the activities of the BAEC during the financial year under review. MEETINGS During the financial year under review, eight (8) BAEC meetings were held. This satisfies the BAEC Terms of Reference, which requires the BAEC to meet at least four (4) times a year. The Group Chief Executive Officer (Group CEO), the Group Chief Internal Auditor (GCIA), the Group Chief Compliance Officer, the Group Chief Operating Officer, the Group Chief Human Resources Officer and the Group Chief Legal Officer and Company Secretary, who is also the Secretary to the BAEC, attend the BAEC meetings. In addition, the Group Chief Financial Officer and any Management representatives were invited to the meeting, where required, to present and facilitate the deliberation on any specific issues arising from the relevant reports presented. The External Auditors were also invited to the meeting to present the audited financial statements, the half-yearly unaudited financial reports, the Management Letters, the Audit Plan and other relevant matters. During the financial year 2021, the BAEC had two (2) private sessions with the auditors without the presence of the Management to review the scope and adequacy of BIMB’s audit process, the annual financial statements and their audit findings. In addition, all BAEC members have given their full commitment to the BAEC meetings held in 2021 as indicated in their satisfactory meeting attendance record shown below:Meeting Attendance % Noraini Che Dan Independent Non-Executive Director/Chairman •Deceased on 26 August 2021 5/5 100 Mohd Yuzaidi Mohd Yusoff Independent Non-Executive Director •Appointed as Interim Chairman w.e.f. 3 September 2021 8/8 100 Mohamed Ridza Mohamed Abdulla Non-Independent Non-Executive Director 8/8 100 Dato’ Sri Khazali Ahmad Independent Non-Executive Director 8/8 100 Zahari @ Mohd Zin Idris Non-Independent Non-Executive Director •Retired w.e.f. 20 September 2021 5/5 100 Mashitah Haji Osman Independent Non-Executive Director •Appointed w.e.f. 3 September 2021 and ceased to be a member on 7 January 2022 3/3 100 Datuk Nik Mohd Hasyudeen Yusoff Non-Independent Non-Executive Director •Appointed w.e.f. 20 September 2021 and ceased to be a member on 7 January 2022 3/3 100 Name 188
191. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information THE BAEC ACTIVITIES IN 2021 Areas of Focus Matters Considered Internal Audit •Reviewed and approved the revised Internal Audit Plan and Budget for the Financial Year (FY) 2021 arising from the continued movement restriction and physical distancing requirement as per the Standard Operating Procedures (SOP) on COVID-19 pandemic. The number of audits performed for FY2021 were 143 (or 108%) against the approved revised audit plan of 133. 29 audits were performed due to regulatory requirements. •Reviewed and approved the 2022 Internal Audit Plan and Budget which includes the scope, procedures and frequency as well as adequacy and competency of internal audit resources. • Reviewed and approved the review of the Internal Audit Division Manual. •Deliberated 81 Internal Audit Reports on the Head Office, Regional Offices, the branches and identified critical units of BIMB, which amongst others focused on the effectiveness and adequacy of governance, risk management and internal control, audit rating and recommendations. •Deliberated 24 Internal Audit Reports on Information System Audit which assessed the adequacy of the information system controls, security including cyber security and the necessary back-up systems to cover for contingencies or disaster. • Deliberated 11 Shariah Audit Reports on compliance with the Shariah rulings. •Reviewed the progress of rectification effort on unresolved audit findings to ensure appropriate corrective actions were taken by Management in a timely manner to address control weaknesses, policies and other areas identified by the Internal Auditors and other control functions. •Reviewed and noted the analysis and trend of audit rating and audit findings of branches from the FY2017 to FY2020. •Reviewed the updates by the Internal Audit on the state of internal controls for the second half of the FY2021. •Reviewed the performance and achievements of the Internal Audit Division for the FY2020 and the first half of the FY2021. • Reviewed and noted 34 investigation reports by Internal Audit Division which cover cases for staff negligence and potential disclosure of customers information. •Reviewed and noted the report by Internal Audit Division on verification of non-audit services fees incurred by external auditors. •Reviewed and noted the report from Institute of Internal Auditors Malaysia (IIAM) on External Quality Assessment Review (QAR) for BIMB’s Internal Audit Division. • Reviewed and noted the minutes of meeting of the Management Audit Committee. External Audit •Reviewed and deliberated the external auditor’s 2021 audit plan encompassing the audit approach, the areas of audit emphasis and audit fees. • Reviewed and deliberated the External Auditors reports on: (i)the audited financial statements for the financial year ended 31 December 2020, which include the key focus area of the audit and internal control matters, on 22 January 2021; (ii)limited review of the unaudited financial statements for the financial period ended 30 September 2021, on 25 October 2021; and (iii) the audited financial statements for the financial year ended 31 December 2021, which include the key focus area of the audit and internal control matters, on 27 January 2022. •Evaluated the independence and objectivity of the external auditor by reviewing the fees and the list of non-audit services provided by the external auditor. •Reviewed and recommended to the Board the re-appointment of external auditor. The BAEC’s evaluation was based on the performance, independence and suitability of the external auditors. It also covers the assessment on the external auditor’s ability in meeting BIMB’s requirements, business insights and ideas, service efficiency and effectiveness as well as value management. 189
192. B A N K I S L A M M A L AY S I A B E R H A D BOARD AUDIT & EXAMINATION COMMITTEE REPORT Areas of Focus Financial Reporting Related Party Transaction Integrity & Governance Matters Considered • Reviewed and recommended to the Board the audited financial statements for the financial year ended 31 December 2020 and the financial year ended 31 December 2021. •Reviewed the unaudited quarterly and half yearly financial result of BIMB and the Group. • Recommended to the Board the proposed final single tier dividend for the financial year ended 31 December 2020 upon being satisfied with the solvency test. • Reviewed related party transactions as disclosed in the financial statements. • Reviewed and deliberated the updates on Corruption Risk Management Report and approved the implementation of divisional Corruption Risk Management as well as the risk action plan. • Reviewed and approved the implementation of Corruption Risk Management Review Plan. •Reviewed and deliberated the Integrity & Governance Division Reports, which include report on the investigation of fraud cases and whistleblowing cases. • Approved the creation of whistleblowing reporting channel for the subsidiaries. • Reviewed and deliberated the development of BIMB’s Organisational Anti-Corruption Plan (OACP). •Reviewed and noted the status of the implementation of Adequate Procedures to protect BIMB from Corporate Liability under Section 17A of MACC Act 2009 (Amendment 2018). TRAINING AND DEVELOPMENT All BAEC members have a wide range of relevant skills, knowledge and industry experience in discharging their duties. They are financially literate and able to understand, analyse and challenge the Management on matters deliberated in the meeting including the financial reporting process. The BAEC members are expected to devote sufficient time to update their knowledge and enhance their skills through appropriate continuing education programmes. During the year, the BAEC members attended several seminars and training conferences to keep abreast with the latest developments Details of the seminars and training programmes attended by each Director in 2021 can be found in the CG Report. PERFORMANCE REVIEW OF THE BAEC Based on the annual evaluation on the effectiveness of the Board, its Committees and the members of the Board, the Board is satisfied with the performance of the BAEC and its members. The BAEC has discharged its duties in accordance with its Terms of Reference and in line with the requirements of MCCG, BNM CG Policy and MMLR. Result of the annual evaluation on the BAEC for the financial year 2021 can be found in the CG Report. RELATIONSHIP WITH EXTERNAL AUDITORS The Board maintains a transparent and professional relationship with the External Auditors through the BAEC. The BAEC reviews and assess the suitability, objectivity and independence of the External Auditors annually. The appointment or reappointment of the External Auditors is carried out in accordance with the requirements set out by BIMB to ensure the independence and objectivity of the External Auditors as statutory auditors are not compromised. The External Auditors also provide non-audit services to BIMB. For engagement of the External Auditors to perform non-audit services, the BAEC has to be satisfied that the External Auditors are suitable, independent and objective in the provision of such services, there is no element of conflict of interest and the fees chargeable are within the allowable threshold set. 190
193. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information The BAEC was satisfied with the quality of audit, performance, competency and sufficient resources provided to BIMB by the External Auditors during the financial year under review. The BAEC was also satisfied that the provision of non-audit services to BIMB by the External Auditors did not impair their objectivity and independence as External Auditors of BIMB. The amount of audit fees and non-audit fees paid by BIMB and the Group can be found on page 303 of Notes 31 of the Financial Statements. INTERNAL AUDIT FUNCTION BIMB has an in-house internal audit function which is carried out by the Internal Audit Division (IAD). The IAD undertakes the audit on entities within BIMB, its subsidiaries and related parties of BIMB. During the financial year under review, the audited entities include BIMB Investment Management Berhad, BIMB Securities Sdn Bhd, Syarikat Al-Ijarah Sendirian Berhad and BIMB Securities (Holdings) Sdn Bhd. The IAD is primarily responsible to undertake regular and systematic reviews in conformance with the Institute of Internal Auditors’ International Professional Practices Framework and the Internal Audit Charter so as to provide reasonable assurance that the risk management process, internal controls and governance practices of BIMB and its Group are operating satisfactorily and effectively and are in line with the Group’s goals and objectives. In view of the implementation of the movement control order, some of the audit works were performed offsite. Responsibility, Scope and Methodology The BAEC oversees the performance and effectiveness of the Internal Audit function based on the approved key performance indicators, assesses the competency and experience of the Internal Audit staff as well as the adequacy of resources in order for the Internal Audit function to carry out its work effectively. The BAEC also ensures that the Internal Audit staff have the authority to discharge their role objectively and independently, free from any relationship or conflict of interest. To reflect the independence of Internal Audit, the GCIA reports functionally to the Board through the BAEC and administratively to the Group CEO. The GCIA is Zalfitri Abd Mutalip who has a degree in Bachelor of Science in Business Administration (Finance), a Certificate in Internal Auditing for Financial Institution (CIAFIN) and is a Chartered Professional in Islamic Finance (CPIF). He has extensive experience in auditing in the financial industry and has helmed the IAD of BIMB since 2017. The annual audit plan is reviewed and approved by the BAEC prior to the beginning of each financial year. The audit plan adopts a risk-based approach in determining the auditable units and frequency of the audits which focussed on the following three (3) components:i. Impact and likelihood of the inherent risk; ii. The respective controls in place; and iii. Existence of effective risk transfer and loss impact reduction practices in minimising potential losses from negligence or fraud. IAD adopts the standards and principles outlined in the Internal Control Framework of Committee of Sponsoring Organization of the Treadway Commission (COSO) and the objectives set by the Institute of Internal Auditors’ International Professional Practices Framework which comprises the core principle for the Professional Practice of Internal Auditing, the definition of Internal Auditing and Code of Ethics. The results of the audit conducted, including its risks, rootcause and recommendations are reported to the BAEC on a regular basis. Resolution of the audit findings and recommendations are performed by the Management and closely observed by the Management Audit Committee whose members comprised the senior management members. In addition, Shariah audit reports including their findings, risks, root-cause and recommendations are notified and deliberated at the Shariah Supervisory Council meetings. Resources The overall costs incurred to maintain the internal audit function in the Group for the Financial Year 2021 was approximately RM7.9 million (Financial Year 2020: RM7.1 million), consists mainly of salaries and other audit related expenditures. As at 31 December 2021, the IAD has a staff strength of 43 auditors, all of whom are equipped with the relevant experience and qualifications. 27 auditors had obtained the required certification, namely, Certification for Bank Auditors (CBA) and/or CIAFIN. In 2021, three (3) staff had obtained CBA, and one (1) staff each had obtained the Certified Information System Auditor (CISA) and Digital Risk Manager (DRM) certification. Due to the continued movement control order and the need for social distancing, the training and development of the auditors’ skillset and competencies were mostly done via the virtual platform. The IAD is committed to provide an independent, objective assurance and advisory services that will add value and improve the Group’s operations. 191
194. B A N K I S L A M M A L AY S I A B E R H A D BOARD AUDIT & EXAMINATION COMMITTEE REPORT IAD Activities in 2021  Prepare the Audit Plan and Budget for approval of the BAEC. The Audit Plan was developed based on assessment of the significant potential risk exposure of the auditable areas.  P rovide independent assessment and objective assurance on the adequacy and effectiveness of internal controls implemented to mitigate the risk exposures. Prepare audit report consisting of observations, improvement opportunities, root-cause, management responses which include the corrective actions by the respective stakeholders, deadline for resolution and person responsible for implementation of corrective actions. F  ollow-up on the Management corrective actions on audit issues raised by the IAD. Determine whether corrective actions taken have generally achieved the desired results to mitigate the risk exposures.  Report to the BAEC, the final audit report highlighting the audit plan coverage, audit scope and risks covered, audit rating, significant audit findings, findings escalated for Management’s immediate action, rootcause and status of corrective actions. A total of 143 audits (against the approved audit plan of 133) were conducted for the Group in FY2021. 192  Report to the BAEC the adequacy, reliability, integrity and compliance of:  risk management, internal controls and governance processes;  Information Technology, stress testing procedures and practices and the backup system to cover for contingencies and disaster; and  R egulatory reporting, accounting records, financial reports and management information.  Review compliance with relevant legal, regulatory and internal policies as well as in compliance with Shariah rules and principles as determined by the Shariah Supervisory Council and Shariah Compliance Policy.  Provide independent assessment on the effectiveness of the Business Continuity Plan/Disaster Recovery Plan to ensure resumption of business activities is not hampered.  Review, update and enhance the Internal Audit Division Manual by incorporating among others, the updated Heat Map tables, Non-Financial Risk Impact Matrix and Structured Training and Certification Plan for Internal Auditors.  Engage the Institute of Internal Auditors Malaysia (IIAM) to conduct the External Quality Assessment Review (QAR). The IAD was assessed as “Generally Conforms” to the Institute of Internal Auditors’ International Standards for the Professional Practice of Internal Auditing (IPPF/Standards).
195. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL INTRODUCTION PURSUANT TO PARAGRAPH 15.26(B) OF THE LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD, THE BOARD OF DIRECTORS (BOARD) IS PLEASED TO PROVIDE THE FOLLOWING RISK MANAGEMENT AND INTERNAL CONTROL STATEMENT (THE STATEMENT) WHICH OUTLINES THE NATURE AND SCOPE OF RISK MANAGEMENT AND INTERNAL CONTROLS OF THE GROUP DURING THE FINANCIAL YEAR ENDED 31 DECEMBER 2021. This Statement has been made in line with the Statement on Risk Management & Internal Control: Guidelines for Directors of Listed Issuers. The Board is committed and acknowledges its responsibility to oversee the system of risk management and internal controls within the Group, including reviewing the adequacy, integrity and effectiveness to safeguard shareholders’ investments and the Group’s assets. In anticipation of the listing of BIMB where it became the Bank Holding Company, BIMB has established a Group Harmonisation Committee that has carried out the initiatives to streamline and strengthen the group governance practices including the risk management and internal controls within the Group. Such initiatives enable BIMB to have an oversight of the subsidiaries within the Group. The Board has received assurance from BIMB’s Group CEO and the Group Chief Financial Officer that the Group’s risk management and internal control systems are operating adequately and effectively, in all material aspects, during the financial year under review and up to the date of this Statement. Taking into consideration assurances from the Management and the input from the relevant assurance providers, the Board is of the view that the systems of risk management and internal control are performing satisfactorily and are adequate to safeguard the shareholders’ investments, customers’ interest and the Group’s assets. The Group will continue to implement new measures to strengthen its internal control and risk management environment. 193
196. B A N K I S L A M M A L AY S I A B E R H A D STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL BOARD RESPONSIBILITY The Board affirms its overall responsibility and oversight in establishing a sound risk management and internal control system in the Group as well as reviewing its adequacy , integrity, and effectiveness. Such a system is designed to manage the Group’s risk appetite within the established risk tolerance set by the Board and the Management, minimising the risk of failure rather than total elimination of risks to achieve the Group’s business objectives. Acknowledging that the system only provides reasonable and not absolute assurance against the occurrence of any material misstatement, loss or fraud; controls and processes have been put in place to contain the limitations inherent in the system such as human error and potential impact of external events beyond the Management’s control. The Board constantly keeps abreast with the developments in areas of risk and governance. The Board is assisted by the Board Risk Committee (BRC) which has been delegated with the primary oversight responsibilities on the Group’s risk management and internal control systems. The Board is also supported by the Board Audit & Examination Committee (BAEC) which provides independent oversight of the Group’s reporting process and internal control systems that facilitates appropriate checks and balances within the Group. Periodic summary reports are provided by the Committees to keep the Board informed of their work, key deliberations and decisions on delegated matters. The Board is of the view that the internal control framework that has been instituted throughout BIMB is sufficient to safeguard the shareholder’s investment, customers’ interest and BIMB’s assets. The governance structure established further ensures that there is effective oversight of risks and internal controls in the Group at all levels. The Board remains responsible for the governance of risk and internal control, as well as all the actions of the Board Committees with regard to the execution of the delegated oversight responsibilities. Reviews are continuously carried out to ensure effectiveness of the system. The Group regularly reviews and improves all controls, processes and response plan arising from the challenges of the COVID-19 pandemic and any other emerging risks that may arise. The Group has established processes to ensure the adequacy and integrity of its internal control system and manage the existing and potential risks with control and governance processes. MANAGEMENT RESPONSIBILITY The Management is accountable to the Board and is overall responsible for the effective implementation of the Board’s policies and procedures on risk management and internal control. This is done by identifying and evaluating the risks faced by the Group and designing, operating and monitoring the risk management and internal control system to mitigate and control risks for consideration by the Board. This includes taking appropriate and timely corrective actions as required. The Management has assured the Board that the Group’s risk management and internal control systems are operating adequately and effectively, in all material aspects, based on the risk management framework and internal control systems adopted by the Group. 194
197. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information The Management’s responsibilities in respect of risk management and internal control include: (a) Monitoring and assessing the overall risk profile of the Group including emerging risks in credit risk, market risk, liquidity risk, operational risk, Shariah non-compliance risk, regulatory/compliance risk, contagion risk, IT & cyber risk, and sustainability risk (including climate-related risk); (b) Reviewing and recommending to the BRC relevant policies, guidelines, and procedures to manage risks in accordance with the Group’s strategic vision and overall risk appetite; (c) Designing, implementing and monitoring the effective implementation of risk management and internal control system; and (d) Reporting in a timely manner to the Board on any material changes to the risks together with the corrective and mitigation actions taken. RISK MANAGEMENT The Board recognises that sound risk management and internal control forms an integral part of the Group’s business operations and decision-making process and are critical in ensuring the Group’s success and sustainable growth. The Enterprise Risk Management (ERM) Framework is the foundation of the control mechanisms within the Group. It consists of an ongoing process to identify, assess, measure, manage, control and report material risks affecting the achievement of the Group’s strategic business objectives. The key elements of the internal control system which is guided by the Group’s ERM framework consists of the following: Risk Governance Risk Appetite Risk Management Process Risk Culture 195
198. B A N K I S L A M M A L AY S I A B E R H A D STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL Risk Governance The Group ’s risk governance provides a formal, transparent and effective governance structure that promotes the active involvement of the Board and Senior Management in the risk management process to ensure a uniform view of risks across the Group. The following Risk Committees have been established to facilitate the implementation of the Risk Management Framework. BOARD OF DIRECTORS The Group’s ultimate governing body which plays a critical role in ensuring sound and prudent policy and practices in the Group. It provides an effective check and balance mechanism in the overall management of the Group. BOARD COMMITTEES Board Financing Review Committee (BFRC) Responsible for: • Reviewing all investment and financing/credit related proposals above specified limits Board Strategic & Sustainability Committee (BSSC) Board Risk Committee (BRC) Responsible for: • Overseeing the Group’s activities in managing the following risks: • Credit Risk • Market & Liquidity Risk • Operational Risk • Compliance Risk • IT and Cyber Risk • Business Continuity Risk • Sustainability Risk (including climate-related risk) • Any other relevant risks Responsible for: • Overseeing, supervising and monitoring the implementation of identified key strategic matters and any corporate exercises MANAGEMENT EXECUTIVE COMMITTEES Financing Committees Responsible for: • Assessing/ approving credits and investment/ capital market proposals Business Continuity Management Committee (BCMC) Responsible for: • Reviewing the Group’s BCM issues and making appropriate recommendation 196 Market Risk Control Committee (MRCC) Responsible for: • Performing the oversight functions to ensure effective risk management of key issues relating to the overall risk management of the Group Operational Risk Control Committee (ORCC) Recovery Management Committee (RMC) Data Management Committee (DMC) Responsible for: • Facilitating MRCC in the management of key issues on operational risk Responsible for: • Overseeing recovery issues and related operational strategies on recovery Responsible for: • Overseeing Data Management initiatives and establish appropriate action plan to resolve issues on data management Rescheduling & Restructuring Oversight Committee (R&ROC) Responsible for: • Overseeing the management of key issues related to post moratorium credit matters Asset & Liability Management Committee (ALCO) Responsible for: • Overseeing and deliberating key issues relating to Group’s asset and liability management and market risk
199. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information The Group’s risk governance approach is premised on the 3-Lines of Defence Approach by placing accountability and ownership of risks to where they arise while maintaining the level of independence among risk taking units, risk control units and independent assurance unit in managing risk. The 3-Lines of Defence is used in implementing the ERM Framework and providing risk management accountability across the Group. THREE LINES OF DEFENCE APPROACH 3 Internal Audit Responsible for providing Independent assurance to Board and Senior Management that Risk Management Processes and Tools are effectively implemented Responsible for establishing and maintaining Risk Management framework; developing Risk Management Tools; assessing, monitoring, reporting and controlling risk; and promoting risk awareness across the Group 2 Risk Control Units* Responsible for ongoing oversight of risk & control at day to day work level and promoting strong risk culture within business/support unit 1 Risk Owner or Risk Taking Units *C  onsists of Group Risk Management Division (including Shariah Risk Management), Group Credit Management Division, Group Compliance Division (including Shariah Compliance) and Group Information Security & Governance Division. Risk Appetite The risk appetite defines the levels of risk that the Group is willing to assume within its risk capacity. It is a critical component of the Group’s ERM Framework, which enables the Board and Management at all levels to communicate, understand and assess the types and levels of risks that the Group is willing to accept in pursuit of its strategic and business goals while taking into consideration the constraints under a stressed environment. The Group’s risk appetite has been integrated into its Corporate Direction and Business Plan and remains dynamic and responsive to the changing external and internal drivers such as the business and market conditions. It is determined based on the following elements: 01 02 03 Risk Capacity Risk Tolerance Risk Appetite •What is the maximum limit of risk the Group can withstand without causing its failure? •How much risk is the Group prepared to take per risk type or business unit? •What level of risk is deemed acceptable by the Board in pursuing its stategy? The Group takes steps to ensure that trigger levels, limit structures and delegated authorities are re-aligned, and potential risk appetite implications are considered in all major resource allocation decisions. In setting the risk appetite of the Group and to enhance the Group’s risk adjusted returns, the discussion of risks is from the point of view of optimising the Group’s risk-return profile instead of ‘loss minimising’. Guided by these principles, our risk appetite is articulated through a set of Risk Appetite Statements across the Group to ultimately balance the strategic objectives of the Group. 197
200. B A N K I S L A M M A L AY S I A B E R H A D STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL Risk Management Process A standard risk management process has been adopted by the Group to ensure that Group-wide risks are properly identified and managed across all products and activities are undertaken in a structured , systematic and consistent manner. The risk management process is as follows: The Group’s risk culture has evolved over time and is a reflection, amongst others, of Senior Management actions, effective enforcement of policies and guidelines and communication strategies. Additionally, the Group perceives risk management as an important means of enhancing competitiveness, performance and operational resilience. Shariah Non-Compliance Risk Step 1: Risk Identification Step 4: Risk Monitoring & Reporting Risk Management Process Step 2: Risk Assessment Step 3: Risk Control & Mitigation Under this approach, active involvement of the Board, Senior Management and staff of all levels are required in the risk management process to ensure a uniform view of risks across the Group. Risk Culture Risk culture is a vital component in strengthening risk governance and forms a fundamental principle of strong risk management. It is key to the long-term effectiveness of the Group’s risk management strategy. As encapsulated in the Group’s Risk Management Tagline, “Managing Risk is Everyone’s Business”, building a strong risk culture is the responsibility of the Board, Senior Management and all employees of the Group. To ensure this, the risk management process and approach has been embedded in all the Group’s core business processes, functions and activities. 198 Shariah Non-Compliance Risk (SNCR) is part of operational risk and is defined as “the risk of legal or regulatory sanctions, financial loss or non-financial implications including reputational damage, which the Group may suffer arising from failure to comply with the rulings of the Shariah Advisory Council of Bank Negara Malaysia (SAC), standards on Shariah matters issued by BNM or decisions or advice of the Group’s Shariah Supervisory Council. The responsibility of managing SNCR is spearheaded by the Group’s Shariah Risk Management Unit that is guided by the Risk Management framework and Operational Risk Management (ORM) Guideline. The documents detail out the Shariah risk management processes and tools in order to provide a consistent framework for managing SNCR across the Group. Shariah risk management is a discipline that systematically identifies, measures, monitors and controls SNCR to mitigate the occurrence of SNC events within the Group. Being part of operational risk, it leverages on the same principles, processes and tools of operational risk. However, the tools are modified to suit the regulatory requirements on Shariah governance in order to provide a robust and consistent approach in managing SNCR. Information Technology Risk Information Technology (IT) risk (including cyber risk) is the business risk associated with the use, ownership, operation, influence, involvement and adoption of technology within the Group. It also consists of technology related events that could potentially impact the business. Banking industry heavily relies on technology and BIMB is no exception. Such reliance exposes the Group to IT related risks such as cyberattacks and system disruptions. To mitigate this, BIMB has established the relevant framework and policy and has also put in place appropriate control measures and processes that are continuously being reviewed and enhanced. The Group also continues to invest in the latest IT infrastructure and tools as well as human capital development.
201. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information The responsibility for managing IT risk is spearheaded by the Group Information Security & Governance Division (GISGD). While it is responsible for establishing, maintaining and enforcing IT risk policies and guidelines, it also works closely with the Group IT Division (GITD), especially in identification, assessment, mitigation, monitoring and reporting of IT risk in the Group. In managing IT risk, the Group is taking among others, the following steps: i.Implementing IT risk management strategy that reflects the culture, appetite and tolerance levels of the Group, taking into consideration technology capabilities, budgets and regulatory requirement; ii.Designing policies and internal controls – policies and internal controls are designed and enforced to reduce technology related risks to an acceptable level and the effectiveness of those controls are monitored; iii.Monitoring process – reviews are conducted to ensure controls are adequately implemented and gaps are highlighted and rectified; iv.Performing review and risk assessment – frequent review and assessment exercise is performed to identify risk, vulnerabilities and threats as well as its mitigation measures. The areas covered includes but not limited to third party service providers and those related to emerging technologies such as cloud-based project implementation; and v.Reporting – IT and cyber risk related reports are periodically presented to Management committees and the Board for deliberation. COMPLIANCE MANAGEMENT Financial Crime Compliance (FCC) BIMB addresses and tackles financial crimes by developing typologies and red flags for financial flows, training frontline staff to identify potential suspicious transactions, and participating in public-private partnerships to share intelligence and good practices. BIMB has established comprehensive controls to anticipate, prevent, detect and respond to any money laundering and terrorist financing activities. The AML/CFT policy outlines the roles and responsibilities and clear accountability of the Board of Directors, Senior Management and its employees. We actively contribute to the industry by taking lead in various initiative including preparing a Standard Operating Procedure (SOP) for Law Enforcement Agency (LEA) process. BIMB continues to support the industry combating financial crime by conducting training and providing certification to compliance officers across the industry on financial crime risks and AML topics. To mitigate the risk of financial crime, particularly money laundering, BIMB established several monitoring rules which are designed to identify and investigate transactions of potential crime. In 2021, we adopted technology in addressing financial crime by leveraging the Robotic Process Automation. To further improve the quality of transaction monitoring, FCC Department applied a Standard Deviation approach in AML System aiming to improve the analyst productivity and reduce false positive. Addressing AML risk does not stop at the Bank level only. As part of managing money laundering/terrorist financing risk at subsidiary level, a consultant was assigned to conduct an Institutional Risk Assessment (IRA) at BIMB Investment Management Berhad and at BIMB Securities Sdn Bhd. The team had kicked start a project to implement Fraud and AML System which will be launched in March 2022. 199
202. B A N K I S L A M M A L AY S I A B E R H A D STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL KEY COMPLIANCE INITIATIVES FOR FY2021 AML REMEDIATION STRENGTHEN AML CONTROLS • Focus on the AML remediation works and addressing gaps in Institutional Risk Assessment exercise. • The remediation shall protect the Bank and its customers in combating money laundering/terrorism financing and other financial crimes. • Revised the AML/CFT rules and parameters to reduce false positive and provide effective transactions monitoring controls. • Adoption of technologies, i.e., Robotic Process Automation (RPA) in transaction monitoring process. • Applying statistical method, i.e., Standard Deviation in the transaction monitoring process and obtain accurate and effective result during the transaction monitoring review. • Conducted Risk Assessment at BIMB Investment to identify and address the money laundering/terrorist financing risk at subsidiary level. • Successful issuance of Compliance related Group Policies, i.e.: GROUP POLICIES E-LEARNING & CERTIFICATIONS 200 1) Group Compliance Policy; 2) Group AML/CFT Policy; 3) Group e-KYC Policy; 4) Group Sanctions Policy; 5) Group Personal Data Protection Policy; 6) Group Anti Bribery and Corruption Policy; 7) Group Compliance Risk Assessment Policy; 8) Group Corruption Risk Assessment Policy; and 9) Group Gift Policy. • Produced new method of e-learning by segregating generic modules into a cluster of smaller topics. • Bite size e-learnings for AML/CFT and Preserving Banking Secrecy and Customer Information were rolled out in 2021 which consisted of four (4) modules each. • Improved staff competency through certification (AICB/ABS, ICA, ACAMS, ACFE and other regulatory compliance certification). Over 62 staff undertook 17 professional certificates in 2021.
203. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information AML/CFT & REGULATORY TRAINING COMMUNIQUÉ MANUAL & POLICY REVIEW • Continuous education on AML/CFT and regulatory training for staff, i.e., in-house training, external training (virtual engagement and sharing session with LHDN, PDRM & KPMG). • 17 webinars and virtual sessions were attended by the staff. • 36 refresher courses and intensive trainings were conducted bank wide. • Introduced 2 new Compliance Programmes to inculcate a strong compliance culture mindset within Compliance Division. • 4 Essential skills of a Compliance Officer and 5 Coffee with Compliance sessions. • Publication of learning and awareness materials through Communiqués to all staff at branches and business units. • 14 publications and 3 videos were issued in 2021. • 225 Manual & Policy reviews were conducted on Business Units processes which required AML/CFT checks and as part of Institutional Risk Assessment (IRA) action plan. • It is to ensure that the processes & products issued by Business Units were aligned with AML/CFT and sanctions requirement. Key Compliance Achievements and Activities for FY2021 Accredited with the Best Independent Assessment for Retail Standalone Category 2021 by PayNet. This has been made successful attributed by the adoption of a structured risk-based review methodology which facilitated the overall review process. Established a dedicated Group Thematic Review team under Compliance Monitoring & Testing Department to support the Group Harmonisation Plan in enabling BIMB to be a public listed company. The team had also leveraged on data analytics tools to further supplement the review methodology performed. Conducted 107 compliance reviews comprising of mandatory, risk-based and thematic reviews for Regulatory and AML/CFT areas, resulting in 79 areas for improvement to further strengthened the internal controls. 201
204. B A N K I S L A M M A L AY S I A B E R H A D STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL Accomplished the Annual Shariah Compliance Review Plan FY2021 as approved by the relevant authorities encompassing mandated regulatory , risk-based review and thematic review. Besides, a strategic alliance was achieved with the other internal control functions, i.e., Shariah Risk Management and Shariah Audit in performing an ad-hoc Shariah compliance review on the common areas. The objectives of these reviews are to provide assurance on the net compliance risk and identify the Shariah Non-Compliance (SNC) risk in designated controls, and where necessary to recommend appropriate mitigation measures. Becomes the reference point in performing an in-depth review and/or investigation on any reported incidents that may give implications to the Shariah compliance status of the Bank’s operations, business, affairs and activities. The decision is crucial as the result will determine the state of purity of the income to be further recognised by the Bank. The process involves scrutinising the details of the issues raised and proposing remedial action plan which may entail corrective and preventive measures. In building up the Shariah compliance culture within the Bank, a continuous collaboration amongst the Shariah governance and control functions was established via series of Shariah Townhall. The programme served as a catalyst to heighten the awareness level and intensify compliance with the current and relevant Shariah rules and regulations so as to curb any possible SNC event. In view of the hardship faced by Malaysians due to the COVID-19 pandemic and recent floods, BNM’s focus will be towards championing the plight formulising measures to aid the impacted sectors. BIMB will continue to develop its products and services to suit our customers’ need including catering for unserved/underserved market by improving our digital outreach. We remain vigilant in disseminating the regulations given by BNM to ensure BIMB’s strategies are in tandem with the National Agenda. While outsourcing is necessary for operational efficiency, we continue to instil strict governance in reviewing each outsourcing party to uphold the zero tolerance principle particularly on corruption, bribery and adverse media. Effective collaboration with our service providers will create synergy and improve our service deliveries and spurring “Real Economy” as part of our VBI initiatives. In safeguarding customers’ information and data, we have instilled the Compliance Culture by creating awareness amongst our staff and service providers on the importance of preserving banking secrecy and confidentiality. Any incidents are detected through our review process and thoroughly investigated to ensure the appropriate remedial actions are taken to avoid recurrence. We do not tolerate any unethical practices and any transgression are severely dealt with by imposing consequence management action to the parties involved. 202
205. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information INTERNAL CONTROL SYSTEM • There are other Board Committees established to assist the Board in discharging its overall governance responsibilities and oversight functions. These Board Committees are the Board Nomination & Remuneration Committee (BNRC), the Board Financing Review Committee (BFRC), the Board Strategic & Sustainability Committee (BSSC) and the Board IT Committee (BITC). The Board has mandated these Board Committees the authority to review all matters within the scope defined in their respective Terms of Reference and make the relevant recommendations to the Board. The Board has established an internal control system to provide an effective governance and oversight, which include the following key components:• Organisational Structure An organisational structure with clear defined lines of responsibility and accountability has been established in line with the business and operating requirements to support a strong control environment. • Annual Business Plan and Budget  ll key operating divisions are involved in the preparation A of the annual business plan and budget taking into consideration the established risk appetite. They will have to go through a challenge session with the Management before the proposal is deliberated by the Board for approval. The Board will regularly review the performance achievements and any revision to the business plan and budget will be re-tabled for the Board’s approval. • • • • Oversight by the Board Risk Committee (BRC) The BRC assists the Board in ensuring that a sound and robust risk management framework as expected by BNM is in place and effectively implemented. The BRC provides an independent oversight on the Management’s activities in managing credit risk, market risk, liquidity risk, operational risk (which includes legal risk, compliance risk, Shariah non-compliance risk, IT risk and business continuity risk), sustainability risk (including climaterelated risk) and other relevant risk and to ensure that the risk management process is in place and functioning for the Group. Policies and Guidelines Several policies and guidelines governing the Group’s business and operations have been put in place and are made available to employees via the intranet portal for reference and compliance. These policies and guidelines are regularly reviewed and updated by the respective business and support units to cater for any changes in laws and regulations as well as changes to the business and operating environments. • Oversight by the Board Audit & Examination Committee (BAEC) The BAEC is established to assist the Board in ensuring a reliable and transparent financial reporting process and internal control system are in place within the Group and provide an independent oversight on the effectiveness of the internal and external audit functions. Material control lapses are escalated to the BAEC for deliberation. The BAEC also deliberates any unresolved audit findings to ensure the Management undertakes the relevant remedial actions within the timeline. Management Executive Committees The Management has set up various Management Executive Committees to assist and support the various Board Committees in overseeing the relevant areas of business operations and controls. This includes Management Committee, Management Risk & Control Committee, Asset & Liability Management Committee, Management Audit Committee, Management IT Committee, Business Continuity Management Committee and Financing Committees. Authority Limits The Board has approved the Authority Limits document which outline the approving authority and the approving limits to the respective Management Committees as well as to the relevant Head of Division. Oversight by Other Board Committees • Performance Review The Board is regularly apprised on the key financial position of BIMB and its major subsidiaries at every Board meeting and where necessary, the Board may instruct the Management to take necessary actions to resolve any issues identified in a timely manner. • Regular Updates on Risk Management Report Risk Management frameworks, policies, guidelines, tools and methodologies are regularly reviewed and updated to ensure relevance to the current business environments and regulatory requirements. The risk management report of the Bank and its major subsidiaries are also regularly deliberated at the BRC, where any key risk issues will be highlighted for discussion. 203
206. B A N K I S L A M M A L AY S I A B E R H A D STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL • Regular Updates on Compliance Report • The Whistleblowing Policy has been put in place to provide an avenue for all employees of the Group and members of the public to disclose any unethical or improper conduct within BIMB Group and to provide protection for employees and members of the public who report such allegations. Regular review on Compliance frameworks, policies, guidelines, tools and methodologies are carried out to ensure it remains relevant to the business requirements and the applicable laws and regulations. All Compliance activities undertaken by the Group are regularly reported and deliberated at the BRC. • Human Resources Management • The effectiveness of the risk management and internal control system of the Group relies on the responsibility, integrity and sound judgment of its employees. Hence, the Group has established policies and procedures governing the recruitment, appointment, performance management and rewards as well as procedures relating to discipline, termination and dismissal for the employees. Human capital development, talent management and succession planning are given priority to ensure sustainability. • • Fraud Management Special Investigation Unit (SIU) has been established within the Integrity and Governance Department of Group Compliance Division and it is responsible for assessing complaints received, detection and investigation of any possible internal or external fraud reported. SIU strives to maintain absolute transparency of reporting and independence of investigation without influence from any internal or external parties. The SIU function is overseen by the BAEC and where it involves high profile and/or whistleblowing cases, the Chief Integrity & Governance Officer (CIGO) reports directly to the Designated Independent Non-Executive Director who is also the Chairman of the BAEC. 204 Anti-Bribery Corruption Policy The Group’s Anti-Bribery and Corruption Policy (ABCP) was developed as part of BIMB’s commitment to integrity and sustainable way of doing business. The ABCP is aligned with all relevant laws and regulations, including the National Anti-Corruption Plan (NACP) and Malaysian Anti-Corruption Commission (MACC) Act 2009. The ABCP underpins a zero-tolerance approach and guides BIMB to ensure that all opportunities on corruption and any action in relation to bribery, conflict of interest, malpractice, abuse of power could be effectively and efficiently addressed as well as ensuring compliance with all applicable anti-corruption policy. Code of Ethics The Code of Ethics has been established by the Group to ensure a high standard of ethical and professional conduct is upheld by all employees in performing their duties and responsibilities. New recruits are briefed on the Code of Ethics and they have to sign a declaration upon joining the organisation. Whistle Blowing Policy • Independent Assurance by the Internal Auditors The Board has established the Internal Audit function to provide independent assurance on the adequacy and effectiveness of the governance, risk management and internal control. The Internal Audit is headed by the Group Chief Internal Auditors who report functionally to the BAEC and administratively to the Group CEO. The internal audit process and activities adopt the standards and principles outlined in the Internal Control Framework of Committee of Sponsoring Organisation of the Treadway Commission (COSO) and the objectives set by the Institute of Internal Auditors’ International Professional Practices Framework which comprises the core principle for the Professional Practice of Internal Auditing, the definition of Internal Auditing and Code of Ethics.
207. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information CORRUPTION RISK MANAGEMENT (CRM) As reported in the preceding annual report, the Group has completed its maiden CRM exercise in FY2020 in which the Group has zero critical risks identified and, overall, the residual corruption risks were rated as satisfactory without any major concerns. Since the completion of CRM, the Group has formalised the CRM framework into a holistic policy known as the Group Corruption Risk Management Policy (GCRMP) in FY2021. In brief, the GCRMP provides the principles and methodology for carrying out the corruption risk assessment for the Group and sets out the CRM review requirement. The policy reflects the Group’s commitment to upholding the highest standards of integrity and ethics, in keeping with the Group’s zero-tolerance stance to all types of bribery and corruption, as well as a commitment to conducting business with integrity, honesty, and respect. CRM Review The Group, through the Governance & Integrity Unit (GIU) of the Integrity & Governance Department (IGD), Group Compliance Division, has begun a CRM Review to meet the need for Adequate Procedures1 - Principle IV: Systematic Review, Monitoring, and Enforcement. Key Objectives of CRM Review To validate the current controls and their effectiveness as identified by each stakeholder To assess for gaps in the control In this respect, the BAEC has, in FY2021 approved a three-year CRM Review plan that outlines the selection and priority review criteria for better deployment of resources. Under the CRM Review Plan, high-risk stakeholders are reviewed within one (1) year, whilst medium and low-risk stakeholders will be reviewed within two (2) and three (3) years, respectively. In FY2021, GIU completed ten (10) reviews Its findings were reported to the BAEC There were no 'poor' ratings assigned by the review Most of the current controls were attested to give reasonable assurance in mitigating the identified corruption risk Adequate Procedures refers to the statutory defence against corporate liability prosecution as accorded under Section 17A (4) of the MACC Act 2009. 1  205
208. B A N K I S L A M M A L AY S I A B E R H A D STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL Organisational Anti-Corruption Plan (OACP) 2022-2025 The National Anti-Corruption Plan 2019-2023 (NACP), which was officially launched by the Prime Minister on 29 January 2019 suggested OACP as an anti-corruption document at the organisational level to manage corruption issues. In 2021, BIMB continued to undertake significant work to enhance its corporate governance and integrity initiatives to be in line with the NACP. The work culminated in the development of BIMB’s OACP, 2022-2025, which will serve as the foundation for all BIMB’s initiatives in this area in the coming years. Key Steps of OACP Development BIMB’s OACP was developed with a vision towards a corrupt-free organisation and a mission to address problems and weaknesses of governance, integrity and anti-corruption in related areas and activities in the organisation. Five (5) key steps were involved in developing BIMB’s OACP based on the TRUST principles (Top Level Commitment, Risk Assessment, Undertake Control Measure, Systematic Review and Training & Communication) recommended by the Guidelines on Adequate Procedures issued pursuant to the MACC Act. 01 TOP LEVEL COMMITMENT Establishment of AntiCorruption Committee and formation of OACP Development Committee (ODC). 02 DATA ANALYSIS Analyse data in the form of reports of the real state of governance, integrity and anti-corruption weaknesses: • MACC/RMP records; • Staff’s disciplinary records; and • Internal Audit/ Compliance report. 03 CORRUPTION RISK MANAGEMENT (CRM) Process of identifying risk and weaknesses that lead to opportunities of corruption to occur. 04 ACTION PLAN • Prepare strategic objective & action plan to adress issues of corruption, governance and integrity. • Milestone as an indicator to measure achievement. Department to be responsible and accountable for the initiatives assigned. 05 MONITORING & EVALUATION • Monitor, evaluate and report progress of the OACP. • Monitor implementation of OACP action plan and ensure compliance to the plan. • Coordinate and engage stakeholders. It is important to establish the ‘tone from the top’ where BIMB implemented clear policies to address corruption risks and proper reporting channels for any suspected and/or actual corruption incidents. IGD also carried out data analysis and CRM exercise to identify potential risk and weakness which may lead to occurrence of corruption activities in the organisation. Subsequently, IGD, through its role as the OACP Development Committee (ODC) Secretariat conducted discussions with the potential corruption risk owners, relevant departments and stakeholders to develop strategic objectives and clear action plans to address these potential corruption, governance and integrity issues. Benchmarking exercises against ministries, government agencies and other corporations were also carried out to ensure BIMB’s OACP is relevant and achieves the highest level of standard expected from a premier financial institution. 206
209. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information Monitoring and implementation of the OACP action plan and initiatives is done through two (2) main reporting structures, where IGD reports on the OACP implementation to the Management Committee and BAEC twice a year and to the relevant regulators on the progress, as and when required. OACP Overview 5 CHAPTERS Covering all aspects Chapters were developed in line with the Malaysian Anti-Corruption Academy (MACA) Certified Integrity Officer (CeIO) modules and benchmarking exercise against other organisations. Tailored to Bank Islam’s needs Formulated through consultation with our experienced external consultant and various internal discussions. 4 STRATEGIES 11 STRATEGIC OBJECTIVES Adopting National Anti-Corruption Plan (NACP) recommendations Testament of commitment from BIMB to achieve our vision as the preferred Islamic financial institution with the highest standards of integrity, governance and accountability to all our stakeholders. Based on CRM Outcome Based on our focused yet comprehensive CRM exercise which considers past data and future possibilities. 53 POTENTIAL RISKS 161 INITIATIVES Collaborative efforts Initiatives were developed through several workshops and discussions. Challenge session was also conducted to determine the viability of the initiatives proposed. The OACP covers four (4) main priority areas, namely Business, Branch Operations, Administration & Support and Governance. IGD reviewed processes involved at BIMB for all departments and divisions and a total of 161 initiatives are included covering short, medium and long term to ensure BIMB is free from corruption to be in line with the goals of the NACP. This plan will be constantly reviewed and updated according to BIMB’s changes and organisation strategic requirements. Three (3) IGD staff have also completed the Certified Integrity Officer (CeIO) programme administered by the Malaysian Anti-Corruption Commission Academy (MACA). Briefings, workshops and awareness programmes on integrity, anti-corruption initiatives and the Bank’s internal policies are consistently carried out to cover all levels of operation at BIMB. It is hoped that the OACP will minimise misconduct involving integrity and corruption among BIMB staff, creating a work environment that emphasises team spirit, harmony, morality, ethics and having a first-class mind. In turn, the continuous improvement of our processes and procedures will increase customer confidence in our services for the common well-being and prosperity. BIMB will continue to be vigilant to ensure our processes and practices foster good governance and integrity. 207
210. B A N K I S L A M M A L AY S I A B E R H A D STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS The external auditors have reviewed this Statement on Risk Management and Internal Control pursuant to the scope set out in the Audit and Assurance Practice Guide 3 (AAPG 3) (Revised 2018), Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report issued by the Malaysian Institute of Accountants (MIA) for inclusion in the Annual Report of the Group for the financial year ended 31 December 2021. Based on the review conducted, the external auditors have reported to the Board that nothing has come to their attention that would cause them to believe that this Statement: (a)has not been prepared in accordance with the disclosures required by paragraphs 41 and 42 of the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers; or (b) is factually inaccurate. AAPG 3 (Revised 2018) does not require the external auditors to consider whether the Directors’ Statement on Risk Management and Internal Control covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk management and internal control system including the assessment and opinion by the Board of Directors and Management thereon. The auditors are also not required to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the Annual Report will, in fact, remedy the problems. This statement is made in accordance with the resolution of the Board dated 15 April 2022. 208
211. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership   Accountability   Financial   Additional Information STATEMENT ON DIRECTORS’ RESPONSIBILITY This statement is prepared pursuant to the Companies Act, 2016 and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. The Directors are required to prepare financial statements which give a true and fair view of the state of affairs of the Group and the Company as at the end of each financial year and of their cash flows for that year then ended. In preparing the financial statements for the year ended 31 December 2021, the Directors have: • • • • adopted suitable accounting policies and applied them consistently; made judgments and estimates that are reasonable and prudent; ensured applicable Financial Reporting Standards have been followed; and prepared the financial statements on a going concern basis. The Board has the overall responsibility to take all steps as are reasonably necessary to safeguard the assets of the Group to prevent and detect fraud and other irregularities. This statement is made in accordance with a resolution of the Board dated 15 April 2022. 209
212. FINANCIAL STATEMENTS 211 Directors ’ Report 218 Statement by Directors 219 Report of the Shariah Supervisory Council 225 Statutory Declaration 226 Independent Auditors’ Report 230 Statements of Financial Position 231 Statements of Profit or Loss 232 Statements of Other Comprehensive Income 233 Consolidated Statement of Changes in Equity 237 Statements of Cash Flow 241 Notes to the Financial Statements 375 Pillar 3 Disclosure 210
213. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information DIRECTORS’ REPORT for the financial year ended 31 December 2021 The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Bank for the financial year ended 31 December 2021. PRINCIPAL ACTIVITIES The Bank is principally engaged in Islamic banking business and the provision of related services. The principal activities of the subsidiaries are as stated in Note 13 to the financial statements. There has been no significant change in the nature of these activities during the financial year. The address of the registered office of the Bank is Level 32, Menara Bank Islam, No. 22, Jalan Perak, 50450 Kuala Lumpur. During the current financial year, BIMB Holdings Sdn. Bhd. (formerly known as BIMB Holdings Berhad) (“BHB”), the former holding company of the Bank have undertaken an internal reorganisation as disclosed in Note 46 to the financial statements respectively. SUBSIDIARIES The details of the Bank’s subsidiaries are disclosed in Note 13 to the financial statements. RESULTS Group RM’000 Bank RM’000 Profit before zakat and tax Zakat and tax expense 704,221 (169,916) 710,625 (169,478) Profit for the year 534,305 541,147 RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year under review except as disclosed in the financial statements. DIVIDENDS Since the end of the previous financial year, the amount of dividends paid by the Bank were as follows: RM’000 In respect of the financial year ended 31 December 2020 as reported in the Directors’ Report of that year: Final dividend of approximately 5.37 sen per ordinary share paid on 4 June 2021 139,639 In respect of the financial year ended 31 December 2021: Interim dividend of approximately 10.93 sen per ordinary share paid on 20 January 2022^ 226,893 366,532 ^ The dividend is based in number of shares after consolidation as disclosed in Note 46(v)(ii). The Directors do not recommend final dividend to be paid for the financial year ended 31 December 2021. 211
214. B A N K I S L A M M A L AY S I A B E R H A D DIRECTORS ’ REPORT for the financial year ended 31 December 2021 DIRECTORS OF THE BANK Directors of the Bank who served during the financial year until the date of this report are: Tan Sri Dr. Ismail Hj. Bakar (Chairman) Azizan Ahmad Mohamed Ridza Mohamed Abdulla Datuk Nik Mohd Hasyudeen Yusoff Dato’ Sri Khazali Ahmad Mohd Yuzaidi Mohd Yusoff Mashitah Haji Osman Dato’ Sri Amrin Awaluddin (appointed on 10 September 2021) Mohd Asri Awang (appointed on 1 October 2021) Datuk Bazlan Osman (appointed on 7 January 2022) Puan Nuraini Ismail (appointed on 7 January 2022) Zahari @ Mohd Zin Idris (retired on 20 September 2021) Noraini Che Dan (deceased on 26 August 2021) DIRECTORS OF THE SUBSIDIARIES Directors of the subsidiaries who served during the financial year until the date of this report are: Name of Company Al-Wakalah Nominees (Tempatan) Sendirian Berhad Directors Dr. Mohd Afzanizam Abdul Rashid (Chairman) (appointed on 1 January 2022) Sazrin Mohd Razak (appointed on 1 January 2022) Maria Mat Said (resigned on 1 January 2022) Mohamad Jamali Haron (resigned on 1 January 2022) BIMB Investment Management Berhad Mohamed Ridza Mohamed Abdulla Najmuddin Mohd Lutfi Dr. Mohd Hatta Dagap Azizan Abd Aziz Datin Maznah Mahbob Dato’ Dr. Mohamad Zabidi Ahmad (appointed on 8 October 2021) Dato’ Ghazali Awang (resigned on 31 October 2021) Bank Islam Trust Company (Labuan) Ltd. and its subsidiary: BIMB Offshore Company Management Services Sdn. Bhd. Zahari @ Mohd Zin Idris (Chairman) Maria Mat Said Maria Mat Said (Chairman) Zaharin Mohd Ali (appointed on 31 December 2021) Zahari @ Mohd Zin Idris (retired on 3 January 2022) Farihan Corporation Sdn. Bhd. 212 Ahmad Haliman Abdul Halim (Chairman) (appointed on 1 January 2022) Iskandar Shah Zulkarnain (appointed on 1 January 2022) Zaharin Mohd Ali (resigned on 1 January 2022) Maria Mat Said (resigned on 1 January 2022)
215. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information DIRECTORS OF THE SUBSIDIARIES (CONTINUED) Name of Company Directors BIMB Holdings Sdn. Bhd. (converted status from BIMB Holdings Berhad on 15 November 2021) Mohamed Iran Moriff Mohd Shariff (Chairman) (appointed on 30 October 2021) Said Mohd Jawahir Said Bahari (appointed on 30 October 2021) Tan Sri Ambrin Buang (retired on 1 November 2021) Datuk Nik Mohd Hasyudeen Yusoff (retired on 1 November 2021) Zahari @ Mohd Zin Idris (retired on 1 November 2021) Mohd Muazzam Mohamed (resigned on 1 November 2021) Noraini Che Dan (deceased on 26 August 2021) BIMB Securities (Holdings) Sdn. Bhd. Mohamad Jamali Haron (appointed on 24 February 2022) Sarina Mohd Ali (appointed on 24 February 2022) Zahari @ Mohd Zin Idris (retired on 3 January 2022) Adi Asri Baharom (resigned on 25 February 2022) Kamaruzaman Abdullah (appointed on 31 December 2021 and resigned on 25 February 2022) Subsidiary of BIMB Securities (Holdings) Sdn. Bhd. BIMB Securities Sdn. Bhd. Subsidiaries of BIMB Securities Sdn. Bhd. BIMSEC Nominees (Tempatan) Sdn. Bhd. BIMSEC Nominees (Asing) Sdn. Bhd. Syarikat Al-Ijarah Sdn. Bhd Adi Asri Baharom Dr. Mohd Hatta Dagap Kamaruzaman Abdullah Muhamad Lukman Musa @ Hussain (appointed on 1 February 2022) Dr. Normazilah Mahzan (appointed on 1 February 2022) Zahari @ Mohd Zin Idris (retired on 31 December 2021) Mustapha Hamat (retired on 31 December 2021) Aida Sharini Abdul Wahab Adam Abdul Aziz (appointed on 31 December 2021) Kamaruzaman Abdullah (resigned on 3 January 2022) Roziah Jais (resigned on 3 January 2022) Mohamad Jamali Haron (appointed on 31 December 2021) Mohd Zamri Hassan (appointed on 31 December 2021) Salih Amaran Jamiaan (retired on 3 January 2022) Khairudin Idris (retired on 3 January 2022) None of the Bank and subsidiaries’ Directors holding office as at 31 December 2021 had any interest in the ordinary shares of the Bank and of its related corporations during the financial year. 213
216. B A N K I S L A M M A L AY S I A B E R H A D DIRECTORS ’ REPORT for the financial year ended 31 December 2021 DIRECTORS’ BENEFITS Since the end of the previous financial year, no Director of the Bank has received nor become entitled to receive any benefit (other than those fees and other benefits included in the aggregate amount of remuneration received or due and receivable by Directors as shown in the Note 32 to financial statements or the fixed salary of a full time employee of the Bank) by reason of a contract made by the Bank or a related corporation with the Director or with a firm of which the Director is a member, or with a firm in which the Director has a substantial financial interest. There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Bank to acquire benefits by means of the acquisition of shares in or debentures of the Bank or any other body corporate. DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES According to the Register of Directors’ Shareholdings required to be kept under Section 59 of the Companies Act 2016, none of the Directors who held office at the end of the financial year held any shares or debentures in the Company or its subsidiaries during the financial year. ISSUE OF SHARES AND DEBENTURES During the financial year, the Bank has issued 42,966,054 new ordinary shares at a consideration of RM3.25 each arising from the Dividend Reinvestment Plan. As disclosed in Note 46 to the financial statements, the Bank has completed a consolidation of its ordinary shares into 2,075,872,514 Bank Islam shares to match BHB’s outstanding shares in issue so that the distribution of the Bank shares will be on a one-for-one basis. There were no debentures issued during the financial year. OPTIONS GRANTED OVER UNISSUED SHARES No options were granted to any person to take up unissued shares of the Bank during the financial year. INDEMNITY AND TAKAFUL COSTS During the financial year, the Bank maintained on group basis, a Directors’ and Officers’ Liability Takaful of up to an aggregate limit of RM50 million against any legal liability incurred by the Directors and Officers in the discharge of their duties while holding the office. The Directors and Officers shall not be indemnified by such takaful for any deliberate negligence, fraud, intentional breach of law or breach of trust proven against them. The amount of premium paid was RM207,575 with certain reimbursement made by the Directors and Officers. In previous financial year, through the former immediate holding company, BIMB Holdings Berhad has maintained a Directors’ and Officers’ Liability Takaful for the Directors and Officers of BIMB Holdings and its subsidiaries (excluding Syarikat Takaful Malaysia Keluarga Berhad and its subsidiaries) of up to an aggregate limit of RM50 million against any legal liability incurred by the Directors and Officers in the discharge of their duties while holding the office. The Directors and Officers shall not be indemnified by such takaful for any deliberate negligence, fraud, intentional breach of law or breach of trust proven against them. The amount of premium paid was RM231,372 with certain reimbursement made by the Directors and Officers. 214
217. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information OTHER STATUTORY INFORMATION Impaired financing Before the financial statements of the Group and of the Bank were made out, the Directors took reasonable steps to ascertain that proper actions had been taken in relation to the writing off of bad financing and the making of impairment provisions for impaired financing, and have satisfied themselves that all known bad financing have been written-off and adequate impairment provisions made for impaired financing. At the date of this report, the Directors are not aware of any circumstances that would render the amount written-off for bad financing, or amount of impairment provisions for impaired financing in the financial statements of the Group and of the Bank, inadequate to any substantial extent. Current assets Before the financial statements of the Group and of the Bank were made out, the Directors took reasonable steps to ascertain that any current assets, other than financing, which were unlikely to be realised in the ordinary course of business at their values as shown in the accounting records of the Group and of the Bank have been written down to their estimated realisable value. At the date of this report, the Directors are not aware of any circumstances that would render the values attributed to the current assets in the financial statements of the Group and of the Bank to be misleading. Valuation methods At the date of this report, the Directors are not aware of any circumstances which have arisen which would render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Bank to be misleading or inappropriate. Contingent and other liabilities At the date of this report, there does not exist: (a) any charge on the assets of the Group or of the Bank which has arisen since the end of the financial year and which secures the liabilities of any other person, or (b) any contingent liability in respect of the Group or of the Bank that has arisen since the end of the financial year other than those incurred in the ordinary course of business. No contingent or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Bank to meet their obligations as and when they fall due. 215
218. B A N K I S L A M M A L AY S I A B E R H A D DIRECTORS ’ REPORT for the financial year ended 31 December 2021 OTHER STATUTORY INFORMATION (CONTINUED) Change of circumstances At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements of the Group and of the Bank misleading. Items of an unusual nature The results of the operations of the Group and of the Bank for the financial year were not, in the opinion of the Directors, substantially affected by any item, transaction or event of a material and unusual nature. There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature, likely to affect substantially the results of the operations of the Group or of the Bank for the current financial year in which this report is made. Compliance with Bank Negara Malaysia’s expectations on financial reporting In the preparation of the financial statements, the Directors have taken reasonable steps to ensure that Bank Negara Malaysia (“BNM”)’s expectations on financial reporting have been complied with, including those as set out in the Financial Reporting for Islamic Banking Institutions and Circular on the Application of MFRS. 2022 BUSINESS PLAN AND OUTLOOK Business Plan, Strategy and Future Outlook Economic recovery is expected in FY2022 with Gross Domestic Product (“GDP”) of 5.3%, despite downward revision of 2021 GDP to 3.0% (previous projection: 4.2%). This is in light of gradual normalisation of domestic economic activities amid higher vaccination rates and easing restrictions on production capacity which will bolster GDP expansion alongside improving global trade. The domestic banking sector is expected to stay resilient in 2022 amid the challenges of the Covid pandemic. Even as impairments begin to surface in the coming year, credit losses will be amply cushioned by healthy earnings accretion, comfortable provisioning buffers and solid capitalisation. Driven by household segment with mortgages as the main driver, overall sentiments shall remain positive for banking sector with continued support to viable consumers facing temporary financial difficulties through repayment assistance packages. In addition, Bank Negara Malaysia (“BNM”) has released a new five-year Financial Services Blueprint 2022 – 2026 in January this year. The blueprint is anchored on 4 key thrusts in fostering greater market dynamism and advancing the sustainability agenda to support the transition towards a greener economy. We have gone into the first year of LEAP25. Our 5-year aspiration of LEAP25 is to increase the asset size and ESG-rated financing assets, reduce Cost-to-Income ratio, sustain superior industry Return-to-Equity (“ROE”), increase our non-fund based income (“NFBI”) contribution, create positive social impact and retain high-performing talents. The Bank’s targets are anchored by the six pillars namely Sustainable Prosperity, Value Based Culture, Community Empowerment, Customer Centricity, Real Economy and Digitalisation. Gearing up for 2022 as the economy moves into the recovery period, the Bank will be focusing on the goal and ensuring effective execution of our strategies. Our customers will always be at the heart of our strategy execution. Cost rationalisation will remain our focus and spending will be allocated to our priority areas. 216
219. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2022 BUSINESS PLAN AND OUTLOOK (CONTINUED) Business Plan, Strategy and Future Outlook (continued) The Bank is currently approaching the tail end of its IT Blueprint Phase 1, which was started in the middle of 2021. As we move into the Phase 2 of the IT Blueprint, we are positive that this will escalate the digitalisation of the Bank’s operations. In addition, the Bank is gearing towards the launch of its own digital channel in 2022, which is expected to further improve customer experience. Subsequent the completion of the restructuring in Q4 2021, the Bank has become the first pure-play full-fledged Islamic financial institution listed on the Main Market of Bursa Malaysia. Consequently, the Bank will have access to a wider and more diverse capital base, allowing for a greater opportunity for future expansion programmes and business growth. RATINGS ACCORDED BY EXTERNAL RATING AGENCY During the financial year, the Bank’s rating was re-affirmed as follows: Rating agency Date re-affirmed Ratings RAM Rating Services Berhad 10 December 2021 Long-term rating: AA3 Short-term rating: P1 Outlook: Stable AUDITORS The auditors, PricewaterhouseCoopers PLT (LLP0014401-LCA & AF1146), have indicated their willingness to accept reappointment. The auditors’ remuneration is disclosed in Note 31 to the financial statements. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors: Tan Sri Dr. Ismail Hj. Bakar Director Mohd Yuzaidi Mohd Yusoff Director Kuala Lumpur, Date: 7 March 2022 217
220. B A N K I S L A M M A L AY S I A B E R H A D STATEMENT BY DIRECTORS pursuant to Section 251 (2) of the Companies Act 2016 In the opinion of the Directors, the financial statements set out on pages 230 to 374 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards, and the requirements of the Companies Act 2016 in Malaysia, and Shariah requirements so as to give a true and fair view of the financial position of the Group and of the Bank as of 31 December 2021 and of their financial performance and cash flows for the financial year then ended. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors: Tan Sri Dr. Ismail Hj. Bakar Director Mohd Yuzaidi Mohd Yusoff Director Kuala Lumpur, Date: 7 March 2022 218
221. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information REPORT OF THE SHARIAH SUPERVISORY COUNCIL ‘Salam Sejahtera’ In carrying out the roles and responsibilities of the Shariah Supervisory Council (SSC) as prescribed in the Shariah Governance Policy Document (SGPD) issued by Bank Negara Malaysia (BNM), and in compliance with our letter of appointment, we hereby submit our report for the financial year ended 31 December 2021. The Bank’s management ensures that its conducts, operations, business, affairs, and activities follow the relevant Shariah rules and principles. Our responsibility is to form an independent opinion based on the review of conduct and businesses of the Bank in producing this report. We had convened nine (9) meetings during the financial year in which we reviewed, among others, products, transactions, services, processes and documents of the Bank. In performing our roles and responsibilities, we had obtained all the information and explanations which we considered necessary in providing us with sufficient evidence to give a reasonable assurance that the Bank has complied with the applicable Shariah rules and principles. At the management level, the Group Chief Shariah Officer (cum Secretary of the SSC), who functionally reports to the SSC, oversees the conduct and effectiveness of Group Shariah Division’s (GSD) functions that carry out the roles and responsibilities related to the Shariah secretariat, research and advisory. The control functions further confirm the Bank’s Shariah governance comprising of Shariah Risk Management, Shariah Compliance and Shariah Audit that resides in the Group Risk Management Division, Group Compliance Division, and Group Internal Audit Division, and reports directly to the Group Chief Risk Officer, Group Chief Compliance Officer, and Group Chief Internal Auditor respectively. The following are the significant developments that took place during the financial year, which reside under our purview: APPROVALS To ensure smooth and timely execution of our business operation, we empower the Group Chief Shariah Officer (GCSO) and Senior Manager of Group Shariah Division to approve a non-substantial variation of Shariah related matters. The approvals are then reported to us periodically as notification. Concurrently, the GCSO or his representative is also sitting as a member in the following committees to advise the Bank on matters relating to Shariah rules and principles: i) ii) iii) iv) v) vi) Management Committee; Sadaqa House and Zakat Committee (Vice Chairman); Management Risk Control Committee; Operational Risk Control Committee; Underwriting and Investment Committee; Product Development Oversight Steering Committee; 219
222. B A N K I S L A M M A L AY S I A B E R H A D Report of the Shariah Supervisory Council APPROVALS (CONTINUED) vii) Rescheduling & Restructuring Oversight Committee; viii) Financing Committee A; ix) Financing Committee B; x) iTEKAD Asnaf Assessment Committee; and xi) Tender Evaluation Committee for Vendor Management. SHARIAH GOVERNANCE We had approved in our meetings several initiatives undertaken by the Bank in strengthening its Shariah governance, including the review of the Shariah Compliance Policy and Shariah Compliance Guideline of Bank Islam Labuan Offshore Branch (BILOB), Charity Fund Management Guideline and Business Zakat Guideline for subsidiaries, i.e. Farihan Corporation Sdn Bhd and Al-Wakalah Nominees (Tempatan) Sdn. Bhd. that aims, among others, to set out the Shariah governance framework within the Bank and ensure our business operations are in line with the Shariah rules and principles. SHARIAH RISK MANAGEMENT We observed that the Bank continuously implemented appropriate measures in managing its Shariah non-compliance (SNC) risk. Firstly, the implementation of Risk Control Self-Assessment (RCSA) aims to assess the significance of identified SNC risks and the effectiveness of the controls in the respective functional areas. Since the introduction of RCSA, a continuous process of identifying and assessing SNC risks at various functional areas have been carried out by all Risk Controllers (RCs). The RCs are also responsible for driving and implementing appropriate controls to mitigate any SNC events while achieving the business objectives of their respective areas. The semi-annually RCSA result, specifically the SNC risk exposures of the Bank, is also tabled in the Management Risk Control Committee and our meetings for monitoring and oversight purposes. Secondly, this year we continue our initiatives in establishing checklists to assist frontliners and relevant functions in managing SNC. For instance, in 2020, the Bank established the Shariah Related Complaint Checklist to guide complaint handlers and product owners to identify Shariah-related complaints lodged by customers. This year, the Bank has extended the initiative by establishing the Shariah Non-Compliant Issues Checklist to identify Shariah related litigation cases. Finally, the Operational Risk Integrated System (ORIS) launch covers the Shariah compliance elements on top of Operational Risk and Business Continuity Management. This platform can manage risk profiles for all business and support units more effectively, thus reducing the probability of SNC or Shariah-related events. 220
223. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information SHARIAH REVIEW & SHARIAH AUDIT The Shariah Review and Shariah Audit functions play a vital role in ensuring Shariah compliance by evaluating and assessing activities in the Bank. Shariah Compliance Department performs shariah review under Group Compliance Division, which conducts regular assessment and validation on the Bank’s compliance with Shariah in its operations, business, affairs and activities, including new products and services implementation alongside adherence with relevant regulatory requirements. Shariah Audit Department carries out Shariah Audit under Group Internal Audit Division which provides an independent assurance to add value and improve the degree of Shariah compliance concerning such activities. Both Shariah Review and Shariah Audit plans for the financial year were reviewed and approved by us for their implementation. Their reports were deliberated in our meetings to confirm that the Bank has complied with the applicable rulings issued by the Shariah Advisory Council (SAC) of Bank Negara Malaysia, the SAC of Securities Commission (for capital market-related matters) and our decisions. Throughout the year, the Shariah review and Shariah audit functions have been conducted by the Bank, covering the following entities/areas: Shariah Audit Shariah Review 1) Trade Operations Department 1) Trade Tawarruq-i (TTQ-i) 2) Consumer Collections Department and Consumer Recovery Department 2) Ar Rahnu Tawarruq 3) Corporate Recovery Department 3) Personal Financing-i Asnaf 4) Consumer Banking Division 4) Takaful – 3rd Party New Products: a) Takaful myWealth Plus; and b) Takaful Tunai Ehsan. 5) Shariah Risk Management 5) Unit Trust - 3rd Party New Products: a) b) c) d) e) f) g) BIMB Shariah IncomePlus Fund (BSIF); Bank Islam Premier Fund (BIPF); Eastspring Investments Dana Al-Islah; Eastspring Investments Islamic Income Fund; Eastspring Investments Dinasti Equity Fund; Eastspring Investments Islamic Small-Cap Fund; and Eastspring Investments Islamic Equity Income Fund. 6) Shariah Compliance Department 6) ASB Financing-i 7) 7) Treasury & Markets Division Targeted Repayment Assistance (TRA) (joint review) 8) Corporate Support Division 8) Annual Shariah Compliance Review on Compliance with Labuan Financial Services Authority’s Guidelines on Shariah Governance for Labuan Islamic Financial Institutions (joint review) 9) Group Shariah Division 9) Assessment on the Implementation of Bank Negara Malaysia’s Guidelines on Late Payment Charges for Islamic Financial Institutions 10) Financial Inclusion Division 10) Assessment on the Implementation of Bank Negara Malaysia’s Policy Document on Credit Card-i 221
224. B A N K I S L A M M A L AY S I A B E R H A D Report of the Shariah Supervisory Council SHARIAH REVIEW & SHARIAH AUDIT (CONTINUED) Shariah Audit Shariah Review 11) Human Resources Division 11) Review on Trade Products Against the Bank Negara Malaysia’s Shariah Policy Documents of Murabahah 12) Bank Islam Labuan Offshore Branch (BILOB)^ 12) Review on Term Deposit-i (Tawarruq) (TDT-i) and TDT-i Special Against Bank Negara Malaysia’s Policy Document of Tawarruq 13) 53 Bank Islam Branches^ 13) Qard Micro Financing (BangKIT) 14) Commodity Trading Platform – Bursa Suq al-Sila’ (BSAS) (joint review) 15) Dynamic Hedging 16) Site Visit Verification on TPG Oil & Gas SB (Follow-Up Review on Ableace Raakin’s Commodity Supplier) (joint review) ^ Only Shariah related findings were escalated for deliberation and decision. SHARIAH TRAINING & AWARENESS During the year, various Shariah training and awareness programmes were designed and organised for the Bank Group’s Board of Directors (BOD) and the Bank’s staff nationwide. These include: a) Two (2) sessions for the BOD on ‘Maqasid Shariah in Islamic Banking’ and ‘Dinamika Dalam Fiqh Muamalat’ by Professor Dato’ Dr Ahmad Hidayat Buang and Dr Shamsiah Mohamad, respectively; b) Three (3) sessions of Bicara SSC on prevalent Shariah topics for the Bank’s staff by Sahibus Samahah Datu Hj. Kipli Hj. Yassin, Dr Shamsiah Mohamad and Prof. Dr Asmadi Mohd Naim; c) Four (4) sessions of quarterly Shariah Ruling and Resolution Training (Shariah Townhall) for the Bank’s Risk Controllers provided by Group Shariah Division (GSD), Shariah Risk Management Department and Shariah Compliance Department; d) Shariah e-learning of Module 1 and Module 2 for the Bank’s staff with requirements to pass a specific test at the end of the session and to complete both Modules by the end of July, August and September 2021. These Modules equip the Bank’s staff with fundamental knowledge of Fiqh al-Muamalat (Islamic Law of Transactions), which is applied in the practice of Islamic banking, requirements of Shariah governance within the industry and types of Shariah contracts used for the Bank’s products and services; e) Four (4) sessions of quarterly online Shariah training by the GSD personnel to further enhance the Shariah knowledge in addition to Shariah e-learning Modules; f) Shariah Online Quiz consisting of five (5) Modules, another platform for the Bank’s staff to assess their level of Shariah knowledge in understanding the fundamental concepts and principles of Islamic banking with the issuance of a certificate of achievement for each Module; g) Six (6) Shariah awareness sessions conducted during induction programme for new Bank’s staff; h) Two (2) Shariah risk sessions were conducted at head office as part of Operational Risk Management training, and two (2) sessions at branch level targeted Risk Controller (RC) to increase awareness and Shariah risk culture among staff. In addition to virtual training, the Shariah Risk e-learning module, which is part of Operational Risk Management e-learning, is provided to staff as a mandatory course. 222
225. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information SHARIAH TRAINING & AWARENESS (CONTINUED) The Bank has also continued to elevate Shariah and Islamic banking knowledge of its SSC members and relevant staff by engaging relevant bodies such as Islamic Banking & Finance Institute Malaysia (IBFIM) and Association of Shariah Advisors in Islamic Finance (ASAS). The SSC members and relevant staff attend the following certification programmes and courses, among others: 1. 2. 3. 4. Certified Shariah Advisors (CSA). Certified Shariah Practitioner (CSP) and Certified Professional Shariah Auditor (CPSA), Islamic Financial Planner (IFP) programme, SHARIAH NON-COMPLIANT EVENTS & INCOME Throughout 2021, we confirmed five (5) incidences of SNC events: 1. 2. Four (4) of the events have occurred at branches that are related to non-execution of aqad; and One (1) event occurred at head office related to incomprehensive product structure for refinancing products. We were also informed of the causes of the incidence and noted that the Bank had taken necessary corrective and preventive measures to avoid the same incident from recurring in the future. We also confirmed that the SNC event and the rectification plan were presented to the Board of Directors and us and reported to BNM according to the prescribed reporting requirement. Within the financial year, the Bank has collected Shariah non-compliant income amounting to RM41,182.96. A total of RM39,692.42 from the collected amount was purified and disposed to charitable causes upon our approval, as noted in Note 23 (Sources and Uses of Charity Fund). BUSINESS ZAKAT In the financial year, the Bank has fulfilled its obligation to pay zakat on its business to state zakat authorities by adopting the growth capital computation method, in compliance with the Banking Zakat Management Manual (Pengurusan Zakat Perbankan) issued by the Wakaf, Zakat and Hajj Department (Jabatan Wakaf, Zakat dan Haji – JAWHAR). The Bank paid the zakat on the Bank’s portion, i.e. shareholders’ fund and other funds received by the Bank excluding depositors’ fund and Investment Account Holders’ fund. Several zakat authorities had mandated distribution of a portion of the zakat paid by the Bank based on their agent (wakil) for distribution to eligible beneficiaries (asnaf) as guided by the Business Zakat Guideline we approved. SAFEGUARDING THE INVESTMENT ACCOUNT HOLDERS (“IAH”) INTEREST In ensuring that the interest of IAH is protected, we confirmed that the profit allocation for the IAH is per Shariah rules and principles where the profit computation formula has been duly presented and approved by us. The performance of the Investment Account has also been disclosed and reported via issuance of Fund Performance Report (FPR), which was already made available on the Bank’s website. 223
226. B A N K I S L A M M A L AY S I A B E R H A D Report of the Shariah Supervisory Council SADAQA HOUSE INITIATIVE In protecting the objective of the Sadaqa House fund and the interest of its donors , we confirmed that the fund management and distribution are implemented per the applicable Shariah rules and principles. We have approved the Sadaqa House Management Guideline that governs the conduct and management of the Sadaqa House fund to ensure it operates in line with Shariah rules and principles. The Sadaqa House and Zakat Committee that the Group Chief Financial Inclusion Officer chairs are mandated to oversee the conduct of the Sadaqa House initiative to be in line with the Sadaqa House Management Guideline. We had also reviewed the financial statement of the Bank and confirmed that the financial statement complies with the applicable Shariah rules and principles. Based on the above, in our opinion: 1) The contracts, transactions and dealings entered into by the Bank, excluding the five (5) Shariah non-compliance incidents mentioned above, during the financial year ended 31 December 2021 that were reviewed comply with the applicable Shariah rules and principles; 2) The allocation of profit and charging of losses relating to Investment Account conformed to the basis that we have approved; 3) The computation, payment and distribution of business zakat comply with the applicable Shariah rules and principles; 4) All earnings realised from sources or by means prohibited by the applicable Shariah rules and principles were disposed to charitable causes and refunded to the deserving counterparties. On that note, we, members of Shariah Supervisory Council of Bank Islam Malaysia Berhad, do hereby confirm that, in our level best, the operations of the Bank for the year ended 31 December 2021 have been conducted in conformity with the applicable Shariah rules and principles. We bear witness only to what we know, and we could not well guard against the unseen! (Surah Yusuf, verse:81) Allah knows best. Professor Dato’ Dr. Ahmad Hidayat Buang Dr. Shamsiah Mohamad Associate Professor Dr. Yasmin Hanani Mohd Safian Sahibus Samahah Datu Hj. Kipli Hj. Yassin Professor Dr. Asmadi Mohamed Naim Kuala Lumpur, Date: 7 March 2022 224
227. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information STATUTORY DECLARATION pursuant to Section 251(1)(b) of the Companies Act 2016 I, Azizan Abd Aziz, the officer primarily responsible for the financial management of Bank Islam Malaysia Berhad, do solemnly and sincerely declare that the financial statements set out on pages 230 to 374 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960. Subscribed and solemnly declared by the above named Azizan Abd Aziz, MIA CA (32474) in Kuala Lumpur on 7 March 2022. Azizan Abd Aziz Before me, 225
228. B A N K I S L A M M A L AY S I A B E R H A D INDEPENDENT AUDITORS ’ REPORT to the members of Bank Islam Malaysia Berhad (Incorporated in Malaysia) (Company No. 198301002944 (98127-X)) OUR OPINION In our opinion, the financial statements of Bank Islam Malaysia Berhad (“the Bank”) and its subsidiaries (“the Group”) give a true and fair view of the financial position of the Group and of the Bank as at 31 December 2021, and of their financial performance and their cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. WHAT WE HAVE AUDITED We have audited the financial statements of the Group and of the Bank, which comprise the statements of financial position as at 31 December 2021 of the Group and of the Bank, and the statements of profit or loss, statements of other comprehensive income, consolidated statement of changes in equity, statement of changes in equity and statements of cash flows of the Group and of the Bank for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 230 to 374. BASIS FOR OPINION We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the “Auditors’ responsibilities for the audit of the financial statements” section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. INDEPENDENCE AND OTHER ETHICAL RESPONSIBILITIES We are independent of the Group and of the Bank in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. OUR AUDIT APPROACH As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements of the Group and of the Bank. In particular, we considered where the Directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the Group and of the Bank, the accounting processes and controls, and the industry in which the Group and the Bank operate. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Bank for the current financial year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Bank as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 226
229. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information KEY AUDIT MATTERS (CONTINUED) Key audit matters How our audit addressed the key audit matters Impairment of Financing, Advances and Others Refer to Note 2.5 and 2.9 of the summary of significant accounting policies and Notes 8, 27 and 39 (b)(iii) of the Financial Statements. We tested the design and operating effectiveness of the controls over impairment of financing, advances and others. These controls covered: •• Identification of financing, advances and others that have experienced significant increase in credit risk or objective evidence of impairment; We focused on this area due to the size of the carr ying value of f inancing, advances and others, which represented 72.6% of total assets of the Group. •• Governance over the impairment processes, including model development, model approval and model validation; •• Data used to determine the allowances for credit losses including the completeness and accuracy of the key inputs and assumptions into respective ECL models; and •• Review and approval of the ECL calculation. In addition, impairment is a highly subjective area as the Group exercised significant judgement on the following areas: Our detailed testing over the financing, advances and others are as follows: Timing of identification of Stage 2 and Stage 3 financing, advances and others Individual assessment •• Assessment of objective evidence of impairment of financing, advances and others based on mandatory and judgemental triggers. •• •• Identification of financing, advances and others that have experienced a significant increase in credit risk. Examined a sample of financing, advances and others particularly focused on customers identified by the Group as having lower credit quality, rescheduled and restructured, borrowers in high risk industries impacted by Covid-19, and formed our own judgement as to whether there was a significant increase in credit risk or any objective evidence of impairment. •• Where objective evidence of impairment was identified by the Group and impairment loss was individually calculated, we examined both the quantum and timing of future cash flows used by the Group in the impairment loss calculation, challenging the assumptions and comparing estimates to external evidence where available. Calculations of the discounted cash flows were also re-performed. Individual assessment Estimates on the amount and timing of futures cash flows based on realisation of collateral or customer’s business cash flows. Collective assessment •• Assessed the methodologies inherent within the collective assessment ECL models applied against the requirements of MFRS 9, including the basis used by the management to determine the key assumptions used in respective ECL models; •• Assessed and tested the significant modelling assumptions, including the basis or judgment used for management’s overlays; •• Assessed and considered reasonableness of forward-looking forecasts assumptions; and •• Tested the accuracy of data inputs used in ECL models and checked the calculation of ECL amount, on a sample basis. Collective assessment Choosing the appropriate collective assessment models and assumptions for the measurement of ECL such as expected future cash flows and forward – looking macroeconomic factors given the wide range of potential economic outcomes due to Covid-19. Based on the procedures performed on individual and collective assessment, we did not find any material exceptions to the Group’s assessment on impairment of financing, advances and others. 227
230. B A N K I S L A M M A L AY S I A B E R H A D INDEPENDENT AUDITORS ’ REPORT to the members of Bank Islam Malaysia Berhad (Incorporated in Malaysia) (Company No. 198301002944 (98127-X)) INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITORS’ REPORT THEREON The Directors of the Bank are responsible for the other information. The other information comprises the Directors’ Report, Report of the Shariah Supervisory Council and Annual Report, which we obtained prior to the date of this auditors’ report, and Annual Report, which is expected to be made available to us after that date. Other information does not include the financial statements of the Group and of the Bank and our auditors’ report thereon. Our opinion on the financial statements of the Group and of the Bank does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Group and of the Bank, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Bank or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditors’ report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL STATEMENTS The Directors of the Bank are responsible for the preparation of the financial statements of the Group and of the Bank that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Bank that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Group and of the Bank, the Directors are responsible for assessing the Group’s and the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Bank or to cease operations, or have no realistic alternative but to do so. AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Bank as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: (a) Identify and assess the risks of material misstatement of the financial statements of the Group and of the Bank, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (b) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and of the Bank’s internal control. 228
231. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: (continued) (c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. (d) Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Bank or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Bank to cease to continue as a going concern. (e) Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Bank, including the disclosures, and whether the financial statements of the Group and of the Bank represent the underlying transactions and events in a manner that achieves fair presentation. (f) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current financial year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. OTHER MATTERS This report is made solely to the members of the Bank, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Pricewaterhousecoopers PLT LLP0014401-LCA & AF 1146 Chartered Accountants Dato' Mohammad Faiz Bin Mohammad Azmi 02025/03/2022 J Chartered Accountant Kuala Lumpur, 7 March 2022 229
232. B A N K I S L A M M A L AY S I A B E R H A D STATEMENTS OF FINANCIAL POSITION as at 31 December 2021 Group 2021 RM ’000 2020 RM’000 2021 RM’000 2020 RM’000 3 4 5 5,222,848 1,582,494 26,037 5,216,737 1,181,200 61,665 5,204,364 1,550,700 26,037 5,216,280 1,175,440 61,665 6 7 8 9 10 12,604,204 1,348,844 58,153,769 312,954 264,050 7,047 193,214 196,000 – 244,753 12,557,991 – 54,670,635 207,349 192,425 106,773 1,511 209,736 – 231,000 12,605,067 1,348,844 58,153,769 257,080 264,050 6,662 191,773 195,614 100,905 241,952 12,558,729 – 54,670,635 196,588 192,425 106,773 – 209,736 15,525 230,516 80,156,214 74,637,022 80,146,817 74,634,312 57,338,834 10,452,902 20,421 20,112 2,001,720 2,014,849 1,570,602 303,448 33,388 – 51,077,262 12,368,528 105,872 29,621 1,501,187 1,713,164 1,136,863 312,429 31,952 74,445 57,363,926 10,561,601 20,421 20,112 2,001,720 2,014,849 1,538,375 302,984 33,256 – 51,095,451 12,368,897 105,872 29,621 1,501,187 1,713,164 1,121,885 312,429 31,776 74,445 73,756,276 68,351,323 73,857,244 68,354,727 3,445,757 2,954,181 3,306,118 2,979,581 3,445,757 2,843,816 3,306,118 2,973,467 6,399,938 6,285,699 6,289,573 6,279,585 80,156,214 74,637,022 80,146,817 74,634,312 849 11,915 849 11,915 80,157,063 74,648,937 80,147,666 74,646,227 18,764,994 20,189,496 18,764,994 20,189,496 Note ASSETS Cash and short-term funds Financial assets at fair value through profit or loss Derivative financial assets Financial assets at fair value through other comprehensive income Financial assets at amortised costs Financing, advances and others Other assets Statutory deposits with Bank Negara Malaysia Current tax assets Deferred tax assets Right-of-use assets Investments in subsidiaries Property and equipment 11 12 13 14 Total assets LIABILITIES AND EQUITY Deposits from customers Investment accounts of customers Derivative financial liabilities Bills and acceptance payable Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah Other liabilities Lease liabilities Zakat and taxation Deferred tax liabilities 15 16 5 17 18 19 12 20 11 Total liabilities EQUITY Share capital Reserves 21 22 Total equity Total liabilities and equity Restricted investment accounts managed by the Bank 16 Total Islamic banking assets owned and managed by the Bank Commitments and contingencies 42 The notes on pages 241 to 374 are an integral part of these financial statements. 230 Bank
233. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information STATEMENTS OF PROFIT OR LOSS for the financial year ended 31 December 2021 Group 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 24 25 2,260,072 497,538 2,504,013 513,934 2,260,072 497,538 2,504,013 513,934 26 458,750 460,059 430,950 436,313 27 (190,738) (48,911) (208,671) (136,380) (190,738) (48,911) (208,671) (136,380) (7,406) (10,938) 2,757 (13,660) (7,406) (10,938) 2,757 (13,660) Note Income derived from investment of depositors’ funds Income derived from investment account funds Income derived from investment of shareholders’ funds Net allowance for impairment on financing and advances, net of recoveries Loss on modification of financial assets Net allowance for impairment on other financial assets Direct expenses Bank Total distributable income Wakalah fees from restricted investment accounts Income attributable to depositors Income attributable to investment account holders 16 28 29 2,958,367 308 (818,688) (160,127) 3,122,052 576 (1,006,479) (222,026) 2,930,567 308 (818,883) (160,643) 3,098,306 576 (1,006,700) (222,026) Total net income Personnel expenses Other overhead expenses 30 31 1,979,860 (723,830) (461,922) 1,894,123 (663,367) (411,085) 1,951,349 (701,784) (449,062) 1,870,156 (649,361) (402,502) Finance cost 34 794,108 (89,887) 819,671 (91,458) 800,503 (89,878) 818,293 (91,457) 35 704,221 (12,275) (157,641) 728,213 (11,770) (151,489) 710,625 (12,222) (157,256) 726,836 (11,815) (151,308) 534,305 564,954 541,147 563,713 21.87 22.19 Profit before zakat and tax Zakat Tax expense Profit for the year Earnings per share (sen) 36 The notes on pages 241 to 374 are an integral part of these financial statements. 231
234. B A N K I S L A M M A L AY S I A B E R H A D STATEMENTS OF OTHER COMPREHENSIVE INCOME for the financial year ended 31 December 2021 Group Profit for the year Other comprehensive income , net of tax: Items that are or may be reclassified subsequently to profit or loss Currency translation differences in respect of foreign operations Movement in fair value reserve (debt securities): Net change in fair value Changes in expected credit loss (debt securities) Net amount transferred to profit or loss Income tax effect relating to components of other comprehensive income Items that will not be reclassified to profit or loss Movement in fair value reserve (equity instrument): Net change in fair value Other comprehensive income for the year, net of tax Total comprehensive income for the year 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 534,305 564,954 541,147 563,713 (14,774) (303,103) (6,834) (87,903) 7,198 248,060 (138) (271,311) (14,680) (303,228) (6,834) (87,903) 7,214 248,060 (138) (271,311) 94,671 5,492 94,671 (317,943) (10,699) (317,974) (10,683) 13,583 16,992 13,708 16,992 (304,360) 229,945 The notes on pages 241 to 374 are an integral part of these financial statements. 232 Bank 6,293 571,247 (304,266) 236,881 5,492 6,309 570,022
235. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the financial year ended 31 December 2021 Attributable to equity holders of the Bank Non-distributable Group Note At 1 January 2021, restated Distributable Share capital RM’000 Other reserves RM’000 Retained earnings RM’000 Total equity RM’000 3,306,118 182,274 2,797,307 6,285,699 – – 534,305 534,305 Profit for the year Currency translation difference in respect of foreign operations Fair value reserve (debt instruments): Net change in fair value Changes in expected credit losses Net amount transferred to profit or loss Income tax effect relating to components of other comprehensive income Fair value reserve (equity instruments): Net change in fair value – 94,671 – 94,671 – 13,583 – 13,583 Total comprehensive income for the year – (304,360) 534,305 229,945 – – 111,187 – – (366,532) 111,187 (366,532) 139,639 – Effect on predecessor accounting Dividends paid on ordinary shares Issue of shares pursuant to Dividend Reinvestment Plan At 31 December 2021 37 – (14,774) – (14,774) – – – (303,103) (6,834) (87,903) – – – (303,103) (6,834) (87,903) 3,445,757 (10,899) – 139,639 2,965,080 6,399,938 Note 22 The notes on pages 241 to 374 are an integral part of these financial statements. 233
236. B A N K I S L A M M A L AY S I A B E R H A D CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the financial year ended 31 December 2021 Attributable to equity holders of the Bank Non-distributable Group Note At 1 January 2020 Prior year adjustment on currency translation difference in respect of foreign operations 47 At 1 January 2020 , restated Share capital RM’000 Other reserves RM’000 Retained earnings RM’000 Total equity RM’000 3,012,368 107,265 2,594,820 5,714,453 – 93,716 3,012,368 200,981 2,501,104 5,714,453 – – 564,954 564,954 – 7,198 – 7,198 Profit for the year Currency translation difference in respect of foreign operations Fair value reserve (debt instruments): Net change in fair value Changes in expected credit losses Net amount transferred to profit or loss Income tax effect relating to components of other comprehensive income Fair value reserve (equity instruments): Net change in fair value – – – Total comprehensive income for the year Transfer from regulatory reserve Dividends paid on ordinary shares Issue of shares pursuant to Dividend Reinvestment Plan At 31 December 2020 22 37 Distributable 248,060 (138) (271,311) – – – – 248,060 (138) (271,311) – 5,492 – 5,492 – 16,992 – 16,992 – 6,293 564,954 571,247 25,000 (293,751) – (293,751) – – (25,000) – 293,750 – – 293,750 3,306,118 182,274 2,797,307 6,285,699 Note 22 The notes on pages 241 to 374 are an integral part of these financial statements. 234 (93,716)
237. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information Attributable to equity holders of the Bank Non-distributable Bank Note At 1 January 2021, restated Distributable Share capital RM’000 Other reserves RM’000 Retained earnings RM’000 Total equity RM’000 3,306,118 182,423 2,791,044 6,279,585 – – 541,147 541,147 Profit for the year Currency translation difference in respect of foreign operations Fair value reserve (debt instruments): Net change in fair value Changes in expected credit losses Net amount transferred to profit or loss Income tax effect relating to components of other comprehensive income Fair value reserve (equity instruments): Net change in fair value – 94,671 – 94,671 – 13,708 – 13,708 Total comprehensive income for the year – 541,147 236,881 (366,532) (366,532) Dividends paid on ordinary shares Issue of shares pursuant to Dividend Reinvestment Plan At 31 December 2021 37 – (14,680) – (14,680) – – – (303,228) (6,834) (87,903) – – – (303,228) (6,834) (87,903) (304,266) – – 139,639 – 3,445,757 (121,843) – 139,639 2,965,659 6,289,573 Note 22 The notes on pages 241 to 374 are an integral part of these financial statements. 235
238. B A N K I S L A M M A L AY S I A B E R H A D CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the financial year ended 31 December 2021 Attributable to equity holders of the Bank Non-distributable Bank Note At 1 January 2020 Prior year adjustment on currency translation difference in respect of foreign operations 47 At 1 January 2020 , restated Share capital RM’000 Other reserves RM’000 Retained earnings RM’000 Total equity RM’000 3,012,368 107,398 2,589,798 5,709,564 – 93,716 3,012,368 201,114 2,496,082 5,709,564 – – 563,713 563,713 – 7,214 – 7,214 Profit for the year Currency translation difference in respect of foreign operations Fair value reserve (debt instruments): Net change in fair value Changes in expected credit losses Net amount transferred to profit or loss Income tax effect relating to components of other comprehensive income Fair value reserve (equity instruments): Net change in fair value – – – Total comprehensive income for the year Transfer from regulatory reserve Dividends paid on ordinary shares Issue of shares pursuant to Dividend Reinvestment Plan At 31 December 2020 22 37 Distributable 248,060 (138) (271,311) – – – – 248,060 (138) (271,311) – 5,492 – 5,492 – 16,992 – 16,992 – 6,309 563,713 570,022 25,000 (293,751) – (293,751) – – (25,000) – 293,750 – – 293,750 3,306,118 182,423 2,791,044 6,279,585 Note 22 The notes on pages 241 to 374 are an integral part of these financial statements. 236 (93,716)
239. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information STATEMENTS OF CASH FLOW for the financial year ended 31 December 2021 Group Cash flows from operating activities Profit before zakat and tax Adjustments for: Depreciation of property and equipment Depreciation of right-of-use assets Net gain on disposal of property and equipment Property and equipment written-off Allowance for impairment on financing, advances and others Losses on modification of financial assets Net allowance for impairment on other financial assets Net loss/(gain) on sale of financial assets at FVTPL Net gain on sale of financial assets at FVOCI Fair value (gain)/loss on FVTPL Dividends from subsidiary Dividends from financial assets at FVTPL Dividends from financial assets at FVOCI Rebate on investment in unit trust Net derivative loss Finance cost on Subordinated Sukuk Murabahah Profit expense on lease Operating profit before changes in assets and liabilities Changes in assets and liabilities: Financing, advances and others Statutory deposits with Bank Negara Malaysia Bills and other receivables Deposits from customers Investment accounts of customers Bills and acceptance payable Other liabilities Recourse obligation on financing sold to Cagamas Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 704,221 728,213 710,625 726,836 59,225 18,197 (603) 619 56,546 18,348 (3) 925 58,803 18,042 (602) 619 56,341 18,317 (3) 925 265,937 48,911 7,406 7,347 (87,903) (16,497) – (11,677) – (2,217) (7) 72,575 17,312 288,187 136,380 (2,757) (528) (271,311) 6,717 – (13,860) (503) (979) (31) 73,622 17,836 265,937 48,911 7,406 7,373 (87,903) (16,350) (800) (11,326) – (2,217) (7) 72,575 17,303 288,187 136,380 (2,757) (528) (271,311) 6,713 (500) (13,722) (503) (979) (31) 73,622 17,835 1,082,846 1,036,802 1,088,389 1,034,822 (3,797,982) (71,625) (1,313,346) 6,261,572 (1,915,626) (9,509) 100,097 500,533 (5,622,680) 977,711 (87,545) 3,668,524 2,128,155 (19,463) 214,455 – (3,797,982) (71,625) (1,374,267) 6,268,475 (1,807,296) (9,509) 104,148 500,533 (5,622,680) 977,711 (81,439) 3,618,579 2,128,524 (19,463) 259,327 – Cash generated from operations 836,960 Zakat paid Tax paid (11,967) (227,995) Net cash generated from operating activities 596,998 2,295,959 (10,862) (100,444) 2,184,653 900,866 (11,822) (227,612) 661,432 2,295,381 (10,795) (100,261) 2,184,325 The notes on pages 241 to 374 are an integral part of these financial statements. 237
240. B A N K I S L A M M A L AY S I A B E R H A D STATEMENTS OF CASH FLOW for the financial year ended 31 December 2021 Group Bank 2021 RM ’000 2020 RM’000 2021 RM’000 2020 RM’000 Cash flows from investing activities Purchase of property and equipment Acquisition of subsidiaries Acquisition of subsidiaries, net of cash acquired Proceeds from disposal of property and equipment Dividends from subsidiary Dividends from financial assets at FVTPL Dividends from financial assets at FVOCI Income from rebate on investment in unit trust Net proceeds from disposal/purchase of securities (71,155) – (14,793) 609 – 11,677 – 2,217 (702,959) (92,879) – – 5 – 13,860 503 979 (670,896) (70,862) (85,380) – 607 800 11,326 – 2,217 (715,809) (92,684) – – 5 500 13,722 503 979 (670,757) Net cash used in investing activities (774,404) (748,428) (857,101) (747,732) 300,000 (139,639) 1,100,000 (293,751) 300,000 (139,639) 1,100,000 (293,751) 139,639 – (70,890) (30,818) 293,750 (700,000) (69,152) (29,920) 139,639 – (70,890) (30,676) 293,750 (700,000) (69,152) (29,883) 198,292 300,927 198,434 300,964 Cash flows from financing activities Issuance of Subordinated Sukuk Murabahah Dividend paid on ordinary shares Proceeds from issuance of ordinary shares pursuant to Dividend Reinvestment Plan Redemption of Subordinated Sukuk Murabahah Finance cost paid on Subordinated Sukuk Murabahah Payments of lease liabilities Net cash generated from financing activities* Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Exchange difference on translation 20,886 5,216,737 (14,775) 1,737,152 3,472,386 7,199 2,765 5,216,280 (14,681) 1,737,557 3,471,509 7,214 Cash and cash equivalents at 31 December 5,222,848 5,216,737 5,204,364 5,216,280 * Net cash (used in)/generated from financing activities are solely attributable to changes from financing cash flows. The notes on pages 241 to 374 are an integral part of these financial statements. 238
241. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES The table below details changes in liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s and the Bank’s statements of cash flows from financing activities. Subordinated sukuk Murabahah Group Nominal RM’000 Finance cost payable RM’000 Lease liabilities RM’000 Total RM’000 At 1.1.2020 New acquisition Redemption/reversal Changes from financing cash flows Finance cost for the year Effects of movement in exchange rates 1,300,000 1,100,000 (700,000) – – – 8,694 – – (69,152) 73,622 – 325,559 437 (1,472) (29,920) 17,836 (11) 1,634,253 1,100,437 (701,472) (99,072) 91,458 (11) At 31.12.2020 1,700,000 13,164 312,429 2,025,593 At 1.1.2021 New acquisition Redemption/reversal Changes from financing cash flows Finance cost for the year Effects of movement in exchange rates 1,700,000 300,000 – – – – 13,164 – – (70,890) 72,575 – 312,429 4,512 – (30,818) 17,312 13 2,025,593 304,512 – (101,708) 89,887 13 At 31.12.2021 2,000,000 14,849 303,448 2,318,297 The notes on pages 241 to 374 are an integral part of these financial statements. 239
242. B A N K I S L A M M A L AY S I A B E R H A D STATEMENTS OF CASH FLOW for the financial year ended 31 December 2021 RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES (CONTINUED) Subordinated sukuk Murabahah Bank Nominal RM’000 Finance cost payable RM’000 Lease liabilities RM’000 Total RM’000 At 1.1.2020 New acquisition Redemption/reversal Changes from financing cash flows Finance cost for the year Effects of movement in exchange rates 1,300,000 1,100,000 (700,000) – – – 8,694 – – (69,152) 73,622 – 325,559 401 (1,472) (29,883) 17,835 (11) 1,634,253 1,100,401 (701,472) (99,035) 91,457 (11) At 31.12.2020 1,700,000 13,164 312,429 2,025,593 At 1.1.2021 New acquisition Redemption/reversal Changes from financing cash flows Finance cost for the year Effects of movement in exchange rates 1,700,000 300,000 – – – – 13,164 – – (70,890) 72,575 – 312,429 3,915 – (30,676) 17,303 13 2,025,593 303,915 – (101,566) 89,878 13 At 31.12.2021 2,000,000 14,849 302,984 2,317,833 The notes on pages 241 to 374 are an integral part of these financial statements. 240
243. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 1. PRINCIPAL ACTIVITIES AND GENERAL INFORMATION The Bank is principally engaged in Islamic banking business and the provision of related financial services. The principal activities of its subsidiaries are as disclosed in Note 13 to the financial statements. The Bank is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The address of its registered office and principal place of business is as follows: Level 32, Menara Bank Islam No. 22, Jalan Perak, 50450 Kuala Lumpur. The consolidated financial statements comprise the Bank and its subsidiaries (together referred to as the “Group”). These financial statements were approved by the Board of Directors on 7 March 2022. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to the periods presented in these financial statements and have been applied consistently by Group entities, unless otherwise stated. 2.1 Basis of preparation (a) Statement of compliance The financial statements of the Group and of the Bank have been prepared in accordance with the applicable Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards (“IFRS”), the requirements of Companies Act 2016 in Malaysia and Shariah requirements. The Government has introduced certain measures to assist customers experiencing temporary financial constraints due to the pandemic. The key measures affecting regulatory and accounting treatment and classifications are as follows: (i) Moratorium repayment on financing: •• The Bank has granted an automatic repayment moratorium on all individuals’ and small-medium enterprises’ (“SMEs”) financing (except for credit card balances) for a period of six months from 1 April 2020. The automatic moratorium applied to financing not in arrears exceeding 90 days as at 1 April 2020 and denominated in Malaysian Ringgit. This measure is extended beyond 1 October 2020 to viable customers on a case-to-case basis, whose applications are received on or before 30 June 2021 via various repayment assistance. On 6 July 2021, BNM announced that individuals, microenterprise customers and SMEs affected by the COVID-19 pandemic, may start applying for the six-month moratorium from 7 July 2021 onwards, in line with the Government’s Pakej Perlindungan Rakyat dan Pemulihan Ekonomi (PEMULIH). In addition to the moratorium, The Bank has offered a reduction in instalments and other packages, including to reschedule and restructure financing and advances to suit the specific financial circumstances of customers.. •• urthermore, the Bank and Agensi Kaunseling dan Pengurusan Kredit has introduced the Financial F Management & Resillience Programme (“URUS”) for individual customers who continued to be affected by the COVID-19 pandemic whose applications are received from 15 November 2021 to 31 January 2022. 241
244. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.1 Basis of preparation (continued) (a) Statement of compliance (continued) •• For credit card balances, the Bank offered the option to convert the balances to term financing. •• For corporate customers, the Bank granted assistance through repayment moratorium or additional working capital or rescheduling and restructuring of existing facilities. This is to enable viable corporations in preserving jobs and resuming economic activities when conditions stabilise and improve. The financial impact of the moratorium repayment is disclosed in Note 2.18. (ii) Definition of defaulted exposures under the policy documents on Capital Adequacy Framework for Islamic Banks for which assistance is granted: •• The determination of “days past due” is based on the new repayment terms of rescheduled and restructured financing. •• Individuals or SMEs are not considered to be in default based on the “unlikeliness to repay” at the time of when the assistance was granted, except for when customers are subject to bankruptcy action. •• Corporates “unlikeliness to repay” are based on holistic assessment of all relevant factors and information, not on the act of accepting assistance from the Bank. The regulatory capital treatment above shall apply to financing denominated in Malaysian Ringgit that meet the following criteria; •• •• The principal or profit or both, is not in arrears exceeding 90 days at the application date of assistance. The application is received on or before due date of the respective assistance programme. The regulatory capital treatment would also be applicable to rescheduled and restructured financing that are facilitated by Agensi Kaunseling dan Pengurusan Kredit, the Small Debt Resolution Scheme and the Corporate Debt Restructuring Committee. (iii) Classification in the Central Credit Reference Information System (“CCRIS”) The following shall apply for rescheduled and restructured financing with arrears not exceeding 90 days at the application date of assistance received: •• •• The financing need not be reported as (R&R) in CCRIS; and The financing need not be reported as credit-impaired in CCRIS Customers under URUS shall be identified as enrolled in the programme to facilitate follow up and monitoring by AKPK and the Bank in order to provide further support. The identification shall be removed once the customers exit the programme or at the earliest, six months after enrollment date. (iv) Bank Negara Malaysia (“BNM”) allows financial institutions to drawdown certain prudential buffers as below: •• •• •• •• Drawdown the capital conservation buffer of 2.5%; Operate below the minimum Liquidity Coverage Ratio (“LCR”) of 100%; Reduce the regulatory reserves held against expected credit losses to 0%; and Minimum Net Stable Funding Ratio (“NSFR”) is lowered to 80% from 100% effective 1 July 2020. BNM requires financial institutions to restore the minimum regulatory requirements by 30 September 2021. 242
245. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.1 Basis of preparation (continued) (a) Statement of compliance (continued) Bank Islam has kept abreast with the latest IBOR developments in Malaysia. A Task Force (“TF”) involving key stakeholders has been formed, headed by Head of Treasury & Markets. There were five TF meetings held to date, on 18 August 2020, 8 December 2020, 16 February 2021, 28 May 2021 and 1 November 2021 respectively. Progress on LIBOR transition against the industry signpost issued by BNM, was discussed at the TF meetings, and tabled to the Asset & Liability Committee (“ALCO”), Board Risk Committee (“BRC”) and Board of Directors (“BOD”) of the Bank for deliberation and to be monitored on a regular basis. The Bank has ceased all new financing referenced to LIBOR, and have renegotiated the existing LIBOR financing, to a new Reference Rate ie. USD COF. Bank Islam no longer has any LIBOR exposure w.e.f. 9 July 2021. Other than as described above, the adoption of other accounting standards, interpretations and amendments did not have any significant impact on the Group and the Bank. The following are accounting standards, amendments and interpretations of the MFRS framework that have been issued by the Malaysian Accounting Standards Board (“MASB”) but have not been adopted by the Group and the Bank. MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2022 •• •• •• •• Annual improvements to MFRS Standards 2018-2020 Amendments to MFRS 3, Business Combinations Amendments to MFRS 116, Property, Plant and Equipment Amendments to MFRS 137, Onerous Contract – Cost of Fulfilling a Contract – Provisions, Contingent Liabilities and Contingent Assets MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2023 •• •• •• •• mendments to MFRS 101, Presentation of Financial Statements – Classification of Liabilities as Current A or Non-current, Disclosure of Accounting Policies MFRS 17, Insurance Contracts Amendments to MFRS 17, Insurance Contract Amendments to MFRS 108, Definition of Accounting Estimates MFRSs, Interpretations and amendments effective for annual periods beginning or after a date yet to be confirmed •• •• Amendments to MFRS 112, Deferred Tax related to Assets and Liabilities arising from a Single Transaction Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in Associates and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The Group and the Bank plan to apply the abovementioned standards, amendments and interpretations on the respective effective dates. The initial application of the accounting standards, amendments and interpretations are not expected to have any material financial impacts to the current period and prior period financial statements of the Group and the Bank. 243
246. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.1 Basis of preparation (continued) (b) Basis of measurement The financial statements have been prepared on the historical cost convention except for derivative financial instruments, financial assets at fair value through profit or loss (“FVTPL”) and fair value through other comprehensive income (“FVOCI”), which have been measured at fair value. (c) Functional and presentation currency The financial statements are presented in Ringgit Malaysia (“RM”), which is the Bank’s functional currency. All financial information is presented in RM and has been rounded to the nearest thousand (RM’000), unless otherwise stated. (d) Use of estimates and judgement The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the financial statements in the period in which the estimates are revised and in any future periods affected. Significant areas of estimation, uncertainty and critical judgements used in applying accounting policies that have significant effect in determining the amount recognised in the financial statements are described in Note 2.9 – Impairment. 2.2Basis of consolidation (a)Subsidiaries Subsidiaries are entities, including structured entities, controlled by the Bank. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. The Group also considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return. Investments in subsidiaries are measured in the Bank’s statement of financial position at cost less impairment losses, if any. Where there is indication of impairment, the carrying amount of the investment is assessed. A write down is made if the carrying amount exceeds its recoverable amount. (b) Business combinations Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group. 244
247. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2Basis of consolidation (b) Business combinations For new acquisitions, the Group measures the cost of goodwill at the acquisition date as: •• •• •• •• the fair value of the consideration transferred; plus the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at proportionate share of the acquiree’s identifiable net assets at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. The Group applies predecessor accounting to account for business combinations under common control. Under predecessor accounting, assets and liabilities acquired are not restated to their respective fair values. They are recognised at the carrying amounts from the consolidated financial statements of the ultimate holding company of the Group and adjusted to conform with the accounting policies adopted by the Group. The difference between any consideration given and the aggregate carrying amounts of the assets and liabilities of the acquired entity is recognised as an adjustment to equity. No additional goodwill is recognised. The acquired entity’s results, assets and liabilities are consolidated from the date on which the business combination between entities under common control occurred. Consequently, the consolidated financial statements do not reflect the results of the acquired entity for the period before the transaction occurred. The comparative information is not restated. (c) Loss of control Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity accounted investee or as a financial asset at FVOCI depending on the level of influence retained. (d) Transactions eliminated on consolidation In preparing the consolidated financial statements, intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions are eliminated. 245
248. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.3Foreign currency (a) Foreign currency transactions In preparing the financial statements of the Group entities, transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the end of reporting date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting date, except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of FVOCI equity instruments or a financial instrument designated as a hedge of currency risk, which are recognised in other comprehensive income. (b) Foreign operations denominated in functional currencies other than Ringgit Malaysia (“RM”) The results and financial position of all the Group entities and branch of the Bank (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: •• the assets and liabilities of operations denominated in functional currencies other than RM, including fair value adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reporting date; •• the income and expenses of the foreign operations are translated to RM at average exchange rates for the period; and •• all resulting exchange differences are recognised as a separate component of other comprehensive income. On consolidation and at Bank, exchange differences arising from the translation of any net investment in foreign entities and branch, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a joint venture that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences relating to that foreign operation recognised in other comprehensive income and accumulated in the separate component of equity are reclassified to profit or loss, as part of the gain or loss on disposal. In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are re-attributed to noncontrolling interests and are not recognised in profit or loss. For all other partial disposals (that is, reductions in the Group’s ownership interest in associates or joint ventures that do not result in the Group losing significant influence or joint control) the proportionate share of the accumulated exchange difference is reclassified to profit or loss. 246
249. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.4Cash and cash equivalents Cash and cash equivalents include cash and short-term funds, and deposits and placements with banks and other financial institutions maturing within three month. 2.5Financial instruments Financial instruments are classified and measured using accounting policies as mentioned below. The Group and the Bank have consider the impact of the pandemic and there is no changes to the Group’s and the Bank’s business model for managing the financial instruments. Initial recognition and measurement A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the Group and the Bank becomes a party to the contractual provisions of the instrument. A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument. Classification and subsequent measurement On initial recognition, a financial asset is classified and measured at: amortised cost; FVOCI - debt instrument; FVOCI - equity instrument; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group and the Bank change its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. (a) Financial assets measured at amortised cost A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: •• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and •• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and profit on the principal amount outstanding. These assets are subsequently measured at amortised cost using effective profit rate method. These assets are stated net of unearned income and any impairment loss. Included in financial assets measured at amortised cost are financing, advances and others which consist of sale-based contracts (namely Bai’ Bithaman Ajil, Bai Al-Inah, Murabahah, Bai Al-Dayn and At-Tawarruq), lease-based contracts (namely Ijarah Muntahiah Bit-Tamleek, construction-based contract (Istisna’) and ArRahnu contract. These financing contracts are recorded in the financial statements as financial assets measured at amortised cost based on concept of ‘substance over form’ and in accordance with MFRS 9.   247
250. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5Financial instruments (continued) Classification and subsequent measurement (continued) (b) Financial assets at FVOCI (i) FVOCI – debt instrument A debt instrument is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: •• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and •• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and profit on the principal amount outstanding. These assets are subsequently measured at fair value. Any gain or loss arising from a change in the fair value is recognised in the fair value reserve through other comprehensive income except for profit income, impairment losses and foreign exchange gains and losses arising from monetary items which are recognised in profit or loss. On derecognition or disposal, the cumulative gains or losses previously recognised in OCI is reclassified from equity into profit or loss. Profit calculated for a debt instrument using the effective profit method is recognised in the profit or loss. (ii) FVOCI – equity instrument On initial recognition of an equity instrument that is not held for trading, the Group and the Bank may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis. These assets are subsequently measured at fair value. Dividend are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss. (c) Financial assets at FVTPL All financial assets not measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group and the Bank may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. These financial assets are subsequently measured at their fair values and any gain or loss arising from a change in the fair value will be recognised in the profit or loss.   248
251. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5Financial instruments (continued) Classification and subsequent measurement (continued) Financial assets – Business model assessment The Group and the Bank make an assessment of the objective of the business model in which a financial asset is held at the portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes: •• the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual profit income, maintaining a particular profit rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets; •• how the performance of the portfolio is evaluated and reported to the management; •• the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; and •• how managers of the business are compensated – e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected. Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Group’s and the Bank’s continuing recognition of the assets. Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL. Financial assets – Assessment whether contractual cash flows are solely payments of principal and profit (“SPPI”) For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Profit’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin. In assessing whether the contractual cash flows are solely payments of principal and profit, the Group and the Bank consider the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group and the Bank consider: •• •• •• •• contingent events that would change the amount or timing of cash flows; terms that may adjust the contractual coupon rate, including variable-rate features; prepayment and extension features; and terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features).   249
252. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5Financial instruments (continued) Classification and subsequent measurement (continued) Financial assets – Assessment whether contractual cash flows are solely payments of principal and profit (“SPPI”) (continued) A prepayment feature is consistent with the SPPI criterion if the prepayment amount substantially represents unpaid amounts of principal and profit on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual profit (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition. Derivative financial instruments The Group and the Bank hold derivative financial instruments to hedge its foreign currency and profit rate exposures. However, the Group and the Bank elect not to apply hedge accounting. Hence, foreign exchange trading positions, including spot and forward contracts, are revalued at prevailing market rates at statement of financial position date and the resultant gains and losses for the financial year are recognised in the profit or loss. An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. In the event of an embedded derivatives, the host contract that is not a financial assets are recognised separately and accounted for in accordance with the policy applicable to the nature of the host contract. Financial liabilities All financial liabilities are subsequently measured at amortised cost other than those categorised as fair value through profit or loss. The financial liabilities measured at amortised cost are deposit from customers, investment accounts of customers, recourse obligations on financing sold to Cagamas, bills and acceptance payables, Subordinated Sukuk Murabahah and other liabilities. Fair value through profit or loss category comprises financial liabilities that are derivatives or financial liabilities that are specifically designated into this category upon initial recognition. Financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss. 250
253. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5Financial instruments (continued) Financial liabilities (continued) (a) Investment accounts Investment accounts are either: (i) Unrestricted investment accounts An unrestricted investment account (“UA”) refers to a type of investment account where the investment account holder (“IAH”) provides the Bank with the mandate to make the ultimate decision without specifying any particular restrictions or conditions. The UA is structured under Mudharabah and Wakalah contracts. Impairment allowances required on the assets for investment accounts are charged to and borne by the investors. (ii) Restricted investment accounts Restricted investment account (“RA”) refers to a type of investment account where the IAH provides a specific investment mandate to the Bank such as purpose, asset class, economic sector and period of investment. RA is accounted for as off balance sheet as the Bank has no risk and reward in respect of the assets related to the RA or to the residual cash flows from those assets except for the fee income generated by the Bank for managing the RA. The Bank also has no ability to exercise power over the RA to affect the amount of the Bank’s return. The RA is structured under the Wakalah contract whereby the IAH appoints the Bank as the agent to invest the funds provided by IAH to finance customers with a view of earning profits and the Bank receives fees for the agency service provided. Financial guarantee contracts A financial guarantee contract is a contract that requires the Group and the Bank to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Fees and commissions arising from financial guarantee contracts are classified as deferred income and are amortised to profit or loss using a straight-line method over the contractual period or, when there is no specified contractual period, recognised in profit or loss upon discharge of the guarantee. Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of: •• •• the amount of the allowance for impairment; and the premium received on initial recognition less cumulative income recognised in accordance with the principal of MFRS 15. 251
254. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5Financial instruments (continued) Derecognition A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in profit or loss. A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. Offsetting Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. 2.6Property and equipment (a) Recognition and measurement Items of property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of selfconstructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property and equipment. Purchased software and management information system under development that is integral to the functionality of the related equipment is capitalised as part of that equipment. The cost of property and equipment recognised as a result of a business combination is based on fair value at acquisition date. The fair value of property is the estimated amount for which a property could be exchanged between knowledgeable willing parties in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of equipment is based on the quoted market prices for similar items when available and replacement cost when appropriate. 252
255. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.6Property and equipment (continued) (a) Recognition and measurement (continued) When significant parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. The gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of property and equipment and is recognised net within “other income” and “other expenses” respectively in profit or loss. (b) Subsequent costs The cost of replacing a component of an item of property and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group and the Bank, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised to profit or loss. The costs of the day-to-day servicing of property and equipment are recognised in profit or loss as incurred. (c)Depreciation Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed, and if a component has a useful life that is different from the remainder of that asset, then that component is depreciated separately. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group and the Bank will obtain ownership by the end of the lease term. Freehold land is not depreciated. Depreciation on management information system under develoment commences when the assets are ready for their intended use. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. The estimated useful lives for the current and comparative periods are as follows: •• •• •• •• •• •• Long term leasehold land Building improvement and renovations Furniture, fixtures and fittings Office equipment Motor vehicles Computer equipment 50 10 2 – 10 6 5 5 – 7 years years years years years years Depreciation methods, useful lives and residual values are reassessed at end of the reporting period, and adjusted as appropriate. 253
256. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.7Leases Leases are recognised as Right-Of-Use (“ROU”) assets and corresponding liabilities at the date at which the leased assets are available for use by the Group and the Bank. The right-of-use assets are depreciated over the lease term on a straight-line basis. The associated lease liabilities are measured at the present value of the remaining lease payments, discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, an incremental borrowing rate is used in determining the discount rate which assumes the interest rate that the Group would have to pay to borrow over a similar term, the funds necessary to obtain the asset. The weighted average incremental borrowing rate applied for the Group and the Bank was at 5.7%. Each lease payment is allocated between the lease liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of profit on the remaining balance of the liability for each period. Payments associated with short-term leases are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Lessee accounting The Group and the Bank first consider whether a contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply this definition, the Group and the Bank assesses whether the contract meets three key evaluations which are whether: •• the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group and the Bank; •• the Group and the Bank have the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract; or •• the Group and the Bank have the right to direct the use of the identified asset throughout the period of use. The Group and the Bank assesses whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use. Measurement and recognition of leases as a lessee At lease commencement date, the Group and the Bank recognises a right-of-use asset and a lease liability on the statement of financial position. The ROU asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group and the Bank, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Group and the Bank depreciates the ROU assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term. The Group and the Bank also assesses the ROU asset for impairment when such indicators exist. 254
257. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.7Leases (continued) Lessee accounting (continued) Measurement and recognition of leases as a lessee (continued) At the commencement date, the Group and the Bank measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the profit rate implicit in the lease if that rate is readily available or the Group’s or Bank’s incremental financing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for profit expense. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the ROU asset, or profit and loss if the ROU asset is already reduced to zero. The Group and the Bank have elected to account for short-term leases using the practical expedients. Instead of recognising a ROU asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. Lessor accounting As a lessor, the Group and the Bank classifies its leases as either operating or finance leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the underlying asset, and classified as an operating lease if it does not. Leases, where the Group and the Bank does not assume substantially all the risks and rewards of ownership are classified as operating leases and, the leased assets are not recognised on the statement of financial position. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred. When the Group and the Bank are an intermediate lessor, it assesses the lease classification of a sublease with reference to the ROU asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group and the Bank apply the exemption described above, then it classify the sublease as an operating lease. 2.8Bills and other receivables Bills and other receivables are stated at amortised cost less any allowance for impairment. 255
258. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.9Impairment Impairment of financial assets (i) Impairment of financial assets The Group and the Bank recognise allowance for impairment or allowance for expected credit losses “ECL” on financial assets measured at amortised cost, financial guarantee contracts, financing commitments and debt securities measured at FVOCI, but not to investments in equity instruments. The Group and the Bank define a financial instruments that has objective evidence of impairment as default, when it meets one or more of the following criteria; Quantitative criteria; i) ii) Principal or profit of both is past due for more than 90 days/MIA 3 Cross default Qualitative criteria; A financing is credit impaired when one or more triggers/criteria that have a detrimental impact on the estimated future cash flow of the financial asset have occurred. The Group and the Bank consider the following mandatory triggers; i) Ceased operation ii) Bankruptcy/wound up iii) Fraud with investigation report duly confirmed as fraud iv) Liquidator/R&M appointed v)Deceased Financial instruments that are credit-impaired with exposure more than RM1 million are assessed on individual basis. The Group and the Bank have considered the impact of the pandemic and has taken into account the economic and financial measures announced by the Government in estimating the ECL on the financial assets. Under collective assessment, the Group and the Bank apply a three-stage approach to measuring ECL on financial assets measured at amortised cost and FVOCI. Financial assets migrate through the following three stages based on the change in credit quality since initial recognition: 256 i) Stage 1: 12 months ECL (“Stage 1”) For exposures where there has not been a significant increase in credit risk since initial recognition and that are not credit impaired upon recognition, the portion of lifetime ECL associated with the probability of default events occurring within the next 12 months is recognised. ii) Stage 2: Lifetime ECL – not credit impaired (“Stage 2”) For exposures where there has been a significant increase in credit risk since initial recognition but that are not credit impaired, a lifetime ECL is recognised.
259. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.9Impairment (continued) Impairment of financial assets (continued) (i) Impairment of financial assets (continued) iii) Stage 3: Lifetime ECL – credit impaired (“Stage 3”) Financial assets are assessed as credit impaired when one or more events that have a negative impact on the estimated future cash flows of that asset have occurred. For financial assets that have become credit impaired, a lifetime ECL is recognised. The Group and the Bank consider the economic and financial measures announced by the Government, i.e. automatic moratorium as well as rescheduling and restructuring for eligible customers are granted as part of an unprecedented government effort to support the economy amid the pandemic, rather than in response to the financial circumstances of individual customers. Judgement is excercised in determining the significant increase in credit risk for customers receiving relief assistance and do not automatically result in a stage transfer. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group and the Bank consider reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s and the Bank’s historical experience, informed credit assessment and including forward-looking information. The Group and the Bank assume that the credit risk on a financial asset has increased significantly when it is more than 30 days past due. The Group and the Bank also use its internal credit risk grading system and external risk rating to assess deterioration in credit quality of a financial assets. The Group and the Bank assess whether the credit risk on a financial asset has increased significantly on an individual or collective basis. For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar risk characteristics, taking into account the asset type, industry, geographical location, collateral type, past-due status and other relevant factors. These characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the counterparty’s ability to pay all amounts due according to the contractual terms of the assets being evaluated. (ii) Measurement of ECL ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group and the Bank expect to receive). ECLs are discounted at the effective profit rate of the financial asset. 257
260. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.9Impairment (continued) Impairment of financial assets (continued) (iii) Incorporation of forward-looking information Relevant macroeconomic factors are incorporated in the risk parameters as appropriate. The key macroeconomics variables (“MEV”) that are incorporated in determining ECLs include, Oil Price (“OP”), Gross Domestic Product (“GDP”), House Price Index (“HPI”), and Kuala Lumpur Composite Index (“KLCI”). Forward-looking macroeconomic forecasts are generated by the Group’s and the Bank’s Economist as part of the ECL process. An economic forecast is accompanied with three economic scenarios: a base case (60%), which is the median scenario, and two less likely scenarios, one upside (20%) and one downside (20%). Selected MEVs are projected over the forecast period, and they could have a material impact in determining ECLs. Forecasted MEVs are derived by Economist using time series econometrics. The data series are procured from the official source such as Department of Statistics Malaysia (“DOSM”), BNM and other government agencies. Prior to MEV forecast, Economist would gather his or her intelligence from discussion with the policy makers, institutional investors and other news flow (main stream and social media) in order to form an opinion. The opinion may cover the economic policies, business cycle and financial market condition. This will be the main input before embarking MEV forecast exercise. The methodology and assumptions including any forecasts of future economic conditions are reviewed regularly. (iv) Credit impaired financial assets At each reporting date, the Group and the Bank assess whether financial assets carried at amortised cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a negative impact on the estimated future cash flows of the financial asset have occurred. Certain mandatory and judgmental triggers that the Group and the Bank use to determine that there is objective evidence of an impairment loss include: •• •• •• •• •• significant financial difficulty of the issuer or obligor; a breach of contract, such as default or delinquency in profit or principal payments; the restructuring of a financing or advance by the Group and the Bank on terms that the Group and the Bank would not consider otherwise; it is probable that the borrower will enter bankruptcy or other financial reorganisation; or based on external credit assessment institutions rating which indicates high likelihood of default. (v) Presentation of allowance for ECL in the statement of financial position Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognised in other comprehensive income. 258
261. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.9Impairment (continued) Impairment of financial assets (continued) (vi) Restructured financing A financing that is renegotiated is derecognised if the existing agreement is cancelled and a new agreement made on substantially different terms or if the terms of an existing agreement are modified such that the renegotiated financing is a substantially different instrument. Where such financing are derecognised, the renegotiated contract is a new financing and impairment is assessed in accordance with the Group’s and the Bank’s accounting policy. Where the renegotiation of such financing are not derecognised, the gross carrying amount is recalculated based on the revised cash flows with gain or loss on modification recognised in profit or loss. Impairment continues to be assessed for significant increases in credit risk compared to the initial origination credit risk rating. (vii)Write-off The gross carrying amount of a financial asset is written-off when the Group and the Bank have no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For individual customers, the Group and the Bank have a policy of writing off the gross carrying amount when the financial asset is 180 days past due based on historical experience of recoveries of similar assets. For commercial and corporate customers, the Group and the Bank individually make an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group and the Bank expect no significant recovery from the amount written-off. However, financial assets that are written-off could still be subject to enforcement activities in order to comply with the Group’s and the Bank’s procedures for recovery of amounts due. Impairment of other assets The carrying amount of other assets (except for current tax assets and deferred tax assets) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the profit or loss. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to the profit or loss in the year in which the reversals are recognised. 259
262. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.10 Bills and acceptances payable Bills and acceptances payable represent the Group’s and the Bank’s own bills and acceptances rediscounted and outstanding in the market. 2.11 Government grants Grant from the government are recognised at their fair value when there is a reasonable assurance that the grant will be received and the Group and the Bank will comply with all attached conditions. Government grants relating to costs are recognised in the profit or loss over the periods to match the related costs for which the grants are intended to compensate. The benefit of a government loan at a below-market rate of interest is treated as a government grant. The loan shall be recognised and measured in accordance with MFRS 9 Financial Instruments. The benefit of the belowmarket rate of interest shall be measured as the difference between the initial carrying value of the loan determined in accordance with MFRS 9 and the proceeds received. The benefit is accounted for in accordance with MFRS 120. The Group and the Bank shall consider the conditions and obligations that have been, or must be, met when identifying the costs for which the benefit of the loan is intended to compensate. 2.12Provisions A provision is recognised if, as a result of a past event, the Group and the Bank have a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The provisions are reviewed at each reporting date and if it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed. 2.13 Contingent liabilities Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is not recognised in the statements of financial position and is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events not wholly within the control of the Group and the Bank, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. 2.14 Contingent assets A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurence or non-occurrence of one or more uncertain future events beyond the control of the Group and the Bank. The Group and the Bank do not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain. 2.15 Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the chief operating decision maker, which in this case is the Chief Executive Officer of the Group, to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available. 260
263. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.16 Share Capital Ordinary shares are classified as equity in the statement of financial position. Cost directly attributable to the issuance of new equity shares are taken to equity as a deduction from the proceeds. Dividend distribution Liability is recognised for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Group, on or before the end of the reporting period but not distributed at the end of the reporting period. Distributions to holders of an equity instrument is recognised directly in equity. 2.17 Recognition of income Financing income Financing income is recognised in the profit or loss using the effective profit rate method. The effective profit rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instruments or, when appropriate, a shorter period to the net carrying amount of the financial instruments. When calculating the effective profit rate, the Group and the Bank have considered all contractual terms of the financial instruments but do not consider future credit losses. The calculation includes all fees and transaction costs integral to the effective profit rate, as well as premium or discounts. Income from a sale-based contract is recognised on effective profit rate basis over the period of the contract based on the principal amounts outstanding whereas income from Ijarah (lease-based contract) is recognised on effective profit rate basis over the lease term. For credit-impaired financial assets the effective profit rate is applied to the net carrying amount of the financial assets (after deduction of the loss allowance). Fee and other income recognition Financing arrangement, management and participation fees, underwriting commissions, brokerage fees and wakalah performance incentive fees are recognised as income based on contractual arrangements. Fees from advisory and corporate finance activities are recognised net of service tax, discounts on satisfaction of performance obligations and completion of each stage of the assignment. Dividend income from subsidiaries and other investments are recognised when the Group’s and the Bank’s rights to receive payment is established. 2.18 Material profit or loss items The Group and the Bank have identified item which is material due to the significance of their nature and/or their amount. This is listed separately here to provide a better understanding of the financial performance of the Group and of the Bank. Group and Bank Loss on modification of financial assets 2021 RM’000 2020 RM’000 (48,911) (136,380) 261
264. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.18 Material profit or loss items (continued) During the previous financial year, the Group and the Bank granted an automatic moratorium on certain financing repayments (except for credit card balances), to individuals and small and medium enterprises (SMEs) for a period of six months from 1 April 2020. The automatic moratorium was applicable to financing that are not in arrears exceeding 90 days and denominated in Malaysian Ringgit. This measure was to assist customers experiencing temporary financial constraints due to the COVID-19 pandemic. Following the end of the six-month blanket moratorium, the Group and the Bank continue to support financing customers that face difficulties in fulfilling their financial obligation, through various Repayment Assistance (“RA”) programme. As a result of the payment moratorium and TRA, the Group and the Bank recognised a one-off loss of RM48,910,000 (2020: RM136,380,000 arising from the modification of the expected cash flows of the financing. The following table includes a summary of information for financial assets with lifetime ECL whose cash flows were modified during the financial year as part of the Group and Bank’s restructuring and rescheduling activities and their respective effect on the Group and the Bank’s financial performance: Group and Bank Financing, advances and others: Amortised cost before modification Net modification loss 2021 RM’000 2020 RM’000 1,247,366 1,232,548 1,881,218 1,867,943 2.19 Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial years. Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. 262
265. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.19 Income tax (continued) A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 2.20Zakat This represents business zakat that is paid on the Bank’s portion. It is an obligatory amount payable by the Group and the Bank to comply with the rules and principles of Shariah. 2.21 Employee benefits Short-term employee benefits Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus and termination benefits if the Group and the Bank have a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. The Group’s and the Bank’s contribution to the Employees Provident Fund is charged to the profit or loss in the year to which they relate. Once the contributions have been paid, the Group and the Bank have no further payment obligations. 2.22Earnings per ordinary shares The Group presents basic earnings per share data for its ordinary shares (“EPS”). Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the year. 2.23Fair value measurements ‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group and the Bank have access at that date. The fair value of a liability reflects its non-performance risk. When available, the Group and the Bank measure the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active market, then the Group and the Bank use valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction. 263
266. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.23Fair value measurements (continued) The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price – i.e. the fair value of the consideration given or received. If the Group and the Bank determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out. If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a bid price and liabilities and short positions at an ask price. Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Group on the basis of the net exposure to either market or credit risk are measured on the basis of a price that would be received to sell a net long position (or paid to transfer a net short position) for a particular risk exposure. Those portfolio-level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio. The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid. The Group and the Bank recognise transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred. 3. CASH AND SHORT-TERM FUNDS Group Cash and balances with banks and other financial institutions Money at call and interbank placements with remaining maturity not exceeding three months Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 754,313 725,644 751,187 725,548 4,468,535 4,491,093 4,453,177 4,490,732 5,222,848 5,216,737 5,204,364 5,216,280 All bank balances are assessed to have low credit risk as they are held with reputable banking institutions and the identified expected credit loss was immaterial. Cash and bank balances of the Group includes restricted cash amounting to RM10,391,000 (2020: RM4,423,000) which is attributed to the creation of units of the funds. Accordingly, amount due to trustee was recognised and disclosed in Note 19 to the financial statements. 264
267. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 4. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS (“FVTPL”) Group Malaysian Government Investment Issues Unit trust Malaysian Islamic Treasury Bills Islamic Commercial Paper Corporate Sukuk Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 – 295,395 1,131,574 145,300 10,225 602,925 238,490 243,618 30,051 66,116 – 263,611 1,131,574 145,300 10,215 602,925 232,730 243,618 30,051 66,116 1,582,494 1,181,200 1,550,700 1,175,440 5. DERIVATIVE FINANCIAL ASSETS/(LIABILITIES) The following tables summarise the contractual or underlying principal amounts of derivative financial instruments held at fair value through profit or loss. The principal or contractual amount of these instruments reflects the volume of transactions outstanding at financial position date, and do not represent amounts at risk. Trading derivative financial instruments are revalued on a gross position and the unrealised gains or losses are reflected as derivative financial assets and liabilities respectively. 2021 Group and Bank Forward contracts Profit rate swaps Fair value Notional amount RM’000 Assets RM’000 7,505,850 79,153 25,120 917 (19,753) (668) 7,585,003 26,037 (20,421) Liabilities RM’000 2020 Fair value Group and Bank Notional amount RM’000 Assets RM’000 Liabilities RM’000 Forward contracts Profit rate swaps 8,518,422 114,056 59,494 2,171 (104,228) (1,644) 8,632,478 61,665 (105,872) 265
268. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 6 . FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (“FVOCI”) Group Financial assets at FVOCI: (a) Debt instrument* (b) Equity instrument Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 12,526,670 77,534 12,494,040 63,951 12,526,670 78,397 12,494,040 64,689 12,604,204 12,557,991 12,605,067 12,558,729 * Included in debt instruments are investment made in Malaysian Government Securities (“MGS”) and Malaysian Government Investment Issues (“MGII”) amounting to RM600,000,000 (2020: RM600,000,000) as part of the Bank’s Statutory Reserves Requirements (“SRR”) compliance. (a) Debt instrument at FVOCI Group and Bank Malaysian Government Investment Issues Corporate Sukuk Malaysian Islamic Treasury Bills Islamic Commercial Papers 2021 RM’000 2020 RM’000 3,497,806 7,143,163 962,313 923,388 2,919,864 9,314,815 – 259,361 12,526,670 12,494,040 Movement of allowance for impairment on financial assets at FVOCI: Group and Bank 266 2021 RM’000 2020 RM’000 Stage 1 At 1 January Net allowances made during the year 403 6,834 265 138 At 31 December 7,237 403
269. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 6. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (“FVOCI”) (CONTINUED) (b) Equity instrument at FVOCI Group Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 Quoted Shares – outside Malaysia# 17,004 13,755 17,004 13,755 Unquoted Shares – in Malaysia* – outside Malaysia 60,515 15 50,194 2 61,378 15 50,932 2 60,530 50,196 61,393 50,934 77,534 63,951 78,397 64,689 The Group and the Bank designated certain investments as equity instrument at FVOCI. The FVOCI designation was made because these instruments are either held for socio-economic purposes or not for trading purposes. Equity instrument at FVOCI of the Bank mainly comprise the following significant individual investment: Fair value Amana Bank Limited *Payment Networks Malaysia Sdn Bhd # Dividend income 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 17,004 60,515 13,755 49,478 – – 503 – 7. FINANCIAL ASSETS AT AMORTISED COST (“AC”) Group Debt instrument at amortised cost: Malaysian Government Investment Issues Corporate sukuk Less: Allowance for impairment Stage 3 – Corporate sukuk Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 802,446 551,687 – 5,289 802,446 551,687 – 5,289 1,354,133 5,289 1,354,133 5,289 (5,289) 1,348,844 (5,289) – (5,289) 1,348,844 (5,289) – 267
270. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 8 . FINANCING, ADVANCES AND OTHERS (a) By type and Shariah contract Group and Bank 2021 Cash line Term financing House financing Syndicated financing Leasing financing Bridging financing Personal financing Other term financing Staff financing Credit cards Trade bills discounted Trust receipts Pawn broking Bai’ Bithaman Ajil Murabahah RM’000 RM’000 Bai’ Al-Dayn RM’000 Bai’ Al-Inah RM’000 - - 484 2,977,908 295,209 1,383,579 40,459 18,789 622,908 4,415 95,124 3,313,576 - 2,124,815 Allowance for impairment on financing, advances and others – Stage 1 – Stage 2 – Stage 3 Net financing, advances and others Ijarah Muntahiah AtBitTawarruq Tamleek^ RM’000 RM’000 Istisna’ RM’000 Total RM’000 1,429,002 - - 1,429,486 107,820 - - 20,513,876 - 1,454,811 3,734 18,071,544 11,080,781 398,071 445,839 87,051 - 96,020 - 42,469 23,534,253 - 1,454,811 96,020 40,328 40,328 - 18,075,278 961 12,760,530 6,553 463,872 445,839 817,779 4,415 95,124 107,820 4,218 53,480,975 96,020 90,311 59,217,735 (487,308) (303,998) (272,660) 58,153,769 ^ Assets funded under Ijarah financing are owned by the Bank throughout the tenure of the Ijarah financing and ownership of the assets will be transferred to customer at the end of financing tenure for a token consideration or other amount as specified in the Ijarah financing contract. 268
271. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 8. FINANCING, ADVANCES AND OTHERS (CONTINUED) (a) By type and Shariah contract (continued) Group and Bank 2020 Bai’ Bithaman Ajil Murabahah RM’000 RM’000 At amortised cost Cash line – Term financing House financing 3,238,398 Syndicated financing – Leasing financing – Bridging financing – Personal financing – Other term financing 487,567 Staff financing 46,367 Credit cards – Trade bills discounted – Trust receipts – Pawn broking – 3,772,332 Ijarah Muntahiah AtBitTawarruq Tamleek^ RM’000 RM’000 Bai’ Al-Dayn RM’000 Bai’ Al-Inah RM’000 – – 1,465 1,287,126 – – – – – 1,411,820 15,847 – – – – – – – – – – 18,280,073 – 1,459,016 – – – – 5,256 16,816,181 15 10,736,190 – 307,861 – 447,471 631,567 5,584 – 31,221 5 – 3,034 – – 2,064,818 31,226 Allowance for impairment on financing, advances and others – Stage 1 – Stage 2 – Stage 3 Net financing, advances and others Istisna’ RM’000 Ar-Rahnu RM’000 Total RM’000 – – – 1,288,591 – – 114,300 – – – – – 45,780 – – 47,380 – 1,119 7,584 – 164,888 – – – – – – – – 9,770 49,498,806 114,300 101,863 – 21,564,251 – 1,459,016 – 114,300 – 47,380 – 16,821,437 – 12,636,711 – 377,659 – 447,471 – – 5,481 830,710 5,589 5,481 5,481 55,598,596 (653,983) (151,446) (122,532) 54,670,635 ^ Assets funded under Ijarah financing are owned by the Bank throughout the tenure of the Ijarah financing and ownership of the assets will be transferred to customer at the end of financing tenure for a token consideration or other amount as specified in the Ijarah financing contract. 269
272. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 8 . FINANCING, ADVANCES AND OTHERS (CONTINUED) (a) By type and Shariah contract (continued) Included in financing, advances and others are house financing and personal financing that are used for the underlying assets of Unrestricted Investment Accounts (“UA”) and financing sold to Cagamas with recourse to the Group and the Bank. The details are as follows: Group Note House financing Unrestricted Investment Accounts Sold to Cagamas with recourse Personal financing Unrestricted Investment Accounts 16 17 16 Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 8,554,270 2,001,720 8,740,902 1,501,187 8,608,619 2,001,720 8,741,086 1,501,187 10,555,990 10,242,089 10,610,339 10,242,273 1,898,632 3,627,626 1,952,982 3,627,811 (b) By type of customer Group and Bank Domestic banking institutions Domestic non-bank financial institutions Domestic business enterprise Small & medium enterprises Government & statutory bodies Individuals Other domestic entities Foreign entities 270 2021 RM’000 2020 RM’000 200,018 1,089,617 10,137,127 2,169,436 919,583 44,451,160 21,676 229,118 200,459 1,272,857 9,859,263 1,799,003 743,051 41,353,603 102,008 268,352 59,217,735 55,598,596
273. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 8. FINANCING, ADVANCES AND OTHERS (CONTINUED) (c) By profit rate sensitivity Group and Bank Fixed rate House financing Others Floating rate House financing Others 2021 RM’000 2020 RM’000 983,468 4,645,157 732,437 3,859,673 23,238,913 30,350,197 21,485,764 29,520,722 59,217,735 55,598,596 (d) By remaining contractual maturity Group and Bank Maturity within one year More than one year to three years More than three years to five years More than five years 2021 RM’000 2020 RM’000 4,117,569 1,731,612 3,136,006 50,232,548 3,660,883 1,516,856 3,272,167 47,148,690 59,217,735 55,598,596 (e) By geographical distribution Group and Bank Central Region Eastern Region Northern Region Southern Region East Malaysia Region 2021 RM’000 2020 RM’000 26,946,146 9,368,591 8,066,342 10,247,330 4,589,326 25,745,132 8,757,468 7,431,066 9,416,361 4,248,569 59,217,735 55,598,596 271
274. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 8 . FINANCING, ADVANCES AND OTHERS (CONTINUED) (f) By sector Group and Bank Primary agriculture Mining and quarrying Manufacturing (including agro-based) Electricity, gas and water supply Wholesale & retail trade, and restaurants & hotels Construction Transport, storage and communications Finance, insurance, real estate and business activities Education, health and others Household sectors 2021 RM’000 2020 RM’000 960,757 67,474 1,008,846 2,054,242 956,449 2,864,869 726,341 4,735,590 1,387,814 44,455,353 1,044,451 67,305 1,001,272 2,032,684 951,149 2,736,468 681,659 4,557,954 1,168,902 41,356,752 59,217,735 55,598,596 (g) By stages Stage 1 RM’000 Stage 2 RM’000 Stage 3 RM’000 Total RM’000 At 1 January 2020 48,265,712 1,525,256 433,001 50,223,969 Transfer to Stage 1 Transfer to Stage 2 Transfer to Stage 3 Financial assets that have been derecognised New financial assets originated or purchased Modification of contractual cash flows Write-offs Exchange differences 263,081 (843,859) (45,319) (7,012,865) 12,410,241 (104,033) – (3,636) (25,902) (32,853) 113,885 (16,214) 13,992 – (112,675) – – – – (7,310,024) 12,904,995 (104,033) (112,675) (3,636) 373,234 55,598,596 (13,822) (23,032) 362,761 (7,493) 4,684 – (127,949) – – – – (8,037,975) 11,800,406 (25,328) (127,949) 9,985 568,383 59,217,735 Group and Bank 272 At 31 December 2020/1 January 2021 52,929,322 Transfer to Stage 1 Transfer to Stage 2 Transfer to Stage 3 Financial assets that have been derecognised New financial assets originated or purchased Modification of contractual cash flows Write-offs Exchange differences 607,206 (620,226) (308,485) (7,539,292) 11,490,674 (25,323) – 9,985 At 31 December 2021 56,543,861 (237,179) 876,712 (68,566) (280,945) 480,762 – – – 2,296,040 (593,384) 643,258 (54,276) (491,190) 305,048 (5) – – 2,105,491
275. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 8. FINANCING, ADVANCES AND OTHERS (CONTINUED) (h) Movement in impaired financing and advances (“impaired financing”) Group and Bank 2021 RM’000 2020 RM’000 373,234 433,001 Classified as impaired during the year Reclassified as not impaired during the year Amount repaid Amount written-off 597,779 (212,296) (62,386) (127,948) 311,012 (190,989) (67,114) (112,676) At 31 December 568,383 373,234 0.96% 0.67% At 1 January Gross impaired financing as a percentage of gross financing, advances and others The contractual amount outstanding on financing and advances that were written-off during the year are still subject to enforcement activity. (i) Impaired financing by geographical distribution Group and Bank Central Region Eastern Region Northern Region Southern Region East Malaysia Region 2021 RM’000 2020 RM’000 395,781 68,146 74,751 17,458 12,247 174,617 86,291 78,220 19,167 14,939 568,383 373,234 (j) Impaired financing by sector Group and Bank Manufacturing (including agro-based) Wholesale & retail trade, and hotels & restaurants Construction Transport, storage and communications Finance, insurance, real estate and business activities Education, health & others Household sectors 2021 RM’000 2020 RM’000 10,307 76,992 285,246 15,311 5,932 1,391 173,204 28,328 89,812 36,220 17,801 6,141 3,969 190,963 568,383 373,234 273
276. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 8 . FINANCING, ADVANCES AND OTHERS (CONTINUED) (k) Movement of allowance for impairment on financing, advances and others Group and Bank Stage 1 RM’000 Stage 2 RM’000 Stage 3 RM’000 Total RM’000 At 1 January 2020 431,135 148,115 172,197 751,447 Transfer to Stage 1 Transfer to Stage 2 Transfer to Stage 3 Changes in credit risk New financial assets originated or purchased Financial assets that have been derecognised Write-offs Exchange differences 1,245 (7,782) (264) 134,059 139,295 (44,708) – 1,003 (66) (2,726) 7,923 60,558 686 (3,364) (112,676) – – – – 208,209 146,384 (66,406) (112,676) 1,003 At 31 December 2020/1 January 2021 653,983 151,446 122,532 927,961 Transfer to Stage 1 Transfer to Stage 2 Transfer to Stage 3 Changes in credit risk New financial assets originated or purchased Financial assets that have been derecognised Write-offs Exchange differences 2,461 (7,311) (167) (189,876) 98,862 (68,660) – (1,984) (2,416) 8,826 (5,036) 164,283 8,326 (21,431) – – (45) (1,515) 5,203 277,396 2,029 (4,992) (127,948) – – – – 251,803 109,217 (95,083) (127,948) (1,984) 487,308 303,998 272,660 At 31 December 2021 (1,179) 10,508 (7,659) 13,592 6,403 (18,334) – – 1,063,966 (l) Effect of modifications on the measurement of allowance for impaired financing, advances and others The following table discloses information on financing and advances that were modified but not derecognised during the year, for which the allowance for impaired financing, advances and others were measured at a lifetime ECL at the beginning of the year, and at the end of the year had changed to a 12-months ECL: Group and Bank Amortised cost before the modification Net modification loss 274 2021 RM’000 2020 RM’000 4,549 5 431 439
277. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 9. OTHER ASSETS Group Other receivables Deposit and prepayments Related companies* Less: Allowance for impairment Stage 3 – Other receivables Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 265,271 50,343 1,071 168,256 41,012 1,056 214,908 43,730 2,173 157,952 40,457 1,154 316,685 210,324 260,811 199,563 (3,731) 312,954 (2,975) 207,349 (3,731) 257,080 (2,975) 196,588 * This relates to amounts due from subsidiaries and related companies that are unsecured, not subject to compensation charges for late payment and repayment is neither fixed nor expected. 10. STATUTORY DEPOSITS WITH BANK NEGARA MALAYSIA The non-interest bearing statutory deposits are maintained with Bank Negara Malaysia in compliance with Section 26(2)(c) of the Central Bank of Malaysia Act, 2009, the amount of which are determined as set percentages of total eligible liabilities. 275
278. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 11 . DEFERRED TAX ASSETS Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The components of deferred tax assets and liabilities during the financial year are as follows: Group 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 193,214 – 1,511 (74,445) 191,773 – – (74,445) 193,214 (72,934) 191,773 (74,445) Deferred tax assets: Provisions for expenses Financing, advances and others Lease liabilities FVOCI Reserves Tax losses Unabsorbed capital allowances Offsetting 26,301 104,763 25,795 46,292 1,510 10 (11,457) 32,505 86,457 24,673 – 1,510 – (143,634) 26,393 104,763 25,768 46,292 – – (11,443) 32,520 86,457 24,646 – – – (143,623) Total deferred tax assets 193,214 Deferred tax assets Deferred tax liabilities Deferred tax liabilities: Property and equipment FVOCI Reserves Deferred income from moratorium Offsetting Total deferred tax liabilities 276 Bank (11,457) – – 11,457 – 1,511 (6,370) (48,379) (163,330) 143,634 (74,445) 191,773 (11,443) – – 11,443 – – (6,359) (48,379) (163,330) 143,623 (74,445)
279. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 11. DEFERRED TAX ASSETS (CONTINUED) The movement in temporary differences during the year are as follows: Provision for expenses RM’000 Financing, advances and others RM’000 33,347 (842) 33,108 53,349 23,142 1,531 – – – (163,330) 1,510 – – – – – – 32,505 86,457 24,673 – Acquisition of subsidiary Recognised in profit or loss Recognised in other comprehensive income – (6,204) – 18,306 – 1,122 – – At 31 December 2021 26,301 Group At 1 January 2020 Recognised in profit or loss Recognised in other comprehensive income At 31 December 2020/ 1 January 2021 Bank At 1 January 2020 Recognised in profit or loss Recognised in other comprehensive income At 31 December 2020/ 1 January 2021 Recognised in profit or loss Recognised in other comprehensive income At 31 December 2021 Deferred Unabsorbed income Lease Capital from liabilities Allowances moratorium RM’000 RM’000 RM’000 Property Tax and losses equipment RM’000 RM’000 FVOCI Reserves RM’000 Total RM’000 (3,462) (2,908) (53,871) – 33,774 (112,200) – – 5,492 5,492 (163,330) 1,510 (6,370) (48,379) (72,934) 10 – – 163,330 – – – (5,087) – – 10 171,467 – – – – – 94,671 94,671 104,763 25,795 10 – 1,510 (11,457) 46,292 193,214 33,347 (827) 33,108 53,349 23,142 1,504 – – – (163,330) – – (3,458) (2,901) (53,871) – 32,268 (112,205) – – – – – – – 5,492 5,492 32,520 (6,127) 86,457 18,306 24,646 1,122 – – (163,330) 163,330 – – (6,359) (5,084) (48,379) – (74,445) 171,547 – – – – – – – 94,671 94,671 26,393 104,763 25,768 – – – (11,443) 46,292 191,773 277
280. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 11 . DEFERRED TAX ASSETS (CONTINUED) Deferred tax assets have not been recognised in respect of the following items: Group Unabsorbed capital allowance Unutilised tax losses Deductible temporary differences Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 131,819 1,251 329 131,819 1,251 329 131,784 – – 131,784 – – 133,399 133,399 131,784 131,784 Under the current tax legislation, the unutilised tax losses will expire in year 2025 where the unutilised capital allowance do not expire. The Bank’s unabsorbed capital allowances of RM131,784,000 (2020: RM131,784,000) is in respect of its leasing business, whereby management considered it is uncertain whether the Bank is able to utilise the benefits in the future. As such, deferred tax assets have not been recognised. 12. RIGHTS-OF-USE ASSETS AND LEASE LIABILITIES The statement of financial position shows the following amounts relating to leases: Group 278 Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 Right-of-use assets (Buildings) As at 1 January Addition Reversal Depreciation 209,736 4,461 – (18,197) 229,135 432 (1,483) (18,348) 209,736 3,920 – (18,042) 229,135 401 (1,483) (18,317) As at 31 December 196,000 209,736 195,614 209,736 Lease liabilities As at 1 January Addition Reversal Payments of lease liabilities Finance cost Effects of movement in exchange rates 312,429 4,512 – (30,818) 17,312 13 325,559 437 (1,472) (29,920) 17,836 (11) 312,429 3,915 – (30,676) 17,303 13 325,559 401 (1,472) (29,883) 17,835 (11) As at 31 December 303,448 312,429 302,984 312,429
281. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 12. RIGHTS-OF-USE ASSETS AND LEASE LIABILITIES (CONTINUED) The statement of profit or loss shows the following amounts relating to leases: Group Expenses relating to short-term leases (included in other overhead expenses) Total cash outflow of leases (including short-term leases) Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 35,165 65,983 35,192 65,112 35,012 65,688 35,477 65,360 The nature of the Group’s and the Bank’s leasing activities recognised in the statement of financial position are described as below: Right-of-use assets: Buildings No. of leases Range of remaining terms Average remaining lease terms No. of leases with termination option 8 0.5-14.4 years 14.2 years 8 Future minimum lease payments are as follows: Within 1 year RM’000 Minimum lease payment due 1 – 5 years RM’000 > 5 years RM’000 Total RM’000 Group 31 December 2021 Lease payment Finance cost Net present value 29,956 17,536 12,420 113,434 59,931 53,502 309,264 71,739 237,526 452,654 149,206 303,448 31 December 2020 Lease payment Finance cost Net present value 30,639 17,203 13,436 109,103 62,552 46,551 338,038 85,596 252,442 477,780 165,351 312,429 31 December 2021 Lease payment Finance cost Net present value 29,481 17,525 11,956 113,434 59,931 53,502 309,264 71,739 237,526 452,179 149,195 302,984 31 December 2020 Lease payment Finance cost Net present value 30,639 17,203 13,436 109,103 62,552 46,551 338,038 85,596 252,442 477,780 165,351 312,429 Bank 279
282. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 13 . INVESTMENTS IN SUBSIDIARIES Bank 2021 RM’000 At cost Unquoted shares in Malaysia Less: Accumulated impairment loss 101,827 (922) 16,447 (922) 100,905 15,525 16,447 85,380 16,447 – 101,827 16,447 Movement of Investment in Subsidiaries At 1 January Acquisition via Proposed Internal Reorganisation (Note 46) At 31 December 2020 RM’000 The principal place of business and country of incorporation of the subsidiaries is Malaysia unless stated otherwise. Details of subsidiaries are as follows: Effective ownership interest 2021 % 2020 % Provides nominee services 100 100 BIMB Investment Management Berhad Manages Islamic Unit Trust Funds 100 100 Bank Islam Trust Company (Labuan) Ltd. and its subsidiary: Provides services as a Labuan registered trust company 100 100 Dormant 100 100 Farihan Corporation Sdn. Bhd. Provides manpower services to the Bank 100 100 BIMB Holdings Sdn. Bhd. (formerly known as BIMB Holdings Berhad)^ Dormant 100 – BIMB Securities (Holdings) Sdn. Bhd.^ and its subsidiary: Investment holding 100 – Stockbroking 100 – Provides nominee services 100 – Provides Nominee services 100 – Leasing of assets 100 – Name of Company Principal activities Al-Wakalah Nominees (Tempatan) Sdn. Bhd. BIMB Offshore Company Management Services Sdn. Bhd. BIMB Securities Sdn. Bhd.^ and its subsidiaries: BIMSEC Nominees (Tempatan) Sdn. Bhd.^ BIMSEC Nominees (Asing) Sdn. Syarikat Al-Ijarah Sdn. Bhd.^ Bhd.^ ^ Subsidiaries acquired during the financial year pursuant to the Proposed Internal Reorganisation (Note 46) 280
283. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 14. PROPERTY AND EQUIPMENT Office equipment RM’000 Computer equipment RM’000 Motor vehicles RM’000 Renovation work-inprogress RM’000 Management information system under development RM’000 136,648 5 2,419 – – (823) 11 102,585 9 3,407 29 (94) (5,971) 10 480,558 1,027 13,502 36,506 (6,222) (21,694) 12 943 – – – (74) – – 3,987 509 815 (45) – – – 56,675 – 50,504 (36,490) – – – 832,213 2,447 71,155 – (6,390) (28,672) 33 36,630 138,260 99,975 503,689 869 5,266 70,689 870,786 – 12 – – – 29,123 1,743 – (86) – 108,486 7,756 – (469) 11 91,229 5,040 (92) (5,840) 10 369,233 44,407 (6,218) (21,658) 11 794 93 (74) – – – – – – – – – – – – 601,213 59,225 (6,384) (28,053) 32 – 12 30,780 115,784 90,347 385,775 813 – – 626,033 143 469 5,850 22,476 9,628 117,914 56 5,266 70,689 244,753 Building improvements Furniture, and fixtures and Freehold fittings building renovations RM’000 RM’000 RM’000 Long term leasehold land RM’000 Freehold land RM’000 Cost At 1 January 2021 From group reorganisation Additions Reclassifications Disposals Written-off Exchange difference 14,784 – – – – – – – 143 – – – – – – 481 – – – – – 36,033 273 508 – – (184) – At 31 December 2021 14,784 143 481 Accumulated depreciation At 1 January 2021 Depreciation for the year Disposals Written-off Exchange difference 2,348 174 – – – – – – – – At 31 December 2021 2,522 Net carrying amount At 31 December 2021 12,262 Group Total RM’000 281
284. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 14 . PROPERTY AND EQUIPMENT (CONTINUED) Total RM’000 943 – – – – – 4,362 2,130 (2,505) – – – 23,428 51,155 (17,908) – – – 761,915 92,879 – (1,069) (21,494) (18) 480,558 943 3,987 56,675 832,213 89,781 5,881 (85) (4,342) (6) 344,014 39,678 (901) (13,552) (6) 701 93 – – – – – – – – – – – – – 566,320 56,546 (1,067) (20,569) (17) 108,486 91,229 369,233 794 – – 601,213 28,162 11,356 111,325 149 3,987 56,675 231,000 Long term leasehold land RM’000 Furniture, fixtures and fittings RM’000 Office equipment RM’000 Computer equipment RM’000 Motor vehicles RM’000 Cost At 1 January 2020 Additions Reclassifications Disposals Written-off Exchange difference 14,784 – – – – – 35,764 646 372 – (749) – 135,352 2,370 1,782 (81) (2,770) (5) 102,239 4,478 351 (85) (4,391) (7) 445,043 32,100 17,908 (903) (13,584) (6) At 31 December 2020 14,784 36,033 136,648 102,585 Accumulated depreciation At 1 January 2020 Depreciation for the year Disposals Written-off Exchange difference 2,174 174 – – – 27,857 1,849 – (583) – 101,793 8,871 (81) (2,092) (5) At 31 December 2020 2,348 29,123 Net carrying amount At 31 December 2020 12,436 6,910 Group 282 Renovation work-inprogress RM’000 Management information system under development RM’000 Building improvements and renovations RM’000
285. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 14. PROPERTY AND EQUIPMENT (CONTINUED) Renovation work-inprogress RM’000 Management information system under development RM’000 Total RM’000 943 – – (74) – – 3,987 752 – – – – 56,675 50,504 (36,490) – – – 829,262 70,862 – (6,342) (28,638) 21 500,207 869 4,739 70,689 865,165 90,931 5,031 (47) (5,816) 7 367,366 44,055 (6,216) (21,654) 2 794 93 (74) – – – – – – – – – – – – 598,746 58,803 (6,337) (28,019) 20 115,706 90,106 383,553 813 – – 623,213 22,466 9,480 116,654 56 4,739 70,689 241,952 Long term leasehold land RM’000 Building improvements and renovations RM’000 Furniture, fixtures and fittings RM’000 Office equipment RM’000 Computer equipment RM’000 Motor vehicles RM’000 Cost At 1 January 2021 Additions Reclassifications Disposals Written-off Exchange difference 14,784 – – – – – 35,795 508 – – (184) – 136,559 2,419 – – (817) 11 102,269 3,305 – (48) (5,947) 7 478,250 13,374 36,490 (6,220) (21,690) 3 At 31 December 2021 14,784 36,119 138,172 99,586 Accumulated depreciation At 1 January 2021 Depreciation for the year Disposals Written-off Exchange difference 2,348 174 – – – 28,896 1,703 – (86) – 108,411 7,747 – (463) 11 At 31 December 2021 2,522 30,513 Net carrying amount At 31 December 2021 12,262 5,606 Bank 283
286. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 14 . PROPERTY AND EQUIPMENT (CONTINUED) Total RM’000 943 – – – – – 4,362 2,130 (2,505) – – – 23,428 51,155 (17,908) – – – 759,152 92,684 – (1,069) (21,494) (11) 478,250 943 3,987 56,675 829,262 89,486 5,877 (85) (4,342) (5) 342,318 39,502 (901) (13,552) (1) 701 93 – – – – – – – – – – – – – 564,052 56,341 (1,067) (20,569) (11) 108,411 90,931 367,366 794 – – 598,746 28,148 11,338 110,884 149 3,987 56,675 230,516 Long term leasehold land RM’000 Furniture, fixtures and fittings RM’000 Office equipment RM’000 Computer equipment RM’000 Motor vehicles RM’000 Cost At 1 January 2020 Additions Reclassifications Disposals Written-off Exchange difference 14,784 – – – – – 35,526 646 372 – (749) – 135,263 2,370 1,782 (81) (2,770) (5) 101,929 4,470 351 (85) (4,391) (5) 442,917 31,913 17,908 (903) (13,584) (1) At 31 December 2020 14,784 35,795 136,559 102,269 Accumulated depreciation At 1 January 2020 Depreciation for the year Disposals Written-off Exchange difference 2,174 174 – – – 27,646 1,833 – (583) – 101,727 8,862 (81) (2,092) (5) At 31 December 2020 2,348 28,896 Net carrying amount At 31 December 2020 12,436 6,899 Bank 284 Renovation work-inprogress RM’000 Management information system under development RM’000 Building improvements and renovations RM’000
287. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 15. DEPOSITS FROM CUSTOMERS (a) By type of deposit Group Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 7,221,380 6,051,242 7,221,380 6,051,242 Demand Deposit Qard 12,954,014 11,742,875 12,968,663 11,752,697 Term Deposit 37,044,548 33,163,038 37,054,991 33,171,405 – 3,662 – 3,662 149,833 176,359 149,833 176,359 35,721,908 31,496,106 35,732,351 31,504,473 1,172,807 1,486,911 1,172,807 1,486,911 118,892 120,107 118,892 120,107 57,338,834 51,077,262 57,363,926 51,095,451 Savings Deposit Qard Special Investment Deposit Mudharabah General Investment Deposit Mudharabah Term Deposit-i Tawarruq Negotiable Islamic Debt Certificates (NIDC) Others Total Deposits (b) Maturity structure of term deposits are as follows: Group Due within six months More than six months to one year More than one year to three years More than three years to five years Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 22,267,682 11,193,457 1,252,439 2,330,970 18,093,028 9,960,654 2,336,348 2,773,008 22,268,464 11,196,267 1,259,290 2,330,970 18,093,941 9,962,675 2,341,781 2,773,008 37,044,548 33,163,038 37,054,991 33,171,405 285
288. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 15 . DEPOSITS FROM CUSTOMERS (CONTINUED) (c) By type of customers Group Domestic non-bank financial institutions Business enterprises Government and statutory bodies Individuals Domestic banking institutions Others Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 6,059,847 22,935,511 16,414,063 7,864,062 976,873 3,088,478 6,901,831 20,921,604 13,033,032 7,042,432 718,962 2,459,401 6,084,939 22,935,511 16,414,063 7,864,062 976,873 3,088,478 6,920,020 20,921,604 13,033,032 7,042,431 718,962 2,459,402 57,338,834 51,077,262 57,363,926 51,095,451 16. INVESTMENT ACCOUNTS OF CUSTOMERS (a) By type and Shariah contract Group Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 Unrestricted investment accounts Without maturity: Mudharabah – Savings – Demand 6,655,637 5,343,189 1,312,448 5,113,275 4,446,643 666,632 6,655,637 5,343,189 1,312,448 5,113,275 4,446,643 666,632 With maturity: Wakalah 3,797,265 7,255,253 3,905,964 7,255,622 10,452,902 12,368,528 10,561,601 12,368,897 849 11,915 849 11,915 Restricted investment accounts (“RA”) managed by the Bank^ With maturity: Wakalah ^ Included in RA managed by the Bank is an arrangement between the Bank and Lembaga Tabung Haji where the Bank acts as an investment agent to manage and administer the RA, with underlying assets amounting to RM849,000 (2020: RM11,915,000). 286
289. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 16. INVESTMENT ACCOUNTS OF CUSTOMERS (CONTINUED) (b) By type of customers Group Individuals Government and statutory bodies Business Enterprises Non-bank financial institutions International Islamic Bank Others Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 5,745,138 2,437,046 1,267,853 835,758 – 167,107 4,840,308 4,385,196 1,130,539 1,861,096 – 151,389 5,745,138 2,437,046 1,267,853 944,457 – 167,107 4,840,308 4,385,196 1,130,539 1,861,465 – 151,389 10,452,902 12,368,528 10,561,601 12,368,897 (c) Movement of investment accounts of customers Mudharabah RM’000 Wakalah RM’000 Total RM’000 Restricted investment accounts Wakalah RM’000 As at 1 January 2020 3,211,343 7,029,030 10,240,373 35,062 Funding inflows/outflows: Net movement New placement Redemption/Principal repayment Income from investment 1,891,324 – – 167,812 – 7,231,351 (7,216,546) 339,397 1,891,324 7,231,351 (7,216,546) 507,209 – – (23,849) 1,278 – (127,979) (157,204) (127,979) – (576) Unrestricted investment accounts Group Bank’s share of profit: Profit distributed to Mudharib Wakalah fees As at 31 December 2020/ 1 January 2021 Funding inflows/outflows: Net movement New placement Redemption/Principal repayment Income from investment Bank’s share of profit: Profit distributed to Mudharib Wakalah fees As at 31 December 2021 (157,204) – 5,113,275 7,255,253 12,368,528 11,915 1,528,718 – – 209,529 – 7,534,543 (11,139,014) 282,542 1,528,718 7,534,543 (11,139,014) 492,071 – – (10,784) 26 – (136,059) (195,885) (136,059) – (308) (195,885) – 6,655,637 3,797,265 10,452,902 849 287
290. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 16 . INVESTMENT ACCOUNTS OF CUSTOMERS (CONTINUED) (c) Movement of investment accounts of customers (continued) Mudharabah RM’000 Wakalah RM’000 Total RM’000 Restricted investment accounts Wakalah RM’000 As at 1 January 2020 3,211,343 7,029,030 10,240,373 35,062 Funding inflows/outflows: Net movement New placement Redemption/Principal repayment Income from investment 1,891,324 – – 167,812 – 7,231,720 (7,216,546) 339,397 1,891,324 7,231,720 (7,216,546) 507,209 – – (23,849) 1,278 – (127,979) (157,204) (127,979) – (576) Unrestricted investment accounts Bank Bank’s share of profit: Profit distributed to Mudharib Wakalah fees As at 31 December 2020/ 1 January 2021 Funding inflows/outflows: Net movement New placement Redemption/Principal repayment Income from investment Bank’s share of profit: Profit distributed to Mudharib Wakalah fees As at 31 December 2021 288 (157,204) – 5,113,275 1,528,718 – – 209,529 (195,885) – 6,655,637 7,255,622 12,368,897 – 1,528,718 7,745,505 7,745,505 (11,242,162) (11,242,162) 283,058 492,587 – (136,059) 3,905,964 (195,885) (136,059) 10,561,601 11,915 – – (10,784) 26 – (308) 849
291. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 16. INVESTMENT ACCOUNTS OF CUSTOMERS (CONTINUED) (c) Movement of investment accounts of customers (continued) Mudharabah RM’000 Wakalah RM’000 Total RM’000 Restricted investment accounts Wakalah RM’000 6,655,637 – – 1,898,633 1,898,632 – 8,554,270 1,898,632 – – – 849 6,655,637 3,797,265 10,452,902 849 5,113,275 – – 3,627,627 3,627,626 – 8,740,902 3,627,626 – – – 11,915 5,113,275 7,255,253 12,368,528 11,915 6,655,637 – – 1,952,982 1,952,982 – 8,608,619 1,952,982 – – – 849 6,655,637 3,905,964 10,561,601 849 5,113,275 – – 3,627,811 3,627,811 – 8,741,086 3,627,811 – – – 11,915 5,113,275 7,255,622 12,368,897 11,915 Unrestricted investment accounts Group Investment portfolio: 2021 House financing Personal financing Other term financing 2020 House financing Personal financing Other term financing Bank Investment portfolio: 2021 House financing Personal financing Other term financing 2020 House financing Personal financing Other term financing 289
292. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 16 . INVESTMENT ACCOUNTS OF CUSTOMERS (CONTINUED) (d) By maturity structures, profit sharing ratio and rate of return Investment account holders Group Average Total profit amount sharing ratio RM’000 (%) Average rate of return (%) Bank’s wakalah fee (%) 2021 Unrestricted investment accounts: Less than 3 months – Mudharabah – Wakalah Between 3 to 12 months – Wakalah Between 1 to 2 years – Wakalah 6,655,637 1,347,882 2 – 0.24 1.94 – 1.77 2,431,471 – 2.30 1.40 17,912 – 1.59 2.12 849 – 7.20 6.79 5,113,275 2,889,632 2 – 0.25 2.44 – 1.84 4,337,062 – 3.03 1.24 28,559 – 3.23 1.04 – 3.70 2.36 8,003,519 2,449,383 10,452,902 Restricted investment accounts: Between 2 to 5 years 2020 Unrestricted investment accounts: Less than 3 months – Mudharabah – Wakalah 8,002,907 Between 3 to 12 months – Wakalah Between 1 to 2 years – Wakalah 4,365,621 12,368,528 Restricted investment accounts: Between 2 to 5 years 290 11,915
293. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 16. INVESTMENT ACCOUNTS OF CUSTOMERS (CONTINUED) (d) By maturity structures, profit sharing ratio and rate of return (continued) Investment account holders Bank Average Total profit amount sharing ratio RM’000 (%) Average rate of return (%) Bank’s wakalah fee (%) 2021 Unrestricted investment accounts: Less than 3 months – Mudharabah – Wakalah Between 3 to 12 months – Wakalah Between 1 to 2 years – Wakalah 6,655,637 1,456,461 2 – 0.24 1.94 – 1.77 2,431,471 – 2.30 1.40 18,032 – 1.59 2.12 849 – 7.20 6.79 5,113,275 2,889,632 2 – 0.25 2.44 – 1.84 4,337,062 – 3.03 1.24 28,928 – 3.23 1.04 – 3.70 2.36 8,112,098 2,449,503 10,561,601 Restricted investment accounts: Between 2 to 5 years 2020 Unrestricted investment accounts: Less than 3 months – Mudharabah – Wakalah 8,002,907 Between 3 to 12 months – Wakalah Between 1 to 2 years – Wakalah 4,365,990 12,368,897 Restricted investment accounts: Between 2 to 5 years 11,915 291
294. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 17 . RECOURSE OBLIGATIONS ON FINANCING SOLD TO CAGAMAS Recourse obligations on financing sold to Cagamas represents house financing accounts that are sold to Cagamas with recourse. Under the agreement, the Bank undertakes to administer the financing on behalf of Cagamas and to buy back any financing which are regarded as defective based on pre-determined and agreed-upon prudential criteria with recourse against the Bank. Such financing transactions and the obligation to buy back the financing are reflected as a liability on the statements of financial position. The financing are not de-recognised and are analysed in Note 8. The details are as follows: Note Nominal value RM’000 Issue date Maturity Date Profit rate (% p.a.) (a) 1,500,000 25 May 2018 25 May 2023 4.75 (b) 500,000 15 May 2021 15 May 2024 2.95 18. SUBORDINATED SUKUK MURABAHAH Group and Bank Note 2021 RM’000 2020 RM’000 (a) 301,962 302,046 (b) (c) (d) (e) 302,286 403,945 704,971 301,685 302,243 403,904 704,971 – 1,712,887 1,411,118 2,014,849 1,713,164 72,575 73,622 Issued under the RM1.0 billion Programme Third tranche Issued under the RM10.0 billion Programme First tranche Second tranche Third tranche Fourth tranche Finance cost on Subordinated Sukuk Murabahah 292
295. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 18. SUBORDINATED SUKUK MURABAHAH (CONTINUED) The details of the issued subordinated Sukuk are as follows: Note Nominal value RM’000 Issue date First call date* Maturity Date Profit rate (% p.a.)# (a) 300,000 13 November 2017 12 December 2022 12 November 2027 5.08 (b) 300,000 7 November 2018 7 December 2023 7 November 2028 5.15 (c) 400,000 26 March 2020 26 March 2025 26 March 2030 3.75 (d) 700,000 21 October 2020 21 October 2025 21 October 2030 3.60 (e) 300,000 12 November 2021 12 November 2026 12 November 2031 4.10 * Optional redemption date or any periodic payment date thereafter. # Accrued and payable semi-annually in arrears. The Subordinated Sukuk Murabahah qualifies as Tier II capital for the computation of the regulatory capital of the Bank in accordance with the Capital Adequacy Framework (Capital Components) for Islamic Banks issued by BNM. 19. OTHER LIABILITIES Group Other payables Advance payment Accruals Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 877,901 575,288 117,413 357,571 680,508 98,784 848,589 575,288 114,498 344,347 680,508 97,030 1,570,602 1,136,863 1,538,375 1,121,885 Included in other payables is amount due to trustee amounting to RM10,391,000 (2020: RM4,423,000) attributed to the creation of unit trust funds. Other payables are also include funds received by the Bank under various government funding schemes as part of government support measure in response to COVID-19 pandemic for specific financing purposes amounting to RM310,967,326 (2020: RM59,522,673) at concession rate. 293
296. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 20 .ZAKAT AND TAXATION Group Zakat Taxation Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 12,307 21,081 11,999 19,953 12,227 21,029 11,827 19,949 33,388 31,952 33,256 31,776 21. SHARE CAPITAL Number of shares (units) Group and Bank Issued and fully paid Ordinary shares At 1 January Consolidation of shares (Note 46) Allotment of new ordinary shares At 31 December 294 2020 ’000 Amount 2019 ’000 2021 RM’000 2020 RM’000 2,600,367 (567,460) 42,966 2,509,982 – 90,385 3,306,118 – 139,639 3,012,368 – 293,750 2,075,873 2,600,367 3,445,757 3,306,118
297. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 22.RESERVES Group Bank Note 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 (a) (b) (c) (d) (101,288) (20,798) – 111,187 188,298 (6,024) – – (101,288) (20,555) – – 188,298 (5,875) – – 182,274 (121,843) 182,423 FVOCI reserve Translation reserve^ Regulatory reserve Merger reserve (10,899) Total other reserves Retained earnings^ 2,965,080 2,797,307 2,965,659 2,791,044 2,954,181 2,979,581 2,843,816 2,973,467 (a) The FVOCI reserve includes the cumulative net change in the fair value of financial assets FVOCI until the financial asset is derecognised. (b) The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of the offshore banking operations in the Federal Territory of Labuan. (c) The regulatory reserve represents the Bank’s compliance with BNM’s Guideline on Financial Reporting for Islamic Banking Institution to maintain, in aggregate, loss allowance for non-credit-impaired exposures and regulatory reserves of no less than 1% of total credit exposures, net of loss allowance for credit- impaired exposures. No regulatory reserve recognised in 2021 and 2020. (d) Merger reserve arising from the Proposed Internal Reorganisation and acquisition of two (2) new BHB ordinary shares. See Note 46. 23.SOURCES AND USES OF CHARITY FUNDS Movement of sources and uses of charity funds are as follows: 2021 RM’000 2020 RM’000 Undistributed funds as at the beginning of the financial year 11 3 Shariah non-compliance income: Funds collected/received during the year 41 60 (40) (52) 12 11 Group and Bank Uses of funds during the year: Contribution to Public Benefit Undistributed funds as at the end of the financial year 295
298. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 24 .INCOME DERIVED FROM INVESTMENT OF DEPOSITORS’ FUNDS Group and Bank Income derived from investment of: (i) General investment deposits (ii) Term deposit-i (iii) Savings and demand deposits (iv) Other deposits 2021 RM’000 2020 RM’000 8,891 1,394,791 808,972 47,418 12,404 1,564,207 869,663 57,739 2,260,072 2,504,013 (i) Income derived from investment of general investment deposits Group and Bank Finance income and hibah Financing, advances and others Financial assets: – fair value through profit and loss – fair value through other comprehensive income – other financial assets at amortised cost Money at call and deposits with financial institutions Other dealing income Net (loss)/gain from sale of financial assets at fair value through profit or loss Net gain/(loss) on revaluation of financial assets at fair value through profit or loss 2021 RM’000 2020 RM’000 7,713 10,088 49 604 38 202 85 965 2 141 8,606 11,281 (25) 2 15 (10) (10) Other operating income Net gain from sale of financial assets at fair value through other comprehensive income of which, Financing income earned on impaired financing Unwinding of modification loss 296 (8) 295 1,131 8,891 12,404 102 28 103 97
299. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 24.INCOME DERIVED FROM INVESTMENT OF DEPOSITORS’ FUNDS (CONTINUED) (ii) Income derived from investment of term deposit-i Group and Bank Finance income and hibah Financing, advances and others Financial assets: – fair value through profit and loss – fair value through other comprehensive income – other financial assets at amortised cost Money at call and deposits with financial institutions Other dealing income Net (loss)/gain from sale of financial assets at fair value through profit or loss Net gain/(loss) on revaluation of financial assets at fair value through profit or loss Other operating income Net gain from sale of financial assets at fair value through other comprehensive income Other income Gain on disposal of leased assets of which, Financing income earned on impaired financing Unwinding of modification loss 2021 RM’000 2020 RM’000 1,171,513 1,216,391 9,140 114,824 7,940 37,770 12,825 146,921 297 18,178 1,341,187 1,394,612 (4,481) 355 3,414 (1,532) (1,067) (1,177) 54,669 170,772 2 – 1,394,791 1,564,207 18,964 10,615 15,959 15,684 297
300. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 24 .INCOME DERIVED FROM INVESTMENT OF DEPOSITORS’ FUNDS (CONTINUED) (iii) Income derived from investment of savings and demand deposits Group and Bank Finance income and hibah Financing, advances and others Financial assets: – fair value through profit and loss – fair value through other comprehensive income – other financial assets at amortised cost Money at call and deposits with financial institutions Other dealing income Net (loss)/gain from sale of financial assets at fair value through profit or loss Net gain/(loss) on revaluation of financial assets at fair value through profit or loss 2021 RM’000 2020 RM’000 680,037 677,884 5,287 66,690 4,622 21,920 7,134 81,880 167 10,029 778,556 777,094 (2,673) 1,949 (724) Other operating income Net gain from sale of financial assets at fair value through other comprehensive income Other income Gain on disposal of leased assets of which, Financing income earned on impaired financing Unwinding of modification loss 298 216 (1,126) (910) 31,139 93,479 1 – 808,972 869,663 10,970 7,032 8,794 9,061
301. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 24.INCOME DERIVED FROM INVESTMENT OF DEPOSITORS’ FUNDS (CONTINUED) (iv) Income derived from investment of other deposits Group and Bank Finance income and hibah Financing, advances and others Financial assets: – fair value through profit and loss – fair value through other comprehensive income – other financial assets at amortised cost Money at call and deposits with financial institutions Other dealing income Net loss from sale of financial assets at fair value through profit or loss Net gain/(loss) on revaluation of financial assets at fair value through profit or loss 2021 RM’000 2020 RM’000 39,928 45,274 314 3,978 248 1,254 487 5,484 12 689 45,722 51,946 (194) (73) 90 (63) (104) Other operating income Net gain from sale of financial assets at fair value through other comprehensive income (136) 1,800 5,929 47,418 57,739 638 601 626 464 of which, Financing income earned on impaired financing Unwinding of modification loss 25.INCOME DERIVED FROM INVESTMENT ACCOUNT FUNDS Group and Bank Finance income Unrestricted investment accounts – Mudharabah – Wakalah Unwinding of modification loss 2021 RM’000 2020 RM’000 209,367 282,865 5,306 167,693 339,200 7,041 497,538 513,934 299
302. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 26 .INCOME DERIVED FROM INVESTMENT OF SHAREHOLDERS’ FUNDS Group Finance income and hibah Financing, advances and others Financial assets: – fair value through other comprehensive income Money at call and deposits with financial institutions Other dealing income Net gain from foreign exchange transactions Net derivatives gain Net gain from sale of financial assets at fair value through profit or loss Net gain/(loss) on revaluation of financial assets at fair value through profit or loss Other operating income Dividend from financial assets at FVTPL Dividend from subsidiary Dividend from financial assets at FVOCI Sale of investment in unit trust Rebate on investment in unit trust 300 Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 9,783 6,607 9,783 6,607 177,794 131 190,253 40 177,794 – 190,253 3 187,708 196,900 187,577 196,863 32,485 7 43,478 31 32,519 7 43,531 31 26 – – – 11,029 (3,986) 10,882 (3,982) 43,547 39,523 43,408 39,580 11,677 – – – 2,217 13,860 – 503 28 979 11,326 800 – – 2,217 13,722 500 503 28 979 13,894 15,370 14,343 15,732
303. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 26.INCOME DERIVED FROM INVESTMENT OF SHAREHOLDERS’ FUNDS (CONTINUED) Group Fees and commission Card fees and commission Takaful service fees and commission Financing fees Sales charges on unit trust Unit trust management fees Commission on MEPS Ar-Rahnu fees Mobile banking fees Corporate advisory fees Deposit and payment service fees Processing fees Commission on bills payment system Commission from wealth management services Ta'widh Charges Others Other income Rental income Net gain on disposal of property and equipment Other income Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 78,655 31,929 19,372 13,150 16,835 7,854 63 7,794 8,885 3,819 3,790 1,815 188 1,555 15,406 74,466 31,335 17,680 11,856 16,786 2,108 6,815 7,002 9,491 4,629 9,732 1,331 110 1,387 10,760 78,655 31,929 19,372 – – 7,854 63 7,794 8,700 3,819 3,648 1,815 5,706 1,554 11,717 74,466 31,335 17,680 – – 2,108 6,815 7,002 9,491 4,629 9,732 1,331 4,712 1,387 10,433 211,110 205,488 182,626 181,121 1,631 603 257 2,549 3 226 2,308 602 86 2,931 3 83 2,491 2,778 2,996 3,017 458,750 460,059 430,950 436,313 27.NET ALLOWANCE FOR IMPAIRMENT ON FINANCING AND ADVANCES Group and Bank Net allowance for impairment on financing, advances and others: – Stage 1 – Stage 2 – Stage 3 Bad debts and financing recovered 2021 RM’000 2020 RM’000 (159,674) 151,178 274,433 (75,199) 228,646 1,661 57,880 (79,516) 190,738 208,671 301
304. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 28 .INCOME ATTRIBUTABLE TO DEPOSITORS Group Deposits from customers: – Mudharabah fund – Non-Mudharabah fund Deposits and placements of banks and other financial institutions: – Non-Mudharabah fund Recourse obligation on financing sold to Cagamas Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 2,109 736,559 4,758 930,187 2,109 736,754 4,758 930,408 36 421 36 421 79,984 71,113 79,984 71,113 818,688 1,006,479 818,883 1,006,700 29.INCOME ATTRIBUTABLE TO INVESTMENT ACCOUNT HOLDERS Group Unrestricted investment accounts – Mudharabah – Wakalah Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 13,644 146,483 10,609 211,417 13,644 146,999 10,609 211,417 160,127 222,026 160,643 222,026 30.PERSONNEL EXPENSES Group Salaries and wages Allowances and bonuses Employees’ Provident Fund Directors and Shariah Supervisory Council Members’ remuneration Medical benefits Staff sales commission Others 302 Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 443,849 120,910 80,482 387,121 108,688 75,992 429,717 118,317 78,019 378,437 106,875 74,534 8,150 27,188 22,391 20,860 7,040 29,835 25,543 29,148 6,473 26,705 22,391 20,162 6,012 28,795 25,543 29,165 723,830 663,367 701,784 649,361
305. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 31. OTHER OVERHEAD EXPENSES Group Promotion Credit and debit card expenses Advertisement and publicity Others Establishment Depreciation of property and equipment Depreciation of right-of-use assets Office rental Information technology expenses Security services Utilities Office maintenance Takaful Rental of equipment Others General expenses Outsourcing fees – Management of self-service terminal – Credit recovery – Others Office supplies Licenses Bank and service charges General expenses Security services for cash in transit Postage and delivery charges Management fees Subscription fees SMS service charges Professional fees Mobile banking expenses Auditors’ remuneration – Statutory audit – Regulatory related – Non-audit Processing charges Property and equipment written-off Others Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 48,642 20,290 16,680 40,574 12,469 14,824 48,642 16,061 7,314 40,574 12,363 5,189 85,612 67,867 72,017 58,126 59,225 18,197 29,215 72,490 8,877 11,170 10,216 7,261 5,950 320 56,546 18,348 29,136 56,133 9,442 12,771 10,847 5,645 6,056 320 58,803 18,042 29,186 72,490 8,877 11,036 9,973 6,379 5,826 320 56,341 18,317 29,499 56,133 9,442 12,698 10,635 5,641 5,978 320 222,921 205,244 220,932 205,004 8,564 – 4,109 8,333 12,551 8,240 30,814 4,915 11,678 – 12,633 19,647 15,267 1,923 13,716 – 1,960 9,911 9,957 7,418 22,547 5,735 9,829 – 5,486 14,274 11,199 2,011 8,564 7,318 4,109 8,239 12,551 8,207 30,814 4,915 11,545 6,839 12,630 19,647 13,396 1,923 13,716 2,345 1,960 9,788 9,957 7,389 22,547 5,735 9,760 7,686 5,483 14,274 10,956 2,011 1,550 263 345 1,030 619 10,908 1,267 150 312 1,201 925 20,076 1,324 263 345 1,030 619 1,835 1,188 150 312 1,201 925 11,989 153,389 137,974 156,113 139,372 461,922 411,085 449,062 402,502 303
306. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 32 . CHIEF EXECUTIVE OFFICER, DIRECTORS AND SHARIAH SUPERVISORY COUNCIL MEMBERS’ REMUNERATION Group 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 2,814 38 2,663 34 2,814 38 2,663 34 2,852 2,697 2,852 2,697 1,466 1,627 621 1,033 1,668 259 1,396 1,480 621 997 1,649 259 3,714 2,960 3,497 2,905 Directors of subsidiaries Executive Director: Salaries and other remuneration, including meeting allowances 946 810 – – Non-Executive Directors: Fees Other emoluments 221 240 72 68 – – – – 461 140 – – 7,973 6,607 6,349 5,602 Members of Shariah Supervisory Council (SSC) – SSC of the Bank – SSC of a subsidiary 797 39 712 14 783 – 703 – Total 836 726 783 703 8,150 7,040 6,473 6,012 Chief Executive Officer: Salaries and other remuneration, including meeting allowances Benefits-in-kind Non-Executive Directors: Fees Other emoluments Benefits-in-kind Total Grand total (excluding benefits-in-kind) (Note 30) 304 Bank
307. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 32. CHIEF EXECUTIVE OFFICER, DIRECTORS AND SHARIAH SUPERVISORY COUNCIL MEMBER’S REMUNERATION (CONTINUED) The total remuneration (including benefits-in-kind) of the Chief Executive Officer, Directors of the Bank is as follows: Remuneration received from the Bank 31 December 2021 Chief Executive Officer: Mohd Muazzam Mohamed Non-Executive Directors: Tan Sri Dr. Ismail Hj. Bakar Azizan Ahmad Mohamed Ridza Mohamed Abdulla Datuk Nik Mohd Hasyudeen Yusoff Dato’ Sri Khazali Ahmad Mohd Yuzaidi Mohd Yusoff Mashitah Haji Osman Dato’ Sri Amrin Awaluddin (appointed on 10 September 2021) Mohd Asri Awang (appointed on 1 October 2021) Zahari @ Mohd Zin Idris (retired on 20 September 2021) Noraini Che Dan (deceased on 26 August 2021) Salary and Bonus RM’000 Other Fees Emoluments RM’000 RM’000 Benefitsin-kind RM’000 Remuneration received from subsidiaries Bank Group Total RM’000 Fees RM’000 Others RM’000 Total RM’000 2,283 – 531 38 2,852 – – 2,852 – – 144 198 195 200 21 75 360 473 – – – – 360 473 – 108 140 50 298 24 17 339 – – – – 130 114 184 156 136 105 190 168 25 65 89 35 291 284 463 359 4 – – – 53 – – – 348 284 463 359 24 15 – 39 – – 39 36 27 25 88 – – 88 – 162 180 136 478 42 47 567 – 140 124 100 364 – 30 394 – 1,396 1,480 621 3,497 70 147 3,714 2,283 1,396 2,011 659 6,349 70 147 6,566 305
308. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 32 . CHIEF EXECUTIVE OFFICER, DIRECTORS AND SHARIAH SUPERVISORY COUNCIL MEMBER’S REMUNERATION (CONTINUED) The total remuneration (including benefits-in-kind) of the Chief Executive Officer, Directors of the Bank is as follows: (continued) Remuneration received from the Bank 31 December 2020 Chief Executive Officer: Mohd Muazzam Mohamed Non-Executive Directors: Tan Sri Dr. Ismail Hj. Bakar Datuk Zamani Abdul Ghani Dato’ Sri Khazali Ahmad Zahari @ Mohd Zin Idris Mohamed Ridza Mohamed Abdulla Datuk Nik Mohd Hasyudeen Yusoff Noraini Che Dan Azizan Ahmad Mohd Yuzaidi Mohd Yusoff Mashitah Haji Osman 306 Salary and Bonus RM’000 Other Fees Emoluments RM’000 RM’000 Benefitsin-kind RM’000 Bank Remuneration received from subsidiaries Group Total RM’000 Fees RM’000 Others RM’000 Total RM’000 2,183 – 480 34 2,697 – – 2,697 – 20 60 50 130 – – 130 – – – 20 78 222 144 148 266 46 28 15 210 254 503 – – 12 – – 8 210 254 523 – 119 158 25 302 24 11 337 – – – – – 36 154 170 148 30 119 260 235 223 36 – 25 50 20 – 155 439 455 391 66 – – – – – – – – – – 155 439 455 391 66 – 997 1,649 259 2,905 36 19 2,960 2,183 997 2,129 293 5,602 36 19 5,657
309. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 32. CHIEF EXECUTIVE OFFICER, DIRECTORS AND SHARIAH SUPERVISORY COUNCIL MEMBER’S REMUNERATION (CONTINUED) The total remuneration of the members of the Shariah Supervisory Council of the Bank is as follows: Remuneration received from the Bank 31 December 2021 Professor Dato’ Dr. Ahmad Hidayat Buang Ustazah Dr. Yasmin Hanani Mohd Safian Asmadi Mohamed Naim Shamsiah Mohamad Datu Haji Kipli Haji Yassin (appointed on 1 January 2021) Ustaz Dr. Ahmad Shahbari @ Sobri Salamon (retired on 31 March 2021) Assistant Professor Dr. Uzaimah Ibrahim (retired on 31 March 2021) 31 December 2020 Professor Dato’ Dr. Ahmad Hidayat Buang Ustaz Dr. Ahmad Shahbari @ Sobri Salamon Assistant Professor Dr. Uzaimah Ibrahim Ustazah Dr. Yasmin Hanani Mohd Safian Asmadi Mohamed Naim Shamsiah Mohamad Sahibus Samahah Dato' Dr. Haji Anhar Haji Opir Fees RM’000 Other Emoluments RM’000 72 66 66 66 Remuneration received from subsidiary Bank Group Total RM’000 Fees RM’000 Total RM’000 108 71 72 36 180 137 138 102 – – – 6 180 137 138 108 66 18 84 – 84 17 64 81 8 89 17 44 61 – 61 370 413 783 14 797 72 66 66 66 61 61 95 32 36 69 35 14 167 98 102 135 96 75 – 6 – – – 3 167 104 102 135 96 78 – 30 30 – 30 392 311 703 9 712 307
310. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 33 .KEY MANAGEMENT PERSONNEL Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel include all the Directors of the Group, and certain senior management members of the Group. The compensation for key management personnel other than the Directors’ remuneration is as follows: Group and Bank Other key management personnel: Short-term employee benefits 2021 RM’000 2020 RM’000 27,787 28,047 Number of employees categorised as key management personnel as at 31 December 2021 was 29 (2020: 30). 34.FINANCE COST Group Finance cost: Subordinated Sukuk Murabahah Profit expense on lease Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 72,575 17,312 73,622 17,836 72,575 17,303 73,622 17,835 89,887 91,458 89,878 91,457 35.TAX EXPENSE Group Malaysian income tax: Current year Under provision/(over provision) in prior year Deferred tax expense relating to origination and reversal of temporary differences arising from: Current year (Over provision)/under provision in prior year 308 Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 183,112 145,996 67,027 (27,738) 182,802 146,001 66,860 (27,757) 329,108 39,289 328,803 39,103 (23,614) (147,853) 110,077 2,123 (23,614) (147,933) 110,077 2,128 (171,467) 112,200 (171,547) 112,205 157,641 151,489 157,256 151,308
311. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 35.TAX EXPENSE (CONTINUED) A reconciliation of effective tax expense for the Group and the Bank are as follows: Group Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 Profit before tax 704,221 728,213 710,625 726,836 Income tax calculated using Malaysian tax rate of 24% Income not subject to tax Non-deductible expenses Impact of Cukai Makmur Zakat Overprovision in prior years 169,013 (4,806) 5,182 (7,011) (2,880) (1,857) 174,771 (1,920) 6,844 – (2,591) (25,615) 170,550 (4,713) 3,242 (7,011) (2,880) (1,932) 174,441 (1,634) 6,721 – (2,591) (25,629) 157,641 151,489 157,256 151,308 36.EARNINGS PER SHARE Basic earnings per share are calculated based on the net profit attributable to equity holders of the Group of RM534,305,000 (2020: RM564,954,000) and the weighted average number of ordinary shares outstanding during the year of 2,443,188,000 (2020: 2,546,005,000). The Group has no dilution in its earnings per ordinary shares in the current and previous financial year as there are no dilutive potential ordinary shares. 37.DIVIDENDS Dividends paid by the Bank: 2021 Final 2020 Interim 2021 Sen per share Total amount RM’000 Date of payment 5.37 10.93 139,639 226,893 4 June 2021 20 January 2022 366,532 2020 Final 2019 Interim 2020 6.05 5.55 151,854 141,897 29 June 2020 18 September 2020 293,751 309
312. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 37 .DIVIDENDS (CONTINUED) From the Final 2020 dividend amount paid wholly in cash of RM139.639 million, RM139.639 million was reinvested to subscribe for 42,966,054 new ordinary shares at RM3.25 each via the Dividend Reinvestment Plan. The dividend was reinvested by former holding company (prior to the Group reorganisation), BIMB Holdings Berhad to strengthen the Bank’s capital position to fund the business growth of the Bank. During the financial year, the following dividend was declared and recognised in the financial position. Interim 2021 ordinary dividend Sen per share Total amount RM’000 10.93 226,893 38.OPERATING SEGMENTS The Group’s reportable segments, as described below, can be classified into four segments. Each segment offers different products and services. The following summary describes the operations in each of the segments: •• Consumer BankingIncludes financing, deposits and other transactions and balances with retail customers •• Corporate and Commercial BankingIncludes corporate finance activities, financing, deposits and other transactions and balances with corporate customers, commercial customers and small & medium enterprises •• Treasury Undertakes funding activities through borrowings and investing in liquid assets such as short-term placements and corporate and government debt securities •• Shareholders unit Operates shareholders’ funds Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before allocation of overheads and income tax. 310
313. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 38.OPERATING SEGMENTS (CONTINUED) 2021 Consumer Banking RM’000 Corporate and Commercial Banking RM’000 Treasury RM’000 Shareholders unit RM’000 Elimination RM’000 Group Total RM’000 Total Revenue (a) 1,929,505 609,975 582,957 67,426 (22,106) 3,167,757 Net fund based income Non-fund based income (b) (c) 1,079,038 149,087 382,804 32,791 111,097 130,283 258,653 66,584 – (21,395) 1,831,592 357,350 1,228,125 415,595 241,380 325,237 (21,395) 2,188,942 Net income Net allowance for impairment on financial assets Profit before overheads, zakat and tax Operating expenses Profit before zakat and tax Segment assets Unallocated assets Total assets 37,290 1,265,415 (228,028) 187,567 (6,650) 234,730 (756) 324,481 – (21,395) (198,144) 1,990,798 (1,286,577) 704,221 44,032,459 14,121,310 19,983,824 385,141 (274,839) 78,247,895 1,908,319 80,156,214 (a) Included in total revenue are income derived from investment of depositors’ funds, investment account funds, investment of shareholders’ funds, loss on modification of financial assets, and wakalah fees from restricted investment accounts. (b) Net fund based income is derived after deducting the income attributable to depositors and income attributable to investment account holders. (c) Included in non-fund based income are fee and commission income that amounted to RM211,418,000, investment income of RM99,270,000 and other non-fund based income that amounted to RM46,662,000. 311
314. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 38 .OPERATING SEGMENTS (CONTINUED) 2020 Consumer Banking RM’000 Corporate and Commercial Banking RM’000 Treasury RM’000 Shareholders unit RM’000 Elimination RM’000 Group Total RM’000 Total Revenue 1,854,908 652,036 784,963 66,123 (15,828) 3,342,202 941,306 141,779 351,755 38,377 146,795 309,411 141,026 58,855 – (15,607) 1,580,882 532,815 1,083,085 390,132 456,206 199,881 (15,607) 2,113,697 257 – 456,463 199,881 Net fund based income Non-fund based income Net income Net allowance for impairment on financial assets Profit before overheads, zakat and tax Operating expenses Profit before zakat and tax Segment assets Unallocated assets Total assets (125,989) 957,096 (80,182) 309,950 – (15,607) (205,914) 1,907,783 (1,179,570) 728,213 40,874,237 13,796,398 18,286,566 54,179 (35,164) 72,976,216 1,660,806 74,637,022 (a) Included in total revenue are income derived from investment of depositors’ funds, investment account funds, investment of shareholders’ funds, loss on modification of financial assets, and wakalah fees from restricted investment accounts. (b) Net fund based income is derived after deducting the income attributable to depositors and income attributable to investment account holders. (c) Included in non-fund based income are fee and commission income that amounted to RM211,418,000, investment income of RM99,270,000 and other non-fund based income that amounted to RM46,662,000. . 312
315. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT Overview The Group’s and the Bank’s business activities involve the use of financial instruments which expose the Group and the Bank to various financial risks, namely credit risk, market risk and liquidity risk. The Group’s and the Bank’s financial risk management is guided by the Group’s Risk Appetite Statement and Risk Management Policies/Guidelines and subject to the oversight by the Board of Directors (“Board”) via the Board Risk Committee (“BRC”). The BRC is assisted by the specific risk management committees namely the Management Risk Control Committee (“MRCC”) and the Asset & Liability Management Committee (“ALCO”). (a) Financial instruments by categories The table in subsequent pages provides an analysis of financial instruments categorised as follows: •• •• •• •• Fair value through profit or loss (“FVTPL”) Financial assets at fair value through other comprehensive income (“FVOCI”) Other financial assets at amortised cost (“AC”) Financial liabilities measured at amortised cost (“FL”) Group 31 December 2021 Financial assets Cash and short-term funds and deposits and placements with financial institutions Financial assets at FVTPL Derivative financial assets Financial assets at FVOCI Financial assets at AC Financing, advances and others Other financial assets at AC* Statutory deposits with Bank Negara Malaysia Financial liabilities Deposits from customers Investment accounts of customers Derivative financial liabilities Bills and acceptance payable Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah Other liabilities Lease liabilities Carrying amount RM’000 FVTPL RM’000 FVOCI RM’000 AC RM’000 5,222,848 1,582,494 26,037 12,604,204 1,348,844 58,153,769 294,508 264,050 – 1,582,494 26,037 – – – – – – – – 12,604,204 – – – – 5,222,848 – – – 1,348,844 58,153,769 294,508 264,050 79,496,754 1,608,531 12,604,204 65,284,019 57,338,834 10,452,902 20,421 20,112 – – 20,421 – – – – – 57,338,834 10,452,902 – 20,112 2,001,720 2,014,849 1,570,602 303,448 – – – – – – – – 2,001,720 2,014,849 1,570,602 303,448 73,722,888 20,421 – 73,702,467 * Excludes prepayment 313
316. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Financial instruments by categories (continued) Group 31 December 2020 Financial assets Cash and short-term funds and deposits and placements with financial institutions Financial assets at FVTPL Derivative financial assets Financial assets at FVOCI Financing, advances and others Other financial assets at AC* Statutory deposits with Bank Negara Malaysia Financial liabilities Deposits from customers Investment accounts of customers Derivative financial liabilities Bills and acceptance payable Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah Other liabilities Lease liabilities * Excludes prepayment 314 Carrying amount RM’000 FVTPL RM’000 FVOCI RM’000 AC RM’000 5,216,737 1,181,200 61,665 12,557,991 54,670,635 192,574 192,425 – 1,181,200 61,665 – – – – – – – 12,557,991 – – – 5,216,737 – – – 54,670,635 192,574 192,425 74,073,227 1,242,865 12,557,991 60,272,371 51,077,262 12,368,528 105,872 29,621 – – 105,872 – – – – – 51,077,262 12,368,528 – 29,621 1,501,187 1,713,164 1,136,863 312,429 – – – – – – – – 1,501,187 1,713,164 1,136,863 312,429 68,244,926 105,872 – 68,139,054
317. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Financial instruments by categories (continued) Bank 31 December 2021 Financial assets Cash and short-term funds and deposits and placements with financial institutions Financial assets at FVTPL Derivative financial assets Financial assets at FVOCI Financial assets at AC Financing, advances and others Other financial assets at AC* Statutory deposits with Bank Negara Malaysia Financial liabilities Deposits from customers Investment accounts of customers Derivative financial liabilities Bills and acceptance payable Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah Other liabilities Lease liabilities Carrying amount RM’000 FVTPL RM’000 FVOCI RM’000 AC RM’000 5,204,364 1,550,700 26,037 12,605,067 1,348,844 58,153,769 239,257 264,050 – 1,550,700 26,037 – – – – – – – – 12,605,067 – – – – 5,204,364 – – – 1,348,844 58,153,769 239,257 264,050 79,392,088 1,576,737 12,605,067 65,210,284 57,363,926 10,561,601 20,421 20,112 – – 20,421 – – – – – 57,363,926 10,561,601 – 20,112 2,001,720 2,014,849 1,538,375 302,984 – – – – – – – – 2,001,720 2,014,849 1,538,375 302,984 73,823,988 20,421 – 73,803,567 * Excludes prepayment 315
318. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Financial instruments by categories (continued) Bank 31 December 2020 Financial assets Cash and short-term funds and deposits and placements with financial institutions Financial assets at FVTPL Derivative financial assets Financial assets at FVOCI Financing, advances and others Other financial assets at AC* Statutory deposits with Bank Negara Malaysia Financial liabilities Deposits from customers Investment accounts of customers Derivative financial liabilities Bills and acceptance payable Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah Other liabilities Lease liabilities Carrying amount RM’000 FVTPL RM’000 FVOCI RM’000 AC RM’000 5,216,280 1,175,440 61,665 12,558,729 54,670,635 182,041 192,425 – 1,175,440 61,665 – – – – – – – 12,558,729 – – – 5,216,280 – – 54,670,635 182,041 192,425 74,057,215 1,237,105 12,558,729 60,261,381 51,095,451 12,368,897 105,872 29,621 – – 105,872 – – – – – 51,095,451 12,368,897 – 29,621 1,501,187 1,713,164 1,121,885 312,429 – – – – – – – – 1,501,187 1,713,164 1,121,885 312,429 68,248,506 105,872 – 68,142,634 * Excludes prepayment (b) Credit risk Overview Credit risk is the risk of a customer or counterparty failing to perform its obligations. It arises from all transactions that could lead to actual, contingent or potential claims against any party, customer or obligor. The types of credit risks that the Group and the Bank considers to be material include: Default Risk, Counterparty Risk, Credit Concentration Risk, Residual/Credit Mitigation Risk, and Migration Risk. 316
319. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) Credit risk governance The management of credit risk is principally carried out by using sets of policies and guidelines approved by the MRCC and/or BRC, guided by the Board of Directors’ approved Risk Appetite Statement. The Group and the Bank have instituted two (2) levels of Financing Committees, which assess and approve credits at their specified authority levels. The MRCC is responsible under the authority delegated by the BRC for managing credit risk at strategic level. The MRCC reviews the Group’s and the Bank’s credit risk policies and guidelines, aligns credit risk management with business strategies and planning, reviews credit profile of the credit portfolios and recommends necessary actions to ensure that the credit risk remains within established risk tolerance levels. The Group’s and the Bank’s credit risk management governance includes the establishment of detailed credit risk policies, guidelines and procedures which document the Group’s and the Bank’s financing standards, discretionary powers for financing approval, credit risk ratings methodologies and models, acceptable collaterals and valuation, and the review, rehabilitation and restructuring of problematic and delinquent financing. Management of credit risk The management of credit risk is being performed by Credit Management Division (“CMD”) and Risk Management Division (“RMD”), and two other units outside of the CMD and RMD domain, namely, Credit Administration Department and Recovery & Rehabilitation Division. The combined objectives are, amongst others: •• To build a high quality credit portfolio in line with the Group’s and the Bank’s overall strategy and risk appetite; •• To ensure that the Group and the Bank is compensated for the risk taken, balancing/optimising the risk/return relationship; •• To develop an increasing ability to recognise, measure and avoid or mitigate potential credit risk problem areas; and •• To conform with statutory, regulatory and internal credit requirements. The Group and the Bank monitors its credit exposures either on a portfolio or individual basis through annual reviews. Credit risk is proactively monitored through a set of early warning signals that could trigger immediate reviews of (certain parts of) the portfolio. The affected portfolio or financing is placed on a watchlist to enforce close monitoring and prevent financing from turning impaired and to increase chances of full recovery. A detailed limit structure is in place to ensure that risks taken are within the risk appetite as set by the Board and to avoid credit risk concentration on a single customer, sector, product, Shariah contract, etc. Credit risk arising from dealing and investing activities are managed by the establishment of limits which include counterparty limits and permissible acquisition of private debt securities, subject to a specified minimum rating threshold. Furthermore, the dealing and investing activities are monitored by an independent middle office unit. 317
320. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) Maximum exposure to credit risk The following table presents the Group’s and Bank’s maximum exposure to credit risk of on-balance sheet and off-balance sheet financial instruments, without taking into account any collateral held or other credit enhancements. For on-balance sheet assets, the exposure to credit risk equals their carrying amount. For financial guarantee contracts, the maximum exposure to credit risk is the maximum amount that the Group and the Bank would have to pay if the obligations of the instruments issued are called upon. For credit commitments, the maximum exposure to credit risk is the full amount of the undrawn credit facilities granted to customers. Group 2021 RM’000 2020 RM’000 5,222,848 1,287,099 26,037 12,526,670 1,348,844 58,153,769 294,508 5,216,737 942,710 61,665 12,494,040 – 54,670,635 192,574 78,859,775 73,578,361 1,822,909 9,357,082 1,941,791 9,615,227 Sub-total 11,179,991 11,557,018 Total credit exposures 90,039,766 85,135,379 Note Cash and short-term funds and deposits and placements with financial institutions Financial assets at FVTPL* Derivative financial assets Financial assets at FVOCI^ Financial assets at AC Financing, advances and others Other financial assets at AC@ (a) (b) Sub-total Credit related obligation: Financial guarantee contracts Financing commitments # * ^ @ # 318 Excludes Excludes Excludes Excludes unit trust equity instruments prepayment derivative financial instruments (c) (d)
321. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) Maximum exposure to credit risk (continued) Bank 2021 RM’000 2020 RM’000 5,204,364 1,287,089 26,037 12,526,670 1,348,844 58,153,769 239,257 5,216,280 942,710 61,665 12,494,040 – 54,670,635 182,041 78,786,030 73,567,371 1,822,909 9,357,082 1,941,791 9,615,227 Sub-total 11,179,991 11,557,018 Total credit exposures 89,966,021 85,124,389 Note Cash and short-term funds and deposits and placements with financial institutions Financial assets at FVTPL* Derivative financial assets Financial assets at FVOCI^ Financial assets at AC Financing, advances and others Other financial assets at AC@ (a) (b) Sub-total Credit related obligation: Financial guarantee contracts Financing commitments # * ^ @ # Excludes Excludes Excludes Excludes (c) (d) unit trust equity instruments prepayment derivative financial instruments (a) Derivative financial assets In mitigating the counterparty credit risks from foreign exchange and derivatives transactions, the Group and the Bank enter into master agreements that provide for closeout netting with counterparties, whenever possible. A master agreement that governs all transactions between two parties, creates the greater legal certainty that the netting of outstanding obligations can be enforced upon termination of outstanding transactions if an event of default occurs. (b) Financing, advances and others Business and retail Financing, advances and others will have levels of collateralisation depending on the nature of the product. The general creditworthiness of a corporate and commercial customer tends to be the most relevant indicator of credit quality of a financing extended to it. The Group and the Bank manage its exposures to assess the customer’s character, industry, business timely manner. The Group and the Bank may take floating charges over all corporate assets and other these customers by completing a credit evaluation to model and capacity to meet their commitments in a collateral in the form of a first charge over real estate, liens and guarantees. 319
322. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) Maximum exposure to credit risk (continued) (b) Financing, advances and others (continued) The Group and the Bank routinely update the valuation of collateral held against all financing as it adopts an annual internal valuation policy and a 2 years external valuation policy. At 31 December 2021, the gross exposure of credit-impaired financing and advances to business customers amounted to RM395,179,000 (2020: RM182,271,000) and the forced sales value of collateral held against those financing and advances amounted to RM278,957,000 (2020: RM298,895,000). House financing The following table presents credit exposures from financing and advances that are credit impaired by ranges of financing-to-value (“FTV”) ratio. FTV is calculated as the ratio of the gross amount of the financing, or the amount committed for financing commitments - to the value of the collateral. Group and Bank FTV ratio Credit-impaired financing Less than 51% 51-70% More than 70% Total 2021 RM’000 2020 RM’000 36,160 8,303 88,708 35,725 6,842 91,517 133,171 134,084 Vulnerable sectors The Group and the Bank have also identified certain vulnerable sectors that are mostly impacted by the pandemic, of which tighter assessment was made on the customers’ credit rating, credit risk, credit cost and available financing. Group and Bank On balance sheet (net of impairment) Financing, advances and others Tourism, airlines, oil and gas, transportation, restaurant, hotel and others % over total maximum exposure 320 2021 RM’000 2020 RM’000 10,667,494 10,189,233 18% 14%
323. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) Maximum exposure to credit risk (continued) (b) Financing, advances and others (continued) Relief and support measures As mentioned in Note 2.1(a)(i), the Government has introduced certain measures to assist customers experiencing temporary financial constraints due to the pandemic. The table below summarised total payment moratoriums and repayment assistances granted to the affected customers; Matured and repaying as per revised schedules RM’000 Extended RM’000 Missed payments RM’000 Total granted RM’000 13,709,948 8,939,906 50,421 4,719,621 19,987,014 11,242,682 446,387 8,297,945 267,364 166,485 12,971 87,908 33,964,326 20,349,073 509,779 13,105,474 288,137 207,125 1,022,145 1,972,308 1,065,715 964,132 51,084 34,177 – 2,311,529 1,307,017 1,986,277 15,020,230 22,923,454 318,448 38,262,132 As a percentage of total: Consumer Mortgages Hire purchase Personal financing 40.4% 43.9% 9.9% 36.0% 58.8% 55.2% 87.6% 63.3% 0.8% 0.8% 2.5% 0.7% 100.0% 100.0% 100.0% 100.0% Commercial of which SME Corporate 12.5% 15.9% 51.5% 85.3% 81.5% 48.5% 2.2% 2.6% – 100.0% 100.0% 100.0% 39.3% 59.9% 0.8% 100.0% 2021 Consumer Mortgages Hire purchase Personal financing Commercial of which SME Corporate 321
324. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) Maximum exposure to credit risk (continued) (b) Financing, advances and others (continued) Relief and support measures (continued) Matured and repaying as per revised schedules RM’000 Extended RM’000 Missed payments RM’000 Total granted RM’000 30,346,281 17,388,738 1,247,353 11,710,190 2,869,399 1,801,123 131,952 936,324 313,404 151,010 23,764 138,630 33,529,084 19,340,871 1,403,069 12,785,144 756,016 657,724 1,852,238 1,165,548 468,414 556,124 20,928 20,928 – 1,942,492 1,147,066 2,408,362 32,954,535 4,591,071 334,332 37,879,938 As a percentage of total: Consumer Mortgages Hire purchase Personal financing 90.5% 89.9% 88.9% 91.6% 8.6% 9.3% 9.4% 7.3% 0.9% 0.8% 1.7% 1.1% 100.0% 100.0% 100.0% 100.0% Commercial of which SME Corporate 38.9% 57.3% 76.9% 60.0% 40.9% 23.1% 1.1% 1.8% – 100.0% 100.0% 100.0% 87.0% 12.1% 0.9% 100.0% 2020 Consumer Mortgages Hire purchase Personal financing Commercial of which SME Corporate (c) Financial guarantee contracts (“FGC”) FGCs mainly comprise guarantees to customers, standby or documentary letters of credit and performance related contingencies. The Group and the Bank will typically have recourse to specific assets pledged as collateral in the event of a default by a party for which the Group and the Bank have guaranteed its obligations to a third party. (d) Financing commitments Financing commitments mainly comprise irrevocable financing commitments to finance a customer provided there is no breach of any condition established in the contract. If such financing commitments are drawn down by the customer there will typically be specific collateral requirements that will need to be satisfied by the customer in order to access to credit facilities. 322
325. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) Maximum exposure to credit risk (continued) (i) Concentration of credit risk for Group and Bank Group 2021 Primary agriculture Mining and quarrying Manufacturing (including agro-based) Electricity, gas and water Wholesale & retail trade, and hotels & restaurants Construction Transport, storage and communications Finance, insurance, real estate and business activities Education, health and others Household sectors Other sectors Cash and short-term funds and deposits and placements with financial institutions RM’000 Financial assets at FVTPL RM’000 Derivative financial assets RM’000 Financial assets at FVOCI RM’000 Financial assets at AC RM’000 Financing, advances and others RM’000 Other assets RM’000 On-Balance Sheet Total RM’000 – – – – – – 122,923 – – – 946,230 64,750 – – 1,069,153 64,750 1,765 10,198 96,540 93,940 – – – 10,215 4 – 47,066 635,629 – 104,270 908,794 2,014,732 – – 955,864 2,764,846 110,587 71,617 564,756 142,967 – – – – 11,505 16 – 1,062,079 – 158,591 902,904 2,597,014 – – 914,409 3,817,700 155,005 527,396 235,621 1,476,088 – – – 1,233,098 46,220 689,359 – 1,968,677 85,578 337,313 5,222,848 1,276,884 1,773 6,407,069 72,508 4,644,988 293,393 17,919,463 180,041 1,511,015 – – – – – – 7,497 – 5,242 838,381 – 2,180,425 60,640 – 906,615 1,351,617 44,033,381 – – – 1,115 2,258,135 44,033,381 3,093,397 454,975 – 225,747 1,921,771 2,273,312 703,759 5,222,848 1,287,099 26,037 12,526,670 1,348,844 58,153,769 294,508 78,859,775 1,822,909 9,357,082 Financial guarantee Financing contracts commitments* RM’000 RM’000 * Financing commitments excluding derivative financial assets 323
326. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) Maximum exposure to credit risk (continued) (i) Concentration of credit risk for Group and Bank (continued) Group 2020 Primary agriculture Mining and quarrying Manufacturing (including agro-based) Electricity, gas and water Wholesale & retail trade, and hotels & restaurants Construction Transport, storage and communications Finance, insurance, real estate and business activities Education, health and others Household sectors Other sectors Cash and short-term funds and deposits and placements with financial institutions RM’000 Financial assets at FVTPL RM’000 Derivative financial assets RM’000 Financial assets at FVOCI RM’000 Financing, advances and others RM’000 Other assets RM’000 On-Balance Sheet Total RM’000 – – – – – – 77,621 – 1,025,569 64,894 – – 1,103,190 64,894 2,082 16,014 186,286 80,830 – – – 16,074 9 – 53,677 1,277,590 962,181 1,966,976 – – 1,015,867 3,260,640 143,149 64,469 579,419 148,676 – – – – 37,921 393 – 906,545 897,828 2,632,171 – – 935,749 3,539,109 128,968 515,506 401,704 1,679,249 – – – 1,384,140 642,844 – 2,026,984 91,714 106,633 5,216,737 – – – 926,636 – – – 8,938 746 – 13,658 5,758,025 870,928 – 2,165,514 4,451,540 1,152,752 40,873,880 – 187,617 – – 4,957 16,549,493 2,024,426 40,873,880 2,184,129 134,802 515,978 – 329,109 1,772,325 1,837,248 946,401 1,876,456 5,216,737 942,710 61,665 12,494,040 54,670,635 192,574 73,578,361 1,941,791 9,615,227 * Financing commitments excluding derivative financial assets 324 Financial guarantee Financing contracts commitments* RM’000 RM’000
327. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) Maximum exposure to credit risk (continued) (i) Concentration of credit risk for Group and Bank (continued) Bank 2021 Primary agriculture Mining and quarrying Manufacturing (including agro-based) Electricity, gas and water Wholesale & retail trade, and hotels & restaurants Construction Transport, storage and communications Finance, insurance, real estate and business activities Education, health and others Household sectors Other sectors Cash and short-term funds and deposits and placements with financial institutions RM’000 Financial assets at FVTPL RM’000 Derivative financial assets RM’000 Financial assets at FVOCI RM’000 Financial assets at AC RM’000 Financing, advances and others RM’000 – – – – – – 122,923 – – – 946,230 64,750 – – 1,069,153 64,750 1,765 10,198 96,540 93,940 – – – 10,215 4 – 47,066 635,629 – 104,270 908,794 2,014,732 – – 955,864 2,764,846 110,587 71,617 564,756 142,967 – – – – 11,505 16 – 1,062,079 – 158,591 902,904 2,597,014 – – 914,409 3,817,700 155,005 527,396 235,621 1,476,088 – – – 1,233,098 46,220 689,359 – 1,968,677 85,578 337,313 5,204,364 1,276,874 1,773 6,407,069 72,508 4,644,988 238,316 17,845,892 180,041 1,511,015 – – – – – – 7,497 – 5,242 838,381 – 2,180,425 60,640 – 906,615 1,351,617 44,033,381 – – – 941 2,258,135 44,033,381 3,093,223 454,975 – 225,747 1,921,771 2,273,312 703,759 5,204,364 1,287,089 26,037 12,526,670 1,348,844 58,153,769 239,257 78,786,030 1,822,909 9,357,082 Other financial On-Balance assets Sheet at AC Total RM’000 RM’000 Financial guarantee Financing contracts commitments* RM’000 RM’000 * Financing commitments excluding derivative financial assets 325
328. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) Maximum exposure to credit risk (continued) (i) Concentration of credit risk for Group and Bank (continued) Bank 2020 Primary agriculture Mining and quarrying Manufacturing (including agro-based) Electricity, gas and water Wholesale & retail trade, and hotels & restaurants Construction Transport, storage and communications Finance, insurance, real estate and business activities Education, health and others Household sectors Other sectors Cash and short-term funds and deposits and placements with financial institutions RM’000 Financial assets at FVTPL RM’000 Derivative financial assets RM’000 Financial assets at FVOCI RM’000 Financing, advances and others RM’000 Other assets RM’000 On-Balance Sheet Total RM’000 - - - 77,621 - 1,025,569 64,894 - 1,103,190 64,894 2,082 16,014 186,286 80,830 - 16,074 9 - 53,677 1,277,590 962,181 1,966,976 - 1,015,867 3,260,640 143,149 64,469 579,419 148,676 - - 37,921 393 906,545 897,828 2,632,171 - 935,749 3,539,109 128,968 515,506 401,704 1,679,249 - - - 1,384,140 642,844 - 2,026,984 91,714 106,633 5,216,280 - 926,636 - 8,938 746 13,658 5,758,025 870,928 2,165,514 4,451,540 1,152,752 40,873,880 - 177,207 4,834 16,538,626 2,024,426 40,873,880 2,184,006 134,802 515,978 329,109 1,772,325 1,837,248 946,401 1,876,456 5,216,280 942,710 61,665 12,494,040 54,670,635 182,041 73,567,371 1,941,791 9,615,227 Financial guarantee Financing contracts commitments* RM’000 RM’000 * Financing commitments excluding derivative financial assets (ii)Collateral The main types of collateral obtained by the Bank to mitigate the credit risk are as follows: •• For residential mortgages – charges over residential properties •• For commercial property financing – charges over the properties being financed •• For vehicle financing under Ijarah Thumma Al-Bai – ownership claims over the vehicles financed •• For other financing and advances – charges over business assets such as premises, inventories, trade receivables and/or cash deposits As at 31 December 2021 and 31 December 2020, there were no assets repossessed by the Bank as a result of taking possession of collateral held as security, or by calling upon other credit enhancements. 326
329. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) (iii) Credit quality of financing, advances and others The credit quality of the Bank’s financing, advances and others are summarised as follows: Group and Bank 2021 Stage 1 RM’000 Stage 2 RM’000 Stage 3 RM’000 Total RM’000 53,198,963 3,178,361 166,537 774,614 778,566 137,945 – – – 53,973,577 3,956,927 304,482 56,543,861 1,691,125 – 58,234,986 – – 414,366 – – 568,383 414,366 568,383 56,543,861 2,105,491 568,383 59,217,735 Financing commitments NPDNI: – Excellent – Satisfactory 8,898,782 198,506 35,876 179,252 3,584 3,537 – – – 9,078,034 202,090 39,413 – Fair 9,133,164 186,373 – 9,319,537 – – 5,499 – – 32,046 5,499 32,046 Financing, advances and others Neither past due nor impaired (“NPDNI”): – Excellent – Satisfactory – Fair Past due but not impaired (“PDNI”) Impaired Gross carrying amount PDNI Impaired Gross exposure Impairment allowances Net exposure Financial guarantee contracts NPDNI: – Excellent – Satisfactory – Fair PDNI Impaired 9,133,164 (463,844) 191,872 (279,621) 32,046 (272,660) 9,357,082 (1,016,125) 65,213,181 2,017,742 327,769 67,558,692 1,434,065 357,840 428 3,275 16,079 172 – – – 1,437,340 373,919 600 1,792,333 19,526 – 1,811,859 – – 11,045 – – 5 11,045 5 Gross exposure Impairment allowances 1,792,333 (23,464) 30,571 (456) 5 – 1,822,909 (23,920) Net exposure 1,768,869 30,115 5 1,798,989 327
330. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) (iii) Credit quality of financing, advances and others (continued) The credit quality of the Bank’s financing, advances and others are summarised as follows: (continued) Group and Bank 2020 Stage 1 RM’000 Stage 2 RM’000 Stage 3 RM’000 Total RM’000 Financing, advances and others NPDNI: – Excellent – Satisfactory – Fair 46,398,623 6,267,615 263,084 827,642 727,566 112,065 – – – 47,226,265 6,995,181 375,149 PDNI Impaired 52,929,322 – – 1,667,273 628,767 – – – 373,234 54,596,595 628,767 373,234 Gross carrying amount 52,929,322 2,296,040 373,234 55,598,596 Financing commitments NPDNI: – Excellent – Satisfactory – Fair 7,924,991 1,431,364 69,915 33,371 105,542 27,818 – – – 7,958,362 1,536,906 97,733 PDNI Impaired 9,426,270 – – 166,731 5,501 – – – 16,725 9,593,001 5,501 16,725 Gross exposure Impairment allowances 9,426,270 (625,052) 172,232 (151,067) Net exposure 328 16,725 (122,532) 9,615,227 (898,651) 61,730,540 2,317,205 267,427 64,315,172 Financial guarantee contracts NPDNI: – Excellent – Satisfactory – Fair 1,691,570 232,950 234 583 15,669 628 – – – 1,692,153 248,619 862 PDNI Impaired 1,924,754 – – 16,880 – – – – 157 1,941,634 – 157 Gross exposure Impairment allowances 1,924,754 (28,930) 16,880 (380) 157 – 1,941,791 (29,310) Net exposure 1,895,824 16,500 157 1,912,481
331. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) (iii) Credit quality of financing, advances and others (continued) No significant changes to estimation techniques or assumptions were made during the year. Internal rating definition:Excellent to Good: Sound financial position with no difficulty in meeting its obligations. Satisfactory: Adequate safety of meeting its current obligations but more time is required to meet the entire obligation in full. Fair: Higher risks on payment obligations. Financial performance may continue to deteriorate. Classification of financing, advances and others:•• Neither past due nor impaired financing Financing for which the customer has not missed a contractual payment (profit or principal) when contractually due and is not impaired and there is no objective evidence of impairment. •• Past due but not impaired financing Financing for 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. •• Impaired financing In addition to Note 2.1(a)(ii), financing is classified as impaired/defaulted: (i) where the principal or profit or both are past due for three months or more; (ii) in the case of revolving credit facilities, where the outstanding amount has remained in excess of the approved limit for a period of three months or more; (iii) where the amount is past due or the outstanding amount has been in excess of the approved limit for three months or less and the financing exhibits indications of significant credit weakness; (iv) as soon as default occurs where the principal and/or profit repayments are schedule on intervals of 3 months or longer. 329
332. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) (iii) Credit quality of financing, advances and others (continued) Past due but not impaired financing Group and Bank 2021 By ageing Month-in-arrears 1 Month-in-arrears 2 2020 RM’000 % to gross financing RM’000 % to gross financing 217,722 196,644 0.37 0.33 429,323 199,444 0.77 0.36 414,366 0.70 628,767 1.13 Impaired financing Group and Bank By ageing Month-in-arrears Month-in-arrears Month-in-arrears Month-in-arrears 0 1 2 3 and above 2021 RM’000 2020 RM’000 279,211 9,002 3,746 276,424 38,464 8,164 20,125 306,481 568,383 373,234 Impaired financing of which rescheduled and restructured financing Group and Bank Consumer Business 2021 RM’000 2020 RM’000 26,791 74,352 23,608 65,369 101,143 88,977 Rescheduled or restructured financings are financings that have been rescheduled or restructured due to deterioration in the customers’ financial positions and the Bank has made concessions that it would not otherwise consider. Once the financing is rescheduled or restructured, its satisfactory performance is monitored for a period of six (6) months before it can be reclassified to performing. 330
333. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) (iii) Credit quality of financing, advances and others (continued) Key macroeconomic variables The following table shows certain key macroeconomic variables used in modelling the allowance for credit losses for Stages 1 and 2. For the base, upside and downside scenarios, the projections are provided for the next 12 months and for the remaining forecast period, which represents a medium-term view. Base scenario Next 12 months (2022) Oil Price (“OP”) Gross Domestic Production (“GDP”) House Price Index (“HPI”) Kuala Lumpur Composite Index (“KLCI”) Upside scenario Remaining forecast period (2023) Next 12 months (2022) Remaining forecast period (2023) Downside scenario Next 12 months (2022) Remaining forecast period (2023) 63.34 62.24 72.18 71.07 30.89 29.79 5.30% 4.50% 6.55% 5.75% -0.80% -1.50% 1.32% 1.43% 2.20% 2.31% 0.79% 0.90% 1,750.0 1,827.0 2,199.9 2,276.9 871.5 925.9 An increase in unemployment rate or CPI will generally correlate with higher allowances for credit losses, whereas an increase in the other macroeconomic factors (KLCI, HPI and GDP) will generally correlate with lower allowances for credit losses. Due to the unprecedented nature of the pandemic, and the difficulty of predicting reliably the forecast period, the Group and the Bank have applied certain management overlay on the overall allowance for credit losses. These overlays and post-model adjustments were taken to reflect the latest macroeconomic outlook not captured in the modelled outcome and potential impact to delinquencies and defaults when the various relief and support measures are expiring in 2022. The impact were estimated at portfolio level. Total overlays for ECLs maintained by the Group and by the Bank as at 31 December 2021 are RM335,526,000 (31 December 2020: RM231,574,000). 331
334. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) (iv) Credit quality of other financial assets excluding cash, short-term funds and deposits Credit quality of other financial assets by external rating is as follows: Group 2021 Financial assets at FVOCI Debt instrument Government bonds and GG Sukuk: Rated AAA Rated AA1 to AA3 Lower than A Gross carrying amount Impairment allowances^ Stage 1 RM’000 Stage 3 RM’000 Total RM’000 8,690,000 – 8,690,000 2,391,696 1,429,133 15,841 – – – 2,391,696 1,429,133 15,841 12,526,670 – 12,526,670 7,237 – 7,237 Derivative financial assets Bank and financial institution counterparties Corporate 16,044 9,993 26,037 Financial assets at FVTPL Government bonds and GG Sukuk: Rated AA1 to AA3 1,131,574 155,515 1,287,089 Financial assets at AC Government bonds and GG MARC C Impairment allowance 1,348,844 – – Net carrying amount 1,348,844 Other financial assets at AC Other unrated financial assets Impairment allowances 294,508 – Net carrying amount 294,508 ^ The impairment allowances are recognised in OCI reserve. 332 – 5,289 (5,289) – 2,975 (2,975) – 1,348,844 5,289 (5,289) 1,348,844 297,483 (2,975) 294,508
335. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) (iv) Credit quality of other financial assets excluding cash, short-term funds and deposits (continued) Credit quality of other financial assets by external rating is as follows: (continued) Group 2021 Financial assets at FVOCI Debt instrument Government bonds and GG Sukuk: Rated AAA Rated AA1 to AA3 Lower than A Gross carrying amount Impairment allowances^ Stage 1 RM’000 Stage 3 RM’000 Total RM’000 7,938,079 – 7,938,079 3,020,792 1,519,327 – – – 15,842 3,020,792 1,519,327 15,842 12,478,198 15,842 12,494,040 403 – 403 Derivative financial assets Bank and financial institution counterparties Corporate 55,409 6,256 61,665 Financial assets at FVTPL Sukuk: Rated AAA 942,710 Other financial assets at AC Other unrated financial assets Impairment allowances 192,574 – Net carrying amount 192,574 8,264 (8,264) – 200,838 (8,264) 192,574 ^ The impairment allowances are recognised in OCI reserve. 333
336. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) (iv) Credit quality of other financial assets excluding cash, short-term funds and deposits (continued) Credit quality of other financial assets by external rating is as follows: (continued) Bank 2021 Financial assets at FVOCI Debt instrument Government bonds and GG Sukuk: Rated AAA Rated AA1 to AA3 Lower than A Gross carrying amount Impairment allowances^ Stage 1 RM’000 Stage 3 RM’000 Total RM’000 8,690,000 – 8,690,000 2,391,696 1,429,133 15,841 – – – 2,391,696 1,429,133 15,841 12,526,670 – 12,526,670 7,237 – 7,237 Derivative financial assets Bank and financial institution counterparties Corporate 16,044 9,993 26,037 Financial assets at FVTPL Government bonds and treasury bills Sukuk: Rated AA1 to AA3 1,131,574 155,515 1,287,089 Financial assets at AC Government bonds and GG MARC C Impairment allowance 1,348,844 – – Net carrying amount 1,348,844 Other financial assets at AC Other unrated financial assets Impairment allowances 239,257 – Net carrying amount 239,257 ^ The impairment allowances are recognised in OCI reserve. 334 – 5,289 (5,289) – 2,975 (2,975) – 1,348,844 5,289 (5,289) 1,348,844 242,232 (2,975) 239,257
337. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) (iv) Credit quality of other financial assets excluding cash, short-term funds and deposits (continued) Credit quality of other financial assets by external rating is as follows: (continued) Bank 2020 Financial assets at FVOCI Debt instrument Government bonds and treasury bills Sukuk Rated AAA Rated AA1 to AA3 Lower than A Gross carrying amount Impairment allowances^ Stage 1 RM’000 Stage 3 RM’000 Total RM’000 7,938,079 – 7,938,079 3,020,792 1,519,327 – – – 15,842 3,020,792 1,519,327 15,842 12,478,198 15,842 12,494,040 403 – 403 Derivative financial assets Bank and financial institution counterparties Corporate 55,409 6,256 61,665 Financial assets at FVTPL Sukuk: Rated AA1 to AA3 942,710 Other financial assets at AC Other unrated financial assets Impairment allowances 182,041 – Net carrying amount 182,041 8,264 (8,264) – 190,305 (8,264) 182,041 ^ The impairment allowances are recognised in OCI reserve.. 335
338. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Market risk Overview Market risk is the risk of adverse impact to the Group’s and the Bank’s arises from fluctuations of market prices and rates. The following are the main market risk factors that the Group and the Bank are exposed to: – Profit Rate Risk: also known as the Rate of Return Risk, is the potential impact on the Group’s and the Bank’s profitability caused by changes in the rate of return due to general market movements or issuer/ customer specific reasons; – Foreign Exchange Risk: the impact of exchange rate movements on the Group’s and the Bank’s currency positions; and – Equity Instrument Risk: the profitability impact on the Group’s and the Bank’s equity positions or investments caused by changes in equity prices or values. The Group and the Bank separates the market risk exposures into either trading book or banking book portfolios. Trading book portfolios include those positions arising from market making, proprietary position taking and other marked-to-market positions as per the Board-approved Trading Book Policy Statements. Banking book portfolios primarily arise from the Group’s and the Bank’s profit rate management of the Bank’s assets and liabilities and investment portfolio mainly for liquidity management. Market risk governance The management of market risk is principally carried out by using sets of policies and guidelines approved by the ALCO and/or BRC, guided by the Board-approved Risk Appetite Statement. The ALCO is responsible under the authority delegated by the BRC for managing market risk at strategic level. Management of market risk The objective is to manage market risk exposures in order to optimise return on risk while maintaining a market risk profile consistent with the Group’s and the Bank’s approved risk appetite. All market risk exposures are managed by Treasury, who has the necessary skills, tools, management and governance to manage such risks. The management of market risk is guided by comprehensive limits, policies and guidelines which are periodically reviewed. The Market Risk Management Department (“MRMD”) is the independent risk control function that is responsible for the implementation of market risk management framework. MRMD is also responsible for developing and reviewing the Group’s and the Bank’s market risk management guidelines and policies, monitoring tools, behavioural assumptions and limit setting methodologies. Escalation procedures are documented and approved by the ALCO and/or BRC. In addition, the market risk exposures and limits are reported to the ALCO and the BRC. Other controls to ensure that market risk exposures remain within tolerable levels include regular stress testing, ad-hoc simulations and rigorous new product approval procedures. Stress test results are produced regularly to determine the impact of changes in profit rates, foreign exchange rates and other risk factors on the Group’s and the Bank’s profitability, capital adequacy and liquidity. The stress test provides the Management and the BRC with an assessment of the financial impact of identified extreme events on the market risk exposures of the Group and the Bank. 336
339. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Market risk (continued) (i) Profit rate risk The table below summarises the Group’s and the Bank’s exposure to profit rate risk. The table indicates average profit rates at the reporting date and the periods in which the financial instruments are repriced or mature, whichever is earlier. Banking book Group 2021 Up to 1 month RM’000 Assets Cash and short-term funds and deposits and placements with financial institutions 4,468,535 Financial assets at FVTPL – Derivative financial assets – Financial assets at FVOCI 748,201 Financing, advances and others – – non-impaired 46,991,212 – impaired net of allowances * – Other financial assets at amortised cost – Statutory deposits with Bank Negara Malaysia – Total assets 52,207,948 Liabilities Deposits from customers 13,126,938 Investment accounts of customers 1,340,131 Derivative financial liabilities – Bills and acceptance payable – Recourse obligations on financing sold to Cagamas – Subordinated Sukuk Murabahah – Other liabilities – Lease liabilities 728 Total RM’000 Effective profit rate % – 5,222,848 1,582,494 1,582,494 26,037 26,037 – 12,604,204 – 1,348,844 – 58,649,352 – (495,583) – 294,508 1.53 2.51 0.34 3.69 2.04 4.24 – – >1–3 months RM’000 >3–12 months RM’000 1–5 years RM’000 Over 5 years RM’000 Non–profit sensitive RM’000 Trading book RM’000 – – – 200,402 – 4,788,799 – – – – – 2,227,959 50,529 1,040,059 – – – – – 6,755,240 1,288,203 1,251,679 – – – – – 2,672,402 10,112 3,656,933 – – 754,313 – – – – 920,670 (495,583) 294,508 – – – – 264,050 – 264,050 4,989,201 3,318,547 9,295,122 6,339,447 1,737,958 1,608,531 79,496,754 9,285,290 1,322,364 – – 14,086,170 1,126,857 – – 497,276 7,913 – – 48,874 – – – 20,294,286 6,655,637 – 20,112 – – 20,421 – 57,338,834 10,452,902 20,421 20,112 1.45 1.29 0.27 – – – – 2,283 – – – 9,409 2,000,000 – – 53,502 – 2,000,000 – 237,526 1,720 14,849 1,570,602 – – – – – 2,001,720 2,014,849 1,570,602 303,448 4.36 4.11 – – Total liabilities 14,467,797 10,609,937 15,222,436 2,558,691 2,286,400 28,557,206 20,421 73,722,888 On-balance sheet profit sensitivity gap Off-balance sheet profit sensitivity gap (profit rate swaps) 37,740,151 (5,620,736) (11,903,889) 6,736,431 4,053,047 (26,819,248) 1,588,110 5,773,866 – – 79,153 Total profit sensitivity gap 37,740,151 4,053,047 (26,819,248) 1,588,110 5,853,019 – – – 79,153 (5,620,736) (11,903,889) 6,815,584 – – * This is arrived at after deducting impairment allowances from the outstanding gross impaired financing. 337
340. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Market risk (continued) (i) Profit rate risk (continued) Banking book >1–3 months RM’000 >3–12 months RM’000 1–5 years RM’000 Over 5 years RM’000 Non–profit sensitive RM’000 Trading book RM’000 Total RM’000 Effective profit rate % – – – 678,405 – – – 1,226,955 – – – 6,725,858 – – – 3,846,980 726,005 – – – – 1,181,200 61,665 – 5,216,737 1,181,200 61,665 12,557,991 1.37 2.34 0.71 5.69 442,090 – – 42,052 – – 1,030,556 – – 2,282,468 – – 744,521 (554,727) 192,574 – – – 55,225,362 (554,727) 192,574 4.72 – – – – 192,425 – 192,425 55,254,200 1,120,495 1,269,007 7,756,414 6,129,448 1,300,798 1,242,865 74,073,227 12,210,156 2,482,295 – – 8,395,068 2,231,737 – – 10,787,258 2,534,420 – – 1,735,439 6,801 – – 35,117 – – – 17,914,224 5,113,275 – 29,621 – – 105,872 – 51,077,262 12,368,528 105,872 29,621 1.99 1.91 1.23 – – – 1,409 – – – 2,267 – – – 9,760 1,500,000 – – 46,551 – 1,700,000 – 252,442 1,187 13,164 1,136,863 – – – – – 1,501,187 1,713,164 1,136,863 312,429 4.74 4.69 Total liabilities 14,693,860 10,629,072 13,331,438 3,289,140 1,987,559 24,208,334 105,872 68,244,926 On-balance sheet profit sensitivity gap Off-balance sheet profit sensitivity gap (profit rate swaps) 40,560,340 (9,508,577) (12,062,431) 4,467,274 4,141,889 (22,907,536) 1,136,993 5,828,301 – 114,056 – – – 114,056 Total profit sensitivity gap 40,560,340 (9,508,577) (12,062,431) 4,581,330 4,141,889 (22,907,536) 1,136,993 5,942,357 Group 2020 Up to 1 month RM’000 Assets Cash and short-term funds and deposits and placements with financial institutions 4,490,732 Financial assets at FVTPL – Derivative financial assets – Financial assets at FVOCI 79,793 Financing, advances and others – non-impaired 50,683,675 – impaired net of allowances * – Other financial assets at amortised cost – Statutory deposits with Bank Negara Malaysia – Total assets Liabilities Deposits from customers Investment accounts of customers Derivative financial liabilities Bills and acceptance payable Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah Other liabilities Lease liabilities – – * This is arrived at after deducting impairment allowances from the outstanding gross impaired financing. 338 5.70
341. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Market risk (continued) (i) Profit rate risk (continued) Banking book Bank 2021 Up to 1 month RM’000 Assets Cash and short-term funds and deposits and placements with financial institutions 4,453,177 Financial assets at FVTPL – Derivative financial assets Financial assets at FVOCI 749,064 Financial assets at amortised cost – Financing, advances and others – non-impaired 46,991,212 – impaired net of allowances * – Other financial assets at amortised cost – Statutory deposits with Bank Negara Malaysia – Total assets 52,193,453 Liabilities Deposits from customers 13,127,720 Investment accounts of customers 1,371,739 Derivative financial liabilities – Bills and acceptance payable – Recourse obligations on financing sold to Cagamas – Subordinated Sukuk Murabahah – Other liabilities – Lease liabilities 683 >1–3 months RM’000 >3–12 months RM’000 1–5 years RM’000 Over 5 years RM’000 Non–profit sensitive RM’000 Trading book RM’000 Total RM’000 Effective profit rate % – – – 200,402 – – – – 2,227,959 50,529 – – – 6,755,240 1,288,203 – – – 2,672,402 10,112 751,187 – – – – – 1,550,700 26,037 – – 5,204,364 1,550,700 26,037 12,605,067 1,348,844 1.53 2.50 0.34 3.69 2.04 4,788,799 – – 1,040,059 – – 1,251,679 – – 3,656,933 – – 920,670 (495,583) 239,257 – – – 58,649,352 (495,583) 239,257 4.24 – – – – – – 264,050 – 264,050 – 4,989,201 3,318,547 9,295,122 6,339,447 1,679,581 1,576,737 79,392,088 9,286,497 14,094,624 1,399,335 1,126,857 – – – – 497,276 8,033 – – 48,874 – – – 20,308,935 6,655,637 – 20,112 – – 20,421 – 57,363,926 10,561,601 20,421 20,112 1.45 1.29 0.27 – – – – – 2,001,720 2,014,849 1,538,375 302,984 4.36 4.11 – 5.70 – – – 2,191 – – – 9,082 2,000,000 – – 53,502 – 2,000,000 – 237,526 1,720 14,849 1,538,375 – 10,688,023 15,230,563 2,558,811 2,286,400 28,539,628 On-balance sheet profit sensitivity gap 37,693,311 Off-balance sheet profit sensitivity gap (profit rate swaps) – (5,698,822) (11,912,016) 6,736,311 4,053,047 (26,860,047) – 79,153 Total profit sensitivity gap (5,698,822) (11,912,016) 6,815,464 Total liabilities 14,500,142 37,693,311 – 20,421 73,823,988 1,556,316 5,568,110 – – 79,153 4,053,047 (26,860,047) 1,556,316 5,647,253 – * This is arrived at after impairment allowances from the outstanding gross impaired financing. 339
342. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Market risk (continued) (i) Profit rate risk (continued) Banking book >1–3 months RM’000 >3–12 months RM’000 1–5 years RM’000 Over 5 years RM’000 Non–profit sensitive RM’000 Trading book RM’000 Total RM’000 Effective profit rate % – – – 678,405 – – – 1,226,955 – – – 6,725,858 – – – 3,846,980 725,548 – – – – 1,175,440 61,665 – 5,216,280 1,175,440 61,665 12,558,729 1.38 2.35 0.71 5.71 442,090 – – 42,052 – – 1,030,556 – – 2,282,468 – – 744,521 (554,727) 182,041 – – – 55,225,362 (554,727) 182,041 4.72 – – – – 192,425 – 192,425 55,254,938 1,120,495 1,269,007 7,756,414 6,129,448 1,289,808 1,237,105 74,057,215 12,210,491 2,482,295 – – 8,397,374 2,231,757 – – 10,792,984 2,534,420 – – 1,735,439 7,150 – – 35,117 – – – 17,924,046 5,113,275 – 29,621 – – 105,872 – 51,095,451 12,368,897 105,872 29,621 2.00 1.91 1.23 – – – 1,409 – – – 2,267 – – – 9,760 1,500,000 – – 46,551 – 1,700,000 – 252,442 1,187 13,164 1,024,855 – – – – – 1,501,187 1,713,164 1,024,855 312,429 4.74 4.69 Total liabilities 14,694,195 10,631,398 13,337,164 3,289,140 1,987,559 24,106,148 105,872 68,151,476 On-balance sheet profit sensitivity gap Off-balance sheet profit sensitivity gap (profit rate swaps) 40,560,743 (9,510,903) (12,068,157) 4,467,274 4,141,889 (22,816,340) 1,131,233 5,905,739 – 114,056 – – – 114,056 Total profit sensitivity gap 40,560,743 (9,510,903) (12,068,157) 4,581,330 4,141,889 (22,816,340) 1,131,233 6,019,795 Bank 2020 Up to 1 month RM’000 Assets Cash and short-term funds and deposits and placements with financial institutions 4,490,732 Financial assets at FVTPL – Derivative financial assets – Financial assets at FVOCI 80,531 Financing, advances and others – non-impaired 50,683,675 – impaired net of allowances* – Other financial assets at amortised cost – Statutory deposits with Bank Negara Malaysia – Total assets Liabilities Deposits from customers Investment accounts of customers Derivative financial liabilities Bills and acceptance payable Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah Other liabilities Lease liabilities – – * This is arrived at after deducting impairment allowances from the outstanding gross impaired financing. 340 5.70
343. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Market risk (continued) (i) Profit rate risk (continued) Profit rate risk in the banking book portfolio Profit rate risk in the banking book portfolio is managed and controlled using measurement tools known as Earnings at Risk (“EaR”) and Economic Value of Equity (“EVE”). The Group and the Bank monitor the sensitivity of EaR and EVE under varying profit rate scenarios (i.e. simulation modeling). The model is a combination of standard and non-standard scenarios relevant to the local market. The standard scenarios include the parallel fall or rise in the profit rate curve and historical simulation. These scenarios assume 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 manage and strategise to change the profit rate exposure profile to minimise losses and to optimise net revenues. The Bank’s hedging and risk mitigation 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 Group’s and the Bank’s profit rate sensitivity to a 150 basis points (2020: 100 basis point) parallel shift as at reporting date. Impact on profit after tax/reserves – Increase/(Decrease) 2021 -150bps RM million 2020 +150bps RM million -100bps RM million +100bps RM million Group Impact on EaR Impact on EVE (206.6) 294.0 206.6 (294.0) (131.4) 241.0 131.4 (241.0) Bank Impact on EaR Impact on EVE (204.7) 293.6 204.7 (293.6) (131.4) 240.9 131.4 (240.9) On 30 June 2020, BNM issued the revised reporting requirements for EVE and EaR which come into effect on 1 January 2021. One of the changes is to report both the EVE and EaR based on 150 basis point parallel shift instead of 100 basis point parallel shift. Another control to manage the profit rate risk in the banking book portfolio includes present value of 1 basis point change (“PV01”) which measures the portfolio’s sensitivity to market rates movement. 341
344. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Market risk (continued) (ii) Market risk in the trading book portfolio Market risk in the trading book portfolio is monitored and controlled using Value-at-Risk (“VaR”). It 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 and the Bank are based on historical simulation which derives plausible future scenarios from past series of recorded market rates and prices. The historical simulation model used by the Group and the Bank incorporates the following features: •• Potential market movements are calculated with reference to data from the past two years; •• Historical market rates and prices are calculated with reference to foreign exchange rates and profit rates; and •• VaR is calculated using a 99 per cent confidence level and for a one-day holding period. A summary of the VaR position of the Bank’s trading book portfolios at the reporting date is as follows: Bank Profit rate risk Foreign exchange risk Overall Bank Profit rate risk Foreign exchange risk Overall 1.1.2021 to 31.12.2021 As at 31.12.2021 RM million Average RM million Maximum RM million Minimum RM million 0.14 0.36 0.50 1.05 0.66 1.71 2.39 1.19 2.78 0.14 0.34 0.50 1.1.2020 to 31.12.2020 As at 31.12.2020 RM million Average RM million Maximum RM million Minimum RM million 2.76 0.42 3.18 1.88 0.47 2.36 3.32 1.02 3.89 0.01 0.23 0.36 In addition to VaR, the Group and the Bank has put in place the maximum loss limits, position limits, tenor limits and PV01 limits in monitoring the trading book portfolio. 342
345. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Market risk (continued) (iii) Foreign exchange risk The Group and the Bank manages and controls the trading book portfolio’s foreign exchange risk by limiting the net open exposure to individual currencies and on an aggregate basis. The Group and the Bank also has in place the sensitivity limit. For the Bank-wide (trading book and banking book portfolios) foreign exchange risk, the Group and the Bank manage and control by limiting the net open exposure on an aggregate basis. Sensitivity Analysis Assuming that other risk variables remain constant, the foreign currency revaluation sensitivity for the Group and 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’): Impact on profit after tax - Increase/(Decrease) 2021 Group and Bank US Dollar vs RM Euro vs RM Others vs RM -1% Depreciation RM’000 12,136 4,576 (193) 2020 +1% Appreciation RM’000 (12,136) (4,576) 193 -1% Depreciation RM’000 +1% Appreciation RM’000 8,844 5,072 (194) (8,844) (5,072) 194 (d) Liquidity risk Overview Liquidity risk is the potential inability of the Group and the Bank to meet its funding needs and regulatory obligation when they fall due, or will have to do it at excessive cost. This risk can arise from mismatches in the timing of cash flows. The Group and the Bank maintains a diversified and stable funding base comprising of retail and corporate customer deposits. This is augmented by wholesale funding and highly liquid assets portfolios. The objective of the Group’s and the Bank’s liquidity management is to ensure that all foreseeable funding commitments and deposit withdrawals can be met when due and that wholesale market remains accessible and cost effective. Savings account, current account, investment accounts (IA) and term deposits form a critical part of the Group’s and the Bank’s funding profile and the Group and the Bank place considerable importance on maintaining their stability. The stability depends upon preserving depositor confidence in the Group and the Bank and the Group’s and the Bank’s capital strength and liquidity, and on competitive and transparent pricing. 343
346. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Liquidity risk (continued) Overview (continued) The Group’s and the Bank’s liquidity management is primarily carried out in accordance with Bank Negara Malaysia’s requirements and the internal limits are approved by the ALCO and/or BRC. The limits vary to take account of the depth and liquidity of the local market in which the Group and the Bank operate. The Group and the Bank maintain a strong liquidity position and manage the liquidity profile of its assets, liabilities and commitments to ensure that cash flows are appropriately balanced and all obligations are met when due. The management of liquidity risk is principally carried out by using sets of policies and guidelines approved by ALCO and/or BRC, guided by the Board’s approved Risk Appetite Statement. The ALCO is responsible under the authority delegated by the BRC for managing liquidity risk at strategic level. Management of liquidity risk All liquidity risk exposures are managed by Treasury, who has the necessary skills, tools, management and governance to manage such risks. Limits and other risk controls are set to meet the following objectives: •• Maintaining sufficient liquidity surplus and reserves to sustain a sudden liquidity shock; •• Ensuring cash flows are relatively diversified across all maturities; •• Ensuring deposit base is diversified and not overly concentrated to a relatively small number of depositors; •• Maintaining sufficient borrowing capacity in the Interbank market •• Maintain sufficient highly liquid financial assets; •• Not over-extending financing activities relative to the deposit base; and •• Not over-relying on non-Ringgit liabilities to fund Ringgit assets. MRMD is also responsible for the implementation of liquidity risk management framework. It develops the Group’s and the Bank’s liquidity risk management guidelines, monitoring tools, behavioural assumptions and limit setting methodologies. Escalation procedures are documented and approved by the ALCO and/or BRC, with proper authorities to ratify or approve any excess. In addition, the liquidity risk exposures and limits are reported to the ALCO and the BRC. Stress testing and scenario analysis are important tools used by the Group and the Bank to manage the liquidity risk. Stress test results are produced regularly to determine the impact of a sudden liquidity shock. The stress testing provides the Management and the BRC with an assessment of the financial impact of identified extreme events on the liquidity and funding risk exposures of the Group and the Bank. Another key control feature of the Group’s and the Bank’s liquidity risk management is the liquidity contingency management plans. These plans identify the pre-emptive quantitative and qualitative indicators of stress conditions arising from systemic or other crises and provide guidance on the actions to be taken in order to minimise the adverse implications to the Group and the Bank. 344
347. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Liquidity risk (continued) Maturity analysis The table below analyses assets and liabilities of the Group and the Bank based on the remaining period at the end of the reporting period to the contractual maturity date in accordance with the requirement of Bank Negara Malaysia Guidelines: Group As at 31 December 2021 Assets Cash and short-term funds and deposits and placements with financial institutions Financial assets at FVTPL Derivative financial assets Financial assets at FVOCI Financial assets at amortised cost Financing, advances and others Other financial assets at amortised cost Statutory deposits with Bank Negara Malaysia Total assets Liabilities Deposits from customers Investment accounts of customers Derivative financial liabilities Bills and acceptance payable Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah Other liabilities Lease liabilities Total liabilities On demand/ no specific maturity date RM’000 Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 6 months RM’000 >6 to 12 months RM’000 754,313 295,395 – 77,534 4,468,535 10,225 5,316 670,667 – 494,559 7,759 200,402 – 447,071 11,972 1,010,231 – 335,244 73 1,217,728 – – – 2,405,500 – 1,325,153 50,529 691,800 294,508 – – – – – 294,508 264,050 – – – – – 264,050 1,685,800 7,560,243 2,027,873 2,211,603 2,058,798 63,952,437 79,496,754 20,294,286 13,126,938 9,285,290 8,116,272 5,969,898 546,150 57,338,834 7,913 10,452,902 668 20,421 – 20,112 Over 1 year RM’000 Total RM’000 – 5,222,848 – 1,582,494 917 26,037 9,427,642 12,604,204 – 1,298,315 1,348,844 505,753 53,225,563 58,153,769 6,655,637 – 20,112 1,340,131 5,176 – 1,322,364 7,565 – 907,940 6,387 – 218,917 625 – – – – – – 2,001,720 2,001,720 – 1,570,602 – – – 728 3,945 – 2,283 10,904 – 3,461 – – 5,948 2,000,000 – 291,028 2,014,849 1,570,602 303,448 28,540,637 14,472,973 10,621,447 9,044,964 6,195,388 4,847,479 73,722,888 Net liquidity gap on statement of financial position (27,227,766) (6,539,801) (8,593,574) (6,833,361) (4,136,590) 59,104,958 5,773,866 345
348. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Liquidity risk (continued) Maturity analysis (continued) The table below analyses assets and liabilities of the Group and the Bank based on the remaining period at the end of the reporting period to the contractual maturity date in accordance with the requirement of Bank Negara Malaysia Guidelines: (continued) On demand/ no specific maturity date RM’000 Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 6 months RM’000 >6 to 12 months RM’000 Over 1 year RM’000 Total RM’000 725,644 238,490 – 63,951 – 4,490,732 243,618 25,579 15,842 1,799,333 – – 26,773 678,405 1,054,893 361 30,051 6,915 395,567 429,657 – 50,041 227 831,388 377,000 – 619,000 2,171 10,572,838 51,009,752 5,216,737 1,181,200 61,665 12,557,991 54,670,635 192,574 – – – – – 192,574 192,425 – – – – – 192,425 1,413,084 6,575,104 1,760,071 862,551 1,258,656 62,203,761 74,073,227 17,914,224 12,210,156 8,395,068 5,830,244 4,957,014 1,770,556 51,077,262 5,113,275 – 29,621 2,482,295 29,422 – 2,231,737 56,599 – 1,913,851 17,269 – 620,569 938 – 6,801 1,644 – 12,368,528 105,872 29,621 – – – – – 1,501,187 1,501,187 – 978,556 – – – 1,409 3,904 – 2,267 9,260 – 3,323 – – 6,437 1,700,000 59,523 298,993 1,713,164 1,038,079 312,429 24,035,676 14,723,282 10,689,575 7,773,947 5,584,958 5,338,704 68,146,142 Net liquidity gap on statement of financial position (22,925,033) (7,845,737) (8,929,504) (6,911,396) (4,326,302) 56,865,057 5,927,085 Group As at 31 December 2020 Assets Cash and short-term funds and deposits and placements with financial institutions Financial assets at FVTPL Derivative financial assets Financial assets at FVOCI Financing, advances and others Other financial assets at amortised cost Statutory deposits with Bank Negara Malaysia Total assets Liabilities Deposits from customers Investment accounts of customers Derivative financial liabilities Bills and acceptance payable Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah Other liabilities Lease liabilities Total liabilities 346
349. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Liquidity risk (continued) Maturity analysis (continued) Bank As at 31 December 2021 Assets Cash and short-term funds and deposits and placements with financial institutions Financial assets at FVTPL Derivative financial assets Financial assets at FVOCI Financial assets at amortised cost Financing, advances and others Other financial assets at amortised cost Statutory deposits with Bank Negara Malaysia Total assets Liabilities Deposits from customers Investment accounts of customers Derivative financial liabilities Bills and acceptance payable Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah Other liabilities Lease liabilities Total liabilities On demand/ no specific maturity date RM’000 Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 6 months RM’000 >6 to 12 months RM’000 751,187 263,611 – 78,397 4,453,177 10,215 5,316 670,667 – 494,559 7,759 200,402 – 447,071 11,972 1,010,231 – 335,244 73 1,217,728 – – – 2,405,500 – 1,325,153 50,529 691,800 239,257 – – – – – 239,257 264,050 – – – – – 264,050 1,596,502 7,544,875 2,027,873 2,211,603 2,058,798 63,952,437 79,392,088 20,308,935 13,127,720 9,286,497 8,120,947 5,973,677 546,150 57,363,926 8,033 10,561,601 668 20,421 – 20,112 Over 1 year RM’000 Total RM’000 – 5,204,364 – 1,550,700 917 26,037 9,427,642 12,605,067 – 1,298,315 1,348,844 505,753 53,225,563 58,153,769 6,655,637 – 20,112 1,371,739 5,176 – 1,399,335 7,565 – 907,940 6,387 – 218,917 625 – – – – – – 2,001,720 2,001,720 – 1,538,375 – – – 683 3,945 – 2,191 10,904 – 3,322 – – 5,760 2,000,000 – 291,028 2,014,849 1,538,375 302,984 28,523,059 14,505,318 10,699,533 9,049,500 6,198,979 4,847,599 73,823,988 Net liquidity gap on statement of financial position (27,268,565) (6,618,435) (8,671,660) (6,837,897) (4,140,181) 59,104,838 5,568,100 347
350. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Liquidity risk (continued) Maturity analysis (continued) On demand/ no specific maturity date RM’000 Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 6 months RM’000 >6 to 12 months RM’000 Over 1 year RM’000 Total RM’000 725,548 232,730 – 64,689 – 4,490,732 243,618 25,579 15,842 1,799,333 – – 26,773 678,405 1,054,893 – 30,051 6,915 395,567 429,657 – 50,041 227 831,388 377,000 – 619,000 2,171 10,572,838 51,009,752 5,216,280 1,175,440 61,665 12,558,729 54,670,635 182,041 – – – – – 182,041 192,425 – – – – – 192,425 1,397,433 6,575,104 1,760,071 862,190 1,258,656 62,203,761 74,057,215 17,924,046 12,210,491 8,397,374 5,832,265 4,960,719 1,770,556 51,095,451 5,113,275 – 29,621 2,482,295 29,422 – 2,231,757 56,599 – 1,913,851 17,269 – 620,569 938 – 7,150 1,644 – 12,368,897 105,872 29,621 – – – – – 1,501,187 1,501,187 – 965,332 – – – 1,409 3,904 – 2,267 9,260 – 3,323 – – 6,437 1,700,000 59,523 298,993 1,713,164 1,024,855 312,429 24,032,274 14,723,617 10,691,901 7,775,968 5,588,663 5,339,053 68,151,476 Net liquidity gap on statement of financial position (22,932,260) (7,851,094) (8,931,830) (6,913,778) (4,330,007) 56,864,708 5,905,739 Bank As at 31 December 2020 Assets Cash and short-term funds and deposits and placements with financial institutions Financial assets at FVTPL Derivative financial assets Financial assets at FVOCI Financing, advances and others Other financial assets at amortised cost Statutory deposits with Bank Negara Malaysia Total assets Liabilities Deposits from customers Investment accounts of customers Derivative financial liabilities Bills and acceptance payable Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah Other liabilities Lease liabilities Total liabilities 348
351. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Liquidity risk (continued) Contractual maturity of financial liabilities on an undiscounted basis The table below present the cash flows payable by the Bank under financial liabilities by remaining contractual maturities at the end of the reporting period. The amounts disclosed in the table are the contractual undiscounted cash flows: Group As at 31 December 2021 Up to 1 month RM’000 >1 to 3 months RM’000 Financial Liabilities Deposits from customers 32,567,363 10,079,216 Investment accounts of customers 8,019,903 1,432,649 Derivative financial liabilities 5,239 9,929 Forward contract 4,995 7,746 Islamic Profit Rate Swap 244 2,183 Bills and acceptance payable 20,112 – Recourse obligations on financing sold to Cagamas 7,120 14,240 Subordinated Sukuk Murabahah – 7,479 Other liabilities 1,270,602 – Lease liabilities 2,542 5,084 41,892,881 11,548,597 Commitments and Contingencies Financial guarantee contracts >3 to 6 months RM’000 >6 to 12 months RM’000 Over 1 year RM’000 7,855,452 6,427,787 614,697 57,544,515 796,052 13,915 6,387 7,528 – 341,948 31,208 625 30,583 – 8,287 10,598,839 136,957 197,248 – 19,753 136,957 177,495 – 20,112 21,359 33,843 – 7,626 42,719 41,810 – 14,155 8,728,247 6,899,627 2,050,345 2,593,902 300,000 422,605 Total RM’000 2,135,783 2,677,034 1,570,602 452,012 6,126,793 75,196,145 205,501 144,324 132,935 365,503 974,646 1,822,909 205,501 144,324 132,935 365,503 974,646 1,822,909 349
352. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Liquidity risk (continued) Contractual maturity of financial liabilities on an undiscounted basis (continued) Group As at 31 December 2020 Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 6 months RM’000 >6 to 12 months RM’000 Over 1 year RM’000 Total RM’000 8,429,037 5,879,065 5,061,386 1,919,877 51,311,787 2,240,679 2,183 – 2,183 – 1,930,504 7,528 – 7,528 – 630,355 30,583 – 30,583 – 7,427 349,233 – 349,233 – 12,419,791 389,783 11 389,772 29,621 11,826 7,356 – 5,135 17,739 27,700 – 7,607 35,478 35,834 – 14,891 1,600,520 2,253,966 59,523 446,908 1,671,476 2,324,856 1,136,863 477,109 38,748,946 10,696,216 7,870,143 5,808,527 6,637,454 69,761,286 136,040 154,767 154,596 339,429 1,156,959 1,941,791 136,040 154,767 154,596 339,429 1,156,959 1,941,791 Financial Liabilities Deposits from customers 30,022,422 Investment accounts of customers 7,610,826 Derivative financial liabilities 256 Forward contract 11 Islamic Profit Rate Swap 245 Bills and acceptance payable 29,621 Recourse obligations on financing sold to Cagamas 5,913 Subordinated Sukuk Murabahah – Other liabilities 1,077,340 Lease liabilities 2,568 Commitments and Contingencies Financial guarantee contracts 350
353. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Liquidity risk (continued) Contractual maturity of financial liabilities on an undiscounted basis (continued) Bank As at 31 December 2021 Up to 1 month RM’000 >1 to 3 months RM’000 Financial Liabilities Deposits from customers 32,567,363 10,079,216 Investment accounts of customers 8,019,903 1,432,649 Derivative financial liabilities 5,239 9,929 Forward contract 4,995 7,746 Islamic Profit Rate Swap 244 2,183 Bills and acceptance payable 20,112 – Recourse obligations on financing sold to Cagamas 7,120 14,240 Subordinated Sukuk Murabahah – 7,479 Other liabilities 1,238,375 – Lease liabilities 2,495 4,989 41,860,607 11,548,502 Commitments and Contingencies Financial guarantee contracts >3 to 6 months RM’000 >6 to 12 months RM’000 Over 1 year RM’000 7,855,452 6,427,787 614,697 57,544,515 796,052 13,915 6,387 7,528 – 341,948 31,208 625 30,583 – 8,287 10,598,839 136,957 197,248 – 19,753 136,957 177,495 – 20,112 21,359 33,843 – 7,484 42,719 41,810 – 13,965 8,728,105 6,899,437 2,050,345 2,593,902 300,000 422,605 Total RM’000 2,135,783 2,677,034 1,538,375 451,538 6,126,793 75,163,444 205,501 144,324 132,935 365,503 974,646 1,822,909 205,501 144,324 132,935 365,503 974,646 1,822,909 351
354. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Liquidity risk (continued) Contractual maturity of financial liabilities on an undiscounted basis (continued) Bank As at 31 December 2020 Up to 1 month RM’000 >1 to 3 months RM’000 >3 to 6 months RM’000 >6 to 12 months RM’000 Over 1 year RM’000 Total RM’000 8,429,037 5,879,065 5,061,386 1,919,877 51,311,787 2,240,679 2,183 2,183 - 1,930,504 7,528 7,528 - 630,355 30,583 30,583 - 7,427 349,233 349,233 - 12,419,791 389,783 11 389,772 29,621 11,826 7,356 5,135 17,739 27,700 7,607 35,478 35,834 14,891 1,600,520 2,253,966 59,523 446,908 1,671,476 2,324,856 1,153,659 477,109 38,765,742 10,696,216 7,870,143 5,808,527 136,040 154,767 154,596 339,429 1,156,959 1,941,791 136,040 154,767 154,596 339,429 1,156,959 1,941,791 Financial Liabilities Deposits from customers 30,022,422 Investment accounts of customers 7,610,826 Derivative financial liabilities 256 Forward contract 11 Islamic Profit Rate Swap 245 Bills and acceptance payable 29,621 Recourse obligations on financing sold to Cagamas 5,913 Subordinated Sukuk Murabahah Other liabilities 1,094,136 Lease liabilities 2,568 Commitments and Contingencies Financial guarantee contracts 6,637,454 69,778,082 (e) Operational Risk Overview Operational risk is defined as the risk of loss arising from inadequate or failed internal processes, people and systems and external events, which includes legal risk and Shariah compliance risk but excludes strategic and reputational risk. Management of operational risk The Group and the Bank recognises and emphasises the importance of operational risk management (“ORM”) and manages this risk through a control-based environment where processes are documented, authorisation is independent, transactions are reconciled and monitored and business activities are carried out within the established guidelines, procedures and limits. 352
355. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 39.FINANCIAL RISK MANAGEMENT (CONTINUED) (e) Operational Risk (continued) Management of operational risk (continued) The Group’s and the Bank’s overall governance approach in managing operational risk is premised on the Three Lines of Defence Approach: •• 1st line of defence – The risk owner or risk taking unit i.e. Business or Support Unit is accountable for putting in place a robust control environment within their respective units. They are responsible for the day-to-day management of operational risk. Head of Division/Department (“HOD”) are accountable for effective management of operational risk within their respective divisions. To reinforce accountability and ownership of risk and control, a Risk Controller for each risk taking unit is appointed to assist in driving the risk and control programme for the Group and the Bank. In addition, an Embedded Risk & Compliance Unit (“ERU”) has been established within the significant business and support units (“BU/SU”). The ERU would assist in implementing and monitoring the ORM activities within the BU/SU. The ERU’s relationship and knowledge of the business allow for a more focused implementation and effective oversight of ORM within the BU/SU. •• 2nd line of defence – Operational Risk Management Department (“ORMD”) is responsible for establishing and maintaining the ORM Framework, developing various ORM tools to facilitate the management of operational risk, monitoring the effectiveness of ORM via an integrated operational risk management system, assessing operational risk issues from the risk owner and escalating the issues to the relevant governance level with recommendations on appropriate risk mitigation strategies. In creating a strong risk culture, ORMD is also responsible to promote risk awareness across the Group and the Bank. Shariah Risk Management Department (“SRM”), Compliance Division which includes Shariah Compliance Department (“SCD”) and Information Security Governance (“ISGD”) complement the role of ORMD as the second line of defence. SRM is responsible for managing the Shariah compliance risk (“SCR”) by establishing and maintaining appropriate SRM guidelines, facilitating the process of identifying, assessing, controlling and monitoring SCR and promoting SCR awareness. Compliance Division is responsible for ensuring effective oversight on compliance-related risks such as regulatory compliance risk, compliance risk as well as money laundering and terrorism financing risks through proper classification of risks and develops, reviews and enhances compliance-related training programmes as well as conducts training that promotes awareness creation. SCD of Compliance Division, is responsible for reviewing and monitoring Shariah compliance of the Group’s operations, activities and services at BU/SU level. ISGD is responsible in managing technology risk by establishing, maintaining and enforcing technology risk policies and guidelines, as well as promoting Bank-wide awareness on technology risk. It also works closely with Information Technology Division (“ITD”) in identifying, assessing, mitigating and monitoring of technology risk in the Group and the Bank. •• 3rd line of defence – Internal Audit provides independent assurance to the Board and senior management on the effectiveness of the ORM process. 353
356. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 39 .FINANCIAL RISK MANAGEMENT (CONTINUED) (f) Offsetting Financial Assets and Financial Liabilities The Group and the Bank report financial assets and financial liabilities on a net basis on the balance sheet only if there is a legally enforceable right to set off the recognised amounts and there is intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. The following financial assets and liabilities are subject to offsetting, enforceable master netting arrangements and similar agreements: Gross amounts of recognised financial assets in the statement of financial position RM’000 Gross amounts of recognised financial liabilities in the statement of financial position RM’000 Derivatives assets Derivatives liabilities 26,037 – – 20,421 26,037 20,421 (14,574) (14,574) (130) (130) 11,333 5,717 2020 Derivatives assets Derivatives liabilities 61,665 – – 105,872 61,665 105,872 (37,505) (37,505) (130) (130) 24,030 68,237 Net amount Related amounts not set presented off in the statements of financial position in statement of Financial financial Financial collateral position instruments received RM’000 RM’000 RM’000 Net amount RM’000 2021 354
357. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 40.FAIR VALUE OF FINANCIAL INSTRUMENTS Financial instruments comprise financial assets, financial liabilities and off-balance sheet instruments. Fair value is the amount at which the financial assets could be exchanged or a financial liability settled, between knowledgeable and willing parties in an arm’s length transaction. The information presented herein represents the estimates of fair values as at the financial position date. Quoted and observable market prices where available, are used as the measure of fair values. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in the assumptions could materially affect these estimates and the corresponding fair values. Fair value information for non-financial assets and liabilities such as investments in subsidiaries and taxation are excluded, as they do not fall within the scope of MFRS 7, Financial Instruments: Disclosure and Presentation which requires the fair value information to be disclosed. The fair values are based on the following methodologies and assumptions: Deposits and placements with banks and other financial institutions For deposits and placements with financial instruments with maturities of less than six months, the carrying value is a reasonable estimate of fair values. For deposits and placements with maturities six months and above, the estimated fair values are based on discounted cash flows using prevailing Islamic money market profit rates at which similar deposits and placements would be made with financial instruments of similar credit risk and remaining period to maturity. Financial assets measured at FVTPL and FVOCI The estimated fair values are generally based on quoted and observable market prices. Where there is no ready market in certain securities, fair values have been estimated by reference to market indicative yields or net tangible asset backing of the investee. Financing, advances and others The fair values are estimated by discounting the estimated future cash flows using the prevailing market rates of financing with similar credit risks and maturities. Deposits from customers and investment accounts of customers The fair values of deposits and investment accounts are deemed to approximate their carrying amounts as rate of returns are determined at the end of their holding periods based on the profit generated from the assets invested. Deposits and placements of banks and other financial institutions The estimated fair values of deposits and placements of banks and other financial institutions with maturities of less than six months approximate the carrying values. For deposits and placements with maturities of six months or more, the fair values are estimated based on discounted cash flows using prevailing money market profit rates for deposits and placements with similar remaining period to maturities. 355
358. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 40 .FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) Bills and acceptance payable The estimated fair values of bills and acceptance payables with maturity of less than six months approximate their carrying values. For bills and acceptance payable with maturities of six months or more, the fair values are estimated based on discounted cash flows using prevailing market rates for borrowings with similar risk profiles. Fair value hierarchy MFRS 13 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources and unobservable inputs reflect the Group’s market assumptions. The fair value hierarchy is as follows: •• Level 1 – Quoted price (unadjusted) in active markets for the identical assets or liabilities. This level includes listed equity securities and debt instruments. •• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This level includes profit rate swaps and structured debt. The sources of input parameters include BNM indicative yields or counterparty credit risk. •• Level 3 – Inputs for asset or liability that are not based on observable market data (unobservable inputs). This level includes equity instruments and debt instruments with significant unobservable components. The table below analyses financial instruments carried at fair value and those not carried at fair value for which fair value is disclosed, together with their fair values and carrying amounts shown in the statement of financial position. The table does not include those short-term/on demand financial assets and financial liabilities where the carrying amounts are reasonable approximation of their fair values. 356
359. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 40.FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) Fair value hierarchy (continued) Fair value of financial instruments not carried at fair value Fair value of financial instruments carried at fair value Group 31 December 2021 Financial assets Financial assets at FVTPL Derivative financial assets Financial assets at FVOCI Financial assets at AC Financing, advances and others Financial liabilities Derivative financial liabilities Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 Level 3 RM’000 Total fair value RM’000 Carrying amount RM’000 – – 17,004 – – 1,582,494 26,037 12,526,670 – – – – 60,530 – – 1,582,494 26,037 12,604,204 – – – – – 1,330,502 61,303,303 1,582,494 26,037 12,604,204 1,330,502 61,303,303 1,582,494 26,037 12,604,204 1,348,844 58,153,769 – 20,421 – 20,421 – 20,421 20,421 – – – – – – – – 2,044,330 2,009,745 2,044,330 2,009,745 2,001,720 2,014,849 Fair value of financial instruments not carried at fair value Fair value of financial instruments carried at fair value Group 31 December 2020 Financial assets Financial assets at FVTPL Derivative financial assets Financial assets at FVOCI Financing, advances and others Financial liabilities Derivative financial liabilities Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 Level 3 RM’000 Total fair value RM’000 Carrying amount RM’000 – – 13,755 – 1,181,200 61,665 12,494,040 – – – 50,196 – 1,181,200 61,665 12,557,991 – – – – 58,065,344 1,181,200 61,665 12,557,991 58,065,344 1,181,200 61,665 12,557,991 54,670,635 – 105,872 – 105,872 – 105,872 105,872 – – – – – – – – 1,577,805 1,730,236 1,577,805 1,730,236 1,501,187 1,713,164 357
360. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 40 .FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) Fair value hierarchy (continued) Fair value of financial instruments not carried at fair value Fair value of financial instruments carried at fair value Bank 31 December 2021 Financial assets Financial assets at FVTPL Derivative financial assets Financial assets at FVOCI Financial assets at AC Financing, advances and others Financial liabilities Derivative financial liabilities Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 Level 3 RM’000 Total fair value RM’000 Carrying amount RM’000 – – 17,004 – – 1,550,700 26,037 12,526,670 – – – – 61,393 – – 1,550,700 26,037 12,605,067 – – – – – 1,330,502 61,303,303 1,550,700 26,037 12,605,067 1,330,502 61,303,303 1,550,700 26,037 12,605,067 1,348,844 58,153,769 – 20,421 – 20,421 – 20,421 20,421 – – – – – – – – 2,044,330 2,009,745 2,044,330 2,009,745 2,001,720 2,014,849 Fair value of financial instruments not carried at fair value Fair value of financial instruments carried at fair value Bank 31 December 2020 Financial assets Financial assets at FVTPL Derivative financial assets Financial assets at FVOCI Financing, advances and others Financial liabilities Derivative financial liabilities Recourse obligations on financing sold to Cagamas Subordinated Sukuk Murabahah 358 Level 1 RM’000 Level 2 RM’000 Level 3 RM’000 Total RM’000 Level 3 RM’000 Total fair value RM’000 Carrying amount RM’000 – – 13,755 – 1,175,440 61,665 12,494,040 – – – 50,934 – 1,175,440 61,665 12,558,729 – – – – 58,065,344 1,175,440 61,665 12,558,729 58,065,344 1,175,440 61,665 12,558,729 54,670,635 – 105,872 – 105,872 – 105,872 105,872 – – – – – – – – 1,577,805 1,730,236 1,577,805 1,730,236 1,501,187 1,713,164
361. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 40.FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) Unobservable inputs used in measuring fair value The following tables show the valuation techniques used in the determination of fair values within Level 3, as well as the key unobservable inputs used in the valuation models. (a) Financial instruments carried at fair value Type Valuation technique Significant unobservable inputs Financial assets measured at FVOCI Net tangible assets Net tangible assets Inter-relationship between significant unobservable inputs and fair value measurement Higher net tangible assets results in higher fair value (b) Financial instruments not carried at fair value The following methods and assumptions are used to estimate the fair values of the following classes of financial instruments: (i) Other financial assets at amortised cost The fair values of securities that are actively traded is determined by quoted mid prices. For non-actively traded securities, the fair values are estimated using valuation techniques such as discounted cash flows analysis. Where discounted cash flows technique is used, the estimated future cash flows are discounted using applicable prevailing market or indicative rates of similar instruments at the reporting date. (ii) Financing and advances The fair values of variable rate financing are estimated to approximate their carrying values. For fixed rate financing, the fair values are estimated based on expected future cash flows of contractual instalment payments, discounted at applicable and prevailing rates at reporting date offered for similar facilities to new borrowers with similar credit profiles. In respect of impaired financing, the fair values are deemed to approximate the carrying values which are net of impairment allowances. (iii) Subordinated Sukuk Murabahah and Recourse obligations on financing sold to Cagamas The fair values of subordinated obligations are estimated by discounting the expected future cash flows using the applicable prevailing profit rates for borrowings with similar risk profiles. 41. CAPITAL COMMITMENTS Group and Bank Property and equipment Contracted but not provided for in the financial statements 2021 RM’000 2020 RM’000 205,214 149,391 359
362. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 42 .COMMITMENTS AND CONTINGENCIES (a) Commitment and contingencies The off-Balance Sheet and counterparties credit risk for the Group and the Bank are as follows: 31 December 2021 Nature of item Credit related exposures Direct credit substitutes Transaction related contingent items Short-term self-liquidating trade related contingencies Other commitments, such as formal standby facilities and credit lines, with an original maturity of: – exceeding one year Any commitments that are unconditionally cancelled at any time by the Bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness Derivative Financial Instruments Foreign exchange related contracts – less than one year Profit rate related contracts – one year to less than five years Total 360 Principal Amount RM’000 Credit Equivalent Amount RM’000 Risk Weighted Asset RM’000 501,511 903,458 501,511 451,729 503,088 438,976 417,940 83,588 83,012 1,246,592 623,295 503,494 8,110,490 – – 11,179,991 1,660,123 1,528,570 Principal Amount RM’000 Positive Fair Value of Derivative Contracts RM’000 Credit Equivalent Amount RM’000 Risk Weighted Asset RM’000 7,505,850 25,120 114,431 66,277 79,153 917 2,368 1,735 7,585,003 26,037 116,799 68,012 18,764,994 26,037 1,776,922 1,596,582
363. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 42.COMMITMENTS AND CONTINGENCIES (CONTINUED) (a) Commitment and contingencies (continued) The off-Balance Sheet and counterparties credit risk for the Group and the Bank are as follows: (continued) 31 December 2020 Nature of item Credit related exposures Direct credit substitutes Transaction related contingent items Short-term self-liquidating trade related contingencies Other commitments, such as formal standby facilities and credit lines, with an original maturity of: – exceeding one year Any commitments that are unconditionally cancelled at any time by the Bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness Derivative Financial Instruments Foreign exchange related contracts – less than one year Profit rate related contracts – one year to less than five years Total Principal Amount RM’000 Credit Equivalent Amount RM’000 Risk Weighted Asset RM’000 449,506 899,541 449,506 449,770 442,426 436,481 592,744 118,549 117,165 938,247 469,124 362,317 8,676,980 – – 11,557,018 1,486,949 1,358,389 Principal Amount RM’000 Positive Fair Value of Derivative Contracts RM’000 Credit Equivalent Amount RM’000 Risk Weighted Asset RM’000 8,518,422 59,494 143,217 60,587 114,056 2,171 5,414 4,045 8,632,478 61,665 148,631 64,632 20,189,496 61,665 1,635,580 1,423,021 361
364. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 42 .COMMITMENTS AND CONTINGENCIES (CONTINUED) (b) Contingent liabilities Perbadanan Harta Intelek Malaysia (“MyIPO” or “Plaintiff”) vide a Writ and Statement of Claim dated 18 October 2021, filed a claim against BIMB Investment Management Berhad (“BIMB Invest” or “First Defendant”), a wholly owned subsidiary of the Bank and Ahmad Azwan Bin Aboo Mansor (“Second Defendant”) The Plaintiff has filed a statement of claim that the Defendants are liable for loss and damage caused by fraudulent misrepresentation, negligence, and breach of statutory duty in respect of placement of monies amounting to RM85.5 million with the First Defendant upon representation made by Second Defendant. BIMB Invest had on 8 December 2021 filed a Defense and subsequently, the Reply to Defense by the Plaintiff was filed on 5 January 2022. Case Management was fixed on 20 January 2022 and subsequently another Case Management has been fixed on 22 February 2022 for First Defendant to inform the court on the status of the application for leave proceedings in the Bankruptcy Court, so as to bring third party proceedings against Second Defendant. During the Case Management held on 22 February 2022, the Plaintiff's application to serve the Writ and Statement of Claim on the Second Defendant by way of substituted service was allowed by the Court and the First Defendant to file and serve the Third Party Notice on the Second Defendant. The next case management was fixed on 22 March 2022. The potential liability of BIMB Invest if there was an adverse decision related to the claim is estimated to be approximately RM71.3 million. The possible obligation towards BIMB Invest to settle the litigation claim are subject to decision by the court and as the case are still preliminary, the settlement to the litigation claim may not be probable at this juncture and therefore no provision is recognised in the financial statements. 43.CAPITAL ADEQUACY Total capital and capital adequacy ratios of the Group and the Bank have been computed based on Bank Negara Malaysia (“BNM”)’s Capital Adequacy Framework for Islamic Banks (Capital Components) issued on 9 December 2020 and Capital Adequacy Framework for Islamic Banks (Risk-Weighted Assets) issued on 3 May 2019. The Group and the Bank is required to meet minimum Common Equity Tier I (“CET I”), Tier I and Total Capital adequacy ratios of 4.5%, 6.0% and 8.0% respectively. To ensure that banks build up adequate capital buffer outside period of stress, a Capital Conservation Buffer (“CCB”) of 2.5% above the minimum capital adequacy was introduced by BNM. The CCB is maintained in the form of CET I Capital above the minimum CET I Capital, Tier I Capital and Total Capital adequacy at 2.5% starting 1 January 2019 onwards. Therefore, the minimum regulatory capital adequacy ratios requirement for CET I capital ratio, Tier I capital ratio and Total Capital ratio are 7.0%, 8.5% and 10.5% respectively starting year 2019 onwards. The Group and the Bank have adopted the Standardised Approach for Credit Risk and Market Risk and the Basic Indicator Approach for Operational Risk. 362
365. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 43.CAPITAL ADEQUACY (CONTINUED) The capital adequacy ratios of the Group and the Bank are set out below: Group Common Equity Tier I   (“CET I”) Capital Ratio Total Capital Ratio Bank 2021 2020 2021 2020 13.179% 18.561% 14.667% 19.822% 12.799% 18.203% 14.642% 19.804% The components of CET I, Tier I and Tier II capital: Group 2021 RM’000 Bank 2020 RM’000 2021 RM’000 2020 RM’000 Paid-up share capital Retained earnings Other reserves Less: Deferred tax assets Gain on financial instruments classified as FVOCI Investment in subsidiaries 3,445,757 2,965,080 (10,899) Total CET I and Tier I Capital 6,206,724 6,180,624 5,996,895 6,160,496 Sukuk Murabahah Loss provisions ^ 2,000,000 534,465 1,700,000 472,256 2,000,000 532,094 1,700,000 472,005 Total Tier II Capital 2,534,465 2,172,256 2,532,094 2,172,005 Total Capital 8,741,189 8,352,880 8,528,989 8,332,501 3,306,118 2,797,307 182,274 (193,214) – – (1,511) (103,564) – 3,445,757 2,965,659 (121,843) 3,306,118 2,791,044 182,423 (191,773) – (100,905) – (103,564) (15,525) ^ Impairment allowances on non-impaired financing and regulatory reserve, subject to maximum of 1.25% of total credit risk-weighted assets less credit absorbed by unrestricted investment accounts. The breakdown of risk-weighted assets in the various categories of risk-weights are as follows: Group Credit risk Less: Credit risk absorbed by unrestricted investment accounts Market risk Operational risk Bank 2021 RM’000 2020 RM’000 2021 RM’000 2020 RM’000 50,180,739 46,862,577 50,080,971 46,842,825 (7,423,579) (9,082,114) (7,513,437) (9,082,416) 42,757,160 489,559 3,847,886 37,780,463 638,925 3,719,636 42,567,534 489,559 3,797,811 37,760,409 638,925 3,675,867 47,094,605 42,139,024 46,854,904 42,075,201 363
366. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 44 .RELATED PARTY TRANSACTIONS Identity of related parties For the purposes of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. Related parties that have material transactions and their relationship with the Bank are as follows: Parties Relationship before reorganisation Relationship after reorganisation Lembaga Tabung Haji Ultimate holding entity Major shareholder* BIMB Holdings Sdn. Bhd. (formerly known as BIMB Holdings Berhad) Holding company Subsidiaries Syarikat Takaful Malaysia Berhad Subsidiary of holding company* Associate company of major shareholder* Subsidiaries of Bank Islam Malaysia Berhad as disclosed in Note 13 Subsidiaries Subsidiaries Associate company of Lembaga Tabung Haji Other related companies Other related companies Koperasi Kakitangan Kumpulan BIMB Holdings Malaysia Berhad Co-operative society in which the employees have interest Co-operative society in which the employees have interest Related party transactions have been entered into in the normal course of business under normal trade terms. * Balances are disclosed under other related companies 364
367. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 44.RELATED PARTY TRANSACTIONS (CONTINUED) (a) The related party transactions of the Bank, other than key management personnel compensation, are as follows (continued): Transaction amounts for 2021 RM’000 2020 RM’000 108 48 576 66 52,357 8,293 2,289 946 9,895 12,827 266 51,173 8,823 2,348 1,252 13,193 17,501 383 849 1 1,038 129 10 5,240 60 7 9,340 23 Ultimate holding entity Income Wakalah fee Office rental Expenses Income attributable to depositors Income attributable to investment account holders Finance cost on Subordinated Sukuk Murabahah Office rental Depreciation of right-of-use assets Profit expense on lease Other rental Holding company Income Office rental Others Expenses Income attributable to depositors Income attributable to investment account holders Office rental 365
368. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 44 .RELATED PARTY TRANSACTIONS (CONTINUED) (a) The related party transactions of the Bank, other than key management personnel compensation, are as follows (continued): Transaction amounts for 2021 RM’000 2020 RM’000 5,518 677 114 4,602 382 75 5,830 196 516 119 7,365 220 1 – 116 342 25,190 2,240 239 203 25,551 1,970 30,151 4,493 856 3,505 82 3,298 4,216 4,607 22,111 908 2,637 3,109 12 – – 6,419 2,550 2,897 4 10 1,768 4 17 95 Subsidiaries Income Fees and commission Office rental Others Expenses Fees and commission Income attributable to depositors Income attributable to investment account holders Office rental Other related companies Income Income from financing, advances and others Fees and commission income Bancatakaful service fee Others Expenses Income attributable to depositors Income attributable to investment account holders Finance cost on Subordinated Sukuk Murabahah Office rental Other rental Depreciation of right-of-use assets Profit expense on lease Takaful fee Co-operative society in which the employees have interest Income Income from financing, advances and others Expenses Income attributable to depositors Income attributable investment account holders Others The inter-company charges of the Group and the Bank with related parties were mainly transacted in Central region. 366
369. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 44.RELATED PARTY TRANSACTIONS (CONTINUED) (b) The outstanding balances of the Bank with related parties, are as follows: 2021 RM’000 2020 RM’000 Ultimate holding entity Amount due from Right-of-use assets Other receivables – – 203,399 23 Amount due to Deposits from customers Investment account of customers Income payable to depositors Income payable to investment account holders Subordinated Sukuk Murabahah Finance cost payable on Subordinated Sukuk Murabahah Commitments and contingencies Lease liabilities Other payables – – – – – – – – – 3,409,339 200,000 14,656 1,405 85,000 604 2,880 305,465 136 Holding company Amount due from Other receivables – 1 Amount due to Deposits from customers Investment account of customers Income payable to investment account holders Other payables – – – – 315 317,269 729 132 Subsidiaries Amount due from Redeemable non-cumulative preference shares Others 2,417 854 2,292 72 Amount due to Deposits from customers Investment account of customers Income payable to investment account holders Income payable to depositors Other payables 23,877 108,369 330 106 10 17,306 369 1 97 12 367
370. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 44 .RELATED PARTY TRANSACTIONS (CONTINUED) (b) The outstanding balances of the Bank with related parties, are as follows (continued): Other related companies Amount due from Financing, advances and others Right-of-use assets Other receivables Amount due to Deposits from customers Investment account of customers Income payable to depositors Income payable to investment account holders Subordinated Sukuk Murabahah Finance cost payable on Subordinated Sukuk Murabahah Commitments and contingencies Lease liabilities Co-operative society in which the employees have interest Amount due from Financing, advances and others Amount due to Deposits from customers Investment account of customers Income payable to depositors Income payable to investment account holders 368 2021 RM’000 2020 RM’000 4,002 190,206 176 – – 150 3,411,729 634,768 26,797 11,307 100,000 688 13,216 297,034 719,894 51,122 5,603 44 – – 16,570 – 57,987 62,568 119 581 1 4 119 569 1 4
371. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 45.CREDIT TRANSACTIONS AND EXPOSURES WITH CONNECTED PARTIES Credit exposures with connected parties as per BNM’s revised Guidelines on Credit Transactions and Exposures with Connected Parties are as follows: Group and Bank 2021 RM’000 2020 RM’000 2,132,777 2,411,078 Percentage of outstanding credit exposures to connected parties as a proportion of total credit exposures 3.24% 3.73% Percentage of outstanding credit exposures with connected parties which is nonperforming or in default 0.00% 0.00% Outstanding credit exposures with connected parties The above disclosure on Credit Transaction and Exposures with Connected Parties is presented in accordance with Para 9.1 of Bank Negara Malaysia’s Revised Guidelines on Credit Transaction and Exposures with Connected Parties. 46.SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR COVID-19 pandemic The World Health Organisation declared the outbreak of Coronavirus disease (COVID-19) as a global pandemic in March 2020. The direct and indirect effects of the COVID-19 outbreak have impacted the global economy, markets and the Group's and the Bank’s counterparties and clients. The COVID-19 effects have a material negative impact on the Group's and the Bank's results of operations. In particular, the process to determine expected credit losses (“ECL”) requires numerous estimates and assumptions, some of which require a high degree of judgement. Changes in the estimates and assumptions can result in significant changes in ECL. The Group and the Bank are not able to predict the COVID-19’s potential future direct or indirect effects other than as disclosed in Note 39(b)(iii). However, the Group and the Bank are taking actions to mitigate the impacts, and will continue to closely monitor the impact and the related risks as they evolve. Proposed placement, proposed scheme of arrangement (“SOA”), proposed internal reorganisation, proposed distribution and capital repayment and proposed transfer of listing status (collectively referred to as the 'Proposals') 369
372. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 46 .SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (CONTINUED) On 11 December 2019, the immediate holding, BIMB Holdings Berhad (“BHB”) had announced and proposed to undertake the following proposals: (i) Proposed placement Proposed placement of new ordinary shares in BHB to raise gross proceeds of up to RM800 million. The proceeds together with internal cash will be used to fully settle BHB’s outstanding sukuk. (ii) Proposed scheme of arrangement Proposed payment to the warrantholder of the outstanding warrants 2013/2023 of BHB by way of a scheme of arrangement under section 366 of the Companies Act 2016 (“the Act”). The total warrants consideration to be paid by BHB will be funded using internally generated funds of BHB. (iii) Proposed Internal Reorganisation The proposed internal reorganisation entails the disposal of BHB’s entire shareholdings in the identified subsidiaries namely BIMB Securities (Holdings) Sdn. Bhd., BIMB Securities Sdn. Bhd. and Syarikat Al Ijarah Sdn. Bhd. to the Bank to be fully settled in cash. (iv) Proposed distribution and capital repayment Proposed distribution of the entire shareholdings of BHB in the Bank and Syarikat Takaful Malaysia Keluarga Berhad (“STMKB”) by way of distribution-in-specie via a reduction and repayment of the entire share capital of BHB in accordance with Section 115 and Section 116 of the Act as well as using the retained earnings of BHB. Prior to the proposed distribution and capital repayment, BHB will undergo a capital reduction and the Bank will undertake a share consolidation. This is to match BHB’s outstanding shares so that the distribution of the Bank shares will be on a one-for-one basis. Concurrently with the completion of the proposed distribution and capital repayment, BHB will issue two (2) new BHB shares to the Bank such that BHB will become a wholly-owned subsidiary of Bank Islam. (v) Proposed transfer of listing After the completion of the proposed distribution and capital repayment, the Bank will assume the listing status of BHB. Accordingly, BHB proposed that the Bank be admitted to the official list of Bursa Securities in place of BHB, with the listing and quotation of the entire consolidated the Bank shares on the main market of Bursa Securities. The Bank will emerge as the first pure-play full-fledged Islamic financial institution to be listed in the region and enhance its corporate stature. The listing will allows Bank Islam to better position itself in the Islamic finance and Islamic capital market and capitalise on the growth of both markets in its efforts to expand its customer base. 370
373. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 46.SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (CONTINUED) The proposed placement, proposed SOA, proposed internal reorganisation, proposed distribution and capital repayment and proposed transfer of listing are not conditional upon each other, save for the following: (i) The proposed distribution and capital repayment is conditional upon the proposed internal reorganisation and proposed transfer of listing; and (ii) The proposed transfer of listing is conditional upon the proposed internal reorganisation and proposed distribution and capital repayment. BHB has on 10 December 2020 announced that it has received the approval from the Minister of Finance (on the recommendation of BNM), and BNM in relation to the Proposals. On 23 February 2021, BHB has announced that it has received approval from Bursa Securities for the listing and quotation of BHB shares to be issued pursuant to the proposed placements and admission of the Bank to the official list of Bursa Securities and the listing of and quotation for the entire issued share capital of the Bank on the Main Market of Bursa Securities pursuant to the proposed transfer of listing. BHB on 13 April 2021 has announce that it has completed the book building exercise pursuant to the proposed placement and has raised gross proceeds of RM795.6 million. The proceeds raised together with internal cash of BHB has been used to fully redeem outstanding sukuk by BHB on 3 June 2021 with total redemption amount of RM988.4 million. On 27 August 2021, BHB has announced the completion of scheme of arrangement following the payment to the warrantsholders amounting RM162.15 million. On 3 September 2021, the Bank has completed a consolidation of its ordinary shares into 2,075,872,514 Bank Islam shares to match BHB’s outstanding shares in issue so that the distribution of the Bank shares will be on a one-forone basis. No. of Bank Islam’s shares (’000) RM’000 As at the Last Practicable Date (“LPD”) Consolidated Allotment of ordinary shares 2,600,367 (567,460) 42,966 3,306,118 – 139,639 After consolidation 2,075,873 3,445,757 371
374. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 46 .SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (CONTINUED) The internal reorganisation which entailed the disposal by BHB of its entire shareholdings in BIMB Securities (Holdings) Sdn. Bhd. (“BIMB SEC HOLDINGS”), BIMB Securities Sdn. Bhd. (“BIMB SEC”) and Syarikat Al Ijarah Sdn. Bhd. (“SASB”) to the Bank was completed on 13 September 2021 following the payment made by the Bank. Purchase consideration (RM’000) Identified companies Sale shares/% BIMB SEC HOLDINGS BIMB SEC SASB 5,000,000 ordinary shares and 45,000,000 preference shares/100% 49,000,000 ordinary shares/49% 10,000,000 ordinary shares/100% 37,667 34,909 12,804 Total 85,380 The Group has adopted predecessor accounting and only incorporate the acquired entity’s results and statements of financial position prospectively from the date on which the business combination between entities under common control occurred. Accordingly, the corresponding amounts for the previous year are also not restated. The differences between the consideration given and the aggregated carrying amounts of the assets and liabilities (as of the date of transaction) of the acquired entities are recorded as an adjustment to equity. No additional goodwill/gain on bargain purchased is recognised. Transfer of the identified companies are as follows: BIMB SEC HOLDINGS RM’000 BIMB SEC RM’000 SASB RM’000 ASSETS Cash and short-term funds Deposits and placements with financial institutions Financial assets at fair value through profit or loss Other financial assets at amortised cost Current tax assets Right-of-use assets Property and equipment 16 1,342 – – – – – 41,693 25,575 2,048 46,190 329 541 1,507 105 – 11,698 – – – 624 TOTAL ASSETS 1,358 117,883 12,427 LIABILITIES Other liabilities Lease Liabilities Zakat and taxation 10 – 1 19,933 597 – 69 – 3 TOTAL LIABILITIES 11 20,530 72 Net assets transferred to the Group Total purchase consideration Difference between purchase consideration and the net assets transferred to the Group (as at the date of transaction) recognised in Equity) 372 1,347 (37,667) 97,353 (34,909) (36,320) 62,444 12,355 (12,804) (449)
375. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 46.SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (CONTINUED) On 7 October 2021, the distribution and capital repayment, was completed following the distribution of BHB’s entire shareholding in Bank Islam and Syarikat Takaful Malaysia Keluarga Berhad to its shareholders. Concurrently, BHB has issued two (2) new ordinary shares to Bank Islam such that BHB is now a wholly-owned subsidiary of Bank Islam. No. of BHB shares (000) As at LPD Issued pursuant to Proposed Placements Cancelled pursuant to the Proposed Distribution and Capital Repayment Issued to Bank Islam RM’000 1,853,651 222,222 4,617,787 800,000 2,075,873 (2,075,873) * 5,417,787 (5,417,787) * * * * comprising two (2) new ordinary shares Transfer of BHB as follows; BHB RM’000 ASSETS Cash and short-term funds Deposits and placements with financial institutions Other financial assets at amortised cost Deferred tax assets Property and equipment 28,773 50,000 380 10 316 TOTAL ASSETS 79,479 LIABILITIES Other liabilities Zakat and taxation (6,115) 82 TOTAL LIABILITIES (6,033) Net assets transferred to the Group Difference between transfer consideration and net assets transferred to the Group recognised in Equity 85,512 85,512 On 8 October 2021, the transfer of listing status has been completed following the de-listing of BHB from the Main Market of Bursa Securities and the listing of and quotation for Bank Islam in its place. 373
376. B A N K I S L A M M A L AY S I A B E R H A D NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2021 47 .PRIOR YEAR ADJUSTMENTS The prior year adjustments are to restate the comparatives of the Translation Reserves and Retained Earnings balances in relation to foreign exchange differences from prior periods arising from the Bank’s net investment in its offshore banking operations in the Federal Territory of Labuan which should have been recognised in other comprehensive income. The effects of the restatement of the financial statements are summarised below: As previously reported RM’000 Adjustment RM’000 Restated RM’000 (106,938) 2,594,820 93,716 (93,716) (13,222) 2,501,104 (106,805) 2,589,798 93,716 (93,716) (13,089) 2,496,082 Group 1 January 2020 Translation reserves Retained earnings Bank 1 January 2020 Translation reserves Retained earnings 374
377. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information PILLAR 3 DISCLOSURE as at 31 December 2021 OVERVIEW The Pillar 3 Disclosure for financial year ended 31 December 2021 for Bank Islam Malaysia Berhad (“the Bank”) and its subsidiaries (“the Group”) describes the risk profile, risk management practices and capital adequacy position in accordance with the disclosure requirements governed by Bank Negara Malaysia’s (“BNM”) “Capital Adequacy Framework for Islamic Banks (“CAFIB”) – Disclosure Requirements (“Pillar 3”)”. The Group adopts the following approaches in determining the capital requirements of Pillar 1 in accordance with BNM’s Guidelines on CAFIB (Basel II – Risk Weighted Assets (“RWA”)) since January 2008: •• •• redit and Market Risk – the Standardised Approach (“SA”); and C Operational Risk – the Basic Indicator Approach (“BIA”). Under the Standardised Approach, standard risk weights are used to assess the capital requirements whilst under the Basic Indicator Approach, the capital requirements are computed based on a fixed percentage over the Group’s average gross income for a fixed number of quarterly periods. As required under Pillar 2, the Group has also developed an Internal Capital Adequacy Assessment Process (“ICAAP”) framework which closely integrates the risk and capital assessment processes and ensures that adequate levels of capital are maintained to support the Group’s current and projected demand for capital under expected and stressed conditions. The ICAAP was adopted in 2012 and has been fully implemented since 2013. The ICAAP is updated and approved on an annual basis by the Management Committee, Board Risk Committee (“BRC”) and Board of Directors (“Board”). BASIS OF DISCLOSURE The Pillar 3 Disclosure is prepared in accordance with BNM’s Pillar 3 Disclosure Guidelines issued in July 2010 and the Group’s internal policy on Pillar 3 Disclosure; which aims to enhance transparency on the risk management practices and capital adequacy of the Bank and the Group. The disclosures include both qualitative and quantitative disclosures with respect to capital adequacy, credit risk, market risk, liquidity risk, operational risk, management of Investment Account (IA) and key aspects of Shariah governance. Whilst this document discloses the Group’s assets both in terms of exposures and capital requirements, the information disclosed herein may not be directly comparable with the information in the Full-Year Financial Statements 2021 published by the Group. These disclosures have been reviewed and verified by the Group Internal Auditor and attested by the Group Chief Executive Officer. MEDIUM AND LOCATION OF DISCLOSURE The Group’s Pillar 3 Disclosure is made available at www.bankislam.com. 375
378. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 MINIMUM REGULATORY CAPITAL REQUIREMENTS The Group ’s main activity is Islamic banking business which focuses on retail banking and financing operations. The following tables show the minimum regulatory capital requirement to support the Group’s and the Bank’s risk weighted assets. 31.12.2021 Group Minimum Riskcapital weighted requirement assets at 8% RM’000 RM’000 31.12.2020 Minimum Riskcapital weighted requirement assets at 8% RM’000 RM’000 Credit Risk Less: Credit Risk absorbed by IA Market Risk Operational Risk 50,180,739 (7,423,579) 489,559 3,847,886 4,014,459 (593,886) 39,165 307,831 46,862,577 (9,082,114) 638,925 3,719,636 3,749,006 (726,569) 51,114 297,571 Total 47,094,605 3,767,569 42,139,024 3,371,122 31.12.2021 Bank Minimum Riskcapital weighted requirement assets at 8% RM’000 RM’000 31.12.2020 Minimum Riskcapital weighted requirement assets at 8% RM’000 RM’000 Credit Risk Less: Credit Risk absorbed by IA Market Risk Operational Risk 50,080,971 (7,513,437) 489,559 3,797,811 4,006,478 (601,075) 39,165 303,825 46,842,825 (9,082,416) 638,925 3,675,867 3,747,426 (726,593) 51,114 294,069 Total 46,854,904 3,748,393 42,075,201 3,366,016 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 BNM’s CAFIB (Risk-Weighted Assets) Guideline. 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 year end. 376
379. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. CAPITAL ADEQUACY 2.1 Capital Management The Group’s primary objectives when managing capital are to maintain a strong capital position to support business growth and to maintain investors, depositors, customers, and market confidence. In line with this, the Group manages its capital actively and ensures that the capital adequacy ratios which take into account the risk profile of the Group, are above the regulatory minimum requirement. To ensure that the Group has sufficient capital to support all its business and risk-taking activities, the Group has implemented a sound capital management process in its management systems and processes. A comprehensive capital management framework has been adopted by the Group as a key enabler for value creation which is important to the long-term survival of the Group. This comprehensive capital management process includes thorough risk assessment and risk management techniques that are embedded within the Group’s risk governance. The assessment is based on the approved business plan, its estimation of current risks inherent in the Group and the impact of capital stress tests on the Group’s capital plan. The Group aims to achieve the following capital management objectives: •• •• •• •• •• •• eeting regulatory capital requirements; M Optimising returns to shareholders; Maintaining adequate levels and an optimum mix of different sources of capital to support the underlying risks of its business; Ensuring adequate capital to withstand shocks and stress; Ensuring sufficient capital to expand its business ventures and inorganic growth; and Allocating an appropriate amount of capital to business units to optimise return on capital. The Group’s capital management is guided by the Capital Management Plan, approved by the Board, to ensure the management of capital is consistent and aligned with the Group’s Risk Appetite Statement and ICAAP Document Policy. The Group’s capital management processes comprise: •• •• •• apital Structuring – ensuring that the amount of regulatory and statutory capital available is consistent with C the Group’s growth plan, risk appetite, and desired level of capital adequacy. Capital structuring focuses on selecting appropriate, most cost-effective mix of capital instruments; Capital Allocation – ensuring that the capital is employed efficiently across the Group based on risk-adjusted return on capital; and Capital Optimisation – seeking an optimal level of capital by facilitating the optimisation of the risk profile of the balance sheet. This will be done through: •• reshaping of the balance sheet; •• capital planning, allocation and optimisation; and •• a sound management of the capital buffer. As such, the four fundamental components of a sound capital planning process include: •• •• •• •• Internal control and governance; Capital policy and risk capture; Forward-looking view; and Management framework for preserving capital. 377
380. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 2 . CAPITAL ADEQUACY (CONTINUED) 2.1 Capital Management (continued) The Group’s Capital Management Plan is updated annually and approved by the Board for implementation at the beginning of each financial year. The capital plan is drawn up to cover at least a three-year horizon and takes into account, amongst others, the Group’s strategic objectives and business plans, regulatory capital requirements, capital benchmarking against the industry, available supply of capital and capital raising options, performance of business sectors based on a Risk Adjusted Return on Capital (“RAROC”) approach, as well as ICAAP and stress testing results. The Group has fully issued Subordinated Sukuk Murabahah under its Subordinated Sukuk Murabahah Programme of up to RM1.0 billion in nominal value (“Subordinated Sukuk Murabahah Programme”) which was approved by the Securities Commission Malaysia (“SC”) on 7 October 2014. On 6 September 2018, the Group successfully lodged with SC under Lodge and Launch Framework a new Sukuk Murabahah Programme of up to RM10.0 billion in nominal value, which allows issuances of Subordinated Sukuk Murabahah and Senior Sukuk Murabahah. The purpose of the Subordinated Sukuk Murabahah issuance under both programmes is to enhance the capital adequacy of the Group, in line with the requirements under the Basel III capital framework. Table below depicts a summary of the Subordinated Sukuk Murabahah under both programmes which are qualified as Tier 2 regulatory capital of the Bank and the Group in accordance with BNM’s CAFIB (Capital Components) Guideline. Capital Instrument Capital Component Main Features 1) Subordinated Sukuk Murabahah Programme of up to RM1.0 billion (Programme 1) •• a) Tranche 1: RM300 million at 5.75% •• •• Issued on 22 April 2015 Mature on 22 April 2025 Note: Tranche 1 was called on 22  April 2020 •• b) Tranche 2: RM400 million at 5.50% •• •• Issued on 15 December 2015 Mature on 15 December 2025 Note: Tranche 2 was called on 15 December 2020 c) Tranche 3: RM300 million at 5.08% •• •• 378 Issued on 13 November 2017 Mature on 12 November 2027 Tier 2 Capital he tenure of both programmes are as follows: T i. Programme 1 – up to thirty (30) years from the date of the first issue under the Subordinated Sukuk Murabahah Programme. ii. Programme 2 – perpetual. The tenure of each issuance of the Subordinated Sukuk Murabahah under both programmes are as follows: i. Programme 1 – shall be not less than five (5) years and up to thirty (30) years from the issue date and provided that the Subordinated Sukuk Murabahah matures on or prior to the expiry of t h e te nure o f t h e S ub o rd in ate d S u k u k Murabahah Programme. ii. Programme 2 – shall be not less than five (5) years from the issue date.
381. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. CAPITAL ADEQUACY (CONTINUED) 2.1 Capital Management (continued) Capital Instrument Capital Component Main Features 2) Sukuk Murabahah Programme of up to RM10.0 billion (Programme 2) •• a) Tranche 1: RM300 million at 5.15% •• •• •• ype: Subordinated Sukuk T Murabahah Issued on 7 November 2018 Mature on 7 November 2028 b) Tranche 2: RM400 million at 3.75% •• •• •• ype: Subordinated Sukuk T Murabahah Issued on 26 March 2020 Mature on 26 March 2030 c) RM700 million at 3.60% •• Type: Subordinated Sukuk Murabahah •• Issued on 21 October 2020 •• Mature on 21 October 2030 d) RM300 million at 4.10% •• Type: Subordinated Sukuk Murabahah •• Issued on 12 November 2021 •• Mature on 12 November 2031 •• •• Tier 2 Capital •• •• ach of the Subordinated Sukuk Murabahah may E have a call option to allow the Bank to redeem the relevant tranche of the Subordinated Sukuk Murabahah (in whole or in part) on any periodic profit payment date after a minimum period of five (5) years from the issue date of that tranche, subject to the relevant early redemption conditions being satisfied. Unsecured. Subordinated Sukuk Murabahah shall be utilised to finance the Bank ’s Islamic banking activities, working capital requirements and other corporate purposes and/or, if required, to redeem any outstanding Sukuk Murabahah issued under both programmes . All utilisation shall be Shariah Compliant. Upon the occurrence of a Non-Viability Event, BNM, jointly with PIDM, shall have the option to require the entire or part of the nominal value of the outstanding Subordinated Sukuk Murabahah, and all other amounts owing under the Subordinated Sukuk Murabahah to be written off. No Conversion into Equity. Total outstanding Subordinated Sukuk Murabahah issued under both programmes which are qualified as Tier 2 regulatory capital of the Bank and the Group as of 31 December 2021 is RM2.0 billion. 2.2Internal Capital Adequacy Assessment Process (“ICAAP”) The Group has carried out the internal assessment process on capital as prescribed in BNM’s CAFIB – ICAAP (“Pillar 2”) to complement its current capital management practices. The first ICAAP Document Policy was formalised and approved by the Board in March 2013 and is being reviewed on an annual basis. The Group’s ICAAP helps to suggest the minimum internal capital requirement for its current and future business strategies and financial plans for the next three (3) years via a comprehensive risk assessment process on its portfolio risk exposures, its risk management practices towards its material risks and potential capital planning buffer required in the event of stress. 379
382. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 2 . CAPITAL ADEQUACY (CONTINUED) 2.2Internal Capital Adequacy Assessment Process (“ICAAP”) (continued) The Group’s ICAAP is conducted on a consolidated basis covering all the Bank’s legal entities as suggested by BNM’s Pillar 2 Guideline. The Group’s ICAAP methodology can be summarised as follows: INTERNAL CAPITAL PLANNING Material Risk Assessment Initial Capital Assessment Economic Capital Definition Capital Supply Capital Demand Capital Stress Test Internal Capital Target Ratio INTERNAL AUDIT INVOLVEMENT Under ICAAP, the following risk types are identified and measured: •• •• •• isks captured under Pillar 1 (i.e. Credit Risk, Market Risk, and Operational Risk); R Risk not fully captured under Pillar 1 (e.g. Migration and Residual Risk); and Risk not covered under Pillar 1 (e.g. Credit Concentration Risk, Profit Rate in the Banking Book, Shariah NonCompliance Risk, Regulatory/Compliance Risk, Contagion Risk, and IT Risk). 2.3Stress Testing Regular stress testing (including reverse stress testing) is performed to assess the Group’s ability to maintain adequate capital under both normal business cycle and unfavourable economic conditions. The stress testing is embedded within the risk and capital management process of the Group and is a key function of capital planning and business planning processes. Stress Testing also plays an important role in: •• •• •• •• Identifying the possible events or future changes in the financial and economic conditions of the country and globally that could potentially have unfavourable effects on the Group’s exposures; Identifying the different portfolios response to changes in key economic variables (profit rate, foreign exchange rate, GDP, etc); Evaluating the Group’s ability to withstand such changes, i.e. its capacity in terms of its capital and earnings, to absorb potentially significant losses; and Analysing the Group’s ability to meet the minimum regulatory capital requirement at all times throughout a reasonably severe economic crisis. The Group has put in place a stress testing programme (including reverse stress testing) which has taken into account all risks deemed material to the Group, namely credit risk, market risk, liquidity risk and operational risk including Shariah non-compliance risk, regulatory compliance risk, contagion risk and IT risk. In line with the Group’s Stress Testing Policy, ad-hoc and more frequent stress testing has been conducted to assess the impact of deterioration on specific risk areas, in line with stressed macroeconomic variables. The impact of COVID-19 pandemic outbreak such as repayment assistance, vulnerable portfolio and liquidity risk to the Group were assessed to ensure the Group’s ability to maintain adequate capital under stressed condition. 380
383. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. CAPITAL ADEQUACY (CONTINUED) 2.4Capital Adequacy Ratios The Group is required to comply with the Common Equity Tier 1 (“CET 1”) Capital Ratio, Tier 1 Capital Ratio and Total Capital Ratio (“TCR”) as prescribed by BNM. The Group has been in compliance with all prescribed capital adequacy ratios throughout the period. Total capital and capital adequacy ratios of the Group have been computed based on the updated BNM’s CAFIB - Capital Components Guideline issued on 9 December 2020 and BNM’s CAFIB – RWA Guideline issued on 3 May 2019. The minimum regulatory capital adequacy ratios requirement for CET 1 capital ratio, Tier 1 capital ratio and TCR including capital buffers i.e., Capital Conservation Buffers (“CCB”) are 7.0%, 8.5% and 10.5% respectively. The CCB is intended to encourage the build-up of capital buffers by individual Islamic banking institutions during normal times that can be drawn down during stress periods. The table below shows the composition of the regulatory capital and capital adequacy ratios as of 31 December 2021, determined by the requirements of the CAFIB. The capital adequacy ratios of the Group and Bank are set as per below: (a) The capital adequacy ratios of the Group and of the Bank: Group Before effect of IA Bank 31.12.2021 31.12.2020 31.12.2021 31.12.2020 Before deducting proposed dividends CET 1 Capital Ratio Tier 1 Capital Ratio Total Capital Ratio 11.39% 11.39% 16.03% 12.07% 12.07% 16.53% 11.03% 11.03% 15.69% 12.04% 12.04% 16.51% After deducting proposed dividends CET 1 Capital Ratio Tier 1 Capital Ratio Total Capital Ratio 10.82% 10.82% 15.47% 11.79% 11.79% 16.26% 10.45% 10.45% 15.11% 11.77% 11.77% 16.24% Group After effect of IA Bank 31.12.2021 31.12.2020 31.12.2021 31.12.2020 Before deducting proposed dividends CET 1 Capital Ratio Tier 1 Capital Ratio Total Capital Ratio 13.18% 13.18% 18.56% 14.67% 14.67% 19.82% 12.80% 12.80% 18.20% 14.64% 14.64% 19.80% After deducting proposed dividends CET 1 Capital Ratio Tier 1 Capital Ratio Total Capital Ratio 12.53% 12.53% 17.91% 14.34% 14.34% 19.49% 12.13% 12.13% 17.53% 14.31% 14.31% 19.47% 381
384. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 2 . CAPITAL ADEQUACY (CONTINUED) 2.4Capital Adequacy Ratios (continued) (b) CET I, Tier I and Tier II capital components of the Group and of the Bank (continued): 31.12.2021 Group RM’000 Tier I Capital Paid-up share capital Share Premium Retained earnings Other reserves Less: Deferred tax assets Less: 55% of fair value Less: Regulatory reserve attributable to financing Less: Investment in subsidiaries 3,445,757 – 2,965,080 (10,899) (193,214) – – – 3,445,757 – 2,965,659 (121,843) (191,773) – – (100,905) Total Common Equity Tier I Capital Total Additional Tier I Capital 6,206,724 – 5,996,895 – Total Tier I Capital Subordinated Sukuk Collective assessment allowance ^ 6,206,724 2,000,000 534,465 5,996,895 2,000,000 532,094 Total Tier II Capital 2,534,465 2,532,094 Total Capital 8,741,189 8,528,989 ^ 382 Bank RM’000 Collective assessment allowance on non-impaired financing and regulatory reserve, subject to maximum of 1.25% of total credit risk-weighted assets after deducting IA as Risk Absorbent.
385. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. CAPITAL ADEQUACY (CONTINUED) 2.4Capital Adequacy Ratios (continued) (b) CET 1, Tier I and Tier II capital components of the Group and of the Bank (continued): 31.12.2020 Group RM’000 Bank RM’000 Tier I Capital Paid-up share capital Share Premium Retained earnings Other reserves Less: Deferred tax assets Less: 55% of fair value Less: Regulatory reserve attributable to financing Less: Investment in subsidiaries 3,306,118 – 2,797,307 182,274 (1,511) (103,564) – – 3,306,118 – 2,791,044 182,423 – (103,564) – (15,525) Total Common Equity Tier I Capital Total Additional Tier I Capital 6,180,624 – 6,160,496 – Total Tier I Capital Subordinated Sukuk Collective assessment allowance ^ 6,180,624 1,700,000 472,256 6,160,496 1,700,000 472,005 Total Tier II Capital 2,172,256 2,172,005 Total Capital 8,352,880 8,332,501 ^ Collective assessment allowance on non-impaired financing and regulatory reserve, subject to maximum of 1.25% of total credit risk-weighted assets after deducting IA as Risk Absorbent. 383
386. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 2 . CAPITAL ADEQUACY (CONTINUED) 2.4Capital Adequacy Ratios (continued) (c) The breakdown of risk-weighted assets by exposures in each major risk category is as follows: (i)Group 31 December 2021 Exposure Class Gross Exposure RM’000 Net Exposure RM’000 Minimum RiskCapital Weighted Requirement At 8% Asset RM’000 RM’000 Credit Risk On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions (“DFIs”) and Multilateral Development Banks (“MDBs”) Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Defaulted Exposures 9,052,249 1,701,095 9,052,249 1,690,995 – 461,944 – 36,955 1,026,027 19,388,649 20,743,307 23,669,331 3,173 1,937,277 1,128,766 1,026,027 19,013,390 20,708,120 23,662,639 3,173 1,937,277 1,089,559 206,060 10,336,801 20,057,433 15,511,861 4,760 991,753 1,013,545 16,485 826,944 1,604,595 1,240,949 381 79,340 81,084 Total for On-Balance Sheet Exposures 78,649,874 78,183,429 48,584,157 3,886,733 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments Defaulted Exposures 1,623,839 116,795 36,288 1,614,088 116,795 36,278 1,478,572 68,005 50,005 118,286 5,440 4,000 Total for Off-Balance Sheet Exposures 1,776,922 1,767,161 1,596,582 127,726 80,426,796 79,950,590 50,180,739 4,014,459 Total On and Off-Balance Sheet Exposures (7,423,579) Less: Credit Risk absorbed by IA Long Position Short Position Market Risk Benchmark Rate Risk Foreign Exchange Risk Inventory Risk 8,792,939 28,311 (7,505,740) (390,224) 1,287,199 (361,914) – 99,335 390,224 – 7,947 31,218 – Total Market Risk 8,821,250 (7,895,964) 925,285 489,559 39,165 3,847,886 307,831 47,094,605 3,767,569 Operational Risk Total RWA and Capital Requirements Note: As at 31 December 2021, the Group did not have any exposures under securitisation. 384 (593,886)
387. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. CAPITAL ADEQUACY (CONTINUED) 2.4Capital Adequacy Ratios (continued) (c) The breakdown of risk-weighted assets by exposures in each major risk category is as follows (continued): (i) Group (continued) 31 December 2020 Exposure Class Gross Exposure RM’000 Net Exposure RM’000 Minimum RiskCapital Weighted Requirement At 8% Asset RM’000 RM’000 Credit Risk On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions (“DFIs”) and Multilateral Development Banks (“MDBs”) Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Defaulted Exposures 8,165,933 1,600,640 8,165,933 1,587,966 – 430,688 – 34,455 510,976 19,584,934 19,456,154 21,610,415 3,783 1,802,897 895,404 510,976 19,226,882 19,416,328 21,604,144 3,783 1,802,897 860,147 103,179 10,505,419 18,879,252 13,735,734 5,674 939,663 839,948 8,254 840,434 1,510,340 1,098,859 454 75,173 67,196 Total for On-Balance Sheet Exposures 73,631,136 73,179,056 45,439,557 3,635,165 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments Defaulted Exposures 1,461,127 148,631 25,822 1,454,525 148,632 25,822 1,329,221 64,632 29,167 106,338 5,171 2,333 Total for Off-Balance Sheet Exposures 1,635,580 1,628,979 1,423,020 113,842 75,266,716 74,808,035 46,862,577 3,749,006 Total On and Off-Balance Sheet Exposures Less: Credit Risk absorbed by IA (9,082,114) (726,569) Long Position Short Position Market Risk Benchmark Rate Risk Foreign Exchange Risk Inventory Risk 9,461,133 23,673 (8,518,693) (325,509) 942,439 (301,836) – 313,417 325,509 – 25,073 26,041 – Total Market Risk 9,484,806 (8,844,202) 640,603 638,926 51,114 3,719,636 297,571 42,139,024 3,371,122 Operational Risk Total RWA and Capital Requirements Note: As at 31 December 2020, the Group did not have any exposures under securitisation. 385
388. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 2 . CAPITAL ADEQUACY (CONTINUED) 2.4Capital Adequacy Ratios (continued) (c) The breakdown of risk-weighted assets by exposures in each major risk category is as follows (continued): (ii)Bank 31 December 2021 Exposure Class Gross Exposure RM’000 Net Exposure RM’000 Minimum RiskCapital Weighted Requirement Asset at 8% RM’000 RM’000 Credit Risk On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions (“DFIs”) and Multilateral Development Banks (“MDBs”) Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Defaulted Exposures 9,052,249 1,701,095 9,052,249 1,690,995 – 461,944 – 36,956 1,007,556 19,388,649 20,743,307 23,669,331 3,173 1,846,888 1,128,766 1,007,556 19,013,389 20,708,121 23,662,639 3,173 1,846,888 1,089,559 202,366 10,336,801 20,057,433 15,511,861 4,760 895,679 1,013,545 16,189 826,944 1,604,595 1,240,949 381 71,654 81,084 Total for On-Balance Sheet Exposures 78,541,014 78,074,569 48,484,389 3,878,752 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments Defaulted Exposures 1,623,839 116,795 36,288 1,614,088 116,795 36,278 1,478,572 68,005 50,005 118,286 5,440 4,000 Total for Off-Balance Sheet Exposures 1,776,922 1,767,161 1,596,582 127,726 80,317,936 79,841,730 50,080,971 4,006,478 Total On and Off-Balance Sheet Exposures (7,513,437) Less: Credit Risk absorbed by IA Long Position Short Position Market Risk Benchmark Rate Risk Foreign Exchange Risk Inventory Risk 8,792,939 28,311 (7,505,740) (390,224) 1,287,199 (361,914) – 99,335 390,224 – 7,947 31,218 – Total Market Risk 8,821,250 (7,895,964) 925,285 489,559 39,165 3,797,811 303,825 46,854,904 3,748,393 Operational Risk Total RWA and Capital Requirements Note: As at 31 December 2021, the Bank did not have any exposures under securitisation. 386 (601,075)
389. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 2. CAPITAL ADEQUACY (CONTINUED) 2.4Capital Adequacy Ratios (continued) (c) The breakdown of risk-weighted assets by exposures in each major risk category is as follows (continued): (ii) Bank (continued) 31 December 2020 Exposure Class Gross Exposure RM’000 Net Exposure RM’000 Minimum RiskCapital Weighted Requirement at 8% Asset RM’000 RM’000 Credit Risk On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions (“DFIs”) and Multilateral Development Banks (“MDBs”) Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Defaulted Exposures 8,165,933 1,600,640 8,165,933 1,587,966 – 430,688 – 34,455 510,893 19,584,934 19,456,154 21,610,415 3,783 1,786,255 895,404 510,893 19,226,882 19,416,328 21,604,144 3,783 1,786,255 860,147 103,163 10,505,419 18,879,252 13,735,734 5,674 919,927 839,948 8,253 840,434 1,510,340 1,098,859 454 73,594 67,196 Total for On-Balance Sheet Exposures 73,614,411 73,162,332 45,419,804 3,633,584 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments Defaulted Exposures 1,461,127 148,631 25,822 1,454,525 148,632 25,822 1,329,221 64,632 29,167 106,338 5,171 2,333 Total for Off-Balance Sheet Exposures 1,635,580 1,628,979 1,423,020 113,842 75,249,991 74,791,311 46,842,824 3,747,426 Total On and Off-Balance Sheet Exposures Less: Credit Risk absorbed by IA (9,082,416) (726,593) Long Position Short Position Market Risk Benchmark Rate Risk Foreign Exchange Risk Inventory Risk 9,461,133 23,673 – (8,518,693) (325,509) – 942,439 (301,836) – 313,417 325,509 – 25,073 26,041 – Total Market Risk 9,484,806 (8,844,202) 640,603 638,926 51,114 3,675,867 294,069 42,075,201 3,366,016 Operational Risk Total RWA and Capital Requirements Note: As at 31 December 2020, the Bank did not have any exposures under securitisation. 387
390. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 3 . RISK MANAGEMENT 3.1Overview The Group’s mission with respect to risk management is to advance its risk management capabilities, culture and practices so as to be in line with internationally accepted standards and practices. In that regard, the specific objectives of managing risk are to: •• •• •• •• •• •• •• Inculcate a risk-awareness culture throughout the Group; Establish a standard approach and methodology in managing risks namely credit, market, liquidity, operational, IT & cyber risk, compliance risks and contagion risk across the Group; Clarify functional structures including objectives, roles and responsibilities; Implement and use a risk management information system that meets the international standards on confidentiality, integrity and its availability; Develop and use tools, such as economic capital, value at risk, and stress testing to support the measurement of risks and enhance risk-based decisions; Ensure that risk policies and overall risk appetite are in line with business targets; and Ensure that the Group’s capital can support current and planned business needs in terms of risk exposures. 3.2Risk Management Functional and Governance Structure The Group has aligned its organisational responsibilities with the objective of ensuring a common view of risks across the Group. As a matter of prudence and good governance, the Group’s core risk management functions, which report to the Board Risk Committee (“BRC”), are independent and segregated from the business divisions and centralised at head office. The following illustrates the Group’s governance structure: Board Committees Shariah Supervisory Council (SSC) Board of Directors Board Audit & Examination Committee (BAEC) Board IT Committee (BITC) Board Strategic & Sustainability Committee (BSSC) Board Financing Review Committee (BFRC) Boards Nomination & Remuneration Committee (BNRC) Management Committees Group Chief Executive Officer Management Committee (MANCO) Sadaqa House and Zakat Committee (SHZC) Management Audit Committee (MAC) Management IT Committee (MITC) Sustainability Committee (SC) Financing Committees (UIC,FCA, FCB, RFC) Bilob Oversight Committee (BOC) Tender Committee (TECA/TECB) Rescheduling & Restructuring Oversight Committee (R&R) 388 Board Risk Committee (BRC) Business Continuity Management Committee (BCMC) Management Risk Control Committee (MRCC) Asset & Liability Management Committee (ALCO) Recovery Management Committee (RMC) Data Management Committee (DMC) Operational Risk Control Committee (ORCC)
391. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 3. RISK MANAGEMENT (CONTINUED) 3.2Risk Management Functional and Governance Structure (continued) The Group recognises the fact that the essence of banking and financial services is centred on risk taking activities. The Group therefore: •• •• •• ecognises that it has to manage risks effectively to achieve its business targets; R Reaches an optimum level of risk-return in order to maximise stakeholders’ value; and Ensures effective and integrated risk management processes that are commensurate with the size and complexity of the current and future operations of the Group within its risk appetite and tolerance. The Group has established the Group Risk Appetite Statement Policy that forms an integral part of the Group’s strategy and business plans. Risk appetite is an expression of the maximum level of risk that the Group is prepared to accept in support of a stated strategy, impacting all businesses from a credit, market and operational risk viewpoint. 4. CREDIT RISK 4.1Overview Credit risk is the risk of a customer or counterparty failing to fulfil its financial obligations in accordance with agreed terms. It arises from all transactions that could lead to actual, contingent or potential claims against any party, customer or obligor (collectively referred to as counterparties). The types of credit risks that the Group considers to be material include: Default Risk, Counterparty Risk, Credit Concentration Risk, Residual/Credit Mitigation Risk and Migration Risk. 4.2Credit Risk Governance The management of credit risk is principally carried out by using sets of policies and guidelines approved by the Management Risk Control Committee (“MRCC”) and/or BRC, guided by the Boards’ approved Group Risk Appetite Statement Policy. The Group has several levels of Financing Committees, which assess and approve credits at their specified authority levels. MRCC is responsible under the authority delegated by BRC for managing credit risk at strategic level. MRCC reviews the Group’s credit risk policies and guidelines, aligns credit risk management with business strategies and planning, reviews credit profile of the credit portfolios and recommends necessary actions to ensure that the credit risk remains within established risk tolerance levels. The Group’s credit risk management governance includes the establishment of detailed credit risk policies, guidelines and procedures which document the Group’s financing standards, discretionary powers for financing approval, credit risk ratings methodologies and models, acceptable collaterals and valuation, and the review, rehabilitation and restructuring of problematic and delinquent financing. 389
392. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 4 . CREDIT RISK 4.3Management of Credit Risk The management of credit risk is being performed by the Group Credit Management Division (“CMD”) and Group Risk Management Division (“RMD”) and two other units outside of CMD and RMD domain, namely, Credit Administration Department and Recovery & Rehabilitation Division. The combined objectives are, amongst others: •• •• •• •• o build a high quality credit portfolio which is in line with the Group’s overall strategy and risk appetite; T To ensure that the Group is compensated for the risk taken, balancing/optimising the risk/return relationship; To develop an increasing ability to recognise, measure and avoid or mitigate potential credit risk problem areas; and To conform with statutory, regulatory and internal credit requirements. The Group monitors its credit exposures either on a portfolio basis or individual basis through annual reviews. Credit risk is proactively monitored through a set of early warning signals that could trigger immediate reviews of (a certain part of) the portfolio. The affected portfolio or financing is placed on a watchlist to enforce close monitoring and prevent financing from turning impaired and to increase chances of full recovery. A detailed limit structure is in place to ensure that risks taken are within the risk appetite as set by the Board and to avoid credit risk concentration on a single customer, sector, product, etc. Credit risk arising from dealing and investing activities are managed by the establishment of limits which include counterparty limits and permissible acquisition of private entities’ instruments, subject to a specified minimum rating threshold. Furthermore, the dealing and investing activities are monitored by an independent middle office unit. 4.4Capital Treatment for Credit Risk The Group adopts the Standardised Approach to compute the credit risk capital requirement under BNM’s CAFIB. 390
393. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 4. CREDIT RISK (CONTINUED) 4.5Credit Quality of Gross Financing and Advances The table below presents the Group’s and the Bank’s gross financing and advances analysed by credit quality: Group and Bank Neither past due nor impaired Past due but not impaired Impaired Gross Impaired Financing as a percentage of Gross Financing and Advances 31.12.2021 RM’000 31.12.2020 RM’000 58,234,986 414,366 568,383 54,596,595 628,767 373,234 59,217,735 55,598,596 0.96% 0.67% (a) Neither Past Due nor Impaired Financings classified as neither past due nor impaired are financings of which the customers have not missed contractual payments (profit or principal) when contractually due and are not impaired as there is no objective evidence of impairment in the financings. The credit quality of gross financing and advances which are neither past due nor impaired is as follows: Group and Bank Excellent to Good Satisfactory Fair 31.12.2021 RM’000 31.12.2020 RM’000 52,111,710 5,813,008 310,268 47,226,265 6,995,181 375,149 58,234,986 54,596,595 Internal rating definition: •• •• •• xcellent to Good: Sound financial position of the customer with no difficulty in meeting its obligations. E Satisfactory: Adequate safety of the customer meeting its current obligations but more time is required to meet the entire obligations in full. Fair: High risks on payment obligations. Financial performance may continue to deteriorate. 391
394. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 4 . CREDIT RISK (CONTINUED) 4.5Credit Quality of Gross Financing and Advances (continued) (b) Past Due but Not Impaired Financings classified as past due but not impaired are financings of which their 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 ageing: Group and Bank By ageing Month-in-arrears 1 Month-in-arrears 2 31.12.2021 RM’000 31.12.2020 RM’000 217,722 196,644 429,323 199,444 414,366 628,767 Analysis of the past due but not impaired financing and advances by sector: Group and Bank Primary agriculture Mining and quarrying Manufacturing (including agro-based) Electricity, gas and water Wholesale & retail trade, and hotels & restaurants Construction Real estate Transport, storage and communications Finance, insurance and business activities Education, health and others Household sectors Other sectors 392 31.12.2021 RM’000 31.12.2020 RM’000 – – 9,910 – 667 342 – 25,536 183 27 377,701 – – 3,615 761 – 23,195 8,215 136 38,370 8,228 2,424 543,823 – 414,366 628,767
395. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 4. CREDIT RISK (CONTINUED) 4.5Credit Quality of Gross Financing and Advances (continued) (c) Impaired Financing and Advances 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. The financing or group of financings is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the financing (a ‘loss event’) and that the loss event has an impact on the estimated future cash flows of the financing or group of financings that can be reliably estimated. The Group and the Bank first assess individually whether the objective evidence of impairment exists individually for financings which are individually significant, and collectively for financings which are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financing, the financing is included in a group of financings with similar credit risk characteristic and collectively assessed for impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the financing’s carrying amount and the present value of the estimated future cash flows. The carrying amount of the financing is reduced through the use of an allowance account and the amount of the loss is recognised in the statement of profit or loss. Group and Bank Impairment financing by assessment type: Individually Assessed of which: Month-in-Arrears Month-in-Arrears Month-in-Arrears Month-in-Arrears 0 1 2 3 and above Collectively Assessed 31.12.2021 RM’000 31.12.2020 RM’000 423,603 219,160 268,316 3,478 1,479 150,330 23,780 6,659 17,010 171,711 144,780 154,074 568,383 373,234 393
396. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 4 . CREDIT RISK (CONTINUED) 4.5Credit Quality of Gross Financing and Advances (continued) (c) Impaired Financing and Advances (continued) Impaired Financing at 31.12.2021 Individual Assessment as at 01.01.2021 Net Charge for the Financial Year Amounts Written Off/ Other Movements Individual Assessment as at 31.12.2021 Collective Assessment Allowance at 31.12.2021 Total Impairment Allowances for Financing At 31.12.2021 – – – – – – – – – – 14,579 2,887 14,579 2,887 10,307 – 6,775 – 1,578 – (6,439) – 1,914 – 104,621 43,233 106,535 43,233 76,992 285,246 – 23,765 14,432 – 5,868 187,722 – (23,116) (5,810) – 6,517 196,344 – 48,216 74,274 – 54,733 270,618 – 15,311 4,567 55 (3,210) 1,412 35,947 37,359 5,932 1,391 173,204 – 258 519 14,879 – (257) (369) 482 – – – (745) – – 150 14,617 – 92,613 19,286 407,356 – 92,613 19,436 421,973 – 568,383 65,195 195,079 (39,320) 220,954 843,012 1,063,966 Individual Assessment Allowance 31 December 2021 RM‘000 Primary Agriculture Mining and Quarrying Manufacturing (including Agro-based) Electricity, Gas and Water Wholesale & Retail Trade and Restaurants & Hotels Construction Real Estate Transport, Storage and Communication Finance, Insurance and Business Services Education, Health and Others Household Sectors Other Sectors Total 394
397. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 4. CREDIT RISK (CONTINUED) 4.5Credit Quality of Gross Financing and Advances (continued) (c) Impaired Financing and Advances (continued) Impaired Financing at 31.12.2020 Individual Assessment as at 01.01.2020 Net Charge for the Financial Year Amounts Written Off/ Other Movements Individual Assessment as at 31.12.2020 Collective Assessment Allowance at 31.12.2020 Total Impairment Allowances for Financing At 31.12.2020 – – – – – – – – – – 18,882 2,411 18,882 2,411 28,329 – 25,797 – (3,555) – (15,469) – 6,775 – 32,316 65,708 39,091 65,708 89,812 36,220 – 23,494 11,133 – 3,335 5,358 – (3,064) (2,059) – 23,765 14,432 – 29,556 89,865 – 53,321 104,297 – Individual Assessment Allowance 31 December 2020 RM‘000 Primary Agriculture Mining and Quarrying Manufacturing (including Agro-based) Electricity, Gas and Water Wholesale & Retail Trade and Restaurants & Hotels Construction Real Estate Transport, Storage and Communication Finance, Insurance and Business Services Education, Health and Others Household Sectors Other Sectors 17,801 4,349 218 – 4,567 34,248 38,815 6,140 3,969 190,963 – – 3,676 19,598 – 258 (1,394) (3,694) – – (1,763) (1,024) – 258 519 14,879 – 106,156 15,631 467,993 – 106,414 16,150 482,872 – Total 373,234 88,047 526 (23,379) 65,195 862,766 927,961 395
398. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 4 . CREDIT RISK (CONTINUED) 4.5Credit Quality of Gross Financing and Advances (continued) (d) Gross Financing and Advances – Exposures by Geographical Areas Of Which: 31 December 2021 RM‘000 Central Region Eastern Region Northern Region Southern Region East Malaysia Region Grand Total Gross Financing Past Due But Not Impaired Financing Impaired Financing Individual Allowances Collective Allowances 26,946,146 9,368,591 8,066,342 10,247,330 4,589,326 215,749 58,516 43,096 73,033 23,972 395,781 68,146 74,751 17,458 12,247 210,034 10,063 – 857 – 436,151 157,554 93,755 105,491 50,061 59,217,735 414,366 568,383 220,954 843,012 Of Which: Gross Financing Past Due But Not Impaired Financing Impaired Financing Individual Allowances Collective Allowances Central Region Eastern Region Northern Region Southern Region East Malaysia Region 25,745,132 8,757,468 7,431,066 9,416,361 4,248,569 326,811 80,907 93,699 88,776 38,574 174,617 86,291 78,220 19,167 14,939 47,606 15,481 – 2,108 – 496,983 94,975 93,343 89,166 88,299 Grand Total 55,598,596 628,767 373,234 65,195 862,766 31 December 2020 RM‘000 396
399. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 4. CREDIT RISK (CONTINUED) 4.6Gross Credit Exposures (a) Geographic Distribution of Credit Exposures (i)Group 31 December 2021 Exposure Class Central Region RM’000 Eastern Region RM’000 Northern Region RM’000 Southern Region RM’000 East Malaysia Region RM’000 Total RM’000 Credit Risk On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions and Multilateral Development Banks Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets 9,052,249 1,128,435 – 128,848 – 87,712 – 329,923 – 26,177 9,052,249 1,701,095 1,025,652 16,303,740 8,208,436 8,764,194 1,921 1,936,666 299 1,080,165 3,790,825 4,344,115 438 – – 728,181 3,296,613 3,924,785 217 – 75 1,464,805 3,285,672 5,174,453 98 – – 783,541 2,244,038 1,536,322 668 611 1,026,026 20,360,432 20,825,584 23,743,869 3,342 1,937,277 Total for On-Balance Sheet Exposures 46,421,293 9,344,690 8,037,508 10,255,026 4,591,357 78,649,874 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments 1,255,100 116,799 81,379 – 70,193 – 109,475 – 143,976 – 1,660,123 116,799 Total for Off-Balance Sheet Exposures 1,371,899 81,379 70,193 109,475 143,976 1,776,922 47,793,192 9,426,069 8,107,701 10,364,501 4,735,333 80,426,796 Total On and Off-Balance Sheet Exposures 397
400. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 4 . CREDIT RISK (CONTINUED) 4.6Gross Credit Exposures (continued) (a) Geographic Distribution of Credit Exposures (continued) (i) Group (continued) 31 December 2020 Exposure Class Central Region RM’000 Eastern Region RM’000 Northern Region RM’000 Southern Region RM’000 East Malaysia Region RM’000 Total RM’000 Credit Risk On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions and Multilateral Development Banks Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets 8,165,933 1,060,099 – 143,574 – 46,935 – 344,404 – 5,628 8,165,933 1,600,640 510,556 16,313,849 7,778,636 8,184,067 2,083 1,800,176 330 1,058,669 3,565,676 3,965,812 620 – – 703,735 3,034,206 3,627,072 141 – 90 1,469,709 3,072,934 4,534,191 118 – – 789,298 2,082,322 1,366,731 821 2,721 510,976 20,335,260 19,533,774 21,677,873 3,783 1,802,897 Total for On-Balance Sheet Exposures 43,815,399 8,734,681 7,412,089 9,421,446 4,247,521 73,631,136 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments 1,217,355 148,631 60,569 – 40,546 – 120,305 – 48,174 – 1,486,949 148,631 Total for Off-Balance Sheet Exposures 1,365,986 60,569 40,546 120,305 48,174 1,635,580 45,181,385 8,795,250 7,452,635 9,541,751 4,295,695 75,266,716 Total On and Off-Balance Sheet Exposures 398
401. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 4. CREDIT RISK (CONTINUED) 4.6Gross Credit Exposures (continued) (a) Geographic Distribution of Credit Exposures (continued) (ii)Bank 31 December 2021 Exposure Class Central Region RM’000 Eastern Region RM’000 Northern Region RM’000 Southern Region RM’000 East Malaysia Region RM’000 Total RM’000 Credit Risk On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions and Multilateral Development Banks Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets 9,052,249 1,128,435 – 128,848 – 87,712 – 329,923 – 26,177 9,052,249 1,701,095 1,007,181 16,303,740 8,208,436 8,764,194 1,921 1,846,277 299 1,080,165 3,790,825 4,344,115 438 – – 728,182 3,296,612 3,924,785 217 – 75 1,464,805 3,285,672 5,174,453 98 – – 783,541 2,244,038 1,536,322 668 611 1,007,555 20,360,433 20,825,583 23,743,869 3,342 1,846,888 Total for On-Balance Sheet Exposures 46,312,433 9,344,690 8,037,508 10,255,026 4,591,357 78,541,014 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments 1,255,100 116,799 81,379 – 70,193 – 109,475 – 143,976 – 1,660,123 116,799 Total for Off-Balance Sheet Exposures 1,371,899 81,379 70,193 109,475 143,976 1,776,922 47,684,332 9,426,069 8,107,701 10,364,501 4,735,333 80,317,936 Total On and Off-Balance Sheet Exposures 399
402. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 4 . CREDIT RISK (CONTINUED) 4.6Gross Credit Exposures (continued) (a) Geographic Distribution of Credit Exposures (continued) (ii) Bank (continued) 31 December 2020 Exposure Class Central Region RM’000 Eastern Region RM’000 Northern Region RM’000 Southern Region RM’000 East Malaysia Region RM’000 Total RM’000 Credit Risk On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions and Multilateral Development Banks Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets 8,165,933 1,060,099 – 143,574 – 46,935 – 344,404 – 5,628 8,165,933 1,600,640 510,473 16,313,849 7,778,636 8,184,067 2,083 1,783,533 330 1,058,669 3,565,676 3,965,812 620 – – 703,735 3,034,206 3,627,072 141 – 90 1,469,709 3,072,934 4,534,191 118 – – 789,298 2,082,322 1,366,731 821 2,722 510,893 20,335,260 19,533,774 21,677,873 3,783 1,786,255 Total for On-Balance Sheet Exposures 43,798,673 8,734,681 7,412,089 9,421,446 4,247,522 73,614,411 1,217,355 148,631 60,569 – 40,546 – 120,305 – 48,174 – 1,486,949 148,631 1,365,986 60,569 40,546 120,305 48,174 1,635,580 45,164,659 8,795,250 7,452,635 9,541,751 4,295,696 75,249,991 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments Total for Off-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures 400
403. – 64,205 3,945 – – – – 1,079,683 6,426 – – – 1,087,271 Total for On-Balance Sheet Exposures – – 25,443 1,112,714 Total for Off-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures 75,339 7,189 7,189 25,443 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments 68,150 – – – 1,162 1,131,200 111,234 361 110,873 1,019,966 – 966,355 52,606 1,005 – – – – 2,865,907 70,971 – 70,971 2,794,936 – 2,793,913 1,023 – – – – – Mining Electricity, Primary and Gas and Agriculture Quarrying Manufacturing Water RM‘000 RM‘000 RM‘000 RM‘000 On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions and Multilateral Development Banks Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Credit Risk 31 December 2021 Exposure Class (i)Group (b) Distribution of Credit Exposures by Sector 4.6Gross Credit Exposures (continued) 4. CREDIT RISK (CONTINUED) 986,886 127,347 24,175 103,172 859,539 – 702,350 157,189 – – – – – 4,310,988 409,644 37 409,607 3,901,344 – 3,739,417 103,232 – – – – 58,695 Wholesale & Retail Trade and Restaurant & Hotels Construction RM‘000 RM‘000 1,947,773 10,372 – 10,372 1,937,401 – 1,885,932 42,637 – – – – 8,832 2,075,376 89,420 – 89,420 1,985,956 – 1,956,311 29,645 – – – – – Transport, Real Storage & Estate Communication RM‘000 RM ‘000 9,280,154 137,266 27,773 109,493 9,142,888 943,022 4,093,785 81,752 – – – 3,789,685 234,644 – 244 381,302 – 381,302 2,515,487 44,565,633 234,962 50,613 184,349 2,280,525 44,184,331 – 374 834,970 143,296 48,037 20,294,212 – 23,742,863 – 3,342 – – – 1,397,518 Finance, Insurance Education, and Health Business and Household Services Others Sector RM‘000 RM‘000 RM‘000 9,052,250 1,701,095 Total RM‘000 1,776,922 116,799 1,660,123 9,559,339 80,426,796 171,772 13,840 157,932 9,387,567 78,649,874 82,629 1,026,025 2,100,216 20,360,433 4,880 20,825,584 – 23,743,868 – 3,342 1,937,277 1,937,277 5,262,565 – Other Sectors RM‘000 I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages   Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 401
404. 402 – 64,577 3,086 353 – – – 1,119,668 1,348 – – – 1,121,971 Total for On-Balance Sheet Exposures – – 25,804 1,147,775 Total for Off-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures 81,002 12,986 12,986 25,804 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments 68,016 – – – 955 On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions and Multilateral Development Banks Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Credit Risk 31 December 2020 Exposure Class 1,343,895 99,231 72 99,159 1,244,664 – 1,099,232 32,791 523 – – – 112,118 3,374,993 58,429 – 58,429 3,316,564 – 3,315,698 866 – – – – – Mining Electricity, Primary and Gas and Agriculture Quarrying Manufacturing Water RM‘000 RM‘000 RM‘000 RM‘000 (i) Group (continued) 871,558 146,876 64,886 81,990 724,682 – 660,832 63,850 – – – – – 3,990,610 383,933 600 383,333 3,606,677 – 3,539,328 62,219 111 – – – 5,019 Wholesale & Retail Trade and Restaurant & Hotels Construction RM‘000 RM‘000 (b) Distribution of Credit Exposures by Sector (continued) 4.6Gross Credit Exposures (continued) 4. CREDIT RISK (CONTINUED) 2,115,607 64,459 – 64,459 2,051,148 – 2,015,830 35,318 – – – – – 2,108,788 64,311 – 64,311 2,044,477 – 2,024,878 19,599 – – – – – Transport, Real Storage & Estate Communication RM‘000 RM ‘000 9,850,303 104,970 15,854 89,116 9,745,333 358,688 3,869,984 72,750 – – – 5,246,069 197,842 2,242,459 215,036 37,795 177,241 2,027,423 100,010 598,072 44,918 – – – – 1,284,423 41,269,882 259,166 – 259,166 41,010,716 421 135,552 19,193,791 21,676,886 3,783 – – 283 Finance, Insurance Education, and Health Business and Household Services Others Sector RM‘000 RM‘000 RM‘000 8,165,933 1,600,640 Total RM‘000 6,869,844 200,379 29,424 170,955 6,669,465 75,266,716 1,635,580 148,631 1,486,949 73,631,136 51,857 510,976 1,891,609 20,335,260 3,238 19,533,774 – 21,677,873 – 3,783 1,802,897 1,802,897 2,919,864 – Other Sectors RM‘000 B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021
405. – 64,205 3,945 – – – – 1,079,683 6,426 – – – 1,087,271 Total for On-Balance Sheet Exposures – – 25,443 1,112,714 Total for Off-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures 75,339 7,189 7,189 25,443 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments 68,150 – – – 1,162 1,131,200 111,234 361 110,873 1,019,966 – 966,355 52,606 1,005 – – – – 2,865,907 70,971 – 70,971 2,794,936 – 2,793,913 1,023 – – – – – Mining Electricity, Primary and Gas and Agriculture Quarrying Manufacturing Water RM‘000 RM‘000 RM‘000 RM‘000 On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions and Multilateral Development Banks Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Credit Risk 31 December 2021 Exposure Class (ii)Bank 986,887 127,347 24,175 103,172 859,540 – 702,350 157,190 – – – – – 4,310,988 409,644 37 409,607 3,901,344 – 3,739,417 103,232 – – – – 58,695 Wholesale & Retail Trade and Restaurant & Hotels Construction RM‘000 RM‘000 (b) Distribution of Credit Exposures by Sector (continued) 4.6Gross Credit Exposures (continued) 4. CREDIT RISK (CONTINUED) 1,947,773 10,372 – 10,372 1,937,401 – 1,885,932 42,637 – – – – 8,832 2,075,376 89,420 – 89,420 1,985,956 – 1,956,311 29,645 – – – – – Transport, Real Storage & Estate Communication RM‘000 RM ‘000 9,280,154 137,266 27,773 109,493 9,142,888 943,023 4,093,785 81,752 – – – 3,789,685 234,643 – 244 381,302 – 381,302 2,515,486 44,565,633 234,962 50,613 184,349 2,280,524 44,184,331 – 374 834,969 143,296 48,037 20,294,212 – 23,742,863 – 3,342 – – – 1,397,518 Finance, Insurance Education, and Health Business and Household Services Others Sector RM‘000 RM‘000 RM‘000 9,052,250 1,701,094 Total RM‘000 1,776,922 116,799 1,660,123 9,450,479 80,317,936 171,772 13,840 157,932 9,278,707 78,541,014 64,158 1,007,555 2,100,216 20,360,432 4,880 20,825,585 – 23,743,868 – 3,342 1,846,888 1,846,888 5,262,565 – Other Sectors RM‘000 I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages   Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 403
406. 404 1 ,121,971 Total for On-Balance Sheet Exposures – – 25,805 1,147,776 Total for Off-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures 81,002 12,986 12,986 25,805 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments 1,343,895 99,231 72 99,159 1,244,664 – 1,099,232 32,791 523 – – – 64,577 3,086 353 – – 1,119,668 1,348 – – – 68,016 – 112,118 – – – 955 On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions and Multilateral Development Banks Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Credit Risk 31 December 2020 Exposure Class 3,374,993 58,429 – 58,429 3,316,564 – 3,315,698 866 – – – – – Mining Electricity, Primary and Gas and Agriculture Quarrying Manufacturing Water RM‘000 RM‘000 RM‘000 RM‘000 (ii) Bank (continued) 871,558 146,876 64,886 81,990 724,682 – 660,832 63,850 – – – – – 3,990,610 383,933 600 383,333 3,606,677 – 3,539,328 62,219 111 – – – 5,019 Wholesale & Retail Trade and Restaurant & Hotels Construction RM‘000 RM‘000 (b) Distribution of Credit Exposures by Sector (continued) 4.6Gross Credit Exposures (continued) 4. CREDIT RISK (CONTINUED) 2,115,606 64,458 – 64,458 2,051,148 – 2,015,830 35,318 – – – – – 2,108,788 64,311 – 64,311 2,044,477 – 2,024,878 19,599 – – – – – Transport, Real Storage & Estate Communication RM‘000 RM ‘000 9,850,304 104,970 15,854 89,116 9,745,334 358,688 3,869,985 72,750 – – – 5,246,069 197,842 2,242,459 215,036 37,795 177,241 2,027,423 100,010 598,072 44,918 – – – – 1,284,423 41,269,882 259,166 – 259,166 41,010,716 421 135,552 19,193,791 21,676,886 3,783 – – 283 Finance, Insurance Education, and Health Business and Household Services Others Sector RM‘000 RM‘000 RM‘000 8,165,933 1,600,640 Total RM‘000 6,853,118 200,379 29,424 170,955 6,652,739 75,249,991 1,635,580 148,631 1,486,949 – 73,614,411 51,774 510,893 1,891,608 20,335,260 3,238 19,533,774 – 21,677,873 – 3,783 1,786,255 1,786,255 2,919,864 – Other Sectors RM‘000 B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021
407. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 4. CREDIT RISK (CONTINUED) 4.6Gross Credit Exposures (continued) (c) Residual Contractual Maturity Breakdown (i)Group 31 December 2021 Exposure Class Up to 1 Year RM’000 > 1 – 5 Years RM’000 Over 5 Years RM’000 Total RM’000 4,574,778 106,851 2,811,303 814,612 1,666,169 779,632 9,052,250 1,701,095 823,210 5,152,471 134,369 17,442 – 457,052 200,384 6,005,414 3,018,105 136,540 34 – 2,432 9,202,547 17,673,110 23,589,887 3,307 1,480,225 1,026,026 20,360,432 20,825,584 23,743,869 3,341 1,937,277 11,266,173 12,986,392 54,397,309 78,649,874 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments 656,789 114,431 448,316 2,368 555,018 – 1,660,123 116,799 Total for Off-Balance Sheet Exposures 771,220 450,684 555,018 1,776,922 12,037,393 13,437,076 54,952,327 80,426,796 Credit Risk On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions and Multilateral Development Banks Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Total for On-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures 405
408. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 4 . CREDIT RISK (CONTINUED) 4.6Gross Credit Exposures (continued) (c) Residual Contractual Maturity Breakdown (continued) (i) Group (continued) 31 December 2020 Exposure Class Up to 1 Year RM’000 > 1 – 5 Years RM’000 Over 5 Years RM’000 Total RM’000 5,025,763 126,850 1,307,472 672,694 1,832,698 801,096 8,165,933 1,600,640 307,302 3,418,150 60,071 10,535 – 351,256 201,040 6,616,986 3,035,247 136,323 14 – 2,634 10,300,124 16,438,456 21,531,015 3,769 1,451,641 510,976 20,335,260 19,533,774 21,677,873 3,783 1,802,897 9,299,927 11,969,776 52,361,433 73,631,136 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments 512,097 143,217 581,139 5,414 393,713 – 1,486,949 148,631 Total for Off-Balance Sheet Exposures 655,314 586,553 393,713 1,635,580 9,955,241 12,556,329 52,755,146 75,266,716 Credit Risk On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions and Multilateral Development Banks Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Total for On-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures 406
409. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 4. CREDIT RISK (CONTINUED) 4.6Gross Credit Exposures (continued) (c) Residual Contractual Maturity Breakdown (continued) (ii)Bank 31 December 2021 Exposure Class Up to 1 Year RM’000 > 1 – 5 Years RM’000 Over 5 Years RM’000 Total RM’000 4,574,778 106,851 2,811,303 814,612 1,666,169 779,632 9,052,250 1,701,095 804,739 5,152,471 134,369 17,442 – 366,663 200,384 6,005,414 3,018,105 136,540 34 – 2,432 9,202,547 17,673,110 23,589,887 3,307 1,480,225 1,007,555 20,360,432 20,825,584 23,743,869 3,341 1,846,888 11,157,313 12,986,392 54,397,309 78,541,014 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments 656,789 114,431 448,316 2,368 555,018 – 1,660,123 116,799 Total for Off-Balance Sheet Exposures 771,220 450,684 555,018 1,776,922 11,928,533 13,437,076 54,952,327 80,317,936 Credit Risk On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions and Multilateral Development Banks Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Total for On-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures 407
410. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 4 . CREDIT RISK (CONTINUED) 4.6Gross Credit Exposures (continued) (c) Residual Contractual Maturity Breakdown (ii) Bank (continued) 31 December 2020 Exposure Class Up to 1 Year RM’000 > 1 – 5 Years RM’000 Over 5 Years RM’000 Total RM’000 5,025,763 126,850 1,307,472 672,694 1,832,698 801,096 8,165,933 1,600,640 307,219 3,418,150 60,071 10,535 – 334,615 201,040 6,616,986 3,035,247 136,323 14 – 2,634 10,300,124 16,438,456 21,531,015 3,769 1,451,640 510,893 20,335,260 19,533,774 21,677,873 3,783 1,786,255 9,283,203 11,969,776 52,361,432 73,614,411 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments 512,097 143,217 581,139 5,414 393,713 – 1,486,949 148,631 Total for Off-Balance Sheet Exposures 655,314 586,553 393,713 1,635,580 9,938,517 12,556,329 52,755,145 75,249,991 Credit Risk On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, Developments Financial Institutions and Multilateral Development Banks Corporate Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Total for On-Balance Sheet Exposures Total On and Off-Balance Sheet Exposures 4.7Assignment of Risk Weights for Portfolios Under the Standardised Approach Under the Standardised Approach, the Group makes use of credit ratings assigned by credit rating agencies in the calculation of credit risk-weighted assets. The following are the rating agencies or External Credit Assessment Institutions (“ECAI”) ratings used by the Group and are recognised by BNM as per the CAFIB Guideline: (a) (b) (c) (d) (e) Standard & Poor’s (“S&P”) Moody’s Investors Services (“MOODY’S”) Fitch Ratings (“FITCH”) Rating Agency Malaysia Berhad (“RAM”) Malaysian Rating Corporation Berhad (“MARC”) The ECAI ratings accorded to the following counterparty exposure classes are used in the calculation of riskweighted assets for capital adequacy purposes: (a) Sovereigns and central banks (b) Banking institutions (c)Corporates 408
411. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 4. CREDIT RISK (CONTINUED) 4.7Assignment of Risk Weights for Portfolios Under the Standardised Approach (continued) Unrated and Rated Counterparties As a general rule, the rating specific to the credit exposure is used, i.e. the issue rating. Where no specific rating exists, the credit rating assigned to the issuer or counterparty of that particular credit exposure is used. In cases where an exposure has neither an issue nor an issuer rating, it is deemed as unrated or the rating of another rated obligation of the same counterparty may be used if the exposure is ranked at least pari passu with the obligation that is rated, as stipulated in the CAFIB Guideline. Where a counterparty or an exposure is rated by more than one ECAI, the second highest rating is used to determine the risk weight. In cases where the credit exposures are secured by guarantees issued by eligible or rated guarantors, the risk weights similar to that of the guarantor are assigned. The below table summarises the rules governing the assignment of risk weights under the Standardised Approach: Rating Category S & P MOODY’S FITCH RAM MARC 1 AAA to AA- Aaa to Aa3 AAA to AA- AAA to AA3 AAA to AA- 2 A+ to A- A1 to A3 A+ to A- A1 to A3 A+ to A- 3 BBB+ to BBB- Baa1 to Baa3 BBB+ to BBB- BBB1 to BBB3 BBB+ to BBB- 4 BB+ to BB- Ba1 to Ba3 BB+ to BB- BB1 to BB3 BB+ to BB- 5 B+ to B- B1 to B3 B+ to B- B1 to B3 B+ to B- 6 CCC+ and below Caa1 and below CCC+ and below C1 and below C+ and below The below table summarises risk weight mapping matrix for each credit quality rating category: Risk Weights Based on Credit Rating of the Counterparty Exposure Class Banking Institutions Rating Category 1 2 3 4 5 6 Unrated Sovereign and Central Banks Corporate Maturity > 6 months Maturity <= 6 months Maturity <= 3 months 0% 20% 50% 100% 100% 150% 100% 20% 50% 100% 100% 150% 150% 100% 20% 50% 50% 100% 100% 150% 50% 20% 20% 20% 50% 50% 150% 20% 20% Under CAFIB, exposures to and/or guaranteed by the Federal Government of Malaysia and Bank Negara Malaysia are accorded a preferential sovereign risk weight of 0%. 409
412. 410 Total Exposures Deduction from Capital Base Average Risk Weight 0 .0% – 9,052,249 0% 20% 35% 50% 75% 100% 150% RWA by Exposures 826,833 170,004 – 547,870 – 230,234 – 9,052,249 – – – – – – Risk Weights 30.3% 538,170 1,774,941 Public Sector Entities RM’000 20.2% 218,997 1,084,001 – 1,076,679 – 7,322 – – – Banks, DFIS & MDBS RM’000 58.5% 12,398,706 21,202,349 3,904,705 3,768,647 – 3,841,980 571,402 8,755,974 359,641 96.8% 20,129,762 20,791,612 196,450 97 – 398,237 1,120,993 19,047,746 28,089 65.9% 15,885,585 24,096,317 – – 6,996,669 5,098,127 4,575,502 7,365,935 60,084 Regulatory Residential Corporate Retail Mortgages RM’000 RM’000 RM’000 Exposures After Netting & Credit Risk Mitigation (CRM) Sovereigns/ Central Banks RM’000 (i) As at 31 December 2021 150.0% 17,765 11,843 – – – – – – 11,843 Higher Risk Assets RM’000 51.2% 991,753 1,937,277 945,524 – – – – 991,753 – Other Assets RM’000 – 1,003,085 2,448,834 4,946,768 4,700,924 36,391,642 689,486 Total Risk Weighted Asset RM’000 62.8% 50,180,738 79,950,590 50,180,739 14,925,761 5,015,427 6,996,669 9,893,536 6,267,898 36,391,642 459,657 Total Exposures After Netting & CRM RM’000 The following presents the credit exposures by risk weights after the effect of credit risk mitigation of the Group: 4.7Assignment of Risk Weights for Portfolios Under the Standardised Approach (continued) 4. CREDIT RISK (CONTINUED) B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021
413. Deduction from Capital Base Average Risk Weight 0 .0% – 8,165,933 Total Exposures RWA by Exposures 8,165,933 – – – – – – 0% 20% 35% 50% 75% 100% 150% Risk Weights Sovereigns/ Central Banks RM’000 29.6% 489,248 1,654,247 720,449 204,553 – 561,814 – 167,431 – 20.3% 124,719 614,954 – 609,193 – 5,761 – – – Banks, DFIS & MDBS RM’000 58.3% 12,325,640 21,154,004 3,434,129 4,392,176 – 3,860,407 449,350 8,693,848 324,094 97.2% 18,955,049 19,495,867 60,926 231 – 403,363 1,180,029 17,817,354 33,964 63.9% 14,009,366 21,907,540 – – 6,319,435 4,555,665 6,169,930 4,802,963 59,547 Regulatory Residential Corporate Retail Mortgages RM’000 RM’000 RM’000 Exposures After Netting & Credit Risk Mitigation (CRM) Public Sector Entities RM’000 (ii) As at 31 December 2020 150.0% 18,891 12,594 – – – – – – 12,594 Higher Risk Assets RM’000 52.1% 939,663 1,802,897 863,234 – – – – 939,663 – Other Assets RM’000 62.6% 46,862,577 74,808,036 13,244,671 5,206,153 6,319,435 9,387,010 7,799,309 32,421,259 430,199 Total Exposures After Netting & CRM RM’000 46,862,578 – 1,041,231 2,211,802 4,693,505 5,849,482 32,421,259 645,299 Total Risk Weighted Asset RM’000 The following presents the credit exposures by risk weights after the effect of credit risk mitigation of the Group (continued): 4.7Assignment of Risk Weights for Portfolios Under the Standardised Approach (continued) 4. CREDIT RISK (CONTINUED) I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages   Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 411
414. 412 – Total Exposures RWA by Exposures Deduction from Capital Base 0.0% 9,052,249 0% 20% 35% 50% 75% 100% 150% Average Risk Weight 826,833 170,004 – 547,870 – 230,234 – 9,052,249 – – – – – – Risk Weights 30.3% 538,170 1,774,941 Public Sector Entities RM’000 20.2% 215,303 1,065,530 – 1,058,208 – 7,322 – – – Banks, DFIS & MDBS RM’000 58.5% 12,398,706 21,202,349 3,904,705 3,768,647 – 3,841,980 571,402 8,755,974 359,641 96.8% 20,129,762 20,791,612 196,450 97 – 398,237 1,120,993 19,047,746 28,089 65.9% 15,885,585 24,096,317 – – 6,996,669 5,098,127 4,575,502 7,365,935 60,084 Regulatory Residential Corporate Retail Mortgages RM’000 RM’000 RM’000 Exposures After Netting & Credit Risk Mitigation (CRM) Sovereigns/ Central Banks RM’000 (i) As at 31 December 2021 150.0% 17,765 11,843 – – – – – – 11,843 Higher Risk Assets RM’000 48.5% 895,679 1,846,888 951,209 – – – – 895,679 – Other Assets RM’000 Total Risk Weighted Asset RM’000 62.7% 50,080,970 79,841,730 50,080,971 14,931,446 – 4,996,956 999,391 6,996,669 2,448,834 9,893,536 4,946,768 6,267,898 4,700,924 36,295,568 36,295,568 459,657 689,486 Total Exposures After Netting & CRM RM’000 The following presents the credit exposures by risk weights after the effect of credit risk mitigation of the Bank: 4.7Assignment of Risk Weights for Portfolios Under the Standardised Approach (continued) 4. CREDIT RISK (CONTINUED) B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021
415. – RWA by Exposures Deduction from Capital Base 0.0% 8,165,934 Total Exposures Average Risk Weight 8,165,934 – – – – – – 0% 20% 35% 50% 75% 100% 150% Risk Weights Sovereigns/ Central Banks RM’000 29.6% 489,249 1,654,247 720,449 204,553 – 561,814 – 167,431 – 20.3% 124,703 614,871 – 609,110 – 5,761 – – – Banks, DFIS & MDBS RM’000 58.3% 12,325,640 21,154,003 3,434,128 4,392,176 – 3,860,407 449,350 8,693,848 324,094 97.2% 18,955,049 19,495,867 60,926 231 – 403,363 1,180,029 17,817,354 33,964 63.9% 14,009,366 21,907,540 – – 6,319,435 4,555,665 6,169,930 4,802,963 59,547 Regulatory Residential Corporate Retail Mortgages RM’000 RM’000 RM’000 Exposures After Netting & Credit Risk Mitigation (CRM) Public Sector Entities RM’000 (ii) As at 31 December 2020 150.0% 18,891 12,594 – – – – – – 12,594 Higher Risk Assets RM’000 51.5% 919,927 1,786,255 866,328 – – – – 919,927 – Other Assets RM’000 62.6% 46,842,825 74,791,311 13,247,765 5,206,070 6,319,435 9,387,010 7,799,309 32,401,523 430,199 Total Exposures After Netting & CRM RM’000 46,842,825 – 1,041,214 2,211,802 4,693,505 5,849,482 32,401,523 645,299 Total Risk Weighted Asset RM’000 The following presents the credit exposures by risk weights after the effect of credit risk mitigation of the Bank (continued): 4.7Assignment of Risk Weights for Portfolios Under the Standardised Approach (continued) 4. CREDIT RISK (CONTINUED) I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages   Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 413
416. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 4 . CREDIT RISK (CONTINUED) 4.8Disclosures of Rated and Unrated Exposures According to Ratings by ECAI a) Ratings of Sovereigns and Central Banks by Approved ECAIs Ratings of sovereigns and central banks by approved ECAIS Moodys Aaa to Aa3 S&P AAA to AAFitch AAA to AA- A1 to A3 A+ to AA+ to A- Baa1 to Baa3 BBB+ to BBBBBB+ to BBB- Ba1 to B3 BB+ to BBB+ to B- Caa1 to C CCC+ to D CCC+ to D Unrated Unrated Unrated On and Off Balance-Sheet Credit Exposures Sovereign and Central Banks* – 9,052,249 – – – – Total – 9,052,249 – – – – 31 December 2021 Exposure Class Ratings of sovereigns and central banks by approved ECAIS Moodys Aaa to Aa3 S&P AAA to AAFitch AAA to AA- A1 to A3 A+ to AA+ to A- Baa1 to Baa3 BBB+ to BBBBBB+ to BBB- Ba1 to B3 BB+ to BBB+ to B- Caa1 to C CCC+ to D CCC+ to D Unrated Unrated Unrated On and Off Balance-Sheet Credit Exposures Sovereign and Central Banks* – 8,165,933 – – – – Total – 8,165,933 – – – – 31 December 2020 Exposure Class * These exposures refer to exposures to Federal Government of Malaysia and Bank Negara Malaysia which are accorded a preferential sovereign risk weight of 0%. b) Ratings of Corporate by Approved ECAIs Ratings of corporate by approved ECAIS 31 December 2021 Exposure Class 414 Moodys S&P Fitch RAMs MARC Aaa to Aa3 AAA to AAAAA to AAAAA to AA3 AAA to AA- A1 to A3 A+ to AA+ to AA to A3 A+ to A- Baa1 to Ba3 BBB+ to BBBBB+ to BBBBB to BB BBB+ to BB- B+ to C B+ to D B+ to D B to D B+ to D Unrated Unrated Unrated Unrated Unrated On and Off Balance-Sheet Credit Exposures Public Sector Entities Insurance Cos, Securities Firms & Fund Manager Corporate 170,004 – – – 1,604,937 3,757,659 27,107 77,480 – 17,334,814 Total 3,927,663 27,107 77,480 – 18,939,751
417. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 4. CREDIT RISK (CONTINUED) 4.8Disclosures of Rated and Unrated Exposures According to Ratings by ECAI (continued) b) Ratings of Corporate by Approved ECAIs (continued) Ratings of corporate by approved ECAIS Moodys S&P Fitch RAMs MARC 31 December 2020 Exposure Class Aaa to Aa3 AAA to AAAAA to AAAAA to AA3 AAA to AA- A1 to A3 A+ to AA+ to AA to A3 A+ to A- Baa1 to Ba3 BBB+ to BBBBB+ to BBBBB to BB BBB+ to BB- B+ to C B+ to D B+ to D B to D B+ to D Unrated Unrated Unrated Unrated Unrated On and Off Balance-Sheet Credit Exposures Public Sector Entities Insurance Cos, Securities Firms & Fund Manager Corporate 204,552 – – – 1,449,694 4,069,429 27,707 83,259 – 16,968,321 Total 4,273,981 27,707 83,259 – 18,418,015 c) Ratings of Banking Institutions by Approved ECAIs Ratings of banking institutions by approved ECAIS Aaa to Aa3 AAA to AAAAA to AAAAA to AA3 AAA to AA- A1 to A3 A+ to AA+ to AA1 to A3 A+ to A- Baa1 to Baa3 BBB+ to BBBBBB+ to BBBBBB1 to BBB3 BBB+ to BBB- Ba1+ to B3 BB+ to BBB+ to BBB1 to B3 BB+ to B- Caa1 to C CCC+ to D CCC+ to D C1 to D C+ to D Unrated Unrated Unrated Unrated Unrated On and Off Balance-Sheet Credit Exposures Banks, MDBs, and DFIs 743,371 151,728 – – – 188,903 Total 743,371 151,728 – – – 188,903 31 December 2021 Exposure Class Moodys S&P Fitch RAMs MARC Ratings of banking institutions by approved ECAIS Aaa to Aa3 AAA to AAAAA to AAAAA to AA3 AAA to AA- A1 to A3 A+ to AA+ to AA1 to A3 A+ to A- Baa1 to Baa3 BBB+ to BBBBBB+ to BBBBBB1 to BBB3 BBB+ to BBB- Ba1+ to B3 BB+ to BBB+ to BBB1 to B3 BB+ to B- Caa1 to C CCC+ to D CCC+ to D C1 to D C+ to D Unrated Unrated Unrated Unrated Unrated On and Off Balance-Sheet Credit Exposures Banks, MDBs, and DFIs 450,463 5,526 – – – 158,965 Total 450,463 5,526 – – – 158,965 31 December 2020 Exposure Class Moodys S&P Fitch RAMs MARC Note: There are no exposures under Short-term ratings for the period under review. 415
418. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 4 . CREDIT RISK (CONTINUED) 4.9Credit Risk Mitigation (CRM) As a first way out, the assessment of credit when granting a financing facility is based on a particular customer’s cash flow as the main source of payment and not on the collateral offered. However, the acceptance of tangible security as collateral would offer a second way out in the event of business failure thereby improving recovery rates. The types of collaterals accepted by the Group would have an impact on the calculation of the Group’s capital adequacy as the quality and the type of collaterals determine whether the Group is able to obtain capital relief and the extent of such relief. Capital relief is defined as the assignment of a lower or zero risk weight to the counterparty exposure by setting off or reducing the counterparty exposure against the collateral value. The main types of collaterals obtained by the Group to mitigate credit risks are as follows: (a) Cash on lien (b) Landed property (c) Shariah compliant quoted shares and unit trusts (d) Malaysian Federal Government Securities (e) Rated/Unrated Islamic Securities/Sukuk (f)Guarantee The reliance that can be placed on CRM is carefully assessed in light of issues such as compliance with Shariah rules and principles, legal enforceability, market value and counterparty credit risk of the guarantor. The Group has put in place policies and procedures which govern the determination of eligibility of various collaterals to protect the Group’s position from the onset of a customer relationship on the CRM, for instance, in requiring standard terms and conditions or specifically agreed upon documentation to ensure the legal enforceability of the credit risk mitigants. In order to obtain a fair assessment of collateral securing the financing facility, a valuation is performed periodically ranging from weekly to annually, depending on the type, liquidity and volatility of the collateral value. In mitigating the counterparty credit risks arising from foreign exchange and derivatives transactions, the Group enters into master agreements that provide for closeout netting with counterparties, whenever possible. A master agreement that governs all transactions between the two parties, creates a greater legal certainty that the netting of outstanding obligations can be enforced upon termination of outstanding transactions if an event of default occurs. 416
419. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 4. CREDIT RISK (CONTINUED) 4.9Credit Risk Mitigation (CRM) (continued) The Group manages its credit risk concentrations by diversifying its portfolios through several measures. The Group monitors credit risk limits via, among others, sector limits, programme limits, deviation limits and Single Counterparty Exposure Limits (SCEL). The following tables disclose the extent to which exposures are covered by eligible credit risk mitigants. Disclosure of Credit Risk Mitigation (CRM): Exposures covered by eligible financial and non-financial collateral RM’000 31 December 2021 Exposure class Exposures before CRM RM’000 Exposures covered by guarantees RM’000 On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, DFIs and MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Defaulted Exposures 9,052,249 1,701,095 1,007,555 19,388,649 20,743,307 23,669,331 3,173 1,846,888 1,128,766 – – – 706,085 194,327 452 – – 384,941 – 10,101 – 1,224,343 136,111 100,983 – – 69,715 Total for On-Balance Sheet Exposures 78,541,013 1,285,805 1,541,253 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments Defaulted Exposures 1,623,840 116,795 36,288 4,805 – 4,752 56,026 – 10 Total for Off-Balance Sheet Exposures 1,776,923 9,557 56,036 80,317,936 1,295,362 1,597,289 Total On and Off-Balance Sheet Exposures 417
420. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 4 . CREDIT RISK (CONTINUED) 4.9Credit Risk Mitigation (CRM) (continued) Disclosure of Credit Risk Mitigation (CRM) (continued): Exposures before CRM RM’000 Exposures covered by guarantees RM’000 On-Balance Sheet Exposures Sovereign/Central Banks Public Sector Entities Banks, DFIs and MDBs Corporates Regulatory Retail Residential Mortgages Higher Risk Assets Other Assets Defaulted Exposures 8,165,933 1,600,640 510,893 19,584,934 19,456,153 21,610,415 3,783 1,786,255 895,405 – – – 540,901 56,341 453 – – 121,080 – 26,565 – 1,226,255 100,260 100,804 – – 81,717 Total for On-Balance Sheet Exposures 73,614,411 718,775 1,535,601 Off-Balance Sheet Exposures Credit-related Exposures Derivative Financial Instruments Defaulted Exposures 1,461,127 148,631 25,822 13,733 – – 10,523 – – Total for Off-Balance Sheet Exposures 1,635,580 13,733 10,523 75,249,991 732,508 1,546,124 31 December 2020 Exposure class Total On and Off-Balance Sheet Exposures 418 Exposures covered by eligible financial and non-financial collateral RM’000
421. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 4. CREDIT RISK (CONTINUED) 4.10Off-Balance Sheet and Counterparties Credit Risk for the Group and the Bank (i) As at 31 December 2021 Nature of item Credit related Exposures Direct credit substitutes Assets sold with recourse Transaction related contingent items Short term self–liquidating trade related contingencies Other commitments, such as formal standby facilities and credit lines, with an original maturity of: – not exceeding one year – exceeding one year Unutilised credit card lines Any commitments that are unconditionally cancelled at any time by the bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a customer’s creditworthiness Derivative Financial Instruments Foreign exchange related contracts – less than one year – one year to less than five years – Five years and above Profit rate related contracts – less than one year – one year to less than five years – five years and above Equity related contracts – less than one year – one year to less than five years – Five years and above Total Positive fair value of derivative contracts RM’000 Credit equivalent amount RM’000 Risk weighted asset RM’000 501,511 – 903,458 501,511 – 451,729 503,088 – 438,976 417,940 83,588 83,012 – 1,246,592 – – 623,295 – – 503,494 – 8,110,490 – – 11,179,991 1,660,123 1,528,570 Principal amount RM’000 7,505,850 25,120 114,431 66,277 – – – – – 79,153 – – 917 – – 2,368 – – 1,735 – – – – – – – – – – – – – 7,585,003 26,037 116,799 68,012 18,764,994 26,037 1,776,922 1,596,582 419
422. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 4 . CREDIT RISK (CONTINUED) 4.10 Off-Balance Sheet and Counterparties Credit Risk for the Group and the Bank (continued) (ii) As at 31 December 2020 Nature of item Credit related Exposures Direct credit substitutes Assets sold with recourse Transaction related contingent items Short term self–liquidating trade related contingencies Other commitments, such as formal standby facilities and credit lines, with an original maturity of: – not exceeding one year – exceeding one year Unutilised credit card lines Any commitments that are unconditionally cancelled at any time by the bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a customer’s creditworthiness Derivative Financial Instruments Foreign exchange related contracts – less than one year – one year to less than five years – Five years and above Profit rate related contracts – less than one year – one year to less than five years – five years and above Equity related contracts – less than one year – one year to less than five years – Five years and above Total 420 Positive fair value of derivative contracts RM’000 Credit equivalent amount RM’000 Risk weighted asset RM’000 449,506 – 899,541 449,506 – 449,770 442,426 – 436,481 592,744 118,549 117,165 – 938,247 – – 469,124 – – 362,317 – 8,676,980 – – 11,557,018 1,486,949 1,358,389 Principal amount RM’000 8,518,422 – – 59,494 – – 143,217 – – 60,587 – – – 114,056 – – 2,171 – – 5,414 – – 4,045 – – – – – – – – – – – – – 8,632,478 61,665 148,631 64,632 20,189,496 61,665 1,635,580 1,423,021
423. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 5. MARKET RISK 5.1Overview All the Group’s financial instruments are subject to the risk that market prices and rates will move, resulting in profit or losses to the Group. The following are the main market risk factors that the Group is exposed to: •• •• •• rofit Rate Risk: also known as the Rate of Return Risk is the potential impact on the Group’s profitability P and capital caused by changes in the rate of return, due to general market movements or issuer/customer specific reasons; Foreign Exchange Risk: the impact of exchange rate movements on the Group’s currency positions; Equity Investment Risk: the profitability impact on the Group’s equity positions or investments caused by changes in equity prices or values; The Group separates the market risk exposures into either trading book or banking book portfolios. Trading book portfolios include those positions arising from market making, proprietary position taking and other marked-tomarket positions as per the Board approved Trading Book Policy Statements. Banking book portfolios primarily arise from the Group’s profit rate management of the Group’s asset & liabilities and investment portfolio mainly for liquidity management. 5.2Market Risk Governance The management of market risk is principally carried out by using sets of policies and guidelines approved by Asset & Liability Committee (“ALCO”) and/or BRC, guided by the Board’s approved Group Risk Appetite Statement Policy. ALCO is responsible under the authority delegated by BRC for managing market risk at strategic level. 5.3Management of Market Risk The objective is to manage market risk exposures in order to optimise return on risk while maintaining a market risk profile consistent with the Group’s approved risk appetite. All market risk exposures are managed by Treasury, who has the necessary skills, tools, management and governance to manage such risks. The management of market risk is guided by comprehensive limits, policies and guidelines which are periodically reviewed. Market Risk Management Department (“MRMD”) is an independent risk control function and is responsible for ensuring effective implementation of market risk management framework. MRMD is also responsible for developing and reviewing the Group’s market risk management guidelines and policies, monitoring tools, behavioural assumptions and limit setting methodologies. Strict escalation procedures are documented and approved by ALCO and/or BRC. In addition, the market risk exposures and limits are regularly reported to ALCO and BRC. Other controls to ensure that market risk exposures remain within tolerable levels include regular stress testing, ad-hoc simulations, and rigorous new product approval procedures. Stress test results are produced regularly to determine the impact of changes in profit rates, foreign exchange rates and other risk factors on the Group’s profitability, capital adequacy and liquidity. The stress test provides the Management and BRC with an assessment of the financial impact of identified extreme events on the market risk exposures of the Group. 421
424. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 5 . MARKET RISK (CONTINUED) 5.3Management of Market Risk (continued) a) Profit rate risk in the banking book portfolio Profit rate risk in the banking book portfolio is managed and controlled using measurement tools known as Earnings-at-Risk (“EaR”) and Economic Value of Equity (“EVE”). The Group monitors the sensitivity of EaR and EVE under varying profit rate scenarios (i.e., simulation modelling). The model is a combination of standard and non-standard scenarios relevant to the local market. The standard scenarios include the parallel fall or rise in the profit rate curve and historical simulation. These scenarios assume 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 manage and strategise to change the profit rate exposure profile to minimise losses and to optimise net revenues. The Group’s hedging and risk mitigation 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 Group’s and Bank’s profit rate sensitivity to a 1501 basis points parallel shift as at reporting date. 31 December 2021 (Decrease)/Increase Group Impact on EaR Impact on EVE -150bps RM million (206.6) 294.0 +150bps RM million 206.6 (294.0) 31 December 2021 (Decrease)/Increase Bank Impact on EaR Impact on EVE -150bps RM million (204.7) 293.6 +150bps RM million 204.7 (293.6) 31 December 2020 (Decrease)/Increase -100bps RM million +100bps RM million (131.4) 241.0 131.4 (241.0) 31 December 2020 (Decrease)/Increase -100bps RM million +100bps RM million (131.4) 240.9 131.4 (240.9) Based on BNM’s revised RORBB reporting requirements, the Group’s and the Bank’s reporting were revised from 100bps to 150bps parallel shock effective 1 January 2021. 1 422
425. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 5. MARKET RISK (CONTINUED) 5.3Management of Market Risk (continued) b) Market Risk in the trading book portfolio Market risk in the trading book portfolio is monitored and managed using Value-at-Risk (“VaR”). It is a technique that estimates the potential losses that could occur as a result of market rates movements over a specified time horizon and to a given level of confidence. The VaR model used by the Bank is based on historical simulation which derives plausible future scenarios from the past series of recorded market rates and prices. The historical simulation model used by the Bank incorporates the following features: •• •• •• otential market movements are calculated with reference to data from the past two years; P Historical market rates are calculated with reference to foreign exchange rates and profit rates; and VaR is calculated using a 99 per cent confidence level and for a one-day holding period. A summary of the VaR position of the Bank’s trading book portfolios as at the reporting date is as follows: As at 31.12.2021 Bank Profit Rate Risk Foreign Exchange Risk Overall RM million Average RM million Maximum RM million Minimum RM million 0.14 0.36 0.50 1.05 0.66 1.71 2.39 1.19 2.78 0.14 0.34 0.50 As at 31.12.2020 Bank Profit Rate Risk Foreign Exchange Risk Overall 1.1.2021 to 31.12.2021 1.1.2020 to 31.12.2020 RM million Average RM million Maximum RM million Minimum RM million 2.76 0.42 3.18 1.88 0.47 2.36 3.32 1.02 3.89 0.01 0.23 0.36 423
426. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 5 . MARKET RISK (CONTINUED) 5.3Management of Market Risk (continued) c) Foreign Exchange Risk The Bank manages and controls the trading book portfolio’s foreign exchange risk by limiting the net open exposure to individual currencies and on an aggregate basis. For the Bank-wide (trading and banking portfolios) foreign exchange risk, the Bank manages and controls by limiting the net open exposure on an aggregate basis. Sensitivity Analysis The Bank has a sensitivity limit for managing the foreign exchange risk in place. The foreign currency revaluation 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”): 31 December 2021 Bank US Dollar Euro Others 31 December 2020 -1% +1% -1% +1% Depreciation Appreciation Depreciation Appreciation RM’000 RM’000 RM’000 RM’000 12,136 4,576 (193) (12,136) (4,576) 193 8,844 5,072 (194) (8,844) (5,072) 194 5.4Capital Treatment for Market Risk The Group adopts the Standardised Approach to compute the market risk capital requirement under BNM’s CAFIB. 6. LIQUIDITY RISK 6.1Overview Liquidity risk is the risk of adverse impact to the financial condition of the Group, or the soundness of the Group being adversely affected by an inability (or perceived inability) to meet its contractual obligations. This risk can arise from mismatches in the timing of cash flows. The Group maintains a diversified and stable funding base comprising retail and corporate customer deposits. This is augmented by wholesale funding and highly liquid assets portfolios. The objectives of the Group’s liquidity management are to ensure that all foreseeable funding commitments and deposit withdrawals can be met when due and that wholesale market access remains accessible and cost effective. Savings accounts, current accounts, investment accounts (IA) and term deposits form a critical part of the Group’s funding profile and the Group places considerable importance on maintaining their stability. The stability depends upon preserving depositors’ confidence in the Group and the Group’s capital strength and liquidity, and on competitive and transparent pricing. 424
427. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 6. LIQUIDITY RISK (CONTINUED) 6.1 Overview (continued) The Group’s liquidity management is primarily carried out in accordance with Bank Negara Malaysia’s requirements and the internal limits approved by ALCO and/or BRC. The limits vary, taking into account the depth and liquidity of the market in which the Group operates. The Group maintains a strong liquidity position and manages the liquidity profile of its assets, liabilities, and commitments to ensure that cash flows are appropriately balanced, and all obligations are met when due. The Group’s liquidity management process includes: •• •• •• •• •• •• aily projection of cash flows and ensuring that the Group has sufficient liquidity surplus and reserves to D sustain a sudden liquidity shock; Projecting cash flows and considering the level of liquid assets necessary in relation thereto; Maintaining liabilities of appropriate term relative to the asset base; Maintaining a diverse range of funding sources with adequate back-up facilities; Monitoring depositor concentration in order to avoid undue reliance on large individual depositors and ensure a satisfactory overall funding mix; and Managing the maturities and diversifying funding liabilities across products and counterparties. 6.2Liquidity Risk Governance The management of liquidity risk is principally carried out by using sets of policies and guidelines approved by ALCO and/or BRC, guided by the Board’s approved Group Risk Appetite Statement Policy. ALCO is responsible under the authority delegated by BRC for managing liquidity risk at strategic level. 6.3Management of Liquidity Risk All liquidity risk exposures are managed by Treasury, who has the necessary skills, tools, management and governance to manage such risks. Limits and triggers are set to meet the following objectives: •• •• •• •• •• aintaining sufficient liquidity surplus and reserves to sustain a sudden liquidity shock; M Ensuring that cash flows are relatively diversified across all maturities; Ensuring that the deposit base is not overly concentrated on a relatively small number of depositors; Maintaining sufficient borrowing capacity in the Interbank market and highly liquid financial assets to back it up; and Not over-extending financing activities relative to the deposit base. MRMD is an independent risk control function and is responsible for ensuring efficient implementation of liquidity risk framework. It is also responsible for developing the Group’s liquidity risk management guidelines, monitoring tools, behavioural assumptions and limit setting methodologies. Strict escalation procedures are documented and approved by ALCO and/or BRC, with proper authorities to ratify or approve the excess. In addition, the liquidity risk exposures and limits are regularly reported to ALCO and BRC. Stress testing and scenario analysis are important tools used by the Group to manage the liquidity risk. Stress test results are produced regularly to determine the impact of a sudden liquidity shock. The stress-testing provides the Management and BRC with an assessment of the financial impact of identified extreme events on the liquidity and funding risk exposures of the Group. Another key control feature of the Group’s liquidity risk management is the liquidity contingency management plans. These plans identify the pre-emptive quantitative and qualitative indicators of stress conditions arising from systemic or other crises and provide guidance on actions to be taken in order to minimise the adverse implications to the Group. 425
428. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 7 . OPERATIONAL RISK 7.1Overview Operational Risk is defined as the “risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, which includes legal risk and Shariah non-compliance risk but excludes strategic and reputational risk”. It is inherent in all banking products, activities, processes and systems and the effective management of operational risk has always been a fundamental element of a bank’s risk management programme. 7.2Operational Risk Governance The Group’s operational risk management (“ORM”) is guided by its ORM Policy, Guideline and Enterprise-Wide Risk Management Policy, as well as its Group Risk Appetite Statement Policy which are designed to provide a sound and well-controlled operational environment within the Group. BRC is a committee of Board to oversee the Management’s activities in managing risks for the Group, including operational risk. Its roles, with regard to ORM, include reviewing and recommending ORM Policy, strategies and risk appetite for Board’s approval. MRCC, under the authority delegated by BRC is responsible to perform the oversight function and to ensure effective management of issues relating to operational risk at strategic level. Operational Risk Control Committee (“ORCC”) which is a sub-committee of MRCC is primarily responsible in ensuring effective implementation and maintenance of policies, processes, and systems for managing operational risk for the Group. Notwithstanding the above, the various Business & Support Units (“BU/SU”) are responsible for managing operational risk within their respective domains on a day-to-day basis and ensuring that their business & operational activities are carried out within the established ORM policies, guidelines, procedures and limits. To reinforce accountability and ownership of risk & control at BU/SU level, a Risk Controller (“RC”) for each BU/SU is appointed and Embedded Risk and Compliance Unit (“ERU”) is established at selected BU/SU to assist in driving the risk & control programme for the Group. Ultimately, all staff of the Group are to ensure they properly discharge their day-to-day responsibilities and are well-equipped with the necessary knowledge including the policies and procedures in executing their job functions. This is in line with our Risk Management Tagline, i.e., “Managing Risk is Everyone’s Business”. 426
429. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 7. OPERATIONAL RISK (CONTINUED) 7.3Management of Operational Risk The Group recognises and emphasises the importance of ORM and manages this risk through a control-based environment where processes are documented, authorisation is independent, transactions are reconciled and monitored, and business activities are carried out within the established ORM policies, guidelines, procedures, and limits. The Group’s overall governance approach in managing operational risk is premised on the Three Lines of Defence Approach: a)1st Line of Defence – The risk owner or risk-taking unit i.e., BU/SU is accountable for putting in place a robust control environment within their respective units. They are responsible for the day-to-day management of operational risk. To reinforce accountability and ownership of risk and control within 1st Line of Defence, the RC is appointed at each BU/SU and ERU is established at selected BU/SU. 2nd Line of Defence – Operational Risk Management Department (“ORMD”) is responsible for establishing and maintaining the ORM Policy and its supporting guidelines/manuals, developing methodologies and various ORM tools to facilitate the management of operational risk, monitoring the effectiveness of ORM, assessing operational risk issues from the risk owner and escalating operational risk issues to the relevant governance level with recommendations on appropriate risk mitigation strategies. In creating a strong risk culture, ORMD is also responsible to promote risk awareness across the Group. Shariah Risk Management Unit (“SRMU”), which forms part of ORMD, is responsible for managing the Shariah non-compliance risk (“SNCR”) by establishing and maintaining appropriate guidelines on Shariah Risk Management (SRM) by facilitating the process of identifying, assessing, controlling, and monitoring SNCR and promoting SNCR awareness. Group Compliance Division, which includes Shariah Compliance Department and Group Information Security & Governance Division (“ISGD”) complement the role of ORMD as the 2nd Line of Defence. Group Compliance Division is responsible for ensuring effective oversight on compliance-related risks such as regulatory compliance risk, compliance risk, corruption risk, money laundering and terrorism financing risks through proper classification of risks and developing, reviewing, and enhancing compliance-related training programmes, as well as conducting trainings that promote awareness creation. Shariah Compliance Department under Group Compliance Division is responsible for reviewing and monitoring Shariah compliance of the Group’s operations, activities, and services at BU/SU level. ISGD is responsible in managing information technology risk by establishing, maintaining, and enforcing information technology risk policies/guidelines and it works closely with Group Technology Division in identifying, assessing, mitigating, and monitoring of information technology risk in the Group. b)3rd Line of Defence – Group Internal Audit including Shariah Audit Department provides independent assurance to the Board and senior management on the effectiveness of the ORM and SRM process. 427
430. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 7 . OPERATIONAL RISK (CONTINUED) 7.4ORM Tools & Mitigation Strategies The Group employs ORM tools comprising proactive and reactive tools which are in line with the best practices in managing and mitigating operational risks, namely: Overview of ORM Tools Proactive Tools Risk Control Self-Assessment •• •• Self-assessment to identify and assess operational risks by Risk Owners; The tool creates ownership and increases operational risk awareness. Key Risk Indicator •• •• A forwardlooking tool to identify potential risks and to enable counter measures and risk mitigation actions before an incident occurs (early warning system); To assist management to focus on high-risk issues. Operational Risk Review •• •• End-to-end review of activities to identify risks and ensure appropriate controls are in place and are effective; To ensure controls are aligned with RCSA and able to mitigate the identified risk. Reactive Tools New Product Services Approval Process •• To ensure risks are identified and adequate controls are in place prior to launching of new product/ services. Risk Loss Event Management & Reporting •• Centralised group-wide loss database which provides line of business loss reporting overview, tracks frequency of events and facilitates detailed reviews of the incident and its impact. Risk Analysis & Reporting •• Analysis and reporting of qualitative and quantitative results from various ORM tools. Scenario Analysis •• A systematic and forward-looking tool of obtaining expert opinions to derive new risks, test the efficiency of existing controls and highlights unexpected risks. In addition, a comprehensive Business Continuity Management (“BCM”) function has been established within the Group to ensure that in the event of material disruptions from internal or external events, critical business functions can be maintained or restored in a timely manner. This ensures minimal adverse impact on customers, staff and products and services. BCM constitutes an essential component of the Group’s risk management process by providing a controlled response to potential operational risk that could have a significant impact on the Group’s critical processes and revenue streams. The Group is also continuously reviewing its critical business operations’ resilience through regular testing and dependencies assessment on its assets (systems, data, third parties, facilities, processes and people) in order to ensure it has the required capability and resources to effectively prepare for different disruption events. 428
431. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 7. OPERATIONAL RISK (CONTINUED) 7.4ORM Tools & Mitigation Strategies (continued) As part of the risk transfer strategy, the Group obtains a 3rd party Takaful coverage to cover for the Group’s high impact loss events. The Group also ensures that the group-wide Operational Risk awareness programme is conducted on an ongoing basis. This training programme emphasises on inculcating an operational risk culture among staff, effective implementation of ORM tools, fraud awareness, BCM and other aspects of ORM. 7.5Capital Treatment for Operational Risk Operational Risk capital charge is calculated using the BIA as per BNM’s CAFIB. The BIA for operational risk capital charge calculation applies an alpha (15%) to the average of positive gross income that was achieved over the previous three years by the Group. The RWA amount is computed by multiplying the minimum capital required with a multiplier of 12.5 (reciprocal of 8%). 8. SHARIAH GOVERNANCE 8.1Overview By virtue of BNM’s Shariah Governance Policy Document (“SGPD”), the Group has established a sound and robust Shariah governance framework with the emphasis placed on the roles of its key functionalities, which include having in place an effective and responsible Board and Management and an independent Shariah Supervisory Council (“SSC”) that is supported by strong and competent internal Shariah functions. As part of the robust Shariah governance framework, to date, the Group has put in place the Shariah Compliance Policy, Shariah Compliance Guideline, Business Zakat Guideline and Charity Fund Management Guideline. These help to ensure the Group’s business activities and behaviours are in compliance with Shariah rules and principles, provisions of the Islamic Financial Services Act (“IFSA”) 2013, BNM’s SGPD and its other rules and regulations, and the resolutions of BNM and Securities Commission (“SC”)’s Shariah Advisory Council and the SSC. 8.2Shariah Risk Management The Group’s Shariah risk management as part of operational risk management is guided by Operational Risk Management (“ORM”) Policy and Guidelines which set out the high-level framework supporting the Shariah Compliance Policy and detail out the Shariah risk management processes and tools. The policy and guidelines serve to provide a consistent group-wide framework for managing SNCR across the Group. In addition to this, the Risk Loss Event Management and Reporting (‘’RLEMR”) Guideline provides sound mechanism on Shariah non-compliance (“SNC”) management and reporting, in order to ensure the Group strictly complies with Shariah rules and principles, as well as the regulatory requirements. The guideline has been established to be in line with the mechanism set out by BNM’s Operational Risk Reporting Requirement – Operational Risk Integrated Online Network (“ORION”) and to ensure compliance with section 28(3) of the IFSA 2013 which requires any SNC event to be immediately reported to BNM. Additionally, pursuant to this guideline, any actual SNC events caused by operational lapses including negligence, breach of policies and lack of due care by staff may be subject to disciplinary action. Being part of operational risk, Shariah risk management leverages on the same ORM principles, processes, and tools. The responsibility of managing SNCR is spearheaded by the Group’s Shariah Risk Management Unit (“SRMU”). In general, all ORM tools are extended to the process of managing SNCR. However, the tools are modified to suit the regulatory requirements on Shariah governance in order to provide a robust and consistent approach in managing SNCR. 429
432. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 8 . SHARIAH GOVERNANCE (CONTINUED) 8.2Shariah Risk Management (continued) Extensive and continuous Shariah risk awareness initiatives have been conducted for the Group’s staff and Risk Controllers (“RC”) to ensure understanding towards Shariah requirements/rulings, effective identification of SNC risks, establishment of controls to prevent SNC event, and to keep updated on the latest Shariah requirements/ rulings issued by Shariah Division, SSC and regulators, and any occurrence of Shariah non-compliance event. In the year 2021, 8 Shariah risk awareness sessions were conducted involving all RCs from HQ and branches. In addition, it is compulsory for all staff to participate in Shariah training via e-Learning as a refresher course. 8.3Shariah Non-Compliance (“SNC”) Events An SNC event is a result of the Group’s failure to comply with the Shariah rules and principles as determined by the Bank’s Shariah Supervisory Council, as well as other relevant body or institution such as the Shariah Advisory Council of BNM and Securities Commission. Throughout the year 2021, there were five (5) incidents confirmed as SNC events by the SSC. In brief, the SNC events were related to non-execution of aqad for deposit-based product, outdated form used for account opening and incomprehensive product structure for the purpose of vehicle refinancing. None of these events have financial impact that contributed to SNC Income. To prevent similar recurrence, the Group is continuously improving its Shariah compliance culture through the issuance of reminders, conducting on-going awareness trainings, as well as establishing additional controls to ensure compliance with Shariah requirements. 8.4Shariah Non-Compliant Income 31 December 2021 31 December 2020 RM41,182.96 RM59,960.47 The main contributors of the SNC income for 2021 were commissions from third party investment product offering (RM31,728.68) and commissions from SNC merchants of card business (RM9,454.28). The amount was disposed to charitable causes upon SSC’s approval. All SNC events and rectification plans were presented and approved by the Board/SSC and reported to BNM in accordance with the prescribed reporting requirement by the regulator. 9. INVESTMENT ACCOUNT 9.1Overview Islamic Financial Services Act 2013 (“IFSA”) distinguishes investment account (IA) from Islamic deposits, where Shariah contracts that need to be applied for IA products are non-principal guaranteed, while Shariah contracts for deposit products are principal guaranteed. In line with the implementation of the IFSA, the Group has developed investment account products based on Mudarabah and Wakalah contracts. Mudarabah is a contract between a customer as capital provider and the Group as an entrepreneur under which the customer provides capital to be managed by the Group and any profit generated is shared according to a mutually agreed profit-sharing ratio (PSR) whilst financial losses are borne by the customer provided that such losses are not due to the Group’s misconduct, negligence or breach of specified terms. 430
433. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 9. INVESTMENT ACCOUNT (CONTINUED) 9.1 Overview (continued) Wakalah refers to a contract where a customer, as the principal, authorises the Group as his agent to perform a particular task on matters that may be delegated i.e., investment, with or without imposition of a fee. In this context, the Shariah contract applied is Wakalah bi al-istithmar (Wakalah for the purpose of investment). In terms of offering, the Group currently has the following two categories of IA: Unrestricted Investment Account (UA) Restricted Investment Account (RA) Unrestricted Investment Account refers to a type of inv e s t m e nt a c c o unt w h e re b y t h e cu s to m e r/ Investment Account Holder (IAH), without specifying any particular restrictions or conditions, provides the Group with the mandate to make the ultimate decision to invest. Restricted Investment Account (RA) refers to an IA where the IAH provides a specific investment mandate to the Group. IA product is not capital guaranteed and is not protected by the Perbadanan Insurans Deposit Malaysia (PIDM). Among the risks associated with IA include but not limited to the following: •• •• •• •• •• •• arket risk – the risk arising from the potential impact of adverse price movements on the economic value M of an asset. Credit risk – the risk arising from the potential that the Bank fails to meet its obligations to IAH in accordance with agreed terms and conditions. Liquidity risk – the risk arising from the potential loss for IAH where there are lesser return and possible capital erosion or loss. Operational risk – the risk arising from the potential loss resulting from inadequate or failed internal processes, people and systems or external events. Legal risk – IAH should ensure that, in entering into this investment it is not in breach of any laws, regulations, contractual or any other legal limitations that may apply to investors. This investment is issued subject to all applicable laws, regulations and guidelines. In the event of change in such laws, regulations or guidelines, Bank Islam may be obliged to change some or all the terms and conditions of the investment, including the possibility of an early termination. Shariah non-compliance risk – the risk arising from possible failures to meet the obligation to Shariah principles or in other words, possible incident of Shariah non-compliances. 431
434. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 9 . INVESTMENT ACCOUNT (CONTINUED) 9.2Governance Structure To safeguard the IAH’s interest, the investment mandate, strategy and parameter are carried out in accordance with the Group’s governance set-up. The IA governance structure adopted by the Group is as depicted in the following diagram: Shariah Supervisory Council Board of Directors BOARD COMMITTEES Board Risk Committee Management Risk Control Committee MANAGEMENT COMMITTEES Business Units/Investment Account Units The roles and responsibilities of the above respective committees are as follows: 432 Committee Responsibility Board of Directors (Board) Responsible to establish an effective governance arrangement to facilitate effective monitoring and control of the overall management and conduct of the IA. The adequacy of the governance arrangement shall be commensurate with the nature, scale, complexity, and risk profile associated with the conduct of the IA. Board Risk Committee (BRC) Assists the Board in performing independent oversight and provides recommendations in respect of the management, operations, and performance of the IA, as well as to play the role of Board Investment Committee. Shariah Supervisory Council Advises and provides clarification on relevant Shariah rulings, decisions, or policies on Shariah matters and endorses the terms and conditions stipulated in IA documentation and ensures that information published is in compliance with Shariah. Management Risk Control Committee Assists BRC in performing independent oversight and provides recommendations in respect of the management, operations and performance of the IA.
435. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 9. INVESTMENT ACCOUNT (CONTINUED) 9.3IA Performance Gross Exposure: Financing funded by UA Return on Assets (“ROA”) Average Net Distributable Income Average/Proportion Net Distributable Income Attributable to the IAH Average Profit Sharing Ratio/Return to the IAH Impaired assets/financing funded by UA (bank-wide) Total allowance for UA Collective allowance provisions funded by UA Individual allowance provisions funded by UA 31 December 2021 31 December 2020 RM’000 RM’000 RM10,561,600,658.98 RM12,368,896,784.16 % % 3.92% 3.49% 4.42% 4.06% 1.28% 36.68% 1.93% 47.56% RM’000 RM’000 568,382.80 54,648.62 NA NA 373,233.77 40,354.48 NA NA 433
436. B A N K I S L A M M A L AY S I A B E R H A D PILLAR 3 DISCLOSURE as at 31 December 2021 GROUP CHIEF EXECUTIVE OFFICER ATTESTATION In accordance with Bank Negara Malaysia ’s Capital Adequacy Framework for Islamic Bank (CAFIB) Disclosure Requirements (Pillar 3), I hereby attest that to the best of my knowledge, the disclosures contained in Bank Islam Malaysia Berhad’s Pillar 3 Disclosure report for the financial year ended 31 December 2021 are consistent with the manner in which the Group and the Bank assesses and manages its risk, and are not misleading in any particular way. Mohd Muazzam Mohamed Group Chief Executive, Bank Islam Malaysia Berhad 434
437. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information SHAREHOLDINGS’ ANALYSIS as at 31 March 2022 ANALYSIS OF HOLDINGS (MALAYSIAN & FOREIGN) NO. OF HOLDERS SIZE OF HOLDINGS NO. OF HOLDERS % MALAYSIAN FOREIGN MALAYSIAN FOREIGN MALAYSIAN FOREIGN 664 2,452 3,563 914 291 8 35 63 63 47 6,964 1,444,309 13,853,818 25,426,363 646,862,854 143 22,315 291,250 2,546,063 33,532,734 _ 0.07 0.64 1.18 30.01 _ _ 0.01 0.12 1.56 3 _ _ 1,431,282,301 _ _ _ _ 66.41 _ _ _ 7,887 216 2,118,876,609 36,392,505 98.31 1.69 1-99 100-1,000 1,001-10,000 10,001-100,000 100,001-107,763,454 (*) 107,763,455 AND ABOVE (**) DIRECTORS HOLDING TOTAL * Less than 5% of issued holdings **5% and above of issued holdings DISTRIBUTION TABLE ACCORDING TO CATEGORY OF HOLDERS NO. OF HOLDERS NO. OF HOLDERS MALAYSIAN CATEGORY OF SHAREHOLDERS 1. INDIVIDUAL 2. BODY CORPORATE A.BANKS/ FINANCE COMPANIES B.INVESTMENTS TRUSTS/ FOUNDATION/ CHARITIES C.OTHER TYPES OF COMPANIES 3.GOVERNMENT AGENCIES/ INSTITUTIONS 4.NOMINEES 5. TRUSTEE 6. OTHERS TOTAL % MALAYSIAN NONBUMIPUTRA BUMIPUTRA FOREIGN 75 MALAYSIAN BUMIPUTRA NONBUMIPUTRA NONBUMIPUTRA BUMIPUTRA 6,612,838 32,469,308 709,138 0,31 1,51, 0,03 5,000 – 67.22 – – FOREIGN FOREIGN 1,916 4,270 54 1 – 1,448,748,272 1 – – 2,678,140 – – 0.12 – – 59 14 48 – 2 – 12,269,336 55,671,036 7,777,669 – 1,515,190 – 0.57 2.58 0.36 – 0.07 – 1,035 _ _ 489 – – 139 – – 81,430,214 – – 471,214,796 – – 34,168,177 – – 3.78 – – 21.86 – – 1.59 – – 3,079 4,808 216 1,607,409,836 511,466,773 36,392,505 74.58 23.73 1.69 435
438. B A N K I S L A M M A L AY S I A B E R H A D SHAREHOLDINGS ’ ANALYSIS as at 31 March 2022 LIST OF DIRECTORS SHAREHOLDINGS NO. OF SHARES HELD THROUGH OWN NAME NO. OF SHARES HELD THROUGH NOMINEES TOTAL SHARES % TAN SRI DR. ISMAIL HAJI BAKAR MOHAMED RIDZA MOHAMED ABDULLA DATUK NIK MOHD HASYUDEEN YUSOFF DATO’ SRI KHAZALI AHMAD AZIZAN AHMAD MOHD YUZAIDI MOHD YUSOFF MASHITAH HAJI OSMAN DATO’ SRI AMRIN AWALUDDIN MOHD ASRI AWANG DATUK BAZLAN OSMAN NURAINI ISMAIL _ – – – – – – – – – – _ – – – – – – – – – – _ – – – – – – – – – – _ – – – – – – – – – – TOTAL – – – – NAME OF DIRECTOR LIST OF SUBSTANTIAL SHAREHOLDERS HOLDINGS OF 5% AND ABOVE No. 1. 2. TOTAL SHAREHOLDINGS % LEMBAGA TABUNG HAJI ACT5351995 1,040,534,000 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 199301012273 EMPLOYEES PROVIDENT FUND BOARD 1,040,534,000 291,465,101 48.28 13.52 FUND BOARD 6,563,800 – – FUND BOARD 1,671,800 – – FUND BOARD 6,153,100 – – FUND BOARD FUND BOARD 247,762,201 10,079,000 – – – – FUND BOARD 899,900 – – FUND BOARD 1,761,100 – – FUND BOARD 4,608,000 – – FUND BOARD 3,351,400 – – FUND BOARD 3,450,000 – – FUND BOARD 5,164,800 – – 142,986,100 142,986,100 6.63 EMPLOYEES PROVIDENT (AMUNDI) EMPLOYEES PROVIDENT (AM INV) EMPLOYEES PROVIDENT (CIMB PRIN) EMPLOYEES PROVIDENT EMPLOYEES PROVIDENT (ASIANISLAMIC) EMPLOYEES PROVIDENT (RHBISLAMIC) EMPLOYEES PROVIDENT (F.TEMISLAMIC) EMPLOYEES PROVIDENT (ABERISLAMIC) EMPLOYEES PROVIDENT (BNP NAJMAH EQ) EMPLOYEES PROVIDENT (CPIAM EQ) EMPLOYEES PROVIDENT (NIAM EQ) 3. AMANAHRAYA TRUSTEES BERHAD AMANAH SAHAM BUMIPUTERA TOTAL 436 NRIC/ REGN. NO. Name 200701008892 SHAREHOLDINGS 1,474,985,201 68.44
439. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information TOP 30 HOLDERS TOTAL SHAREHOLDINGS % LEMBAGA TABUNG HAJI CITIGROUP NOMINEES (TEMPATAN) SDN BHD EMPLOYEES PROVIDENT FUND BOARD AMANAHRAYA TRUSTEES BERHAD AMANAH SAHAM BUMIPUTERA PERMODALAN NASIONAL BERHAD KUMPULAN WANG PERSARAAN (DIPERBADANKAN) AMANAHRAYA TRUSTEES BERHAD AMANAH SAHAM BUMIPUTERA 2 CITIGROUP NOMINEES (TEMPATAN) SDN BHD URUSHARTA JAMAAH SDN BHD (2) CITIGROUP NOMINEES (TEMPATAN) SDN BHD EXEMPT AN FOR AIA BHD MAYBANK NOMINEES (TEMPATAN) SDN BHD MTRUSTEE BERHAD FOR PRINCIPAL DALI EQUITY GROWTH FUND (UT-CIMB_DALI)(419455) MAJLIS UGAMA ISLAM SABAH AMANAHRAYA TRUSTEES BERHAD AMANAH SAHAM MALAYSIA 3 PERTUBUHAN KESELAMATAN SOSIAL MAJLIS UGAMA ISLAM SABAH CARTABAN NOMINEES (TEMPATAN) SDN BHD PBTB FOR TAKAFULINK DANA EKUITI CITIGROUP NOMINESS (TEMPATAN) SDN BHD EMPLOYEES PROVIDENT FUND BOARD (ASIANISLAMIC) AMIN BAITULMAL JOHOR AMANAHRAYA TRUSTEES BERHAD AMANAH SAHAM MALAYSIA AMANAHRAYA TRUSTEES BERHAD PUBLIC ISLAMIC DIVIDEND FUND CITIGROUP NOMINEES (TEMPATAN) SDN BHD URUSHARTA JAMAAH SDN BHD (AFFIN 2) MAJLIS AGAMA ISLAM SELANGOR CIMB ISLAMIC NOMINEES (TEMPATAN) SDN BHD AFFIN HWANG ASSET MANAGEMENT BERHAD FOR MAJLIS UGAMA ISLAM DAN ADAT RESAM MELAYU PAHANG CITIGROUP NOMINEES (TEMPATAN) SDN BHD EMPLOYEES PROVIDENT FUND BOARD (AMUNDI) AMANAHRAYA TRUSTEES BERHAD AC PRINCIPAL DALI ASIA PACIFIC EQUITY GROWTH FUND CITIGROUP NOMINEES (TEMPATAN) SDN BHD EMPLOYEES PROVIDENT FUND BOARD (CIMB PRIN) LEMBAGA TABUNG ANGKATAN TENTERA HSBC NOMINEES (TEMPATAN) SDN BHD HSBC (M) TRUSTEE BHD FOR MANULIFE INVESTMENT SHARIAH PROGRESS FUND HSBC NOMINEES (TEMPATAN) SDN BHD HSSBC (M) TRUSTEE BHD FOR ALLIANZ LIFE INSURANCE MALAYSIA BERHAD (MEF) MAJLIS AGAMA ISLAM NEGERI PULAU PINANG MAJLIS AMANAH RAKYAT AMANAHRAYA TRUSTEES BERHAD AMANAH SAHAM BUMIPUTERA 3 - DIDIK 1,040,534,000 247,762,201 48.28 11.50 142,986,100 6.63 93,921,603 66,598,980 26,934,202 4.36 3.09 1.25 24,423,626 1.13 16,258,600 0.75 14,303,360 0.66 11,717,299 10,799,171 0.54 0.50 10,514,900 10,421,700 10,204,330 0.49 0.48 0.47 10,079,000 0.47 8,316,000 8,138,800 0.39 0.38 TOTAL NO. NAME 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 7,716,900 0.36 7,388,200 0.34 6,573,488 6,571,600 0.30 0.30 6,563,800 0.30 6,450,900 0.30 6,153,100 0.29 6,008,652 5,839,500 0.28 0.27 5,725,400 0.27 5,544,000 5,544,000 5,217,364 0.26 0.26 0.24 1,835,210,776 85.14 437
440. B A N K I S L A M M A L AY S I A B E R H A D PROPERTIES OWNED BY BIMB GROUP PROPERTY LISTING FOR BANK ISLAM MALAYSIA BERHAD Location Description of Existing Use Tenure Age of Building (years) Land, Built-up Area (square feet) Net Book Value as at 31.12.2021 (RM) Date of Acquisition HS (D) 80625 PT 45 Lot No. 37, Seksyen 87 Jalan Tun Razak 50750 Kuala Lumpur Building site Leasehold for 99 years expiring on 29.12.2093 NA 6,597 11,675,086.13 30.12.1994 No. PT 1708 & 1709 H S (M) 2660 & 2661 Lot No. 1 & 2, Batu 5 1/2 Jalan Cheras 56100 Kuala Lumpur Vacant land Leasehold for 99 years expiring on 02.04.2085 NA 4,443 57,272.78 03.04.1986 Lot No. PT 805-HSD 1323 Mukim Bagan Nakhoda Omar, Sabak Bernam Selangor Vacant land Leasehold for 99 years expiring on 03.02.2101 NA 405,000 533,305.13 25.03.1999 Net Book Value as at 31.12.2021 (RM) Date of Acquisition 612,477.63 30.09.1985 PROPERTY LISTING FOR SYARIKAT AL-IJARAH SENDIRIAN BERHAD Location No. PT Lot 002600 & 002601 No.HS (D) 815 & 816 No. 71 & 73 Jalan Taman Selat Off Jalan Bagan Luar 12720 Butterworth Pulau Pinang 438 Description of Existing Use 4-storey shophouse/ office for Bank Islam Operation Tenure Age of Building (years) Land, Built-up Area (square feet) Freehold 36 Lot 002600 - 171 Lot 002601 - 273 (square meter)
441. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information DIRECTORY OF MAIN AND REGIONAL OFFICES CENTRAL REGION 1 Level 28 Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur Tel :(6) 03 2688 2745 Fax:(6) 03 2688 2725 2 2 & 4, Jalan 6C/7 Seksyen 16 43650 Bandar Baru Bangi Selangor Tel :(6) 03 8925 8490 / 8491 / 8492 Fax:(6) 03 8925 6168 KUALA LUMPUR • BANDAR TASIK PERMAISURI Tel :(6) 03 9171 4818 / 5078 / 7245 Fax:(6) 03 9171 7289 • BANDAR WAWASAN Tel :(6) 03 2694 8175 / 8192 / 8244 Fax:(6) 03 2694 8291 • BUKIT DAMANSARA Tel :(6) 03 2092 1064 / 1066 / 1067 Fax:(6) 03 2092 1072 • JALAN TUN RAZAK Tel :(6) 03 2161 1333 / 1340 / 1341 Fax:(6) 03 2161 1360 / 2164 8450 • KL SENTRAL Tel :(6) 03 2274 9878 / 9899 (6) 03 2274 9901 / 6430 Fax:(6) 03 2274 9902 / 4324 • MEDAN Tel :(6) (6) Fax:(6) MARA 03 2691 9079 / 9082 03 2691 9086 / 9088 03 2692 1890 3 1st Floor, No. 1 Jalan Elektron EU16/E Seksyen U16, Denai Alam 40160 Shah Alam, Selangor Tel :(6) 03 7831 1395 / 7734 2498 / (6) 03 7831 3481 • MENARA BANK ISLAM Tel :(6) 03 2161 0073 / 0076 (6) 03 2166 0797 Fax:(6) 03 2166 0798 • TAMAN Tel :(6) (6) Fax:(6) TUN DR ISMAIL 03 7726 5744 03 7728 7894 / 5270 03 7722 4539 • MENARA TM Tel :(6) 03 2240 2020 / 0296 Fax:(6) 03 2240 2391 • UIAM, GOMBAK Tel :(6) 03 6185 3150 / 3262 / 3282 Fax:(6) 03 6185 3402 •SEMARAK Tel :(6) 03 2681 0042 / 0049 / 0057 Fax:(6) 03 2681 0076 • UNIVERSITI MALAYA Tel :(6) 03 7960 8934 / 7429 / 6235 Fax:(6) 03 7960 4320 •SELAYANG Tel :(6) 03 6135 2655 / 2934 Fax:(6) 03 6137 9199 • WANGSA MAJU Tel :(6) 03 4142 7733 / 7886 / 8204 Fax:(6) 03 4142 8209 • SERI PETALING Tel :(6) 03 9056 2939 / 2943 / 2969 Fax:(6) 03 9056 2982 • TAMAN MELAWATI Tel :(6) 03 4107 7800 / 6842 / 6852 Fax:(6) 03 4107 7181 439
442. B A N K I S L A M M A L AY S I A B E R H A D DIRECTORY OF MAIN AND REGIONAL OFFICES SELANGOR •AMPANG Tel :(6) 03 9200 4389 / 4392 / 4497 Fax:(6) 03 9200 4507 • ARA DAMANSARA Tel :(6) 03 7846 0557 / 1165 / 1347 Fax:(6) 03 7846 1473 • BANDAR BARU BANGI Tel :(6) 03 8925 8490 / 8491 / 8492 Fax:(6) 03 8925 6168 • BANDAR BOTANIC, KLANG Tel :(6) 03 3324 7132 / 7623 / 8671 Fax:(6) 03 3324 8758 • BANDAR KINRARA Tel :(6) 03 8079 1601 / 1602 / 1603 Fax:(6) 03 8079 1604 •BANTING Tel :(6) 03 3187 3772 / 3181 4772 Fax:(6) 03 3187 3776 • BUKIT JELUTONG Tel :(6) 03 7847 3710 / 3711 / 3712 Fax:(6) 03 7847 3714 •CYBERJAYA Tel :(6) 03 8319 3491 / 3492 / 3493 Fax:(6) 03 8319 3494 • DENAI ALAM Tel :(6) 03 7734 0726 / 1750 / 1846 Fax:(6) 03 7734 5602 •KAJANG Tel :(6) 03 8736 0798 / 1773 / 2185 Fax:(6) 03 8736 2362 • KELANA JAYA Tel :(6) 03 7806 2955 / 2946 (6) 03 7803 8190 Fax:(6) 03 7806 1214 440 •KLANG Tel :(6) 03 3342 1911 / 1912 / 1913 Fax:(6) 03 3342 1914 • SRI GOMBAK Tel :(6) 03 6185 9655 / 9667 / 9672 Fax:(6) 03 6185 9675 • KOTA DAMANSARA Tel :(6) 03 6141 8447 / 8456 / 8465 Fax:(6) 03 6141 8474 • SUBANG JAYA Tel :(6) 03 8023 2072 / 2087 / 2125 Fax:(6) 03 8023 2140 • PJ NEW TOWN Tel :(6) 03 7960 4812 / 4813 / 4814 Fax:(6) 03 7860 4815 • SUNGAI BESAR Tel :(6) 03 3224 2886 / 3478 (6) 03 3224 2434 / 2876 Fax:(6) 03 3224 3479 • PUTRA HEIGHTS Tel :(6) 03 5192 0981 / 1516 / 1532 Fax:(6) 03 5192 1534 •RAWANG Tel :(6) 03 6091 7652 / 7657 / 7661 Fax:(6) 03 6091 7682 • SAUJANA UTAMA Tel :(6) 03 6038 2877 / 3275 / 3308 Fax:(6) 03 6038 3384 • SECTION 14, PETALING JAYA Tel :(6) 03 7957 3131 / 3834 Fax:(6) 03 7957 4141 • SECTION 18, SHAH ALAM Tel :(6) 03 5541 0250 / 0255 Fax:(6) 03 5541 0259 •SEMENYIH Tel :(6) 03 8723 4624 / 4629 / 4630 Fax:(6) 03 8723 4631 • SETIA ALAM Tel :(6) 03 3358 1359 / 8413 / 7347 Fax:(6) 03 3362 3216 • SHAH ALAM Tel :(6) 03 5510 1481 / 1492 / 4509 Fax:(6) 03 5510 1497 • SUNGAI BULOH Tel :(6) 03 6156 0082 / 0084 / 0086 Fax:(6) 03 6156 0085 • TANJUNG KARANG Tel :(6) 03 3269 1090 / 0090 Fax:(6) 03 3269 1091 • UiTM SHAH ALAM Tel :(6) 03 5510 4194 / 4196 Fax:(6) 03 5510 4186 WILAYAH PERSEKUTUAN •PUTRAJAYA Tel :(6) 03 8889 3192 / 3193 / 3194 Fax:(6) 03 8889 3189 • IFiC PUTRAJAYA Tel :(6) 03 8861 3698 / 2824 Fax:(6) 03 8861 2673
443. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information NORTHERN REGION 1 1st Floor, No. 3009 Bangunan KWSP Seberang Jaya Lebuh Tenggiri 2 13700 Seberang Jaya Pulau Pinang Tel : (6) 04 382 9100 Fax: (6) 04 382 9166 PERLIS •KANGAR Tel :(6) 04 970 5525 / 5535 Fax:(6) 04 970 5565 KEDAH 2 1st Floor, 21 & 23 Jalan Taman Meru Utama A1 Medan Meru Utama Meru Raya, 30020 Ipoh, Perak Tel :(6) 05 527 7701 Fax:(6) 05 527 7706 •KODIANG Tel :(6) 04 925 0397 / 0100 / 0208 Fax:(6) 04 925 0215 • SUNGAI LIMAU, YAN Tel :(6) 04 769 1017 Fax:(6) 04 768 1042 •KULIM Tel :(6) 04 403 3300 / 3003 / 3976 Fax:(6) 04 403 3977 • SUNGAI PETANI Tel :(6) 04 422 0620 / 0621 / 0622 (6) 04 423 8752 Fax:(6) 04 421 3912 • ALOR SETAR Tel :(6) 04 733 5126 / 5136 (6) 04 731 9813 Fax:(6) 04 733 5128 •LANGKAWI Tel :(6) 04 966 2463 / 2464 / 2466 (6) 04 966 5191 Fax:(6) 04 966 2469 •BALING Tel :(6) 04 470 1678 / 7052 Fax:(6) 04 470 1679 • ALOR SETAR 2 (PERSIARAN SULTAN ADDUL HAMID) Tel :(6) 04 772 8800 / 5818 (6) 04 771 6575 Fax:(6) 04 772 8100 • GUAR CHEMPEDAK Tel :(6) 04 468 0880 / 4827 / 4829 (6) 04 468 4830 Fax:(6) 04 468 0884 •JITRA Tel :(6) 04 917 4404 / 1151 Fax:(6) 04 917 4225 • SUNGAI PETANI 2 Tel :(6) 04 422 0061 / 0062 / 0063 Fax:(6) 04 422 0064 • UNIVERSITI UTARA MALAYSIA Tel :(6) 04 924 6271 / 6272 / 6273 Fax:(6) 04 924 6270 • POKOK SENA Tel :(6) 04 782 1033 / 1034 Fax:(6) 04 782 1022 •SIK Tel :(6) 04 469 2124 / 2127 / 2157 Fax : (6) 04 469 2142 441
444. B A N K I S L A M M A L AY S I A B E R H A D DIRECTORY OF MAIN AND REGIONAL OFFICES PULAU PINANG PERAK • BANDAR BARU PERDA Tel :(6) 04 540 3150 / 3151 / 3153 Fax:(6) 04 540 3152 • BAGAN SERAI Tel :(6) 05 721 8509 / 8513 / 8512 Fax:(6) 05 721 8515 • BAYAN BARU Tel :(6) 04 642 5094 / 5095 / 5096 (6) 04 642 5097 Fax:(6) 04 642 5098 •IPOH Tel :(6) 05 255 3866 / 3867 / 3868 Fax:(6) 05 253 5760 •BUTTERWORTH Tel :(6) 04 331 2357 / 2358 (6) 04 332 1301 / 1317 Fax:(6) 04 331 2360 •GEORGETOWN Tel :(6) 04 262 4724 / 4933 / 5019 (6) 04 262 0626 Fax:(6) 04 262 2594 • KEPALA BATAS Tel :(6) 04 575 5517 / 5579 / 3376 Fax:(6) 04 575 3986 • MERU RAYA Tel :(6) 05 527 7701 / 7702 / 7703 Fax:(6) 05 527 7706 • PARIT BUNTAR Tel :(6) 05 716 4493 / 4494 Fax:(6) 05 716 4495 • SERI ISKANDAR Tel :(6) 05 371 6020 / 6021 / 6022 Fax:(6) 05 371 6023 • SRI MANJUNG Tel :(6) 05 688 1227 / 9071 Fax:(6) 05 688 1672 •TAIPING Tel :(6) 05 806 5441 / 5442 / 5443 Fax:(6) 05 806 5436 • TANJUNG MALIM Tel :(6) 05 459 8237 / 5127 / 5125 Fax:(6) 05 459 8241 • TELUK INTAN Tel :(6) 05 622 1700 / 1200 / 1411 Fax:(6) 05 622 1489 442
445. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information EASTERN REGION 1 No. 8033, 2nd Floor Bandar Satelit Pasir Tumboh 16150 Kota Bharu Kelantan Tel :(6) 09 764 3840 / 3850 / 3854 Fax:(6) 09 764 3870 KELANTAN • BANDAR BARU TUNJUNG Tel :(6) 09 743 0190 / 0192 / 0193 Fax:(6) 09 743 0194 • GUA MUSANG Tel :(6) 09 912 2003 Fax:(6) 09 912 1772 • KOTA BHARU Tel :(6) 09 741 9222 / 9333 / 9555 (6) 09 743 8825 Fax:(6) 09 743 8826 2 2nd Floor Putra Square Branch 25200 Kuantan Pahang Tel :(6) 09 517 3452 / 3491 / 3584 Fax:(6) 09 517 3605 3 3rd & 4th Floor, Lot 35308 Dataran Austin Gong Badak Mukim Kuala Nerus 20200 Kuala Terengganu Terengganu Tel :(6) 09 667 2426 / 2427 / 2428 Fax:(6) 09 667 2429 • TANAH MERAH Tel :(6) 09 955 8341 / 2341 Fax:(6) 09 955 8342 • PUTRA SQUARE Tel :(6) 09 517 3225 / 3229 / 3231 Fax:(6) 09 517 3235 • PADANG GARONG Tel :(6) 09 747 1867 / 9313 / 9317 Fax:(6) 09 747 1902 •RAUB Tel :(6) 09 355 8300 / 8301 Fax:(6) 09 355 8302 • WAKAF BHARU Tel :(6) 09 719 8444 / 8445 / 8446 Fax:(6) 09 719 8447 •TEMERLOH Tel :(6) 09 296 5301 / 3222 / 1416 Fax:(6) 09 296 5300 PAHANG TERENGGANU • KUALA KRAI Tel :(6) 09 966 4627 / 3002 / 3008 Fax:(6) 09 966 4651 • BANDAR MUADZAM SHAH Tel :(6) 09 452 3175 / 5175 / 5176 Fax:(6) 09 452 3177 •CHUKAI Tel :(6) 09 859 9999 / 9977 Fax:(6) 09 858 1675 • KUBANG KERIAN Tel :(6) 09 764 0058 / 0070 / 0071 Fax:(6) 09 764 0057 •JENGKA Tel :(6) 09 466 2890 / 2871 / 4837 (6) 09 466 4153 Fax:(6) 09 466 2891 •DUNGUN Tel :(6) 09 848 5498 (6) 09 845 3302 / 3055 Fax:(6) 09 848 5502 •JERANTUT Tel :(6) 09 266 6120 / 6121 / 9096 (6) 09 266 9380 / 9381 Fax:(6) 09 266 6380 • JALAN PADANG HILIRAN Tel :(6) 09 631 3533 / 8354 / 8355 Fax:(6) 09 631 3633 •MACHANG Tel :(6) 09 975 2800 / 1490 Fax:(6) 09 975 2900 • PASIR MAS Tel :(6) 09 790 0750 / 0751 Fax:(6) 09 790 0752 • PASIR PUTEH Tel :(6) 09 786 0061 / 0062 / 0063 Fax:(6) 09 786 0068 • PASIR TUMBOH Tel :(6) 09 764 4077 Fax:(6) 09 764 6077 • KUALA ROMPIN Tel :(6) 09 414 6064 / 6065 / 6068 Fax:(6) 09 414 6074 •KUANTAN Tel :(6) 09 513 3366 / 3367 / 3368 Fax:(6) 09 513 3369 •PEKAN Tel :(6) 09 422 8622 / 8922 Fax:(6) 09 422 8818 •JERTEH Tel :(6) 09 697 3388 / 1672 / 1673 Fax:(6) 09 697 1592 • KUALA TERENGGANU Tel :(6) 09 622 4730 / 4744 / 4754 (6) 09 622 4780 (6) 09 623 4537 Fax:(6) 09 623 3944 • KUALA NERUS Tel :(6) 09 667 1700 / 1702 / 1703 Fax:(6) 09 667 1705 443
446. B A N K I S L A M M A L AY S I A B E R H A D DIRECTORY OF MAIN AND REGIONAL OFFICES SOUTHERN REGION 1 15th Floor , Menara TH Jalan Ayer Molek 80000 Johor Bahru Johor Tel :(6) 07 225 8800 Fax:(6) 07 225 8901 JOHOR • AUSTIN HEIGHT Tel :(6) 07 364 3070 / 3081 / 3293 Fax:(6) 07 364 3839 • BANDAR PENAWAR Tel :(6) 07 822 2802 / 2803 / 2804 Fax:(6) 07 822 2806 • BATU PAHAT Tel :(6) 07 431 9350 / 9352 / 8927 Fax:(6) 07 431 9351 • IFSC JOHOR BAHRU Tel :(6) 07 223 7030 / 7031 Fax:(6) 07 223 7032 • JOHOR BAHRU Tel :(6) 07 224 0242 / 0244 / 0272 Fax:(6) 07 224 0243 •KLUANG Tel :(6) 07 772 6423 / 6417 / 6878 Fax:(6) 07 773 2702 • KOTA TINGGI Tel :(6) 07 883 8800 / 5582 (6) 07 882 6205 Fax:(6) 07 882 4485 •KULAIJAYA Tel :(6) 07 663 5204 / 5205 / 5206 Fax:(6) 07 663 3208 •MERSING Tel :(6) 07 799 5076 / 6606 / 6607 (6) 07 799 6608 Fax:(6) 07 799 5077 444 2 JC 526 & 527, Tingkat 1 Jalan Bestari 5 77200 Jasin Melaka Tel :(6) 06 529 4402 / 4403 Fax:(6) 06 529 4370 •MUAR Tel :(6) 06 952 8301 / 8302 / 8303 Fax:(6) 06 952 8304 •JASIN Tel :(6) 06 529 5301 / 5302 / 5303 Fax:(6) 06 529 5312 • PASIR GUDANG Tel :(6) 07 252 6671 / 6672 / 6673 Fax:(6) 07 252 6676 • MASJID TANAH Tel :(6) 06 384 5108 / 8340 / 8332 Fax:(6) 06 384 5109 •PONTIAN Tel :(6) 07 688 1909 / 2259 (6) 07 686 5666 Fax:(6) 07 688 3660 •SEGAMAT Tel :(6) 07 932 4257 / 2901 / 2862 (6) 07 932 2873 Fax : (6) 07 932 4273 • TAMAN BUKIT INDAH Tel :(6) 07 239 5977 / 5978 / 5979 Fax:(6) 07 239 5980 •TAMPOI Tel :(6) 07 234 5228 / 5229 / 8785 Fax:(6) 07 234 5230 MELAKA NEGERI SEMBILAN • KUALA PILAH Tel :(6) 06 481 4600 / 8482 Fax:(6) 06 481 1431 •NILAI Tel :(6) 06 799 0549 / 0277 / 6124 Fax:(6) 06 799 6217 • PORT DICKSON Tel :(6) 06 647 4330 (6) 06 646 3281 Fax:(6) 06 647 5657 •SENAWANG Tel :(6) 06 678 2731 / 2732 / 2733 Fax:(6) 06 678 2734 • AYER KEROH Tel :(6) 06 232 0986 / 1273 / 6559 Fax:(6) 06 232 6561 •SEREMBAN Tel :(6) 06 762 9814 / 9815 / 9816 (6) 06 762 9817 Fax:(6) 06 763 8391 • BANDAR MELAKA Tel :(6) 06 284 1366 / 1367 / 1368 Fax : (6) 06 284 7257 •TAMPIN Tel :(6) 06 441 4131 / 4132 / 4133 Fax:(6) 06 441 7479 • BANDAR ENSTEK Tel :(6) 06 799 6484 / 6485 / 6486 Fax:(6) 06 799 6487
447. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information EAST MALAYSIA REGION 1 1st Floor, UMNO Building Jalan Kemajuan 88500 Kota Kinabalu Sabah Tel :(6) 088 447 114 / 160 / 260 Fax:(6) 088 447 256 SABAH 2 Lot 423 – 426, Bangunan Aiman Jalan Kulas Barat Section 5 93400 Kuching Sarawak Tel :(6) 082 425 118 / 235 419 (6) 082 416 215 Fax:(6) 082 233 172 / 234 108 (6) 082 235 521 SARAWAK •ALAMESRA Tel :(6) 088 487 978 / 975 / 976 Fax:(6) 088 487 980 •BINTULU Tel :(6) 086 337 413 / 418 / 493 / 781 Fax:(6) 086 337 401 • KOTA KINABALU Tel :(6) 088 447 285 / 306 / 312 / (6) 088 447 314 Fax:(6) 088 447 315 • KOTA SAMARAHAN Tel :(6) 082 662 616 / 617 / 284 (6) 082 662 285 Fax:(6) 082 662 618 • LAHAD DATU Tel :(6) 089 863 255 / 244 / 577 Fax:(6) 089 863 433 •KUCHING Tel :(6) 082 412 259 / 413 229 (6) 082 414 159 / 417 289 Fax:(6) 082 410 446 •SANDAKAN Tel :(6) 089 214 885 / 942 / 964 Fax:(6) 089 214 977 •TAWAU Tel :(6) 089 778 966 / 758 Fax:(6) 089 779 666 •KENINGAU Tel :(6) 087 342 201 / 202 / 203 Fax:(6) 087 342 204 •MIRI Tel :(6) 085 415 422 / 424 / 425 Fax:(6) 085 415 421 •SIBU Tel :(6) 084 327 140 / 141 / 142 Fax:(6) 084 327 144 • SIMPANG TIGA, KUCHING Tel :(6) 082 453 716 / 726 / 736 Fax:(6) 082 453 711 WILAYAH PERSEKUTUAN •LABUAN Tel :(6) 087 419 205 / 424 667 Fax:(6) 087 419 206 445
448. B A N K I S L A M M A L AY S I A B E R H A D AR-RAHNU BRANCHES ALOR SETAR • Lot 2024, Jalan Langgar 05000 Alor Setar Kedah Tel :(6) 04 731 9090 Fax:(6) 04 730 5050 KUBANG KERIAN • PT 816, Ground Floor Jalan Raja Perempuan Zainab II Bandar Baru Kubang Kerian 16150 Kota Bharu Kelantan Tel :(6) 09 767 8090 Fax:(6) 09 764 5090 TANAH MERAH • Lot PT175 Jalan Hospital 17500 Tanah Merah Kelantan Tel :(6) 09 955 7090 Fax:(6) 09 955 5090 SUNGAI PETANI • 21-B, Jalan Ibrahim 08000 Sungai Petani Kedah Tel :(6) 04 421 9090 Fax:(6) 04 421 5050 KOTA BHARU • No. 1154 & 1155, Seksyen 11 Lorong Medan MARA Bandar Kota Bharu 15000 Kota Bharu Kelantan Tel :(6) 09 748 9090 Fax:(6) 09 748 9050 446 KUALA TERENGGANU PASIR MAS • Lot 319, Seksyen 1 Jalan Pasir Pekan 17000 Pasir Mas Kelantan Tel :(6) 09 790 8090 Fax:(6) 09 790 3090 PASIR PUTEH • No. PT 546, Seksyen 2 Jalan Nara 16800 Pasir Puteh Kelantan Tel :(6) 09 786 9090 Fax:(6) 09 786 5050 • MBKT-No 19 Pusat Niaga Paya Keladi Kampung Paya Keladi 20200 Kuala Terengganu Terengganu Tel :(6) 09 626 7090 Fax:(6) 09 623 5050 KUANTAN • No. G-11, Ground Floor Mahkota Square Jalan Mahkota 25000 Kuantan Pahang Tel :(6) 09 517 9090 Fax:(6) 09 514 5050
449. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information SME HUB HEADQUARTERS • Level 29, Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur Tel :03-2028 3286 CENTRAL REGION • SME BANKING SHAH ALAM Tingkat Bawah, Wisma PKPS Seksyen 14, Persiaran Perbandaran 40675 Shah Alam Selangor General Line:03-5510 0103 / 0018 / 0288 Fax :03-5519 7261 • SME BANKING BANGI Bank Islam Bandar Baru Bangi No. 2 & 4, Jalan 6C/7 43650 Bandar Baru Bangi Selangor General Line:03-8920 1062 Fax :03-8925 6168 • SME BANKING SRI GOMBAK Lot No. 120 & 121, Jalan Prima SG 5 Prima Sri Gombak 68100 Batu Caves Selangor General Line:03-6181 1058 Fax :03-6185 9675 • SME BANKING SRI PETALING No. 1 Jalan Radin Bagus Bandar Baru Seri Petaling 57100 Kuala Lumpur General Line:03-9056 1421 Fax :03-9056 2982 EASTERN REGION • SME BANKING KELANTAN STATE Tingkat 2, PT1540, 1541 & 1542 Persiaran KK6, Jalan Raja Perempuan Zainab II Bandar Baru Kubang Kerian 16150 Kota Bharu Kelantan General Line:09-764 1049 Fax :09-765 0177 • SME BANKING TERENGGANU STATE • SME BANKING PULAU PINANG STATE • SME BANKING PAHANG STATE • SME BANKING GEORGETOWN Tingkat 2 & 3, PT 35308 & PT 35309 Dataran Austin, Mukim Kuala Nerus 21300 Kuala Terengganu Terengganu General Line:09-667 2426 / 2427 Fax :09-667 2433 Bank Islam Putra Square No. 1 & 3, Tingkat 2 Jalan Putra Square 2 25200 Kuantan Pahang General Line:09-517 3491 Fax :09-517 3605 SOUTHERN REGION • SME BANKING JOHOR STATE Tingkat 15, Menara Tabung Haji Jalan Ayer Molek 80000 Johor Bahru Johor General Line:07-225 8800 Fax :07-225 8899 • SME BANKING AYER KEROH No. 1 & 3, Jalan KF4 Kota Fesyen-MITC, Hang Tuah Jaya 75450 Ayer Keroh Melaka General Line:06-232 6216 Fax :06-232 6494 NORTHERN REGION • SME BANKING KEDAH/ PERLIS STATE No. 212 & 213, Kompleks Perniagaan Sultan Abdul Hamid Persiaran Sultan Abdul Hamid 05050 Alor Setar Kedah Tel :04-771 0102 Fax :04-771 0112 Tingkat 1 (Mezanine) Bangunan KWSP, Seberang Jaya No. 3009, Lebuh Tenggiri 2 13700 Seberang Jaya Pulau Pinang General Line:04-382 9100 Fax :04-382 9166 Ground Floor Wisma Great Eastern Light Street Peti Surat 1204 10200 Georgetown Pulau Pinang General Line:04-262 4724 Fax :04-262 2594 • SME BANKING PERAK STATE No. 21 & 23 Jalan Taman Meru Utama A1 Medan Meru Utama 30020 Ipoh Perak General Line:05-527 2125 Fax :05-527 7706 • SME BANKING SG PETANI Lot 71 & 72 Jalan Lagenda 1 Lagenda Height 08000 Sungai Petani Kedah. Tel : 04-422 0620 Fax: 04-421 3912 EAST MALAYSIA • SME BANKING KUCHING STATE Lot 433, 434 & 435, Section 11 KTLD Bangunan Tuanku Muhamad Al Idrus Jalan Kulas 93400 Kuching Sarawak Tel : 082-414 159 / 082-412 259 Fax: 082-410 446 • SME BANKING KOTA KINABALU STATE Ground & First Floor UMNO Building Jalan Kemajuan Karamunsing 88850 Kota Kinabalu Sabah Tel : 088-447 274 447
450. B A N K I S L A M M A L AY S I A B E R H A D BUREAU DE CHANGE  KLIA ARRIVAL LANDSIDE • Lot No. MTB-3-L11 Level 3, Arrival Hall Main Terminal Building Kuala Lumpur International Airport 64000 Sepang Selangor Tel :03-8787 1239 Fax: 03-8787 1108 KLIA CONTACT PIER • Lot No. CPI-4-A02 Contact Pier International Kuala Lumpur International Airport 64000 Sepang Selangor Tel :03-8787 1840 Fax: 03-8787 1843 KLIA 2 LANDSIDE • Lot L2-24A Gateway @ KLIA2, Terminal KLIA2 Kuala Lumpur International Airport 2 Jalan KLIA2/1 64000 Sepang Selangor Tel :03-8775 8032 Fax: 03-8775 8029 KOTA KINABALU INTERNATIONAL AIRPORT • Lot No. L1L01 (C7) Level 1, Arrival Hall (Landside) 88740 Kota Kinabalu International Airport Sabah Tel :088-204 232 Fax: 088-204 175 KLIA IMMIGRATION • Lot No. MTB-3-A21 Arrival Hall (Immigration) Kuala Lumpur International Airport 64000 Sepang Selangor Tel :03-8787 1213 Fax: 03-8787 1186 KLIA SATELLITE • Lot No. SAT-P-A41 Passenger Level, Satellite Building Kuala Lumpur International Airport 64000 Sepang Selangor Tel :03-8787 1214 Fax: 03-8787 1231 448 PENANG INTERNATIONAL AIRPORT • Lot No. L1AS14 Level 1, International Arrival (Airside) Penang International Airport 11900 Bayan Lepas Pulau Pinang Tel :04-645 3388 Fax: 04-643 9488
451. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information VEHICLE FINANCING SALES HUB TEMERLOH MERU RAYA KOTA KINABALU • D/A BANK ISLAM MALAYSIA BERHAD TEMERLOH BRANCH • D/A BANK ISLAM MALAYSIA BERHAD MERU RAYA BRANCH • D/A BANK ISLAM MALAYSIA BERHAD KOTA KINABALU BRANCH Lot No. C-49 & C-50 Jalan Tengku Ismail 28000 Temerloh Pahang Tel :(6) 09 296 1416 Fax:(6) 09 296 5300 Ground Floor, No. 19 Jalan Taman Meru Utama A1 Medan Meru Utama 30020 Ipoh Perak Tel :(6) 05 527 7742 / 7743 Fax : (6) 05 527 7751 1st Floor, Bangunan UMNO Jalan Kemajuan, Karamunsing 88000 Kota Kinabalu Sabah Tel :(6) 088 447 294/295 Fax:(6) 088 447 305 KUALA LUMPUR ALOR SETAR • D/A BANK ISLAM MALAYSIA BERHAD ALOR SETAR BRANCH No. 1, Kompleks Perniagaan Utama Jalan Sultanah Sambungan 05150 Alor Setar Kedah Tel :(6) 04 735 5966 Fax:(6) 04 735 1002 KUALA TERENGGANU • D/A BANK ISLAM MALAYSIA BERHAD JLN SULTAN ISMAIL BRANCH 1st Floor, Lot 1128 Bangunan Majlis & Adat Melayu Terengganu, Jalan Banggol 20720 Kuala Terengganu Terengganu Tel :(6) 09 622 4730 Fax:(6) 09 631 5455 AYER KEROH • D/A BANK ISLAM MALAYSIA BERHAD AYER KEROH BRANCH 1st Floor, 1 & 3, Jalan KF 4 Kota Fesyen-MITC, Hang Tuah Jaya 75450 Ayer Keroh Melaka Tel :(6) 06 232 6216 / 6024 Fax:(6) 06-232 6494 KOTA BHARU • D/A BANK ISLAM MALAYSIA BERHAD KOTA BHARU BRANCH 1st Floor, Seksyen 25, Lundang Jalan Sultan Yahya Petra 15720 Kota Bharu Kelantan Tel :(6) 09 747 3488 Fax:(6) 09 747 3491 BUTTERWORTH • D/A BANK ISLAM MALAYSIA BERHAD BUTTERWORTH BRANCH 1st Floor, No. 71 & 73 Jalan Taman Selat Off Jalan Bagan Luar 12720 Butterworth Penang Tel : (6) 04 332 1333 Fax:(6) 04 333 4477 JOHOR BAHRU • D/A BANK ISLAM MALAYSIA BERHAD JOHOR BAHRU BRANCH • 3rd Floor, Block E Wisma RKT Ground Floor No 10, Jalan Raja Abdullah Off Jalan Sultan Ismail 50300 Kuala Lumpur Tel :(6) 03 2691 0277 Fax:(6) 03 2698 8636 KUANTAN • D/A BANK ISLAM MALAYSIA BERHAD KUANTAN BRANCH No. 1-05, 1-06, 1-07 Mahkota Square Jalan Mahkota 25000 Kuantan Pahang Tel :(6) 09 513 6262 Fax:(6) 09 515 8623 SHAH ALAM • Ground Floor, Wisma PKPS, Section 14, Persiaran Perbandaran 40675 Shah Alam Selangor Tel :(6) 03 5519 5188 Fax:(6) 03 5519 6188 No. 8-01, Jalan Padi Emas 5/2 81200, Bandar Baru Uda Johor Bahru Johor Tel :(6) 07 237 9155 Fax:(6) 07 237 9166 449
452. B A N K I S L A M M A L AY S I A B E R H A D SUBSIDIARIES OF BIMB GROUP BIMB INVESTMENT MANAGEMENT BERHAD • 19th Floor, Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur Tel :(6) 03 2161 2524 / 2924 Toll Free:1800 88 1196 Fax :(6) 03 2161 2464 BANK ISLAM TRUST COMPANY (LABUAN) LTD & BIMB OFFSHORE COMPANY MANAGEMENT SERVICES SDN BHD • Level 15 (A), Main Office Tower Financial Park Complex Jalan Merdeka 87000 F.T. Labuan Tel :(6) 087 451 806 Fax:(6) 087 451 808 AL-WAKALAH NOMINEES (TEMPATAN) SENDIRIAN BERHAD • 21st Floor, Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur Tel :(6) 03 2726 7724 Fax:(6) 03 2726 7733 FARIHAN CORPORATION SDN BHD • 19th Floor, Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur Tel :(6) 03 2782 1333 Fax:(6) 03 2782 1355 450 BIMB HOLDINGS SDN BHD • 31st Floor, Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur Tel : (6) 03 2781 2999 Fax : (6) 03 2781 2998 Website: www.bimbholdings.com SYARIKAT AL-IJARAH SENDIRIAN BERHAD • 31st Floor, Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur Tel : (6) 03 2781 2999 Fax: (6) 03 2781 2998 BIMB SECURITIES (HOLDINGS) SDN BHD • 31st Floor, Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur Tel : (6) 03 2781 2999 Fax: (6) 03 2781 2998 BIMB SECURITIES SDN BHD • Level 32, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : (6) 03 2613 1600 Fax : (6) 03 2613 1799 Website: www.bimbsec.com.my Online trading : www.bisonline.com.my BIMSEC NOMINEES (TEMPATAN) SDN BHD • Level 32, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : (6) 03 2613 1600 Fax: (6) 03 2613 1799 BIMSEC NOMINEES (ASING) SDN BHD • Level 32, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : (6) 03 2613 1600 Fax: (6) 03 2613 1799
453. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information NOTICE OF THE 39TH ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the 39th Annual General Meeting of Bank Islam Malaysia Berhad (“BIMB” or “the Company”) will be held virtually at the broadcast venue at Level 10, Menara Bank Islam, 22 Jalan Perak, 50450 Kuala Lumpur on Monday, 23 May 2022 at 10.00 a.m. for the following purposes: ORDINARY BUSINESS 1.To receive the Audited Financial Statements for the financial year ended 31 December 2021 together with the Reports of the Directors and Auditors thereon. (Please refer to Note 1) 2.To re-elect the following Directors, each of whom is retiring by rotation in accordance with Clause 133 of the Company’s Constitution and being eligible, has offered himself for re-election: i) ii) (Ordinary Resolution 1) (Ordinary Resolution 2) Datuk Nik Mohd Hasyudeen Yusoff Encik Mohd Yuzaidi Mohd Yusoff 3.To re-elect the following Directors, each of whom is retiring in accordance with Clause 142 of the Company’s Constitution and being eligible, has offered herself/himself for re-election: i) ii) iii) iv) (Ordinary (Ordinary (Ordinary (Ordinary Dato’ Sri Amrin Awaluddin Encik Mohd Asri Awang Datuk Bazlan Osman Puan Nuraini Ismail 4.To approve the payment of the following fees to each Non-Executive Directors for the period from the 39th AGM to the 40th AGM of the Company: Resolution Resolution Resolution Resolution 3) 4) 5) 6) (Ordinary Resolution 7) TOTAL AMOUNT (PER ANNUM) (RM) BOARD BRC BAEC BNRC BFRC Chairman 144,000.00 90,000.00 48,000.00 18,000.00 24,000.00 Member 72,000.00 72,000.00 36,000.00 12,000.00 18,000.00 SITTING FEE (PER MEETING) (RM) Chairman Member 5,000.00 3,000.00 5.To approve the payment of benefits of up to RM1,150,000.00 to eligible Non-Executive Directors for the period from the 39th AGM to the 40th AGM of the Company. (Ordinary Resolution 8) 6.To re-appoint Messrs. PricewaterhouseCoopers PLT as the External Auditors of the Company for the financial year ending 31 December 2022 and to authorise the Directors to fix their remuneration. (Ordinary Resolution 9) 451
454. B A N K I S L A M M A L AY S I A B E R H A D NOTICE OF THE 39TH ANNUAL GENERAL MEETING SPECIAL BUSINESS To consider , and if thought fit, to pass the following Ordinary Resolutions: 7. Authority to Directors to Allot New Ordinary Shares in BIMB (“BIMB shares”) “THAT subject always to the Companies Act, 2016 (“the Act”), the Company’s Constitution, (Ordinary Resolution 10) the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”) and approval of the relevant government/regulatory authorities, the Directors be and are hereby authorised pursuant to Section 75 of the Act, to allot BIMB shares at any time and upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit, provided that the aggregate number of BIMB shares to be allotted pursuant to the said allotment does not exceed ten percent (10%) of the total number of issued shares of the Company as at the date of such allotment and that the Directors be and are hereby authorised to obtain all necessary approvals from the relevant authorities for the allotment, listing and quotation of the additional shares so allotted on Bursa Malaysia and that such authority to allot BIMB shares shall continue to be in force until the conclusion of the next AGM of the Company.” 8.Proposed renewal of the authority for Directors to allot and issue new ordinary shares of BIMB, for the purpose of the Company’s Dividend Reinvestment Plan (“DRP”) that provides the shareholders of BIMB the option to elect to reinvest their cash dividend in new BIMB shares. “THAT pursuant to the DRP as approved by the Shareholders at the Extraordinary General Meeting held on 19 November 2021 and subject to the approval of the relevant regulatory authority (if any), approval be and is hereby given to the Company to allot and issue such number of new BIMB shares from time to time as may be required to be allotted and issued pursuant to the DRP until the conclusion of the next Annual General Meeting upon such terms and conditions and to such persons as the Directors of the Company at their sole and absolute discretion, deem fit and in the interest of the Company PROVIDED THAT the issue price of the said new BIMB shares shall be fixed by the Directors based on the adjusted five (5) market days volume weighted average market price (“VWAP”) of BIMB shares immediately prior to the price-fixing date after applying a discount of not more than 10%, of which the VWAP shall be adjusted ex-dividend before applying the aforementioned discount in fixing the issue price; AND THAT the Directors and the Secretary of the Company be and are hereby authorised to do all such acts and enter into all such transactions, arrangements, deeds, undertakings and documents as may be necessary or expedient in order to give full effect to the DRP with full power to assent to any conditions, modifications, variations and/or amendments as may be imposed or agreed to by any relevant authorities (if any) or consequent upon the implementation of the said conditions, modifications, variations and/or amendments, by the Directors as they, in their absolute discretion, deem fit and in the best interest of the Company.” 9.To transact any other ordinary business of which due notice shall have been given in accordance with the Companies Act 2016. By Order of the Board MARIA MAT SAID Company Secretary (LS 0009400) Practicing Certificate No. 202008002449 Kuala Lumpur 25 April 2022 452 (Ordinary Resolution 11)
455. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information EXPLANATORY NOTES: 1. AUDITED FINANCIAL STATEMENTS The Audited Financial Statements laid at this meeting pursuant to Section 340(1)(a) of the Companies Act 2016 are meant for the shareholders’ information and discussion only. It does not require the shareholders’ approval, and therefore the Audited Financial Statements are not put forward for voting. 2. RE-ELECTION OF DIRECTORS Ordinary Resolutions 1, 2, 3, 4, 5 and 6 Clause 133 of the Company’s Constitution provides that one-third (1/3) of the Directors of the Company for the time being, or, if their number is not three (3) or a multiple of three (3), then the nearest one-third (1/3) shall retire from office, provided that all Directors shall retire from office at least once in three (3) years, but shall be eligible for reelection. Clause 142 of the Company’s Constitution provides that the Directors shall have power at any time and from time to time to appoint any person to be a Director either to fill a casual vacancy or as an addition to the existing Directors. Any Director so appointed shall hold office only until the next following annual general meeting and shall then be eligible for re-election but shall not be taken into account in determining the Directors who are to retire by rotation at that meeting. Based on the number of Directors who are subject to retirement by rotation under Clause 133 of the Company’s Constitution, two (2) out of seven (7) Directors shall retire at this 39th AGM. Datuk Nik Mohd Hasyudeen Yusoff and Encik Mohd Yuzaidi Mohd Yusoff will retire by rotation at this 39th AGM and being eligible, have offered themselves for re-election as Directors of the Company. During the year under review, there are four (4) new Directors being appointed to the Company. According to Clause 142 of the Company’s Constitution, all four (4) Directors, namely, Dato’ Sri Amrin Awaluddin (appointed on 10 September 2021), Encik Mohd Asri Awang (appointed on 1 October 2021), Datuk Bazlan Osman and Puan Nuraini Ismail (both appointed on 7 January 2022) will retire at this 39th AGM and being eligible, have offered themselves for re-election as Directors of the Company. The Board Nomination and Remuneration Committee (“BNRC”) of the Company has considered the performance and contribution of each retiring Director and has also assessed the independence of the Independent Non-Executive Directors seeking re-election. Based on the results of the annual Board Effectiveness Evaluation conducted for the financial year ended 31 December 2021, the performance for each of the retiring Director was found to be satisfactory (rated between 4.1 to 4.3) with the exception of Datuk Bazlan Osman and Puan Nuraini Ismail who were evaluated separately as they were appointed on 7 January 2022. In addition, all retiring Directors met with all the requirements of fit and proper criteria issued by Bank Negara Malaysia. The retiring Independent Non-Executive Directors have also fulfilled the independence criteria as set out in the BNM CG Policy, the Main Market Listing Requirements of Bursa Malaysia Securities Berhad as well as the Company’s Board Charter. All the retiring Directors have no record of adverse finding under MACC Act 2009, LEXIS NEXIS, Insolvency Act or for any mismanagement that could adversely affect the Company. The Board had endorsed the BNRC’s recommendation on the re-election of the retiring Directors. The retiring Directors had abstained from deliberation and decisions on their re-election at the BNRC and Board meetings. The Board is of the collective view that all of the said Directors who are retiring at this 39th AGM have satisfactorily discharged their roles and responsibilities to act in the best interest of the Company. The Board is satisfied that, considering their wealth of expertise and experience that the retiring Directors possess and brings to the Board, shall further strengthen the Board composition and dynamic. The profiles of the Directors seeking for re-election are set out on pages 137 to 142 under Profile of Directors’ section of the Company’s Integrated Annual Report 2021. 453
456. B A N K I S L A M M A L AY S I A B E R H A D NOTICE OF THE 39TH ANNUAL GENERAL MEETING 3 . DIRECTORS’ FEES AND BENEFITS Ordinary Resolution 7 – Payment of Non-Executive Director’s Fees The Proposed fees to be paid to each Non-Executive Directors from this AGM to the next AGM of the Company is based on the following fee structure which has not changed since it was first approved by the shareholder at 34th AGM held on 6 Maye 2017: TOTAL AMOUNT (PER ANNUM) (RM) BOARD BRC BAEC BNRC BFRC Chairman 144,000.00 90,000.00 48,000.00 18,000.00 24,000.00 Member 72,000.00 72,000.00 36,000.00 12,000.00 18,000.00 SITTING FEE (PER MEETING) (RM) Chairman Member 5,000.00 3,000.00 The fee structure is reasonable after benchmarking and taking into account prevailing market and economic conditions as well as practices of other comparable companies in the market. Ordinary Resolution 8 – Benefits Payable to Non-Executive Directors The benefits payable to Non-Executive Directors comprise allowances, benefits-in-kind and other emoluments payable to them, details of which are tabulated below: a) b) c) Car Allowance - Chairman -RM10,000 per month Senior Independent Director’ Allowance -RM2,000 per month Other Benefits - Includes benefits that are claimable or otherwise such as leave passage, medical and insurance benefits and other payments made available by the Company to eligible Non-Executive Directors. The proposed amount of up to RM1,150,000.00 (remain unchanged with the approved benefits at the 38th AGM) to be paid as benefits to eligible Non-Executive Directors from this AGM to the next AGM of the Company will be paid on monthly basis and/or as and when claimed or incurred. For shareholders’ ease of reference, the Board had endorsed the BNRC’s recommendation to provide the breakdown of the total fees and other benefits to be paid to NEDs from the 39th AGM until the 40th AGM as follows:Taking into consideration there will be more meeting to discuss on the strategic matters, the Company anticipates higher number of meetings in 2022/2023, i.e., 83 meetings (2021/2022: 78 meetings). The detail on the fees to be paid to the NEDs are as follows:Retainer and sitting fees RM3,388,500.00 Other benefits RM1,150,000.00 Total RM4,538,500.00 Based on the above computation, the total fees (retaining and sitting fees together with other benefits) will be RM4,538,500.00, slightly higher than the amount approved by the shareholder of RM4,211,007.00 at the 38th AGM on 31 May 2021. The Company viewed that the amount proposed is reasonable taking into consideration the Company’s financial health and performance. 454
457. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information 4. RE-APPOINTMENT OF AUDITORS Ordinary Resolution 9 The Board, through the Board Audit and Examination Committee (“BAEC”) had, on 27 January 2022, completed its annual assessment on the external auditors, i.e., Messrs. PricewaterhouseCoopers PLT (“PwC”) in accordance with BNM’s Guideline on Corporate Governance for the appointment/re-appointment of external auditors. The assessment covered the following aspects: i. Level of knowledge, capabilities, experience and quality of previous work; ii. Level of engagement with the BAEC and the Management; iii. Ability to provide constructive observations, implications and recommendations in areas requiring improvements; iv. Adequacy in audit coverage, effectiveness in planning and conduct of audit; v. Ability to perform audit work within agreed timeframe; vi. Non-audit services rendered by the external auditors did not impede independence; and vii.The external auditors demonstrated unbiased stance when interpreting standards/policies adopted by the Company. Being satisfied with PwC’s performance in 2021, their technical competency and audit independence as well as fulfillment of criteria as set out in BNM’s Guideline for the Appointment/Re-appointment of External Auditors, the Board, at its meeting held on 28 January 2022, had approved the BAEC’s recommendation for the re-appointment of PwC as the external auditors of the Company for the financial year ending 31 December 2022. 5. AUTHORITY TO DIRECTORS TO ALLOT SHARES Ordinary Resolution 10 The above proposed ordinary resolution is a general mandate to be obtained from the shareholders of the Company at this AGM and if passed, will empower the Directors pursuant to Section 75 of the Act, to allot BIMB shares of up to an aggregate amount not exceeding ten percent (10%) of the issued share capital of the Company as at the date of such allotment of shares without having to convene a general meeting. This general mandate, unless revoked or varied at a general meeting, will expire at the conclusion of the next AGM of the Company. The general mandate, if granted, will provide the Company the flexibility to undertake any share issuance without having to convene a general meeting and thereby reducing administrative time and costs associated with the convening of additional general meeting(s). The general mandate is to allow for possible share issue and/or fund raising exercises including placement of shares for the purpose of funding current and/or future investment projects, working capital and/or acquisitions as well as in the event of any strategic opportunities involving equity deals which may require the Company to exercise the mandate. This is only to be undertaken if the Board considers it to be in the best interest of the Company. The Company has not issued any new shares under the general mandate for allotment of share pursuant to Section 75 of the Act which was approved at the 38th AGM held on 31 May 2021 which will lapse at the conclusion of the upcoming 39th AGM. 6. RENEWAL OF AUTHORITY FOR THE DIRECTORS TO ALLOT AND ISSUE NEW ORDINARY SHARES IN RESPECT OF THE DIVIDEND REINVESTMENT PLAN (“DRP”) Ordinary Resolution 11 If passed, will give authority to the Directors to allot and issue new ordinary share for the DRP in respect of dividends to be declared until the next AGM. A renewal of this authority will be sought at the next AGM. 455
458. B A N K I S L A M M A L AY S I A B E R H A D NOTICE OF THE 39TH ANNUAL GENERAL MEETING NOTES ON ABSTENTION FROM VOTING Any Director referred to in Ordinary Resolutions 1 to 6 , who is a Shareholder of the Company will abstain from voting on the resolutions in respect of his/her re-election at this AGM. All Directors who are Shareholders of the Company will abstain from voting on Ordinary Resolutions 7 and 8 concerning Directors’ remuneration at this AGM. For the record, none of the Directors holds any shares in the Company. NOTES ON VIRTUAL AGM, VOTING RIGHTS AND PROCEDURES 1) The 39th AGM of the Company will be conducted on a virtual basis through live streaming and online remote voting via Remote Participation and Electronic Voting facilities (“RPEV”). The Virtual Meeting via RPEV will be available at https://meeting.boardroomlimited.my. Please follow the procedures provided in the Administrative Guide for the 39th AGM in order to register, participate and vote remotely. 2) The venue of the 39th AGM is strictly for the purpose of complying with Section 327(2) of the Companies Act 2016 and Clause 96 of the Company’s Constitution which requires the Chairman of the meeting to be present at the main venue of the meeting. The notification of the venue of the 39th AGM is to inform shareholders where the electronic AGM production and streaming would be conducted. No shareholders/proxies from the public will be physically allowed at the meeting venue. 3) In accordance with Clause 109 of the Company’s Constitution, each member of the Company (“Member”) shall be entitled to be present and to vote at any general meeting of the Company, either personally or by proxy or by attorney and to be reckoned in a quorum in respect of shares fully paid and in respect of partially paid shares where calls are not due and unpaid. Members may exercise their rights to participate (including pose questions via the RPEV) during the 39th AGM. 4) Pursuant to Paragraph 8.29A of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all resolutions set out in this Notice of the 39th AGM will be conducted by way of a poll. 5) The Company had appointed its share registrar, i.e., Boardroom Share Registrars Sdn Bhd (“Boardroom”) as a poll administrator to conduct the poll by way of electronic voting (“e-voting”) and SKY Corporate Services Sdn Bhd as the Independent Scrutineers to verify the poll results. 456
459. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information NOTES ON APPOINTMENT OF PROXY 1) In accordance with Clause 94 of the Company’s Constitution, a Member entitled to attend and vote at a meeting of the Company is entitled to appoint one (1) or more proxies to exercise all or any of his/her rights to attend, participate, speak and vote for him/her subject to the following provisions: a) save as provided for Note (2) below, Clause 113 of the Company’s Constitution and the Companies Act 2016, each member shall not be permitted to appoint more than two (2) proxies to attend the same meeting; and b) where a Member appoints more than one (1) proxy, the appointment shall be invalid unless he/she specifies the proportion of his/her holdings to be represented by each proxy. 2) For the avoidance of doubt and subject always to Note (1)(b) above, the Company’s Constitution and the Companies Act 2016: a) where a Member is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which an exempt authorised nominee may appoint in respect of each omnibus account it holds; and b) where a Member is an authorised nominee, he/she may appoint at least one (1) proxy in respect of each securities account it holds to which ordinary shares in the Company are credited. Each appointment of proxy by an authorised nominee may be made separately or in one (1) instrument of proxy should specify the securities account number and the name of the beneficial owner for whom the authorised nominee is acting. 3) There shall be no restriction as to the qualification of the proxy. Hence, a proxy may not need to be a Member. 4) The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing or if such appointer is a corporation, under its Seal or the hand of its attorney. 5) The instrument appointing a proxy (“Proxy Form”) must be deposited at the Registrar’s office in the following manner: a) by electronic means through the Boardroom Smart Investor Portal at https://investor.boardroomlimited.com by logging in and selecting “Submit eProxy Form”; or b) by hand or post to Boardroom Share Registrars Sdn Bhd at 11th Floor, Menara Symphony, No. 5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya, Selangor, Malaysia, not less than forty eight (48) hours before the time appointed for holding the meeting which is no later than 10.00 a.m. on Saturday, 21 May 2022. 6) The lodging of a completed Proxy Form does not preclude a Member from attending and voting should the Member decided to do so. If the Member subsequently decided to attend the 39th AGM, the Member is requested to revoke the earlier appointment of proxy by notifying Boardroom in writing, no later than Saturday, 21 May 2022 at 10.00 a.m. MEMBERS ENTITLED TO ATTEND THE VIRTUAL AGM For the purpose of determining a Member who is entitled to attend the virtual 39th AGM, the Company will request Bursa Malaysia Depository Sdn Bhd, in accordance with Clause 95 of the Company’s Constitution, to issue a Record of Depositor (“ROD”) as at 17 May 2022. Only Depositor whose name appears on the ROD as at 17 May 2022 shall be entitled to attend the meeting or appoint a proxy(ies) to attend and/or vote on his/her behalf. 457
460. B A N K I S L A M M A L AY S I A B E R H A D STATEMENT ACCOMPANYING NOTICE OF THE 39TH ANNUAL GENERAL MEETING DIRECTORS WHO ARE STANDING FOR RE-ELECTION AT THE 39TH ANNUAL GENERAL MEETING Pursuant to Paragraph 8 .27(2) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, BIMB wishes to highlight the Directors who are standing for re-election pursuant to Clause 133 and Clause 142 of the Company’s Constitution at the 39th Annual General Meeting of the Company are as follows: 1. Clause 133 of the Company’s Constitution • • 2. Datuk Nik Mohd Hasyudeen Yusoff (Non-Independent Non-Executive Director) Encik Mohd Yuzaidi Mohd Yusoff (Independent Non-Executive Director) Clause 142 of the Company’s Constitution • • • • Dato’ Sri Amrin Awaluddin (Non-Independent Executive Director) Encik Mohd Asri Awang (Independent Non-Executive Director) Datuk Bazlan Osman (Independent Non-Executive Director) Puan Nuraini Ismail (Independent Non-Executive Director) The Profiles of the above Directors are set out in 137 to 142 of this Integrated Annual Report. AUTHORITY TO DIRECTORS TO ALLOT SHARES Details on the authority to allot shares in BIMB pursuant to Section 75 of the Companies Act 2016 are provided under the explanatory notes no. 5 in the Notice of the 39th Annual General Meeting. DATE, TIME AND PLACE OF THE 39TH ANNUAL GENERAL MEETING The 39th Annual General Meeting of BIMB will be held as follows: Date Time How Where 458 : Monday, 23 May 2022 : 10.00 a.m. : Virtual Meeting : Broadcast venue at Level 10, Menara Bank Islam, 22 Jalan Perak, 50450 Kuala Lumpur, Malaysia.
461. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information ADMINISTRATIVE GUIDE FOR THE 39TH ANNUAL GENERAL MEETING Day and Date : Monday, 23 May 2022 Time : 10.00 a.m. Online Meeting Platform : https://meeting.boardroomlimited.my Registration : Virtual meeting via Remote Participation and Electronic Voting (“RPEV”) facilities. Broadcast Venue : Level 10, Menara Bank Islam, 22 Jalan Perak, 50450 Kuala Lumpur, Malaysia. Mode of Communication : 1.Type text in the meeting platform. The Messaging window facility will be opened concurrently with the Virtual Meeting Portal, i.e., one (1) hour before the meeting, which is from 9.00 a.m. on Monday, 23 May 2022. 2.Shareholders may also submit their questions before the meeting via Boardoom’s website at https://investor.boardroomlimited.com by selecting “SUBMIT QUESTION” to pose and submit their questions electronically. Please submit any questions in relation to the agenda items for the 39th AGM no later than 10.00 a.m. on Monday, 16 May 2022. VIRTUAL 39TH AGM 1. The 39th AGM of the Company will be conducted entirely on a virtual basis through live streaming and online remote voting via RPEV. 2. The Company invites shareholders to participate in the 39th AGM from their home or office and follow the entire proceedings as the 39th AGM will be be conducted via RPEV. With the RPEV facilities, you may exercise your right as a member of the Company to participate and vote at the 39th AGM. The RPEV is also in line with Practices 12.1 and 13.3 of the Malaysian Code on Corporate Governance 2021. The decision is made pursuant to Section 327 of the Companies Act 2016 (“the Act”) and Clause 96 of the Company’s Constitution. 3. The broadcast venue is strictly for the purpose of complying with Section 327 (2) of the Act and Clause 96 of the Company’s Constitution that requires the Chairman of the meeting to be present at the main venue of the meeting. No shareholders/ proxies from the public will be physically allowed at the meeting venue. All members are urged to attend the 39th AGM remotely via meeting platform available on the designated link at https://meeting.boardroomlimited.my. 4. Shareholders can participate in our virtual 39 th AGM by registering online via Boardroom Smart Investor Portal at https://investor.boardroomlimited.com. PROCEDURE OF THE 39TH AGM 1. The Login user Guide for participation, posing questions and voting at the 39th AGM will be emailed to you together with your remote access user ID and password once your registration has been approved. 2. No recording or photography of the 39th AGM meeting (“Meeting”, as applicable) proceedings is allowed without prior written permission of the Company. 3. You must ensure that you are connected to the internet at all times in order to participate and vote when the 39th AGM has commenced. Therefore, it is your responsibility to ensure that connectivity for the duration of the Meeting is maintained. ENTITLEMENT TO PARTICIPATE AND VOTE In respect of deposited securities, only members whose names appear on the Record of Depositors on 17 May 2022 (General Meeting Record of Depositors) shall be eligible to participate the Meeting or appoint proxy(ies) to participate on his/her behalf. 459
462. B A N K I S L A M M A L AY S I A B E R H A D ADMINISTRATIVE GUIDE FOR THE 39TH ANNUAL GENERAL MEETING (”39TH AGM”) APPOINTMENT OF PROXY 1. Shareholders entitled to participate and vote at the 39th AGM is entitled to appoint proxy(ies) to participate and vote in his/ her stead. If you are not able to participate in the 39th AGM remotely, you are encouraged to appoint the Chairman of the Meeting as your proxy and indicate the voting instruction in the Form of Proxy. 2. You may download the Form of Proxy from our website at www.bankislam.com 3. The Form of Proxy must be deposited at the office of the Share Registrar, Boardroom Share Registrars Sdn Bhd (“Boardroom”) at Ground Floor or 11th Floor, Menara Symphony, No. 5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya, Selangor Darul Ehsan, Malaysia or via electronic means through the Boardroom Smart Investor Online Portal (“BSIP”) at https://investor.boardroomlimited.com by logging in and selecting “Submit eProxy Form” not less than 48 hours before the meeting. Please refer to ‘Online Registration Procedure and RPEV’ for information and guidance. CORPORATE SHAREHOLDER Corporate shareholders who require their corporate representative to participate and vote at the 39th AGM must deposit their certificate of appointment of corporate representative to Boardroom not later than 10:00 am on 21 May 2022. REVOCATION OF PROXY If you have submitted your Form(s) of Proxy and subsequently decide to appoint another person or wish to participate in our virtual 39th AGM yourself, please write in to bsr.helpdesk@boardroomlimited.com to revoke the earlier appointed proxy 48 hours before the meeting. ONLINE REGISTRATION PROCEDURE AND RPEV 1. Please note that this option is available to (i) individual member; (ii) corporate shareholders; (iii) Authorised Nominee; and (iv) Exempt Authorised Nominee. 2. If you choose to participate in the Meeting online, you will be able to view a live webcast of the Meeting, ask questions and submit your votes in real time whilst the Meeting is in progress. 3. Kindly follow the steps below on how to request for login ID and password. PROCEDURE ACTION Prior to AGM Date 1 460 Register Online with Boardroom Smart Investor Portal (for first time registration only) (Note: If you have already signed up with Boardroom Smart Investor Portal, you are not required to register. You may proceed to Step 2) (a) Open an internet browser. Latest version of Chrome, Firefox, Safari, Edge or Opera is recommended. (b) Go to Boardroom Smart Investor Portal website at https://investor.boardroomlimited.com (c)Click Register to sign up for a BSIP account. (d) Complete registration with all required information. Upload and attached your MyKad front and back image. Click Register. (e) You will receive an e-mail from BSIP Online for e-mail address verification. Click on Verify E-mail Address from the e-mail received to proceed with the registration. (f) Once your email address is verified, you will be re-directed to BSIP Online for verification of mobile number. Click on Request OTP Code and an OTP code will be sent to the registered mobile number. You will need to enter the OTP Code and click Enter to complete the process. (g) Once your mobile number is verified, registration of your new BSIP account will be pending for final verification. (h) An e-mail will be send to you to inform the approval of your BSIP account within one (1) business day. Subsequently, you can login at https://investor.boardroomlimited.com with the e-mail address and password filled up by you during registration to proceed.
463. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information PROCEDURE ACTION Prior to AGM Date 2 Submit request for Remote Participation User ID and Password (Note: Registration for RPEV will open from 25 April 2022. You are required to register to ascertain your eligibility to participate at the 39th AGM by using RPEV). Shareholders are encouraged to register at least 48 hours before the commencement of the meeting to avoid any delay in the registration. Individual Members (a) Open an internet browser. Latest version of Chrome, Firefox, Safari, Edge or Opera is recommended. (b) Go to Boardroom Smart Investor Portal website at https://investor.boardroomlimited.com (c) Login with your registered email address and password. [Note: If you do not have an account with BSIP, please sign-up/register with Boardroom Smart Investor Portal for free - refer to Item Step 1 for guide.] (d) Select and click on Corporate Meeting. (e) Go to “BANK ISLAM 39TH VIRTUAL ANNUAL GENERAL MEETING” and click Enter. (f) Go to VIRTUAL and click on Register for RPEV. (g) Read and agree to the Terms & Conditions. (h) Enter your CDS Account Number and click Submit to complete your request. (i) You will receive a notification that your RPEV registration has been received and is being verified. (j) Upon system verification against the AGM’s Record of Depositors as at 17 May 2022, you will receive an email from Boardroom either approving or rejecting your registration for the remote participation. (k) If approved, RPEV credential will be provided in your email. (l) Please note that one (1) user ID and password can only log on to one (1) device at a time. (m) If rejected, a rejection note will be provided in your email. Please note that the closing date and time to submit your request is by Saturday, 21 May 2022 at 10.00 a.m. Appointment of Proxy – Individual Members (a) Open an internet browser. Latest version of Chrome, Firefox, Safari, Edge or Opera is recommended. (b) Go to BSIP website @ https://investor.boardroomlimited.com (c) Login with your registered email address and password. [Note: If you do not have an account with BSIP, please sign-up/register with Boardroom Smart Investor Portal for free - refer to Item Step 1 for guide.] (d) Select and click on Corporate Meeting. (e) Go to “BANK ISLAM 39TH VIRTUAL ANNUAL GENERAL MEETING” and click Enter. (f) Go to PROXY and click on Submit eProxy Form. (g) Read and agree to the Terms & Conditions. (h) Enter your CDS Account Number and insert the number of securities. (i) Appoint the Chairman of the meeting or your proxy(ies) and enter the required particulars for your proxy(ies). (j) Indicate your voting instructions – FOR or AGAINST, otherwise your proxy(ies) will decide your votes during meeting. (k) Review and confirm your proxy(ies) appointment. (l) Click submit. (m) Download or print the e-Proxy Form acknowledgement. Please note that the closing date and time for proxy form submission is by Saturday, 21 May 2022 at 10.00 a.m. 461
464. B A N K I S L A M M A L AY S I A B E R H A D ADMINISTRATIVE GUIDE FOR THE 39TH ANNUAL GENERAL MEETING (”39TH AGM”) PROCEDURE ACTION Prior to AGM Date Submit request for Remote Participation User ID and Password (continued) Corporate Shareholders, Authorised Nominee and Exempt Authorised Nominee (a) Write in to bsr.helpdesk@boardroomlimited.com by providing the name of Member, CDS Account Number accompanied with the Certificate of Appointment of Corporate Representative or Form of Proxy to submit the request. (b) Please provide a copy of corporate representative’s or proxy holder’s MyKad/Identification Card (front and back) or Passport as well as his/her email address. (c) You will receive notification from Boardroom that your request has been received. (d)Upon system verification of your registration against the General Meeting ROD as at 17 May 2022, you will receive your remote access User ID and Password along with the email from Boardroom if your registration is approved. (e) Please note that one (1) user ID and password can only log on to one (1) device at a time. Please note that the closing date and time to submit your request is by Saturday, 21 May 2022 at 10.00 a.m. On the day of the AGM 3 Login to Meeting Platform (a) The Meeting Platform will be open for login one (1) hour before the commencement of the 39th AGM. (b) The Meeting Platform can be accessed via one of the following: •Launch the meeting platform by scanning the QR code given to you in the user login guide along with your remote participation User ID and Password; OR • Navigate to the website at https://meeting.boardroomlimited.my (c) Enter the Meeting ID No. and sign in with the user ID and password provided to you via the email notification in Step 2. 4 Participation (Note: Questions submitted online will be moderated before being sent to the Chairman to avoid repetition) (a) If you would like to view the live webcast, select the broadcast icon . (b) If you would like to ask a question during the 39th AGM, select the messaging icon . (c) Type your message within the chat box and click the send button once completed. Please note that the quality of the connectivity to the Meeting Platform for live webcast, as well as for remote voting is highly dependent on the bandwidth and stability of the internet connection available at the location of the remote users. Kindly ensure that you are connected to the internet at all times in order to participate and vote when the virtual 39th AGM has commenced. Therefore, it is your responsibility to ensure that connectivity for the duration of the meeting is maintained. 5 Voting 6 End of Participation 462 (a) Once the meeting is open for voting, the polling icon will appear with the resolutions and your voting choices. (b) To vote, select your voting direction from the options provided. A confirmation message will appear to show your vote has been received. (c) To change your vote, re-select another voting direction. (d) If you wish to cancel your vote, please press “Cancel”. (a) Upon the announcement by the Chairman on the closure of the 39th AGM, the live webcast will end. (b) You can now logout from the Meeting Platform.
465. I N T EG R AT ED A N N UA L R EP O R T 2 0 2 1 Key Messages    Overview   Value Creation   MD&A  Sustainability  Leadership  Accountability   Financial    Additional Information PARTICIPATION THROUGH LIVE WEBCAST AND QUESTION AT THE 39TH AGM 1. Shareholders who participate in the virtual 39th AGM are able to view the Company’s presentation or slides via the live webcast. 2. All modes of communications are accepted for the purpose of posting questions to the Chairman and the Board of Directors before or during the 39th AGM. Shareholders are however encouraged to post questions via the online platform during the 39th AGM. 3. You may submit your questions in advance electronically in relation to the agenda items for the 39th AGM via Boardroom’s website at https://investor.boardroomlimited.com by selecting “SUBMIT QUESTION”. If you have any questions, please submit them no later than 10.00 a.m. on Monday, 16 May 2022. 4. You may also use the Messaging window facility to submit your questions during the meeting. The Messaging window facility will be opened one (1) hour before the 39th AGM which is from 9.00 a.m. on Monday, 23 May 2022. 5. The Chairman and the Board of Directors will endeavour their best to respond to the questions submitted by the shareholders which are related to the resolutions to be tabled at the 39th AGM. If there is time constraint, the responses to relevant questions will be published on the Company’s website at the earliest possible, after the 39th AGM. VOTING PROCEDURE AT THE 39TH AGM 1. The voting procedure will be conducted by poll in accordance with Paragraph 8.29A of Bursa Malaysia Securities Berhad Main Market Listing Requirements. The Company has appointed Boardroom as Poll Administrator to conduct the poll by way of electronic voting (e-voting) and SKY Corporate Services Sdn Bhd as the Independent Scrutineers to verify and validate the poll results. 2. At the Meeting, you will be provided a briefing on the e-voting housekeeping rules. 3. For the purposes of this 39th AGM, e-voting will be carried out via personal smart mobiles, tablets or personal computer/ laptops. 4. Shareholders and proxies are required to use one (1) of the following methods to vote remotely: a.Launch the meeting platform by scanning the QR code given to you in the user login guide along with your remote participation User ID and Password; OR b. Access to the website at URL https://meeting.boardroomlimited.my 5. You may proceed to cast your votes on each of the proposed resolutions as soon as the Chairman calls for the poll to be opened until such time when the Chairman announces the closure of the poll. You are reminded to cast your votes before the poll is closed. 6. The Independent Scrutineers will verify the poll results reports upon closing of the poll session by the Chairman and the Chairman will declare whether with resolutions put on vote were successfully carried or otherwise. INTEGRATED ANNUAL REPORT 2021 As part of our commitment to sustainable practices, the Integrated Annual Report (IAR) 2021 and the following documents are available on Bursa Malaysia Berhad’s website at www.bursamalaysia.com under Company Announcements of Bank Islam Malaysia Berhad and also at the Company’s website at www.bankislam.com i. ii. iii. Corporate Governance (CG) Report 2021. Notice of the 39th AGM, Form of Proxy and Administrative Guide for the 39th AGM. Request IAR 2021 Hardcopy Form. 463
466. B A N K I S L A M M A L AY S I A B E R H A D ADMINISTRATIVE GUIDE FOR THE 39TH ANNUAL GENERAL MEETING (”39TH AGM”) NO VOUCHERS/DOOR GIFTS There will be no voucher(s) or any door gift(s) for shareholders/proxies who participate in the 39th AGM. PERSONAL DATA PRIVACY By registering for the remote participation and electronic voting meeting and/or submitting the instrument appointing a proxy(ies) and/or representative(s), the member of the Company (or their proxies) has consented to the use of such data for purposes of processing and administration by the Company (or its agents); and to comply with any laws, listing rules, regulations and/or guidelines. The member (or their proxies) agrees that he/she will indemnify the Company in respect of any penalties, liabilities, claims, demands, losses and damages as a result of the shareholder/proxies’ breach of warranty. ENQUIRY If you have general administrative enquiries on the 39th AGM, please contact the following during office hours (8.30 a.m. to 5.30 p.m.): Boardroom Share Registrars Sdn Bhd Office Helpdesk : 03-7890 4700 Puan Nursyahirah Binti Che Rahimi : 03-7890 4754 Facsimile No. : 03-7890 4670 Email : bsr.helpdesk@boardroomlimited.com : nursyahirah.cherahimi@boardroomlimited.com 464
467. BANK ISLAM MALAYSIA BERHAD No . of Shares held CDS Account No. Company No. 198301002944 (98127-X) (Incorporated in Malaysia) PROXY FORM *I/We *NRIC No./Passport No./Company No. of and telephone no./email address *member/members of Bank Islam Malaysia Berhad (“BIMB” or “the Company”), hereby appoint Full Name and Address (in Block Letters) NRIC/Passport No. No. of Shares Email Address being a % of Shareholdings Tel No *and/or Full Name and Address (in Block Letters) NRIC/Passport No. No. of Shares Email Address % of Shareholdings Tel No or failing *him/her, the Chairman of the meeting as *my/our *proxy/proxies to vote for *me/us on *my/our behalf at the 39th Annual General Meeting of the Company to be held virtually at the broadcast venue at Level 10, Menara Bank Islam, 22 Jalan Perak, 50450 Kuala Lumpur on Monday, 23 May 2022 at 10.00 a.m. or any adjournment thereof. Please indicate with an “x” in the appropriate space(s) provided below on how you wish your votes to be cast. If no specific direction as to voting is given, the proxy will vote or abstain from voting at *his/her discretion. NO ORDINARY RESOLUTION 1 TO RE-ELECT DATUK NIK MOHD HASYUDEEN YUSOFF AS A DIRECTOR 2 TO RE-ELECT ENCIK MOHD YUZAIDI MOHD YUSOFF AS A DIRECTOR 3 TO RE-ELECT DATO’ SRI AMRIN AWALUDDIN AS A DIRECTOR 4 TO RE-ELECT ENCIK MOHD ASRI AWANG AS A DIRECTOR 5 TO RE-ELECT DATUK BAZLAN OSMAN AS A DIRECTOR 6 TO RE-ELECT PUAN NURAINI ISMAIL AS A DIRECTOR 7 TO APPROVE THE PAYMENT OF NON-EXECUTIVE DIRECTORS FEE FROM THE 39TH AGM TO THE 40TH AGM OF THE COMPANY 8 TO APPROVE THE PAYMENT OF BENEFIT TO THE NON-EXECUTIVE DIRECTORS OF UP TO RM1,150,000.00 FROM THE 39TH AGM TO THE 40TH AGM OF THE COMPANY 9 TO RE-APPOINT MESSRS. PRICEWATERHOUSECOOPERS PLT AS THE EXTERNAL AUDITORS OF THE COMPANY 10 AUTHORITY TO DIRECTORS TO ISSUE NEW SHARES IN BIMB PURSUANT TO SECTION 75 OF THE COMPANIES ACT, 2016 11 RENEWAL OF AUTHORITY FOR THE DIRECTORS TO ALLOT AND ISSUE ORDINARY SHARES OF THE COMPANY IN RELATION TO DIVIDEND REINVESTMENT PLAN Signed this day of FOR , 2022. Signature of Member/Common Seal *Strike out whichever is not desired. Unless otherwise instructed, the proxy may vote as he/she thinks fit AGAINST
468. Notes : 1. 2. 3. 4. 5. 6. 7. The 39th AGM of the Company will be conducted entirely on a virtual basis through live streaming and online remote voting via Remote Participation and Electronic Voting Facilities (“RPEV”). The virtual meeting Facilities will be available at https://meeting.boardroomlimited.my. Please follow the procedures provided in the Administrative Guide for the 39th AGM in order to participate remotely. The venue of the 39th AGM is strictly for the purpose of complying with Section 327(2) of the Act and Clause 96 of the Company’s Constitution which requires the Chairman of the meeting to be present at the main venue of the meeting. The notification of the venue of the 39th AGM is to inform shareholders where the electronic 39th AGM production and streaming will be conducted. NO shareholders/proxies from the public will be physically allowed at the meeting venue. In accordance with Clause 109 of the Company’s Constitution, each member of the Company (“Member”) shall be entitled to present and to vote at any general meeting of the Company, either personally or by proxy or by attorney and to be reckoned in a quorum in respect of shares fully paid and in respect of partially paid shares where calls are not due and unpaid. Members may exercise their rights to participate (including pose questions via the RPEV) during the 39th AGM. Pursuant to Paragraph 8.29A of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all resolutions set out in this Notice of the 39th AGM will be conducted by way of a poll. The Company has appointed its share registrar, i.e. Boardroom Share Registrars Sdn. Bhd. (“Boardroom” or “Registrar”) as the poll administrator to conduct the poll by way of electronic voting (“e-voting”) and SKY Corporate Services Sdn. Bhd. as the Independent Scrutineers to verify the poll results. For the purpose of determining a Member who is entitled to attend the virtual 39th AGM, the Company will request Bursa Malaysia Depository Sdn. Bhd., in accordance with Clause 95 of the Company’s Constitution, to issue a Record of Depositor (“ROD”) as at 17 May 2022. Only a Member whose name appears on the ROD as at 17 May 2022 shall be entitled to attend the meeting or appoint a proxy(ies) to attend and/or vote on his/her behalf. Notes on Appointment of Proxy: (a) In accordance with Clause 94 of the Company’s Constitution, a Member entitled to attend and vote at a meeting of the Company is entitled to appoint one (1) or more proxies to exercise all or any of his/her rights to attend, participate, speak and vote for him/her subject to the following provisions: (b) (c) (d) (e) (f) (i) save as provided under Note (b) below, Clause 113 of the Company’s Constitution and the Companies Act 2016, each Member shall not be permitted to appoint more than two (2) proxies to attend the same meeting; and (ii) where a Member appoints two (2) proxies, the appointment shall be invalid unless he/ she specifies the proportion of his/her holdings to be represented by each proxy. For the avoidance of doubt and subject always to Note (a)(ii) above, the Company’s Constitution and the Companies Act 2016: (i) where a Member is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which an exempt authorised nominee may appoint in respect of each omnibus account it holds; and (ii) where a Member is an authorised nominee, he/she may appoint at least one (1) proxy in respect of each securities account it holds to which ordinary shares in the Company are credited. Each appointment of proxy by an authorised nominee may be made separately or in one instrument of proxy should specify the securities account number and the name of the beneficial owner for whom the authorised nominee is acting. There shall be no restriction as to the qualification of the proxy. Hence, a proxy need not be a Member. The instrument appointing a proxy shall be in writing under the hand of the appointer or his/ her attorney duly authorised in writing or if such appointer is a corporation, under its Seal or the hand of its attorney. The instrument appointing a proxy (“Proxy Form”) must be deposited at the Registrar’s office in the following manner: (i) by electronic means through the Boardroom Smart Investor Portal at https:// boardroomlimited.my by logging in and selecting “Submit eProxy Form”; or (ii) by hand or post to Boardroom Share Registrars Sdn. Bhd. at 11th Floor, Menara Symphony, No. 5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya, Selangor, Malaysia, not less than forty-eight (48) hours before the time appointed for holding the meeting which is no later than Saturday, 21 May 2022 at 10.00 a.m. The lodging of a completed Proxy Form does not preclude a Member from attending and voting should the Member decides to do so. If the Member subsequently decided to attend the 39th AGM, the Member is requested to revoke the earlier appointment of proxy by notifying Boardroom in writing, no later than Saturday, 21 May 2022 at 10.00 a.m. Then fold here AFFIX STAMP BOARDROOM SHARE REGISTRARS SDN BHD 11th Floor, Menara Symphony No. 5, Jalan Prof. Khoo Kay Kim Seksyen 13, 46200 Petaling Jaya Selangor Darul Ehsan Malaysia 1st fold here