Bank Islam Integrated Annual Report 2020

OVERVIEW The Pillar 3 Disclosure for financial year ended 31 December 2020 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: • • Credit and Market Risk – the Standardised Approach (“SA”); and • • 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 was fully implemented in 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 2020 published by the Group. These disclosures have been reviewed and verified by the Group Internal Auditor and attested by the Chief Executive Officer. MEDIUM AND LOCATION OF DISCLOSURE The Group’s Pillar 3 Disclosure is made available at www.bankislam.com . BANK ISLAM MALAYS IA BERHAD INTEGRATED ANNUAL REPORT 2020 315 PILLAR 3 DISCLOSURE as at December 2020