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Content
Highlights and Overview Accountability

04 10 Years Financial Highlights 96 Statement on Corporate Governance

05 Corporate Information 106 Statement on Internal Controls
06 Asset Performance 109 Statement on Risk Management
09 Connected Party 118 Statement on Compliance
10 Media Highlights 120 Code of Conduct & Ethical Principles

Leadership The Financial

14 Board of Directors 121 Financial Statements

16 Profile of Board of Directors 293 Basel II Pillar 3 Disclosures
30 Shariah Committee
32 Profile of Shariah Committee
34 Terms of Reference
36 Statement from the Chairman of Shariah Committee
38 Senior Management
40 Profile of Senior Management Team

Insights Others

46 Chairmans Statement 366 Branch Network

52 An Interview with the CEO
60 Consumer Banking
66 Business Banking
70 Treasury and Capital Markets
72 Investment Banking
73 Musharakah Property Investment (MPI)
74 Muamalat Invest Sdn Bhd (MISB)
75 Muamalat Venture Sdn Bhd (MVSB)
76 Business Process & Transformation
78 ICT Division
80 Customer Service
82 Shariah
84 Human Capital
86 Corporate Responsibility
90 Calendar of Events
92 Wakaf Selangor Muamalat
93 Tabung Mawaddah
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To Become the Preferred Islamic

Financial Service Provider

To Deliver Best Value to the

Stakeholders

Care Respect Integrity Innovative

Sevice Oriented
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Bank Muamalats logo and identity are essentially formed by a dynamic line in a continuous motion. The
principal objective of efficiency and dynamism are reflected by this single line. The single line signifies an
efficient, clear and focused vision. This reflects the strong relationship between the bank and its customers.

The dome is a basic design element of Islamic architecture. It is used to signify the place for prayers and shelter.
This represents the products and services that Bank Muamalat can offer to its customers. The five domes are
representative of the five tenets of Islam and the five times Muslims are called to pray. The five points are also
used in relation to the five principles of the Rukun Negara, giving a truly Malaysian objective to its existence.
The linkage of the five domes with a single line signifies networking of Bank Muamalat and the relationship
between Bank Muamalat, customers and its external environment. This networking and togetherness translate
the very meaning of Muamalat itself, which is relationship between mankind.

An hour glass embedded in the centre within the logo design stands for the time which is the essence of a bank.
Investments grow over time. Two colours are used within the logo. Sultan blue, a royal colour is used to provide
a feeling of strength and confidence. Orange is a warm and exciting colour. It gives light and signifies growth.
The orange is used to signify the warmth of Bank Muamalat which is in continuous growth, never static but
always dynamic.
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10 Years Financial Highlights

(2005-2015) GROUP

Jan 2009 - Mar 2010

2011 Restated

2012 Restated

2013
2005

2006

2007

2008

2014

2015
_____________________________________________________________________________________________________________________________________________
Total Shareholders Fund (RM000) 523,683 713,126 737,331 702,236 1,319,131 1,348,286 1,401,004 1,598,476 1,745,576 1,854,694
_____________________________________________________________________________________________________________________________________________
Profit/(Loss) Before Tax (RM000) 41,251 103,409 64,238 44,068 142,061 186,785 103,006 235,963 208,284 121,966
_____________________________________________________________________________________________________________________________________________
Profit/(Loss) After Tax (RM000) 32,328 72,520 48,138 31,951 98,834 120,433 69,244 167,936 151,564 89,280
_____________________________________________________________________________________________________________________________________________
Total Assets (RM000) 10,269,647 13,450,636 13,808,090 14,398,645 16,733,420 18,659,940 20,504,037 21,071,590 20,061,690 22,438,036
_____________________________________________________________________________________________________________________________________________
Total Deposits (RM000) 9,373,971 12,178,691 12,172,868 12,447,970 14,920,856 16,216,173 18,151,087 18,744,179 17,629,228 19,544,549
_____________________________________________________________________________________________________________________________________________
Total Financing (RM000) 4,154,021 5,373,343 5,870,585 6,427,747 7,037,126 7,495,007 9,064,271 10,352,626 11,899,691 13,414,670
_____________________________________________________________________________________________________________________________________________
No of Branches 42 43 48 48 49 51 58 59 59 59
No of Service Centres/Kiosk 6 6 3 5 6 4 2 7 7 7
No of Offshore Branches/Labuan 1 1 1 1 1 1 1 1 1 1
No of Staff 1,145 1,380 1,454 1,419 1,584 1,763 1,929 2,099 2,135 1,987
_____________________________________________________________________________________________________________________________________________
Return on Asset (%) - Pretax 0.45 0.87 0.47 0.31 0.73 1.06 0.53 1.14 1.01 0.57
Return on Equity (%) - Pretax 8.00 16.72 8.86 6.12 11.24 15.24 7.49 15.73 12.46 6.78
_____________________________________________________________________________________________________________________________________________

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Corporate
Information
BOARD OF DIRECTORS
Chairman
__________________________________
Tan Sri Dato Dr. Mohd Munir Abdul Majid

Members
__________________________________
Dato Sri Che Khalib Mohamad Noh
Dato Mohamed Hazlan Mohamed Hussain
Dato Haji Mohd Redza Shah Abdul Wahid
Haji Mohd Izani Ghani
Hisham Zainal Mokhtar
(resigned w.e.f. 30 June 2014)
Haji Abdul Jabbar Abdul Majid
Tengku Dato Seri Hasmuddin Tengku Othman
Dato Azmi Abdullah
Dato Haji Kamil Khalid Ariff
Azura Othman (appointed w.e.f. 24 April 2015)

COMPANY SECRETARY
__________________________________
Nora Shikhen Ramli (LS 01587)

REGISTERED OFFICE
__________________________________
20th Floor, Menara Bumiputra
Jalan Melaka
50100 Kuala Lumpur
Tel: 603-2615 7069
Fax: 603-2693 3367

AUDITORS
__________________________________
Ernst & Young
Level 23A, Menara Milenium
Jalan Damanlela
Pusat Bandar Damansara
50490 Kuala Lumpur

BANK MUAMALAT MALAYSIA BERHAD (6175-W) 5

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Asset
Performance

6 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

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Asset Quality
2011 2012 2013 2014 2015
COMPONENTS RM million RM million RM million RM million RM million

Gross impaired financing 378.3 446.3 265.4 325.7 339.7

Gross impaired financing ratio 4.8% 2.9% 2.5% 2.7% 2.5%

Financing loss reserve ratio 89.0% 87.8% 102.2% 83.3% 83.3%

Collective assessment ratio 3.1% 2.9% 2.3% 1.6% 1.8%

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Connected As at end of FY2015, connected parties exposures

accounted for 5.5% of the total outstanding credit

Party
exposures of RM24 billion. The amount stood at 62% against
the Bank Muamalats capital base of RM2.14 billion. Both
measurements were well below the threshold limit set by
Bank Negara Malaysia.

BANK MUAMALAT MALAYSIA BERHAD (6175-W) 9

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Media
Highlights

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Board of
Directors

Haji Mohd Izani Ghani

Dato Sri
Che Khalib Mohamad Noh

Tengku Dato Seri Hasmuddin

Tengku Othman

Dato Haji Mohd Redza Shah

Abdul Wahid

Tan Sri Dato Dr.

Mohd Munir Abdul Majid

14 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

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Dato Mohamed Hazlan

Mohamed Hussain
Dato Haji Kamil Khalid Ariff

Azura Othman

Dato Azmi Abdullah

Nora Shikhen Ramli

(Company Secretary)
Haji Abdul Jabbar Abdul Majid

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Profile of Board of
Directors

Tan Sri Dato Dr. Mohd Munir Abdul Majid

Chairman

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Tan Sri Dato Dr Mohd Munir Abdul Majid is Chairman of Board of Directors and in August he was appointed its
Bank Muamalat and was appointed to the Board of Bank Non-Executive Chairman until July 2011.
Muamalat on 3 June 2008. He is also the Chairman of Veto
Committee. He became the Chairman of Bank Muamalat in 2008. In
February 2014, Dr. Munir was appointed Chairman of
He obtained a B.Sc (Econ) from the London School of CIMB Asean Research Institute and also joined the board
Economics and Political Science (LSE) in 1971 where he of the Institute of Strategic and International Studies
also obtained his Ph.D in International Relations in 1978. (ISIS) Malaysia. He is the Chairman of the Asean Business
He taught at the Department of International Relations in Advisory Council Malaysia Chapter and the chairman
LSE from 1972-1975. He was a research analyst for Daiwa of the Council region-wide in 2015. He is currently the
Europe NV in London from 1975-1978. President of the Asean Business Club and also the Co-
chair of the Malaysia-America Foundation, which seeks to
Dr Munir joined the New Straits Times (NST) at the end deepen relations between the two countries.
of 1978 as a leader writer and progressed to become
the Group Editor. During his time at NST, he published Dr. Munir was the founder President of the Kuala Lumpur
numerous articles on national and international politics, Business Club (2003-2008). In May 2004, he was appointed
and economics. (He continues to write, now as a a member of the Court of Fellows of the Malaysian Institute
columnist for The Star, Malaysias leading English language of Management.
newspaper). He left NST in 1986 to become the CEO of
a small merchant bank, Pertanian Baring Sanwa (PBS), In December 2005, he was made an Honorary Fellow of
whose name he changed to Commerce International the LSE and was appointed Visiting Senior Fellow at LSE
Merchant Bankers (CIMB) which was then transformed into IDEAS in 2008 (Centre for International Affairs, Diplomacy
one of Malaysias leading merchant banks. He was invited and Strategy) where he started the Southeast Asia
by the Government of Malaysia to establish and become International Affairs Programme and led the programme
the first and founding Executive Chairman of the Securities until 2012. He has written for IDEAS publications and
Commission in 1993, where he served for two terms until published in International Politics, a British academic
1999. journal. A collection of his articles was published in a book,
9/11 and the Attack on Muslims. He is a member of the
As the founding executive chairman he was instrumental International Institute of Strategic Studies.
in shaping the legal and regulatory framework of the
capital markets, as well as introducing the countrys first Dr Munir received his early education at St Marks Primary
code of corporate governance. During this time, he was School in Butterworth and the Bukit Mertajam High School
the chairman of the emerging markets committee of the in the state of Penang. He received his upper secondary
International Organisation of Securities Commissions education at the Royal Military College in Sungei Besi near
(IOSCO). In 1997, he received the Cranfield Management Kuala Lumpur where he was awarded the Commandants
Excellence award. Prize for being the best all-round student in 1967. He left
for London the next year.
After leaving the Securities Commission, he served as a
Senior Independent Non-Executive Director of Telekom
Malaysia Berhad for 4 years until June 2004, and was the
chairman of its mobile subsidiary Celcom (M) Berhad from
2002-2004. In June 2004, Dr Munir joined Malaysia Airlines

BANK MUAMALAT MALAYSIA BERHAD (6175-W) 17

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Profile of Board of
Directors
Dato Sri Che Khalib Mohamad Noh
Non-Independent Non-Executive Director

Dato Sri Che Khalib Mohamad Noh was appointed as

a Non-Independent Non-Executive Director of Bank
Muamalat nominated by DRB-HICOM Berhad on 27 August
2012. He is a member of Remuneration, Nomination and
Veto Committees.

Dato Sri Che Khalib is currently the Group Managing

Director of MMC Corporation Berhad. He was the former
President and Chief Executive Officer of Tenaga Nasional
Bhd (TNB), prior to his position as the Chief Operating
Officer - Finance, Strategy & Planning of DRB-HICOM
Berhad.

A qualified accountant, Dato Sri Che Khalib is a member

of the Malaysian Institute of Accountants (CA, M) and
also a Fellow of the Association of Chartered Certified
Accountants (FCCA, UK) United Kingdom.

Dato Sri Che Khalib began his career with Messrs Ernst
& Young in 1989 and later joined Bumiputra Merchant
Bankers Berhad. He was previously a member of the Board
and the Executive Committee of Khazanah Nasional Berhad
from year 2000 to 2004. He also served as a Board member
within the United Engineers Malaysia (UEM) Group of
companies and Bank Industri & Teknologi Malaysia Berhad.

He currently sits on the Board of Gas Malaysia Berhad,

Zelan Berhad, Malakoff Corporation Berhad, Johor Port
Berhad, MMC Engineering Group Berhad, NCB Holdings
Bhd, Aliran Ihsan Resources Berhad, Pos Malaysia Berhad
and several private limited companies.

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Dato Mohamed Hazlan

Mohamed Hussain
Non-Independent Non-Executive Director

Dato Mohamed Hazlan Mohamed Hussain was appointed as a

Non-Independent Non-Executive Director of Bank Muamalat,
nominated by DRB-HICOM Berhad on 27 August 2012. He is
a member of Board Muamalat Banking Solutions Steering
Committee.

He is currently the Group Director of Services and Education

of DRB-HICOM Berhad. Prior to this appointment, he was the
Group Director for Commercial Division, Prasarana Group since
November 2011. Dato Mohamed Hazlan has held various high
ranking positions in diverse organisations including Group
Director for Bus Division, Chief Operating Officer, RapidKL,
Chief Corporate Strategist of Offshore Works Sdn. Bhd. and
Chief Operating Officer of Posmel, Pos Malaysia Berhad from
2007 until 2009.

He started his career with Arnold Hill & Co Chartered

Accountants in London, United Kingdom since 1988 until 1993.
With extensive experience and expertise in trust management
and audit, he returned and joined Projek Lebuhraya Utara
Selatan Berhad (PLUS) where he led the establishment of
Internal Audit Department in 1994. In 1998, he led the Toll
Department before he was promoted to Regional Manager
II managing Operations for Central Region in the same year.
He later became the General Manager of Operations Division
in September 1999 until 2003 and was promoted as a Senior
General Manager in 2004.

He graduated from Imperial College of Science and Technology,

University of London majoring in Civil Engineering leading to
Bachelor of Engineering.

BANK MUAMALAT MALAYSIA BERHAD (6175-W) 19

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Profile of Board of
Directors
Dato Haji Mohd Redza Shah
Abdul Wahid
Chief Executive Officer/Executive Director

Dato Haji Mohd Redza Shah Abdul Wahid is currently Chief

Executive Officer (CEO) of Bank Muamalat and was appointed
to the Board of Bank Muamalat on 1 November 2008.

He holds a Bachelor of Science in Economics in Industry and

Trade (Honours) from London School of Economics, University
of London in 1986 and Master of Science Economics in
International Banking and Finance from University of Wales,
Cardiff.

Dato Haji Mohd Redza Shah became an Associate Chartered

Accountant (ACA) whilst he started his career with Touche
Ross & Co, London (now known as Deloitte & Touche) in 1988
as Trainee Accountant. At the end of 1992 he joined Arab
Malaysian Corporation Berhad as an Internal Audit Manager
and progressed to become the Corporate Finance Manager.

He then joined Khazanah Nasional Berhad when it commenced

operations in July 1994 as a Senior Finance Manager and later
moved to Silterra Malaysia Sdn Bhd, a subsidiary of Khazanah
Nasional Berhad as Chief Financial Officer. He left Silterra
Malaysia Sdn Bhd to spearhead Tradewinds Corporation
Berhad as the Group CEO from September 2002 to November
2005 and Acting CEO of Tradewinds (M) Berhad where he
served from May 2004 until November 2005, prior to his
position as Group Chief Operating Officer of DRB-HICOM
Berhad.

Dato Haji Mohd Redza Shah also sits on the Board of Malaysian
Electronic Payment System Sdn Bhd (MEPS), Islamic Banking
& Finance Institute Malaysia (IBFIM) and Bank Muamalats
subsidiaries. He was recently appointed as director of Raeed
Holding Sdn Bhd, an entity to manage the operation of the
Islamic Investment Account, which is under the purview of
BNM. Dato Haji Mohd Redza Shah is also the President of
Association of Islamic Banking Institutions Malaysia.

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Haji Mohd Izani Ghani

Non-Independent Non-Executive Director

Haji Mohd Izani Ghani was appointed as a Non-Independent

Non-Executive Director of Bank Muamalat Malaysia Berhad
nominated by Khazanah Nasional Berhad (Khazanah), on 1
March 2009. He is a member of Remuneration, Nomination
and Board Risk Management Committees of Bank Muamalat.

He graduated from the London School of Economics and

Political Science in 1991 with BSc (Economics) specialising
in Accounting and Finance. After graduating from LSE, he
pursued his professional accounting qualification from the
Association of Chartered Certified Accountants and admitted
to fellowship in 2000. He is also a member of Malaysian
Institute of Accountants.

He is currently the Executive Director/Chief Financial Officer

of Khazanah. On Islamic finance initiatives, he was deeply
involved in the issuance of the worlds first exchangeable
sukuk for USD750 million in 2006, followed by other landmark
sukuk transactions in SGD and Renminbi currencies in 2010
and 2011 respectively. In relation to RM funding, he was
instrumental in the setting up of various sukuk programmes
at Khazanah. In June 2015, his team launched and priced
worlds first Sustainable and Responsible Investment Sukuk to
fund Trust Schools in Malaysia.

His first exposure to the corporate world was in 1993 when

he joined the then Renong Group. In 1999, he joined the
concession holder of Putrajaya township development,
Putrajaya Holdings Sdn Bhd to assist in the financing for the
construction of the Government office buildings and staff
quarters. He left Putrajaya Holdings in 2005 to join Khazanah.

He is also a director of Malaysia Airports Holdings Berhad and

Fajr Capital Limited.

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Profile of Board of
Directors
Haji Abdul Jabbar Abdul Majid
Non-Independent Non-Executive Director

Haji Abdul Jabbar Abdul Majid was appointed as an

Independent Non-Executive Director of Bank Muamalat since
13 October 2004. Subsequently, he has been re-designated as
a Non-Independent Non-Executive Director by Bank Negara
Malaysia on 12 October 2013. He is a Fellow Member of the
Institute of Chartered Accountants, Australia, as well as a
member of the Malaysian Institute of Accountants. He was a
member of the Executive Council of the Malaysian Institute of
Certified Public Accountants (MICPA).

He is the member of Board Audit, Remuneration, Nomination,

Board Risk Management and Veto Committees.

Haji Abdul Jabbar began his career in 1974 as Senior Manager

in the Internal Audit and Organisation Department of Bank
Pertanian Malaysia. In 1977, he joined KPMG Malaysia as
Manager and was admitted to the partnership two years
later. In 1993, he was promoted to Deputy Senior Partner and
was made Senior Partner in 1995, a position he held until his
retirement in 2000.

Haji Abdul Jabbar then joined Malaysia Derivatives Exchange

Berhad in 2001 and retired as Executive Chairman on 28
February 2004. He was the former president of MICPA. He
was an Adjunct Professor of the Faculty of Economics and
Accounting of the International Islamic University and a
member of the Senate of the Open University Malaysia Board.

He also sits on the Board of Opcom Holdings Berhad.

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Tengku Dato Seri Hasmuddin

Tengku Othman
Independent Non-Executive Director

Tengku Dato Seri Hasmuddin Tengku Othman was

appointed as a Non-Independent Non-Executive Director of
Bank Muamalat since 18 April 2006 and was subsequently
redesignated to Independent Non-Executive Director by Bank
Negara Malaysia on 16 February 2009.

He is the Chairman of Board Audit and Nomination

Committees and is a member of Board Risk Management and
Remuneration Committees.

Tengku Dato Seri Hasmuddin holds a Bachelor of Laws (Hons)

from University of Malaya and was admitted to the Bar in 1987.
He is a practicing lawyer and is currently the principal partner
of Messrs Hisham, Sobri & Kadir. His areas of expertise include
various aspects of Islamic banking and finance, corporate
banking and project financing, corporate matters, corporate
Muamalat Islamic banking and litigation as well as matters
relating to Syariah.

He is a director of a number of companies including Aliran

Ihsan Resources Berhad, Institut Jantung Negara Sdn Bhd, HSK
Corporate Advisory & Consultancy and Rangkaian Hotel Seri
Malaysia Sdn Bhd.

He is also the Chairman of the Task Force on AIBIM National

Land Code Steering Committee and Member of Jawatankuasa
Pemantauan dan Pengawasan Syarikat Jaminan Pembiayaan
Perniagaan Berhad.

He is active in social and charitable activities and has been

appointed as trustee for Yayasan Munarah, Tuanku Najihah
Foundation, Yayasan Institut Quran Kuala Lumpur, Tabung
Amanah Pesakit Malaysia, Institut Quran Tuanku Jaafar and
Yayasan Kolej Islam Sultan Alam Shah.

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Profile of Board of
Directors
Dato Azmi Abdullah
Independent Non-Executive Director

Dato Azmi Abdullah was appointed as an Independent Non-

Executive Director of Bank Muamalat since 16 September
2009. He is the Chairman of Remuneration and Board Risk
Management Committees and member of Nomination, Board
Audit, Board Muamalat Banking Solutions Steering and Veto
Committees.

Prior to joining Bank Muamalat, he was the First Managing

Director/Chief Executive Officer of SME Bank for over 4
years and the Managing Director/Chief Executive Officer of
Bumiputera-Commerce Bank Berhad, where he served for
more than 26 years in various departments.

Dato Azmi graduated with a B.A. (Hons) Degree in Economics

from Universiti Kebangsaan Malaysia (UKM) in 1974. He was
conferred Honorary Doctorate in Business Administration
from Universiti Kebangsaan Malaysia in 2006 and presently a
Director of UKM Holdings Sdn Bhd. He also sits as a Director
in Kumpulan Wang Persaraan (Diperbadankan), APFT Berhad,
ECS Solution Sdn Bhd, Trans National Insurance Broker Sdn
Bhd and a member of the Board and Investment Committee
of Amanah Raya Berhad.

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Dato Haji Kamil Khalid Ariff

Independent Non-Executive Director

Dato Haji Kamil Khalid Ariff was appointed as an Independent

Non-Executive Director of Bank Muamalat on 29 September
2011. He is the Chairman of Board Muamalat Banking Solutions
Steering Committee and member of Board Risk Management
and Board Audit Committees.

He graduated with MBA in International Business from

Michigan, USA in 1979. Prior to this, he obtained Bsc in
Management from Syracuse University, New York and the
Diploma in Public Administration from ITM. His last position
was as the Managing Director/Chief Executive Officer of
Mahkota Technologies Sdn Bhd (formerly known as General
Electric Company of the UK) dealing mainly in the electrical
engineering/supply Industry. Upon his recent retirement, he
has been retained as Advisor to the Mahkota Group. He was
also a Chairman/Director of several other private companies.

In the last 30 years, he has served in numerous Management

and Board positions in several large corporate entities namely
The New Straits Times, Kumpulan Perangsang Selangor Bhd,
Kumpulan Guthrie Bhd and Idris Hydraulic Bhd. During this
time, he was exposed to various multi facet industries which
were advertising and publishing, trading, manufacturing
and engineering. He was also the founder Director of the
Kuala Lumpur Tin Market, which he, as part of a Government
Steering Committee, help set up in the mid 1980s.

Dato Haji Kamil Khalid is also the Chairman of Uni.Asia General

Insurance Berhad and sits on the Board of Gibraltor BSN Life
Malaysia Berhad, Pramerica BSN Holdings Sdn Bhd and Indah
Water Konsortium and its several Board Committees as an
Independent Director.

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Profile of Board of
Directors
Azura Othman
Independent Non-Executive Director

Azura was appointed as an Independent Non-Executive

Director of Bank Muamalat on 24 April 2015. She is a member
of Board Audit and Veto Committees.

Azura graduated with a degree in Accounting and Finance

from the London School of Economics and Political Science.
She is also a Fellow of ACCA (UK), a member of Malaysian
Institute of Accountant and a practicing member of the
Association of Chartered Islamic Finance Professionals (ACIFP).
She is currently a PhD candidate at the International Centre of
Education in Islamic Finance (INCEIF).

Currently, she is the Chief Executive Officer of ACIFP, a

professional standard setting body for Islamic finance
practitioners. She was a former Executive Director of
PricewaterhouseCoopers Taxation Services, Malaysia. She
has over 19 years of experience as a tax consultant and in
engagements relating to Islamic Finance, working together
with the Malaysian Ministry of Finance, Inland Revenue Board
and BNM. Her major assignments include formulating the tax
incentives for Malaysia as the International Islamic Financial
Centre (MIFC).

26 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

Hadith:

The best earning is what

a man earns with his
own hands and from a
permissible trade.

(Al- Hakim: no. 2160)

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Shariah Committee

Ustaz Engku Ahmad Fadzil

Engku Ali
Dr. Wan Marhaini Wan Ahmad

Prof. Madya
Dr. Mohamad Sabri Haron

Ustaz Azizi Che Seman

SS Datuk Dr. Zulkifli Mohamad Al-Bakri

Dr. Ab Halim Muhammad

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Ustaz Haji Azizi Che Seman

Chairman

Ustaz Haji Azizi Che Seman is currently a lecturer at the Islamic Studies Academy, University
of Malaya, a position he has held since 2002. He has been with Bank Muamalat since 1 April
2005. Until now, he is entrusted to be the Chairman for Bank Muamalats Shariah Committee.
He has also been appointed as Shariah Advisor of AIBIM. In terms of qualification, he is
now pursuing his studies in the field of Islamic capital market. He holds a Master Degree in
Economics from International Islamic University of Malaysia in 2001 and a Bachelor of Islamic
Studies from University Malaya in 1996. His specialisation areas are in Islamic Capital Market,
Islamic Economics, Fiqh Muamalat and Islamic Research Methodology. Besides his function
in Shariah advisory, he also contributes his ideas and experiences in the development of
Bank Muamalats IT system.

Ustaz Engku Ahmad Fadzil Engku Ali

Ustaz Engku Ahmad Fadzil Engku Ali has obtained his early education at The Malay College
Kuala Kangsar from 1982 until 1986. He later furthered his study in Laws and successfully
obtained his Bachelors Degree in Laws (Second Class Honors Upper) from the International
Islamic University of Malaysia in 1993. In the subsequent year, he graduated from the same
university with a Bachelors Degree in Shariah Law (First Class Honors). He was called to
the bar, admitted and enrolled as an Advocate and Solicitor of the High Court of Malaya in
1995. He then pursued his studies at Jordan University and in the year 2000, he successfully
obtained a Masters Degree in Islamic Judiciary. Since then until October 2014, he served
as a lecturer at the International Islamic University of Malaysia. Some of the subjects that
he taught at the university were Islamic Law of Successions, Islamic Jurisprudence and
Islamic Criminal Laws. He is now pursuing his PhD at the University of Malaya in Multi-
level Marketing from the perspective of the Islamic Law. He has been a member of Bank
Muamalats Shariah Committee since 2005.

Prof. Madya Dr. Mohamad Sabri Haron

Prof. Madya Dr. Mohamad Sabri Haron is a lecturer at the Centre of General Studies, National
University of Malaysia. He is also an Associate Senior Fellow at Institute of West Asian Studies.
He obtained a Diploma in Islamic Studies from Kolej Sultan Zainal Abidin in 1985 and
Bachelor of Islamic Studies (al-Quran and al-Sunnah) from National University of Malaysia
in 1988. He completed his Master of Comparative Law at International Islamic University of
Malaysia in 1993. He succeeded in obtaining his PhD in Islamic Law (Fiqh and Usul Fiqh) in
1998 from University of Jordan. He has been with Bank Muamalat since December 2003.
His specialisation areas are in Islamic Economics and Islamic Civilisation. He has also been
seconded to the Securities Commission as the Senior Manager in Islamic Capital market
starting from 1 June 2009 until 31 May 2010.

BANK MUAMALAT MALAYSIA BERHAD (6175-W) 31

a n n u a l r e p o r t 2 0 1 5

Profile of Shariah
Committee

Dr. Ab Halim Muhammad

Dr. Ab. Halim Muhammad graduated in 1972 with a Bachelors Degree of Shariah from Al-
Azhar University, Cairo Egypt and completed his studies in PhD of Shariah at St. Andrews
University Scotland in 1977. He served as a lecturer and became the Head of Department
of Quran & Sunnah, Faculty of Islamic Studies Universiti Kebangsaan Malaysia. Some of the
subjects that he taught were Islamic Jurisprudence (Muamalat, Islamic Banking & Islamic
Finance and Takaful), Principles of Islamic Jurisprudence and Islamic Criminal Laws. He was
the first Chairman of Shariah Committee of Bank Muamalat prior to joining National Shariah
Advisory Council of Bank Negara Malaysia in 2004. He has been re-appointed as a member
of Bank Muamalats Shariah Committee since 30 November 2009.He was also a member of
Shariah Committee of Security Commission and currently he is Shariah Committee of ASDI
Unit Trust Terengganu, Apex Unit Trust and Reit Johor. Recently, he has been appointed as
Ahli Jamaah Ulama Majlis Agama Islam Negeri Kelantan.

SS Datuk Dr. Zulkifli Mohamad Al-Bakri

SS Datuk Dr. Zulkifli Mohamad Al-Bakri obtained his early education at Sek. Men. Agama
(Atas) Sultan Zainal Abidin, Terengganu and furthered his study in a Bachelors Degree at
Universiti Islam Madinah, Arab Saudi prior to entering Universiti Ilmu-Ilmu Islam Dan Arab,
Syria to finish his Masters. He succeeded in obtaining his PhD at USM, Pulau Pinang in
2004. He served as a lecturer in Universiti Sains Islam Malaysia from 2006-2009. He is now
focusing more on writing and has written many books in Fatwa, Islamic Law and Islamic
Jurisprudence. He has a vast experience in Islamic Banking as he was formerly the Chairman
of Shariah Committee of Bank Pertanian Malaysia prior to joining Bank Muamalat on 1 April
2011. He is also an expert and capable in providing fatwa, as he served as a member of
Fatwas Committee for state of Negeri Sembilan and the Chairman for Shariah Committee
in World Fatwa Management and Research Institute (INFAD) at USIM. He also frequently
appears in the local television and radio programme on various Islamic fields. He was
proclaimed as Mufti Wilayah Persekutuan effective 20 June 2014.

Dr. Wan Marhaini Wan Ahmad

Dr. Wan Marhaini Wan Ahmad is currently a senior lecturer at the Finance and Banking
Department, University of Malaya, a position she has held since 2002. She completed her
doctorate in Zakat Investment at the University of Edinburgh, United Kingdom in 2012. She
received a Masters Degree in Economics from International Islamic University of Malaysia in
2002 and has a degree in Shariah from the Academy of Islamic Studies University of Malaya
in 1996. Her research interests lies in the area of Fiqh Muamalat, Islamic Economics, Islamic
Finance and Banking. In the University of Malaya, she has experiences teaching both Islamic
and conventional economics and finance for both undergraduate and Masters programmes
(MBA and MM). Currently, she teaches principles of Islamic economics and Islamic finance as
well as the applications of modern Islamic banking, takaful and Islamic capital market. Prior
to joining Bank Muamalat, she has served as a Shariah Committee member for EONCAP
Islamic Bank Berhad from April until November 2011.

32 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

Hadith:

May Allah have mercy on the

tolerant man when he buys,
when he sells and when he
demands payment.

Al-Bukhari
a n n u a l r e p o r t 2 0 1 5

Terms
of Reference

Objective/Purpose Authority
These terms of references were prepared These Terms of reference are governed by the
to inform and notify the appointed Shariah IFSA 2013 (including any amendment that
Committee on all relevant matters pertaining to will be made from time to time)(Laws and
their duties, processes and procedures. Regulations).

Duties, Responsibilities & Accountability of the Shariah (4) Endorse and validate relevant documentations
Committee To ensure that the products of Bank Muamalat
comply with Shariah principles, the Shariah
The main duties and responsibilities of the Shariah Committee must approve:
Committee are as follows:
i. the terms and conditions contained in the
(1) Responsibility and accountability forms, contracts, agreements or other legal
The Shariah Committee is expected to understand documentations used in executing the transactions;
that in the course of discharging the duties and and
responsibilities as a Shariah Committee member
must be in accordance with Laws and Regulations ii. the product manual, marketing advertisements,
in respect of duties and obligations of the Shariah sales illustrations and brochures used to describe
Committee member, and responsible and the product.
accountable for all Shariah decisions, opinions and
views provided by them. (5) Assess work carried out by Shariah review and
Shariah audit
(2) Advise to the Board and Bank Muamalat To assess the work carried out by Shariah review and
including Bank Muamalats subsidiaries Shariah audit in order to ensure compliance with
The Shariah Committee is expected to advise the Shariah matters which forms part of their duties in
Board, Management including Bank Muamalats providing their assessment of Shariah compliance
subsidiaries and provide input to Bank Muamalat and assurance information in the annual report.
on Shariah matters in order for Bank Muamalat to
comply with Shariah principles at all times. (6) Assist related parties on Shariah matters
The related parties of Bank Muamalat such as its
(3) Endorse Shariah policies and procedures legal counsel, auditor or consultant may seek advice
The Shariah Committee is expected to endorse on Shariah matters from the Shariah Committee
Shariah policies and procedures prepared by Bank and the Shariah Committee is expected to provide
Muamalat and to ensure that the contents do the necessary assistance to the requesting party.
not contain any element which is not in line with
Shariah.

34 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

 a n n u a l r e p o r t 2 0 1 5

(7) Shariah Advisory Council, Bank Negara Malaysia (11) Report to the shareholders and the depositors
The Shariah Committee may advise Bank Muamalat that all Bank Muamalats activities are in
to consult the Shariah Advisory Council of Bank accordance with Shariah.
Negara Malaysia (SAC) on Shariah matters that
could not be resolved. (12) Provide Shariah advisory and consultancy
services in all matters relating to Bank Muamalats
In cases where there are uncertainties and products, transactions and activities as well as
differences of opinions, Bank Muamalat may seek other businesses involving Bank Muamalat.
advice and refer for a ruling from the SAC. The
request for advice shall be communicated through (13) Scrutinize and endorse the annual financial
the Secretariat of the SAC. report of Bank Muamalat.

Members of the Shariah Committee must not act (14) Provide training to the staff as well as notes or
in a manner that would undermine the rulings and relevant materials for their reference.
decisions made by the SAC or the committee they
represent. They are required to respect and observe (15) Represent Bank Muamalat or to attend any
the published Shariah rulings issued by the SAC and meetings with the SAC or other relevant bodies
shall not go against the decisions of the committee concerning any Shariah issues relating to Bank
that they represent in public. Muamalat.

In cases of disputes and court proceedings related (16) The Shariah Committee shall maintain the
to Islamic financial business or any Shariah issues confidentiality of Bank Muamalats internal
arising from Bank Muamalats business operations, information and shall responsible for the safe
both the court and the arbitrator shall take into guarding of confidential information. He or
consideration the published rulings of the SAC or she should maintain all information in strict
refer such issues to the SAC for its ruling. Any ruling confidence, except when disclosure is authorized
made by the SAC arising from a reference made by Bank Muamalat or required by law.
shall be binding on Bank Muamalat and the court or
the arbitrator. In the event where the decision given
by Bank Muamalats Shariah Committee is different 17) The Shariah Committee shall ensure the quality
from the ruling given by the SAC, the rulings of the and consistency of the Shariah decisions.
SAC shall prevail. However, the Shariah Committee is
allowed to adopt a more stringent Shariah decision.

(8) Provide Written Shariah Opinions

The Shariah Committee is required to provide
written Shariah opinions in circumstances where
Bank Muamalat make reference to the SAC for
further deliberation, or where Bank Muamalat
submits applications to Bank Muamalat for new
product approval.

(9) Provide Bank Muamalat with guidelines and

advice on religious matters to ensure that Bank
Muamalats overall activities are in line with
Shariah.

(10) Make decisions on matters arising from existing

and future activities of Bank Muamalat which
have religious repercussions.

BANK MUAMALAT MALAYSIA BERHAD (6175-W) 35

a n n u a l r e p o r t 2 0 1 5

Statement
from The Chairman of
Shariah Committee

In line with its vision to become the preferred Islamic financial services provider, Bank
Muamalat has set distinguished example in the industry as one of the leading Islamic
banks. The Committees and Bank Muamalats adherence to the Shariah Governance
Framework (SGF) for Islamic Financial Institutions (IFI) issued by Bank Negara Malaysia
(BNM) has placed Bank Muamalat among the best Islamic Financial Institution in
terms of Shariah governance. Bank Muamalat has exemplified initiatives in promoting
Shariah not only in the domain of its product offerings but encompassing all aspects
in the organisation.

36 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

 a n n u a l r e p o r t 2 0 1 5

As Shariah Committee of Bank Muamalat, we have given our utmost dedication to quality and demonstrated our commitment
to ensure Shariah compliance in the products, process, documentations, marketing, IT systems and other related matters.
With the assistance of other SGF organs within Bank Muamalat, we believe that we have played our role to oversee Shariah
matters related to Bank Muamalats business operations and activities. Besides regular banking businesses, the Committee
also supports the development of other Shariah based products and services initiated by Bank Muamalat namely wakaf,
rahn, zakat and qardh to fulfill the need of the Ummah at large. Bank Muamalat has increasingly involved on wakaf land
projects and corporate social responsibility over the years and this is what differentiates us from other entitites.

Now, we are challenged by the new law, the Islamic Financial Services Act 2013 (IFSA) which has been enforced in June 2013.
The IFSA has been characterised as omnibus financial legislation, that repeals the Islamic Banking Act 1983 and the Takaful
Act 1984; which combines the Islamic financial and takaful services under the aforementioned acts in a similar fashion.
The IFSA provides the regulation and supervision of IFI, payment systems and other relevant entities. It also provides the
oversight of the Islamic money market and Islamic foreign exchange market to promote financial stability and compliance
with Shariah.

Pursuant to the enforcement of Islamic Financial Services Act 2013 (IFSA), certain changes are to be made in Bank Muamalat
such as the transition of saving based account and Mudarabah based account which challenges the operation of Bank
Muamalat. However, the positive perspective has to be set in mind as the changes will make Islamic banking more progressive.
Currently, Bank Muamalat is moving forward to the development of some new products that will be offered in line with IFSA
requirement.

During the FY 2015, Muamalat Banking Solution (MBS) project is the main transformation agenda of Bank Muamalat and
poised to transform it into an innovative and competitive player in the financial market. It involves the replacement of the
former core banking system and supporting applications with a single integrated, comprehensive and complete suite of
Shariah compliant banking solution. Decommissioning the legacy system and replacing it with this new integrated system
will improve efficiency in distribution and delivery. The MBS project will minimise human errors, system will be automated
and proper and sequence of aqad can be ensured. Alhamdulillah, it was a smooth and successful transition for which all
those involved can be proud and are to be congratulated.

We would like to extend our warmest congratulations to the Board of Directors and the Management for their genuine
concern and strong passion to ensure not only the productivity and profitability of Bank Muamalat, but also to assure the
dictates and requirements of Shariah are properly observed and adhered to. Indeed, we are very thankful and proud of
such cooperation received, especially from the Management and generally from the staff, in providing the Committee with
adequate information and materials in ensuring our deliberations on each issue would be resolved accordingly. We also
congratulate Bank Muamalat as the MBS project has become a reality and InsyaAllah will benefit Bank Muamalat to gain its
mission and vision.

It is highly hoped and reasonably anticipated that Bank Muamalat becomes more relevant in this increasingly challenging
industry while upholding the Shariah implementations and applications in the Islamic banking and business without
undermining the never-ending quest for the ultimate goal of gaining Allahs blessing and pleasure.

Thank you

Regards

Ustaz Haji Azizi Che Seman

Chairman, Shariah Committee

BANK MUAMALAT MALAYSIA BERHAD (6175-W) 37

 a n n u a l r e p o r t 2 0 1 5

Senior
Management

PeerMohamed
Ibramsha
Chief Operating Officer Adinor Mohamed Yunus Jamilah Abdul Sallam
(Operations Division) Chief Risk Officer EVP, Human Capital Division

Hafni Mohd Said

EVP, Finance Division Gary Chin
EVP, ICT Division

38 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

 a n n u a l r e p o r t 2 0 1 5

Haji Ismail Ibrahim Syed Alwi Mohd Sultan

EVP, Credit Management EVP, Corporate Services

Dato Haji Mohd Redza Shah

Abdul Wahid
Chief Executive Officer

Mashitah Hj Osman
Chief Operating Officer
(Business Division)

BANK MUAMALAT MALAYSIA BERHAD (6175-W) 39

a n n u a l r e p o r t 2 0 1 5

Profile of Senior
Management
PeerMohamed Ibramsha
Chief Operating Officer - Operations Division

PeerMohamed is currently the Chief Operating Officer Operations Division

and his current portfolio covers Operations Division, Business Process &
Transformation Department, Security & Safety Department, Trade Finance
Department, Treasury Processing & Settlement Department and Data Quality
Department. He holds a Bachelors Degree in Accountancy and is also a
member of Malaysian Institute of Accountant and a Fellow Certified Practicing
Accountant (FCPA) with CPA Australia. He has been with Bank Muamalat
since November 2008. Prior to this, he was the CFO of Alam Flora Sdn Bhd
for approximately 2 years and CFO of Glenmarie Properties Sdn Bhd Group of
companies for approximately 10 years.

Mashitah Haji Osman

Chief Operating Officer, Business Division

Mashitah is a holder of a Masters Degree in Business Administration from

University of Wales and has over 30 years of experience in Investment Banking.
She was named one of the top 15 female movers and shakers in the Shariah
finance industry by Islamic Finance Asia.

She joined Bank Islam in November 2006 to set up and head the Corporate
Investment Banking Division, encompasses 3 distinct departments offering
corporate finance, debt capital market and corporate banking products and
services. Prior to Bank Islam, she was attached to RHB Investment Bank Berhad
to lead the Islamic Finance department mainly specialising in Islamic Debt
Capital Market.

In September 2014, she joined Bank Muamalat as Chief Operating Officer to

oversee the business operations of Deposit, Consumer, Business Banking and
Investment Banking.

40 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

 a n n u a l r e p o r t 2 0 1 5

Haji Ismail Ibrahim

Executive Vice President, Credit Management

Haji Ismail joined Bank Muamalat as an Executive Vice President, CEOs Office in April 2012
and was subsequently redesignated to Executive Vice President, Operations on 1 February
2013 with direct oversight of Business Process & Transformation, Credit Operations,
Document Management, Compliance, Treasury Processing & Settlement and Trade Finance
Departments. He was redesignated to Executive Vice President, Credit Management Division
since 9 September 2014.

Prior to joining Bank Muamalat, Haji Ismail was on the Board of Kuwait Finance House
(Malaysia) Berhad as an Independent Non-Executive Director. He started his career in Agro
Bank Malaysia Berhad (formerly known as Bank Pertanian Malaysia Berhad), and later moved
to United Overseas Bank (Malaysia) Berhad [formerly known as Chung Khiaw Bank (Malaysia)
Berhad/Lee Wah Bank Limited] and Affin Bank Berhad (formerly known as Perwira Habib Bank
Berhad).

In 1992, he joined Public Bank Berhad as the Director, Credit Operations overseeing
credit evaluation, credit administration and loan recovery. He was also the pioneer staff
in the development of Islamic banking in Public Bank Berhad and played a key role in the
establishment of Public Islamic Bank Berhad, a wholly owned subsidiary of Public Bank Berhad.

He was appointed as the Chief Executive Officer of Public Islamic Bank and remained on the
post until his retirement in January 2011. Haji Ismail brings with him a wealth of 42 years of
banking experience in areas of credit evaluation, loan recovery, credit administration, branch
management and Islamic banking operations.

Adinor Mohamed Yunus

Chief Risk Officer & Head of Risk Management

Adinor is currently the Chief Risk Officer with direct oversight of Risk Management
Department, Credit Assessment Department, and the Regional Approving Center
which is the central approving unit for all consumer financings. He also serves
as a member of the Management Committee, Executive Risk Management
Committee, Investment Committee, IT Steering Committee and Asset Liability
Committee.

He has spent more than 20 years in the Treasury and Capital Markets at various
banks in Kuala Lumpur and Jakarta. His last appointment was the Head of Group
Treasury at Bank Pembangunan Malaysia Berhad, prior to joining Bank Muamalat
in 2011.

He holds a Bachelor of Business Administration (Accounting and Finance) and a

Master of Business Administration from Loyola University, USA

BANK MUAMALAT MALAYSIA BERHAD (6175-W) 41

a n n u a l r e p o r t 2 0 1 5

Profile of Senior
Management
Syed Alwi Mohamed Sultan
Executive Vice President, Corporate Services Division

Syed Alwi is the Executive Vice President, Corporate Services Division at Bank
Muamalat with direct oversight of Product Development and Innovation
Department and Shariah Department. He serves as a member of the
Management Committee, Executive Risk Management Committee, Investment
Committee and Asset Liability Committee. He also sits as a Board member of
Muamalat Invest Sdn. Bhd, a wholly owned subsidiary of Bank Muamalat.

Prior to joining Bank Muamalat, Syed Alwi was the Managing Director and Head
of Islamic Banking, Asia Pacific at BNP Paribas, Director of Islamic Origination
at Standard Chartered Saadiq Malaysia Berhad and Vice President, Corporate
Banking-Asia at The Islamic Bank of Asia Limited, Singapore. Syed Alwi has more
than seventeen (17) years of working experience in the Islamic financial services
industry, both as a consultant and a banker. He has been involved in arranging
and structuring several syndicated Islamic facilities, Sukuk transactions and
Islamic derivative transactions for clients in Asia Pacific and Middle East.

He is an Accounting graduate and also holds an MBA in Islamic Finance (First

Class) from the International Islamic University Malaysia.

Gary Chin
Executive Vice President, Information Communication
Technology Division

Gary is currently the Executive Vice President of Information

Communication Technology Division, Bank Muamalat. He
holds a Bachelor of Science in Computer Science and Statistics
from Sydney University in 1986, and Post Graduate Diploma
in Electrical Engineering majoring in Communications.

He is a leading expert in the IT Networking and

Communication industry, in the APAC region. Technically
competent with numerous ICT Engineering and Training
certifications on most leading industry products, specialising
in mobility, voice over IP, routing and switching technology.

Gary has more than 28 years in ICT with international exposure

and technically certified and competent Consultant for many
major Networking and Communications companies, with
expertise in integrating data and voice networks.

42 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

 a n n u a l r e p o r t 2 0 1 5

Hafni Mohd Said

Executive Vice President, Finance Division

Hafni is currently the Executive Vice President of Finance Division,

Bank Muamalat. He holds a Bachelor of Commerce (Accounting)
from Dalhousie University, Halifax, Canada, and in 2008 he completed
his Master in Business Administration (Finance) from Universiti Putra
Malaysia.

He joined Bank Muamalat in July 2010 as the Chief Internal Auditor

and has been given a new role in Finance Division of Bank Muamalat
since October 2014.

Prior to joining Bank Muamalat, Hafni started his working career with
RHB Bank Berhad as a Management Trainee since completion of his
bachelors degree in 1992, and his last position at RHB Bank Berhad
was as the Vice President, Head of Islamic Banking & Subsidiaries
Audit Department.

Jamilah Abdul Sallam

Executive Vice President, Human Capital

Jamilah is the Executive Vice President of Human Capital Division, Bank

Mualamat. She holds a Masters degree of Arts in Human Resources
Management from University of Lincolnshire & Humberside, United
Kingdom.

With more than 27 years of experience as an HR practitioner in

the financial services industry, Jamilah has in-depth knowledge in
Human Resources Management. Her areas of expertise include
Strategic HR Management, Organisational Development and Change
Management, Compensation and Benefits Strategies, Performance
Management, Employee Relations and Training & Development.

Prior to joining Bank Muamalat, Jamilah was the General Manager,

Human Resources in Bank Islam Malaysia Berhad and Senior Vice
President of Human Resources at RHB Investment Bank Berhad.

BANK MUAMALAT MALAYSIA BERHAD (6175-W) 43

a n n u a l r e p o r t 2 0 1 5

Chairmans
Statement
TAN SRI DATO DR. MOHD MUNIR ABDUL MAJID
Chairman

Best Advisory Family Top Institutional Unit

Takaful Sales Campaign Trust Adviser (IUTA)
performance by Great Qualifier
Eastern Takaful in unit trust sales by
IFAST

46 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

 a n n u a l r e p o r t 2 0 1 5

Dear Fellow Stakeholders, rising cost of funds creating a low margin environment
and tougher requirements on regulatory compliance.
Over many years now, I would typically begin the However, prudential regulations especially with regards
Chairmans Statement with a review of the business to tighter regulatory capital requirements have created
environment and the performance and activities of a banking sector with strong capitalisation and ample
Bank Muamalat during the past year. For the year 2014, liquidity. The Islamic financial sector continued its growth
however, I wish to take a few moments to reflect on the momentum as it grew by 12% in 2014 to account for
tragedies involving the missing MH370, the crashed MH17 25.6% of total banking system assets and is thus marching
plane, the tragic floods that hit many parts of Malaysia steadily towards the target of 40% of banking system
in December 2014, the Air Asia and other tragedies that assets by 2020.
affected Malaysians of all walks of life. Our condolences
go out to all those affected. These tragedies brought the FINANCIAL RESULTS
best out of us too, as I proudly witnessed the relentless
efforts by the staff of Bank Muamalat responding to these Against the above backdrop, I am pleased to report
tragedies. They were all nothing against the magnitude of that Bank Muamalat did commendably well as it posted
the calamities, but even feeble efforts show we are above a higher revenue of RM1.072 billion, a 6.8% increase
all part of the communities that we serve and that these from the revenue of the previous financial year. This was
communities are at the centre of our world. mainly driven by its stable financing growth as well as
contributions from fee based income. Nevertheless, due
Getting back to the norm of my usual Chairmans to increased cost of funds and large impairment charges
Statement, let me note the global economy in 2014 on financing during the year, the Profit Before Tax (PBT)
continued to show serious structural problems - weighed declined by 41% to RM122 million and the Return on
down by low growth, high debt and high unemployment. Equity (RoE) was dragged down to 6.78% compared to
Six years after the start of the Western financial crisis, 12.46% in the previous financial year.
the global economic recovery continued to rely heavily
on accommodative monetary policies in advanced Bank Muamalats gross financing increased by 12.5%
economies, which were intended to support economic driven predominantly by an 18.5% increase in residential
growth by encouraging economic risk taking. Whilst the property. The financing portfolio was RM13.7billion at the
benefits of monetary easing became more evident in end of the financial year. For FY 2014, Bank Muamalats
some economies, it has also resulted in growth in global total assets stood at RM22.4 billion.
debt in many countries, raising the ratio of global debt to
global GDP by 17%, by some estimates. These higher levels The capital position of Bank Muamalat remained solid with
of debt threaten financial stability and pose a greater risk a Total Capital Ratio of 16.10% and Common Equity Tier 1
of a crisis. ratio of 13.30%, well above the minimum requirements
under Basel III guidelines. Bank Muamalats gross impaired
In 2014, the Malaysian economy recorded a stronger financing ratio continued to improve and as at March
growth of 6.0% (2013: 4.7%), driven by continued strength 2015, the ratio stood at 2.5%, an improvement from the
in private domestic demand and improved performance in 2.7% in 2014. The downward trend is expected to continue
the external trade sector. In July 2014, the Monetary Policy further as Bank Muamalat maintains its focus on robust
Committee (MPC) raised the Overnight Policy Rate (OPR) credit analysis and control process and credit risk policies.
by 25 basis points to 3.25%, the first adjustment since May
2011 with the dual aim of maintaining steady economic Bank Muamalat continued its active engagement in
growth whilst mitigating any risk of financial imbalance. diversifying its funding base and easing concentration risk
Inflation rate averaged 3.2% in 2014, an increase from concerns. One of the initiatives was the Oh Yeah deposit
the 2.1% of 2013, driven mainly by domestic cost factors campaign which had the impact of growing total deposits
arising from upward adjustments in the prices of selected to RM19.6 billion as at March 2015 from RM17.6 billion in
previously price-administered items such as petrol, sugar the preceding year. The Financing to Deposit ratio was
and electricity. registered at a healthy level of 70.1%.

The banking sector remained intensely competitive with

BANK MUAMALAT MALAYSIA BERHAD (6175-W) 47

a n n u a l r e p o r t 2 0 1 5

Chairmans
Statement

PROGRESS AND CHALLENGES

I am delighted to inform that in June 2014, Bank Muamalat

recorded an important breakthrough as it successfully
completed the installation of its new core banking system
- the Muamalat Banking System - a single integrated,
comprehensive and complete suite of Shariah compliant
core banking solution. This new core banking system
will set the foundation for Bank Muamalat to achieve
accelerated growth through improved efficiency and
enhanced product roll out that is tailored to meet the
needs of customer requirements.

Bank Muamalat extended its successful deposit campaign,

Oh Yeah 2 campaign, with the emphasis to diversify
sources of deposit and grow our customer base. This
second edition of the savings campaign managed to
accumulate a total savings in excess of RM380 million with
more than 41,000 new accounts registered.

In line with Bank Muamalats strategy to garner larger

contribution from fee based businesses, Bank Muamalat
expanded its Ar-Rahnu (pawn broking) business and
strengthened its wealth management, bancatakaful and
Investment banking services. The Ar-Rahnu business
continues to contribute credible fee-based income to the
top line and Bank Muamalat will continue to monitor ways
to optimize the resources for this business. Currently, our
Ar-Rahnu services are available at 27 branches nationwide.
Our wealth management business also witnessed a
sterling performance as it exceeded its target during the
financial year amid market and regulatory headwinds. I
am delighted to note that Muamalat LifeHEBAT Campaign
managed to surpass Great Eastern Takaful 2015 financial
year target by 131% within just 7 months. This achievement
has been acknowledged as the best advisory family takaful
sales campaign performance by Great Eastern Takaful in
their history of Bancatakaful sales. Bank Muamalat was also
crowned as the Top Institutional Unit Trust Adviser (IUTA)
Qualifier in unit trust sales by IFAST at its recent Global
Wealth Advisers Symposium. Bank Muamalat has also
become the first Islamic bank to implement an integrated
platform model that allows customers to access a broader
selection of Shariah compliant unit trusts funds through
Bank Muamalats branches nationwide.

We started our first Bureau de Change (BDC) business

which was opened at the KLIA2 terminal last year. Despite
the tragic events that affected tourism business in Malaysia
during the year, the BDC business has shown encouraging

48 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

 a n n u a l r e p o r t 2 0 1 5

performance. Bank Muamalat has now opened a second ratio and liquidity coverage ratio requirements.
BDC outlet with the launch of the BDC at KLIA Main
Terminal. We hope to achieve greater diversification of The fall in oil prices and the continued sluggishness
revenues through the BDC business and help further of the price of crude palm oil (CPO) may pose risks on
contribute to our fee based income portfolio. the countrys economic fundamentals and on the oil
and gas and palm oil industry respectively. For Islamic
On the Small and Medium Enterprise (SME) business banks in particular, the (IFSA) is expected to strengthen
segment, we have restructured the business model the employment of Shariah contracts towards product
towards consolidating the business. To gain market share development initiatives which will witness greater product
in this segment, we launched the Muamalat BizSTAR-i innovation, heighten customer education initiatives and
product during the year to provide options on ownership reinforce internal Shariah risk governance.
of business premises targeted at business clients.
Despite the weaker financial performance during the
Bank Muamalats asset management subsidiary, year, we are committed to ensure that the performance
Muamalat Invest Sdn Bhd (MISB), continued to grow of the bank improves in the next financial year despite
in terms of assets under management (AUM). As at the challenging environment. Bank Muamalat has put
end of the FY2015 the AUM stood at RM2.7billion, a in place clear strategies to address credit quality, yield
commendable 50% growth from the AUM of the previous improvement, effective cost management, efficient
year. This accomplishment was achieved through the process improvements and diversification of sources
series of wholesale funds that were launched during the of revenue, profit and growth, without compromising
year that contributed to the performance and growth customer service, risk management and regulatory and
and widened the footprint of MISB in the wholesale Shariah compliance.
Islamic fund market.
The FY2015 will compel us to exercise greater discipline
At Bank Muamalat, it is part of our corporate belief and focus in executing our plans and strategies. We will
system to be a socially responsible corporate entity adopt a penetration strategy in the consumption credit
towards creating sustainable communities and society. business and Ar Rahnu business, to improve yields and
Bank Muamalats Tabung Mawaddah under Masih Ada diversification of sources of income as well as to further
Yang Sayang (MAYS) programme continued to run expand the Ar Rahnu business to other selected branches.
activities to support the communities, especially the less As for the other businesses such as house financing,
fortunate. Among them are contributions to improve the business banking and SME segment we will continue
infrastructure of Tahfiz schools and selected mosques. to maintain market share whilst being prudent on asset
Bank Muamalat has also contributed in the construction quality. Our two BDC outlets are expected to supplement
of the knowledge complex in Penang as well as in consistent fee based income and improve our yields.
providing dedicated transportation vehicles for selective
mosques and Tahfiz schools nationwide. We will continue on our efforts to develop innovative
products especially in managing our liability profile and
PROSPECTS improving fee based income. Amongst these are the
Investment Account products and current and savings
The Malaysian economy is expected to soften in 2015 with account (CASA) products which will be designed to comply
BNM projecting GDP growth of between 4.5%-5.5%. With with the classifications provided under IFSA. We will
the weakening of the Ringgit, problems in the euro zone, enhance the strategy of deploying the Corporate Payment
a moderation in Chinas GDP growth and softer Japanese and Collection System (CPCS) and continue our focus on
economy, growth is anticipated to be primarily driven the niche strategy of managing cash and payments for
by the domestic economy, led by private consumption government agencies.
and private investment as exports take a back seat.
The banking sector will continue to experience intense Our asset management business under MISB is expected
competition and margin compression as banks keep on to gain further ground and gradually increase its income
competing for funds to manage key performance and contribution to the group. We foresee that our securities
ratios including financing to deposit ratio, cost to income investment activities will face headwinds given the

BANK MUAMALAT MALAYSIA BERHAD (6175-W) 49

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Chairmans
Statement

volatilities in the interest rate, credit and currency their guidance, counsel, insights and support.
markets. Our Investment banking activities will continue
to concentrate on origination of private debt securities I wish to thank the relevant authorities, in particular Bank
and spearhead the banks initiatives on Musharakah based Negara Malaysia, the Securities Commission and the
partnerships. Ministry of Finance for their continuing guidance and
assistance.
We have over the last few years consciously strengthened
our risk management practices and instilled stronger risk I would also like to extend my gratitude to our customers
management culture. Towards this end, we will continue for their continued support and loyalty. May Allah bless
to improve our tools and systems to enable us to make our efforts and provide us with His continued sustenance.
sound decisions that will inspire confidence from our
stakeholders, namely our customers, shareholders and
regulators. Yours Sincerely,
Tan Sri Dato Dr Mohd Munir Abdul Majid
Moving forward, we are clearly focused on managing our
costs to improve efficiency, diversifying our sources of
revenue, profit and growth through product innovation,
customer service and technological improvements.
Customers are the core of banking services thus we will
ensure our product roll-out and services are tailored
towards the various customer segments that we serve.
People are the key component of our organisation, thus
we will invest in our human capital resources and ensure
we retain and channel talent towards realising their
true potential. Finally, we will continue being a bank
of the community for the community and give back to
the communities that we serve through our corporate
responsibility initiatives.

ACKNOWLEDGEMENT

In June 2014, Encik Hisham Zainal Mokhtar resigned from

the board. We have benefitted from his vast experience
and we would like to thank him for his contribution.

I would like to take this opportunity to welcome Puan

Azura Othman as a member of the Board of Directors. Her
tenure as Non-Executive Director was effective beginning
April 2015. We are fortunate to benefit from her 19 years of
experience as a tax consultant and numerous involvements
relating to Islamic Finance, working together with the
Malaysian Ministry of Finance and Bank Negara Malaysia.

On behalf of the Board, I would like to sincerely express

thanks to the management team and all members of
staff at Bank Muamalat for their leadership, commitment
and hard work towards making Bank Muamalat a bank
of choice for our customers and look forward to their
continued contribution in the years ahead. I would also like
to record my appreciation to my fellow Board members for

50 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

 a n n u a l r e p o r t 2 0 1 5

...Truly many are the partners

(in business) who wrong each
other: Not so do those who
believe and work deeds of
righteousness, and how few
are they!...
(Sad: 24)

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52 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

 a n n u a l r e p o r t 2 0 1 5

An interview
with the CEO
Dato Haji Mohd Redza Shah Abdul Wahid
Chief Executive Officer

BANK MUAMALAT MALAYSIA BERHAD (6175-W) 53

a n n u a l r e p o r t 2 0 1 5

1
A building is not just a In October 2014, Bank Muamalat turned 15 years. Can
you share with us a bit of history about Bank Muamalat
building but a foot print of and how you became the CEO?

an organisation. It breathes; I still remember this as clear as day. It was back in 1998, and
it grows as part of the the financial crisis had hit us very hard. I was then a Senior
Manager at Khazanah and remember very well attending a
community surrounding it. meeting between Khazanah and MOF officials strategising

Its past present and future ways moving forward for Bank Bumiputra to identify a
possibility at further capital injected by Khazanah. Hardly
is a legacy of retold, told 6 months had passed, Khazanah was approved by Bank of

and untold storiesits Commerce on the mandate to merge Bank of Commerce

(BOC) with Bank Bumiputra Malaysia Berhad (BBMB) and
failure, its success has been by the time, there were already a MOU signed between

imprinted on its walls and in BOC and BBMB. The rest, I guess is history as this was the
start of the birth of the Bumiputra Commerce Group and
time it rises to be stronger. Bank Muamalat Malaysia Berhad.

Bank Muamalat was born out if the desire of the

As like any other bank, Bank Government to want to see competition within the Islamic
Banking Framework as Bank Islam had existed then for
Muamalat has been here more than 15 years and Islamic Banking had not made

serving the community significant inroads in the conventional demand industry.

1,000 of the Bank Bumiputra staff were given another
with all its financial needs. hope by the Government granting this 2nd Islamic license

For the past 15 years Bank to Bank Muamalat. The Governments commitment too
Bank Muamalat is enormous and very noble.
Muamalat has grown in In the year 2008, the entrance of our current shareholder
time with the community. to support the growth of the Bank saw another additional

Always striving to provide capital injection of RM500 million being made by both
DRB-Hicom and Khazanah.
better and more efficient
services, including offering It was a bit of a surprise to me when I was appointed
as the CEO of Bank Muamalat, as I was involved in the
a wide range of products. recruitment of the CEO for Bank Muamalat. And in the
process somehow rather I was selected as the CEO. Bank
Muamalat is one of DRBs biggest acquisitions at that time.
DRB-Hicom had sent 6 of its best people seconded to Bank
Muamalat to assist in the first few years and as for me, I
took it as a personal challenge.

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As any other organisations, the first year I was with the Despite the increasingly challenging landscape, we
bank, there were a lot of challenges and issues that needed have achieved a great deal in many areas which include
rectification. One of the major challenges was to gain the improvement in infrastructure, people, processes as well
regulators confidence in how we should turn around the as our products & services and this has contributed to our
bank and we presented our business plan but they were improved balance sheet and financial position.
not convinced. We then did a quick win to tackle our NPF.
Alhamdulillah, we managed to tackle the NPF of the bank Our products and services are not just meant for Muslims,
from a high 4% to a low 1%. Roles of Chief Risk Officer and it is in fact for all and this is part of our effort to have a
Chief Compliance Officer were introduced to strengthen better engagement beyond the Muslim community. Right
the controls function. At the same time, we started to have now, 13% of our more than 800,000 customers are non-
regular communications with the employees to ensure Muslim and this is a great achievement to us.
they are engaged with our business plan. And in doing so,
we managed to win the confidence of the regulators and Infrastructure wise, many of our branches have been
stakeholders. renovated with a new look and feel to provide for a
better customer experience in line with the fast changing
One of the most memorable achievements is when we customer needs.
managed to breakthrough the profit figure by reaching
the RM200 million in PBT within two years and increased In looking to improve and streamline our processes,
the credit rating from the central bank. we have embraced the Six Sigma programme which
you can normally see being practiced at manufacturing
Moving forward, we will continue to practice Islamic companies. We believe the same concept can be applied
Banking in its truest form and continue to be an example to our bank and this was evidenced by the reduction in our
for the entire community in Malaysia. We are a small Bank turn-around time for a number of key processes which are
and we are small enough to make changes and create now comparable to industry standards.
bigger impact.
In terms of products, we at Bank Muamalat aim to make a
difference when we create our products and go beyond
2 profit orientation towards enriching our community. Over
What has happened in the last 15 years? the years, we have, amongst others, launched products
that help customers to consolidate their debt at a lower
A lot really As I was very much a part of Bank Muamalats profit rate, we have Ar-Rahnu to cater to the needs of the
history right from the onset. Khazanahs investment in lower income group, we have micro credit facility to assist
Bank Bumiputra had more than paid off. The 16% shares small and medium entrepreneurs and the most recent, we
of CAHB that is used to hold is now worth billions, BBMB have the Waqf fund wherein we offer our customers the
Securities was sold together with Bumiputra Merchant and channel and the opportunity to invest in a noble cause for
the value of its 30% stake in Bank Muamalat has more than the afterlife.
doubled. From a Bank that was born in the most difficult
times, we have more than survived and are beginning to These are some of the improvements you can see at our
make a mark in the market. Alhamdulillah, profits have Bank. We have strengthened our foundation and we
surged beyond RM200 million, when it comes to waqf believe all our efforts have put us on a stronger footing in
we are the market envy and we have the most modern IT ensuring sustainable growth and performance.
system today in the banking industry in Malaysia.

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3 4
Last year Bank Muamalat implemented its new core Your plans for Bank Muamalat in the next 5 years.
banking system. Can you tell us a bit about that?
We will continue to embrace our long term aspiration to be
Muamalat Banking Solution (MBS) as we call it, involves the preferred Islamic financial institution and this requires
the replacement of the current core banking system continuous efforts to upgrade our service delivery as well
and supporting applications with a single integrated, as infrastructure to enable us to be at the forefront.
comprehensive and complete suite of Shariah compliant
banking solution. We aim to meet the following objectives:- And over the next few years, we will look at the possibility
of going into the regional market. As a start, we might
a) Single System Platform and Seamless Intergration begin with collaborations rather than investment, with a
b) Streamlined Business Operation view of maybe taking a stake in the market later on.
c) Improve Customer Service Satisfaction
d) Single Customer View As for products and services, we are looking towards
e) Improve Product Time to Market developing products/services that are competitive not
only in terms of returns, but also to serve the needs of
The MBS programme kicked off on 13 December 2012 corporate social responsibility. Waqf services that we are
and the Go Live date was on 16 June 2014. It took running now, is a unique example; a free-of-charge service
extraordinary people to make this happen. All work had offered to customers which in turn would contribute to
been done throughout the 2 years and it was time to raise the development of certain sectors in the country and in
the curtains. Some issues had surfaced at the very last our case, the education and health sectors. This is what we
minute, however the team managed to resolve the issues. call Ethical Banking. Although we might have to sacrifice
a little bit of extra return but it is profitable in the longer
Lots of things had prevailed throughout this programme, term as we could win the customers loyalty through this
ordinary people could transform to be superheroes and kind of products. And yes, we want to be the Champion in
teamwork was at a Magnificent 5 standard. Through Ethical Banking.
good communications and encouragement, everybody
worked voluntarily without much fuss and with great
determination. This small little bank that was a menace to
the authorities for many years with so many problems had
turned the corner and redefined IT Transformation in the
region. Our ATM TCP/IP is the first in the market and is the
envy of others! Indeed this was a turnaround

56 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

It is Allah who send forth the
Winds, so that they raise up
the Clouds, and We drive
them to a Land that is dead,
and revive the earth therewith
after its death; even so (will
be) the Resurrection!

(Fatir: 9)
a n n u a l r e p o r t 2 0 1 5

Consumer
Banking
The key portfolios-namely
mortgage, personal financing
and automobile financing on an
aggregate basis registered a
double digit growth surpassing
the RM1 billion mark in net
growth. Attar Salleh
Head, Consumer Banking Division

Consumer Banking continued to perform well for the

FY2015, bringing in revenue of RM555.8 million for Bank
Muamalat. The result was driven by a strong growth in
financing portfolio, and implementation of strategic
initiatives that led to expanded revenue streams.

The Consumer Banking landscape in Malaysia was

challenging in 2014, as financing spreads remained
compressed owing to low financing pricing across the
industry, property cooling measures and prudential credit
policies due to higher household debt.

Bank Muamalats Consumer Banking performed well

during the year, despite the fierce competitive pricing
environment. Financing income was higher due to the 10%
robust growth in financing, driven by our core segment,
residential mortgages, which grew 19% year-on-year. On
the other hand, the non-funded income also grew well
with accelerated performance from wealth management
business.

On the deposit front, Bank Muamalats core deposits grew

by 3% on annual basis and the composition of CASA
expanded further to 32%, slightly higher than last FYs
29%.

60 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

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Overall, Consumer Banking recorded a strong growth

in revenue to reach RM542.6 million, growing 14%
higher than the RM476.26 million in the previous year
and remains the largest revenue contributor to Bank
Muamalat.

Net financing growth increased by 10%, with

Mortgage rising at a faster pace this year. Mortgage
has grown to account for 51% of total Consumer
Banking financing portfolio, followed by Personal
Financing at 35% and Auto Financing at 10%.

During the year, Bank Muamalat further strengthened its value proposition by enhancing the features of its full suite of
products, increasing cross-selling and product bundling and analytics-driven marketing campaigns. Bank Muamalat also
streamlined the credit processes to deliver better customer service. Meanwhile, Bank Muamalat will continue to look for
operational efficiencies across the network and better sales productivity to further reduce the cost-to-income ratio.

BANK MUAMALAT MALAYSIA BERHAD (6175-W) 61

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Consumer
Banking

MORTGAGE
Although market conditions for the real estate sector is
on downwards bias since mid-2013, mortgage recorded a
robust growth of 19% year-on-year, driven by demand for
housing from the middle working-age population as well
as the rising trends in the urban lifestyle.

During the FY2015, Bank Muamalat offered customers an

enhanced product called the SMART Mortgage 1Hutang
which bundled extra cash features to cater for debt
consolidation, investment and house renovation.

Other strategies to enhance financing on mortgage are to focus on collaboration with selected developers, to mix
and balance between primary and secondary portfolios as well as improving yield through product-bundling and
cross-selling initiatives.

Moving forward, Bank Muamalat will focus on financing quality and sales productivity especially in the prime and sub
urban areas to further enhance the customer base.

PERSONAL FINANCING
Personal financing continues to contribute positively to
consumer bankings revenue. For FY2015, the segment has
contributed 7% year-on-year growth or RM211 million to
overall gross financing.

Continuous efforts from road shows and briefings on

financial planning and debt management to targeted
market segment have continued to bring in customers and
retain existing customers via anti-attrition programmes.

Our personal financing product via deduction at source, has grown into a healthy portfolio that enables us to
implement better marketing strategies and remain competitive at all times. Concurrently, Bank Muamalat will
continue to improve the credit risk framework to ensure that impaired financing ratio is kept low.

62 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

 a n n u a l r e p o r t 2 0 1 5

AUTOMOBILE FINANCING
The hire purchase business continues to shrink further,
registering a negative growth of 10%. The trend is a result
of reduction in emphasis on hire purchase business in
order to increase the consumer financing portfolio overall
yield.

Bank Muamalats focus on auto financing will remain on

increasing its financing base in new passenger vehicle
financing under Auto BBA product.

DEPOSITS

Bank Muamalats strategy to actively encourage retail internet banking has

resulted in significant growth in the internet banking user base. For FY2015,
significant growth was seen in the number of users for internet banking
services. As at the end of the year, the number of retail internet banking users
rose by 112% to almost 100,000 users in 2014.

The growth in total deposits is also attributable to our Savings Account (SA)
campaign namely OH YEAH!! 2 Deposit Campaign, which attracted new
deposits and new-to-bank customers.

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Consumer
Banking

AR RAHNU BUSINESS
Currently, Ar Rahnu business has been established at 27 of our branches. The Ar-Rahnu financing outstanding and safe
keeping fee income as at FY2015 stood at RM46.9 million and RM6.1 million respectively as compared to RM40.7 million and
RM8.1 million in FY2014, respectively. The declining trend in price of gold since early 2014 has impacted the overall market
sentiment of Ar Rahnu business.

The Ar-Rahnu business will be expanded to another 13 selected branches, and the income from this initiative is expected to
contribute between 10% to 15% of Bank Muamalats fee income.

WEALTH MANAGEMENT

Our LifeHEBAT Campaign saw a tremendous increase in our Regular Family Takaful business, which is expected to continue
to register similar growth platform for the current financial year.

64 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

 a n n u a l r e p o r t 2 0 1 5

Hadith:

Whoever dies free from

pride, deceit and debt, will
enter Paradise

(Ad-Darimi, Ibn Majah, At-

Tirmidhi)

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Business
Banking

FY2015 was a challenging year for Business

Banking Division (BBD) with economic
uncertainties causing Bank Muamalat
to be selective in its new financing and
concentration in certain industries.
Nor Hamidah Abd Bakar
Acting Head, Business Banking Division

Despite this backdrop, the Division continued to improve Financing Assets from RM3,830 million to RM4,342 million, a 13.4%
increase. This was a larger increase compared to FY2014, where the growth was 7.7%. The resulting financing income was
also larger at RM201 million, an improvement of 8.2%. The division also continued its commendable fee recognition with
RM8.8 million in FY2015, albeit slightly reduced from RM10.4 million in FY2014. The fee income was partly lower by a change
in Bank Muamalats policy towards implementing FRS139 standards, whereby the fees collected upfront for Bank Guarantees
(BG) are now amortised over the BG tenure.

66 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

 a n n u a l r e p o r t 2 0 1 5

The improvement in Financing Assets in

FY2015 was supported by strengthening
of bilateral financing relationships.
Nevertheless, the Division continues
to actively look for opportunities in
infrastructure, Private Financing Initiatives
(PFI) and township financing in order to
book quality long term assets with minimal
risk of non-completion.

The Divisions corporate financing was

mostly concentrated in the finance,
insurance, real estate and business services
(33.9%), manufacturing (20.8%) and
wholesale and retail trade (15.6%) sectors
while for commercial financing, the sectors
were mainly catered to construction (30.9%),
finance, insurance, real estate and business
services (22.2%) and wholesale and retail
trade (13.9%). Despite these statistics,
the department has been prudent in its
real estate exposure, mostly coming from
the lower risk affordable residential and
township properties in high growth regions
such as the Central Region and Penang.

In terms of deposits, the Division recorded

a total deposit growth of RM623 million
in FY2015 or a 34.8% improvement
from FY2014. The growth was a sterling
improvement over FY2014, whereby the
growth was only RM61 million or 3.5% over
FY2013. Total deposits reached RM2,412
million consisting of current accounts (CAs)
of RM908 million (92% y-o-y) and Fixed
Term Accounts (FTAs) of RM1,504 million
(14% increase). The Division is supported
by the Government Desk, whose function is
to improve deposits especially CAs through
promoting Bank Muamalats Corporate
Internet Banking, cultivating relationships
with government ministries and assisting
them with their cash management.

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MOVING FORWARD

For the new Financial Year, BBD will continue to strengthen

its position by concentrating on yield improvement and
asset quality, amid continued economic uncertainties
which are expected in 2016. To further improve
efficiency, a new structure will be implemented with
three main sections of Corporate Banking, Commercial
Banking and Regional Banking. The SME Retail and Retail
Business Banking sections will be absorbed under the
new Commercial Banking section in order to synergise
resources and cross-selling opportunities. With the new
strategies in place, BBD forecasts minimal Financing Assets
growth but higher margins overall and lower delinquent
For FY2015, BBD processed a massive RM5,933 million and NPF ratios.
worth of financing applications. This is a commendable
achievement for our lean team. Nevertheless, Bank
Muamalat has been prudent with its credit processing and
continues to concentrate on utilisation and asset quality.
The Division improved its overall utilisation from 64% in
FY2014 to 72% in FY2015. On the other hand, the Divisions
Non Performing Financing (NPF) ratio reduced to 2.9% in
FY2015 from 4.4% in FY2014 and has been on a reducing
trend for the past few years. The Delinquent Ratio was also
low for the division at 0.2%.

68 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

 a n n u a l r e p o r t 2 0 1 5

Those who devour usury will

not stand except as stand
one whom the Evil one by
his touch Hath driven to
madness. That is because
they say: Trade is like usury,
but Allah hath permitted trade
and forbidden usury. Those
who after receiving direction
from their Lord, desist, shall
be pardoned for the past; their
case is for Allah (to judge);
but those who repeat (The
offence) are companions
of the Fire: They will abide
therein (for ever).

(Al-Baqarah: 275)

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Treasury
and Capital Markets

Risk appetites started to improve

somewhat in early 2015 amid growing
expectation the Fed will not be aggressive
when it actually starts to hike interest
rates given the fragile growth situation
elsewhere.

Adi Asri Baharom

Head, Treasury and Capital Markets Division

Treasury & Capital Markets performed reasonably well in short term cash rates gapped up as banks competed for
a year that was fraught with challenges. Global financial wholesale funding to comply with LCR requirements.
markets continued to be volatile amid uncertainty over Margin compression was exacerbated as CASA growth
the policy direction of the U.S. Federal Reserve. Market remained flat and industry LD ratios jumped to about 90
participants were generally of the view that the Fed percent.
will start hiking interest rates soon after the end of its
Quantitative Easing (QE) program in October 2014. The US Bank Muamalats wholesale funding costs crept up
Dollar gained ground as investors positioned for higher significantly towards the latter part of the financial year
interest rates. The unexpected sharp drop in oil prices, but were moderated by a commendable growth in CASA
however, reversed sentiment, with most central banks and arbitrage from an almost threefold increase in foreign
easing monetary policy as the threat of inflation subsided currency customer placements. Bank Muamalats LCR was
and prospects for global economic growth became tepid. well above regulatory levels throughout the last financial
The risk aversion that followed buoyed the US Dollar. year. The investment portfolio valuation improved
Treasuries saw net buying, with the 10-year yield dipping significantly as the local yield curve eased into the first
below 1.70 percent in January 2015. quarter of 2015. Income from Foreign Exchange activities
also registered a significant increase from the previous
The significant drop in oil prices, coupled with the general year.
strength of the US Dollar saw the Ringgit being sold
off on concern that Governments deficit target will be OUTLOOK FOR 2015/2016
En. Hatta Salleh
compromised. The Ringgit climbed to a 3.70 high against
the US Dollar in March 2015. Risk appetites started to improve somewhat in early 2015
amid growing expectation the Fed will not be aggressive
The Malaysian government yield curve also saw correction when it actually starts to hike interest rates given the
with the 10-year government bonds yielding more than fragile growth situation elsewhere. Oil prices stabilised to
4.20 percent in December 2014 before settling town to between US$50-US$60 by the end of first quarter of 2015
3.90 percent by end March 2015. The local yield curve, while large fund inflows helped to maintain 10-year MGS
however, has been artificially flat since October 2014 as yields at around 3.90 percent.

70 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

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Going forward, we expect financial markets volatility to remain, driven by the developments in the U.S. We expect to see
another round of fund outflows as the Fed is expected to undertake its first rate hike post the sub-prime crisis before the end
of 2015.

Barring any further shocks to oil prices, the Ringgit is expected to be stable against major currencies but may give further
ground against a resurgent US Dollar. Inflationary pressure from the recent GST implementation is expected to be modest
while monetary policy should remain accommodative with no change in the OPR in 2015.

The prospect of a lift off by the Fed puts us again on a cautious stance in our investment portfolio positioning for the coming
financial year. Our strategy of short duration and emphasis on funding and asset liquidity will be maintained while foreign
exchange activities will continue to focus on customer flows.

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Investment
Banking

Particularly in respect of fund raising

for various infrastructure projects
under the Governments Economic
Transformation Programme.

Michael Ariff Salleh

Head, Investment Banking Department

The investment banking arena remained extremely Looking ahead, challenging economic conditions and
competitive throughout the financial year, with a depressed capital market activities are seen as continuing
subdued economic and business environment resulting to be the predominant features of the investment banking
in limited opportunities, mostly emanating from the landscape, where the public sector, GLCs and top-tier
public, Government-linked (GLC) and blue-chip corporate corporates are expected to remain as the primary source
sectors. Given the traditional dominance of the larger local of business opportunities, particularly in respect of fund
and foreign players in this space, the Investment Banking raising for various infrastructure projects under the
Department faced considerable challenges in establishing Governments Economic Transformation Programme.
deal flows to further its aspiration to become one of the
leading Islamic investment banking houses in the country. In cognisance of this, strategic focus moving forward will
be skewed towards project and syndicated financing
Against such a backdrop, the department turned in a transactions which, apart from their financing assets
commendable performance in securing several mandates generation potential, carry attractive fee propositions. At
across both the debt and equity capital markets and the same time, the department will continue to leverage
private equity business segments. Noteworthy deals on its unique bank-based private equity business for
in the debt capital market include acting as Principal structured investment opportunities that command
Adviser for the restructuring of a RM5.8 billion Sukuk for a inherently higher returns. A new income stream is also
highway concessionaire in Johor and Joint Lead Arranger poised to open up in the year ahead pursuant to the Banks
of a RM450.0 million Sukuk for an independent power Investment Account initiatives, while expansion into the
producer (IPP) in Sabah. corporate finance (equity) market is under near term
consideration as well, albeit on a cautious approach with
In the equity capital market, Bank Muamalat clinched market conditions a key determining factor.
a coveted Underwriter role for Malakoff Corporation
Berhads RM2.7 billion listing exercise, Malaysias largest In order to be able to realise these opportunities, plans
IPO for 2015 at the time. Meanwhile, two new private are in place to strengthen the departments manpower
equity investments were concluded one in an integrated resources with skilled and experienced personnel, aimed
healthcare service and facilities provider in Singapore and at enhancing existing capabilities whilst maximising
the other in an integrated transportation and logistics value-add for clients, thus increasing Bank Muamalats
service provider in Perak, with the former realising a 16.5% competitiveness and prospects of securing mandates to
per annum return during the financial year. further establish itself as a leading player in the domestic
investment banking scene.

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Musharakah
Property Investment (MPI)

The memorandum is meant for both

parties to jointly develop waqf land
nationwide based on the Musharakah
concepts.

Zahrul Azmi Zakaria

Head, Musharakah Property Investment Department

Musharakah Property Bank Muamalat has taken a step further with the
Memorandum of Understanding between Bank Muamalat
Investment was and UDA Waqf Sdn Bhd (UDA Group of Companies),
signed on 25th January 2015. The memorandum is meant
established in 2011 for both parties to jointly develop waqf land nationwide
based on the Musharakah concepts.
and mainly focusing The development of waqf land will improve the socio-
on direct property economics of Muslims by providing opportunities for
them to participate in the economic activities from waqf
acquisition, property development process.

investment and To date, we have several property developments activities

property development in Seberang Jaya, Pulau Pinang and Ipoh, Perak Darul
Ridzuan that will be executed within FY2015/2016.

activities.
Musharakah is an Arabic word which literally means
sharing. Technically, Musharakah is a contract between the
partners to contribute capital to an enterprise or a venture,
whether existing or new, or to an owner of a real estate.
Profits generated by the venture or real estate or asset are
shared in accordance with the terms of the Musharakah
Jamilah Abdul
agreement, Sallamare shared in proportion to each
while losses
Head, Human Capital Management
partners share of capital.
Division

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Muamalat
Invest Sdn Bhd (MISB)
Investments are continued to be made
into building infrastructure and resources
in order to position itself as a key player
in the wholesale Islamic capital market
space.

Sharifatul Hanizah Said Ali

CEO, Muamalat Invest Sdn Bhd

MISB a wholly owned subsidiary of Bank Muamalat, was wholesale Islamic capital market space.
incorporated on 22 April 1999 with a paid up capital
of RM10 million. MISB has been licensed as a Fund At present, MISB through its series of Islamic wholesale
Management company by Securities Commission Malaysia funds has captured around 11% of the total Islamic
since 6 December 2005 and was accorded an Islamic Fund wholesale fund Net Asset Value (NAV) based on Summary
Management licence in September 2010. of Statistic-Wholesale Funds in Malaysia issued by
Securities Commission Malaysia.
MISB provides Shariah compliant investment management
services which include:- MISB is also embarking on efforts to diversify asset classes
for products offered and it is expected to launch a series
Management of discretionary investment of Sukuk funds later this year catering to the Islamic
mandates for asset classes covering equity and wholesale institutional and corporate investors.
Sukuk; and

Provision of wholesale fund products for

investments in various asset classes i.e. Islamic
money market instruments, Shariah compliant
equities and Sukuk.

For FY2015, MISB continues to grow its Assets under

Management (AUM) to approximately RM2.7 billion from
approximately RM1.8 billion in FY2014. This translates to an
increase of approximately 50% year-on-year. Investments
are continued to be made into building infrastructure and
resources in order to position itself as a key player in the

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Muamalat
Venture Sdn Bhd (MVSB)
Looking ahead, further improvement
is forecasted for FY2016 as the more
recent joint venture branches with PKB
start to turn in profits.

Hafni Mohd Said

EVP, Finance Division

Bank Muamalat, through its subsidiary MVSB and under in turn a corresponding drop in demand for currency
the supervision of Strategic Liaison Management Office exchange.
(SLMO), began venturing into Musharakah Mutanaqisah
(Diminishing Partnership) arrangements in 2008, with For FY2015, MVSBs share of profit from the PKB and MEX
Permodalan Kelantan Berhad (PKB), an established and partnerships improved to RM5.2 million from RM2.2 million
well known participant in the Islamic Pawn Broking or Ar- the previous year, with the total outstanding investment
Rahnu sector, as its first partner. as at financial year end increased to RM69.5 million
from RM55.6 million previously. Looking ahead, further
During FY2015, the partnership with PKB doubled from 6 improvement is forecasted for FY2016 as the more recent
joint venture branches; Jelawat, Wakaf Che Yeh, Pasir Mas, joint venture branches with PKB start to turn in profits.
Tanah Merah, Pasir Puteh and Guchil in Kelantan; to 12, Meanwhile, MVSB will look to identify new ventures and
with the addition of another 2 branches in Kelantan which new partners as it strives to grow the Musharakah business
are Gua Musang and Kota Bahru and 4 in Sabah namely even further towards enhancing its contribution to Bank
Sandakan, Putatan, Api-Api and Tawau. In view of the Muamalat.
positive achievements to date, further expansion of the
partnership with PKB is proposed for FY2016 with 4 new
joint venture branches currently planned in Sabah.

Apart from PKB, MVSB has since 2013 been in partnership

with Metro Money Exchange Sdn Bhd (MEX), which is
actively involved in the Wholesale Money Exchange
business, supplying currency to local banks and Bureau de
Change (BDC). MEX is currently the supplier of currency for
Bank Muamalats BDC in KLIA and KLIA 2. Being volume-
oriented with thin margins, the currency exchange
business in FY2015 was considerably affected by external
events which led to a decrease in tourism activities and

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Business
Process & Transformation

Key focus area such as processes

on Structure Personal Financing
were improved, therefore seeing an
improvement on its turnaround time by
70% from previous performance.

Noor Hayati Abu Yaziz @ Mohamad

Head, Business Process & Transformation Department

ACHIEVEMENT

Series of sequentially designed initiatives were introduced Between January to March 2015, Operation & Process
for FY2015 to further inculcate the Culture of Continuous Change has conducted 12 sessions of Bankwide
Improvement. This is more critical since the migration of Workshops on the development of Bank Muamalats
the new technology platform via IT transformation. documents managemet. To ensure the operational and
functional processes are documented and Policy, SOP or
The focus is aimed at delivering more customer focused User Guides are sufficiently developed, Bankwide Process
initiatives and at the same time sustaining the engagement Review exercise has been established.
from all stakeholders within Bank Muamalat. Programmes
such as Win & Share & Idea Buzz were introduced to drive MUAMALAT ONLINE MANUAL system readiness provides
engagement from all with cross functional improvement user with a secured collaboration and ensured security
initiatives run by Lead Specialist in Quality & Improvement. of the banks controlled documents. It also allows users
These programmes have translated to RM6.6 million of to create, amend and enhance the policy, SOP and User
cost savings. Guide.

64 initiatives were completed under the Win & Share

programme covering areas from various departments.
11 quick wins were implemented post MBS or IT
transformation to further enhance our deliverables to the
customer. Key focus area such as processes on Structure
Personal Financing were improved, therefore seeing an
improvement on its turnaround time by 70% from previous
performance. Simple quick wins implemented have also
reduced the waiting time at our branches significantly by
20%, thus allowing our branches to focus on better sales &
service delivery.

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ACTIVITIES CONDUCTED IN FY 2015 MOVING FORWARD

Some of the key activities/initiatives conducted for FY2015: 3 years Quality & Process Excellence Roadmap was
prepared to set further requirement in implementing
4 Aug 2014 Improvised initiative, Win & Share continuous improvement culture. We look forward to
and Idea Buzz soft launched via having the following initiatives to further enhance the
ICP and CCD internal blast. service delivery & customer experience:

30 Sep 2014 Bank Muamalat 15th Anniversary a. Bank Muamalat Annual Quality Convention
Night Celebration, celebrated Bank b. Stakeholder Engagement
Muamalats long service employee c. ISO Certification
as well as our shareholders. d. Execution of key improvement projects identified in
pipeline database
21 Oct 2014 Marked 4th time participation
in DRB-Hicom 5S Workplace
Organisation. Bank Muamalat has
achieved 6th placing with 89.5%
Higher Gold points among other
DRB Hicom companies.

Sep 2014 Feb 2015 Business Process Redesign for

Branches has taken place at Taman
Melawati Branch, BOCC and SPICK.

7 Mar 2015 Lead and coordinate the

participation of Bank Muamalat
for DRB ICC/QIT Convention FY
2015.

20 Jan 4 Mar 2015 Established process review

exercise for Bankwide Operation
& Process Change. This on-going
initiative involves all departments/
divisions in Bank Muamalat.

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ICT
Division

The Promise of Better Times In Sight

Gary Chin
EVP, Information Communication & Technology Division

The need for a new core banking system was evident and the commitment from the staff in general. Clearly the
after almost 15 years of modification, it was becoming trust Bank Muamalats Board had in the dedication and
increasingly difficult to cope with the existing legacy experience of its own staff to lead the project was well
system. Multiple, disparate, aging systems are getting justified.
expensive to run and has inhibited the timely launching
of new products, resulting in poor customer experiences. MBS programme is beyond a core banking system
The time for change has come upon us, for us to upgrade replacement. It changes the legacy processes and ways of
one core banking system; and Muamalat Banking Solution doing things in a more effective manner. With successful
(MBS) was the means for this change. The programme MBS implementation, Bank Muamalat is now equipped
kicked off in December 2012 upon the appointment of with the following capabilities:
core banking system vendors.
NEW TECHNOLOGY AND INFRASTRUCTURE
With MBS came the promise of better times to come. It
was set to raise productivity through system efficiencies, Establishment of new Tier-3 Data Center and Disaster
improve deliveries and enhance service quality. In short, Recovery Center.
it was an investment towards the future sustainability of Robust IT Infrastructure which consists of new servers
Bank Muamalat and its vision to be the preferred Islamic and network appliances technology to support the
financial services provider. business growth, system availability and consistent
system response time.
POST MBS: THE DAWN OF A NEW ERA New state-of-the-art security devices such as firewall
and IPS technology for advance security perimeter
Having kicked off the project in December 2012, the long defense.
awaited transformation was finally completed and the Fully redundant high speed network links with
system went live on 16 June 2014. This was certainly bandwidth optimiser at data centers to accommodate
a crucial moment in Bank Muamalats 15 years and the existing and future system requirement.
system cutover went on without any major problems. This Upgrade of network bandwidth at head office, site
was due largely to the advanced planning and effective offices and branches to assure swift system response
leadership from the MBS management team as well as time and excellent service delivery to customers.

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Upgrade of user workstations to new hardware and With a clear mandate from top management, IT and
operating system to increase productivity. business leaders are now focused on Bank Muamalats
Leverage and optimise of server and storage hardware core business objectives. IT system is now ready to support
utilisation through virtualization technology. world-class processes, facilitate corporate-wide decision
Upgrade of back office support system and other making by supplying better data, help the business
delivery channel to support better fulfillment of internal develop better insights about customers, and provide an
and external needs. accurate and up-to-date view of its financial and logistics
position. MBS platform has delivered a unified information
REDUCED COST AND COMPLEXITY system to link all divisions to collaborate and develop
better business strategy moving forward.
Better control of IT Infrastructure and simplified system
integration. The dedication, commitment and resolution displayed
Consolidation of various legacy systems into a common by the staff were definitely an inspiration to all and
platform and database resulted less complexity, demonstrated the internal capabilities of Bank Muamalat
hardware and lower operating cost to manage. to undertake a project of this magnitude. With MBS in place,
Centralised full-fledged web based front line system Bank Muamalat can now spread its wings and unleash
simplified system delivery at branches. its potential to take advantage of the vast opportunities
Parameter driven banking solution allowing rapid within the financial landscape.
changes to be made to the product and its processes;
allowing flexible and faster product time to market
delivery.

ENHANCE PROCESSES AND EFFICIENCIES

Fully integrated, end-to-end workflow accelerated the

financing application process.
Straight through processing for 3rd party payment
system to ensure faster turn-around- time.
Automation of manual legacy processes eliminated
task redundancy and increase productivity.

DATA CONSOLIDATION AND REPORTING

Single customer CIF record for holistic view of customer

relationship management and cross selling initiative.
Centralise Data Warehouse delivers accurate data source
for regulatory reporting and analytics requirement.
Dashboard reporting offers management with accurate
real time information and better decision making.

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Customer
Service

Holding strong to our commitment in

Customer Excellence, Customer Service
will continue to build strong lasting
friendships with the customers which
continues to be the main foundation of
the business.
Azihan Othman
Head, Customer Service Department

Customer Service is a journey not a destination

In the true spirit of Bank Muamalat, Customer Service fully embraces its 5 shared core values, namely Care, Integrity,
Innovative, Service Oriented and Respect.

Understanding that connecting to customers on an emotional level is the key in establishing a lasting relationship, Bank
Muamalat goes beyond simply delivering product and services, and focus on developing strong bonds with the customers.
Bank Muamalat continues to strive on promoting a positive and customer-centric environment that enhances customers
experience, promotes sales and ensures customer loyalty in most aspects of its activities.

With the new MBS system implemented in June 2014, Customer Service took the central role of highlighting and providing
meaningful feedback on common and recurring issues raised by customers for further enhancement of the system.
Improvement in timeline in managing and responding
to any input, queries and feedback from customers to
2 working days from the previous 14 days was also a
major milestone for the department.

Mystery Shopper Programme continues to be an

important measurement of Bank Muamalats level
of customer service. During the year under review,
the survey was conducted at all 60 Bank Muamalat
branches with 3 visits per branch. The service index
revealed an increasing trend during the programme
which shows consistency of service at the branches.
The average score of service index for FY2015 is
commendable at 84%.

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Make things easy for the people, and do

not make it difficult for them, and make them
calm (with glad tidings) and do not repulse
(them)
- Hadith Al-Bukhari

A Customer Satisfaction Survey was also conducted to gauge customers opinion of Bank Muamalats level
of service as well as on the range of products offered. The results of both Mystery Shopper Programme
and Customer Satisfaction Survey were compared with the two top banks in Malaysia for benchmarking
purposes.

In line with the objective towards transforming Bank Muamalat into a sales-driven culture, the Telemarketing
team was established within Customer Service department, with the following objectives:-

As an additional income-generating avenue for Bank Muamalat;

Cross-selling of its various products and services;
Promoting seamless banking process where customers can do banking via channels such as
telephone (mobile), internet, fax, ATM and mail; and
Attracting younger generations to bank with Bank Muamalat through easy and convenient process.

Another initiative undertaken by the department in order to provide further convenience to its customers is
to have all inbound calls to branches centralised at the Contact Centre under Customer Service Department.
Customers only need to call a central number (toll-free line 1-300-88-8787) for all their enquiries and
feedback. The long operating hours of the Contact Centre (6 am 12 midnight daily, 7 days a week) will
enable customers to call Bank Muamalat at their own convenience.

The journey to success requires Bank Muamalat to be steadfast (Istiqamah) and committed in its efforts
to deliver the best value to its stakeholders. Holding strong to our commitment in Customer Excellence,
Customer Service will continue to build strong lasting friendships with the customers which continues to be
the main foundation of the business.

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Shariah
Shariah department plays an
important role in providing advisory
function to the Bank as well as
performing in-depth research and
studies on Shariah matters.
Mohd Izuwan Mahyudin
Head, Shariah Department

SHARIAH ADVISORY & SECRETARIAT SECTION:

The section acts as secretariat to the Shariah Committee premise, issuance of updated and new documents of
(SC) and has been providing Shariah advisory and General Shariah Decision on selected topics to all staff,
consultation. organising familiarisation programme on products and
operational process involved in banking activities and
The role of Shariah Secretariat in performing secretariat managing Training Needs Analysis for SC.
function to the SC comprises of providing input and
support to the SC which includes coordinating meetings, Among the challenges faced by our section and SC during
compiling proposal papers, disseminating Shariah this financial year is to give full commitment for testing and
decisions to relevant stakeholders, engaging with relevant exercise of MBS project, particularly in providing Shariah
parties who seek further deliberations on issues from the advisory via review and assessment as well as participating
SC and ensuring the welfare of SC members is accordingly in MBS sessions. In addition, we were also challenged by
served. the post enforcement of IFSA 2013 that repealed the
Islamic Banking Act 1983 which highlights new insight
In terms of Shariah advisory and consultancy roles, the including the legislated duty on Islamic banks to ensure
functions are to assist and provide advice to the relevant end to end Shariah compliance, and transition of Islamic
parties based on the decision of the SC, includes pre- Deposits. IFSA also enables issuances of Shariah Standards
product approval, operation process, documentations, & Practice Guides in which we are giving full commitment
En. Hatta
activities Salleh Unit, Support Unit, Bank Muamalats
of Business in reviewing the standard and analysing any gaps.
subsidiaries and external clients (upon request).

During FY2015, several initiatives have been conducted

including further development of Share Point Portal which
contains data and record management on products and
services as approved by the SC for easy reference by the
Shariah Governance Organs and SC within Bank Muamalats

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SHARIAH RESEARCH & DEVELOPMENT SECTION:

The role of Shariah Research is to perform in-depth research and studies on Shariah matters, including providing day-to-
day Shariah advice and consultancy to relevant parties, especially those involved in the product development process. For
FY2015, a total of 43 research papers have been completed comprising Shariah issues, product development and special
request by Shariah Committee and other parties.

Apart from our in-house research, Bank Muamalat goes the extra mile with the establishment of strategic alliances with
International Islamic University of Malaysia (IIUM) and University Sains Islam Malaysia (USIM) through research grants, details
as follows:-

University Research Grant Duration Status

Best Practices in Shariah Risk Management: Empirical

IIUM 6 months Completed
Study of Malaysian Islamic Financial Institutions

USIM Knowledge Transfer Program Shariah Audit 2 years In progress

For FY2015, Bank Muamalat has collaborated with Telaga Biru Sdn Bhd (TBSB) in a publication project under the sponsorship
and supervision of Bank Muamalat. This collaboration has published two books entitled Pelbagai Hukum Muamalat on
Deposit and Financing. On the other hand, one of the research papers granted to IIUM entitled An Empirical Study of the
Effectiveness of the Shariah Governance Framework SGF (2010) has been published by International Shariah Research
Academy for Islamic Finance (ISRA).

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Human
Capital
A strong performance culture backed
by our 5 core values - Care, Respect,
Integrity, Innovative and Service
Oriented, becomes our aspiration
as we move forward in the most
competitive era of the financial
industry.
Jamilah Abdul Sallam
EVP, Human Capital Division

To fulfill the vision of becoming the preferred Islamic continues to recruit employees from diverse backgrounds
financial services provider, Bank Muamalat requires great to support the business needs and also to share the vision
people to work with us. At Bank Muamalat, attracting and and the commitment to performance.
retaining talent is the most important part of corporate
responsibility and people strategies. As for Bank Muamalats efforts to attract new talent, we
focus in two areas:
To drive Bank Muamalat into the future phases of growth,
it adopts a holistic approach towards hiring, developing I) Internal Talent
and motivating employees, and aligning workforce with a Bank Muamalat assesses the potential of employees as
common set of core values to influence behavior and shape part of the integrated people development cycle and
the corporate culture of Bank Muamalats operations. to identify successors for critical roles. Employees and
managers discuss their career ambitions and jointly
As Bank Muamalat believes that the people is the most consider next steps.
important asset in ensuring Bank Muamalats growth
moving forward, business-oriented skills and highly II) External Talent
competent candidates are what Bank Muamalat requires Bank Muamalat works closely with universities to
in the medium and long term. attract highly talented candidates. For critical and
highly specialised areas, Bank Muamalat will source
ATTRACTING AND RETAINING TALENT them from the market.

Bank Muamalats success depends on its ability to attract, TALENT STRATEGY

develop and retain the best talent at every level, which is
becoming increasing challenging for the banking industry. Bank Muamalat needs to develop and retain skilled and
productive workforce in order to maintain a profitable and
Bank Muamalat continues to hire bright and dynamic sustainable business. Bank Muamalats strategy is to offer
individuals to support its business growth. As at April 2015, development opportunities for these employees.
Bank Muamalats headcount stands at 2,000 employees and

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There are several approaches taken by Bank Muamalat to EMPLOYEE ENGAGEMENT

attract and retain talent. In supporting the emerging talent,
Bank Muamalat provides them with numerous training Regular communications is fundamental for employee
programmes to improve their knowledge and skills. engagement.

As part of Bank Muamalats Talent Management process, Bank Muamalat uses its annual Bank-wide employee survey
an annual review of people plans for Bank Muamalat to assess engagement levels and identify opportunities to
business and support units have been undertaken by Bank improve ways of working and support employees to do
Muamalat. their best.

The review focuses on:- From the survey, the employees scores are calculated to
i) Talent pipeline and succession planning; provide key indicators of how committed employees are
ii) Employee development initiatives and readiness to Bank Muamalat and our customers.
of the employee in supporting business operations
and growth plans; and PERFORMANCE MANAGEMENT SYSTEM (PMS)
iii) Talent Development programmes in each business
and support units. Developing Bank Muamalats people is a crucial part of its
human resources process. Every year, Bank Muamalat uses
Bank Muamalat plans to develop talented and highly the People Performance Management process to align its
skilled professionals through tailor-made training and business targets with employees individual development
developmental training programmes. This is to ensure plans and to define the actions required in order to
continuity in Bank Muamalats workforce and retain the achieve the short-term goal as well as longer-term career
required knowledge, skills and competencies of the development.
employees.
Bank Muamalat has further refined the PMS to incentivise
As Bank Muamalat grows, it has become more committed and drive productivity among our employees.
to further develop the employees supervisory and
leadership skills to ensure they meet the requirement of Identifying talent and Bank Muamalats succession
the organisation. planning process completes the annual cycle, ensuring
further career opportunities for high-potential employees
TRAINING & DEVELOPMENT and their participation in specific development
programmes.
Continuous training is vital for the employees to gain
insight, enhance their knowledge and improve their During the year under review, Bank Muamalats employees
leadership as well as technical skills in discharging their attrition rate was 7% which is below the industry average.
responsibilities effectively and to keep abreast with the This reflects a high level of commitment and satisfaction.
development in the banking industry. All employees are
encouraged to attend at least two (2) training courses/
seminar within a financial year.

Throughout the year, employees are provided with the

opportunity to be trained in an on-going basis in areas
relating to banking and financial industry.

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Corporate
Responsibility
Corporate Social Responsibility goes hand in hand with Bubur Lambuk Distribution
Islamic banking or ethical banking and it is defined as
corporate initiative to assess and take responsibility for During the Ramadan month, Bank Muamalat initiated a
the companys effects on the environment and impact bubur lambuk distribution to 930 staff in HQ.
on social welfare. The term generally applies to company
effort that goes beyond what may be required by Bual Bicara Israk & Mikraj 2014
regulators or environmental protection groups. Corporate
social responsibility may also be referred to as corporate In celebration of the Isra & Mikraj , Bank Muamalat
citizenship and can involve incurring short-term costs organised a talk entitled Israk & Mikraj Menjana Peribadi
that do not provide an immediate financial benefit to Bertaqwa. The talk was hosted by Ustaz Zulhazwan Ismail
the company, but instead promote positive social and and the panelist was Mr Sham Kamikaze and Ustaz Dr.
environmental change. Roslan Mohamed from Universiti Malaya.

At Bank Muamalat, our slogan is Do Something Good Lambaian Kaabah 2014

Everyday and this is reflected in our Corporate Social
Responsibility for the year 2014. Bank Muamalat in its effort to appreciate its people have
long introduced Lambaian Kaabah programme. This
CR @ THE WORKPLACE programme is a programme that provides an opportunity
for the staff to perform their Umrah. This year Bank
What is an organisation without its people? In Bank Muamalat has sent 10 staff and their spouses for the said
Muamalat, the people are our backbone that moves purpose.
the organisation to be where we are today and Bank
Muamalat emphasise in promoting continuous learning CR @ COMMUNITY
& development and health & safety programme.
Bank Muamalat also promotes in creating a working Corporate Responsibility for the community is the heart
environment free from discrimination and harassment. of Bank Muamalat. This ongoing commitment has been
The investments we undertake to continuously improve a part of Bank Muamalats fabric since our earliest days.
workplace standards solidify our reputation as a socially We hold strongly to our belief in making a positive and
responsible company and an envious workplace. Our sustainable impact to the communities we operate in.
employees are treated with utmost respect and dignity Our business helps support economic growth through
across their gender, cultural and individual divides. As a expansion of products and services, employment and the
way of saying thanks, Bank Muamalat has run a few CR @ creation of knowledgeable workers. We believe that we can
the workplace programme. contribute significantly in enhancing the living standards
of the community through initiatives such as sponsorships,
Bank Muamalat Sports & Recreation Club charitable contributions, disaster relief efforts.

As part of Bank Muamalats effort in striking a work life Emergency Rescue Team to KELANTAN
balance for its employees, a sports & recreational club
has been introduced known as Bank Muamalat Sports & This year, due to the flood situation in Kelantan, Bank
Recreation Club (SRC) and as part of its first initiative of Muamalat has initiated a Bank Muamalat Malaysia Berhad
activities, SRC launched its Sihat@Muamalat Programme Emergency Rescue Team. This team was sent to assist the
which initiates aerobic classes and a Gym for workout. staff that was affected in the east coast area as well as the

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public. Part of their services was to clean up homes and CR @ ENVIRONMENT

supply basic necessities.
15th Anniversary CSR: Beach Cleaning, Mangroves Planting
Charity Free Market Back to School Programme & River Cruise.
for the Orphanage
As part of Bank Muamalats efforts to instill Love thy
The Charity Free Market Back to School programme for Nature spirit and in conjunction with its 15th Anniversary,
the Orphanage was held in the month of December 2014. Bank Muamalat organised a beach cleaning, mangroves
This charity programme was partly funded by the staff planting & river cruise activity. This effort is Bank
amounting to RM35,366.00 and was organised in a bazaar Muamalats initiative to increase the environmental
concept at level 6, Menara Bumiputra. awareness amongst the staff and it was participated by 60
staff lead by the CEO himself, Y.Bhg Dato Haji Mohd Redza
CR @ MARKETPLACE Shah.

Bank Muamalat is committed to being a responsible

corporate citizen not only with the community but as well

CSR goes hand

as our business partners. Hence, we strive at building long
term relationships based on clarity of purpose, integrity,

in hand with
respect, honesty and fairness. Programmes such as friendly
golf, bowling and other sports activities are being held
occasionally.
Islamic banking or ethical banking
Recreational Retreat at Belum Rainforest Resort With
Jabatan Akauantan Negara Malaysia, organised by
and it is defined as corporate
Business Banking Division. initiative to assess and take
Bank Muamalat organised a recreational retreat to Belum responsibility for the companys
Rainforest Resort which was participated by 65 participants
from Business Banking Division and various departments
effects on the environment and
of Jabatan Akauntan Negara Malaysia (JANM). Among impact on social welfare.
the activities in this event were Discover the Royal Belum
Rainforest, Search for the Rafflesia Spot, Visit to the Orang
Asli Village at Kampung Aman Damai, Picnic Lunch at the
Sungai Ruok Waterfall and Bamboo Rafting.

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Corporate
Responsibility

Respect the
victims of MH17
and MH370

Zoo Negara:
Volunteer
Programme

So fear Allah as much

as ye can; listen and
obey and spend in
charity for the benefit
of your own soul and
those saved from the
covetousness of their
own souls-they are
the ones that achieve
prosperity.

(Surah At Taghabun:16)

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Mangrove Seed planting &

River Cruise

IFTAR with
Orpans & Tahfiz
At Glenmarie Golf & Country Club

Back to
School
with
Orphans
IFTAR with BMMB
Employees
At Sime Darby Convention Centre

Doa Selamat-BMMBs
15 years Anniversary

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Calendar
of Events
17-23 Jan 2014 RoadShow 2014
23 Jan 2014 MOU Signing Ceremony with Kuala Lumpur Indian And Malay Chambers
30 Jan 2014 Doa Selamat @ PJ Branch
07 Feb 2014 Continuous Improvement Annual Ceremony Dinner
04 Mar 2014 Ceremony of Wakaf Donation for Islam Makmur Haemodialysis Centre, Kuantan, Pahang
08 Mar 2014 Independence Mothers and Berusaha 1 Malaysia Seminar Programme
Apr 2014 Forum Perdana Kem Terendak
07 Apr 2014 Forum Perdana at Pulapol, Jalan Semarak
10 Apr 2014 Official Launch of Sports & Recreational Club
Bus Handover Ceremony to Badan Kebajikan Taman Pengasih Sultan Hj Ahmad Shah
Forum Perdana for Hari Ulang Tahun Tentera Darat ke 81 at Kem Terendak, Melaka
Eurasia Tour 2014
19 Apr 2014 Golf Muhibah with ATM
05 May 2014 Oh Yeah Prize Giving Ceremony
06 May 2014 Signing Ceremony between Bank Muamalat and USIM
28 May 2014 Wakaf Donation for Sekolah Rendah Islam Al-Huda dan Institusi Latihan Ilmuan Al-Quran (ILIQ) Ceremony
29 May 2014 Forum Perdana @ I-CAM Pekan and Site Visit to Volkwagen & Mercedes Assembly Plant
06 Jun 2014 The Official Launch of BizSTAR-I
17 Jun 2014 Aquaria Adventure with PDK4 Children
18 Jun 2014 Bank Muamalat Collaborates with My Angkasa Amanah
25 Jun 2014 The Official Opening Of Bank Muamalat Bureau De Change

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26 Jun 2014 Lambaian Kaabah

13 Jul 2014 Launch of Surau Irshadiah, Sungai Bakap, Pulau Pinang
22 Aug 2014 MH17 Malaysia Mourning Day
23 Aug 2014 Community Service Programme with Zoo Negara
02 Sep 2014 Strategic Collaboration Between Bank Muamalat and Bank of London and The Middle East
12 Oct 2014 Wakaf Selangor Muamalat: Van Handover to Madrasah Uthmaniah, Pulau Pinang
21 Oct 2014 The BURSA Bull Charge Run
22 Oct 2014 15th Anniversary BMMB Golf @ Seri Menanti
04 Nov 2014 Signing & Launching of Bank Muamalat & GETSBY
10-12 Nov2014 KLIFF 2014
22 Nov 2014 15th Anniversary Beach Cleaning, Mangrove Planting & River Cruise
27 Nov 2014 Wakaf Selangor Muamalat: Penyerahan Gas Nitrogen ke PPUKM, Cheras
Nov 2014 Forum Perdana Masjid Cina Ipoh
12 Dec 2014 Back to School Bazaar
20 Jan 2015 UDA signing Ceremony
23 Jan 2015 Oh Yeah Prize Giving Ceremony
07 Feb 2015 Golf With PDRM
10 Feb 2015 Chinese New Year Dinner with Staff
01 Mar 2015 Spot My Bank
28 Mar 2015 Earth Hour

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Wakaf
Selangor Muamalat
Wakaf Selangor Muamalat (WSM) has been in the market for 3 years since its inception on 27 September 2012. Since then,
WSM received overwhelming response from the public. As at FY2015, total wakaf fund collected was RM10,682,566 while
total collection for FY2015 alone was RM4,427,846. For FY2015, WSM through its Joint Management Committee (JMC)
between Bank Muamalat and Perbadanan Wakaf Selangor (PWS) has approved RM2,917,197 and disbursed RM2,499,082
in wakaf projects.

No Beneficiaries of WSM Aid Type of Aid Value in

Ringgit (RM)
1 Sekolah Kebangsaan
Manggol Bongor, Megat LCD Projector 2,650.00
Dewa, Kodiang, Kedah
2 Sekolah Rendah Islam (SERI)
School Building 498,000.00
Al Huda, Gombak, Selangor
3 Persatuan Institusi Tahfiz
School Van 78,254.38
Al-Quran Selangor (PITAS)
4 Madrasah Uthmaniah,
School Van 79,654.38
Pulau Pinang
5 Pusat Kanser PPUKM- 254,900.00
Nitrogen
MAKNA, PPUKM, Cheras,
Storage Tank
Selangor
Total contribution 758,158.76

Sek. Keb. Sek Ren Islam

Manggol Al Huda,
Bongor, Kedah Gombak

Madrasah Pusat Kanser

Uthmaniah, PPUKM-
Pulau Pinang MAKNA,
Cheras

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Tabung
Mawaddah
Tabung Mawaddah (TM) Committee has been in TABUNG MAWADDAH MICRO FINANCING FUND
operation since 2002, dedicated to aid and implement
charitable activities to 8 Asnaf recipients (Fakir, Miskin, Offered under the concept of Qardhul Hassan (no profit
Amil, Muallaf, Riqab, Gharimin, Fisabillah and Musafir) changed) which targeted to assist the poor or needy
and non-asnaf recipients. TM is funded by zakat and alms individuals who are about to start-up a new business or
(sadaqah) sources contributed by Bank Muamalat and expand their existing business with minimum loan of
the staff. The portion for the non-Asnaf recipients are RM600 and maximum up to RM10, 000 of loan amount.
funded via sadaqah sources.
The repayment plan is based on their affordability with
The objectives of TM Committees establishment are: a tenure of up to 3 years. As at March 2015, we have 216
to provide assistance and financial aid to the individuals under review with total financing amount of
needy; RM404,000.
to ensure that each donation, charity and alms
reach the targeted groups;
to carry out Bank Muamalats corporate
social responsibilities
to the society on the basis of Maslahah Ammah;
to instill the spirit and caring nature of Malaysian
society creation of a harmonious society; and
to practice the teaching of Islam in helping the
needy.

Besides a one off contribution, TM also provides monthly

allocation for:
Food for homeless programme;
Micro credit scheme to aid small entrepreneur;
Maahad Tahfiz Mawaddah, Lembah Beringin,
Hulu Selangor;
Masih Ada Yang Sayang (MAYs) community
programmes;
Programme Dakwah Serantau,Yayasan Amal
Malaysia; and
Monthly aid to the 8 Asnaf recipients

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94 BANK MUAMALAT MALAYSIA BERHAD (6175-W)

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Statement
on Corporate Governance
The Board of Bank Muamalat acknowledges that good engage in any business dealing or other relationship
corporate governance practices form the cornerstone with Bank Muamalat in order that they are capable of
of an effective and responsible organisation. The Board exercising independent judgement and act in the best
is fully committed to the recommendations of the interest of Bank Muamalat and its shareholders.
Malaysian Code of Corporate Governance (the Revised
Code) as well as the Guidelines on Corporate Governance A brief profile of each member of the Director is presented
for Licensed Islamic Banks (Revised BNM/GP1-i) issued by on pages 16 to 26 of this Annual Report.
BNM.
Directors Code of Ethics
Therefore the Board continuously strives to ensure that
best practices are adopted in establishing accountability The Directors continue to observe a code of ethics based
and integrity of the Board and Management. Hence the on the code of conduct expected of Directors of financial
Board will continue to ensure that the right leadership, institutions as set out in the BNM/GP7- Part 1 Code of
policy, strategy and internal controls, are well in place Ethics: Guidelines on the Code of Conduct for Directors,
in order to continuously deliver and sustain Bank Officers and Employees in the Banking Industry and the
Muamalats value propositions for the benefit of its Company Directors Code of Ethics established by the
stakeholders generally and at the same time, ensure Companies Commission of Malaysia.
continuing momentum towards reaching Bank
Muamalats aspirations to become the preferred Islamic Roles & Responsibilities of the Board
financial services provider.
The Board has the responsibility of ensuring the strategic
BOARD OF DIRECTORS guidance of Bank Muamalat, the effective monitoring of
management, and accountability to Bank Muamalat and
Board Structure, Composition and Processes shareholders. In discharging their duties, the Board act
on well-informed basis, in good faith, with due diligence
The present size and composition of the Board is well and care, and in the best interests of Bank Muamalat and
balanced. As presently constituted, the Board has the stakeholders.
stability, continuity and commitment as well as the
capacity to discharge its responsibilities effectively. The Directors in discharging their duties and
responsibilities are constantly mindful of the public
The Board currently comprises 10 members, 1 CEO/ interests and concerns of the business community,
Executive Director and 9 Non- Executive Directors, of particularly those of customers, shareholders and all
which 5 are Independent Directors. The Non-Independent other stakeholders.
Non- Executive Directors are the representatives of the
shareholders namely DRB-HICOM Berhad and Khazanah The key duties of the Board include the following:-
Nasional Berhad. The current composition of the Board
is in compliance with the Revised BNM/GP1-I as more Review and approve strategies, business
than one-third of the Board members are Independent plans and significant policies and monitor
Directors. managements performance in implementing
them;
The Non- Executive Directors do not participate in the
day-to-day management of Bank Muamalat and do not

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Set corporate values and clear lines of Ensure approval and oversight of Bank
responsibility and accountability that are Muamalats capital management framework
communicated throughout the organisation; and its related policies, processes and strategies;
Ensure competent management; Ensure approval of capital allocation on risk-
Ensure that the operation of the Islamic bank adjusted basis appropriate levels of capital
are conducted prudently, and within the is maintained in line with the approved Risk
framework of relevant laws and policies; Appetite and risk profile; and
Ensures that the Islamic bank established Ensure approval of proposed issuance, call or
comprehensive risk management policies, redemption of any capital instruments and
process and infrastructure, to manage the ordinary shares and for proposed dividend
various types of risks; payments and reinvestment.
Institute comprehensive policies, process and
infrastructure to ensure Shariah compliance Directors may also seek independent professional advice,
in all aspects of the Islamic banks operations, at Bank Muamalats expense, when deemed necessary for
products and activities; the proper discharge of their duties.
Set up an effective internal audit department,
staffed with qualified internal audit personnel Board Meetings and Access to Information
to perform internal audit function, covering the
financial, management and Shariah Audit; Bank Muamalats Board Meetings are scheduled in
Establish procedure to avoid self-serving advance before the end of the financial year, specifically
practices and conflicts of interest including before the end of the calendar year, so as to allow
dealing of any form with related entities; members of the Board to plan ahead and fit the coming
Ensure protection of the interests of the years Board and Board Committees meetings into their
depositors, particularly investment account respective schedules.
holders;
Establish and ensure the effective functioning The Board meets every month with additional meetings
of various board committees; convened as and when urgent issues and/or important
Ensure the Islamic bank has a beneficial decisions are required to be taken between the scheduled
influence on the economic well-being of its meetings. Scheduled Board meetings are structured with
community; a pre-set agenda.
Ensure development, implementation and
maintain an effective oversight over Bank The Directors are provided with the agenda and the
Muamalats Data Management and MIS meeting papers containing information relevant to the
Framework and ensure that the MIS Framework matters to be deliberated in advance of the meeting dates
is aligned with business and risk strategies of for their perusal. At each meeting, the Board receives
the Bank; updates from the respective Chairmen/representatives of
Ensure establishment and adherence to the the Board Audit Committee and Board Risk Management
internal policies governing risk concentrations Committee on matters that have been deliberated at both
by reviewing it annually. The independent committees, as well as on matters that require attention.
review is to be conducted regularly to verify
compliance to the prudential limit and The Board has direct access to the information of Bank
standards set by Bank Muamalat as well as the Muamalat through the Senior Management as well as
established internal policies; the services of the Company Secretary. The Company

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Statement
on Corporate Governance

Secretary also ensures that a quorum is present at the commencement of each Board and Committees meeting in order
to constitute a valid meeting.

The Board convened 13 meetings for the FY2015 and the attendance of each director in office during the financial year is
set out below:-

Number of meetings
Directors
Held Attended %
Tan Sri Dato Dr Mohd Munir Abdul Majid
(Chairman/Independent Non-Executive Director) 13 13 100

Dato Sri Che Khalib Mohamad Noh

(Non-Independent Non-Executive Director) 13 9 69

Dato Mohamed Hazlan Mohamed Hussain

13 12 92
(Non-Independent Non-Executive Director)
Dato Haji Mohd Redza Shah Abdul Wahid
13 13 100
(Executive Director/Chief Executive Officer)
Haji Mohd Izani Ghani
13 13 100
(Non-Independent Non-Executive Director)
Hisham Zainal Mokhtar
(Non-Independent Non-Executive Director) 5 4 80
*resigned w.e.f. 30 June 2014
Haji Abdul Jabbar Abdul Majid
13 12 92
(Non-Independent Non-Executive Director)
Tengku Dato Seri Hasmuddin Tengku Othman
13 11 85
(Independent Non-Executive Director)
Dato Azmi Abdullah
13 13 100
(Independent Non-Executive Director)
Dato Haji Kamil Khalid Ariff
13 12 92
(Independent Non-Executive Director

Training Programme for Directors

The Board assumes the responsibility to further enhance the skills and knowledge of the members on the relevant new
laws and regulations and changing commercial risks, as well as to keep abreast with developments in the financial services
industry. Each director attends at least one training programme, which is to be specifically identified by Bank Muamalat
for its directors during the financial year.

Board Appointment Process

Bank Muamalat is governed by the Revised BNM/GP1-i in respect of the appointment of new directors and the re-
appointment of its existing directors upon the expiry of their respective tenures of office as approved by BNM. All
appointment of directors is subject to the approval by BNM.

The primary responsibility of the directors appointment/re-appointment has been delegated to the Board Nomination

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Committee. The Board Nomination Committee comprises Annual Board Assessment

exclusively of non-executive directors, with the Chairman
and the majority of whom are independent. In line with One of the broad responsibilities of the Board Nomination
the Revised BNM/GP1-i, the Board Nomination Committee Committee is to provide a formal and transparent
recommends to the Board suitable candidates for procedure for the assessment of effectiveness of
directorships and appointment of key senior personnel of individual directors and the Board as a whole. In line with
the Bank and relevant subsidiaries. The Board Nomination the Revised BNM/GP1-i and for this purpose, the Board
Committee also ensures candidates satisfy the relevant Nomination Committee had conducted and established
requirements on the skills and core competencies of a clear selection criteria, processes and procedures to
director and are deemed fit and proper to be appointed assess each directors ability to contribute to the effective
as director in accordance with the Fit and Proper criteria. decision making of the Board. In addition, assessment
would also be undertaken to gauge the effectiveness of
The Board Nomination Committee has, during the the relevant Board Committees.
year under review evaluated and recommended the
appointment of Azura Othman as an independent non The annual board assessment exercise was primarily
executive director to the Board of Bank Muamalat. based upon the answers to a customised questionnaire
which was prepared internally. The Board Nomination
The Board considers that the recent appointment of Committee upon its recent annual review carried out
the above director who brings her own unique skills, is satisfied that the size of Bank Muamalats Board is
experience and knowledge in the commercial sector with optimum and there is an appropriate mix of knowledge,
exposure in the financial related industry will ensure that aptitude and core competencies in the composition
the critical competencies gaps identified by the Board are of the Board. All the Directors comply with the fit and
appropriately addressed and provide fresh insights that proper criteria as established by BNM in the Revised
would help Bank Muamalat overcome challenges ahead. BNM/GP1-i.

Re-election of Directors

In accordance with Bank Muamalats Articles of

Association, all directors are subject to retirement by
rotation at due intervals of rotation. Being eligible they
may offer themselves for re-election, a process that
enables the shareholders to vote them back into office.

Directors who are appointed as additional directors or

to fill casual vacancies during the year are subject to re-
election by the shareholders at the next Annual General
Meeting following their appointment.

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Statement
on Corporate Governance

BOARD COMMITTEES

The Board has established several Board Committees whose compositions and terms of reference are in accordance with
the Revised BNM/GP1-i as well as best practices prescribed by the Revised Code.

The Board Committees in the Bank are as follows:-

1. Board Audit Committee

The Board Audit Committee comprises exclusively of Non-Executive Directors of the Board, responsible to fulfill the
oversight function in relation to the adequacy and integrity of system of internal controls and financial reporting, risk
management and compliance with internal policies, procedures and external applicable rules and regulations.

The Board Audit Committee is authorised by the Board to investigate any activities within its Terms of Reference and
has unrestricted access to both the internal and external auditors and Senior Management team of Bank Muamalat.

The composition of the Board Audit Committee and the attendance of the meetings held in the year under review are
as follows:-

Number of meetings
Directors
Held Attended %
Tengku Dato Seri Hasmuddin Tengku Othman
16 16 100
(Chairman/Independent Non-Executive Director)
Haji Abdul Jabbar Abdul Majid
16 16 100
(Non-Independent Non-Executive Director)
Hisham Zainal Mokhtar
(Non-Independent Non-Executive Director) 2 2 100
*resigned w.e.f. 30 June 2014
Dato Azmi Abdullah
16 15 94
(Independent Non-Executive Director)
Dato Haji Kamil Khalid Ariff
16 16 100
(Independent Non-Executive Director)

The objectives and activities carried out by the Board Audit Committee during the year under review are summarised
in the Statement of Internal Control as stated in pages 106 to 108 of this Annual Report.

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2. Board Nomination Committee

The Board Nomination Committee provides a formal and transparent procedure for the appointment of directors, CEO
and members of Shariah Committee as well as assessment of effectiveness of board as a whole, Shariah Committee
members and performance of CEO and key senior management officers.

The Board Nomination Committee comprises of Non-Executive Directors and the Chairman who is independent.
Meetings are held as and when required for the Board Nomination Committee to deliberate on related matters. The
members of the Nomination Committee and the attendance for the year under review are as follows:-

Number of meetings
Directors
Held Attended %
Tengku Dato Seri Hasmuddin Tengku Othman
11 11 100
(Chairman/Independent Non-Executive Director)
Dato Sri Che Khalib Mohamad Noh
11 6 55
(Non-Independent Non-Executive Director)
Haji Mohd Izani Ghani
11 11 100
(Non-Independent Non-Executive Director)
Hisham Zainal Mokhtar
(Non-Independent Non-Executive Director) 3 2 67
*resigned w.e.f. 30 June 2014
Haji Abdul Jabbar Abdul Majid
11 11 100
(Non-Independent Non-Executive Director)
Dato Azmi Abdullah
11 10 91
(Independent Non-Executive Director)

The primary duties and responsibilities of the Nomination Committee are as follows:-

Establishes minimum requirements for the Board that is, the required mix of skills, experience, qualification
and other core competencies required of a director. The Board Nomination Committee is also responsible for
establishing minimum requirements for the CEO.
Recommends and assesses the nominees for directorship, board committee members, and Shariah Committee
members as well as the CEO.
Oversees the overall composition of the Board, in terms of the appropriate size and skills, and balance between
executive directors, non-executive directors and independent directors through annual review.
Recommends to the Board the removal of a director/CEO/Shariah Committee member from the Board/management/
committee if the director/CEO/Shariah Committee member is ineffective, errant and negligent in discharging his
responsibilities.
Establishes a mechanism for the annual formal assessment on the effectiveness of the board as a whole, assessment
of the performance individual directors, the performance of the CEO and other key senior management officers
(Executive Vice President (EVP) and above).
Oversees the appointment, management succession planning and performance evaluation of key senior
management officers.

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Statement
on Corporate Governance

Recommends to the board the removal of key senior management officers if they are ineffective, errant and
negligent in discharging their responsibilities.

3. Board Remuneration Committee

The Board Remuneration Committee provides a formal and transparent procedure for developing a remuneration
policy for Directors, CEO and key senior management officers and ensuring that Bank Muamalats compensation
package is competitive and consistent with its culture, objectives and strategies.

In addition, the Board Remuneration Committee is also responsible for developing remuneration policy for the Shariah
Committee members that commensurate with their roles and responsibilities. The Board Remuneration Committee
will then recommend the proposed remuneration package to the Board for its approval.

The composition and the attendance for the year under review of the Board Remuneration Committee are as follows:-

Number of meetings
Directors
Held Attended %
Dato Azmi Abdullah
8 8 100
(Chairman/Independent Non-Executive Director)
Dato Sri Che Khalib Mohamad Noh
8 5 63
(Non-Independent Non-Executive Director)
Haji Mohd Izani Ghani
8 8 100
(Non-Independent Non-Executive Director)
Haji Ismail Ibrahim
(Non-Independent Non-Executive Director) 3 2 67
*resigned w.e.f. 30 June 2014
Haji Abdul Jabbar Abdul Majid
8 8 100
(Non-Independent Non-Executive Director)
Tengku Dato Seri Hasmuddin Tengku Othman
8 8 100
(Independent Non-Executive Director)

The specific responsibilities of the Board Remuneration Committee include amongst others, the following:-

Provide a formal and transparent procedure for developing the remuneration for directors, board committee
members, CEO, Shariah committee and key senior management officers and to ensure that their compensation is
competitive and consistent with Bank Muamalats culture, objectives and strategy.
Recommend to the Board on the policies, strategies and framework for Bank Muamalat in relation to the
remuneration, rewards and benefits.
Recommend the remuneration of the Shariah Committee members for the full boards approval. The remuneration
shall commensurate and reflect the roles and responsibilities of the Shariah Committee.

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4. Board Risk Management Committee

The Board Risk Management Committee is authorised to oversee Managements activities in managing credit, market,
liquidity, operational, legal and other risk and to ensure that the risk management process is in place and functioning.
In addition, the Board Risk Management Committee is also responsible for ensuring that a comprehensive risk
management infrastructure is in place for managing the risk associated with Mudharabah and Musharakah financing
or investments.

The composition and the attendance for the year under review of the Board Risk Management Committee are as
follows:-

Number of meetings
Directors
Held Attended %
Dato Azmi Abdullah
14 14 100
(Chairman/Independent Non-Executive Director)
Haji Mohd Izani Ghani
14 10 71
(Non-Independent Non-Executive Director)
Haji Abdul Jabbar Abdul Majid
14 12 86
(Non-Independent Non-Executive Director)
Tengku Dato Seri Hasmuddin Tengku Othman
14 14 100
(Independent Non-Executive Director)
Dato Haji Kamil Khalid Ariff
14 14 100
(Independent Non-Executive Director)

The objectives and activities carried out by the Board Risk Management Committee during the year under review are
summarised in the Risk Management Statement as stated in pages 109 to 117 of this Annual Report.

5. Shariah Committee

The Shariah Committee was established in accordance with the requirements of the Islamic Financial Services Act
2013 as well as Bank Muamalats Articles of Association, which prescribe the setting up a Shariah body to ensure that
Bank Muamalats conduct its affairs in accordance with the Shariah principles. Members of the Shariah Committee are
scholars renowned for their knowledge and experience in Fiqh Muamalat.

Further details of this Shariah Committee are set out on Pages 30 to 37 of this Annual Report.

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Statement
on Corporate Governance

6. Board Muamalat Banking Solutions Committee

In addition to the above committees, the Board has also established a Board Muamalat Banking Solutions Committee
(Board MBS Committee). The Special Board committee is formed to provide direction, guidance and oversight for IT
solutions development, implementation and maintenance for the Bank and also to provide recommendation to the
Board on the proposed solution.

The composition and the attendance for the year under review of the Board MBS Committee are as follows:-

Number of meetings
Directors
Held Attended %
Dato Haji Kamil Khalid Ariff
14 14 100
(Chairman/Independent Non-Executive Director)
Dato Mohamed Hazlan Mohamed Hussain
14 14 100
(Chairman/Non-Independent Non-Executive Director)
Hisham Zainal Mokhtar
(Non-Independent Non-Executive Director) 7 1 14
*resigned w.e.f. 30 June 2014
Dato Azmi Abdullah
14 14 100
(Independent Non-Executive Director)

The specific responsibilities of the Board MBS Committee include amongst others, the following:-

To provide direction, guidance and oversight for IT solutions development, implementation and maintenance for
Bank Muamalat.
To ensure the MBS solution aligns in accordance to the business objectives and needs and to be implemented
according to the project schedule.
To ensure proper project management including project organisation, kick-off, tracking and monitoring is carried
out.
To provide the oversight function on the provision of adequate and competent resources in terms of manpower
and financials for the implementation.

The MBS Go-Live cut over date was on 16 June 2014 and the Special Board Committee has been disbanded since April
2015.

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7. Internal Audit and Control Activities

The Board has the overall responsibility for maintaining a system of internal controls that provides reasonable assurance
of effective and efficient operations and compliance with laws and regulations, as well as internal procedures and
guidelines.

The Statement on Internal Control and activities of Bank Muamalat are summarized on page 106 to 108 of this Annual
Report.

8. Related Party Transactions

The details of related party transactions of Bank Muamalat are disclosed on pages 218 to 219 under the Audited
Financial Statement for the financial year ended 31 March 2015 of this Annual Report.

9. Management Reports

At every Board meeting, a progress report on the on-going projects of Bank Muamalat pertaining to products and
services, information technology, recruitment, human resource, policies and procedures, regulatory requirement as
well as income and expenses are submitted to the Board for review.

10. Corporate Responsibility

As part of its shared values, Bank Muamalat is continuously developing and strengthening its relationship with the
community. Through its Corporate Responsibility initiatives, Bank Muamalat willingly gives back to the community
not just in monetary terms but also through the provision of products, services as well as educating the public on the
importance of Islamic financial services through a series of ceramahs.

Further details of the Corporate Responsibility Initiatives are set out on Pages 86 to 89 of this Annual Report.

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Statement
on Internal Controls

The Statement on Internal Controls is made

pursuant to best practices as defined by
Malaysian Code on Corporate Governance 2012
by Securities Commission to include in its Annual
Report a statement about the state of its internal
control. The statement is crucial as it outlines the
processes to be adopted by the Board in reviewing
the adequacy and effectiveness of internal control
system of Bank Muamalat.

RESPONSIBILITY

The Board recognises the importance of maintaining a system of internal controls can only provide a reasonable
sound system of internal controls and risk management rather than an absolute assurance against risk of material
practices as well as reviewing their adequacy and misstatements on financial information and records
effectiveness to safeguard shareholders value. Robust and or against fraud or losses. The concept of reasonable
dynamic risk management and internal controls are vital in assurance also acknowledges that the control procedures
ensuring stability of the business in facing rapid changes cost should not exceed the expected benefits.The Board
of business operations today. The Board reviews and is is of the opinion that, for the period under review up
ultimately responsible for the adequacy and integrity to the issuance date of the annual report and financial
of the internal controls systems in Bank Muamalat in statements, the system of internal controls in place at Bank
addressing business and operational risks.The Board Muamalat is appropriate and adequate to safeguard the
diligently exercises overall responsibility in ensuring that stakeholders interest and its assets. The control structure
Bank Muamalats system of internal controls is adequate and process which have been instituted throughout
and effective to manage the risk profiles within Bank Bank Muamalat are reviewed and enhanced from time to
Muamalats risk appetite. It is pertinent to note that, such a time as to suit the changes in Bank Muamalats business
system is designed to manage Bank Muamalats key areas environment and risk appetite. As at the date of approval
of risks within an acceptable risk appetite, rather than to of this statement, the improvement of the internal controls
guarantee total elimination of risk of failure to achieve system remained in place.
Bank Muamalats objectives and goals. As such, the

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Board Audit Committee (BAC) Internal Audit Function

The Board Audit Committee (BAC) has the authority and The BAC is supported by the Internal Audit Department
is empowered by the Board of Bank Muamalat to review (IAD), which forms an integral part of the governance
the adequacy and effectiveness of the internal controls processes in Bank Muamalat. The Internal Auditors evaluate
system and risk management framework implemented by and contribute to the improvement of governance, risk
Bank Muamalat and its subsidiary companies. management, and control processes using a systematic
and disciplined approach. The IAD assists BAC by providing
Convene meetings or meet with members of the reasonable assurance and value-added recommendations
Management, Internal Auditors, External Auditors, and on the adequacy, and effectiveness of the system of
Officers of Bank Muamalat or outside counsel. internal controls and financial reporting, and compliance
with internal policies, procedures, and external applicable
Conduct or authorise investigations to be carried out rules and regulations. The IAD conducts independent risk-
into any matter within the scope of the BACs duties. based audits based on annual audit plan approved by BAC.

Appoint, employ, and oversee the work of public In preparation of the audit plan, IAD has taken the business
accounting firm in conducting the annual financial strategy, objectives, risk, and internal control environment
audit, whose partners subsequently would report of Bank Muamalat, and activities of its operating and
directly on outcome of the work to the BAC. support units into consideration. The IAD evaluates
the associated risks, internal controls, and compliance
Review connected party transactions and related party matters through a structured risk-based audit approach
transactions, as well as review any write off request and periodic audit on units, branches, and key business
from the Management. processes of which, the frequency is determined by the
level of risk assessed, and the IAD provides independent
Review and discuss with the Management and the and objective reports for BACs review and deliberation in
External Auditors on results of the audits, and all their periodic meetings.
matters required to be communicated to the BAC
under generally accepted accounting standards.

Review all significant findings, observations,

recommendations, and action plans reported by the
Internal Auditors, Management, External Auditors, and
Regulators. In addition, status of actions taken by the
Management on observations raised by the above-
mentioned parties are being tracked at the Audit
Resolution Monitoring Committee (ARMC), which
Minutes of the ARMC meetings are presented for BACs
deliberation.

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OTHER KEY ELEMENTS OF INTERNAL CONTROLS Defined authority limits have been established for each
level within Bank Muamalat to approve acquisition and
The other key elements incorporated by the Board, disposals of assets, approval of credit items, writing
which contributes to an effective internal controls system off operational and credit items, as well as approving
includes: expenses. In regards to Bank Muamalats commitment
towards its Whistle Blowing Policy, the Board has
Organisation Structure established Muamalat Ethics Line to enable employees
Establishment of a formalised organisation structure that to raise concerns in a responsible manner regarding any
provides clear demarcation of reporting and responsibility unprofessional or unethical conduct, and to have such
for ensuring proper assignment of authorities, segregation concerns properly investigated. All disclosures under this
of duties, and accountability towards Bank Muamalat. Policy will be managed by a third party appointed by Bank
Muamalat and will be treated as strictly confidential.
Business Plan and Budget
Annual business plan and budget are prepared and
submitted to the Board for approval, where performance
achievements are reviewed against the targeted results
on monthly basis to allow corrective actions to be taken to
mitigate risks. The Board reviews regular reports from the
Management on the key financial and operating statistics,
as well as legal and regulatory matters.

Policies and Procedures

The Board approves any changes or updates to Bank

Muamalats policies. Bank Muamalats policies and
procedures are established and formalised to ensure
compliance with internal controls and the relevant laws and
regulations, which are set out in the respective manuals,
guidelines, and directives issued by Bank Muamalat and
the regulatory authorities that updated from time to time.

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Statement
on Risk Management
Bank Muamalats management of risk is undertaken in an integrated approach,
which essentially looks at a broad spectrum of risks inherent in Bank Muamalats
business operations and manages them under an established governance and
oversight structure.

As a financial institution, Bank Muamalat encounters various forms of risks in

its day-to-day business activities. Key inherent risks in the financial services are
credit, market, liquidity, operational, strategic and business risks. In addition, Bank
Muamalat also faces the risk of Shariah non-compliance, an important and unique
risk faced by full-fledged Islamic Financial Institutions (IFI). Failure to effectively
manage these risks could potentially lead to dire consequences such as financial
losses, regulatory breaches and adverse public perception that may give rise to
crisis of confidence.

Hence, it is imperative for these risks to be managed in a holistic and timely manner.
To achieve this, Bank Muamalat conducts ongoing analysis of its risk profile against
current and projected operating conditions. Appropriate risk management
strategies are then formulated and implemented under an established governance
structure to ensure prompt monitoring, review and response.

BUSINESS CONDITIONS

In 2014 and continuing into the early 2015, the financial tighter capital and liquidity standards are adding on to
services industry saw growing challenges in the form of the increasingly complex financial landscape which has
rising funding and operational costs, continued margin resulted in higher need for regulatory compliance and
compression, volatility in currencies and commodity adoption of more cost efficient approaches. These have
prices, and dampening consumer demand. Banks were necessitated the build-up of substantial infrastructure and
reporting a slowdown in financing growth and this has related capabilities in the form of systems, processes and
been largely attributed to weaker consumer sentiments expertise, and have sent financial institutions scrambling
coupled with tighter regulatory prudential measures into further consolidation mode and in pursuit of lower-
introduced to control household debt levels. cost and sustainable funding sources.

Amidst global economic and geopolitical uncertainties, Locally, BNM has introduced revisions to its CAFIB1

__________
1
The Capital Adequacy Framework for Islamic Banks (CAFIB) issued on 27 June 2013 and its related documents.

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Statement
on Risk Management

guidelines, which is modeled after the BCBSs revised promoting the country as a major Islamic financial hub, the
capital and liquidity reform measures (generally referred IFSA is a comprehensive legal framework that amalgamates
to as the Basel III reform package ). The new capital and the previous legislative acts and other related BNM
liquidity standards came into effect on 1 January 2013 guidelines on banking and takaful. It integrates corporate
and are being implemented under a gradual phase-in and Shariah governance, in alignment with global best
transitional arrangement until its full compliance in year practices, and enforces them as a substantive law.
2019. As banks rush to comply with the minimum liquidity
(LCR) requirement which shall become mandatory in June Under the IFSA, IFIs are required to comply with the
2015, the banking sector saw intense competition for Shariah and operational standards issued by BNM and
stable deposits, which in turn resulted in higher cost of other applicable regulatory bodies, which essentially
funds. covers all facets of the IFIs business objectives, operations
and product offerings. One of the key elements of the IFSA
In the run-up to the Basel III2 implementation, Bank is the enforcement of end-to-end Shariah compliance in
Muamalat has taken early steps to ensure compliance to every aspect of the IFIs operations. In business dealings,
these regulatory requirements. To address its funding and IFIs are required to ensure that all Shariah contracts comply
liquidity requirements, Bank Muamalat has formulated with the Shariah rules and principles and sufficiently
and implemented several strategies to reduce its reliance reflect the underlying risks and rewards of the financial
on wholesale deposits and to increase more stable sources transactions.
of funding. These include intensifying acquisition of stable
deposits such as consumer/retail SME CASA, building on Pursuant to the IFSA3, IFIs are required to distinguish
the DRB group synergy to tap for deposits from group their deposit products from investments, thus pushing
companies and employees, and sourcing for longer- for greater diversification of their product offerings
term funding alternatives. A dedicated department and and services. Deposits previously structured under
taskforce were specifically set up to initiate, execute and mudharabah concept are considered as investments
oversee these deposit drive initiatives. and has to be segregated from other types of deposits.
Banks have until June 2015 to fully transition the affected
The capital standards under the revised CAFIB guidelines deposit products and come up with mudharabah and
are primarily aimed at enhancing the quality of capital musyarakah-based investment accounts as new offerings
held by banks in support of their business activities and to would-be investors. The move is seen as providing
risk profile. To maximise absorption of potential losses, greater flexibility and opportunity for IFIs to broaden and
banks are required to hold higher amounts of capital diversify its product structures and explore possibilities
buffers and high quality capital instruments. As these for more capital relief in the form of specific asset-backed
forms of capital would entail higher cost, Bank Muamalat investment accounts.
has formulated and implemented a strategic action plan to
ensure regulatory compliance and achieve optimal capital Bank Muamalat has initiated a review of its products,
utilisation. services and processes to ensure compliance to the
regulatory requirements and has accordingly developed
The Islamic Financial Services Act 2013 (IFSA) , which came alternative deposit products as well as investment
into force in June 2013, has brought about various changes accounts for its customers. While the transition of deposit
to the local banking scene. Aimed at strengthening and accounts are expected to be smooth, introduction of
__________
2
The rules are detailed out in the documents Basel III: A global regulatory framework for more resilient banks and banking systems, Basel III: International
framework for liquidity risk measurement, standards and monitoring, and subsequent additional documents issued by the Basel Committee on Banking
Supervision (BCBS).
3
The Islamic Financial Services Act 2013 repeals the Islamic Banking Act 1983 and the Takaful Act 1984 and incorporates elements from the Payment System
Act 2003 and the Exchange Control Act 1953.

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Statement
on Risk Management

the new investment accounts is projected to undergo a process of awareness-building, educating, and open
gradual familiarisation and acceptance phase, particularly communication with the various stakeholders within
as the market has to be accustomed to the non-capital the organisation. Constant engagement is maintained
protected feature of the investment products. between the risk management team and the business
MANAGING RISKS units to facilitate and foster greater understanding and
cooperation towards better risk management.
Bank Muamalat formulates risk management strategies to
ensure that risks are effectively addressed and managed. RISK GOVERNANCE
Risk strategies are also developed with the aim of
balancing risks with business objectives and ensuring Bank Muamalats risk governance structure is based on a
that the growth plans are well supported by a defined and distributed function approach, where risk governance and
effective risk infrastructure. management is taken under three distinct lines of defence.
The first line of defence in managing risks lies within
Among the key strategies are to establish a comprehensive the business units where risks are directly undertaken
risk infrastructure and a risk assessment and monitoring and assumed in the day-to-day business activities and
framework. The risk assessment framework is a systematic operation. As front-liners, the business units are responsible
and ongoing process of identifying, evaluating, monitoring, for carrying out the established processes for identifying,
managing and responding to existing and emerging risks mitigating and managing risks within their respective
in line with Bank Muamalats business objectives as well environment in alignment with Bank Muamalats strategic
as changes in the operating and regulatory environments. targets.
Embedded in the risk infrastructure is the risk management
approach and processes where through these processes, The second line of defence, which comprises the risk
Bank Muamalat is able to identify and measure significant management control functions and compliance, ensures
risks, define its risk appetite, and finally, formulate the independent oversight and management of all
appropriate strategies to manage and mitigate them. material risks undertaken by Bank Muamalat. The risk
management function provides specialised resources for
Following the conversion of Bank Muamalats key core developing risk frameworks, policies, methodologies and
banking systems under the Muamalat Banking Solution tools for risk identification, measurement and control. It
(MBS) implementation in mid 2014, Bank Muamalat has also provides the control function, which monitors the
embarked onto the next phase of the MBS project which risks by using various key indicators and reports, guided
covers the essential risk analytics and management by the established risk appetite and tolerance limits.
system. Deemed as a key addition to the risk infrastructure,
the newly acquired systems would address and enhance Finally, the third line of defence, which involves internal
Bank Muamalats future risk management capabilities audit, provides the independent review and assurance
to meet new challenges and the growing regulatory on the adequacy of the risk management processes and
compliance needs. These include the credit risk datamart, effectiveness of the first two lines of defence in fulfilling
market risk and asset-liability management (ALM) systems, their mandates.
and enhancement of the operational risk assessment and
loss data management system.

Another important risk management element is the

existence of a strong risk culture. Bank Muamalat aims
to cultivate and internalise this positive and proactive
approach towards addressing risk through an ongoing

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on Risk Management

RISK MANAGEMENT ORGANISATION STRUCTURE

The risk governance structure comprises board and management level committees as well as risk control units, which are
guided by a reporting hierarchy to enforce the overall governance and oversight of Bank Muamalats risks. Each committee
and control unit has its own defined responsibilities and delegated authorities.

The Board holds the ultimate responsibility for the overall risk governance and management. This includes determination
of risk strategies, defining the risk appetite and ensuring effective of control and monitoring of risks. The Board is also
responsible for ensuring the risk management structure is clearly defined and performs effectively.

The Board is supported by two board-level committees, existing risk management framework for its adequacy and
namely the Board Risk Management Committee (BRMC) for ensuring that a robust infrastructure and systems as
and the Shariah Committee (SC), each with distinct roles and well as resources are in place to monitor risk and capital
responsibilities. The committees, through the authorities positions.
delegated by the Board, execute and implement Bank
Muamalats strategies, policies and methodologies and Shariah compliance management is enforced by the
ensure that these are kept in line with the Boards vision. Board through the SC. The SC functions independently
from the Board and is tasked with the responsibility of
The BRMC is a board-level forum that focuses and understanding Shariah issues in all activities assumed
deliberates on all risk management issues. The committee by Bank Muamalat. The SC also serves as advisory to the
oversees and ensures the effective management of risks Board and the management team on all Shariah matters.
and enforcement of the approved risk tolerances and limits. Shariah management and compliance has to be closely
It is also responsible for the review and assessment of the aligned to ensure Bank Muamalat has a full view of all risks

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and is able to put in place an integrated and end-to-end breached, the tolerance limit will trigger the appropriate
Shariah compliance management. actions needed to address the situation. The business-level
RAS are jointly developed with the business lines and the
At the management level, specialised risk committees actual performance are measured and monitored against
have been set up to oversee specific risk areas and the risk appetite on a regular basis.
perform the control functions. These cover the
asset-liability management, credit evaluation and CAPITAL MANAGEMENT
management, investment management, and operational
risk management. To support the above committees, a Bank Muamalats capital strategies and approach
dedicated Risk Management Department has been formed in managing capital risk is embedded in the capital
to carry out the day-to-day risk management functions, management framework. Developed in accordance
independent from business lines and targets. with the capital standards as outlined in the BNMs
CAFIB guidelines, Bank Muamalats capital management
RISK APPETITE framework adopts forward-looking and risk-based
approaches and principles.
Bank Muamalats risk appetite framework comprises a
governance structure and a set of risk appetite statements The main capital management objective is to ensure
(RAS) which are outlined based on the stakeholders that capital resources are efficiently used while striving
expectation. It serves as a foundation for Bank Muamalats for business and strategic targets. To achieve this, Bank
risk culture and sets out the principles and policies to guide Muamalat assesses its capital requirements and develops
business activities and decision making process towards an annual capital plan. The plan contains a capital forecast
achieving an optimal balance between risk and return. covering a three-year planning cycle to ensure that
sufficient capital is maintained to meet business needs
The RAS incorporates Bank Muamalats key performance and to support the risks associated with these activities.
indicators such as earnings volatility, liquidity and capital
ratios. At the strategic level, Bank Muamalats tolerance To assess the capital requirement, Bank Muamalat
for earnings volatility and liquidity are clearly stated to applies the regulatory Standardised Approach for credit
facilitate appropriate governance and oversight. Tolerance and market risks and the Basic Indicator Approach for
on liquidity is set based on thresholds on key liquidity operational risk for the measurement and quantification
ratios. The risk appetite also defines Bank Muamalats risk of its risk-weighted assets. As prescribed under the ICAAP,
capacity in terms of the capital levels required to support other possible major risks that are not covered under these
its business activities as well as the capital buffers deemed measurement approaches are also assessed to determine
adequate to meet regulatory and strategic requirements. further capital requirement, if any.

Regarded as a key cornerstone of the risk management Bank Muamalats capital position is closely monitored
framework, Bank Muamalat formulates strategic and against the capital plans and internal capital targets to
business plans in alignment with the Board-approved ensure that they remain within set targets or to trigger
risk appetite statements. Aside for business planning, preemptive or remedial actions, if deemed necessary. Bank
the RAS is also applied in developing risk management Muamalat conducts regular stress tests to evaluate the
strategies. As it provides the basis for Bank Muamalats impact of specific macro-economic and risk factors on its
risk-taking boundaries, risk tolerance limits and measures capital adequacy levels and for formulation of appropriate
are formulated based on the approved risk appetite and capital management strategies.
serve as a reference point for all risk taking and monitoring
activities. In the event a risk boundary is approached or Stress testing is performed to identify early warning signs

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Statement
on Risk Management

and potential risk events that may adversely impact Bank CREDIT RISK MANAGEMENT
Muamalats risk profile and business direction. It is also
used to determine the appropriate capital buffers needed Credit risk is defined as the risk of a financial loss if any
to be maintained to ensure that Bank Muamalat does not customer or counterparty fails to meet its obligations
breach the minimum regulatory ratios under actual and to Bank Muamalat as they fall due. It is a primary source
stressed scenarios. of risk to Bank Muamalat, arising mainly from retail and
wholesale financing exposures which form the bulk of
The capital planning and management framework is Bank Muamalats assets. It covers all financing exposures,
also used to ensure that adequate capital buffer is held including guarantees and irrevocable undrawn facilities,
under normal and projected adverse conditions. Hence, and financial assets, such as investment securities held in
the annual capital plan addresses any capital issuance Bank Muamalats banking book. To a lesser degree, Bank
requirements, capital instrument composition and Muamalat is also exposed to other forms of credit risk, such
maturity profile, and capital crisis contingency planning. as those arising from settlement balances with market
counterparties.
Internal Capital Assessment Adequacy Process
(ICAAP) To manage credit risk, Bank Muamalat has put in place an
established and comprehensive framework comprising of
The capital management framework documents the policies, processes, measurement methodologies, and an
key capital management policies, principles, processes oversight structure. Credit underwriting and management
and responsibilities that are to be applied in capital is governed by a set of credit-related policies, namely
planning and management as well as for capital adequacy the Credit Risk Policy (CRP) and Guidelines to Credit Risk
assessment as required under the Internal Capital Policies (GCRP), and related operating procedures. They
Adequacy Assessment Process (ICAAP). outline Bank Muamalats policies on credit risk such as
financing underwriting standards, pricing policy, risk
Capital planning and management is integrated with risk rating, approving authority limits, prudential limits, risk
management where the comprehensive risk assessment mitigation, review process, rehabilitation and restructuring,
conducted on all risk areas is used in the capital adequacy and provisioning for impaired financing. The policies are
assessment to study its impact on Bank Muamalats reviewed and updated regularly to ensure its continued
capital standing. The risk and capital assessment entails relevance and effectiveness.
the identification of material risks inherent in business
activities and the effectiveness of controls put in place to The credit risk management approach involves the
mitigate and manage these risks. measurement, mitigation and management of credit
risk exposures at every stage of the credit process. At
In the ICAAP, which is conducted in conjunction with the credit origination, the business units are guided by the
strategic and business planning process, Bank Muamalat underwriting standards, credit rating models and the
determines the level of capital to be allocated for business pricing policy. Credit underwriting proposals are then
growth, in line with the targeted profit and Risk Adjusted subjected to independent evaluation and risk assessment
Return on Capital (RAROC), and the required capital prior to approval. At the approval stage, the approving
buffers. Additionally, internal capital targets are set in the authority levels and limits are clearly defined to ensure that
annual capital plan and used as an ongoing monitoring credit decision making are undertaken under a prudent
and management mechanism to ensure capital levels are and proper governance structure. These authority limits
maintained at the approved levels are approved by the Board and are subject to periodic
review to ensure its effectiveness and compliance.

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Bank Muamalat monitors and manages the credit The above market risk and ALM management process is
exposures based on concentration and portfolio segments governed by the Market Risk & ALM Policies and Guidelines
to ensure that they are kept within the approved risk (MRAPG) and Trading Book Policy Statement (TBPS).
appetite and risk tolerance levels. Monthly exposure review
and analytical reports are produced and tabled to the risk RATE OF RETURN RISK
management committees for deliberation. The reports
also provide the basis for formulation of risk management Rate of return risk refers to the variability of Bank Muamalat
strategies and policies. assets and liabilities resulting from the volatility of the
market benchmark rates, both in the trading and banking
Exposures to delinquent and problematic financing are books. Such changes can adversely affect both Bank
managed by an independent department that focuses and Muamalats earnings and its economic value.
specialises on restructuring and recovery activities. A set
of early warning triggers are used to identify potentially To assess and manage the exposure, Bank Muamalat uses
distressed financing accounts and to facilitate initiation various measurement tools and analyses to study the
of remedial actions. The exposure is actively monitored to impact of market rate changes on earnings and balance
ensure delinquency is kept within tolerable limits. sheet profile. Among these are the earnings at risk (EaR),
economic value of equity (EVE) and re-pricing gap
MARKET RISK & ASSET-LIABILITY MANAGEMENT analysis. In addition, the value at risk (VaR) approach is used
to estimate the maximum potential loss of the investment
Market risk is the risk of losses resulting from movements portfolio over a specified time.
in market rates, foreign exchange rates, and equity
and commodity prices, which adversely impact Bank Risk tolerance limits are then built along these sensitivity
Muamalats earnings and capital positions. measurements to manage and mitigate the related risk
exposures. Bank Muamalat actively manages the following
Exposure to market risk arises from trading and non- rate of return risks:
trading activities. Bank Muamalats risk management
framework addresses both market risk and asset-liability Risks Definition
management, where market risk exposures are managed
Re-pricing Risk Timing differences in maturity and re-
and controlled in order to optimise return on risk while
pricing of Banks assets and liabilities
maintaining a market profile consistent with Bank
Muamalats strategic plan. Yield Curve Risk Unanticipated yield curve shifts that has
adverse impact on Banks income and
economic values
The framework covers key risk management practices such
Basis Risk Arises from imperfect correlation in the
as risk identification, measurement, mitigation, monitoring
adjustment of rates earned and paid on
and control and includes a formal governance and different instruments with otherwise similar
oversight structure. An independent market risk control re-pricing characteristics
function is responsible for measuring risk exposures
Optionality/ The risk arising from options embedded
according to the established policies and guidelines and Embedded in Banks assets, liabilities and off-balance
reports to the ALCO Working Committee on a monthly Option Risk sheet portfolio
basis. Balance sheet and capital management issues and
strategies are discussed at the ALCO and later escalated LIQUIDITY RISK
with recommended action plans to the ERMC, BRMC and
Board respectively. Liquidity risk is the risk of Bank Muamalats failure to
provide adequate financial resources to fund increases

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Statement
on Risk Management

in its assets or to meet payment obligations as they fall OPERATIONAL RISK MANAGEMENT
due. This leads to an inability to support normal business
activity and meet liquidity regulatory requirements. It Operational risk is defined as the risk of losses resulting
is imperative for Bank Muamalat to ensure that there is from inadequate or failed internal processes, people, and
sufficient availability of cash and liquid assets to meet systems, and/or from various external events. The objective
these short-term and long-term obligations and this is of Operational Risk Management (ORM) is to effectively
conducted through an active and effective management manage risks to minimise possible financial losses arising
of its balance sheet. from these operational lapses.

For ongoing management and monitoring of the liquidity Bank Muamalat has established an Incident Management
and funding positions, Bank Muamalat establishes risk Data Collection (IMDC) and reporting system where all
tolerances and limits within applicable risk appetite material loss incidents, potential loss or near miss incidents
metrics, monthly reporting of its asset, liability and liquidity are immediately reported and recorded. The IMDC report
positions and a comprehensive liquidity crisis contingency is designed as a tool to report and capture information
plan and action framework. on all incidents that may give rise to operational losses,
including Shariah and regulatory non-compliances.
The primary focus of Bank Muamalats liquidity
management is to assess all cash inflows against outflows Bank Muamalat has also instituted the Risk and Control
to identify the potential for any net shortfall going forward. Self Assessment (RCSA) process which is a forward looking
This includes funding requirements for off-balance sheet approach in assessing operational risk to identify and close
commitments. any control gaps prevalent in the business processes. In
addition, Key Risk Indicators (KRI) are built into the business
Bank Muamalat pays particular attention to its ability processes to facilitate the monitoring and tracking of
to cover any shortfall in liquidity for up to 1-month time operational risk exposures over time.
period followed by a medium-term assessment of liquidity
of up to one year. The measurement and limits used to The management of operational risks is targeted at
monitor and manage the liquidity risk are as prescribed preventing risk events and damages (by in-process and
under the BNMs liquidity framework, namely the New managerial controls), handling critical situations (via
Liquidity Framework (NLF), Liquidity Coverage Ratio (LCR) contingency plans and business continuity management
and Net Stable Funding Ratio (NSFR). To mitigate the risk, (BCM)) and mitigating potential losses (collaterals). The
Bank Muamalat employs a funding diversification strategy applied risk management system and controls are in
and establishes a liquidity contingency plan. line with Bank Muamalats level of operational risks and
internal standard operating procedures. By establishing
To ensure its readiness in dealing with a liquidity crisis, Bank and operating a system of control procedures that
Muamalat has set up a pre-crisis management framework commensurate with its risks, Bank Muamalat limits its
with a build-in and structured crisis response mechanism, exposures to an acceptable level in accordance with its risk
which allows for quick identification of potential liquidity appetite.
crisis before it occurs. The process involves continuous
monitoring of various indicators which acts as early- In relation to operational risk management, the key risk
warning signals of impending crisis situations of different organs which plays a critical role in the overall integrated
severity levels. risk management framework are the Operational Risk
Management unit, Operational Risk Management
Committee (ORMC), Internal Audit, Compliance and the
business lines.

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SHARIAH RISK MANAGEMENT The management and mitigation of Shariah risks is

undertaken and governed by the Shariah Management
Shariah non-compliance risk is defined as the risk that and Compliance Framework, Guidelines on New Product
arises from Bank Muamalats failure to comply with the Approvals and related Shariah risk management policies,
Shariah rules and principles as determined by the relevant procedures and general decisions.
Shariah regulatory councils or committees.
Risk mitigation for Shariah inherent risks covers efforts
To manage Shariah risk, Bank Muamalat has established taken to reduce the probability/likelihood or consequences
the Shariah Risk Management Unit (SRMU) as part of its of a threat. Shariah risk may be avoided when Bank
integrated risk management framework, in accordance Muamalat refuses to accept the risk event by not engaging
with BNMs regulatory requirement as outlined under in the Shariah non-compliance activities that would lead
the Shariah Governance Framework (SGF). The SRMU to financial loss due to Shariah non-compliant income.
is responsible for the management of Shariah risk and
ensures that Shariah risk areas, which may interrelate with REPUTATIONAL RISK MANAGEMENT
operational risk, credit risk and market risk, are proactively
identified, assessed and controlled, and subsequently Strategic risk is defined as the risk of unexpected negative
reported to the management and Board on a timely basis. developments in Bank Muamalats results stemming
from its fundamental strategic and business decisions.
Main responsibilities of the SRMU include formulation of Reputational risk is the risk of loss arising from negative
policies and guidelines on Shariah risk management and perception of Bank Muamalats image by the public and its
identification and assessment of Shariah non-compliance stakeholders, which could adversely impact shareholder
risks in business operations, activities, products and value.
services.
In assessing strategic risk, Bank Muamalat looks at risks
Other functions performed by the SRMU are as follows: associated with its current and future business plans and
strategies. These may include plans for entering into new
Assess effectiveness of existing controls and businesses, expansion of existing products and services,
recommend appropriate controls or mitigation and enhancement or replacement of infrastructure, such
plan; as those involving information technology, networking
Assess new and existing products, services and and outsourcing.
operating procedures from Shariah risk
perspective; Reputational risk generally arises from failure to effectively
Monitor for possible Shariah non-compliance manage all other types of risks. Bank Muamalat therefore
risk and report to the Board, Shariah Committee places high importance on its overall risk governance
and management; and in particular, on ensuring compliance to the Shariah
Identify potential income or profit arising tenets. As a full-fledged Islamic financial institution,
from business operations and activities that negative perception on the part of its customers and other
could not be recognised as a halal (lawful in stakeholders could lead to significant and sustained brand
Shariah) income to Bank Muamalat due to non- damage and other adverse consequences.
adherence with Shariah requirements;
Formulate procedures on cleansing of non-halal Managing reputational risk is therefore the responsibility
income and monitor the de-recognition of all individuals within the organisation, particularly those
process; and who are directly involved in making commercial decisions
Conduct training and awareness programme in their respective functions or business lines.
on Shariah risk to inculcate a Shariah compliance
risk culture.
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Statement
on Compliance
Bank Muamalat recognises that regulatory compliance integral par t of Bank Muamalat s business
risk and obligations have to be managed proactively and activities.
effectively, with the culture of compliance embedded
across all business activities of Bank Muamalat. The Board and management of Bank Muamalat further
pledges to ensure the implementation of the following
As with any other financial services provider, Bank drivers of effective compliance culture:
Muamalat is exposed to the risk of impairment to its
business model, reputation and financial condition from Leadership principle
failure to comply with laws and regulations, internal Full commitment by all staff in ensuring
policies and procedures, as well as the expectations of compliance risk and requirement are effectively
stakeholders. This encompasses the compliance risk faced administered; and
by Bank Muamalat. In operating its business as a compliant Sufficient provision and appropriate resources
financial services provider, Bank Muamalat upholds the for the compliance programme.
adoption and practice of good corporate governance.
These principles serve as an important guide for Bank Culture principle
Muamalat as it continuously evolves to meet the growing Compliance culture is consciously promoted
demands of compliance best practices. bank-wide; and
All staff are continuously engaged to ensure
Compliance is the collective responsibility of the they inculcate compliance awareness and
respective Boards, Senior Management and each and discharge their duties effectively to ensure their
every employee of Bank Muamalat. Furthermore, there is respective units comply with regulatory and
a dedicated officer and compliance team in each of the internal requirements.
applicable entity. Hence, everyone concerned is expected
to promote self-regulation and be accountable for his or Training and Communication Principle
her own activities while maintaining ethical principles and Compliance knowledge and awareness are
behavior in everything that he or she does. constantly reinforced and communicated; and
Compliance competency and training needs are
The Board, CEO and senior Management have adopted the recognised and addressed.
Compliance Framework and Charter built on the following
principles: Compliance Risk Identification & Assessment
Principle
Commitment to comply with the relevant legal Red flags and compliance risks are proactively
and regulatory requirements; identified; and
Early warning system i.e self auditing is in place
Dedicated compliance function coordinates to identify compliance requirements.
the management of Bank Muamalats compliance
risk; implement a compliance programme Compliance Management and Mitigation
across Bank Muamalat to ensure effective Principle
operations of Compliance Framework; and Effective policies, processes and internal controls
are in place to mitigate non-compliance risk; and
Embedding the Compliance Framework within Policies and procedures are communicated to
the operations of Bank Muamalat, thus making ensure that they are comprehended.
regulatory compliance risk management an

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Compliance Monitoring Principle detection and repor ting of the suspicious

Per for mance of compliance controls and activities to Financial Intelligence Enforcement
compliance programme are monitored, Department (FIED) and BNM;
measured and reported; and Assist the enforcement agencies in providing
Compliance programme are reviewed on a required information and suspicious transaction
regular basis and constantly enhanced. in a timely manner;
Maintain record keeping of all identification
Compliance Reporting and Resolution Principle and transactions details in accordance with
Appropriate methods are established and statutory requirements;
maintained to identify, capture, escalate, analyse Avenue to escalate and deliberate issues
and respond to issues or contravention associated surrounding AML/CFT on monthly basis with
with compliance requirements. Senior Management and the Board to reaffirm
the commitment and enhance the oversight
function;
ANTI MONEY LAUNDERING AND COUNTER Regular independent review by internal and
FINANCING OF TERRORISM (AML/CFT) ex ter nal par ties to assess the adequac y,
effectiveness of the internal controls and state of
Bank Muamalat also explicitly recognises the importance
compliance with the policy and guidelines; and
of maintaining continuous efforts and initiatives in
Strict enforcement of appropriate disciplinary
assisting the Government and BNM in combating illicit
ac tion based on established disciplinar y
and money laundering activities as well as financing of
procedures on employees who are found to have
terrorism activities through the use of the banking system.
contravened with such policy and guidelines.
With infrastructure and processes in place, Bank Muamalat
has demonstrated its full commitment and support in
All entities, business units and branches within Bank
ensuring compliance with Anti-Money Laundering and
Muamalat are strongly committed in complying with the
Anti-Terrorism Financing Act, 2001 (AMLATFA) as one of
AML/CFT Policy and Internal Guidelines as well as the
the responsible Reporting Institution (RI). The building
applicable regulations and legislations.
blocks of the infrastructure are the AML/CFT Policy and the
Internal Guidelines that sets out the following:

Roles, responsibilities and accountabilities of all

employees in combating money laundering and
terrorism activities;
Regular education and training to instill staff
awareness on the importance of AML/CFT so as
to assist in preventing and detecting suspicious
activities;
Customer Due Diligence process to proactively
identified and profile the customers based on
selected key criteria;
Use of subscribed database and management
information system for on-going screening
of customers transactions to facilitate timely

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Code of Conduct
& Ethical Principles
Bank Muamalat is committed to maintaining the highest standards of conduct at the workplace and in business engagements.
Our business must be conducted fairly, professionally, impartially and in full compliance of Shariah principles.

The Code and Ethic/Conduct reflects and reinforces Bank Muamalats values as an Islamic Bank and it is designed to assist the
stakeholders in understanding the ethical principles:

Uphold good reputation and public confidence by providing 100% Shariah Compliant products and services as a
preferred Islamic financial service provider;

Treat all stakeholders which includes the employees, business partners, customers and communities with full
respect and dignity and appreciate the diversity of our workforce;

Adhere to all rules and regulation including Statutory Regulatory Requirements, Shariah Principles as well as Bank
Muamalats internal policy and guidelines;

Protects all customers information from improper disclosure, abuse or loss. However, the customer information
may be made available to third parties with the written consent of the respective customer or when disclosure
is authorised by Governmental or judicial bodies or agencies or our regulators, but Bank Muamalat will only do so
under proper authority;

Work in a professional manner for the benefit of customers during the relationship, whereby Bank Muamalat is
responsible for the protection of the financial interests of the customer; and

Do the right thing at all times without compromise and as a preferred Islamic financing provider, Bank Muamalat is
very clear, truthful and accurate in what we say and do.

As a custodian of public fund, Bank Muamalat is committed to protect and monitor consumer deposits/savings and other
similar financial assets through the development of control systems with high level of efficiency and effectiveness to reduce
fraud, embezzlement or misuse. In view of that, Bank Muamalat has invested in a more efficient core banking system to
replace the existing platform where the bank-wide migration has been launched in the middle of June 2014.

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