Page 356 - Bank-Muamalat-AR2020

354 BANK MUAMALAT MALAYSIA BERHAD About Us Our Leadership Our Strategy
ANNUAL REPORT FY2020

BASEL II
PILLAr 3 DISCLOSurE

2.1 INTErNAL CAPITAL ADEquACy ASSESSMENT PrOCESS (“ICAAP”) (CONT’D)
Stress Test

Stress testing is an important tool used in assessing and determining appropriateness of capital levels to ensure its ability to
absorb stress events in order to protect the depositors and other stakeholders.
Stress testing is performed to identify early warning signs and potential risk events that may adversely impact the Bank’s risk
profile. Stress testing is also used to determine the level of capital buffers that are considered adequate to ensure that the Bank
does not breach the minimum regulatory ratios under stress scenarios and to formulate appropriate management actions.
The Bank employs two stress test approaches, namely sensitivity and scenario analyses. The stress testing supports management
and decision making in the following areas:
i. Assessment of the Bank’s material risk profile under stress events and estimate the potential impact and implications to
the Bank;
ii. Assessment of capital adequacy in relation to the Bank’s risk profile, which is integral to the ICAAP;

iii. Facilitate capital and liquidity contingency planning across a range of stressed conditions and aiding in the development
and formulation of appropriate strategies for maintaining required level of capital and management of identified risks;
and

iv. Embedded as an integral part of the strategic planning and management process.
The tables below present the capital adequacy ratios of the Group and the Bank.

Table 1: Capital adequacy ratios
Group Bank
31 December 31 December 31 December 31 December
2020 2019 2020 2019

Core Capital Ratio 15.486% 15.998% 15.385% 15.895%
Risk-weighted capital ratio 17.955% 18.653% 17.858% 18.555%

The following table represents the Group’s and Bank’s capital position as at 31 December 2020. Details on capital instruments,
including share capital and reserves are found in Notes 25 to 26 of the financial statements.