Page 322 - Bank-Muamalat-Annual-Report-2021

320 bank MuaMalat Malaysia berhaD
ABOUT US OUR LEADERSHIP OUR STRATEGY OUR PERFORMANCE

NOTES TO THE FINANCIAL STATEMENTS
31 DECEMbEr 2021 (26 JAMADIL AwAL 1443H)

46. fINANcIAL RIsk MANAGeMeNT OBJecTIves AND POLIcIes (cONT’D.)

(b) Market risk (cont’d.)
Types of market risk (cont’d.)
(iii) Profit rate risk (cont’d.)

Inter-bank Offered Rate (“IBOR”) Reformed (cont’d.)
• Accounting risk if the Bank’s hedging relationships fail and from unrepresentative income statement volatility
as financial instruments transition to RFRs; and
• Legal and Compliance risk of litigation due to transition value transfer between bank and its customers and
counterparties.
(c) Liquidity and funding risk

Liquidity and funding risk is the potential inability of the Group and the Bank to meet its funding requirements arising
from cash flow mismatches at a reasonable cost while market liquidity risk refers to the Group’s and the Bank’s potential
inability to liquidate positions quickly and with insufficient volumes, at a reasonable price.

The Group and the Bank monitor the maturity profile of assets and liabilities so that adequate liquidity is maintained at
all times. The Group’s and the Bank’s ability to maintain a stable liquidity profile is primarily due to its success in retaining
and growing its customer deposits base.

The marketing strategy of the Group and the Bank has ensured a balanced mix of deposits level. Stability of the deposits
base thus minimises the Group’s and the Bank’s dependency on volatile short-term receiving. Considering the effective
maturities of deposits are based largely on retention history (behavioral method) and in view of the ready availability of
liquidity investments, the Group and the Bank are able to ensure that sufficient liquidity is always available whenever
necessary.

The Asset & Liability Committee (“ALCO”) chaired by the Chief Executive Officer, is being conducted on monthly basis,
which purpose is to review the Liquidity Gap Profile of the Group and the Bank. In addition, the Group and the Bank
apply the liquidity stress test which addresses strategic issues concerning liquidity risk.

The tables depicted in the following pages are the analysis of assets and liabilities of the Group and the Bank as at 31
December 2021 based on remaining contractual maturities.