Page 408 - Bank-Muamalat-Annual-Report-2021

406 BANK MUAMALAT MALAYSIA BERHAD
ABOUT US OUR LEADERSHIP OUR STRA TEGY OUR PERFORMANCE
OUR LEADERSHIP
OUR PERFORMANCE
ABOUT US
OUR STRATEGY
BASEL II
PILLAR 3 DISCLOSURE

8.0 MArKeT rIsK AnD AsseTs-lIABIlITy MAnAgeMenT (“AlM”)

Market risk is defined as the risk of losses in on and off-balance sheet positions arising from movements in market prices.
Asset-Liability Management (“ALM”) refers to the coordinated management of the Group’s and the Bank’s balance sheet,
which includes assets, liabilities and capital. The main focus of ALM is on the Group’s and the Bank’s overall performance that
can be measured in terms of net income. In turn, the primary determinant of net income will be the overall risk-return position
of the Group and the Bank.

The key objective of market risk management and ALM of the Bank is to manage and control market risk exposures in order
to optimise return on risk while maintaining a market profile that is consistent with the Bank’s strategic, business plan and risk
appetite.

The Bank’s market risk management and ALM objectives are to:
• Ensure the implementation of an effective market risk management system in the Bank;

• Assume an appropriate balance between the level of risk and the level of return desired in order to maximise the return
to shareholders’ funds;

• Ensure prudent management of the Bank’s resources to support the growth of the Bank’s economic value; and
• Proactively manage the Bank’s balance sheet in order to maximise earnings and attain its strategic goal within the overall
risk/return preferences.

The Bank has an independent market risk control function that is responsible for measuring and managing market risk exposures
in accordance with the Board-approved policies and guidelines. The unit reports to the ALCO Working Committee on a
monthly basis, where issues on balance sheet and capital management are proactively discussed and any recommendation
and decision reached are then escalated to the ERMC, BRMC and Board respectively.
The Bank has formulated several strategies to effectively manage and ensure a sound balance sheet profile that complements
both regulatory and business requirements. Among the strategies implemented for FYE 31 December 2021 were:
• Embark on the enhancement of Fund Transfer Pricing (“FTP”) Framework as a mechanism for distributing revenue
between profit centres and to improve profitability through improved pricing;
• Concentrate more on sourcing for deposits from retail and SME customers, longer term retail deposits, and deposits
from transactional and operational accounts; and

• Review and enhancement of deposit products and features and introduction of more innovative deposit and investment
account products.

The Bank’s market risk management and ALM processes, which include risk identification, measurement, mitigation,
monitoring and reporting are guided by the Market Risk and ALM Policies and Guidelines (“MRAPG”) and the Trading and
Banking Book Policy Statement (“TBPS”).

The Bank defines and segregates its trading and banking book positions as outlined under the TBPS. The policy covers
the definition of trading and banking book for financial instruments, classification, performance, limit monitoring, position
valuation and hedging requirements.