Page 216 - Bank-Muamalat_Annual-Report-2023

BANK MUAMALAT MALAYSIA BERHAD

NOTES TO THE
FINANCIAL STATEMENTS
31 DECEMBER 2023 (18 JAMADIL AKHIR 1445H)

2. MATERIAL ACCOUNTING POLICIES (CONT’D.)
2.2 Material accounting policy information (cont’d.)

(b) Financial assets (cont’d.)
(iv) Impairment of financial assets (cont’d.)

(4) Forward looking information
ECL are the unbiased probability-weighted credit losses determined by evaluating a range of
possible outcomes and considering future economic conditions. The reasonable and supportable
forward looking information is based on the collation of macroeconomic data obtained from
various external sources, such as, but not limited to regulators, government and foreign ministries
as well as independent research organisations.
Where applicable, the Bank incorporates forward-looking adjustments in credit risk factors of
PD and LGD used in the ECL calculation; taking into account the impact of multiple
probability-weighted future forecast economic scenarios.
Embedded in ECL is a broad range of forward-looking information as economic inputs, such as:

• Consumer Price Index;
• Unemployment rates;
• House Price Indices; and
• Overnight Policy Rate.
The Bank applies the following three (3) alternative macroeconomic scenarios to reflect an unbiased
probability-weighted range of possible future outcomes in estimating ECL:

Base scenario : This scenario reflects that current macroeconomic conditions continue to prevail; and
Upside and Downside scenarios : These scenarios are set relative to the base scenario, reflecting best
and worst-case macroeconomic conditions based on subject matter expert’s best judgement from
current economic conditions.

(5) Financial investments at FVOCI
The ECL for financial investments measured at FVOCI does not reduce the carrying amount of
these financial assets in the statement of financial position, which remains at fair value. Instead,
an amount equal to the allowance that would arise if the assets were measured at amortised
cost is recognised in OCI as an accumulated impairment amount, with a corresponding charge
to profit or loss. The accumulated loss recognised in OCI is recycled to profit and loss upon derecognition
of the assets.
(6) Valuation of collateral held as security for financial assets

The amount and type of collateral required depends on assessment of credit risk of the counterparty.
Guidelines are implemented regarding the acceptability of types and collateral and valuation
parameters.
The main types of collateral obtained by the Group and the Bank are as follows:
- For home financing - mortgages over residential properties;

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