Page 424 - Bank-Muamalat_Annual-Report-2023

BANK MUAMALAT MALAYSIA BERHAD

BASEL II
PILLAR 3 DISCLOSURE

8.0 MARKET RISK AND ASSETS-LIABILITY MANAGEMENT (“ALM”) (CONT’D)
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 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, BRCC 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 2023
were:

• On-going enhancement of Fund Transfer Pricing (“FTP”) as a mechanism for distributing revenue between profit
centres and to improve profitability through improved pricing;

• Concentrate more on sourcing for stable deposits from retail and small businesses segments, longer term deposits,
and deposits from transactional and operational accounts; and
• Offering of investment account products as risk absorbent.

The Bank’s market risk management and ALM processes, which include risk identification, measurement, mitigation, monitoring
and reporting are guided by the Market Risk Management Framework (“MRMF”) and the Trading Book 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.

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