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RISK MANAGEMENT IN ISLAMIC BANK

MD AROP OTHMAN RISK MANAGEMENT DIVISION BANK ISLAM MALAYSIA BERHAD 15 NOVEMBER 2007

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Content
Introduction to Risk Management Risk Management for Islamic Banks Principles of Risk Management g Risk Management in Bank Islam

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INTRODUCTION TO RISK MANAGEMENT
Concept of risk management Definition of risk Risk management process Impact of poor risk management p p g

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Concept of risk management in Islam
Text in Al-Quran

“O my children, do not enter the capital of Egypt by one gate but go into it by different gates. However, know it well that I cannot ward off you Allah’s will for none other than He has nay authority whatsoever. In Him I have put my trust and all who want to rely upon anyone should put their trust in Him alone ” alone. (Surah Yusuf: Verse 67)

Hadith from Prophet Muhammad s a w s.a.w
Prophet (peace be upon him) once asked a Bedouin who had left his camel untied, “Why do you not tie your camel?” The Bedouin answered, “I put my trust in God ” The Prophet PBUH then said “tie up your camel first then put your God. said, tie trust in God.”
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What is risk?
Risks are uncertain future events which could influence the achievement of the Bank’s objectives, including strategic, operational, fi ti l financial and compliance objectives. i l d li bj ti

Uncertain future events could be: • Failure of a borrower to repay a financing • Fluctuation of foreign exchange rates • Fraud, incomplete security documentations, etc • Non-compliance with shariah law and principles • Other events that may result in a loss to the Bank

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What is risk management? Risk management is the process by which various risk exposures are (1) identified. Page 6 INCEIF-LOFSA WORKSHOP. (3) mitigated and controlled controlled. LABUAN . (2) measured/assessed. (4) reported and monitored.

LABUAN .Lesson learnt from poor risk management 1. Daiwa Bank .The company loss USD2.The bank lost USD1. Orange County .The trader hid the losses while trading in bond market .The company lost USD1.The trader hid the losses while trading in the copper futures .6 b 3.There was lack of management control over the trader . Sumitomo 2 S it . Barings Bank .69 b in the derivatives market Page 7 INCEIF-LOFSA WORKSHOP.Nick Leeson singled handedly destroyed a bank 2.1 b USD1 1 4.

RISK MANAGEMENT FOR ISLAMIC BANKS Islamic banking business activities Risks inherent in Islamic banking business Uniqueness of Islamic banking Risk issues for Islamic banks Shariah non-compliance risk Rate of return risk/Displaced Commercial risk Inventory risk Completion risk Risk transformation at different stages of contract Page 8 INCEIF-LOFSA WORKSHOP. LABUAN .

LABUAN .Islamic banking business activities Page 9 INCEIF-LOFSA WORKSHOP.

LABUAN .Balance sheet of Islamic bank Profit & Loss Revenue Customer Financing Balance Sheet Islamic bank Deposit Dividen/Hibah Depositors Assets Asset-backed transactions Murabahah/Ijarah/Istisna/Salam Profit sharing transactions Mudharabah/Musharakah Fee based services Liabilities Demand deposit Investment accounts Mudharabah Special investment accounts Mudharabah/Musharakah Equity Off Balance Sheet Restricted investments Direct investors Page 10 INCEIF-LOFSA WORKSHOP.

LABUAN .Risk profile of Islamic bank Shariah non-compliance risk Displaced Commercial risk Equity Investment risk Islamic bank Credit Risk Operational risk Uniq que Rate of return risk Gene eric Market risk Liquidity risk Strategic Legal Fiduciary Reputation Transparency Regulatory compliance Page 11 INCEIF-LOFSA WORKSHOP.

rates. the economic value of an asset The potential loss arising from the Bank’s inability either to meet i obligations or to f d i its bli i fund increases i assets as they in h fall due without incurring unacceptable costs or losses The potential loss resulting from inadequate or failed internal processes. LABUAN .Generic risks for banks Types of risks Credit risk Definition The potential that a counterparty fails to meet its obligations in accordance with agreed terms and conditions of credit-related contract The potential impact of adverse price movements such as benchmark rates foreign exchange rates equity prices on rates. people and system or external events Market risk Liquidity risk Operational risk Page 12 INCEIF-LOFSA WORKSHOP.

Istisna and Ijarah. the risks of financing may transform from credit to market and vice versa at different stages of contract Hence capital requirement needs to take into account both the credit and market risk Page 13 INCEIF-LOFSA WORKSHOP. LABUAN . Salam.Risks transformation for financing of assets Even generic risks are not straight forward in Islamic banking For financing that involves financing assets eg Murabahah.

LABUAN .Risk transformation under Murabahah & MPO Murabahah Bank ll M b h h – B k sells assets it already owned t customer at cost + t l d d to t t t Murabahah Purchase Orderer (MPO) – Bank sells assets it acquires to customer at cost + based on promise to purchase (PP) by customer Type of contract Murabahah and non binding non-binding Murabahah purchase order Stage of contract Asset available for sale (asset on balance sheet) Asset is sold to and payment is due from customer Maturity of contract or upon full settlement Binding Murabahah Purchase Order Asset available for sale (asset on balance sheet) Asset is sold to and payment is due from customer Maturity of contract or upon full settlement Page 14 Credit risk X X X - Market risk X - INCEIF-LOFSA WORKSHOP.

Liabilities & risks pertaining to the th asset i b t is born b B k by Bank IMB – Bank promise to transfer the asset by sale or hibah & MUST be separately expressed and independent of underlying Ijarah Type of contract Operating Ijarah Stage of contract Asset available for lease (prior to signing of a lease contract) p g g g Upon signing a leasing contract and the asset is available for lease Maturity of contract term and the leased asset is returned to the bank Credit risk X X Market risk X X X X - Ijarah Muntahia Bittamleek Asset available for lease (prior to signing of a lease contract) Upon signing a leasing contract and the asset is available for lease Maturity of contract term and the leased asset is sold and the ownership of asset i t hi f t is transferred t f d to the customer Page 15 - - INCEIF-LOFSA WORKSHOP. LABUAN .Risk transformation under Ijarah & IMB Ijarah – Bank owns the assets whilst transferring the right to use the asset to lessee.

Thi risk i relevant under M dh b h and b i i k This i k is l t d Mudharabah d Musharakah contracts. Page 16 INCEIF-LOFSA WORKSHOP.Unique risks for Islamic banks Types of risks Shariah noncompliance risk p Rate of return risk Displaced Commercial risk Definition Risk arises from the failure to comply with the Shariah rules and principles p p The potential impact on the returns caused by unexpected change in the rate of returns The risk that the bank may confront commercial pressure to pay returns that exceed the rate that has been earned on its assets financed by investment account holders. The bank foregoes part or its entire share of profit in order to retain its fund providers and dissuade them from withdrawing their funds. LABUAN Equity Investment risk . The risk arising from entering into a partnership for the purpose of undertaking or participating in a particular financing or general business activity as described in the contract. and in which the provider of finance shares in the business risk.

Gambling (maysir)-free 4. FEATURE WHY? 1. Uncertainty or lack of knowledge (gharar)-free 3. LABUAN 2.Salient features of Islamic banking Prima-facie Prima facie free from prohibitive list as prescribed clearly by Shariah Shariah. Avoid any dispute due to unfairness in dealing caused by the lack of knowledge. Zero-sum game wherein it just transfers the wealth. not creating new wealth. Not in direct conflict with “established” Shariah principles in mu’amalah. This does not negate freedom of contract (hurriyah l t ’ (h i h al-ta’aqud) d) Page 17 INCEIF-LOFSA WORKSHOP. Not involved in selling or leasing or partnership in something is impure or not halal 5. Religious and ethical value consideration or public policy. . It cannot earn more money by itself without putting it into real productive actions. To ensure every contract behaves in its proper context. Interest (riba)-free (riba) free Money is just a medium of exchange.

1 2. 3. 4 1. 4. Seller Buyer Asset to be transacted Aqad – offering and acceptance The original price of the asset is known to the buyer p p y Transparent in terms of profit to be taken by the seller Payment must be made with something of legal tender value Not ribawi commodities Additional requirements Page 18 INCEIF-LOFSA WORKSHOP. 4. LABUAN . 3. 2.Examples of Shariah issues Completeness of aqad (contract) risk Murabahah Contract Basic tenets 1.

Wadi ah: 1 Wadi’ah: Disclosure of the hibah on the rate board. Gift to depositors Shariah non-compliance fund 2. 2 Mudharabah (deposit) Guarantee on the capital and return Maintenance cost on the Mudharabah deposit account Shariah non-compliance fund 3. 3 Remittance Shariah non-compliance fund Page 19 INCEIF-LOFSA WORKSHOP. website etc.Examples of Shariah issues 1. LABUAN .

Examples of Shariah issues 4. Sale (Bai’ Inah & BBA) MPO – Ownership of the asset prior to sale aqad Inter-conditional Inter conditional clause between ASA & APA The word “agree” in the aqad Financing of non-Shariah compliant asset Financing of asset intended for non-Shariah compliant activities 5. LABUAN . AITAB Appointment of customer as the Bank’s purchasing agent prior to Ijarah contract Maintenance cost during Ijarah tenure Page 20 INCEIF-LOFSA WORKSHOP.

Recovery Repossession .Examples of Shariah issues 6. activities etc asset etc. Refinancing Refinancing of encumbered property 8. 7. 6 Trade Financing d i i Commitment fee on the unutilized line BG – guarantee of non Shariah compliant asset.BBA Page 21 INCEIF-LOFSA WORKSHOP. LABUAN .

Impediment from Allah’s blessing or barakah b k h Contravention of the provision of Islamic Banking Act 1983 (Section 3(5)(a) Section 3(5)( ) & S ti 4) Jeopardize the Bank’s reputation as an Islamic bank Financial Impacts Invalidation of contract (‘aqad) Non-halal income Capital adequacy ratio (CAR) Impact Page 22 INCEIF-LOFSA WORKSHOP.Implications of Shariah non-compliances nonNon Financial Impacts Against the commands of Allah. LABUAN .

LABUAN .Rate of Return Risk Associated with the management of assets and liabilities Fixed rate long term assets funded by variable rate short-term liabilities Movement in b M t i benchmark rates may result i f d providers h i h k t lt in fund id having expectations of a higher rate of return Subsequently. they may lose their fund providers which could consequently lead to liquidity risk Page 23 INCEIF-LOFSA WORKSHOP. If Islamic bank does not yield to market pressure. it may result in displaced commercial risk where due to market pressure. Islamic bank needs to pay a return that exceeds the rate that has been earned on its assets.

LABUAN .Profit distribution Income from investment Income from financing Income from IMM investing Gross Income Less: Net trading income and other income Financing and investment loss provision Profit equalisation reserve Direct expenses Net Distributable Income Profit Sharing Ratio Investment Risk Reserve Depositor Islamic bank Page 24 INCEIF-LOFSA WORKSHOP.

GUIDING PRINCIPLES OF RISK MANAGEMENT BASEL Committee on Banking Supervision Islamic Financial Services Board (IFSB) Bank Negara Malaysia Page 25 INCEIF-LOFSA WORKSHOP. LABUAN .

LABUAN .BASEL 1988 Capital Accord (Basel I) Regulatory based Set out requirements to calculate capital charge ie the amount of capital to be set aside to absorb potential loss across banks and across countries One size fits all 1996 Basel I (Amendments) Market Risk was incorporated into Basel I 2004 International Convergence of Capital Measurement and Capital g p p Standards (Basel II) Aims to make capital requirements more risk sensitive Includes Operational Risk Bank shall be subject to 3 mutually reinforcing pillar Pillar 1: Minimum Capital requirements Pillar 2: Supervisory Review Process Pillar 3: Market Discipline Page 26 INCEIF-LOFSA WORKSHOP.

IFSB 2005 Guiding Principles of Risk Management 2005 Capital Adequacy Standard 2006 Corporate G C t Governance 2007 Supervisory Review Process 2007 Transparency and Market Discipline Page 27 INCEIF-LOFSA WORKSHOP. LABUAN .

LABUAN .IFSB Guiding Principles of Risk Management 15 guiding principles which cover q g process (1) ( ) General requirement for an effective risk management p Credit risk (4) Equity Investment Risk (3) Market Risk (1) Liquidity Risk (2) Rate of Return Risk (2) Operational risk (2) Page 28 INCEIF-LOFSA WORKSHOP.

including: Appropriate Board and Senior Management oversight Identify.0 – IIFS shall have in place a comprehensive risk management and reporting process. LABUAN .IFSB Guiding Principles of Risk Management General requirement p p p g Principle 1. report and control relevant categories of risks Held adequate capital against risk Comply with Shariah rules and principles Adequate risk reporting to the supervisory authority Page 29 INCEIF-LOFSA WORKSHOP. measure. monitor.

IFSB Guiding Principles of Risk Management Shariah non-compliance p p q y . including Shariah Board/Advisor. LABUAN . Principle 7. to ensure compliance with Shariah rules and principles Requirements: IIFS shall ensure that they comply at all times with the Shariah rules and p principles p IIFS shall ensure that their contract documentation complies with Shariah rules and principles IIFS shall undertake a Shariah compliance review at least annually IIFS shall keep track of income not recognised arising out of Shariah noncompliance and assess the probability of similar cases arising in the future Page 30 INCEIF-LOFSA WORKSHOP.1 – IIFS shall have in place adequate systems and controls.

pp Page 31 INCEIF-LOFSA WORKSHOP.2 – IIFS shall have in place an appropriate framework for managing displaced commercial risk. LABUAN .1 – IIFS shall establish a comprehensive risk management framework and reporting process to assess the potential impacts of market factors affecting rates of return on assets in comparison with the expected rates of return for investment account holders Principle 6.IFSB Guiding Principles of Risk Management Rate of return risk p p g Principle 6. where applicable g g p .

To T promote stability and efficiency of the fi bili d ffi i f h financial system b reducing the i l by d i h likelihood of Islamic banks becoming insolvent. To provide protection to depositors and/ or PSIA – the higher the CAR. To ensure that the Islamic banks’ capital p p position commensurate with its overall risk profile and strategy.IFSB Capital Adequacy Standard The Th need for RWCR framework df f k To ensure that Islamic banks can absorb a reasonable level of losses before becoming insolvent. Page 32 INCEIF-LOFSA WORKSHOP. LABUAN . the higher the level of protection.

00% PSIA is Profit Sharing Investment Account Page 33 INCEIF-LOFSA WORKSHOP.Standard Formula Eligible Capital Total RWA (Credit + Market Risks) + Operational Risk Less RWA funded by PSIA (Credit + Market Risks) > 8.IFSB Capital Adequacy Standard IFSB RWCR . LABUAN .

Supervisory Discretion Formula Eligible Capital Total RWA (Credit + Market Risks) + Operational Risk Less RWA funded by Restricted PSIA (Credit + Market Risks) Less (1 – α)[RWA funded by Unrestricted PSIA (Credit + Market Risks)] Less α [RWA funded by Profit Equalisation Reserve (PER) and Investment Risk Reverse (IRR) of Unrestricted PSIA (Credit + Market Risks)] Page 34 INCEIF-LOFSA WORKSHOP. LABUAN .IFSB Capital Adequacy Standard IFSB RWCR .

LABUAN .RISK MANAGEMENT IN BANK ISLAM Risk Management Framework Organisational Structure Policy and Guidelines Enablers Page 35 INCEIF-LOFSA WORKSHOP.

Risk Management Framework (RMF) Providing an architecture that governs the overall risk management philosophy and strategy Acting A ti as a f foundation t allow management of risks t b conducted most d ti to ll t f i k to be d t d t effectively in line with the industry’s best practices Setting a tone for the philosophical and practical approaches in managing risk Page 36 INCEIF-LOFSA WORKSHOP. LABUAN .

Concept & Methodology SOLAH – THE PILLAR OF ISLAM NIYYAH Pronouncement/ Statement of Solah PHILOSOPHY OF SOLAH IN LIFE MISSION STATEMENT BANK ISLAM’S RMF MISSION & OBJECTIVES JAMA AH JAMA’AH Implementation Structure of Solah STRUCTURE FUNCTIONAL STRUCTURE SYARAT Necessary Elements of Solah RULE OF LAW POLICIES & GUIDELINES RUKUN Essential Activities of Solah PROCEDURE PROCESSES QAEDAH Facilities Required for Solah TOOLS ENABLERS Page 37 INCEIF-LOFSA WORKSHOP. LABUAN .

LABUAN . C . C) ( C . RFC) Management Risk Control Committee ( (MRCC) CC) Risk Management Division (RMD) Business Support Units Asset Liability Committee (ALCO) Other Corporate Support Units Credit Risk Market Risk Credit Administration Credit Analysis Business Risk Control & Compliance Shariah Compliance Risk Operational Risk Page 38 INCEIF-LOFSA WORKSHOP.Functional Structure Shariah Supervisory Council (SSC) BOARD OF DIRECTORS Other Board Committees Board Risk Committee (BRC) Constitution Function As per BNM guidelines Risk Mgmt Oversight and Over-riding authority for Risk Mgmt Approval of RMD S b i i A l f Submissions SHAREHOLDER MANAGEMENT Internal Audit Department Board Financing Review Committee (BFRC) Managing Director Functional Administrative Business Units Other Management Committees Financing Committees (FCA. FCB.

operational and Shariah compliance Policies are supported by Guidelines and further supported by operational manuals to ensure policies are implemented properly Approving authority RMF – Board Policy – Board Guideline – MRCC Manual . guidelines and manuals are reviewed annually to ensure consistency and in line with business reality Page 39 INCEIF-LOFSA WORKSHOP. LABUAN .Stakeholders All policies. market.Policies & Guidelines Policies for principle risk areas are in place covering areas of credit.

Credit Recovery Guideline 14. Sovereign Risk Guideline 8. Valuation Guideline 6.Credit risk Policy Credit Risk Policy . Guidelines 1. Negative List Guideline 4.The policy addresses the broad credit management framework that covers the objective. Collaterals Guideline 5. Business Relationship Etiquette Guideline 11. Watchlist Guideline 12. Guidelines on Risk Adjusted Pricing for Corporate & Commercial p Page 40 INCEIF-LOFSA WORKSHOP. Consumer Grading Guideline 9. Sectoral Guideline 10. Pricing Matrix Guidelines 2. structure and credit processes in order to establish the best practices in the management of credit risk that are in line with the regulatory requirements. LABUAN . 6 Discretionary Power Guideline 7. strategy. Financing P 12 Fi i Process G id li Guideline 13. Acceptance Letter Offer Guideline 3.

LABUAN . 7 Market Risk Manual & Procedures Page 41 INCEIF-LOFSA WORKSHOP.Addresses market risk factors which include but not limited to profit rate or rate of return. equity and commodity risks inherent in the Bank’s trading and banking books 1. 6. Asset and Liability Management (ALM) and Middle Office functions of the Market Risk Department Trading Book Policy . 1 2. foreign exchange. Market Risk Limits Guideline Hedging Guideline Mark-to-Market Guideline Rate Reasonability Check Guideline y Value-at-Risk (VaR) Guideline Asset and Liability Management Guideline 7. 3.Market risk Policy Guidelines Market Ri k Policy Describes the Ri k P li M k t Risk P li – D ib th Risk Policy and Analytics. 5. 4.

Operational risk Policy Guidelines Operational Ri k P li – Th policy provides O ti l Risk Policy The li id the effective and efficient operational risk management through out the Bank through its strategies in terms of organization structure. 5. 8. Customer Complaint Guideline 10. 7. BRCP Page 42 INCEIF-LOFSA WORKSHOP. process. Operational Risk Management Guideline Management Awareness and SelfAssessment (MASA) Reporting Guideline Fraud Handling and Reporting Guideline g p g Takaful/Insurance Guideline Key Risk Indicators (KRIs) Guideline Outsourcing Guideline Operational Risk Management Process for Information Security Management System 9. 6. risk measurement and i kt l i k t d analytic model management information system 1. LABUAN . 4. risk tolerance. 3. 1 2.

Tawarruq Contract Guideline Page 43 INCEIF-LOFSA WORKSHOP. 2. Dhamanah/ Kafalah Contract Guideline 10. LABUAN . provisions of the Islamic Banking Act 1983 and Bank Negara Malaysia’s rules and regulations. Wadiah Contract Guideline. Ijarah and Ijarah Muntahiah Bit Tamlik Guideline 3. Musharakah (financing) Contract Guideline 6. products and services in compliance with the Shariah principles. Wakalah Contract Guideline 11. Musharakah Mutanaqisah Contract Guideline 9.Shariah compliance risk Policy Shariah Compliance Risk Management Policy – The policy provides the Shariah requirements applicable throughout the Bank in its activities. Mudharabah (financing) C t t G id li 4 M dh b h (fi i ) Contract Guideline 5. Guidelines 1. Mudharabah (Deposit) Contract Guideline 8. Murabahah and MPO Contract Guideline 4. Handling and Reporting of Shariah Non Compliances Guideline p 7.

LABUAN .Process of risk management Awareness & Identification Knowing what the risks/risk areas are Assessment & Measurement Analytical ability to assess & measure risks Mitigation & Control Identifying & applying appropriate mitigations & controls of identified y g pp y g pp p g risks/risk areas Monitoring & Reporting g p g Continuous monitoring & appropriately reporting identified risks/risk areas Page 44 INCEIF-LOFSA WORKSHOP.

LABUAN .Q Operational Risk Management System Administrative systems Page 45 INCEIF-LOFSA WORKSHOP.QRisk.Enablers Tools to assess and monitor risk issues include: Key Risk Indicator (KRI) Management Awareness and Self Assessment (MASA) Risk Profiling Portfolio / Exposure tracking Customer Ratings Value at Risk (VaR) Systems to manage risk issues y g Core Banking and Middle-wares Financing Origination & Collection Systems Treasury Middle Office systems . Quantum y y Q .

LABUAN .Managing Shariah non-compliance risk nonFunctional structure F ti l t t Shariah Supervisory Council Shariah Department Shariah Audit Unit of h IAD Ext ternal Audit/ BNM / Audit Audit Examinatio on Co ommittee Shariah Compliance Risk Mgmt Shariah Compliance p Risk Working Group Board Risk Committee Page 46 INCEIF-LOFSA WORKSHOP.

but functionally is independent of the Board and management of the Bank. Formulating SCRM policy and guidelines Performing independent evaluation on products. Chairman: GM CABD D Ch i CABD. Sub-committee of Management Risk Control Committee – established to be responsible for developing the SCRM capability of the Bank. LABUAN Shariah Compliance Risk Working Group . manual & guidelines Monitoring SNC and keeping track of income arising from SNC Identifying internal control weakness and recommending mechanism to address the SNC. Page 47 INCEIF-LOFSA WORKSHOP.Managing Shariah non-compliance risk nonFunctional structure Function Shariah Supervisory Council C il Shariah Department SCRM Department Key Roles and Responsibilities/ Remarks Structurally reports to Board. Deputy Ch i t Chairman: CRO S CRO. Shariah l t d tt Third layer of control mechanism after SSC and SD. Secretary: H d of SCRMD and t Head f d members: Senior officers from Business and Support Units. Facilitating the process of managing SCR in the Bank. Governed by BNM GPS1 Support the SSC’s function on day-to-day basis Providing Shariah advice based on the decisions of Shariah councils Conducting training C d ti t i i on Sh i h related matters.

initiatives. LABUAN . manuals Mitigation & Control Issue policy and g p y guidelines Establish Shariah Compliance Risk Working Group Shariah representative in all committees Require sign off Monitoring & Reporting Shariah non-compliances tracking report Key Risk Indicators Monthly reporting to MRCC and BRC y p g Page 48 INCEIF-LOFSA WORKSHOP.Managing Shariah non-compliance risk nonAwareness & Identification A Id tifi ti Conduct Shariah awareness program to all staff Incorporate Shariah requirement in operational manuals Newsletter on quarterly basis Risk portal Assessment & Measurement Develop Shariah compliance risk scorecard Shariah assessment on new products.

SCRMU Detection of ≤ 5 cases of PSNC. Detection of 6 . Shariah non-compliance is “ZERO TOLERANCE” RATING 1 2 3 4 5 DEFINITION Very Satisfactory Satisfactory Fair Unsatisfactory Very Unsatisfactory U i f DESCRIPTION No potential SNC case being reported to SCRMU. LABUAN .Key Risk Indicators Report SNC is one of the Bank s Key Risk Indicator (KRI) parameters.≤ 10 cases of PSNC. Confirmation of at least 1 SNC by SSC. Bank’s parameters Objectives of the parameter: To promote better understanding of Shariah compliance. To provide a benchmark in determining the level of SNC. Detection of > 10 cases of PSNC. Page 49 INCEIF-LOFSA WORKSHOP.

e. Factor th t distinguishes I l i b ki f F t that di ti i h Islamic banking from conventional b ki ti l banking.Shariah compliant is crucial Original basis for having a banking system that meets the religious requirements of Muslim in line with their ‘Aqidah. Page 50 INCEIF-LOFSA WORKSHOP. Ensures acceptance. Fulfills the objectives of Islamic finance i. LABUAN . to achieve justice (‘adalah) and fairness (musawah) in the distribution of resources. validity and enforceability of contracts from Shariah point of view view.

‫ُ ً ﺟِﻼ‬ ً ْ‫ﺷﻜْ ًا َﺰﻳ‬ ‫ﺮ‬ Thank You ‫َاﻟْ َ َم‬ ‫واﻟﺴﻼم‬ ‫و ﺴﻼ‬ Wassalam Page 51 INCEIF-LOFSA WORKSHOP. LABUAN .