2. CAPITAL ADEQUACY 2.1 Capital Management The Group’s primary objectives when managing capital are to maintain a strong capital position to support business growth and to maintain investors, depositors, customers, and market confidence. In line with this, the Group manages its capital actively and ensures that the capital adequacy ratios which take into account the risk profile of the Group, are above the regulatory minimum requirement. To ensure that the Group has sufficient capital to support all its business and risk-taking activities, the Group has implemented a sound capital management process in its management systems and processes. A comprehensive capital management framework has been adopted by the Group as a key enabler for value creation which is important to the long-term survival of the Group. This comprehensive capital management process includes thorough risk assessment and risk management techniques that are embedded within the Group’s risk governance. The assessment is based on the approved business plan, its estimation of current risks inherent in the Group and the impact of capital stress tests on the Group’s capital plan. The Group aims to achieve the following capital management objectives: • Meeting regulatory capital requirements; • Optimising returns to shareholders; • Maintaining adequate levels and an optimum mix of different sources of capital to support the underlying risks of its business; • Ensuring adequate capital to withstand shocks and stress; • Ensuring sufficient capital to expand its business ventures and inorganic growth; and • Allocating an appropriate amount of capital to business units to optimise return on capital. The Group’s capital management is guided by the Capital Management Plan, approved by the Board, to ensure the management of capital is consistent and aligned with the Group’s Risk Appetite Statement and ICAAP Document Policy. The Group’s capital management processes comprise: • Capital Structuring – ensuring that the amount of regulatory and statutory capital available is consistent with the Group’s growth plan, risk appetite, and desired level of capital adequacy. Capital structuring focuses on selecting appropriate, most cost-effective mix of capital instruments; • Capital Allocation – ensuring that the capital is employed efficiently across the Group based on risk-adjusted return on capital; and • Capital Optimisation – seeking an optimal level of capital by facilitating the optimisation of the risk profile of the balance sheet. This will be done through: – reshaping of the balance sheet; – capital planning, allocation and optimisation; and – a sound management of the capital buffer. 407 www.bankislam.com 1 2 3 4 5 6 7 8 9 FINANCIAL STATEMENTS
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