2. CAPITAL ADEQUACY (CONTINUED) 2.1 Capital Management (continued) As such, the four fundamental components of a sound capital planning process include: • Internal control and governance; • Capital policy and risk capture; • Forward-looking view; and • Management framework for preserving capital. The Group’s Capital Management Plan is updated annually and approved by the Board for implementation at the beginning of each financial year. The capital plan is drawn up to cover at least a three-year horizon and takes into account, amongst others, the Group’s strategic objectives and business plans, regulatory capital requirements, capital benchmarking against the industry, available supply of capital and capital raising options, performance of business sectors based on a Risk Adjusted Return on Capital (“RAROC”) approach, as well as ICAAP and stress testing results. The Group has fully issued Subordinated Sukuk Murabahah under its Subordinated Sukuk Murabahah Programme of up to RM1.0 billion in nominal value (“Subordinated Sukuk Murabahah Programme”) which was approved by the Securities Commission Malaysia (“SC”) on 7 October 2014. On 6 September 2018, the Group successfully lodged with SC under Lodge and Launch Framework, a Sukuk Murabahah Programme of up to RM10.0 billion in nominal value, which allows issuances of Subordinated Sukuk Murabahah and Senior Sukuk Murabahah. The purpose of the Subordinated Sukuk Murabahah issuance under both programmes is to enhance the capital adequacy of the Group, in line with the requirements under the Basel III capital framework. Both programmes are qualified as Tier 2 regulatory capital of the Bank and the Group in accordance with BNM’s CAFIB (Capital Components) Guideline. Additionally, on 27 June 2022, the Group successfully lodged with SC under Lodge and Launch Framework, a Sukuk Wakalah Programme of up to RM5.0 Billion in nominal value, for the issuances of Additional Tier-1 Capital Sukuk Wakalah. Subsequently, on 24 August 2022, the Group issued RM500 million Additional Tier 1 Sukuk Wakalah under the RM5.0 billion Sukuk Wakalah Programme. This shall qualify as Tier 1 regulatory capital of the Bank and the Group. For 2023, the Group had on 17 October 2023 issued RM400mil Additional Tier 2 Subordinated Sukuk Murabahah under the RM10.0billion Sukuk Murabahah Programme. This shall qualify as Tier 2 regulatory capital of the Bank and the Group in accordance with BNM’s CAFIB (Capital Components) Guideline. 408 Pillar 3 Disclosure as at 31 December 2023 Bank Islam Malaysia Berhad ◆ Integrated Annual Report 2023
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