2. CAPITAL ADEQUACY (CONTINUED) 2.3 Stress Testing (continued) The Group has put in place a stress testing programme (including reverse stress testing) which has taken into account all risks deemed material to the Group, namely credit risk, market risk, liquidity risk and operational risk including Shariah non-compliance risk, regulatory compliance risk, contagion risk and IT risk. In line with the Group’s Stress Testing Policy, the Group has taken into consideration the current economic environment and potential customer’s credit deterioration due to adverse economic scenario by reviewing the potential affected financing retail customers. Whilst the treatment for non-retail additional stressed areas has been carried out as part of watchlist assessment. Ad-hoc stress testing has also been conducted to assess the impact of deterioration on specific risk areas, in line with stressed macroeconomic variables. These impacts have been assessed to ensure the Group’s ability to maintain adequate capital under stressed condition. 2.4 Capital Adequacy Ratios The Group is required to comply with the Common Equity Tier 1 (“CET 1”) Capital Ratio, Tier 1 Capital Ratio and Total Capital Ratio (“TCR”) as prescribed by BNM. The Group has been in compliance with all prescribed capital adequacy ratios throughout the period. Total capital and capital adequacy ratios of the Group have been computed based on the updated BNM’s CAFIB - Capital Components Guideline issued on 15 December 2023 and BNM’s CAFIB – RWA Guideline issued on 18 December 2023. The minimum regulatory capital adequacy ratios requirement for CET 1 capital ratio, Tier 1 capital ratio and TCR including capital buffers i.e., Capital Conservation Buffers (“CCB”) are 7.0%, 8.5% and 10.5% respectively. The CCB is intended to encourage the build-up of capital buffers by individual Islamic banking institutions during normal times that can be drawn down during stress periods. The table below shows the composition of the regulatory capital and capital adequacy ratios as of 31 December 2023, determined by the requirements of the CAFIB. The capital adequacy ratios of the Group and Bank are set as per below: (a) The capital adequacy ratios of the Group and of the Bank: Before effect of IA Group Bank 31.12.2023 31.12.2022 31.12.2023 31.12.2022 Before deducting proposed dividends CET 1 Capital Ratio 11.41% 11.08% 10.91% 10.77% Tier 1 Capital Ratio 12.22% 11.95% 11.73% 11.64% Total Capital Ratio 16.12% 16.05% 15.66% 15.76% After deducting proposed dividends CET 1 Capital Ratio 11.00% 10.73% 10.49% 10.41% Tier 1 Capital Ratio 11.81% 11.60% 11.31% 11.28% Total Capital Ratio 15.71% 15.70% 15.24% 15.40% 413 www.bankislam.com 1 2 3 4 5 6 7 8 9 FINANCIAL STATEMENTS
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