9. INVESTMENT ACCOUNT (CONTINUED) 9.1 Overview (continued) Mudarabah is a contract between a customer as capital provider and the Group as an entrepreneur under which the customer provides capital to be managed by the Group and any profit generated is shared according to a mutually agreed profit-sharing ratio (PSR) whilst financial losses are borne by the customer provided that such losses are not due to the Group’s misconduct, negligence or breach of specified terms. Wakalah refers to a contract where a customer, as the principal, authorises the Group as his agent to perform a particular task on matters that may be delegated i.e., investment, with or without imposition of a fee. In this context, the Shariah contract applied is Wakalah bi al-Istithmar (Wakalah for the purpose of investment). In terms of offering, the Group currently has Unrestricted Investment Account: Unrestricted Investment Account (UA) Unrestricted Investment Account refers to a type of IA where the customer/Investment Account Holder (IAH) provides the Group with the mandate to make the ultimate investment decision without specifying any particular restrictions or conditions. The Group will apply risk management controls over portfolio, legal and operational activities, including asset allocation, liquidity adherence to investment objective and parameters, valuation, monitoring performance, Shariah compliance and others as per guided in the BNM’s Investment Account Policy. Notwithstanding the above, in times of adversity in the markets, the Group may manage its asset allocation to safeguard the investment portfolio provided that such investment is within the investment objectives of the fund. IA product is not capital guaranteed and is not protected by the Perbadanan Insurans Deposit Malaysia (PIDM). Among the risks associated with IA include but not limited to the following: (a) Risk of Capital Loss – refers to the potential decrease in the value of the original investment amount. (b) Market Risk – refers to the potential impact of adverse price on the economic value of an asset. (c) Liquidity Risk – refers to the potential inability of the Group to meet short term withdrawal demands from the IAH. (d) Credit Risk – refers to the potential event that may arise when substantial amount of assets for the fund goes into default. (e) Legal Risk – IAH should ensure that, in entering into this investment it is not in breach of any laws, regulations, contractual or any other legal limitations that may apply to investors. This investment is issued subject to all applicable laws, regulations and guidelines. In the event of change in such laws, regulations or guidelines, Bank Islam may be obliged to change some or all the terms and conditions of the investment, including the possibility of an early termination. (f) Shariah Non-Compliance Risk – refers to the possible failures to comply with the rulings of BNM’s SAC and standards issued by BNM or decisions or advice of Bank Islam’s Shariah Supervisory Council. 466 Pillar 3 Disclosure as at 31 December 2023 Bank Islam Malaysia Berhad ◆ Integrated Annual Report 2023
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