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Management Discussion and Analysis Ensuring Sustainability Commitment to Lead Upholding Accountability Financial Statements 101

Shariah Committee’S report

ShArIAh CoMMITTEE’S rESPoNSIBILITy (cont’d)
The Shariah Committee has provided appropriate advice on various aspects of the Bank’s Islamic business operations to ensure
compliance with applicable Shariah rules and principles as well as the relevant resolutions and rulings made by the Shariah Advisory
Council (“SAC”) of BNM.

ShArIAh MANAGEMENT DEPArTMENT

SMD primary mandate is the Secretariat to the Shariah Committee of the Bank, SMD has the responsibility to provide the operational
support for effective functioning of the Shariah Committee, including; coordinating communications and disseminating information
among the Shariah Committee, the Board of Directors (“Board”) and its committees as well as senior management; performing
indepth research and studies on Shariah issues; providing day-to-day advice to relevant parties within the Bank on Shariah matters
based on the rulings of the SAC and decisions or advice of the Shariah Committee; ensuring proper dissemination of decisions or
advice of the Shariah Committee within the Bank and undertaking administrative and secretarial functions to support the Shariah
Committee.

CoNTroL FuNCTIoNS
a. Shariah risk Management

Shariah Risk Management (“SRM”) refers to a function that systematically identifies, measures, monitors and reports SNC risks
in the operations, business, affairs and activities of the Bank.

The management of SNC risk is executed through the three (3) lines of defence. The three (3) lines of defence are: First - the
business units and functional lines; Second - Shariah Risk and Shariah Review; Third - Shariah Audit.
During financial year 2023, the Bank has been continuously implementing robust control measures in managing its SNC risk
in line with the risk appetite strategy and metrics as approved by the Board. For effective SRM function, the Governance,
Risk, and Compliance (“GRC”) System is used to facilitate the Shariah risk profiling exercise, which includes the Risk and Control
Self-Assessment (“RCSA”), Key Risk Indicator (“KRI”), Key Control Testing (“KCT”), and Loss Event Database (“LED”).

b. Shariah review & Shariah Audit
In ensuring that the Bank’s Islamic business activities are conducted in conformity with the Shariah rules and in accordance with
the regulatory requirements, the Bank’s Shariah Review has regularly assessed and evaluated the Bank’s business activities,
product features and service offered by the Bank whilst Shariah Audit provides its independent assessment and assurance on
overall effectiveness of Shariah internal control system to ensure compliance of the Bank’s operations, business, affairs, and
activities with Shariah.
During the year, Shariah Committee has assessed the work carried out by Shariah reviewer and provide insights from Shariah
perspective to the Shariah auditor. Their reports were deliberated in the Shariah Committee meeting, where the findings
become the basis for the Shariah Committee to form an opinion on its compliance with Shariah rules and principles, Shariah
guidelines and rulings issued by the SAC of Bank Negara Malaysia as well as Shariah decisions and resolutions made by the
Shariah Committee.

ShArIAh TrAINING AND AWArENESS
In year 2023, a total of 125 staff had attended various external/internal Islamic finance and Shariah related training programs and
seminars in ensuring that the staff are continuously equipped with Shariah knowledge and awareness in line with BNM’s Shariah
Governance spirit.