Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Reports and Financial Statements

for the financial year ended 31 December 2012

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Reports and Financial Statements

for the financial year ended 31 December 2012
Contents
Pages
Directors Report

2 11

Statement by Directors

12

Statutory Declaration

12

Board Shariah Committees Report

13 15

Independent Auditors Report

16 17

Statement of Financial Position

18

Statement of Income

19

Statement of Comprehensive Income

19

Statement of Changes in Equity

20 21

Statement of Cash Flows

22 23

Summary of Significant Accounting Policies

24 46

Notes to the Financial Statements

47 186

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Directors Report
for the financial year ended 31 December 2012
The Directors have pleasure in submitting their Report and the Audited Financial Statements of
CIMB Islamic Bank Berhad (CIMB Islamic or the Bank) for the financial year ended 31
December 2012.

Principal activities
The principal activities of the Bank during the financial year are Islamic banking and finance
business and the provision of related financial services. There was no significant change in the
nature of these activities during the financial year.

Financial results
RM'000
401,070

Net profit after taxation

Dividends
No dividends have been paid or declared by the Bank since the financial year ended 31 December
2011.
The Directors do not recommend the payment of any dividend for the current financial year.

Reserves, provisions and allowances

There were no material transfers to or from reserves or provisions or allowances during the
financial year other than those disclosed in the Financial Statements and notes to the Financial
Statements.

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Directors Report
for the financial year ended 31 December 2012 (Continued)
Bad and doubtful financing
Before the Financial Statements of the Bank were made out, the Directors took reasonable steps
to ascertain that proper action had been taken in relation to the writing off of bad financing and
the making of allowance for doubtful financing and satisfied themselves that all known bad
financing had been written off and that adequate allowance had been made for doubtful
financing.
At the date of this Report, the Directors are not aware of any circumstances which would render
the amounts written off for bad financing or the amount of the allowance for doubtful financing
in the Financial Statements of the Bank inadequate to any substantial extent.

Current assets
Before the Financial Statements of the Bank were made out, the Directors took reasonable steps
to ascertain that any current assets, other than financing, which were unlikely to be realised in
the ordinary course of business, were shown in the accounting records of the Bank at the amount
which they might be expected to realise.
At the date of this Report, the Directors are not aware of any circumstances which would render
the values attributed to current assets in the Financial Statements of the Bank misleading.

Valuation methods
At the date of this Report, the Directors are not aware of any circumstances which have arisen
which render adherence to the existing method of valuation of assets or liabilities of the Bank
misleading or inappropriate.

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Directors Report
for the financial year ended 31 December 2012 (Continued)
Contingent and other liabilities
At the date of this Report, there does not exist:
(a)

any charge on the assets of the Bank which has arisen since the end of the financial year
which secures the liability of any other person; or

(b)

any contingent liability of the Bank which has arisen since the end of the financial year
other than in the ordinary course of banking business.

No contingent or other liability has become enforceable or is likely to become enforceable within
the period of twelve months after the end of the financial year which, in the opinion of the
Directors, will or may substantially affect the ability of the Bank to meet their obligations when
they fall due.

Change of circumstances
At the date of this Report, the Directors are not aware of any circumstances not otherwise dealt
with in this Report or the Financial Statements of the Bank that would render any amount stated
in the Financial Statements misleading.

Items of an unusual nature

In the opinion of the Directors:
(a)

the results of the Banks operations for the financial year have not been substantially
affected by any item, transaction or event of a material and unusual nature; and

(b)

there has not arisen in the interval between the end of the financial year and the date of
this Report any item, transaction or event of a material and unusual nature likely to affect
substantially the results of the operations of the Bank for the financial year in which this
Report is made.

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Directors Report
for the financial year ended 31 December 2012 (Continued)
Directors
The Directors who have held office since the date of the last Report and at the date of this Report
are as follows:
Directors
Datuk Dr. Syed Muhamad bin Syed Abdul Kadir
Raja Shaharul Niza bin Raja Abdul Aziz
Professor Dr. Mohammad Hashim Kamali
Badlisyah bin Abdul Ghani
Habibah Abdul (appointed on 19 January 2012)
Dato' Sulaiman bin Mohd Tahir (appointed on 28 May 2012)
Dato' Sri Mohamed Nazir bin Abdul Razak (resigned on 6 March 2012)
Dato' Anwar bin Haji @ Aji (resigned on 8 March 2012)
Dr. Achmad Riawan Amin (resigned on 5 April 2012)

In accordance with Article 83 of the Banks Articles of Association, Raja Shaharul Niza bin Raja
Abdul Aziz and Badlisyah bin Abdul Ghani shall retire from the Board at the forthcoming Annual
General Meeting and being eligible, offer themselves for re-election.
In accordance with Article 84 of the Banks Articles of Association, Dato Sulaiman bin Mohd
Tahir will retire from the Board at the forthcoming Annual General Meeting and being eligible,
offer himself for re-election.

Directors interests in shares and share options

According to the Register of Directors Shareholdings, the beneficial interests of the Directors who
held office at the end of the financial year in the shares of the ultimate holding company during
the financial year are as follows:
Number of ordinary shares of RM1 each
As at
Acquired/
As at
1 January/Date
Disposed
31 December
Granted
of appointment
Ultimate holding company
CIMB Group Holdings Berhad
Direct interest
Badlisyah bin Abdul Ghani
Dato' Sulaiman bin Mohd Tahir

26,910
116,225 **

63,124 **
-

90,034
116,225

** Shares granted under Equity Ownership Plan (EOP)

Other than as disclosed above, according to the Register of Directors' Shareholdings, the
Directors in office at the end of the financial year did not hold any interests in shares and options
over shares of the Bank, the immediate holding company, the ultimate holding company and the
Banks related companies during the financial year.
5

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Directors Report
for the financial year ended 31 December 2012 (Continued)
Directors benefits
Since the end of the previous financial year, no Director of the Bank has received or become
entitled to receive any benefit (other than the benefit included in the aggregate amount of
emoluments received or due and receivable by Directors shown in Note 30 to the Financial
Statements or the fixed salary as a full time employees of the Bank) by reason of a contract made
by the Bank or a related corporation with the Director or with a firm of which the Director is a
member or with a company in which the Director has a substantial financial interest.
Neither at the end of the financial year, nor at any time during the financial year, did there subsist
any other arrangements to which the Bank is a party with the object or objects of enabling Directors
of the Bank to acquire benefits by means of the acquisition of shares in, or debentures of, the Bank
or any other body corporate other than Management Equity Scheme and Equity Ownership Plan of
the ultimate holding company (see Note 29 (d) and (e) of the Financial Statements).

2012 Business Plan And Strategy

The Banks Business Plan and Strategy for 2012 reflects the second year of the implementation
of the 3rd phase of the Groups Islamic banking and finance business Management Roadmap
instituted in 2002, which covers the period between 2011-2015, where we aim to enhance and
entrench our ASEAN platform using the our Groups footprint, resources and insfrastructure.
Our medium to long-term aspirations up to 2015 recognises that the pursuit of our various
strategic priorities will have resource implications driven by the complexity and the number of
projects that we undertake to optimize our business in Malaysia and regionally. This includes
planned growth of regulatory dialogue activities to ensure a conducive operating environment for
our business and having an integrated and regionalised approach to business development and
operations.
The Bank is preparing to enhance its operations and to become more active in providing clear
Islamic financial value propositions to its stakeholders. This brings about the opportunity for the
Bank to apply the 10 years of experience it has built up in the industry in Malaysia, regionally
and globally to provide better product and service delivery to consumers so as to increase wallet
share from consumers, especially Muslim consumers that the has been a low lying fruit for the
Bank.

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Directors Report
for the financial year ended 31 December 2012 (Continued)
2012 Business Plan And Strategy (Continued)
The recent global economic slowdown with weak leading indicator data and a degradation of the
external environment resulting from the ongoing sovereign debt crisis in the Eurozone as well as
various regulatory changes for the industry that would lead to margin compression and higher
operational risk, all pointed to weaker growth rates in 2012. The heightened uncertainty posed by
the upcoming national general election that could happen anytime in 2012 up to early 2013 did
not help the expectations in 2012. Within this vague, dynamic and complex operational
environment, taking account of the transitional challenges of automating the business with a new
core banking system and business trends, the operational objectives of the Bank for 2012 are to:

maintain strong focus on quality product and service delivery;

achieve rapid operational start of the new Shariah governance framework introduced by
Bank Negara Malaysia sometime in 2011;
strengthen portfolio management capacity to handle growing balance sheet;
be prepared to respond to shifting challenges and potential game-changing crisis events
anticipated in the year;
promote client focus across the organisation and dynamic business development; and
building on strengthened matrix management and the dual banking leveraged model to
ensure efficient resource allocation across business segments.

Outlook for 2013

The Bank expects competitions to continue to intensify in 2013. The Bank will continue to focus
in enhancing our understanding of our customer base so that we can focus on the right Islamic
financial value propositions to all stakeholders. All these will be achieved by leveraging on the
Groups strengths and reach especially across the Asean regions and now the Asia-Pacific
regions. Although Malaysia will continue to dominate in terms of business and revenue
contributions, the Bank expects ex-Malaysia contributions to increase gradually in the medium
term predominantly in advisory and fee based activities. Greater emphasis in growing the
Indonesia and Singapore operations will be put in 2013 to take advantage of greater regulatory
facilitations coupled with a steady increase in the consumer awareness of the value propositions
offered by Islamic retail products and services.

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Directors Report
for the financial year ended 31 December 2012 (Continued)
Outlook for 2013 (Continued)
The Islamic investment banking segment particularly Islamic bond or sukuk will continue to
offer substantial opportunities to the Bank due to sustainable and increasingly more visible
demands across Asia Pacific including in Malaysia where sukuk has entrenched itself as one of
the most popular choices of fund raising. The Bank is also in the process of expanding its
wholesale banking product offerings to differentiate itself from its competitors. In the Middle
East, the Bank will continue to focus on providing specific services covering asset management,
treasury and advisory to select group of clientele and help bridge the gap between the Middle
East and Asia Pacific.
The Bank will also be focusing on various implementation plans involving the IT infrastructures,
risk, services and operational platforms in our effort to strengthen the overall support and
governance structures. The Bank will take advantage on the growth momentum. which has been
made possible due to our highly innovative and proven business model which focuses on the
economies of scale and complete infrastructure available within the Group.
We anticipate the business to continuously be impacted by regulatory changes as well as well
legislative changes in 2013, which will cause the operating environment to be tough and risky.
We do not see any significant difficulty in managing those changes and we have taken the
necessary steps to ensure business and revenue growth are not affected.

Rating by External Rating Agencies

Details of the ratings of the Bank and its debt securities are as follows:

Rating Agency
Malaysian Rating Corporation
Berhad ('MARC')
Date accorded: December 2012

RAM Rating Services

Berhad ('RAM')
Date accorded: August 2012

Rating Classification
Long Term Financial Institution Rating: AAA
Short Term Financial Institution Rating: MARC-1
Tier 2 Junior Sukuk Programme: AA+IS
Long Term Ratings Outlook: Stable

Definition
Indicates an exceptionally strong capacity to meet its
financial commitments and exhibits a high degree of
resilience to adverse developments in the economy,
and in business and other external conditions.
Typically possess a strong balance sheet and superior
earnings record

Long Term Financial Institution Rating/Outlook:

AAA/Stable
Short Term Financial Institution Rating: P1

Indicates a superior capacity to meet its financial

obligations

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Directors Report
for the financial year ended 31 December 2012 (Continued)
Board Shariah Committee
Pursuant to the enterprise wide Shariah governance framework as provided by Bank Negara
Malaysia in its Guideline on Shariah Governance for Islamic Financial Institutions and now as
enshrined in the recently approved Islamic Financial Services Act 2013, the Board of Directors
(the Board) is ultimately responsible and accountable for the oversight and management of
Shariah matters in the Banks operation. In undertaking its duties and responsibilities relating to
Shariah, the Board relies on the advice of the Board Shariah Committee of CIMB Group as
established under the Bank.
The main responsibility of the Board Shariah Committee is to assist the Board in the oversight
and management of all Shariah matters relating to the Islamic banking and finance business of
the Bank. The Board Shariah Committee operates on the authority as delegated and empowered
to it by the Board and as attributed to it under relevant financial regulations and legislations.
All decisions by the Board on Shariah matters relating its business shall be made based on the
decisions, views and opinions of the Board Shariah Committee. If the Board disagrees with any
decisions, views, and opinions of the Board Shariah Committee on any Shariah matter, the
former shall refer back the matter to the latter for a second or third review before final decision
is made. All and any final decision of the Board on Shariah matter shall be made based on the
final decisions, views and opinions of the Board Shariah Committee. All decisions of the Board
and the Board Shariah Committee on Shariah matters shall at all times be subordinated to the
decision of the Shariah Advisory Council of the relevant Malaysian financial regulators and shall
take into consideration the relevant authority on Shariah matters in the relevant jurisdiction it is
doing business.
The Board Shariah Committee shall at all times assist the Board to ensure that the Groups
Islamic banking and finance business does not have elements/activities which are not
permissible under Shariah.
The members of the Board Shariah Committee are as follows:
1.
2.
3.
4.
5.
6.

Sheikh Professor Dr. Mohammad Hashim Kamali

Sheikh Nedham Muhammad Seleh Yaqooby
Sheikh Dr. Haji Mohd Naim bin Haji Mokhtar
Sheikh Associate Professor Dr. Shafaai bin Musa
Sheikh Dr. Yousef Abdullah Al Shubaily
Professor Dr. Noor Inayah Yaakub

The Board hereby affirms based on advice of the Board Shariah Committee that the Banks
operations has been done in a manner that does not contradict with Shariah save and except for
those that have been specifically disclosed in this financial report (if any). This affirmation by the
Board is independently verified and confirmed by the Board Shariah Committee in a separate
Board Shariah Committee Report made herein.
9

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Directors Report
for the financial year ended 31 December 2012 (Continued)
Zakat obligations
The obligation and responsibility for payment of Zakat lies with the Muslim shareholders (if
any) of the Bank, the Banks Immediate Holding Company and the Banks Ultimate Holding
Company. The obligation and responsibility for specific payment of Zakat on deposits and
investments received by the Bank from its customers lies with its Muslim customers only. The
aforesaid is subject to the jurisdictional requirements on Zakat payment as may be applicable
from time to time on the Bank and its subsidiaries arising from changes to local legislation,
regulation, law or market convention as the case may be. Accrual of Zakat expenses (if any) in
the financial statement of the Bank is reflective of this.

Significant events during the financial year

Significant events during the financial year are disclosed in Note 40 to the Financial Statements.

Subsequent events after the financial year

There are no significant events subsequent to the financial year ended 31 December 2012.

Statement of Directors Responsibility

In preparing the Financial Statements, the Directors have ensured that the Malaysian Financial
Reporting Standards (MFRSs), International Financial Reporting Standards, and the
requirements of the Companies Act, 1965 have been complied with and reasonable and prudent
judgements and estimates have been made.
It is the responsibility of the Directors to ensure that the Financial Statements of the Bank
present a true and fair view of the state of affairs of the Bank as at 31 December 2012 and of the
results and cash flows of the Bank for the financial year ended on that date.
The financial statements are prepared on a going concern basis and the Directors have ensured
that proper accounting records are kept so as to enable the preparation of the financial statements
with reasonable accuracy.

10

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Directors Report
for the financial year ended 31 December 2012 (Continued)
Statement of Directors Responsibility (Continued)
The Directors have also overall responsibilities for taking such steps as are reasonably open to
them to safeguard the assets of the Bank and for the implementation and continued operation of
adequate accounting and internal control systems for the prevention and detection of fraud and
other irregularities. The system of internal controls is designed to provide reasonable and not
absolute assurance for achieving certain internal control standards and helps the Bank manage
the risk of failure to achieve business.
The Statement by Directors pursuant to Section 169 of the Companies Act, 1965 is set out on
page 12 of the Financial Statements.

Ultimate holding company

The Directors regard CIMB Group Holdings Berhad, a quoted company incorporated in
Malaysia, as the ultimate holding company.

Auditors
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.
Signed on behalf of the Board of Directors in accordance with their resolution.

Datuk Dr. Syed Muhamad bin Syed Abdul Kadir

Director

Badlisyah bin Abdul Ghani

Director

Kuala Lumpur
12 March 2013
11

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Statement by Directors
Pursuant to Section 169(15) of the Companies Act, 1965
We, Datuk Dr. Syed Muhamad bin Syed Abdul Kadir and Badlisyah bin Abdul Ghani, being two of
the Directors of CIMB Islamic Bank Berhad, state that, in the opinion of the Directors, the
Financial Statements set out on pages 18 to 186 are drawn up so as to give a true and fair view of
the state of affairs of the Bank as at 31 December 2012 and of the results and cash flows of the
Bank for the financial year ended on that date, in accordance with Malaysian Financial Reporting
Standards (MFRSs), International Financial Reporting Standards, and the requirements of the
Companies Act, 1965 in Malaysia.
Signed on behalf of the Board of Directors in accordance with their resolution.

Datuk Dr. Syed Muhamad bin Syed Abdul Kadir

Director

Badlisyah bin Abdul Ghani

Director
Kuala Lumpur
12 March 2013

Statutory Declaration
Pursuant to Section 169(16) of the Companies Act, 1965
I, Kim Kenny, being the person primarily responsible for the financial management of CIMB
Islamic Bank Berhad, do solemnly and sincerely declare the Financial Statements set out on pages
18 to 186 are, in my opinion, correct and I make this solemn declaration conscientiously believing
the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Kim Kenny
Subscribed and solemnly declared by the above named Kim Kenny at Kuala Lumpur before me, on

Commissioner for Oaths

12

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Board Shariah Committees Report

In the name of Allah, the Most Beneficent, the Most Merciful.
We, the members of the CIMB Group Board Shariah Committee as established under the Bank,
is responsible to assist the Board in the oversight and management of Shariah matters in the
operation of the Bank. Although the Board is ultimately responsible and accountable for all
Shariah matters under the Bank, the Board relies on our independent advice on the same.
Our main responsibilities and accountabilities is to assist the Board in ensuring that the Banks
business does not have elements/activities which are not permissible under Shariah. In
undertaking our duties we shall follow and adhere to the decisions, views and opinions of the
Shariah Advisory Council of the relevant Malaysian financial regulators for businesses
undertaken in Malaysia and for businesses outside Malaysia we shall take into consideration the
decisions, views and opinions of the relevant authority on Shariah matters (if any, sanctioned by
law/regulation to be followed by the Bank) in the relevant jurisdiction that the Bank is doing
business.
As members of the Board Shariah Committee, we are responsible to provide an independent
assessment and confirmation in this financial report that the operations of the Bank has been done
in conformity with Shariah as has been decided and opined by us and with those Notices, Rules,
Standards, Guidelines and Frameworks on Shariah matters as announced and implemented by
Malaysian regulators and where relevant by the financial regulators in the relevant jurisdictions that
the Banks businesses were undertaken during the period being reported.
Our independent assessment and confirmation has been used as the basis for the Boards
affirmation of the same in the Directors Report herein before.
In making our independent assessment and confirmation, we have always recognised the
importance of the Bank maintaining and reinforcing the highest possible standards of conduct in all
of its actions, including the preparation and dissemination of statements presenting fairly the
Shariah compliant status of its businesses. In this regard we have developed and maintained a
system of monitoring and reporting which provides the necessary internal controls to ensure that
any new Islamic financial transactions are properly authorised and transacted in accordance to the
requirements of Shariah; the Banks assets and liabilities under its balance sheets are safeguarded
against possible shariah non-compliance; and, that the day to day conduct of its operations does not
contradict Shariah principles.
The system is augmented by written policies and procedures, the careful selection and training of
Shariah qualified staff, the establishment of an organisational structure that provides an appropriate
and well-defined division of responsibility by Management and the communication of Shariah
policies and guidelines of business conduct to all staff of the Bank.

13

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Board Shariah Committees Report (continued)

Firstly, the system of internal control for effective Shariah governance is supported by a
professional staff of Shariah researchers that supports us in our decision and deliberations,
providing check and balance for all Shariah matters as presented to us by the Management.
Secondly, the Management has instituted the Shariah review framework that operates on a front to
back basis comprising of self-assessment/self-reporting mechanism and periodic independent
review undertaken by Group Compliance Department under the General Counsel Division. Thirdly,
the system is also augmented by the Management putting in place a Shariah risk management
framework covering the first; second and; third line of defenses. Lastly, there is also a strong team
of internal auditors who conduct periodic Shariah audits of all the Banks operations on a
scheduled and periodic basis.
We acknowledge that in 2012 the emplaced system of internal control in the Bank to meet the
newly instituted enterprise wide Shariah governance framework by Bank Negara Malaysia is still
relatively new with a lot of rooms for further improvement. On balance, we are satisfied that the
Management has put in place the appropriate level of control as required by us. We also take
comfort that on top of all these system of internal control, the external auditors have full and free
access to, and meet periodically with, us and the Audit Committee to discuss their audit and
findings as to the integrity of the Banks Shariah compliance and the adequacy of the system of
internal controls to detect non-compliance to Shariah.
All in all, the Management of the Bank is responsible and accountable to the Board to ensure that
the businesses of the Bank are done in accordance with the requirement of Shariah. It is our
responsibility to form an independent opinion of the state of Shariah compliancy of the business
and its operations and advice the Board accordingly. Based on the internal and external controls
that have been put in place by the Management, in our opinion, to the best of our knowledge, the
Bank has complied with the Shariah rulings issued by the Shariah Advisory Council of Bank
Negara Malaysia and by all other financial regulators (where relevant), as well as Shariah decisions
made by us.
In our opinion:
1. The contracts, transactions and dealings entered into by the Bank during the financial year
ended 31 December 2012 that were presented to us were done in compliance with Shariah;
2. The allocation of profit and charging of losses relating to investment accounts conformed to the
basis that were approved by us in accordance with Shariah; and
3. All earnings that were realised from sources or by means prohibited by Shariah have been
considered for disposal to charitable causes.

14

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Board Shariah Committees Report (Continued)

We have assessed the independent work carried out for Shariah review and Shariah audit functions by the
relevant functionaries under the established system of internal control, which included the examination, on
a test basis, of each type of transaction, of relevant documentation and procedures adopted by the Bank. We
are satisfied that the Management has planned and performed the necessary review and audit so as to
obtain all the information and explanations which are considered necessary to provide us with sufficient
evidence to give reasonable assurance that the Bank has not violated Shariah.
We, the members of the Board Shariah Committee, are of the opinion that the operations of the Bank for
the year ended 31 December 2012 were conducted in conformity with Shariah.

On behalf of the Board Shariah Committee.

Sheikh Professor Dr. Mohammad Hashim Kamali

Member

Sheikh Associate Professor Dr. Shafaai bin Musa

Member

Kuala Lumpur
12 March 2013

15

Independent Auditors Report to the

member of CIMB Islamic Bank Berhad
Company No: 671380-H
(Incorporated in Malaysia)

Report on the Financial Statements

We have audited the Financial Statements of CIMB Islamic Bank Berhad on pages 18 to 186,
which comprise the statement of financial position as at 31 December 2012 of the Bank, and the
statements of income, comprehensive income, changes in equity and cash flows of the Bank for
the financial year then ended, and a summary of significant accounting policies and other
explanatory notes, as set out on Notes 1 to 41.
Directors Responsibility for the Financial Statements
The Directors of the Bank are responsible for the preparation of these Financial Statements in
accordance with that give a true and fair view in accordance with Malaysian Financial Reporting
Standards (MFRSs), International Financial Reporting Standards, and the requirements of the
Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as
the Directors determine is necessary to enable the preparation of Financial Statements that are
free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these Financial Statements based on our audit. We
conducted our audit in accordance with approved standards on auditing in Malaysia. Those
standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance whether the Financial Statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the Financial Statements. The procedures selected depend on our judgement,
including the assessment of risks of material misstatement of the Financial Statements, whether
due to fraud or error. In making those risk assessments, we consider internal control relevant to
the Banks preparation of the Financial Statements that give true and fair view to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Banks internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the Directors, as well as evaluating the overall presentation of the Financial Statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion

16

Independent Auditors Report to the

member of CIMB Islamic Bank Berhad (Continued)
Company No: 671380-H
(Incorporated in Malaysia)

Opinion
In our opinion, the Financial Statements have been properly drawn up in accordance with
Malaysian Financial Reporting Standards, International Financial Reporting Standards and the
Companies Act, 1965 so as to give a true and fair view of the financial position of the Bank as of
31 December 2012 and of its financial performance and cash flows for the financial year then
ended.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report
that, in our opinion, the accounting and other records and the registers required by the Act to be
kept by the Bank have been properly kept in accordance with the provisions of the Act.

Other Matters
This report is made solely to the member of the Bank, as a body, in accordance with Section 174
of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume
responsibility to any other person for the content of this report.

PricewaterhouseCoopers
(No. AF: 1146)
Chartered Accountants

Mohammad Faiz Bin Mohammad Azmi

(No. 2025/03/12(J))
Chartered Accountant

Kuala Lumpur

17

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Statement of Financial Position

as at 31 December 2012

Assets
Cash and short-term funds
Deposits and placements with banks and other
financial institutions
Financial assets held for trading
Financial investments available-for-sale
Financial investments held-to-maturity
Islamic derivative financial instruments
Financing, advances and other financing/loans
Other assets
Deferred taxation
Amount due from holding company
Amount due from related companies
Statutory deposits with Bank Negara Malaysia
Property, plant and equipment
Intangible assets
Goodwill
Total assets
Liabilities
Deposits from customers
Deposits and placements of banks and other
financial institutions
Subordinated Sukuk
Other liabilities
Islamic derivative financial instruments
Provision for tax and zakat
Amount due to holding company
Amount due to related companies
Total liabilities
Capital and reserves attributable to equity holder
of the Bank
Perpetual preference shares
Ordinary share capital
Reserves
Total equity
Total equity and liabilities
Commitments and contingencies
Capital adequacy
Core capital ratio
Risk-weighted capital ratio

Note

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

6,296,329

7,554,885

7,744,407

3
4
5
6
7
8
9
10
11
11
12
13
14
15

601,335
6,117,048
2,797,337
652,390
168,360
33,073,282
254,882
10,731
431
1,104,097
5,490
7,328
136,000
51,225,040

1,090,383
2,753,069
1,243,668
690,066
147,608
28,074,104
299,017
6,359
1,760
1,097,797
3,899
4,170
136,000
43,102,785

950,000
2,347,894
656,008
898,714
150,688
22,424,577
334,228
4,307
245,034
828
143,406
1,862
4,287
136,000
36,042,240

16

35,267,899

29,238,470

22,677,955

17
18
19
7

11,660,728
863,557
397,107
380,529
9,870
298,352
3,554
48,881,596

10,250,833
564,679
308,946
395,854
16,614
393,673
139
41,169,208

11,125,028
300,000
384,556
199,199
12,989
34,699,727

20
21
22

70,000
1,000,000
1,273,444
2,343,444
51,225,040

70,000
1,000,000
863,577
1,933,577
43,102,785

70,000
750,000
522,513
1,342,513
36,042,240

26,964,137

16,924,373

17,877,382

35
35

8.69%
13.27%

10.44%
14.42%

13.22%
17.19%

11
11

18

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Statement of Income
for the financial year ended 31 December 2012

Income derived from investment of

depositors funds and others
Income derived from investment of
shareholder's funds
Allowances for losses on financing, advances
and other financing/loans
Allowances for impairment losses on other receivables
Total distributable income
Income attributable to depositors
Total net income
Personnel expenses
Other overheads and expenditures
Profit before taxation
Taxation
Profit after taxation

2012

2011

Note

RM'000

RM'000

23

1,913,804

1,621,433

24

239,934

203,493

25

(32,045)
(93)
2,121,600
(1,113,512)
1,008,088
(83,024)
(389,572)
535,492
(134,422)
401,070

(113,831)
(21)
1,711,074
(941,315)
769,759
(68,082)
(254,561)
447,116
(111,384)
335,732

40.11

37.39

26
27
28
31

Earnings per share (sen)

- basic

32

Statement of Comprehensive Income

for the financial year ended 31 December 2012

Profit for the financial year

Other comprehensive income :
Revaluation reserve of financial investments available-for-sale
- Net gain from change in fair value
- Realised gain transferred to statement of income
on disposal
- Income tax effects
Total other comprehensive income
Total comprehensive income for the financial year

19

2012
RM'000

2011
RM'000

401,070

335,732

17,178

12,504

(5,602)
(2,894)
8,682

(6,681)
(1,456)
4,367

409,752

340,099

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Statement of Changes in Equity

for the financial year ended 31 December 2012

At 1 January 2012
- as previously reported
- effect of adopting MFRS 1
As restated
Net profit for the financial year
Other comprehensive income (net of tax)

Note

Share
capital
RM000

Perpetual
preference
shares
RM000

Statutory
reserve
RM000

Non-distributable
Revaluation
reservefinancial
investments
available-for-sale
RM000

39

1,000,000
1,000,000

70,000
70,000

454,387
454,387

8,268
5,027
13,295

(2,457)
(2,457)

458
458

59,113
59,113

16,499
16,499

322,282
322,282

1,928,550
5,027
1,933,577

401,070

401,070

Merger
reserve
RM000

Capital
reserve
RM000

Regulatory
reserve
RM000

Share-based
payment
reserve
RM000

Retained
profits
RM000

Total
RM000

- Financial investments available-for-sale

8,682

Total comprehensive income for the financial year

8,682

401,070
16,279

572

Expiry of Management Equity Scheme

(16,279)

Share-based payment expense

572

Transfer to statutory reserve

Transfer to regulatory reserve
Shares released under Equity Ownership Plan
As at 31 December 2012

1,000,000

200,535

70,000

654,922

21,977

(2,457)

458

20

183,511
242,624

(200,535)

(457)
335

(183,511)
355,585

8,682
409,752

(457)
2,343,444

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Statement of Changes in Equity

for the financial year ended 31 December 2012 (Continued)

Note

At 1 January 2011
- as previously reported
- effect of adopting MFRS 1
As restated
Net profit for the financial year
Other comprehensive income (net of tax)
- Financial investments available-for-sale
Total comprehensive income for the financial year
Share-based payment expense
Transfer to statutory reserve
Transfer to regulatory reserve
Issuance of shares
Shares released under Equity Ownership Plan
As at 31 December 2011

39

Share
capital
RM000

Perpetual
preference
shares
RM000

Statutory
reserve
RM000

Non-distributable
Revaluation
reservefinancial
investments
available-for-sale
RM000

750,000
750,000

70,000
70,000

286,521
286,521

5,082
3,846
8,928

(2,457)
(2,457)

458
458

7,405
7,405

15,534
15,534

206,124
206,124

1,338,667
3,846
1,342,513

335,732

335,732

4,367
4,367
13,295

(2,457)

458

51,708
59,113

1,100
(135)
16,499

335,732
(167,866)
(51,708)
322,282

4,367
340,099
1,100
250,000
(135)
1,933,577

250,000
1,000,000

70,000

167,866
454,387

21

Merger
reserve
RM000

Capital
reserve
RM000

Regulatory
reserve
RM000

Share-based
payment
RM000

Retained
profits
RM000

Total
RM000

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Statement of Cash Flows

for the financial year ended 31 December 2012
2012

2011

RM'000

RM'000

Profit before taxation

535,492

447,116

Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Profit income from financial investments available-for-sale
Profit income from financial investments held-to-maturity
Profit expense on subordinated Sukuk
Gain from disposal of financial investments available-for-sale
Property, plant and equipment written off
Net (gain)/loss from hedging derivatives
Unrealised (gain)/loss on foreign exchange
Unrealised loss from revaluation of financial assets held for trading

1,660
2,811
(73,042)
(44,085)
29,617
(5,602)
117
(4,682)
(61,557)

1,039
1,280
(38,305)
(38,521)
23,307
(6,681)
7,959
31,935

260
(42,947)
(22,437)
88,129
93
572
404,399

753
(25,294)
10,599
151,604
21
1,100
567,912

(5,087,308)
43,587
(6,300)
489,048
(3,321,260)
1,330

(5,801,131)
35,054
(954,391)
(140,383)
(380,140)
245,034
(932)

6,029,429
1,409,895
(13,641)
(95,321)
3,415
147,645
4,918
(146,361)
(141,443)

6,560,515
(874,195)
189,136
393,673
139
(102,837)
(262,546)
(111,268)
(373,814)

Accretion of discount less amortisation of premium

Unrealised (gain)/loss from revaluation of Islamic profit rate swap
Allowances for losses on financing, advances and other financing/loans
Provision for other receivables
Share-based payment expense
(Increase)/decrease in operating assets
Financing, advances and other financing/loans
Other assets
Statutory deposits with Bank Negara Malaysia
Deposits and placements with banks and other financial institutions
Financial assets held for trading
Amount due from holding company
Amount due from related company
Increase/(decrease) in operating liabilities
Deposits from customers
Deposits and placements from banks and other financial institutions
Islamic derivative financial instruments
Amount due to holding company
Amount due to related companies
Other liabilities
Taxation paid
Net cash flows used in operating activities

22

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Statement of Cash Flows

for the financial year ended 31 December 2012 (Continued)
Note

Cash flows from investing activities

Net proceeds from sale/(purchase) of financial investmens held-to-maturity
Net proceeds from purchase of financial investments available-for-sale
Profit income received from financial investments available-for-sale
Profit income received from financial investments held-to-maturity
Purchase of property, plant and equipment
Purchase of intangible assets
Net cash flows used in investing activities
Cash flow from financing activities
Issuance of ordinary shares
Profit expense on subordinated Sukuk
Proceeds from issuance of subordinated Sukuk
Net cash flows generated from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the financial year
Cash and cash equivalents at end of the financial year

23

2012

2011

RM'000

RM'000

37,997

(82,369)

(1,512,570)
49,082
43,772
(3,513)
(5,824)
(1,391,056)

(280,622)
23,488
49,327
(3,550)
(689)
(294,415)

(26,057)
300,000
273,943

250,000
(21,293)
250,000
478,707

(1,258,556)
7,554,885
6,296,329

(189,522)
7,744,407
7,554,885

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012
The following accounting policies have been used consistently in dealing with items that are
considered material in relation to the Financial Statements.

Basis of preparation and Transition from FRS to MFRS

The Financial Statements of the Bank have been prepared in accordance with the Malaysian
Financial Reporting Standards, International Financial Reporting Standards and the requirements
of the Companies Act, 1965 in Malaysia.
The Financial Statements of the Bank for the financial year ended 31 December 2012 are the first
set of Financial Statements prepared in accordance with Malaysian Financial Reporting
Standards (MFRS), including MFRS 1 First-time Adoption of MFRS. Subject to certain
transition elections disclosed in Note 39, the Bank has consistently applied the same accounting
policies in its opening MFRS statement of financial position at 1 January 2011 (transition date)
and throughout all years presented, as if these policies had always been in effect. Comparative
figures for 2011 in these Financial Statements have been restated to give effect to these changes.
Note 39 discloses the impact of the transition to MFRS on the Banks reported financial position,
financial performance and cash flows.
The Financial Statements have been prepared under historical cost convention, as modified by
the revaluation financial investments available-for-sale, financial assets and financial liabilities
(including Islamic derivatives financial instruments) at fair value through profit or loss.
The preparation of Financial Statements in conformity with MFRSs requires the use of certain
critical accounting estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the Financial
Statements, and the reported amounts of income and expenses during the reported period. It also
requires the Directors to exercise their judgement in the process of applying the Banks
accounting policies. Although these estimates and judgement are based on the Directors best
knowledge of current events and actions, actual results may differ from those estimates.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the Financial Statements, are disclosed in Note 37.

24

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012(Continued)
A

Basis of preparation and Transition from FRS to MFRS (Continued)

Standards, amendments to published standards and interpretations to existing standards

that are applicable to the the Bank but not yet effective
The Bank will be required to adopt the new standards, amendments to standards and
interpretations in the period set out below:
(i)

Financial year beginning on/after 1 January 2013

MFRS 13 Fair Value Measurement (effective from 1 January 2013) aims to

improve consistency and reduce complexity by providing a precise definition of
fair value and a single source of fair value measurement and disclosure
requirements for use across MFRSs. The requirements do not extend the use of
fair value accounting but provide guidance on how it should be applied where its
use is already required or permitted by other standards. The enhanced disclosure
requirements are similar to those in MFRS 7 Financial instruments: Disclosures,
but apply to all assets and liabilities measured at fair value, not just financial ones.

Amendment to MFRS 7 Financial Instruments: Disclosures (effective from 1

January 2013) requires more extensive disclosures focusing on quantitative
information about recognised financial instruments that are offset in the statement
of financial position and those that are subject to master netting or similar
arrangements irrespective of whether they are offset.

Amendment to MFRS 101 Presentation of Items of Other Comprehensive

Income (effective from 1 July 2012) requires entities to separate items presented
in other comprehensive income in the statement of comprehensive income
(OCI) into two groups, based on whether or not they may be recycled to profit
or loss in the future. The amendments do not address which items are presented in
OCI.

The Bank will apply these standards from financial years beginning on or after 1 January
2013.

25

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012(Continued)
A

Basis of preparation and Transition from FRS to MFRS (Continued)

Standards, amendments to published standards and interpretations to existing standards

that are applicable to the Bank but not yet effective (Continued)
(ii)

Financial year beginning on/after 1 January 2014

(iii)

Amendment to MFRS 132 Financial Instruments: Presentation (effective from 1

January 2014) does not change the current offsetting model in MFRS 132. It
clarifies the meaning of currently has a legally enforceable right of set-off that
the right of set-off must be available today (not contingent on a future event) and
legally enforceable for all counterparties in the normal course of business. It
clarifies that some gross settlement mechanisms with features that are effectively
equivalent to net settlement will satisfy the MFRS 132 offsetting criteria.

Financial year beginning on/after 1 January 2015

MFRS 9 Financial Instruments - classification and measurement of financial

assets and financial liabilities (effective from 1 January 2015) replaces the
multiple classification and measurement models in MFRS 139 with a single
model that has only two classification categories: amortised cost and fair value.
The basis of classification depends on the entitys business model for managing
the financial assets and the contractual cash flow characteristics of the financial
asset.
The accounting and presentation for financial liabilities and for de-recognising
financial instruments has been relocated from MFRS 139, without change, except
for financial liabilities that are designated at fair value through profit or loss
(FVTPL). Entities with financial liabilities designated at FVTPL recognise
changes in the fair value due to changes in the liabilitys credit risk directly in
other comprehensive income (OCI). There is no subsequent recycling of the
amounts in OCI to profit or loss, but accumulated gains or losses may be
transferred within equity.
The guidance in MFRS 139 on impairment of financial assets and hedge
accounting continues to apply.
MFRS 7 requires disclosures on transition from MFRS 139 to MFRS 9.

The adoption of the above new accounting standards will not have any significant impact
on the financial results of the Bank except for MFRS 9 and MFRS 119. The financial
effects of the adoption of MFRS 9 and MFRS 119 are still being assessed by the Bank.

26

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Group Accounting Policies

for the financial year ended 31 December 2012 (Continued)
B

Recognition of profit income and profit expense

Profit income and expense for all profit-bearing financial instruments are recognised within profit
income and profit expense in the statement of income using the effective profit method.
The effective profit method is a method of calculating the amortised cost of a financial asset or a
financial liability and of allocating the profit income or profit expense over the relevant period. The
effective profit rate is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial instruments or, when appropriate, a shorter period to the
net carrying amount of the financial asset or financial liability. When calculating the effective profit
rate, the Bank takes into account all contractual terms of the financial instrument and includes any
fees or incremental costs that are directly attributable to the instrument and are an integral part of
the effective profit rate, but not future credit losses.
Profit on impaired financial assets is recognised using the rate of profit used to discount the future
cash flows for the purpose of measuring the impairment loss. A financial asset or a group of
financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment
as a result of one or more events that has occurred after the initial recognition of the asset (an
incurred loss event) and that loss event (or events) has an impact on the estimated future cash
flows of the financial asset or the group of financial assets that can be reliably estimated.

27

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
C

Recognition of fees and other income

Financing arrangement fees and commissions are recognised as income when all conditions
precedent are fulfilled. Commitment fees for financing, advances and other financing/loans that are
likely to be disbursed are deferred (together with direct cost) and income which forms an integral
part of the effective profit rate of a financial instrument is recognised as an adjustment to the
effective profit on the financial instrument.
Guarantee fees, portfolio management fees and income from asset management and securities
services are recognised as income based on a time apportionment method.
Brokerage fees are recognised as income based on inception of such transactions.
Dividends are recognised when the right to receive payment is established.

Financial assets

(a)

Classification
The Bank allocates its financial assets into the following categories: financial assets at fair
value through profit or loss, financing and receivables, financial investments held-tomaturity and financial investments available-for-sale. Management determines the
classification of its financial instruments at initial recognition.

(i)

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss comprise of financial assets held for
trading and other financial assets designated by the Bank as fair value through profit or loss
upon initial recognition.
A financial asset is classified as held for trading if it is acquired or incurred principally for
the purpose of selling or repurchasing it in the near term or if it is part of a portfolio of
identified financial instruments that are managed together and for which there is evidence of
a recent actual pattern of short-term profit-taking. Derivatives are also categorised as held
for trading unless they are designated and effective as hedging instruments.

28

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
D

Financial assets (Continued)

(a)

Classification (Continued)

(ii)

Financing and receivables

Financing and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market.

(iii)

Financial investments held-to-maturity

Financial investments held-to-maturity are non-derivative instruments with fixed or
determinable payments and fixed maturities that the Banks management has the positive
intent and ability to hold to maturity. If the Bank sell other than an insignificant amount of
financial investments held-to-maturity, the entire category will be tainted and reclassified as
financial investments available-for-sale.

(iv)

Financial investments available-for-sale

Financial investments available-for-sale are those intended to be held for an indefinite
period of time, which may be sold in response to needs for liquidity or changes in profit
rates, exchange rates or equity prices or that are not classified as financial assets at fair value
through profit or loss, financing and receivables and financial investments held-to-maturity.

(b)

Recognition and initial measurement

Financial assets are initially recognised at fair value plus transaction costs for all financial
assets not carried at fair value through profit or loss. Transaction costs for securities carried
at fair value through profit or loss are taken directly to the statement of income.

(c)

Subsequent measurement
Financial assets at fair value through profit or loss and financial investments available-forsale are subsequently carried at fair value, except for investments in equity instruments that
do not have a quoted market price in an active market and whose fair value cannot be
reliably measured in which case the investments are stated at cost. Gains and losses arising
from changes in the fair value of the financial assets at fair value through profit or loss are
included in the statement of income in the period which they arise. Gains and losses arising
from changes in fair value of financial investments available-for-sale are recognised directly
in other comprehensive income, until the securities are de-recognised or impaired at which
time the cumulative gains or loss previously recognised in equity are recognised in the
statement of income . Foreign exchange gains or losses of financial investments availablefor-sale are recognised in the statement of income in the period it arises.

29

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
D

Financial assets (Continued)

(c)

Subsequent measurement (Continued)

Financial investments held-to-maturity are subsequently measured at amortised cost using
the effective profit method. Gains or losses arising from the de-recognition or impairment of
the securities are recognised in the statement of income.
Profit from financial assets held at fair value through profit or loss, financial investments
available-for-sale and financial investments held-to-maturity is calculated using the
effective profit method and is recognised in the statement of income. Dividends from
available-for-sale equity instruments are recognised in the statement of income when the
entitys right to receive payment is established.
Financing and receivables are initially recognised at fair value which is the cash
consideration to originate or purchase the financing including the transaction costs, and
measured subsequently at amortised cost using the effective profit rate method. Profit on
financing is included in the statement of income. In the case of impairment, the impairment
loss is reported as a deduction from the carrying value of the financing and recognised in the
statement of income.

(d)

Reclassification of financial assets

The Bank may choose to reclassify a non-derivative financial assets held for trading out of
the held for trading category if the financial asset is no longer held for the purposes of
selling in the near term. In addition, the Bank may choose to reclassify financial assets that
would meet the definition of financing and receivables out of the held for trading or
available-for-sale categories if the Bank have the intention and ability to hold these financial
assets for the foreseeable future or until maturity at the date of reclassification.
Reclassifications are made at the fair value at the date of the reclassification. The fair values
of the securities becomes the new cost or amortised cost as applicable, and no reversals of
fair value gains or losses recorded before the reclassification date are subsequently made.
The effective profit rates for the securities reclassified to held-to-maturity category are
determined at the reclassification date. Further changes in estimates of future cash flows are
recognised as an adjustment to the effective profit rates.

30

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
E

Financial liabilities

Financial liabilities are measured at amortised cost, except for trading liabilities and liabilities
designated at fair value, which are held at fair value through profit or loss. Financial liabilities
are initially recognised at fair value plus transaction costs for all financial liabilities not carried at
fair value through profit or loss. Financial liabilities at fair value through profit or loss are
initially recognised at fair value, and transaction costs are expensed in statement of income.
Financial liabilities are derecognised when extinguished.
(a)

Financial liabilities at fair value through profit or loss

This category comprises two sub-categories: financial liabilities classified as held for
trading, and financial liabilities designated at fair value through profit or loss upon initial
recognition.
A financial liability is classified as held for trading if it is acquired or incurred
principally for the purpose of selling or repurchasing it in the near term or if it is part of
a portfolio of identified financial instruments that are managed together and for which
there is evidence of a recent actual pattern of short-term profit-taking. Derivatives are
also categorised as held for trading unless they are designated and effective as hedging
instruments. The specific Bank accounting policy on derivatives is detailed in Note H.
The financial liabilities measured at fair value through profit or loss upon initial recognition
are trading derivatives.

(b)

Financial liabilities at amortised cost

Financial liabilities that are not classified as at fair value through profit or loss fall into this
category and are measured at amortised cost. The financial liabilities measured at amortised
cost are deposits from customers, deposits and placements of banks and other financial
institutions, subordinated sukuk, sundry creditors, amount due to related companies and
amount due to holding company.

31

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
F

De-recognition of financial assets and financial liabilities

Financial assets are de-recognised when the contractual rights to receive the cash flows from
these assets have ceased to exist or the assets have been transferred and substantially all the risks
and rewards of ownership of the assets are also transferred (that is, if substantially all the risks
and rewards have not been transferred, the Bank tests control to ensure that continuing
involvement on the basis of any retained powers of control does not prevent de-recognition).
Financial liabilities are de-recognised when they have been redeemed or otherwise extinguished.
Collateral furnished by the Bank under standard repurchase agreements transactions is not derecognised because the Bank retains substantially all the risks and rewards on the basis of the
predetermined repurchase price, and the criteria for de-recognition are therefore not met.

Impairment of financial assets

a)

Assets carried at amortised cost

A financial asset or a group of financial assets is deemed to be impaired if, and only if, there
is objective evidence of impairment as a result of one or more events that has occurred after
the initial recognition of the asset (an incurred loss event) and that loss event (or events)
has an impact on the estimated future cash flows of the financial asset or the group of
financial assets that can be reliably estimated.
The criteria the Bank use to determine that there is objective evidence of impairment loss
include indications that the customer or a group of customers is experiencing significant
financial difficulty, the probability that they will enter bankruptcy or other financial
reorganisation, default of delinquency in outstanding payments and where observable data
indicates that there is a measurable decrease in the estimated future cash flows, such as
changes in arrears or economic conditions that correlate with defaults.
The Bank first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant, and individually or collectively for
financial assets that are not individually significant. If the Bank determines that no
objective evidence of impairment exists for an individually assessed financial asset,
whether significant or not, it includes the asset in a group of financial assets with similar
credit risk characteristics and collectively assesses them for impairment.
The amount of the loss is measured as the difference between the assets carrying amount
and the present value of estimated future cash flows discounted at the financial assets
original effective profit rate. The carrying amount of the asset is reduced through the use of
an allowance account and the amount of the loss is recognised in the statement of income. If
a financing or financial investments held-to-maturity has a variable profit rate, the discount
rate for measuring any impairment loss is the current effective profit rate determined under
the contract.
32

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
G

Impairment of financial assets (Continued)

a)

Assets carried at amortised cost (Continued)

Financial assets that have not been individually assessed are grouped together for portfolio
impairment assessment. These financing are grouped according to their credit risk
characteristics for the purposes of calculating an estimated collective loss. These
characteristics are relevant to the estimation of future cash flows for groups of such assets
by being indicative of the debtors ability to pay all amounts due according to the
contractual terms of the assets being assessed. Future cash flows on a group of financial
assets that are collectively assessed for impairment are estimated on the basis of historical
loss experience for assets with credit risk characteristics similar to those in the group.
The methodology and assumptions used for estimating future cash flows are reviewed
regularly by the Bank to reduce any differences between loss estimates and actual loss
experience.
When a financing is uncollectible, it is written off against the related allowance for
impairment. Such financings are written off after taking into consideration the realisable
value of collateral, if any, when in the judgement of the management, there is no prospect of
recovery.
If in a subsequent period, the amount of impairment losses decreases and the decrease can
be related objectively to an event occurring after the impairment was recognised (such as an
improvement in the debtors credit rating), the previously recognised impairment loss is
reversed by adjusting the allowance account. The amount of the reversal is recognised in the
statement of income.

(b)

Assets classified as available-for-sale

The Bank assess at each date of the statement of financial position whether there is
objective evidence that the financial asset is impaired.
For debt securities, the Bank uses criteria and measurement of impairment loss applicable
for assets carried at amortised cost above. If in a subsequent period, the fair value of a
debt instrument classified as financial investments available-for-sale increases and the
increase can be objectively related to an event occurring after the impairment loss was
recognised in statement of income, the impairment loss is reversed through statement of
income.

33

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
G

Impairment of financial assets (Continued)

(b)

Assets classified as available-for-sale (Continued)

In the case of equity instruments classified as financial investments available-for-sale, in
addition to the criteria for assets carried at amortised cost above, a significant or prolonged
decline in the fair value of the security below its cost is considered in determining whether
the securities are impaired. If there is an objective evidence that an impairment loss on
financial investments available-for-sale has been incurred, the cumulative loss that has been
recognised directly in equity is removed from equity and recognised in the statement of
income. The amount of cumulative loss that is reclassified to statement of income is the
difference between the acquisition cost and the current fair value, less any impairment loss
on that financial asset previously recognised in statement of income. Impairment losses
recognised in statement of income on equity instruments are not reversed through the
statement of income.

Derivative financial instruments and hedge accounting

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered
into and are subsequently remeasured at their fair values. Fair values are obtained from quoted
market prices in active markets, including recent market transactions, and valuation techniques,
including discounted cash flow models and option pricing models, as appropriate. All derivatives
are carried as assets when fair value is positive and as liabilities when fair value is negative.
Changes in the fair value of any derivatives that do not qualify for hedge accounting are recognised
immediately in the statement of income.
The best evidence of fair value of a derivative at initial recognition is the transaction price (i.e. the
fair value of the consideration given or received) unless the fair value of the instrument is evidenced
by comparison with other observable current market transactions in the same instrument (i.e.
without modification or repackaging) or based on a valuation technique whose variables include
only data from observable markets. When such evidence exists, the Bank recognise statement of
income immediately.

34

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
H

Derivative financial instruments and hedge accounting (Continued)

The method of recognising the resulting fair value gain or loss depends on whether the derivative
is designated as a hedging instrument, and if so, the nature of the item being hedged. The Bank
designate certain derivatives as either: (1) hedges of the fair value of recognised assets or
liabilities or firm commitments (fair value hedge) or (2) hedges of future cash flows attributable
to a recognised asset or liability, or a highly probable forecasted transaction (cash flow hedge) or
(3) hedges of a net investment in a foreign operation (net investment hedge). Hedge accounting is
used for derivatives designated in this way provided certain criteria are met.
At the inception of the transaction, the Bank document the relationship between hedging
instruments and hedged items, as well as their risk management objective and strategy for
undertaking various hedge transactions. The Bank also document their assessment, both at hedge
inception and on an ongoing basis, of whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in fair values or cash flows of hedged
items.

(a)

Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value
hedges are recorded in the statement of income, together with any changes in the fair
value of the hedged assets or liabilities that are attributable to the hedged risk.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the
carrying amount of a hedged item for which the effective profit method is used is
amortised to the statement of income over the period to maturity. The adjustment to the
carrying amount of a hedged equity security remains in retained profits until the disposal
of the equity security.

35

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
H

Derivative financial instruments and hedge accounting (Continued)

(b)

Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and
qualify as cash flow hedges are recognised in equity. The gain and loss relating to the
ineffective portion is recognised immediately in the statement of income. Amounts
accumulated in equity are recycled to the statement of income in the periods in which the
hedged item will affect the statement of income.
When a hedging instrument expires or is sold, or when a hedge no longer meets the
criteria for hedge accounting, any cumulative gain or loss existing in equity at that time
remains in equity and is recognised when the forecast transaction is ultimately recognised
in the statement of income. When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was reported in equity is immediately transferred to the
statement of income.

(c)

Net investment hedge

Hedges of net investments in foreign operations are accounted for similarly to cash flow
hedges. Any gain or loss on the hedging instrument relating to the effective portion of the
hedge is recognised in equity. The gain or loss relating to the ineffective portion is
recognised immediately in the statement of income.
Gains and losses accumulated in the equity are recycled to the statement of income when
the foreign operation is partially disposed or sold.

(d)

Derivatives that do not qualify for hedge accounting

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair
value of any derivative instrument that does not qualify for hedge accounting are
recognised immediately in the statement of income.

36

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
I

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the
items. Subsequent costs are included in the assets carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Bank and the cost of the item can be measured reliably. The carrying amount of the
replaced part is de-recognised. All other repairs and maintenance costs are charged to the statement
of income during the financial period in which they are incurred.
Property, plant and equipment are depreciated on a straight-line basis to write off the cost of the
assets to their residual values over their estimated useful lives, summarised as follows:
Renovations
Office equipment
Furniture and fixtures
Motor vehicles
Computer equipment:
- servers
- other hardware

5 years or over the period of the tenancy, whichever is shorter

3 - 5 years
10 years
5 years
3 - 5 years
3 - 5 years

Depreciation on assets under construction commences when the assets are ready for their
intended use.
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end
of each reporting period.
Property, plant and equipment are reviewed for impairment at the end of each reporting period
and whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. Where the carrying amount of an asset is greater than its estimated recoverable
amount, it is written down to its recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amounts
and are included in other operating income.

37

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
J

Intangible assets

(a)

Goodwill
Goodwill arises on business combinations when the cost of acquisition exceeds the fair
value of the Banks share of the identifiable assets, liabilities and contingent liabilities
acquired. Gains and losses on the disposal of an entity include the carrying amount of
goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units (CGU) for the purpose of impairment
testing. The allocation is made to those CGUs or groups of CGUs that are expected to
benefit from the synergies of the business combination in which the goodwill arose,
identified according to operating segment. The Bank allocates goodwill to each business
unit (Note 15 to these Financial Statements).
Goodwill is tested annually for impairment or more frequently if events or changes in
circumstances indicate a potential impairment. The carrying value of goodwill is
compared to the recoverable amount, which is the higher of value in use and the fair value
less costs to sell. Any impairment is recognised immediately as an expense and is not
subsequently reversed.

.
(b)

Other intangible assets

Other intangible assets include computer software. Acquired computer software licences
are capitalised on the basis of the costs incurred to acquire and bring to use the specific
software.
Computer software are stated at cost less accumulated amortisation and accumulated
impairment losses, and are amortised over their estimated useful lives as follows:
Computer software

3 15 years

38

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
K

Assets purchased under lease

(a)

Finance lease
Assets purchased under lease which in substance transfers the risks and benefits of
ownership of the assets to the Bank are capitalised under property, plant and equipment.
The assets and the corresponding lease obligations are recorded at the lower of the present
value of the minimum lease payments or the fair value of the leased assets at the beginning
of the lease term. Such leased assets are subject to depreciation on the same basis as other
property, plant and equipment.
Leases which do not meet such criteria are classified as operating leases and the related
rentals are charged to the statement of income.

(b)

Operating lease
Leases of assets under which all the risks and benefits of ownership are retained by the
lessor are classified as operating leases. Payments made under operating leases are charged
to the statement of income on a straight-line basis over the period of the lease.
When an operating lease is terminated before the lease period has expired, any payment
required to be made to the lessor by way of compensation (tawidh) is recognised as an
expense in the period in which termination takes place.

Assets sold under lease

(a)

Finance lease
When assets are sold under a finance lease, the present value of the lease payments is
recognised as a debtor. The difference between the gross debtor and the present value of
the debtor is recognised as unearned finance income. Lease income is recognised over
the term of the lease using the net investment method, which reflects a constant periodic
rate of return.

(b)

Operating lease
Assets leased out under operating leases are treated as the Banks assets and included in
the property, plant and equipment. They are depreciated over their expected useful lives
on a basis consistent with similar fixed assets. Rental income is recognised on a straightline basis over the lease term.

39

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
M

Currency translations

(a)

Functional and presentation currency

The Financial Statements are presented in Ringgit Malaysia, which is the Banks functional
and presentation currency.

(b)

Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency using the
exchange rates prevailing at the dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation at yearend exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognised in the statement of income, except when deferred in equity as qualifying
cash flow hedges and qualifying net investment hedges.
Changes in the fair value of monetary securities denominated in foreign currency
classified as available-for-sale are analysed between translation differences resulting from
changes in the amortised cost of the security and other changes in the carrying amount of
the security. Translation differences related to changes in the amortised cost are
recognised in statement of income, and other changes in the carrying amount are
recognised in equity.
Translation differences on non-monetary financial assets and liabilities, such as equity
instruments held at fair value through profit or loss, are reported as part of the fair value
gain or loss. Translation differences on non-monetary financial assets such as equities
classified as available-for-sale are included in the revaluation reserves-financial
investments available-for-sale in equity.

Income and deferred taxes

The tax expense for the period comprises current and deferred tax. Tax is recognised in statement
of income, except to the extent that it relates to items recognised in other comprehensive income or
directly in equity. In this case, the tax is recognised in other comprehensive income or directly in
equity, respectively.
Current tax expense is determined according to the tax laws of Malaysia and includes all taxes
based upon the taxable profits.
Deferred income tax is recognised in full, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the Financial
Statements. However, deferred income tax is not accounted for if it arises from initial recognition of
an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting for taxable profit or loss.
40

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
N

Income and deferred taxes (Continued)

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be
available against which the temporary differences can be utilised.
Deferred tax related to fair value re-measurement of available-for-sale securities, which are charged
or credited directly to equity, is also credited or charged directly to equity and is subsequently
recognised in the statement of income together with the deferred gain or loss.
Deferred income tax is determined using tax rates (and tax laws) that have been enacted at the end
of each reporting period and are expected to apply when the related deferred tax asset is realised or
the deferred tax liability is settled.
Deferred and income tax assets and liabilities are offset when there is a legally enforceable right to
offset current tax assets against current tax liabilities and when the deferred income tax assets and
liabilities relate to taxes levied by the same taxation authority on either the taxable entity or
different taxable entities where there is an intention to settle the balances on a net basis.

Employee benefits

(a)

Short-term employee benefits

The Bank recognises a liability and an expense for bonuses. The Bank recognises a
provision where contractually obliged or where there is a past practice that has created a
constructive obligation.
Wages, salaries, paid annual leave, bonuses, and non-monetary benefits are accrued in the
period in which the associated services are rendered by employees of the Bank.

(b)

Post employment benefits

Defined contribution plans
A defined contribution plan is a pension plan under which the Bank pays fixed contributions
into a separate entity (a fund) and will have no legal or constructive obligations to pay
further contributions if the fund does not hold sufficient assets to pay all employees benefits
relating to employee service in the current and prior periods.
The Banks contributions to a defined contribution plan are charged to the statement of
income in the period to which they relate. Once the contributions have been paid, the Bank
has no further payment obligations. Prepaid contributions are recognised as an asset to the
extent that a cash refund or a reduction in the future payments is available.

41

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
O

Employee benefits (Continued)

(c)

Other long-term employee benefits

The cost of long-term employee benefits (for example, long-term service leave) is accrued
to match the rendering of services by the employees concerned using an accounting
methodology similar to that for defined benefit plans for the liability which is not expected
to be settled within 12 months.

(d)

Termination benefits
Termination benefits are payable whenever an employees employment is terminated before
the normal retirement date or whenever an employee accepts voluntary redundancy in
exchange for these benefits. The Bank recognises termination benefits when they are
demonstrably committed to either terminate the employment of current employees
according to a detailed formal plan without possibility of withdrawal or to provide
termination benefits as a result of an offer made to encourage voluntary redundancy.
Benefits falling due more than 12 months after the reporting period are discounted to their
present value.

(e)

Share-based compensation benefits

Management Equity Scheme (MES or the Scheme)
The Bank has an equity-settled, share-based compensation plan of the equities in the
ultimate holding company, CIMB Group Holdings Berhad (CIMB Group) which is
settled by a substantial shareholder of CIMB Group. The Bank receiving the employees
services should account for the plan as equity settled when it has no obligation to settle
the share-based payment transaction. The value of the employee services received in
exchange for the grant of options of CIMB Group is recognised as an expense with a
corresponding increase in the share option reserves over the vesting period. The total
amount to be recognised over the vesting period is determined by reference to the fair
value of the options granted on the date of grant. Non-market vesting conditions are
included in the estimation of the number of shares under options that are expected to
become exercisable on the vesting date.
At the end of each reporting period, the Bank revise its estimates of the number of shares
under options that are expected to become exercisable on the vesting date and recognises
the impact of the revision of the estimate to the statement of income, with a
corresponding adjustment to the share option reserve over the remaining vesting period.

42

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
O

Employee benefits (Continued)

(e)

Share-based compensation benefits (Continued)

Employee Ownership Plan (EOP)

The CIMB Group operates an equity-settled, share-based compensation plan, where
ordinary shares of the Company are purchased from the market at market value and
awarded to the eligible executive employees.
The cost of equity-settled transactions is recognised, together with a corresponding increase
in equity, over the period in which the performance and/or service conditions are fulfilled,
ending on the date on which the award is fully released to relevant employees (the final
release date). The fair value of the employee services received in exchange for the grant of
the shares is recognised as an expense in statement of income over the period of release,
based on the best available estimate of the number of shares expected to be released at each
of the relevant release date. On the final release date, the estimate will be revised to equal
the actual number of shares that are ultimately released to the employees.
.

Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable
amount. The recoverable amount is the higher of an assets fair value less costs to sell and value in
use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash-generating units). Non financial assets other than
goodwill that suffered impairment are reviewed for possible reversal of the impairment at each
reporting date.
The impairment loss is charged to the statement of income unless it reverses a previous revaluation
in which case it is charged to the revaluation surplus. Impairment losses on goodwill are not
reversed. In respect of other assets, any subsequent increase in recoverable amount is recognised in
the statement of income unless it reverses an impairment loss on a revalued asset in which case it is
taken to revaluation surplus.

43

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
Q

Provisions

Provisions are recognised by the Bank when all of the following conditions have been met:
(i)
(ii)
(iii)

the Bank has a present legal or constructive obligation as a result of past events;
it is probable that an outflow of resources to settle the obligation will be required; and
a reliable estimate of the amount of obligation can be made.

Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any one item included in the same
class of obligations may be small.
Provisions are measured at the present values of the expenditures expected to be required to settle
the obligation using a pre-tax rate that reflects current market assessments of the time value of
money and risks specific to the obligation. The increase in the provision due to passage of time is
recognised as an expense.

Financial guarantee contracts

Financial guarantee contracts are contracts that require the issuer to make specified payments to
reimburse the holder for a loss it incurs because a specified customer fails to make payments
when due, in accordance with the terms of an instrument. Such financial guarantees are given to
banks, financial institutions and other bodies on behalf of customers to secure financing and
other banking facilities.
Financial guarantees are initially recognised in the financial statements at fair value on the date
the guarantee was given. The guarantees are agreed on arms length terms and the value of the
premium agreed corresponds to the value of the guarantee obligation. No receivable for the
future premiums is recognised. Subsequent to initial recognition, the Banks liabilities under
such guarantees are measured at the higher of the amount determined in accordance with MFRS
137 Provision, Contingent Liabilities and Contingent Assets, and the amount initially
recognised less, when appropriate, accumulative amortisation recognised in accordance with
MFRS 118 Revenue. These estimates are determined based on experience of similar
transactions and history of past losses, supplemented by the judgment of management. The fee
income earned is recognised on a straight-line basis over the life of the guarantee.
Any increase in the liability relating to guarantees is reported in the statement of income within
overhead expenses.

44

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
S

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, bank balances and deposit placements maturing
less than one month.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision-maker. The chief operating decision-maker is the person or group
that allocates resources to and assesses the performance of the operating segments of an entity.
The Bank has determined the Group Management Committee as its chief operating decisionmaker.
Intra-segment revenue and costs are eliminated at head office. Income and expenses directly
associated with each segment are included in determining business segment performance.

Contingent assets and contingent liabilities

Contingent assets arise from unplanned or other unexpected events that give rise to the
possibility of an inflow of economic benefits to the Bank. As this may result in the recognition of
income that may never be realised, contingent assets are not recognised in the Banks financial
statements.
Contingent liabilities, which include certain guarantees and letters of credit pledged as collateral
security, are possible obligations that arise from past events whose existence will be confirmed
only by the occurrence, or non-occurrence, of one or more uncertain future events not wholly
within the control of the Bank; or are present obligations that have arisen from past events but
are not recognised because it is not probable that settlement will require the outflow of economic
benefits, or because the amount of the obligations cannot be reliably measured.
Contingent liabilities are not recognised in the financial statements but are disclosed unless the
probability of settlement is remote.

Restricted Profit Sharing Investment Accounts (RPSIA)

These deposits are used to fund specific financing. The RPSIA is a contract based on the Shariah
concept of Mudharabah between two parties, i.e. investor and entrepreneur to finance a business
venture where the investor provides capital and the business venture is managed solely by the
entrepreneur. The profit of the business venture will be shared based on pre-agreed ratios with the
Bank as Mudharib (manager or manager of funds), and losses shall be borne solely by depositors.

45

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Summary of Significant Accounting Policies

for the financial year ended 31 December 2012 (Continued)
W

Share capital

(a)

Classification
Ordinary shares and non-redeemable preference shares with discretionary dividends are
classified as equity. Other shares are classified as equity and/or liability according to the
economic substance of the particular instrument. Distributions to holders of a financial
instrument classified as an equity instrument are charged directly to equity.

(b)

Share issue costs

Incremental external costs directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.

(c)

Dividends to shareholders of the Bank

Dividends on cumulative redeemable preference shares are recognised as a liability and
expressed on an accrual basis. Dividends on ordinary shares are recognised as a liability
when the shareholders right to receive the dividend is established.

46

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012
1

General information

The Bank is principally engaged in all aspects of Islamic banking and finance business and in the
provision of related financial services. Islamic banking and finance business refers generally to the
acceptance of deposits and granting of financing and all other activities allowed under the Islamic
Banking Act, 1983 done in accordance with Shariah.
The immediate holding company of the Bank is CIMB Bank Berhad, a licensed bank incorporated
in Malaysia and the Directors regard CIMB Group Holdings Berhad, a quoted company
incorporated in Malaysia, as the Banks ultimate holding company.
The Bank is a licensed Islamic Bank under the Islamic Banking Act, 1983, incorporated and
domiciled in Malaysia.
The address of the Banks registered office is 5th Floor, Bangunan CIMB, Jalan Semantan,
Damansara Heights, 50490 Kuala Lumpur.
The address of the Banks principal place of business is 34th Floor, Menara Bumiputra- Commerce,
11 Jalan Raja Laut, 50350 Kuala Lumpur.

Cash and short-term funds

Cash and balances with banks and other financial institutions

Money at call and deposit placements maturing within one month

47

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

128,732
6,167,597
6,296,329

142,823
7,412,062
7,554,885

73,353
7,671,054
7,744,407

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
3

Deposits and placements with banks and other financial institutions

Licensed banks
Licensed investment banks
Other financial institutions

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

444,936
146,362
10,037
601,335

861,019
229,364
1,090,383

400,000
550,000
950,000

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

68,456
3,540,897
150,202
1,656,985
251,804
5,668,344

9,734
1,806,188
146,891
504,157
20,163
95,456
2,582,589

1,283,823
98,364
638,001
194,227
2,214,415

448,704
6,117,048

170,480
2,753,069

133,479
2,347,894

Financial assets held for trading

Money market instruments

Unquoted:
In Malaysia
Malaysian Government treasury bills
Bank Negara negotiable notes
Islamic accepted bills
Islamic negotiable instruments of deposits
Malaysian Government Securities
Government Investment Issues

Unquoted securities:
In Malaysia
Private debt securities

48

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
5

Financial investments available-for-sale

RM'000

31 December
2011
RM'000

1 January
2011
RM'000

1,140,378
20,764
34,262
54,240
1,249,644

448,440
35,857
33,697
517,994

165,641
35,423
201,064

1,547,118

725,099

454,369

575
2,797,337

575
1,243,668

575
656,008

31 December
2012
Money market instruments
Unquoted:
In Malaysia
Government Investment Issues
Islamic Cagamas bonds
Malaysian Government Securities
Khazanah bonds

Unquoted securities:
In Malaysia
Private debt securities
Placement with Islamic Banking and Finance
Institute Malaysia

On 1 January 2012, the Bank designated a previously held financial investments held-to-maturity to
financial investments available-for-sale, as allowed under MFRS 1. The fair value and carrying amount of
the financial statements held-to-maturity of the Bank at the date of designation (in RM'000) is RM 493,994
(1 January 2011: RM200,048) and RM 487,291 (1 January 2011: RM194,921) respectively.

Financial investments held-to-maturity

Unquoted securities:
In Malaysia
Private debt securities
Amortisation of premium less accretion of discount

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

652,430
(40)
652,390

688,724
1,342
690,066

897,820
894
898,714

Private debt securities amounting to (in RM'000) RM Nil (31 December 2011: RM Nil; 1 January 2011:
RM864,907) are funded by a RPSIA depositor, as part of an arrangement with CIMB Bank Berhad.

49

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
7

Islamic derivative financial instruments, commitments and

contingencies

(i)

Islamic derivative financial instruments

The following tables summarise the contractual or underlying principal amounts of
derivative financial instruments held at fair value through profit or loss and hedging
purposes. The principal or contractual amounts of these instruments reflect the volume of
transactions outstanding at the date of statement of financial position, and do not
represent amounts at risk.
Trading derivative financial instruments are revalued on a gross position basis and the
unrealised gains or losses are reflected in Islamic Derivative Financial Instruments
Assets and Liabilities respectively.
31 December 2011

31 December 2012

Fair values

Fair values
Liabilities
RM000

Principal
amount
RM000

Assets
RM000

33,775
15,854
1
297
17,994
67,921

(31,664)
(8,780)
(1)
(297)
(17,994)
(58,736)

463,003
1,266,140
1,425
67,409
330,114
2,128,091

8,265,671

75,209

(52,354)

Equity related derivatives

Equity options

1,471,506

15,856

Held for hedging purpose

Islamic profit rate swaps

7,078,403

Liabilities
RM000

Assets
RM000

Liabilities
RM000

8,586
10,986
2
714
15,938
36,226

(1,641)
(8,785)
(714)
(15,939)
(27,079)

33,825
1,621,195
245
88,549
1,743,814

42
8,235
1
2,653
10,931

(460)
(20,753)
(2,653)
(23,866)

5,290,799

92,632

(95,791)

5,799,537

122,279

(108,850)

(15,856)

1,896,611

10,555

(10,555)

2,219,544

6,342

(6,342)

9,374

(253,583)

4,629,498

8,195

(262,429)

4,400,000

11,136

(60,141)

21,449,014

168,360

(380,529)

13,944,999

147,608

(395,854)

14,162,895

150,688

(199,199)

Assets
RM000

1,579,364
2,628,568
1,604
92,114
331,784
4,633,434

Profit rate derivatives

Islamic profit rate swaps

Total derivative assets/(liabilities)

Fair values
Principal
amount
RM000

Principal
amount
RM000
Foreign exchange derivatives
Currency forwards
Currency swaps
Currency spot
Currency option
Cross currency profit rate swaps

1 January 2011

50

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
7

Islamic derivative financial instruments, commitments and

contingencies (Continued)

(i)

Islamic derivative financial instruments (Continued)

Fair value hedge
Fair value hedges are used by the Bank to protect it against the changes in fair value of
financial assets and financial liabilities due to movements in market rates. The Bank uses
Islamic profit rate swaps to hedge against profit rate risk of financing. For designated and
qualifying fair value hedges, the changes in fair value of derivative and item in relation to
the hedged risk are recognised in the statement of income. If the hedge relationship is
terminated, the cumulative adjustment to the carrying amount of the hedged item is
amortised in the statement of income based on recalculated effective profit rate over the
residual period to maturity, unless the hedged item has been derecognised, in which case,
it is released to the statement of income immediately.
Included in the net income (Note 24) is the net gains and losses arising from fair value
hedges during the year as follows:

Gain/(loss) on hedging instruments

Gain/(loss) on the hedged items attributable to the hedged risk

(ii)

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

12,895
(13,562)

(217,591)
216,290

(6,643)
8,522

Commitments and contingencies

In the normal course of business, the Bank enters into various commitments and incur
certain contingent liabilities with legal recourse to their customers. No material losses are
anticipated as a result of these transactions and hence, they are not provided for in the
financial statements.

51

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
7
(ii)

Islamic derivative financial instruments, commitments and

contingencies (Continued)
Commitments and contingencies (Continued)
The notional/principal amount of the commitments and contingencies constitute the
following:
31 December
2011

1 January
2011

Principal
amount
RM'000

Principal
amount
RM'000

Principal
amount
RM'000

195,449

28,627

37,197

434,554

345,460

374,102

85,180

249,517

17,949

3,852,873
901,637

1,469,541
857,762

1,782,407
1,411,601

45,430

28,467

91,231

5,515,123

2,979,374

3,714,487

31 December
2011

1 January
2011

Principal
amount
RM'000

Principal
amount
RM'000

Principal
amount
RM'000

3,580,714
157,015
895,706

1,797,977
89,714
240,400

1,655,265
88,549
-

1,093,345
4,615,834
9,634,894

1,391,478
2,712,481
5,816,338

377,279
4,315,158
5,507,100

710,632
345,162
415,712

208,568
962,110
725,933

637,740
1,075,479
506,325

21,449,014

13,944,999

14,162,895

26,964,137

16,924,373

17,877,382

31 December
2012

Credit related
Direct credit substitutes
Certain transaction-related
contingent items
Short-term self-liquidating
trade-related contingencies
Irrevocable commitments to extend credit:
- maturity not exceeding one year
- maturity exceeding one year
Miscellaneous commitments
and contingencies
Total credit-related commitments
and contingencies

31 December
2012

Treasury related
Foreign exchange related contracts:
- less than one year
- one year to less than five years
- over five years
Profit rate related contracts:
- less than one year
- one year to less than five years
- over five years
Equity related contracts:
- less than one year
- one year to less than five years
- above 5 years
Total treasury-related commitments
and contingencies

52

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
8

Financing, advances and other financing/loans

(i)

By type:

Cash line
Term financing
- House financing
- Syndicated term financing
- Hire purchase receivables
- Other term financing
Credit card receivables
Bills receivable
Islamic trust receipts
Claims on customer under Islamic accepted bills
Revolving credits
Share purchase financing
Other loans
Gross financing, advances and other financing/loans^
Fair value changes arising from fair value hedges
Less: Allowance for impairment loss
- Individual impairment allowance
- Portfolio impairment allowance

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

471,590

373,056

322,529

8,231,990
330,015
6,495,487
15,766,461
97,882
3,766
35,707
340,687
1,450,191
35,226
33,259,002
222,909
33,481,911

7,134,214
192,065
5,410,652
14,444,297
104,078
2,581
35,391
233,479
423,325
28,353,138
241,966
28,595,104

5,532,014
380,986
5,234,598
10,518,830
90,472
2,235
59,091
191,657
407,330
11
22,739,753
17,997
22,757,750

(60,925)
(347,704)
33,073,282

(103,256)
(417,744)
28,074,104

(92,683)
(240,490)
22,424,577

^Included in financing, advances and other financing/loans are exposures to Restricted Profit Sharing
Investment Accounts (RPSIA), as part of an arrangement between CIMB Islamic Bank Berhad and
CIMB Bank Berhad. CIMB Bank Berhad is exposed to risks and rewards on RPSIA financing and will
account for all the portfolio and individual impairment for bad and doubtful financing arising thereon.
As at 31 December 2012, the gross exposures to RPSIA financing is RM 988 million (31 December 2011:
RM1,065 million; 1 January 2011 : RM7,331 million) and the portfolio impairment allowance relating to
this RPSIA amounting to RM3.5 million (31 December 2011: RM3.7 million; 1 January 2011: RM154.8
million) is recognised in the Financial Statements of CIMB Bank Berhad. There was no individual
impairment provided on this RPSIA financing.

53

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
8

Financing, advances and other financing/loans (Continued)

(i)

By type: (Continued)

The Bank has undertaken fair value hedge on the profit rate risk of RM6,500 million (31
December 2011: RM4,350 million; 1 January 2011 : RM4,400 million) financing using Islamic
profit rate swaps.

Gross financing hedged

Fair value changes arising from fair value hedges

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

6,500,000
222,909
6,722,909

4,350,000
241,966
4,591,966

4,400,000
17,997
4,417,997

The fair value loss on Islamic profit rate swaps in this hedge transaction as at 31 December
2012 is RM247 million (31 December 2011 : RM262 million; 1 January 2011: RM49 million).
(ii)

By contract:

Bai' Bithaman Ajil (deferred payment sale)

Ijarah Muntahiyyah Bittamlik/AITAB
(Lease Ending with Ownership)
Murabahah (Cost Plus Sale )
Bai' al-'inah (Sale and repruchase )
Others

(iii)

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

12,957,557

11,569,606

10,320,341

7,330,211
325,682
12,455,612
189,940
33,259,002

6,299,331
226,767
9,913,017
344,417
28,353,138

5,979,854
303,903
5,827,671
307,984
22,739,753

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

574,212

357,211

213,028

1,360,257
5,191,432
6,747,294
19,122,879
16,981
245,947
33,259,002

1,332,710
3,146,765
6,545,671
16,714,078
12,445
244,258
28,353,138

1,267,220
3,131,681
4,539,837
13,353,200
5,467
229,320
22,739,753

By type of customer:

Domestic non-bank financial institutions

Domestic business enterprises
- Small medium enterprises
- Others
Government and statutory bodies
Individuals
Other domestic entities
Foreign entities

54

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
8

Financing, advances and other financing/loans (Continued)

(iv)

By profit rate sensitivity:

Fixed rate
- house financing
- hire purchase receivables
- others
Variable rate
- house financing
- others

(v)

31 December
2011
RM'000

1 January
2011
RM'000

316,820
6,495,487
12,112,954

402,488
5,410,652
11,924,643

417,942
5,234,598
8,024,882

7,915,170
6,418,571
33,259,002

6,731,726
3,883,629
28,353,138

5,114,072
3,948,259
22,739,753

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

2,674,004
914,279
3,051,647
26,619,072
33,259,002

651,916
638,507
1,514,944
25,547,771
28,353,138

1,754,853
860,224
1,770,618
18,354,058
22,739,753

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

3,233,098
97,882
1,970,429
8,273,772
2,573,888
360,709
35,648
6,512,442
7,289,268
20,290
2,891,576
33,259,002

3,179,054
104,078
1,014,686
7,163,093
1,926,886
428,357
10
5,410,377
6,641,897
34,787
2,449,913
28,353,138

1,710,557
90,472
759,803
5,579,762
1,651,458
391,915
20,606
5,234,598
7,039,034
261,548
22,739,753

By residual contractual maturity:

Within one year

One year to less than three years
Three years to less than five years
Five years and more

(vi)

31 December
2012
RM'000

By economic purpose:

Personal use
Credit card
Construction
Residential property
Non-residential property
Purchase of fixed assets other than land and building
Purchase of securities
Purchase of transport vehicles
Working capital
Merger and acquisition
Other purpose

55

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
8

Financing, advances and other financing/loans (Continued)

(vii)

Impaired financing by economic purpose:

Personal use
Credit cards
Construction
Residential property
Non-residential property
Purchase of fixed assets other than land and building
Purchase of securities
Purchase of transport vehicles
Working capital
Other purpose

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

15,570
419
894
91,240
35,148
1,966
10
87,912
63,532
7,437
304,128

19,240
4,506
3,319
85,570
27,302
1,154
3
99,353
96,005
9,326
345,778

17,165
2,616
1,584
85,002
16,131
1,738
19,364
86,560
101,590
4,129
335,879

(viii) Movements in impaired financing, advances and other financing/loans are as follows:
2012
RM'000

2011
RM'000

345,778

335,879

Classified as impaired during the financial year

Reclassification from unwinding income
Reclassified as non-impaired during the financial year
Amount written back in respect of recoveries

383,095
10,109
(152,618)
(73,013)

349,997
(122,608)
(90,543)

Amount written off

(209,223)

(126,947)

304,128

345,778

0.91%

1.22%

At 1 January

At 31 December
Ratio of gross impaired financing, advances and other
financing/loans to gross financing, advances and other
financing/loans

56

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
8

Financing, advances and other financing/loans (Continued)

(ix)

Movements in impairment allowance:

Individual impairment allowance

At 1 January
Allowance made during the financial year
Unwinding income
Amount written off
At 31 December

Portfolio impairment allowance

At 1 January
Allowance made during the financial year
Transfer from CIMB Bank
Unwinding income
Amount written off
At 31 December
Portfolio impairment allowance (inclusive of regulatory reserve)
as % of gross financing, advances and other financing/loans
(excluding RPSIA financing) less individual impairment
allowance

57

2012
RM'000

2011
RM'000

103,256
1,586
4,090
(48,007)
60,925

92,683
16,491
(1,477)
(4,441)
103,256

2012
RM'000

2011
RM'000

417,744
86,543
6,019
(162,602)
347,704

240,490
135,113
166,234
(4,181)
(119,912)
417,744

2.30%

2.31%

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
9

Other assets

Deposits and prepayments

Sundry debtors
Credit Support Annex for derivative transactions
Clearing accounts

10

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

100
36,369
61,430
156,983
254,882

150
153,626
52,090
93,151
299,017

308
53,235
68,470
212,215
334,228

Deferred taxation

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities and when the deferred taxes relate to the same tax
authority. The following amounts, determined after appropriate offsetting, are shown in the
statement of financial position:

Porftfolio impairment allowance for bad and doubtful financing

Accelerated tax depreciation
Financial investments available-for-sale
Provision for expenses
Deferred tax assets

58

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

78
(2,234)
(7,326)
20,213
10,731

27
(839)
(4,432)
11,603
6,359

(809)
(2,976)
8,092
4,307

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
10

Deferred taxation (Continued)

The movements in deferred tax assets and liabilities during the financial year comprise the
following:

Deferred tax
assets/(liabilities)

Porftolio
Revaluation
impairment
reserve allowance for
financial
bad and Accelerated investments
doubtful
tax
availablefinancing depreciation
for-sale
RM000
RM000
RM000

At 1 January 2012
- as previously reported
- effect of adoption of MFRS 1
As restated
Credited/(charged) to statement of income (Note 31)

27
27
51

(839)
(839)
(1,336)

(2,756)
(1,676)
(4,432)
-

Total
RM000

11,603
11,603
8,893

8,035
(1,676)
6,359
7,608

Over provision in prior year

(59)

Transferred to equity

At 31 December 2012

78

(2,234)

(7,326)

20,213

10,731

At 1 January 2011
- as previously reported
- effect of adoption of MFRS 1
As restated
Credited/(charged) to statement of income (Note 31)
Under/(over) provision in prior year
Transferred to equity
At 31 December 2011

27
27

(809)
(809)
(8)
(22)
(839)

(1,694)
(1,282)
(2,976)
(1,456)
(4,432)

8,092
8,092
2,689
822
11,603

5,589
(1,282)
4,307
2,708
800
(1,456)
6,359

11

Provision
for
expenses
RM000

(283)

(2,894)

(342)
(2,894)

Amount due from/(to) related companies and holding company

The amount due from/(to) related companies and holding company are unsecured and payable on
demand.

59

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
12

Statutory deposits with Bank Negara Malaysia

The non-profit bearing statutory deposits maintained with Bank Negara Malaysia are in compliance
with Section 26 (2)(c) of the Central Bank of Malaysia Act, 2009, the amounts of which are
determined at set percentages of total eligible liabilities.

13

Property, plant and equipment

2012
Cost
At 1 January
Additions
Written off
Reclassified to intangible assets
At 31 December

Renovations,
office
equipment,
furniture
and
fixtures
RM'000

Motor
vehicles
RM'000

Computer
equipment
RM'000

Total
RM'000

8,293
2,356
(4,472)
(1,407)
4,770

2,450
1,157
(360)
3,247

13
(10)
3

10,756
3,513
(4,842)
(1,407)
8,020

6,338
1,089
(4,452)
(1,262)
1,713

506
571
(263)
814

13
(10)
3

6,857
1,660
(4,725)
(1,262)
2,530

3,057

2,433

5,490

14

Accumulated depreciation
At 1 January
Charge for the financial year
Written off
Reclassified to intangible assets
At 31 December
Net book value
at 31 December

60

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
13

Property, plant and equipment (Continued)

2011
Cost
At 1 January
Additions
Written off
Reclassified to intangible assets
At 31 December

Renovations,
office
equipment,
furniture
and
fixtures
RM'000

14

Accumulated depreciation
At 1 January
Charge for the financial year
Written off
At 31 December
Net book value
at 31 December
Net book value
at 1 January 2011

14

Motor
vehicles
RM'000

Computer
equipment
RM'000

Total
RM'000

6,833
1,953
(19)
(474)
8,293

853
1,597
2,450

13
13

7,699
3,550
(19)
(474)
10,756

5,498
859
(19)
6,338

326
180
506

13
13

5,837
1,039
(19)
6,857

1,955

1,944

3,899

1,335

527

1,862

Intangible assets

Computer software
Cost
At 1 January
Additions
Reclassified from property, plant and equipment
At 31 December

13

Amortisation
At 1 January
Amortisation for the financial year
Reclassified to property, plant and equipment
At 31 December
Net book value at 31 December

2012
RM'000

2011
RM'000

17,142
5,824
1,407
24,373

15,979
689
474
17,142

12,972
2,811
1,262
17,045

11,692
1,280
12,972

7,328

4,170
4,287

Net book value at 1 January 2011

The above intangible assets include computer software under construction at cost of RM247,000
(31 December 2011: RM 77,000; 1 January 2011: RM 479,000).
61

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
15

Goodwill

Cost
At 1 January/At 31 December

2012
RM'000

2011
RM'000

2012
RM'000

136,000

136,000

136,000

Goodwill is wholly allocated to the retail banking cash-generating unit (CGU).

The recoverable amount of the CGU is determined based on value-in-use calculations. These
calculations use pre-tax cash flow projections based on the 2013 financial budgets approved by
management, projected for 5 years based on the average to year historical Gross Domestic
Product (GDP) growth of the country covering a five year period, revised for current economic
conditions. Cash flows beyond the five year period are extrapolated using an estimated growth
rate of 5.00% (31 December 2011: 5.00% ; 1 January 2011: 5.00%). The discount rate is 7.10%
(31 December 2011: 8.72% ; 1 January 2011: 8.89%) which reflects the specific risks relating to
the CGU.
Management believes that no reasonably possible change in any of the key assumptions would
cause the carrying value of any CGU to exceed its recoverable amount.

16

Deposits from customers

(i)

By type of deposits

Non-Mudharabah
Demand deposits
Savings deposits
Fixed return investment accounts
Islamic negotiable instruments of deposits
Commodity Murabahah
Short-term money market deposit-i
Others

Mudharabah
Demand deposits
Savings deposits
General investment deposits (inclusive of Special
General investment deposits in (RM'000) RM1,314,609
(31 December 2011:RM6,987,965; 1 January 2011:RM7,561,472))
Specific investment deposits

62

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

3,524,606
1,181,904
6,665,864
2,370,187
519
12,849,247
40,762
26,633,089

3,028,707
932,787
5,564,248
2,510,276
440,600
3,994,930
36,595
16,508,143

2,941,557
701,147
5,126,454
1,033,019
69,379
25,191
9,896,747

4,234,083
524,422

2,550,795
397,201

1,497,390
289,034

2,669,874
1,206,431
8,634,810
35,267,899

8,026,370
1,755,961
12,730,327
29,238,470

8,642,020
2,352,764
12,781,208
22,677,955

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
16

Deposits from customers (Continued)

(i)

By type of deposits (Continued)

The maturity structure of investment deposits and negotiable instruments of deposit is as
follows:

One year or less (short-term)

More than one year (medium/long-term)

(ii)

31 December
2011
RM'000

1 January
2011
RM'000

24,912,546
849,576
25,762,122

21,120,979
1,171,406
22,292,385

15,118,639
2,104,997
17,223,636

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

6,493,384
13,353,094
4,566,521
10,854,900
35,267,899

5,322,304
10,355,115
4,122,166
9,438,885
29,238,470

5,685,744
6,893,132
3,573,972
6,525,107
22,677,955

By type of customers

Government and statutory bodies

Business enterprises
Individuals
Others

17

31 December
2012
RM'000

Deposits and placements of banks and other financial institutions

Licensed Islamic banks

Licensed investment banks
Licensed banks
Other financial institutions

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

1,315,473
998,659
9,075,733
270,863
11,660,728

317,074
853,083
9,072,329
8,347
10,250,833

394,625
571,200
10,108,954
50,249
11,125,028

Included in the deposits and placements of licensed banks is the Restricted Profit Sharing
Investment Account (RPSIA) placed by CIMB Bank Berhad amounting to RM 984 million (31
December 2011: RM1,063 million; 1 January 2011: RM8,460 million) for tenures between 1
month to 4 months at indicative profit rates from 3.42% to 3.61% per annum (31 December 2011
: 3.39% to 3.76% ; 1 January 2011: 2.81% to 4.18%). These deposits are used to fund certain
specific financing. The RPSIA is a contract based on the Shariah concept of Mudharabah
between two parties, i.e. investor and entrepreneur to finance a business venture where the
investor provides capital and the business venture is managed solely by the entrepreneur. The
profit of the business venture is shared between both parties based on pre-agreed ratios. Losses
shall be borne solely by the investors.
63

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
18

Subordinated Sukuk

Subordinated Sukuk-RM850 million

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

863,557

564,679

300,000

The RM850 million unsecured subordinated Sukuk (the Sukuk) is part of the Tier-2 Junior Sukuk
programme which was approved by the Securities Commission on 22 May 2009. Under the
programme, the Bank is allowed to raise Tier-2 capital of up to RM2.0 billion in nominal value
outstanding at any one time.
a)

The Sukuk of RM300 million under the first issuance was issued at par on 25 September
2009 and is due on 25 September 2024, with optional redemption on 25 September 2019 or
any periodic payment date thereafter. The Sukuk bears a profit rate of 5.85% per annum
payable semi-annually in arrears.

b)

The second tranche of the Sukuk of RM250 million was issued at par on 21 April 2011 and
is due on 21 April 2021, with optional redemption on 21 April 2016 or any periodic
payment date thereafter. The Sukuk bears a profit rate of 4.20% per annum payable semiannually in arrears.

c)

On 18 September 2012, the Bank had issued the third tranche of Sukuk of RM300 million
at par and is due on 18 September 2022, with the optional redemption on 18 September
2017 or any periodic payment date thereafter. The Sukuk bears a profit rate of 4.00% per
annum, payable semi-annually in arrears.

The Bank has undertaken fair value hedge on the profit rate risk of the RM250 million subordinated
Sukuk using Islamic profit rate swaps.

Subordinated Sukuk, at cost

Fair value changes arising from fair value hedges

31 December
2012

31 December
2011

1 January
2011

RM'000

RM'000

RM'000

250,000
5,628
255,628

250,000
7,959
257,959

The fair value gain of profit rate swaps in this hedge transaction as at 31 December 2012 was
RM5,932,760 (31 December 2011: RM8,194,538; 1 January 2011: RM Nil).
64

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
18

Subordinated Sukuk (Continued)

The Bank has undertaken fair value hedge on the profit rate risk of the third tranche RM300 million
subordinated Sukuk using Islamic profit rate swaps.

Subordinated debts, at cost

Fair value changes arising from fair value hedges

31 December
2012

31 December
2011

1 January
2011

RM'000

RM'000

RM'000

300,000
(2,351)
297,649

The fair value loss of profit rate swaps in this hedge transaction as at 31 December 2012 was
RM2,302,664.
The RM850 million Sukuk qualify as Tier-2 capital for the purpose of the RWCR computation.

19

Other liabilities

Accruals and other payables

Clearing accounts
Others

65

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

74,304
291,125
31,678
397,107

78,679
215,259
15,008
308,946

25,099
327,463
31,994
384,556

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
20

Perpetual preference shares

2012
RM'000

2011
RM'000

Authorised
Perpetual preference shares of RM1.00 each
At 1 January/31 December

100,000

100,000

Issued and fully paid

Perpetual preference shares of RM1.00 each
At 1 January/31 December

70,000

70,000

The preference shares shall rank pari passu among themselves, and in priority to the ordinary
shares.
Each preference share shall on a winding-up or other return of capital confer on its holder the right
to receive, in priority to the holders of ordinary shares, the cash repayment in full the nominal
amount and premium payable of that preference share after the payment and discharge of all debts
and liabilities of the Bank and the costs of winding up or such capital reduction exercise.
A preference share shall not entitle its holder to participate in the surplus assets and profits of the
Bank beyond such redemption rights as are expressly set out in these Articles.
The Bank may declare dividends on any of the preference shares.
The preference shares are not convertible to ordinary shares or any other class of share of the Bank.

21

Ordinary share capital

2012
RM'000

2011
RM'000

Authorised
Ordinary shares of RM1.00 each:
At 1 January
Issued during the financial year
At 31 December

1,500,000
1,500,000

900,000
600,000
1,500,000

Issued and fully paid

Ordinary shares of RM1.00 each:
At 1 January
Issued during the financial year
At 31 December

1,000,000
1,000,000

750,000
250,000
1,000,000

66

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
22

Reserves

(a)

The statutory reserve is maintained in compliance with Section 15 of the Islamic Banking
Act, 1983 and is not distributable as cash dividend.

(b)

Merger reserves, which are non-distributable, relate to the difference between the cost of
the merger between the Bank and the Islamic banking operation of CIMB Bank Berhad,
and the value of the net assets and reserves transferred to the Bank.

(c)

Capital reserves, which are non-distributable, relate to the retained earnings of the Islamic
banking business of CIMB Bank Berhad which were transferred to the Bank, arising from
the business combination under common control using the predecessor basis of
accounting in the financial year 2007.

(d)

Regulatory reserves are maintained as an additional credit risk absorbent to ensure

robustness on the financing impairment assessment methodology with the adoption of FRS
139 beginning 1 January 2010.

(e)

Movement of the revaluation reserve of financial investments available-for-sale is as

follows :

At 1 January
- as previously reported
- effect of adopting MFRS 1
As restated
Net gain from change in fair value
Realised gain transferred to sattement of income on disposal
Deferred taxation
Net change in available-for-sale securities
At 31 December

(f)

2012
RM'000

2011
RM'000

8,268
5,027
13,295
17,178
(5,602)

5,082
3,846
8,928
12,504
(6,681)

(2,894)

(1,456)

8,682
21,977

4,367
13,295

Share-based payment reserve represents the Banks commitments for Management Equity
Scheme and Employee Ownership Plan under share-based compensation benefits.

67

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
23

Income derived from investment of depositors funds and others

Note

Income derived from investment of:

- General investment deposits
- Specific investment deposits
- Other deposits

(i)

(i)
(ii)
(iii)

2012
RM'000

2011
RM'000

823,547
97,510
992,747
1,913,804

602,357
325,387
693,689
1,621,433

Income derived from investment of general investment deposits

Financing, advances and other financing/loans:

- Income other than recoveries
- Unwinding income*
Financial assets held for trading
Financial investments available-for-sale
Financial investments held-to-maturity
Money at call and deposit with financial institutions
Accretion of discount less amortisation of premium
Total finance income and hibah
Other operating income
Net gain/(loss) from financial assets held for trading:
- realised
- unrealised
Net gain from sale of financial investments available-for-sale
Net gain/(loss) on maturity of financial investments held-to-maturity
Net loss from foreign exchange transactions
Fee and commission income

*Unwinding income is income earned on impaired financial assets

68

2012
RM'000

2011
RM'000

672,697
2,185
13,092
31,887
18,976
69,516
808,353
19,132
827,485

497,878
2,198
7,616
16,035
5,098
69,786
598,611
12,326
610,937

8,918
(136)
2,378
528
(18,411)
(6,723)
2,785
823,547

678
(291)
2,542
(104)
(14,862)
(12,037)
3,457
602,357

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
23

Income derived from investment of depositors fund and others

(Continued)

(ii)

Income derived from specific investment deposits

Financing, advances and other financing/loans:

- Income other than recoveries
Money at call and deposit with financial institutions
Financial investments held-to-maturity

(iii)

2012
RM'000

2011
RM'000

60,404
37,106
97,510

233,922
64,135
27,330
325,387

Income derived from investment of other deposits

Financing, advances and other financing/loans:

- Income other than recoveries
- Unwinding income*
Financial assets held for trading
Financial investments available-for-sale
Financial investments held-to-maturity
Money at call and deposit with financial institutions
Accretion of discount less amortisation of premium
Total finance income and hibah
Other operating income
Net gain/(loss) from financial assets held for trading:
- realised
- unrealised
Net gain from sale of financial investments available-for-sale
Net gain/(loss) on maturity of financial investments held-to-maturity
Net loss from foreign exchange transactions
Fees and commission income
*Unwinding income is income earned on impaired financial assets

69

2012
RM'000

2011
RM'000

809,176
2,641
15,508
37,861
23,113
83,449
971,748
21,919
993,667

573,766
2,568
8,325
20,357
5,493
79,641
690,150
11,555
701,705

11,397
(112)
2,967
661

812
(152)
3,827
(136)

(19,222)
(4,309)
3,389
992,747

(16,530)
(12,179)
4,163
693,689

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
24

Income derived from investment of shareholders fund

Financing, advances and other financing/loans:

- Income other than recoveries
- Unwinding income*
Financial assets held for trading
Financial investments available-for-sale
Financial investments held-to-maturity
Money at call and deposits with financial institutions
Accretion of discount less amortisation of premium
Total finance income and hibah
Other operating income
Net gain/(loss) from financial assets held for trading:
- realised
- unrealised
Net gain from sale of financial investments available-for-sale
Net gain/(loss) on maturity of financial investments held-to-maturity
Net loss from foreign exchange transactions
Net loss from hedging derivatives
Net gain/(loss) from derivative financial instruments:
- realised
- unrealised
Fees and commission income
Less : Fee and commission expense
Net fees and commision income
Other income:
- Sundry income

*Unwinding income is income earned on impaired financial assets

70

2012
RM'000

2011
RM'000

70,204
229
1,348
3,294
1,996
7,269
84,340
1,896
86,236

58,995
261
890
1,912
600
8,216
70,874
1,413
72,287

970
(12)
257
56
(1,839)
(662)

82
(310)
312
(10)
(1,757)
(1,301)

33,580
22,437
54,787
94,918
(1,909)
93,009

57,130
(10,599)
43,547
83,829
(1,961)
81,868

5,902
239,934

5,791
203,493

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
25

Allowances for losses on financing, advances and other financing/loans

Individual impairment allowance:

- made during the financial year
Portfolio impairment allowance:
- net allowance made during the financial year
Bad debts on financing:
- recovered
- written off

71

2012
RM'000

2011
RM'000

1,586

16,491

86,543

135,113

(56,103)
19
32,045

(37,775)
2
113,831

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
26

Income attributable to depositors

2012
RM'000

2011
RM'000

Deposits from customers:

- Mudharabah
- Non-Mudharabah

155,634
530,931

285,278
259,011

Deposits and placements of banks and other financial institutions:

- Mudharabah
- Non-Mudharabah

91,125
306,205

200,155
173,564

29,617
1,113,512

23,307
941,315

2012
RM'000

2011
RM'000

16,850
60,766
1,045
4,363
83,024

13,859
38,474
8,528
7,221
68,082

Others

27

Personnel expenses

Wages and salaries

Allowances and bonuses
Staff incentive
Other staff related costs

72

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
28

Other overheads and expenditures

2012
RM'000

2011
RM'000

Establishment
Rental
Depreciation of property, plant equipment
Outsourcing expenses
Repairs and maintenance
Others

1,573
1,660
7,167
2,027
3,483

1,189
1,039
2,737
(2,658)
1,051

Promotion
Advertisement and publicity
Others

6,338
2,506

960
2,605

2,398
2,811
586
1,359
10,723
42,631

2,041
1,280
791
1,203
10,311
22,549

208,662
95,478
10,097
32,704
346,941

133,949
60,044
8,496
29,523
232,012

389,572

254,561

General expenses
Professional fees
Amortisation of intangible assets
Communication
Incidental expenses on banking operations
Others

Shared services costs paid/payable to CIMB Bank/CIMB Investment Bank

Personnel expenses
Establishment
Promotion
General expenses

The personnel expenses and other overhead and expenditures include the following statutory
disclosures:

Directors remuneration (excluding benefits-in-kind) (Note 30)

Auditors remuneration :
PwC Malaysia (audit):
- statutory audit
- limited review
- other audit related
PwC Malaysia (non-audit):
- tax and taxation services

73

2012
RM'000

2011
RM'000

1,900

1,818

108
40
60

105
40
60

33

13

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
29

Significant related party transactions and balances

(a)

Related parties and relationship

Parties are considered to be related if one party has the ability to control the other party or
exercise significant influence over the other party in making financial or operational
decisions.
The related parties of, and their relationship with the Bank, are as follows:
Related parties
CIMB Group Holdings Berhad
CIMB Group Sdn Bhd
CIMB Bank Berhad
Subsidiaries of CIMB Group Holdings Berhad as
disclosed in its financial statements
Subsidiaries of CIMB Group Sdn Bhd as
disclosed in its financial statements
Subsidiaries of CIMB Bank Berhad as disclosed
in its financial statements
Key management personnel

Relationship
Ultimate holding company
Penultimate holding company
Immediate holding company
Subsidiaries of ultimate holding company
Subsidiaries of penultimate holding company
Subsidiaries of immediate holding company
See below

Key management personnel are those persons having the authority and responsibility for
planning, directing and controlling the activities of the Bank either directly or indirectly.
The key management personnel of the Bank include all the Directors of the Bank and its
employees who make certain critical decisions in relation to the strategic direction of the
Bank.

74

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
29

Significant related party transactions and balances (Continued)

(b)

Related party transactions

In addition to related parties disclosures mentioned elsewhere in the Financial Statements,
set out below are other significant related party transactions.

2012
Income
Profit income on deposits and placement with banks
and other financial institutions
Profit income on financial investments held-to-maturity
Profit income on financing, advances and other
financing/loans
Expenditure
Profit expense on deposits and placements of banks
and other financial institutions
Profit expense on deposits from customers
Profit expense on subordinated sukuk
Shared service costs
Security services
Process cost

2011
Income
Profit income on deposits and placement with banks
and other financial institutions
Profit income on financial investments held-to-maturity
Profit income on financing, advances and other
financing/loans
Expenditure
Profit expense on deposits and placements of banks
and other financial institutions
Profit expense on deposits from customers
Profit expense on subordinated sukuk
Shared service costs
Security services

75

Immediate
and ultimate
holding
company
RM'000

Other
related
companies

Key
management
personnel

RM'000

RM000

1,556
1,010

9,942
-

333,081
1,018
29,408
281,520
-

29,406
2,023
209
65,421
32
49

1,479
-

Immediate
and ultimate
holding company

Other
related
companies

Key
management
personnel

RM'000

RM'000

RM000

715
1,010

4,920
-

338,001
11
23,249
205,540
-

23,062
2,276
59
26,472
33

2,471
-

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
29

Significant related party transactions and balances (Continued)

(b)

Related party transactions (Continued)

Key management compensation

Salaries and other short-term employee benefits

Share options balance of ultimate holding company

Shares of the ultimate holding company

2012
RM'000

2011
RM'000

16,946

12,441

2012
Unit

2011
Unit

531,945

4,760,000
505,163

Included in the above is the Executive Directors compensation which is disclosed in

Note 30. The share options are granted on the same terms and condition as those offered
to other employees of the Bank.
There were no financing, advances and other financing/loans granted to the Directors of
the Bank. Financing made to other key management personnel of the Bank are on similar
terms and conditions generally available to other employees within the Bank. No
individual impairment allowances/specific allowances were required in 2011 and 2010
for financing, advances and other financing/loans made to the key management
personnel.

76

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
29

Significant related party transactions and balances (Continued)

(c)

Related party balances

2012
Amounts due from
Current accounts, deposits and placements with
banks and other financial institutions
Profit income on deposits and placements with banks
and other financial institutions
Financial investments held-to-maturity
Profit income on financial investments held-to-maturity
Financing, advances and other financing/loans
Amounts due to
Deposit from customers
Deposits and placements of banks and other
financial institutions
Profit expense on deposits from customers
Profit expense on deposits and placements of banks
and other financial institutions
Subordinated sukuk
Profit expense on subordinated sukuk
Shared service costs

2011
Amounts due from
Current accounts, deposits and placements with
banks and other financial institutions
Profit income on deposits and placements with banks
and other financial institutions
Financial investments held-to-maturity
Profit income on financial investments held-to-maturity
Financing, advances and other financing/loans
Amounts due to
Deposit from customers
Deposits and placements of banks and other
financial institutions
Profit expense on deposits from customers
Profit expense on deposits and placements of banks
and other financial institutions
Subordinated sukuk
Profit expense on subordinated sukuk
Shared service costs

77

Immediate
and ultimate
holding company
RM'000

Other
related
companies
RM'000

Key
management
personnel
RM'000

351,831

262,600

759
20,105
89
-

1,179
-

41,736
8,423,985

344,867
1,392,896

38,733

51

211

208,025
844,000
10,206
28,513

4,173
6,000
74
5,321

Immediate
and ultimate
holding company
RM'000

Other
related
companies
RM'000

Key
management
personnel
RM'000

285,930

311,600

350
20,132
89
-

876
-

12,145

125,548

14,133

8,934,915
8

848,270
51

137,413
549,000
6,704
15,501

4,813
1,000
16
1,441

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
29

Significant related party transactions and balances (Continued)

(d)

Management Equity Scheme (MES or the Scheme)

This Scheme was initiated as part of a performance linked compensation scheme by a
substantial shareholder of CIMB Group, whereby share options are granted to selected
employees of the Group and the Bank. The Scheme was launched on 1 March 2004, the
expiry date of the Scheme was extended from 28 February 2012 to 31 May 2012. The
Scheme lapsed thereafter.
The eligibility for participation in the scheme shall be at the discretion of the Nomination
and Remuneration Committee of CIMB Group. Entitlements of eligible members of
senior management are non-assignable and non-transferable whereby the Nomination and
Remuneration Committee of CIMB Group administers the scheme on behalf of the
substantial shareholder. The entitlements granted vest in proportions across various
exercised periods.
As the Group and the Bank do not have an obligation to settle the transaction with its
employees, the Group and the Bank have accounted for the transaction as equity settled in
accordance with MFRS 2.

78

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
29

Significant related party transactions and balances (Continued)

(d)

Management Equity Scheme (MES or the Scheme) (Continued)

The weighted average fair value of the entitlements granted, determined using the
Binomial Valuation Model was RM7.06 each . The significant inputs into the model were
as follows:

Valuation assumptions
- Expected volatility
- Expected dividend yield
- Expected option life
- Weighted average share price at grant date
- Weighted average risk-free profit rate

30.6%
1.5%
RM10.46
3.6%

The volatility measured at the standard deviation of on daily share price returns was based
on statistical analysis of daily prices over the last two years.
The total share-based payment expenses recognised in relation to the Scheme for the
Bank during the current financial year is NIL (2011: RM745,379). The shares were
exercisable 2 years from the grant date.

79

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
29

Significant related party transactions and balances (Continued)

(d)

Management Equity Scheme (MES or the Scheme) (Continued)

Details of the movement in the number of entitlements outstanding are as follows:

Share options :
At 1 January
- Granted during the financial year
- Bonus issue
- Exercised
- Forfeited
- As at 31 December

Grant date
22.3.2007
31.5.2007
27.3.2008
31.3.2009
6.8.2009
1.10.2009
8.3.2010
30.3.2010

Exercise price per share (RM)

3.48
3.48
3.48
3.48
3.48
3.48
3.48
3.48

Options (unit)
916,433
275,200
360,780
302,812
9,164
36,657
363,531
1,833

2012
Unit
'000

2011
Unit
'000

800

1,679

(800)
-

(877)
(2)

800

Expiry date
31.5.2012
31.5.2012
31.5.2012
31.5.2012
31.5.2012
31.5.2012
31.5.2012
31.5.2012

The weighted average share price at the time of exercise was RM7.44 (2011:RM8.23).
The is no weighted average remaining contractual life as at 31 December 2012 (2011:
0.16 year).
The total entitlement granted during 2012 and 2011 was nil and the number of
entitlements that are exercisable at the financial year end is 799,990 units (2011: 877,238
units).

80

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
29

Significant related party transactions and balances (Continued)

(e)

Equity Ownership Plan (EOP)

The EOP was introduced in 1 April 2011 by CIMB Group where CIMB Group will grant
ordinary shares of CIMB Group to selected employees of the Bank. Under the EOP,
earmarked portions of variable remuneration of selected employees of the Bank will be
utilised to purchase ordinary shares of CIMB Group from the market. The purchased
shares will be released progressively to the eligible employees at various dates after the
purchase date, subject to continued employment. A related company will act on behalf of
CIMB Group to administer the EOP and to hold the shares up to the pre-determined
transfer dates. The eligibility of participation in the EOP shall be at the discretion of the
Group Compensation Review Committee of CIMB Group.
Upon termination of employment other than retirement, disability or death, any
unreleased shares will be disposed at market price and proceeds received will be donated
to CIMB Foundation on behalf of the employees. In the event of retirement, disability or
death of the eligible employee, the release of shares will be accelerated to the date of
termination of employment and the shares will be assigned to the designated beneficiary.
The total share-based payment expense recognised in statement of income for the Bank
during the financial year amounted to RM 571,914 (2011:RM354,755)
The weighted average fair value of shares awarded under EOP was RM7.70 per ordinary
share (2011:RM8.27 per ordinary share), based on market price during the period in
which they were purchased.
Movements in the number of the Companys ordinary shares awarded are as follows:

Shares :
At 1 January
- Awarded
- Released
- At 31 December

81

2012
Unit
'000

2011
Unit
'000

238
461
(275)
424

330
(92)
238

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
29

Significant related party transactions and balances (Continued)

(f)

Credit transactions and exposures with connected parties

Credit exposures with connected parties as per BNMs revised the Guidelines on Credit
Transactions and Exposures with Connected Parties which became effective on 1 January
2008 are as follows:

Outstanding credit exposures with connected parties

Percentage of outstanding credit exposures to
connected parties as a proportion of total
credit exposures
Percentage of outstanding credit exposures with
connected parties which is non-performing or in default

(g)

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

497,862

624,736

681,773

0.9%

1.5%

1.9%

0.0%

0.0%

0.0%

Transactions with shareholders and Government

Khazanah Nasional Berhad (KNB), the major shareholder of the ultimate holding
company, owns 29% of the issued capital of the ultimate holding company (2011: 24%).
KNB is an entity controlled by the Malaysian Government. The Group and the Bank
consider that, for the purpose of MFRS 124 Related Party Disclosures, KNB and the
Malaysian Government is in the position to exercise significant influence over it. As a
result, the Malaysian Government and Malaysian Government controlled bodies
(collectively referred to as government-related entities) are related parties of the Group
and the Bank.
Apart from the individually significant transactions as disclosed in Note 29(d) to the
Financial Statements, the Bank has collectively, but not individually, significant
transactions with other government-related entities which include but not limited to the
following:
-

Purchase of securities issued by government-related entities

Financing to government-related entities
Deposit placing with and deposit taking from government-related entities

These transactions are conducted in the ordinary course of the Banks business on
commercial terms comparable to the terms of transaction with other entities that are not
government-related. These commercial terms are consistently applied in accordance with
the Banks internal policies and processes, which do not depend on whether the
counterparties are government-related entities or not.
82

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
30

CEO, Directors and Shariah Committee Members remuneration

The Directors of the Bank in office during the financial year were as follows:

Non-Executive Directors
Datuk Dr. Syed Muhamad bin Syed Abdul Kadir
Raja Shaharul Niza bin Raja Abdul Aziz
Professor Dr. Mohammad Hashim Kamali
Habibah Abdul (appointed on 19 January 2012)
Dato Sulaiman bin Mohd Tahir (appointed on 28 May 2012)
Dato Sri Mohamed Nazir bin Abdul Razak (resigned on 6 March 2012)
Dato Anwar bin Haji @ Aji (resigned on 8 March 2012)
Dr. Achmad Riawan Amin (resigned on 5 April 2012)
Executive Director
Badlisyah bin Abdul Ghani

The Directors of the Bank and their total remuneration during the financial year are analysed
below:
CEO and Executive Director
- Salary and other remuneration, including meeting allowance
- Bonus
- Benefits-in-kind

Non-Executive Directors
- Fees
- Benefits-in-kind

Shariah Committee members

2012
RM'000

2011
RM'000

974
926
17
1,917

905
1,095
23
2,023

547
25
572

475
16
491

404
2,893

383
2,897

* The CEOs salary, other remuneration, including meeting allowances and bonus were paid by a related company and
has been charged back to the Bank.

83

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
30

CEO, Directors and Shariah Committee Members remuneration

(Continued)

The Directors bonus for the financial year 2012 will be paid in tranches, spread over financial
year 2013, while for financial year 2011, it was similarly paid in tranches, spread over financial
year 2012. A similar condition is also imposed on the bonus for certain key personnel.
The number of Directors of the Bank whose total remuneration during the financial year falls within
the following bands is analysed below:
2012

2011

Executive Director
RM1,900,001 RM2,150,000

Non-Executive Directors
RM50,000 and below
RM50,001 to RM100,000
RM100,001 to RM150,000
RM150,001 to RM250,000

2
3
1

2
4
1

2012
RM'000

2011
RM'000

141,688
(7,608)
342
134,422

114,805
(2,708)
(713)
111,384

535,492

447,116

133,873

111,779

(842)
1,049
342
134,422

(381)
699
(713)
111,384

31

Taxation

Taxation based on profit for the financial year:

- Malaysian income tax
Deferred taxation (Note 10)
Under/(over) accrual in prior year
Reconciliation between tax expense and the Malaysian tax rate
Profit before taxation
Tax calculated at a rate of 25% (2011: 25%)
Tax effects:
- income not subject to tax
- expenses not deductible for tax purposes
Under/(over) accrual in prior year
Tax expense

84

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
32

Earnings per share

a)

Basic earnings per share

The basic earnings per ordinary share is calculated based on the net profit for the financial
year of RM401,070,000 (2011: RM335,732,000) divided by the weighted average
number of ordinary shares of 1,000,000,000 (2011: 897,945,000) in issue during the
financial year.

b)

Diluted earnings per share

The Bank has no dilution in its earnings per ordinary share in the current and previous
financial year as there are no dilutive potential ordinary shares.

33

Lease commitments

The Bank has lease commitments in respect of rented premises and equipment on hire, all of which
are classified as operating leases. A summary of the non-cancellable long-term commitments is as
follows:

Within one year

One year to five years
Five years and more

34

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

560
2,238
233

560
2,238
793

560
2,238
1,912

Capital commitments

Capital expenditure:
- authorised and contracted for
- authorised but not contracted for

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

480
1,000

1,261
4,606

1,184
3,553

These capital commitments are for acquisition of property, plant and equipment

85

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
35

Capital adequacy

The key driving principles of the Banks capital management policies are to diversify its sources
of capital to allocate capital efficiently, and achieve and maintain an optimal and efficient capital
structure of the Bank, with the objective of balancing the need to meet the requirements of all key
constituencies, including regulators, shareholders and rating agencies.
The capital management process is centrally supervised by the Group Executive Committee
(EXCO), Group Risk Committee (GRC) and Board Risk Committee (BRC) who
periodically assess and review of the capital requirements and source of capital across the Group,
taking into account all on-going and future activities that consume or create capital, and ensuring
that the minimum target for capital adequacy is met. Available capital is allocated across
competing demands, guided by the predetermined policies, and to ensure regulatory compliance.
Monthly updates on capital position of the Bank are also provided to the Board of Directors.

The capital adequacy ratios of the Bank are computed in accordance with Bank Negara Malaysia
Guidelines on Risk Weighted Capital Adequacy Framework: Internal Rating-Based approach
(IRB approach) for Credit Risk, where Advanced Internal Rating-Based (AIRB) is used for
retail exposure and Foundation IRB for Non-Retail exposure while Operational risk is based on
Basic Indicator Approach. Market Risk remained unchanged under Standardised Approach.

86

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
35

Capital adequacy (Continued)

Capital Structure and Adequacy

The table below sets out the summary of the sources of capital and the capital adequacy ratios of
the Bank as at 31 December 2012. The Bank issue various capital instruments pursuant to the
respective regulatory guidelines, including tier 2 subordinated sukuk that qualify as capital
pursuant to the Capital Adequacy Framework for Islamic Banks (CAFIB) issued by BNM.
(a)

The capital adequacy ratios of the Bank are as follows:

Tier I capital
Eligible Tier II capital
Capital base

31 December 31 December
2012
2011
RM'000
RM'000

1 January
2011
RM'000

1,924,786
1,015,011
2,939,797

1,714,378
654,979
2,369,357

1,182,897
355,874
1,538,771

8.69%
13.27%

10.44%
14.42%

13.22%
17.19%

31 December 31 December
2012
2011
RM'000
RM'000

1 January
2011
RM'000

1,000,000
70,000
1,008,843
2,078,843
(18,057)
(136,000)
1,924,786

1,000,000
70,000
791,169
1,861,169
(10,791)
(136,000)
1,714,378

750,000
70,000
506,180
1,326,180
(7,283)
(136,000)
1,182,897

850,000
242,624
45,257

550,000
59,113
64,585

300,000
7,405
30,892

17,577

(122,870)
1,015,011
2,939,797

(18,719)
654,979
2,369,357

355,874
1,538,771

Core capital ratio

Risk-weighted capital ratio

(b)

Components of Tier I and Tier II capitals are as follows:

Tier I capital
Paid-up share capital
Perpetual preference shares
Other reserves
Less: Deferred tax
Less: Goodwill
Tier II capital
Subordinated Sukuk
Regulatory reserve
Portfolio impairment allowance^
Surplus of total eligible provision over
expected loss
Excess of total expected loss over total eligible
provision
Total Tier II capital
Total capital base

87

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
35

Capital adequacy (Continued)

Capital Structure and Adequacy (Continued)

(c)

Breakdown of risk-weighted assets in the various categories of risk-weights as at 31

December :

Credit risk
Market risk
Operational risk

31 December 31 December
2012
2011
RM'000
RM'000

1 January
2011
RM'000

14,677,578
346,673
1,402,324
16,426,575

7,623,657
285,115
1,041,278
8,950,050

19,554,311
913,826
1,678,915
22,147,052

The capital base of the Bank as at 31 December 2012 has excluded portfolio impairment
allowance on impaired financing restricted from Tier II capital of RM16,481,812 (31 December
2011: RM21,373,892; 1 January 2011: RM19,709,506).

In accordance with BNMs guidelines on the recognition and Measurement of Profit Sharing
Investment Account (PSIA) as Risk Absorbent, the credit and market risks on the assets
funded by the PSIA are excluded from the risk weighted capital (RWCR) calculation.
As at 31 December 2012, RPSIA assets excluded from the RWCR calculation amounted to RM
988 million (31 December 2011: RM1,065 million ; 1 January 2011: RM6,217 million).

88

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management

(a)

Financial risk management objectives and policies

The Group embraces risk management as an integral component of the Groups business,
operations and decision-making process. In ensuring that the Group achieves optimum
returns whilst operating within a sound business environment, the risk management teams
are involved at the early stage of the risk taking process by providing independent inputs
including relevant valuations, credit evaluations, new product assessments and
quantification of capital requirements. These inputs enable the business units to assess the
risk-vs-reward value of their propositions and thus enable risk to be priced appropriately in
relation to the return.
The objectives of the Groups risk management activities are to:

(b)

Identify the various risk exposures and risk capital requirements;

Ensure risk taking activities are consistent with risk policies and the aggregated
risk position are within the risk appetite as approved by the Board; and

Create shareholder value through proper allocation of risk capital and facilitate
development of new business and products.

Enterprise Wide Risk Management Framework (EWRM)

The Group employs an EWRM framework to manage its risk and opportunity
effectively. The EWRM framework provides the Board and management with a tool to
anticipate and manage both the existing and potential risks, taking into consideration
changing risk profiles as dictated by changes in business strategies, operating and
regulatory environment and functional activities.
The key components of the Groups EWRM framework are represented in the diagram
below:

89

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

(b)

Enterprise Wide Risk Management Framework (Continued)

The Group acknowledges that strong risk governance forms the backbone that holds the
EWRM together. The Board of Directors through the Board Risk Committee (BRC) is
ultimately responsible for the Groups risk management activities and provides strategic
direction through the risk appetite statement and the corresponding capital and risk
management frameworks. The implementation of the EWRM is supervised through
several risk committees, with the line management being primarily responsible for
identifying and managing risks at the onset. The Group Risk Division (GRD) is
principally tasked to assist the various committees and undertakes the performance of the
independent risk management, monitoring and reporting functions of the EWRM. The
implementation of the EWRM is subjected to the independent assurance and assessment
by Group Internal Audit Division.
The EWRM starts its comprehensive risk assessment process by assessing all risk taking
activities of the Group from the perspectives of its financial and brand reputation impact,
thus identifying the Groups material risks. These material risks are assessed, measured,
controlled, monitored and reported on an on-going basis in accordance with the Groups
risk management processes embodied within the EWRM.
At the core of the EWRM is a robust risk and capital management framework that relates
the Groups material risks to its capital requirements and planning activities, ensuring its
capital adequacy at all time. The Groups Risk-based Performance Measurement
Framework provides a common and consistent measurement of risk to facilitate
comparison of risks across business units and risk types. This enables the Group to
consider both the downside risk, for risk protection and upside potential, for earnings
growth. Hence, allowing the Group to measure the performance of each business on an
absolute basis (economic profit) and relative percentage return basis (Risk Adjusted
Return on Capital RAROC) against the Groups costs of capital. Each year capital is
allocated to the business units based on the respective business plan, budgeted profit and
targeted RAROC.
The foundation of the EWRM is made up of three major building blocks, which are Risk
Management Limits and Controls, Risk Analysis and Reporting, and Stress Testing.
Limits constitute the key mechanism to control allowable risk taking activities and are
regularly reviewed in the face of changing business needs, market conditions, and
regulatory requirements. Timely reports and meaningful analysis of risk positions are
critical to enable the Board and its management to exercise control over all exposures
and make informed business decisions.
90

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

(b)

Enterprise Wide Risk Management Framework (Continued)

Stress testing involves identifying possible events or future changes in the financial and
economic conditions that could have unfavourable effects on the Groups exposure and
the assessment of the Groups ability to withstand such changes, usually in relation to
the capacity of its capital and earnings to absorb potentially significant losses as well as
the sufficiency of its liquidity surplus and reserves. Steps are then identified to manage
risk and conserve capital. Group wide stress test is performed semi-annually.

(c)

Risk Governance
In accordance with the Groups risk management structure, the BRC assumes the
ultimate responsibility on behalf of the Boards of Directors for the supervision of risk
management within the Group. In line with best practices, the BRC determines the risk
policy objectives for the Group.
Responsibility for administering risk management and control is delegated to the Group
Risk Committee (GRC). The GRC is chaired by the Group Managing Director/Chief
Executive Officer, and undertakes the oversight function for overall risk limits, aligning
them to the risk appetite. The GRC is further supported by several sub-committees,
namely Group Wholesale Bank Risk Committee (GWBRC), Consumer Bank Credit
Committee (CBCC), Regional Credit Committee (RCC), Singapore Business Credit
Committee (SBCC), Regional Liquidity Risk Committee (RLRC) and Operational Risk
Committee (ORC), each set up to manage and control specific risk areas. In relation to
Profit rate Risk in the Banking Book (IRRBB)/ Rate of return Risk in the Banking Book
(RORBB), GRC is further assisted by the Balance Sheet Management Committee
(BSMC) that is responsible for recommending and executing strategies and hedging
proposals for the banking book as well as ensuring the Groups profit rate/rate of return
risk profile is within the risk limits/MATs endorsed by GRC. With this set-up, the Board
and BRC through the various risk committees and BSMC maintain oversight of various
risks across the Group.
The composition of the committees includes senior management and individuals from
business divisions as well as divisions which are independent from the business units.
BRC reviews the composition of these committees except for BSMC, to reflect a balance
of experienced independent and non-independent individuals with the necessary skills
and qualifications to carry out the roles and responsibilities of the relevant committee.

91

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

(c)

Risk Governance (Continued)

The following chart sets out the organisational structure of the risk management
committees overseeing risk management activities and gives an overview of the
respective committees roles and responsibilities:
BOARD OF DIRECTORS
BOARD RISK COMMITTEE

Review and recommend risk policies and strategies for approval

Oversee entire EWRM and provide strategic guidance to various
committees

GROUP RISK COMMITTEE

Group Wholesale Bank

Risk Committee
(GWBRC)

Oversee Groups
exposures to
market risks
Evaluate and
approve proposals
for primary and
secondary market
deals for financing
and equity

Consumer Bank
Credit Committee
(CBCC)

instruments for the

Group

Credit approval
authority for
Malaysian centric
credit exposure
Assign and review
the Malaysian
sectorial exposures
Review and approve
Global Banking
Institutions Limits
for Malaysian
centric banking

Credit approval
authority for
Malaysian centric
credit exposures
Ensuring Group
overall
financing
meets regulatory
guidelines and
approved internal
policies and
procedures
Oversee the
development of
credit policies and
procedures,
encompassing all
products and
businesses with
Consumer
Banking

Review and advise onrisk policies and strategies

Oversee management of risk, capital allocation and asset
liability management processes across our Group

Review and
approve or concur
non-Malaysian
centric credit
exposures
Ensuring Group
overall
financing
meets regulatory
guidelines and
approved internal
policies and
procedures
Review and
approve or concur
all non-Malaysian
Interbank Limit,
Global Financial
Institutions
Counterparty
Limits and Global
Country Limit

Regional Liquidity
Risk Committee
(RLRC)

Singapore Business
Credit Committee
(SBCC)

Regional Credit
Committee (RCC)

Credit approval
authority for
primarily Singapore
centric credit
exposures
Ensuring Group
overall
financing
meets regulatory
guidelines and
approved internal
policies and
procedures

groups

92

Operational Risk
Committee (ORC)

Oversee the
Groups overall
liquidity
management
Ensure Group is
able to meet its
cash flow
obligations in a
timely and cost
effective manner
Together with
BSMC, oversees
the
IRRBB/RORBB

Oversee operational
risk management in
terms of best
practices, policies
and risk tolerance
Review controls and
action plans to
address identified
risks
Oversight on all
Business Continuity
Management
(BCM)/
Disaster Recovery
(DR) activities

Balance Sheet
Management
Committee (BSMC)

Review balance
sheet positions
Recommend and
executing balance
sheet strategies
and hedging
Ensure risk profile
is kept within the
established risk
appetite/ limits/
MAT

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

(c)

Risk Governance (Continued)

The overseas subsidiaries risk committees are set-up in a similar structure in their
respective jurisdictions. Whilst recognising the autonomy of the local jurisdiction and
compliance to local requirements, the Group strives to ensure a consistent and
standardised approach in its risk governance process. As such, the relevant Group and
Regional committees have consultative and advisory responsibilities on regional matters
across the Group. This structure increases the regional communication, sharing of
technical knowledge and support towards managing and responding to risk management
issues, thus allowing the Board to have a comprehensive view of the activities within the
Group.
Three-Lines of Defence
The Groups risk management approach is based on the three-lines of defence concept
whereby risks are managed from the point of risk-taking activities. This is to ensure clear
accountability of risk across the Group and risk management as an enabler of the
business units. As a first line of defence, the line management, including all business
units and client facing activities, are primarily responsible for risk management on a dayto-day basis. The second line of defence provides oversight functions and performs
independent monitoring of business activities and reporting to management to ensure
that the Group is conducting business and operating within the approved appetite and
also in compliance to regulations. The third line of defence is Group Internal Audit
Division who provides independent assurance to the Boards that the internal controls and
risk management activities are functioning effectively.
The Roles of Group Chief Risk Officer (CRO) and Group Risk Division (GRD)
Within the second line of defence is GRD, a function independent of business units that
assists the Group's management and various risk committees in the monitoring and
controlling of the Group's risk exposures. GRD comprises Group Risk Management
(GRM), Group Credit (GC), Regional Credit Management (RCM) and Regional Risk
(RR) and its key responsibilities are analyse, monitor and report the material risks to
which the Group is exposed. GRD is headed by the CRO who is appointed by the Board
to spearhead the risk management functions and the implementation of the EWRM. The
CRO actively engages the Board and senior management on risk management issues and
initiatives. The CRO also maintains an oversight on risk management functions across
all entities within the Group.

93

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

The Roles of CRO and Group Risk Division (continued)
In ensuring a standardised approach to risk management across the Group, all risk
management teams within the Group are required to conform to the Groups EWRM
framework, subject to necessary adjustments required for local regulations. For branches
and subsidiaries without any risk management outfit, all risk management activities will
be centralised at GRM. Otherwise, the risk management activities will be performed by
the local risk management team with matrix reporting line to GRD.

(d)

Group Risk Management

GRM monitors risk-taking activities, initiates and proposes risk policies, risk
measurement methodologies and risk limits, performs independent review of financing
assets quality and financing recovery plan, coordinates capital market products
deployments and develops the risk-based product pricing framework for financing
portfolios.
In propagating and ensuring compliance to the market risk framework, GRM reviews
treasury trading strategies, analyses positions and activities vis--vis changes in the
financial market and performs mark-to-market as part of financial valuation.
GRM is also tasked with the co-ordination of the Groups effort towards implementation
of Basel II. In this regard, GRM develops, implements and validates all internal rating
and scoring models and closely monitors the usage of the rating and scoring systems to
ensure relevancy to current market conditions and integrity of the ratings.
GRM adds value to business propositions by providing advice on market valuations,
quantifications of capital requirement and independent risk assessment. This enables the
business units to prepare for the potential risks associated with the new transactions or
business ventures and consequently, address the management and mitigation of such
risks from the early stage of the proposition. The business units gain understanding of
the risk-reward equation of the proposition, consider the risk factors in the pricing
decision, and ensure that the projected returns from the business propositions
commensurate with the risks taken. In order to ensure the independence of GRM in such
an arrangement, GRMs remuneration is not linked to the success of particular
transactions or deals.
94

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

The Roles of CRO and Group Risk Division (continued)

(e)

Group Credit
GC carries out independent assessments and evaluations of all credit risk related
proposals originating from the various business units such as financing and advances,
fixed income, derivatives, sales and trading, prior to submission to the CBCC, GWBRC,
the Group Executive Committee (EXCO) or Board for approval. GC ensures proper
grouping of entities and counterparties under the single customer framework. GC also
reviews the Groups holdings of all fixed income assets issued by Malaysian companies
and recommends the internal ratings for GWBRCs approval.

(f)

Regional Credit Management

A regional credit platform was established with a primary objective of enhancing
efficiency and effectiveness of the credit oversight as well as credit approval process for
all non-Malaysian centric Corporate and Financial Institutions within the Group. The
platform includes 2 credit committees, the SBCC for smaller-sized exposures and the
RCC for larger regional exposures. All credit proposals submitted to the 2 credit
committees for approval/concurrence are routed through RCM for independent
assessment and due recommendation to the credit committees.

(g)

Regional Risk

RR was established with the objective of overseeing the risk management functions of
the regional offices in Singapore, Cambodia and Indonesia as well as the CIMB Groups
unit trust business under CIMB Principal Asset Management Berhad.

95

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

The Roles of CRO and Group Risk Division (continued)
For the regional offices, the respective risk management team identifies, analyses,
monitors, reviews, and reports the risk exposures of each individual country, including:
i) Proprietary trading strategies, positions and activities against changes in the
financial market on a daily basis.
ii) Limit utilisation and adequacy, transaction prices and mark-to-market positions.
iii) Credit reviews.
iv) New product approval process.
The Validation Team is independent from the risk taking units and model development
team, and reports to RR. The function of this unit is to perform validation, as guided by
regulatory guidelines and industry best practices on the credit rating systems, estimates
of the risk components, and the processes by which the internal ratings are obtained and
used. The unit provides recommendations to the modelling team and the business users.
The unit reports its findings and recommendations to GRC and BRC.

(h)

Strategies and Processes for Various Risk Management

These information are available in later sections for each Credit Risk, Market Risk and
Liquidity Risk.

36.1

Credit Risk
Credit risk is defined as arising from losses due to the obligor, market counterparty or
issuer of securities or other instruments held, failing to perform its contractual
obligations to the Group. It arises primarily from financing activities through financing
assets as well as commitments to support clients obligations to third parties, i.e.
guarantees. In sales and trading activities, credit risk arises from the possibility that the
Groups counterparties will not be able or willing to fulfil their obligation on
transactions on or before settlement date. In derivative activities, credit risk arises when
counterparties to derivative contracts, such as profit rate swaps, are not able to or willing
to fulfil their obligation to pay the positive fair value or receivable resulting from the
execution of contract terms. Credit risk may also arise where the downgrading of an
entitys rating causes the fair value of the Groups investment in that entitys financial
instruments to fall.

96

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit Risk (Continued)

Credit Risk Management
The purpose of credit risk management is to keep credit risk exposure to an acceptable
level vis--vis the capital and to ensure the returns commensurate with risk.
The credit approving authority is established and documented in the Groups credit
policy. The Group adopts a multi-tiered credit approving authority spanning various
delegated authorities and various credit committees. The credit committees namely,
SBCC, CBCC, RCC and GWBRC are set up to enhance the efficiency and effectiveness
of the credit oversight as well as the credit approval process for all credit applications
originating from the Groups business units. The Committees also ensure the overall
financing portfolio meets the guidelines of the regulatory authorities and adheres to the
approved credit policies and procedures.
All credit applications are independently evaluated by GC/RCM prior to submission to
the relevant committees for approval. Adherence to and compliance with single
customer, country and global counterparty limits as well as the assessment of the quality
of collateral are approaches adopted to address concentration risk to any large
sector/industry, or to a particular counterparty group or individual.
Adherence to established credit limits is monitored daily by GRM, which combines all
exposures for each counterparty or group, including off-balance sheet items and potential
exposures. Limits are also monitored based on rating classification of the obligor and/or
counterparty.
It is a policy of the Group that all exposures must be rated or scored based on the
appropriate internal rating models, where available. Retail exposures are managed on a
portfolio basis and the risk rating models are designed to assess the credit worthiness and
the likelihood of the obligors to pay their obligations, performed by way of statistical
analysis from credit bureau and demographic information of the obligors. The risk rating
models for non-retail exposures are designed to assess the credit worthiness of the
corporations or entities in paying their obligations, derived from risk factors such as
financial history and demographics or company profile. These rating models are
developed and implemented to standardise and enhance the credit underwriting and
decision-making process for the Groups retail and non-retail exposures.

97

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit Risk (Continued)

Credit Risk Management (Continued)
Credit reviews and rating are conducted on the credit exposures on at least an annual
basis and more frequently when material information on the obligor or other external
factors come to light.
The exposures are actively monitored, reviewed on a regular basis and reported regularly
to GRC and BRC so that deteriorating exposures are identified, analysed and discussed
with the relevant business units for appropriate remedial actions including recovery
actions, if required.
In addition to the above, the Group also employs Value at Risk (VaR) to measure and
manage credit portfolio risk due to credit events. The Group adopted the Monte Carlo
simulation approach in the generation of possible portfolio scenarios to obtain the
standalone and portfolio VaR. This approach takes into account the credit concentration
risk and the correlation between obligors/counterparties and industries.

Credit Risk Mitigation

The employment of various credit risk mitigation techniques such as appropriate credit
structuring, and posting of collateral and/or third party support form an integral part of
the credit risk management process. Credit risk mitigants are taken where possible and
is considered secondary recourse to the obligor for the credit risk underwritten.
Collaterals/Securities
All extension of credit in so far as deemed prudent, must be appropriately and
adequately secured. A credit proposal is considered secured only when the entire
proposal is fully covered by approved collateral/securities within their approved
margins as set out in the relevant credit policy guides. GWBRC/RCC is empowered to
approve any inclusion of new acceptable collaterals/securities.

98

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit Risk (Continued)

Credit Risk Mitigation (Continued)
Collaterals/Securities(Continued)
Recognised collaterals include both financial and physical assets. Financial collaterals
consist of mainly cash deposits, shares, unit trusts and debt securities, while physical
collateral include land and buildings and vehicles. Guarantors accepted are in line with
BNMs Risk Weighted Capital Adequacy Framework (RWCAF) (Basel II Risk
Weighted Assets Computation) and Capital Adequacy Framework for Islamic Banks
(CAFIB) guidelines. Eligible credit protection is also used to mitigate credit losses in
the event that the obligor/counterparty defaults.
Collateral Valuation and Management
The Group has in place policies which govern the determination of eligibility of various
collaterals including credit protection, to be considered for credit risk mitigation which
includes the minimum operational requirements that are required for the specific
collateral to be considered as effective risk mitigants.
The collateral is valued periodically ranging from daily to annually, depending on the
type of collateral. Specifically for real estate properties, a framework for valuation of
real estate properties is established to ensure adequate policies and procedures are in
place for efficient and proper conduct of valuation of real estate properties and other
related activities in relation to the interpretation, monitoring and management of
valuation of real estate properties.
Netting
In mitigating the credit risks in swaps and derivative transactions, the Group enters into
master agreements that provide for closeout and settlement netting arrangements with
counterparties, whenever possible. A master agreement that governs all transactions
between two parties, creates the greatest legal certainty that credit exposure will be
netted. In effect, it enables the netting of outstanding obligations upon termination of
outstanding transactions if an event of default occurs.

99

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit Risk (Continued)

Credit Risk Mitigation (Continued)
Concentrations within risk mitigation
CIMB Group avoids unwanted credit or market risk concentrations by diversifying its
portfolios through a number of measures. Amongst others, there are guidelines in place
relating to maximum exposure to any counterparty, sectors and country.
Off-Balance Sheet Exposures and Counterparty Credit Risk (CCR)
CCR limits are established at the individual counterparty level and approved by
GWBRC and/or RCC. These limits are monitored and reported at both business and at
the Group level.
Credit Risk Mitigation
For credit derivatives and swaps transactions, the Group enters into master agreement
with counterparties, whenever possible. Further, the Group may also enter into Credit
Support Annexes (CSA) with counterparties. The net credit exposure with each
counterparty is monitored and the Group may request for additional margin for any
exposures above the agreed threshold, in accordance with the terms specified in the
relevant CSA or the master agreement. The eligibility of collaterals and frequency calls
are negotiated with the counterparty and endorsed by GWBRC and/or RCC.
Treatment of Rating Downgrade
In the event of a one-notch downgrade of rating, based on the terms of the existing CSA
and exposure as at 31 December 2012, there will be no requirement for additional
collateral to be posted.
On the other hand, counterparty rating is being monitored and in the event of a rating
downgrade, remedial actions such as revision of the counterparty credit limit, suspension
of the limit or the request for additional collateral may be taken.

100

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012(Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.1 Maximum exposure to credit risk (without taking into account any collateral held or
other credit enhancements)
For financial guarantees and similar contract granted, the exposure to credit risk is the
maximum amount that the Bank would have to pay if the guarantees were called upon. For
credit related commitments and contingents that are irrevocable over the life of the
respective facilities, it is generally the full amount of the committed facilities. For all other
financial assets, the exposure to credit risk equals their carrying amount in the statement of
financial position.

31 December 2012 31 December 2011

RM'000
RM'000

Financial guarantees
Credit related commitments and contingencies

1 January 2011
RM'000

195,060
4,885,509

28,489
2,605,425

36,420
3,303,964

5,080,569

2,633,914

3,340,384

The financial effect of collateral (quantification to the extent to which collateral and
other credit enhancements mitigate credit risk) held for net financing, advances and other
financing/loans for the Bank is 71.5% (31 December 2011: 84.7%; 1 January 2011:
86.8%) while the financial effect of collateral for derivatives for the Bank is 57.4% (31
December 2011: 67.3%; 1 January 2011: 99.4%). The financial effects of collateral held
for the remaining on balance sheet financial assets are insignificant.

101

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.2 Concentration of risks of financial assets with credit risk exposure

A concentration of credit risk exists when a number of counterparties are engaged in
similar activities and have similar economic characteristics that would cause their ability
to meet contractual obligations to be similarly affected by changes in economic or other
conditions.
(a)

Geographical sectors
The analysis of credit risk concentrations (without taking into account any collateral held
or other credit enhancements) based on the location of the counterparty are as follows:

31 December 2012

Cash and short-term funds

Deposits and placements with banks and other
financial institutions
Financial assets held for trading
- Money market instruments
- Unquoted securities
Financial investments available-for-sale
- Money market instruments
- Unquoted securities
Financial investments held-to-maturity
- Unquoted securities
Islamic derivative financial instruments
- Trading derivatives
- Hedging derivatives
Financing, advances and other financing/loans
- Cashline
- Term financing
- Bills receivable
- Islamic trust receipts
- Claim on customers under Islamic accepted bills
- Share purchase financing
- Credit card receivables
- Revolving credits
Other assets
Amount due from related companies
Financial guarantees
Credit related commitments and contingencies
Total credit exposures

Malaysia
RM'000

United
Singapore United States Kingdom Hong Kong

Indonesia
RM'000

RM'000

RM'000

RM'000

RM'000

Others

Total
RM'000

RM'000

6,274,730

509

19,412

1,678

6,296,329

601,335

601,335

5,668,344
448,704

5,668,344
448,704

1,249,644
1,531,539

15,579

1,249,644
1,547,118

652,390

652,390

158,933
9,374

53
-

158,986
9,374

447,035
30,686,880
3,764
33,021
326,677
35,057
96,311
1,444,537
86,720
431
195,002
4,885,509

58
-

447,035
30,686,880
3,764
33,021
326,677
35,057
96,311
1,444,537
86,720
431
195,060
4,885,509

54,835,937

509

19,412

17,368

54,873,226

102

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012(Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.2 Concentration of risks of financial assets with credit risk exposure (Continued)
(a)

Geographical sectors (Continued)

31 December 2011

Cash and short-term funds

Deposits and placements with banks and other
financial institutions
Financial assets held for trading
- Money market instruments
- Unquoted securities
Financial investments available-for-sale
- Money market instruments
- Unquoted securities
Financial investments held-to-maturity
- Unquoted securities
Islamic derivative financial instruments
- Trading derivatives
- Hedging derivatives
Financing, advances and other financing/loans
- Cashline
- Term financing
- Bills receivable
- Islamic trust receipts
- Claim on customers under Islamic accepted bills
- Credit card receivables
- Revolving credits
Other assets
Amount due from related companies
Financial guarantees
Credit related commitments and contingencies
Total credit exposures

Malaysia
RM'000

United
Singapore United States Kingdom Hong Kong

Indonesia
RM'000

RM'000

RM'000

RM'000

RM'000

Others

Total
RM'000

RM'000

7,474,241

149

16,900

63,559

36

7,554,885

1,090,383

1,090,383

2,582,589
170,480

2,582,589
170,480

517,994
725,099

517,994
725,099

690,066

690,066

139,295
8,195

118
-

139,413
8,195

358,854
26,945,758
2,581
33,772
218,370
96,626
418,143
202,495
1,671
28,489
2,605,425

89
-

358,854
26,945,758
2,581
33,772
218,370
96,626
418,143
202,495
1,760
28,489
2,605,425

44,310,526

149

16,900

63,559

243

44,391,377

103

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.2 Concentration of risks of financial assets with credit risk exposure (Continued)
(a)

Geographical sectors (Continued)

1 January 2011

Cash and short-term funds

Deposits and placements with banks and other
financial institutions
Financial assets held for trading
- Money market instruments
- Unquoted securities
Financial investments available-for-sale
- Money market instruments
- Unquoted securities
Financial investments held-to-maturity
- Unquoted securities
Islamic derivative financial instruments
- Trading derivatives
- Hedging derivatives
Financing, advances and other financing/loans
- Cashline
- Term financing
- Bills receivable
- Islamic trust receipts
- Claim on customers under Islamic accepted bills
- Credit card receivables
- Revolving credits
Other assets
Amount due from holding company
Amount due from related companies
Financial guarantees
Credit related commitments and contingencies
Total credit exposures

Malaysia
RM'000

United
Singapore United States Kingdom Hong Kong

Indonesia
RM'000

RM'000

RM'000

RM'000

RM'000

Others

Total
RM'000

RM'000

7,473,635

77,088

17,924

61,670

114,090

7,744,407

950,000

950,000

2,214,415
133,479

2,214,415
133,479

201,064
454,369

201,064
454,369

898,714

898,714

139,552
11,136

139,552
11,136

310,925
21,395,426
2,235
54,886
176,123
86,591
398,391
121,182
245,034
828
36,420
3,303,964

310,925
21,395,426
2,235
54,886
176,123
86,591
398,391
121,182
245,034
828
36,420
3,303,964

38,608,369

77,088

17,924

61,670

114,090

38,879,141

104

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.2 Concentration of risks of financial assets with credit risk exposure (Continued)
(b)

Industry sectors
The analysis of credit risk concentrations (without taking into account any collateral held or other credit enhancements) for items recognised in
the statement of financial positions, based on the industry sectors of the counterparty are as follows:

Cash and shortterm funds

Deposits and
placements
with banks and
other financial
institutions

Financial
assets held
for trading
(i)

Financial
investments
available-forsale
(i)

Financial
investments
held-tomaturity
(i)

Trading
derivatives

Hedging
derivatives

Other financial

RM000
-

RM000
-

RM000
121,134
161,542

RM000
122,550
204,963
183,025

RM000
508,904

RM000
222
30,356
15

RM000
-

RM000

6,296,329
-

601,335
-

1,872,615

683,320
25,687

143,486
-

82,004
-

3,931,541
30,216

1,551,734
25,483

6,296,329

601,335

6,117,048

2,796,762

652,390

31 December 2012

Agriculture
Mining and quarrying
Manufacturing
Electricity, gas and water
Construction
Transport, storage and communications
Finance, takaful, real estate
and business services
Finance, takaful and business services
Real estate
Others
Purchase of landed property
- Residential
Government and government agencies
Purchase of transport vehicles
Consumption credit
Education and health
Others

Financing,
advances and
other financing/
loans
(ii)

Total credit
exposures

RM000
706,398
23,262
767,139
156,138
1,335,640
860,066

RM000
706,398
23,262
767,361
309,044
1,661,737
1,713,552

9,374
-

87,151
-

2,485,906
-

12,261,520
25,687

13,172
33,217

8,141,424
6,744,478
6,345,776
3,250,098
1,648,601
608,356

158,986

9,374

87,151

33,073,282

8,141,424
12,240,925
6,345,776
3,250,098
1,648,601
697,272
49,792,657

Islamic derivative
financial instruments

* Other financial assets include amount due from holding company, amount due from related companies and other financial assets

105

assets

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.2 Concentration of risks of financial assets with credit risk exposure (Continued)
(b)

Industry sectors (Continued)

Cash and shortterm funds

Deposits and
placements
with banks and
other financial
institutions

Financial
assets held
for trading
(i)

Financial
investments
available-forsale
(i)

Financial
investments
held-tomaturity
(i)

Trading
derivatives

Hedging
derivatives

RM'000
-

RM'000
-

RM'000
81,700
-

RM'000
15,116
114,723
155,192
139,229

RM'000
55
9,284
404,246

RM'000
3,368
-

RM'000
-

RM'000
-

RM'000
735,164
15,023
431,573
155,228
229,408
818,907

7,554,885
-

1,090,383
-

651,048
-

94,615
35,342

272,289
384

131,137
-

8,195
-

204,255
-

2,044,909
-

12,051,716
35,726

2,010,181
10,140

668,490
20,386

3,808
-

4,741
167

6,986,835
6,544,997
5,250,195
3,215,772
1,218,882
427,211

6,986,835
9,232,217
5,250,195
3,215,772
1,218,882
457,904

7,554,885

1,090,383

2,753,069

1,243,093

690,066

139,413

8,195

204,255

28,074,104

41,757,463

31 December 2011

Agriculture
Mining and quarrying
Manufacturing
Electricity, gas and water
Construction
Transport, storage and communications
Finance, takaful, real estate
and business services
Finance, takaful and business services
Real estate
Others
Purchase of landed property
- Residential
Government and government agencies
Purchase of transport vehicles
Consumption credit
Education and health
Others

Islamic derivative
financial instruments

Financing,
advances and other
Other financial financing/ loans
*
assets
(ii)

Total credit
exposures
RM'000
750,280
15,023
434,941
270,006
475,584
1,362,382

*
Other financial assets include amount due from holding company, amount due from related companies and other financial assets

106

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.2 Concentration of risks of financial assets with credit risk exposure (Continued)
(b)

Industry sectors (Continued)

Agriculture
Mining and quarrying
Manufacturing
Electricity, gas and water
Construction
Transport, storage and communications
Finance, takaful, real estate
and business services
Finance, takaful and business services
Real estate
Others
Purchase of landed property
- Residential
General commerce
Government and government agencies
Purchase of transport vehicles
Consumption credit
Education and health
Others

Islamic derivative
financial instruments

Cash and shortterm funds

Deposits and
placements
with banks and
other financial
institutions

Financial
assets held
for trading
(i)

Financial
investments
available-forsale
(i)

Financial
investments
held-tomaturity
(i)

Trading
derivatives

Hedging
derivatives

Other financial

RM000
-

RM000
-

RM000
5,145
10,143
-

RM000
15,107
33,108
67,498
114,450

RM000
8,826
400,000

RM000
-

RM000
-

879,297
-

950,000
-

736,365
-

95,873
10,129

489,888
-

139,552
-

6,865,110
-

1,596,241
-

31,142
277,340
10,786

7,744,407

950,000

2,347,894

655,433

898,714

1 January 2011

Financing,
advances and other
financing/loans
(ii)

Total credit
exposures

RM000
86
726
576
4,257

RM000
814,791
4,823
563,825
236,480
251,485
740,303

RM000
829,984
4,823
563,825
275,459
338,528
1,259,010

11,136
-

352,931
52

1,454,075
-

5,109,117
10,181

400
7,145
871

5,410,723
380,715
4,538,302
5,234,598
1,776,563
644,240
373,654

139,552

11,136

367,044

22,424,577

5,410,723
412,257
13,284,138
5,234,598
1,776,563
644,240
385,311
35,538,757

* Other financial assets include amount due from holding company, amount due from related companies and other financial assets

107

assets

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.2 Concentration of risks of financial assets with credit risk exposure (Continued)
(b)

Industry sectors (Continued)

(i)

Financial assets held for trading, financial investments available-for-sale and financial investments held-to-maturity are further analysed
by types of securities as follows:

31 December 2012

Agriculture
Electricity, gas and water
Construction
Transport, storage and communications
Finance, takaful, real estate
and business services
Finance, takaful and business services
Real estate
Others
Government and government agencies
Others

Financial assets held for trading

Money market
Unquoted
instruments
securities

Financial investments available-for-sale

Money market
instruments Unquoted securities

Financial investments held-tomaturity

Unquoted securities

Total credit
exposures
RM000
122,550
326,097
853,471

RM000
-

RM000
121,134
161,542

RM000
-

RM000
122,550
204,963
183,025

RM000
508,904

1,807,186
-

65,427
-

20,764
-

662,556
25,687

143,486
-

2,699,419
25,687

3,861,158
-

70,385
30,216

1,228,880
-

322,854
25,483

5,483,277
55,699

5,668,344

448,704

1,249,644

1,547,118

652,390

9,566,200

108

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.2 Concentration of risks of financial assets with credit risk exposure (Continued)
(b)

Industry sectors (Continued)

(i)

Financial assets held for trading, financial investments available-for-sale and financial investments held-to-maturity are further analysed
by types of securities as follows (Continued):

31 December 2011

Financial assets held for trading

Financial investments available-for-sale

Money market
instruments Unquoted securities
Agriculture
Electricity, gas and water
Construction
Transport, storage and communications
Finance, takaful, real estate
and business services
Finance, takaful and business services
Real estate
Others
Government and government agencies
Others

RM000
-

651,048
1,931,541
2,582,589

RM000
81,700
-

78,640
10,140
170,480

Financial investments held-tomaturity

Money market
instruments

Unquoted securities

Unquoted securities

Total credit
exposures

RM000
-

RM000
15,116
114,723
155,191
139,229

RM000
86
9,284
407,047

RM000
15,116
114,809
246,175
546,276

35,857
-

58,759
35,343

273,649
-

186,352
20,386

482,137
517,994

109

725,099

690,066

1,019,313
35,343
2,678,670
30,526
4,686,228

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.2 Concentration of risks of financial assets with credit risk exposure (Continued)
(b)

Industry sectors (Continued)

(i)

Financial assets held for trading, financial investments available-for-sale and financial investments held-to-maturity are further analysed
by types of securities as follows (Continued):

1 January 2011

Agriculture
Electricity, gas and water
Construction
Transport, storage and communications
Finance, takaful, real estate
and business services
Finance, takaful and business services
Real estate
Others
General commerce
Government and government agencies
Others

Financial assets held for trading

Money market
instruments Unquoted securities
RM000
RM000
5,145
10,143
-

736,365
1,478,050
2,214,415

118,191
133,479

Financial investments available-for-sale

Money market
instruments Unquoted securities
RM000
RM000
15,107
33,108
67,498
114,450

35,423
165,641
201,064

110

60,450
10,129
31,142
111,699
10,786
454,369

Financial investments held-tomaturity

Unquoted securities
RM000
8,826
400,000

489,888
898,714

Total credit
exposures
RM000
15,107
38,253
86,467
514,450

1,322,126
10,129
31,142
1,873,581
10,786
3,902,041

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.2 Concentration of risks of financial assets with credit risk exposure (Continued)
(b)

Industry sectors (Continued)

(ii)

Financing, advances and other financing/loans are further analysed by product types as follows:

31 December 2012
Agriculture
Mining and quarrying
Manufacturing
Electricity, gas and water
Construction
Transport, storage and communications
Finance, takaful, real estate
and business services
Finance, takaful and business services
Others
Purchase of landed property
- Residential
Government and government agencies
Purchase of securities
Purchase of transport vehicles
Consumption credit
Education and health
Trade and hospitality
Others

Cashline

Term financing

Bills receivable

Islamic trust
receipts

Claim on
customers under
Islamic accepted
bills

RM000
58,771
15,544
34,301
299
68,933
11,106

RM000
581,480
7,718
407,700
155,840
426,492
839,895

RM000
873
-

RM000
21,041
4,237
502

RM000
5,497
151,773
27,701
87

RM000
-

RM000
-

RM000
60,650
151,451
808,277
8,477

RM000
706,398
23,262
767,139
156,139
1,335,640
860,067

90,872

2,132,544

66

283

262,139

2,485,904

42,390
118,245
6,574
447,035

8,141,424
6,744,478
6,345,776
3,153,787
1,552,162
193,869
3,715
30,686,880

2,891
3,764

7,175
33,021

889
140,447
326,677

96,311
96,311

35,057
35,057

53,161
100,382
1,444,537

8,141,424
6,744,478
35,057
6,345,776
3,250,098
1,648,602
563,009
10,289
33,073,282

111

Credit card
receivables

Share purchase
financing

Revolving credits

Total credit
exposures

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.2 Concentration of risks of financial assets with credit risk exposure (Continued)
(b)

Industry sectors (Continued)

(ii)

Financing, advances and other financing/loans are further analysed by product types as follows (Continued):

31 December 2011
Agriculture
Mining and quarrying
Manufacturing
Electricity, gas and water

Claim on customers
under Islamic
accepted bills

Credit card
receivables

Revolving credits

Total credit
exposures
RM000
735,165
15,024

Cashline

Term financing

Bills receivable

Islamic trust
receipts

RM000
37,828
9,122

RM000
649,545
5,902

RM000
-

RM000
-

RM000
5,560
-

RM000
-

RM000
42,232
-

36,509

214,919

2,581

19,890

117,556

40,119

431,574

155,228

155,228

Construction

60,317

153,677

3,131

3,156

9,127

229,408

Transport, storage and communications

Finance, takaful, real estate
and business services
Finance, takaful and business services
Others
Purchase of landed property

10,963

802,168

111

1,487

4,178

818,907

67,965

1,798,256

1,117

177,570

2,044,908

6,986,835
6,544,997

6,986,835
6,544,997

- Residential
Government and government agencies
Purchase of transport vehicles

5,250,195

5,250,195

Consumption credit

3,119,147

96,626

3,215,773

Education and health

43,210

1,131,596

883

43,193

1,218,882

Trade and hospitality

92,940

124,712

10,640

88,611

101,724

418,627

8,581

8,581

2,581

33,772

218,370

96,626

418,143

28,074,104

Others

358,854

26,945,758

112

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.2 Concentration of risks of financial assets with credit risk exposure (Continued)
(b)

Industry sectors (Continued)

(ii)

Financing, advances and other financing/loans are further analysed by product types as follows (Continued):

1 January 2011
Agriculture
Mining and quarrying
Manufacturing
Electricity, gas and water
Construction
Transport, storage and communications
Finance, takaful, real estate
and business services
Finance, takaful and business services
Others
Purchase of landed property
- Residential
Government and government agencies
General commerce
Purchase of transport vehicles
Consumption credit
Others

Claim on customers
under Islamic
accepted bills

Credit card
receivables

Revolving credits

Total credit
exposures
RM'000
814,791
4,823
563,825
236,480
251,485
740,303

Cashline

Term financing

Bills receivable

Islamic trust
receipts

RM'000
15,209
2,782
22,817
56,453
14,431

RM'000
737,100
2,041
385,323
236,480
180,680
717,947

RM'000
-

RM'000
15,156
5,068
724

RM'000
4,599
102,905
4,220
1,356

RM'000
-

RM'000
57,883
37,624
5,064
5,845

82,021

1,195,286

914

175,854

1,454,075

70,576
46,636

5,410,723
4,538,302
108,917
5,234,598
1,689,972
958,057

2,235
-

33,938
-

62,113
16

86,591
-

102,935
13,186

5,410,723
4,538,302
380,714
5,234,598
1,776,563
1,017,895

310,925

21,395,426

2,235

54,886

176,123

86,591

398,391

22,424,577

113

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.2 Concentration of risks of financial assets with credit risk exposure (Continued)
(b)

Industry sectors (Continued)

The analysis of credit risk concentrations (without taking into account any collateral held
or other credit enhancement) for items recognised in the statement of financial position,
based on the industry sectors of the counterparty are as follows:
Financial
guarantees
RM'000
20
28,812
50,674
100,131
3,797

31 December 2012
Agriculture
Mining and quarrying
Manufacturing
Electricity, gas and water
Construction
Transport, storage and communications

Credit related
commitments and
contingencies
RM'000
151,406
1,061
489,370
81,889
2,311,032
295,364

Finance, takaful, real estate

and business services
Finance, takaful and business services
General commerce
Others

31 December 2011
Agriculture
Mining and quarrying
Manufacturing
Electricity, gas and water
Construction
Transport, storage and communications

3,557
6,214
1,855
195,060

468,252
303,301
783,834
4,885,509

Financial
guarantees
RM'000
12,997
90
250
5,549

Credit related
commitments and
contingencies
RM'000
82,500
3,579
620,074
22,053
101,296
290,001

1,516
395
7,692
28,489

534,310
145,786
805,826
2,605,425

Finance, takaful, real estate

and business services
Finance, takaful and business services
General commerce
Others

114

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.2 Concentration of risks of financial assets with credit risk exposure (Continued)
(b)

Industry sectors (Continued)

The analysis of credit risk concentrations (without taking into account any collateral held
or other credit enhancement) for items recognised in the statement of financial position,
based on the industry sectors of the counterparty are as follows (Continued):

1 January 2011
Agriculture
Mining and quarrying
Manufacturing
Electricity, gas and water
Construction
Transport, storage and communications

Financial
guarantees
RM'000
11,004
17,922
2,144

Credit related
commitments and
contingencies
RM'000
247,387
602
156,645
655,274
208,417
243,987

2,252
2,938
160
36,420

929,943
242,012
619,697
3,303,964

Finance, takaful, real estate

and business services
Finance, takaful and business services
General commerce
Others

115

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.3 Credit quality of financial assets

Financial assets are required under FRS 7, to be categorised into neither past due nor
impaired, past due but not impaired or impaired.
(i)

Financing, advances and other financing/loans

Financing, advances and other financing/loans are summarised as follows:

31 December 2012

Cashline
Term financing
Bills receivable
Islamic trust receipts
Claim on customers under Islamic accepted bills
Share purchase financing
Credit card receivables
Revolving credits
Total
Less: Impairment allowances

Neither past due

nor impaired
(a)

Past due but

not impaired
(b)

Impaired
(c)

Total

RM'000

RM'000

RM'000

RM'000

415,327
28,951,579
2,972
32,648
322,637
35,216
93,588
1,448,529
31,302,496

32,908
1,833,567
4,937
3,875
1,875,287

23,355
261,715
794
3,059
13,114
10
419
1,662
304,128

471,590
31,046,861
3,766
35,707
340,688
35,226
97,882
1,450,191
33,481,911
(408,629)
33,073,282

Total net amount

116

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.3 Credit quality of financial assets (Continued)

(i)

Financing, advances and other financing/loans (Continued)

31 December 2011

Neither past due

nor impaired
(a)

Past due but not

impaired
(b)

Impaired
(c)

Total

RM'000

RM'000

RM'000

RM'000

322,556
25,762,140
2,581
33,693
215,791
93,703
419,592
26,850,056

38,850
1,352,749
154
1,689
5,828
1,399,270

11,650
308,305
1,544
15,999
4,547
3,733
345,778

373,056
27,423,194
2,581
35,391
233,479
104,078
423,325
28,595,104

Cashline
Term financing
Bills receivable
Islamic trust receipts
Claim on customers under Islamic accepted bills
Credit card receivables
Revolving credits
Total
Less: Impairment allowances
Total net amount

1 January 2011

(521,000)
28,074,104

Neither past due

nor impaired
(a)
RM'000

Past due but not

impaired
(b)
RM'000

Impaired
(c)
RM'000

Total
RM'000

260,934
20,236,089
2,235
53,578
168,882
83,975
383,900
21,189,593

50,485
1,162,759
2,028
8,835
4,073
4,098
1,232,278

11,110
285,588
3,485
13,940
2,424
19,332
335,879

322,529
21,684,436
2,235
59,091
191,657
90,472
407,330
22,757,750

Cashline
Term financing
Bills receivable
Islamic trust receipts
Claim on customers under Islamic accepted bills
Credit card receivables
Revolving credits
Total
Less: Impairment allowances
Total net amount

(333,173)
22,424,577

* Impairment allowances include allowances against financial assets that have been impaired and those
subject to portfolio impairment.

117

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.3 Credit quality of financial assets (Continued)

(i)

Financing, advances and other financing/loans (Continued)

(a)

Financing, advances and other financing/loans that are neither past due nor
impaired
The credit quality of financing, advances and other financing/loans that are neither past
due nor impaired can be assessed by reference to the internal rating system adopted by
the Bank.

31 December 2012
Cashline
Term financing
- House financing
- Syndicated term financing
- Other term financing
- Hire purchase receivables
Bills receivable
Islamic trust receipts
Claim on customers under Islamic accepted bills
Share purchase financing
Credit card receivables
Revolving credits
Total

118

Good

Satisfactory

No rating

Total

RM'000

RM'000

RM'000

RM'000

316,495

32,091

66,741

415,327

330,015
8,875,820
30,198
312,718
1,448,029

399,239
1,578
5,232
500

7,535,745
6,156,106
5,654,654
2,972
872
4,687
35,216
93,588
-

7,535,745
330,015
15,431,165
5,654,654
2,972
32,648
322,637
35,216
93,588
1,448,529

11,313,275

438,640

19,550,581

31,302,496

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.3 Credit quality of financial assets (Continued)

(i)

Financing, advances and other financing/loans (Continued)

(a)
Financing, advances and other financing/loans that are neither past due nor
impaired

31 December 2011
Cashline
Term financing
Bills receivable
Islamic trust receipts
Claim on customers under Islamic accepted bills
Credit card receivables
Revolving credits
Total

1 January 2011

Good

Satisfactory

No rating

Total

RM'000

RM'000

RM'000

RM'000

238,398
3,447,290
2,581
27,006
208,867
381,138

40,668
237,426
4,650
1,041
-

43,490
22,077,424
2,037
5,883
93,703
38,454

322,556
25,762,140
2,581
33,693
215,791
93,703
419,592

4,305,280

283,785

22,260,991

26,850,056

Good

Satisfactory

No rating

Total

RM'000

RM'000

RM'000

RM'000

50,980
16,688,415
83,975
100,205
16,923,575

260,934
20,236,089
2,235
53,578
168,882
83,975
383,900
21,189,593

189,770
3,379,135
2,235
53,578
168,882
282,985
4,076,585

Cashline
Term financing
Bills receivable
Islamic trust receipts
Claim on customers under Islamic accepted bills
Credit card receivables
Revolving credits
Total

119

20,184
168,539
710
189,433

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.3 Credit quality of financial assets (Continued)

(i)

Financing, advances and other financing/loans (Continued)

(a)

Financing, advances and other financing/loans that are neither past due nor
impaired (Continued)
Credit quality descriptions can be summarised as follows:
Good - There is a high likelihood of the asset being recovered in full and therefore, of
no cause for concern to the Bank.
Satisfactory - There is concern over the counterpartys ability to make payments when
due. However, these have not yet converted to actual delinquency and the counterparty
is continuing to make payments when due and is expected to settle all outstanding
amounts.
No rating - Refers to counterparties that do not satisfy the criteria to be rated internally.
These include sovereigns, individuals, schools, non-government organisations,
cooperatives and others.

120

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.3 Credit quality of financial assets (Continued)

(i)

Financing, advances and other financing/loans (Continued)

(b)

Financing, advances and other financing/loans that are past due but not
impaired
The Bank considers an asset is past due when any payment due under strict contractual
terms is received late or missed. However, financing, advances and other
financing/loans which are less than 90 days past due, are not yet considered to be
impaired unless there are impairment triggers available to indicate otherwise.
An age analysis of financing, advances and other financing/loans that are past due but
not impaired are set out below:

31 December 2012
Cashline
Term financing
Claim on customers under Islamic accepted bills
Credit card receivables
Total

121

Up to 1 month
RM'000

>1 to 3
months
RM'000

Total
RM'000

27,584
1,297,990
2,619
2,573
1,330,766

5,324
535,577
2,318
1,302
544,521

32,908
1,833,567
4,937
3,875
1,875,287

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.3 Credit quality of financial assets (Continued)

(i)

Financing, advances and other financing/loans (Continued)

(b)

Financing, advances and other financing/loans that are past due but not
impaired (Continued)

Up to 1 month >1 to 3 months

RM'000
RM'000

31 December 2011

27,185
956,716
154
572
3,033
987,660

Cashline
Term financing
Islamic trust receipts
Claim on customers under Islamic accepted bills
Credit card receivables
Total

1 January 2011

11,665
396,033
1,117
2,795
411,610

38,850
1,352,749
154
1,689
5,828
1,399,270

Up to 1 month >1 to 3 months

RM'000
RM'000

Total
RM'000

48,092
808,905
764
6,019
2,375
866,155

Cashline
Term financing
Islamic trust receipts
Claim on customers under Islamic accepted bills
Credit card receivables
Revolving credits
Total

122

Total
RM'000

2,393
353,854
1,264
2,816
1,698
4,098
366,123

50,485
1,162,759
2,028
8,835
4,073
4,098
1,232,278

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.3 Credit quality of financial assets (Continued)

(i)

Financing, advances and other financing/loans (Continued)

(c)

Impaired financing, advances and other financing/loans

Total gross impaired financing, advances and other financing/loans

Less: Impairment allowances
Total net impaired financing, advances and other financing/loans

31 December 2012
RM'000

31 December 2011
RM'000

1 January 2011
RM'000

304,128
(162,524)
141,604

345,778
(261,936)
83,842

335,879
(190,168)
145,711

Refer to Note 8(vi) for analysis of impaired financing, advances and other
financing/loans by economic purpose.

123

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.3 Credit quality of financial assets (Continued)

(ii)

Financial assets held for trading and financial investments

Financial assets held for trading, financial investments available-for-sale and financial
investments held-to-maturity are summarised as follows:

Financial assets held for trading

- Money market instruments
- Unquoted securities
Financial investments available-for-sale
- Money market instruments
- Unquoted securities
Financial investments held-to-maturity
- Unquoted securities
Total

31 December 2012
RM'000

31 December 2011
RM'000

1 January 2011
RM'000

5,668,344
448,704

2,582,589
170,480

2,214,415
133,479

1,249,644
1,547,118

517,994
725,099

201,064
454,369

652,390
9,566,200

690,066
4,686,228

898,714
3,902,041

There were no financial assets held for trading, financial investments available-for-sale
and financial investments held-to-maturity that are past due but not impaired or
impaired for the Bank.

124

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.3 Credit quality of financial assets (Continued)

(ii)

Financial assets held for trading and financial investments (Continued)

(a)

Financial assets held for trading and financial investments that are neither past
due nor impaired
The table below presents an analysis of financial assets held for trading and financial
investments that are neither past due nor impaired based on ratings by major credit
rating agencies:

31 December 2012
Financial assets held for trading
- Money market instruments
- Unquoted securities
Financial investments available-for-sale
- Money market instruments
- Unquoted securities
Financial investments held-to-maturity
- Unquoted securities
Total

31 December 2011
Financial assets held for trading
- Money market instruments
- Unquoted securities
Financial investments available-for-sale
- Money market instruments
- Unquoted securities
Financial investments held-to-maturity
- Unquoted securities
Total
0

Sovereign (no
rating)

Investment
grade
(AAA to BBB-)

Others (no
rating)

Total

RM'000

RM'000

RM'000

RM'000

3,861,157
70,384

1,807,187
378,320

5,668,344
448,704

1,140,378
354,525

109,266
1,092,529

100,064

1,249,644
1,547,118

25,103

627,287

652,390

5,426,444

3,412,405

727,351

9,566,200

Sovereign (no
rating)

Investment
grade
(AAA to BBB-)

Others (no
rating)

Total

RM'000

RM'000

RM'000

RM'000

1,931,541
78,640

651,048
91,840

2,582,589
170,480

448,441
186,352

69,553
409,457

129,290

517,994
725,099

126,236

563,830

690,066

2,644,974

1,348,134
-

693,120
-

4,686,228
9,566,201

125

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.3 Credit quality of financial assets (Continued)

(ii)

Financial assets held for trading and financial investments (Continued)

(a)

Financial assets held for trading and financial investments that are neither past
due nor impaired (Continued)

1 January 2011
Financial assets held for trading
- Money market instruments
- Unquoted securities
Financial investments available-for-sale
- Money market instruments
- Unquoted securities
Financial investments held-to-maturity
- Unquoted securities
Total

Sovereign (no
rating)

Investment
grade
(AAA to BBB-)

Others (no
rating)

Total

RM'000

RM'000

RM'000

RM'000

1,916,630
-

297,785
59,809

73,670

2,214,415
133,479

201,064
21,351

338,170

94,848

201,064
454,369

464,906

38,496

395,312

898,714

2,603,951

734,260

563,830

3,902,041

Securities of the Bank with no rating mainly consist of Islamic private debt securities.

(iii)

Other credit risk financial assets

An analysis of the credit quality of the Banks other credit risk financial assets that are
neither past due nor impaired are set out below:
Sovereign
(no rating)

Investment
Grade

Non Investment
Grade

Others (no
rating)

Total

(AAA to BBB-) (BB+ and below)

31 December 2012
Cash and short-term funds
Deposits and placements with banks and
other financial institutions
Other assets
Islamic derivative financial instruments
Amount due from related companies
Total

RM'000

RM'000

RM'000

RM'000

RM'000

5,558,472

737,857

6,296,329

90,313

511,022

601,335

532
-

87,378
-

1,237
-

86,720
79,213
431

86,720
168,360
431

5,649,317

1,336,257

1,237

166,364

7,153,175

126

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.3 Credit quality of financial assets (Continued)

(iii)

Other credit risk financial assets (Continued)

Sovereign (no
rating)
31 December 2011
Cash and short-term funds
Deposits and placements with banks and
other financial institutions
Other assets
Islamic derivative financial instruments
Amount due from related companies
Total
0

Total

RM'000
15,971

RM'000
7,554,885

RM'000
631,221

4,867
-

1,090,383
84,617
-

5,291
-

202,495
52,833
1,760

1,090,383
202,495
147,608
1,760

6,912,560

1,806,221
-

5,291
-

273,059
-

8,997,131
-

Investment
Non Investment
Grade
Grade
(AAA to BBB-) (BB+ and below)

Others (no
rating)

Sovereign (no
rating)

RM'000

Others (no
rating)

RM'000
6,907,693

1 January 2011
Cash and short-term funds
Deposits and placements with banks and
other financial institutions
Other assets
Islamic derivative financial instruments
Amount due from holding company
Amount due from related companies
Total

Investment
Non Investment
Grade
Grade
(AAA to BBB-) (BB+ and below)
-

RM'000
6,965,110

RM'000
779,297

550,000
11,462
-

400,000
10,370
53,938
245,034
-

816
-

99,350
95,934
828

7,526,572

1,488,639
-

816
-

196,112
-

RM'000

RM'000
-

Total
RM'000
7,744,407
950,000
121,182
150,688
245,034
828
9,212,139
-

There were no other financial assets that are past due but not impaired or impaired
for the Bank.

127

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.1

Credit risk (Continued)

36.1.4 Renegotiated financial instruments

Restructuring activities include extended payment arrangements, approved external
management plans, modification and deferral of payments. During the financial year,
total carrying amount of financing, advances and other financing/loans of the Bank that
would otherwise be past due or impaired whose terms have been renegotiated amounted
to RM38,211,293 (2011: RM52,777,000, 2010: RM27,343,000).

36.1.5 Repossessed collateral

The Bank has not taken possession of any collateral held as security.

128

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk
Market risk is defined as any fluctuation in the market value of a trading or investment
exposure arising from changes to market risk factors such as profit rates/benchmark
rates, currency exchange rates, credit spreads, equity prices, commodities prices and
their associated volatility.
Market risk is inherent in the business activities of an institution that trades and invests
in securities, derivatives and other structured financial products. Market risk may arise
from the trading book and investment activities in the banking book. For the trading
book, it can arise from customer-related businesses or from the Groups proprietary
positions. As for investment activities in the banking book, the Group holds the
investment portfolio to meet liquidity and statutory reserves requirement and for
investment purposes.
Market Risk Management (MRM)
Market risk is evaluated by considering the risk/reward relationship and market
exposures across a variety of dimensions such as volatility, concentration/diversification
and maturity. The GRC ensures that the risk exposures undertaken by the Group is
within the risk appetite approved by the Board. GRC, supported by the Market Risk
Management (MRM) function in GRM is responsible to measure and control market
risk of the Group through robust measurement and the setting of limits while facilitating
business growth within a controlled and transparent risk management framework.
The Group employs the VaR framework to measure market risk where VaR represents
the worst expected loss in portfolio value under normal market conditions over a specific
time interval at a given confidence level. The Group has adopted a historical simulation
approach to compute VaR. This approach assesses potential loss in portfolio value based
on the last 500 daily historical movements of relevant market parameters and 99%
confidence level at 1-day holding period.
Broadly, the Group is exposed to four major types of market risk namely equity risk,
benchmark rate risk, foreign exchange risk and commodity risk. Each business unit is
allocated VaR limits for each type of market risk undertaken for effective risk
monitoring and control. These limits are approved by the GRC and utilisation of limits is
monitored on a daily basis. Daily risk reports are sent to the relevant traders and Group
Treasurys Market Risk Analytics Team. The head of each business unit is accountable
for all market risk under his/her purview. Any excess in limit will be escalated to
management in accordance to the Groups exception management procedures.

129

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

Market Risk Management (Continued)
In addition to daily monitoring of VaR usage, on a monthly basis, all market exposures
and VaR of the Group will be summarised and submitted to GRC and BRC for its
perusal. The usage of market VaR by risk type based on 1-day holding period of the
Groups trading exposures as at 31 December 2012 is shown in Note 36.2.1.
Although historical simulation provides a reasonable estimate of market risk, this
approach relies heavily on historical daily price movements of the market parameter of
profit. Hence, the resulting market VaR is exposed to the danger that price and rate
changes over the stipulated time horizon might not be typical. Example, if the past 500
daily price movements were observed over a period of exceptionally low volatility, then
the VaR computed would understate the risk of the portfolio and vice versa.
In order to ensure historical simulation gives an adequate estimation of market VaR,
backtesting of the historical simulation approach is performed annually. Backtesting
involves comparing the derived 1-day VaR against the hypothetical change in portfolio
value assuming end-of-day positions in the portfolio were to remain unchanged. The
number of exceptions would be the number of times the difference in hypothetical value
exceeds the computed 1-day VaR.
The Group also complements VaR with stress testing exercises to capture event risk that
are not observed in the historical time period selected to compute VaR. Stress testing
exercise at the group-wide level involves assessing potential losses to the Groups
market risk exposures under pre-specified scenarios. This type of scenario analysis is
performed twice yearly. Scenarios are designed in collaboration with the Regional
Research Team to reflect extreme and yet plausible stress scenarios. Stress test results
are presented to the GRC to provide senior management with an overview of the impact
to the Group if such stress scenarios were to materialise.
In addition to the above, MRM undertakes the monitoring and oversight process at
Group Treasury and Equity Derivatives Group trading floors, which include reviewing
treasury trading strategy, analysing positions and activities vis--vis changes in the
financial markets, monitoring limits usage, assessing limits adequacy and verifying
transaction prices.
MRM also provides accurate and timely valuation of the Groups position on a daily
basis. Exposures are valued using market price (Mark-to-Market) or a pricing model
(Mark-to-Model) (collectively known as MTM) where appropriate. The MTM process
is carried out on all positions classified as Held for Trading as well as Available for Sale
on a daily basis for the purpose of meeting independent price verification requirements,
calculation of profits/losses as well as to confirm that margins required are met.
130

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

Market Risk Management (Continued)
Treasury products approval processes will be led by MRM to ensure operational
readiness before launching. All new products are assessed by components and in totality
to ensure financial risks are accurately identified, monitored and effectively managed.
All valuation methods and models used are documented and validated by the
quantitative analysts to assess its applicability to market conditions. The process
includes verification of rate sources, parameters, assumptions in modelling approach and
its implementation. Existing valuation models are reviewed periodically to ensure that
they remain relevant to changing market conditions. Back-testing of newly approved or
revised models may be conducted to assess the appropriateness of the model and input
data used.
Capital Treatment for Market Risk
At present, the Group adopts the Standardised Approach to compute market risk capital
requirement under BNMs guidelines on RWCAF (Basel II Risk Weighted Assets
Computation) and CAFIB.

131

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.1 VaR
The usage of market VaR by risk type based on 1-day holding period of the Banks trading
exposures are set out below:

VaR
Foreign exchange risk
Profit rate risk
Total
Total shareholder's funds
Percentage over shareholder's funds

31 December
2012
RM'000

31 December
2011
RM'000

1 January
2011
RM'000

759
1,323
2,082

485
964
1,449

319
1,216
1,535

2,343,444
0.09%

1,933,577
0.07%

1,342,513
0.11%

36.2.2 Profit rate risk

Profit rate risk relates to the potential adverse impact on the net profit income arising
from the changes in market rates. One of the primary sources of profit rate risk is the
repricing mismatches between profit earning assets and profit bearing liabilities. Profit
rate risk is measured and reported at various levels through various techniques including
Earnings-at-Risk (EaR).
(a)

Profit rate risk

The tables below summarise the Banks financial assets and financial liabilities at their
full carrying amounts, analysed by the earlier of contractual repricing or maturity dates.

132

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.2 Profit rate risk (Continued)

(a)

Profit rate risk (Continued)

Non-trading book

31 December 2012

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Non-profit sensitive

Trading book

Total

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

132,663

6,296,329

Financial assets
Cash and short-term funds

6,163,666

Deposits and placements with banks and other

financial institutions
Financial assets held for trading

353,000

93,000

152,950

2,385

601,335

11,383

6,105,665

6,117,048

Financial investments available-for-sale

113,434

881,123

1,771,969

30,236

2,796,762

Financial investments held-to-maturity

118,383

20,016

4,947

500,000

9,044

652,390

- Trading derivatives

158,986

158,986

- Hedging derivatives

5,990

3,384

9,374

21,540,463

1,376,829

196,909

45,991

1,917,875

7,995,215

33,073,282

Other assets

86,720

86,720

Amount due from related companies

431

431

27,704,129

1,848,212

309,925

312,375

2,809,935

10,270,568

272,862

6,264,651

49,792,657

Islamic derivative financial instruments:

Financing, advances and other financing/loans

Total financial assets

133

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.2 Profit rate risk (Continued)

(a)

Profit rate risk (Continued)

Non-trading book

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Non-profit sensitive

Trading book

Total

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

28,280,731

4,099,140

1,135,821

815,545

609,354

237,161

90,147

35,267,899

2,638,319

3,167,274

181,929

171,482

5,287,238

214,486

11,660,728

- Trading derivatives

126,946

126,946

- Hedging derivatives

2,714

250,869

253,583

Other liabilities

19,113

19,113

Amount due to holding company

298,352

298,352

Amount due to related company

3,554

3,554

Subordinated sukuk

250,000

600,000

13,557

863,557

Total financial liabilities

30,919,050

7,266,414

1,317,750

987,027

6,149,306

1,088,030

639,209

126,946

48,493,732

Net profit sensitivity gap

(3,214,921)

(5,418,202)

(1,007,825)

(674,652)

(3,339,371)

9,182,538

31 December 2012

Financial liabilities
Deposits from customers
Deposits and placements of banks and other
financial institutions
Islamic derivative financial instruments:

6,137,705

`
Financial guarantees

195,060

195,060

Credit related commitments and contingencies

3,894,665

59,227

23,019

932

59,049

848,617

4,885,509

Treasury related commitments and contingencies

3,894,665

59,227

23,019

932

564,286
623,335

6,514,117
7,362,734

7,078,403

195,060

12,158,972

134

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.2 Profit rate risk (Continued)

(a)

Profit rate risk (Continued)

Non-trading book

31 December 2011

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Non-profit sensitive

Trading book

Total

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

131,810

7,554,885

Financial assets
Cash and short-term funds

7,423,075

Deposits and placements with banks and other

financial institutions
Financial assets held for trading

892,930

192,000

5,453

1,090,383

2,753,069

2,753,069

Financial investments available-for-sale

130,038

15,122

644,097

447,562

6,274

1,243,093

Financial investments held-to-maturity

481,334

200,000

8,732

690,066

- Trading derivatives

139,413

139,413

- Hedging derivatives

8,195

8,195

11,860,972

1,920,010

5,232,835

62,300

1,602,834

7,395,153

28,074,104

Other assets

202,495

202,495

Amount due from related companies

1,760

1,760

19,284,047

2,812,940

5,554,873

77,422

2,736,460

8,042,715

356,524

2,892,482

41,757,463

Islamic derivative financial instruments:

Financing, advances and other financing/loans

Total financial assets

135

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.2 Profit rate risk (Continued)

(a)

Profit rate risk (Continued)

Non-trading book

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Non-profit sensitive

Trading book

Total

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

19,921,925

5,973,812

1,414,405

669,216

577,151

590,743

91,218

29,238,470

2,195,610

2,576,861

47,708

5,287,238

143,416

10,250,833

- Trading derivatives

133,425

133,425

- Hedging derivatives

159

262,270

262,429

Other liabilities

48,609

48,609

Amount due to ultimate holding company

393,673

393,673

Amount due to related company

139

139

Subordinated sukuk

250,000

300,000

14,679

564,679

Total financial liabilities

22,117,535

8,550,673

1,462,113

669,216

6,114,548

1,153,013

691,734

133,425

40,892,257

Net profit sensitivity gap

(2,833,488)

(5,737,733)

4,092,759

(591,794)

(3,378,088)

6,889,702

31 December 2011

Financial liabilities
Deposits from customers
Deposits and placements of banks and other
financial institutions
Islamic derivative financial instruments:

Financial guarantees
Credit related commitments and contingencies
Treasury related commitments and contingencies

2,759,057

28,489

28,489

1,494,493

30,699

1,144

36,349

189,002

853,738

2,605,425

4,629,498

28,489

7,263,412

264,837

4,364,661

1,494,493

30,699

1,144

36,349

453,839

5,218,399

136

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.2 Profit rate risk (Continued)

(a)

Profit rate risk (Continued)

Non-trading book

1 January 2011

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Non-profit sensitive

Trading book

Total

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

55,101

7,744,407

Financial assets
Cash and short-term funds

7,689,306

Deposits and placements with banks and other

financial institutions
Financial assets held for trading

800,000

150,000

950,000

2,347,894

2,347,894

Financial investments available-for-sale

5,034

9,858

10,069

276,361

354,111

655,433

Financial investments held-to-maturity

464,908

233,806

200,000

898,714

- Trading derivatives

139,552

139,552

- Hedging derivatives

11,136

11,136

8,953,173

1,781,804

3,462,540

279,115

1,568,979

6,378,955

11

22,424,577

Other assets

121,182

121,182

Amount due from holding company

245,034

245,034

Amount due from related companies

828

828

16,642,479

2,586,838

3,622,398

754,092

2,079,146

6,944,202

422,156

2,487,446

35,538,757

Islamic derivative financial instruments:

Financing, advances and other financing/loans:

Total financial assets

137

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.2 Profit rate risk (Continued)

(a)

Profit rate risk (Continued)

Non-trading book

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Non-profit sensitive

Trading book

Total

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

15,065,443

4,637,984

312,880

377,081

1,576,731

528,266

179,570

22,677,955

2,470,971

2,927,735

480,108

5,246,214

11,125,028

- Trading derivatives

139,058

139,058

- Hedging derivatives

60,141

60,141

Other liabilities

23,055

23,055

Total financial liabilities

17,536,414

7,565,719

792,988

377,081

6,822,945

300,000
888,407

202,625

139,058

300,000
34,325,237

Net profit sensitivity gap

(893,935)

(4,978,881)

2,829,410

377,011

(4,743,799)

6,055,795

Financial guarantees

36,420

36,420

Credit related commitments and contingencies

3,303,964

3,303,964

4,400,000

7,740,384

1 January 2011

Financial liabilities
Deposits from customers
Deposits and placements of banks and other
financial institutions
Islamic derivative financial instruments:

Subordinated sukuk

Treasury related commitments and contingencies

4,400,000

4,400,000

138

2,348,388

3,340,384

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.2 Profit rate risk (Continued)

(a)

Profit rate risk (Continued)

The profit rate risk for financial investments available-for-sale, financial investments held-to-maturity and financing, advances and other
financing/loans of the Bank are further analysed by classes of financial assets as follows:
Non-trading book

31 December 2012

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Non-profit sensitive

Total

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

100,114
13,321

569,717
311,406

568,280
1,203,689

11,533
18,702

1,249,644
1,547,118

Financial investments available-for-sale:

- Money market instruments
- Unquoted securities
Financial investments held-to-maturity:
- Unquoted securities
Financing, advances and other financing/loans:
- Cashline
- Term financing
- Bills receivable
- Trust receipts
- Claim on customers under Islamic accepted bills
- Share purchase financing
- Credit card receivables
- Revolving credits

118,383

20,016

4,947

500,000

9,044

652,390

447,035
20,370,105

276,062

11,633

45,991

1,947,875

8,035,214

447,035
30,686,880

3,764
10,162
113,583
35,057
96,311
344,447

11,789
173,938
965,039

11,070
39,156
135,051

3,764
33,021
326,677
35,057
96,311
1,444,537

Total

21,420,464

1,545,211

216,926

159,426

2,833,945

10,307,183

39,279

36,522,434

139

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.2 Profit rate risk (Continued)

(a)

Profit rate risk (Continued)

Non-trading book

31 December 2011

Financial investments available-for-sale

- Money market instruments
- Unquoted securities
Financial investments held-to-maturity
- Unquoted securities
Financing, advances and other financing/loans
- Cashline
- Term financing
- Bills receivable
- Trust receipts
- Claim on customers under Islamic accepted bills
- Credit card receivables
- Revolving credits

Total

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Non-profit sensitive

Total

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

115,007
15,030

15,122

327,876
321,566

73,282
368,936

1,829
4,445

517,994
725,099

476,609

208,534

4,923

690,066

358,854
11,130,835

1,598,786

5,190,747

27,402

1,602,834

7,395,154

358,854
26,945,758

801
4,392
75,915
96,626
193,547

1,780
22,523
121,711
175,211

6,857
20,744
14,487

34,898

2,581
33,772
218,370
96,626
418,143

11,860,970

1,920,011

5,362,872

77,422

2,728,885

8,045,906

11,197

30,007,263

140

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.2 Profit rate risk (Continued)

(a)

Profit rate risk (Continued)

Non-trading book

1 January 2011

Financial investments available-for-sale

- Money market instruments
- Unquoted securities
Financial investments held-to-maturity
- Unquoted securities
Financing, advances and other financing/loans:
- Cashline
- Term financing
- Bills receivable
- Trust receipts
- Claim on customers under Islamic accepted bills
- Credit card receivables
- Revolving credits

Total

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Non-profit sensitive

Total

RM000

RM000

RM000

RM000

RM000

RM000

RM000

RM000

5,034

9,858

5,044
5,024

145,840
130,521

50,180
303,932

201,064
454,369

464,907

233,807

200,000

898,714

310,925
8,301,615

1,509,240

3,359,175

277,450

1,568,979

6,378,956

11

310,925
21,395,426

2,235
29,865
54,388
86,591
167,554

15,412
103,232
153,920

9,609
18,503
75,253

1,664

2,235
54,886
176,123
86,591
398,391

8,953,173

1,786,838

3,472,398

754,089

2,079,147

6,933,068

11

23,978,724

141

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.2 Profit rate risk (Continued)

(b)

Sensitivity of profit and reserves

(i) Sensitivity of profit
The table below shows the sensitivity of the Banks banking book to movement in profit
rates:
Year

Impact to profit (after tax)

Impact to profit (after tax)

31 December 2012
31 December 2011

+ 100 basis points

RM'000

(34,225)
(27,176)

- 100 basis points

RM'000

34,225
27,176

Sensitivity is measured using the EaR methodology. The treatments and assumptions
applied are based on the contractual repricing and remaining maturity of the products,
whichever is earlier. Items with indefinite repricing maturity are treated based on the
earliest possible repricing date. The actual dates may vary from the repricing profile
allocated due to factors such as pre-mature withdrawals, prepayment and others.
A 100 bps parallel rate movement is applied to the yield curve to model the potential
impact on profit in the next 12 months from policy rate change.
The projection assumes that profit rates of all maturities move by the same amount and,
therefore, do not reflect the potential impact on profit of some rates changing while
others remain unchanged. The projections also assume that all other variables are held
constant and are based on a constant reporting date position and that all positions run to
maturity.

142

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.2 Profit rate risk (Continued)

(b)

Sensitivity of profit and reserves (Continued)

(ii)

Sensitivity of reserves

The table below shows the sensitivity of the Banks banking book to movement in profit
rates:

Year

Impact to reserves
Impact to reserves

31 December 2012
31 December 2011

+ 100 basis points

RM'000

(177,575)
(52,931)

- 100 basis points

RM'000

177,575
52,931

A 100 bps parallel rate movement is applied to the yield curve to model the potential
impact on profit in the next 12 months from changes in risk free rates. The impact on
reserves arises from changes in valuation of financial investments available-for-sale
following movements in risk free rates.
The projection assumes that all other variables are held constant. It also assumes a
constant reporting date position and that all positions run to maturity.
The above sensitivities do not take into account the effects of hedging and do not
incorporate actions that the Bank would take to mitigate the impact of this profit rate
risk. In practice, the Bank proactively seeks to mitigate the effect of prospective profit
movements.

143

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.3 Foreign exchange risk

The Bank is exposed to transactional foreign exchange exposures which are exposures
on assets and liabilities denominated in currencies other than the functional currency of
the transacting entity.
The Bank takes minimal exposure to the effects of fluctuations in the prevailing foreign
currency exchange rates on its financial position and cash flows.
(a)

Foreign exchange risk

The table below summarises the financial assets, financial liabilities and net open position
by currency of the Bank which are mainly in Ringgit Malaysia, United States Dollars, and
others.
31 December 2012
MYR
RM'000

Financial assets
Cash and short-term funds
Deposits and placements with banks and other
financial institutions
Financial assets held for trading:
- Money market instruments
- Unquoted securities
Financial investments available-for-sale:
- Money market instruments
- Unquoted securities
Financial investments held-to-maturity:
- Unquoted securities
Islamic derivative financial instruments:
- Trading derivatives
- Hedging derivatives
Financing, advances and other financing/loans:
- Cashline
- Term financing
- Bills receivable
- Islamic trust receipts
- Claim on customers under Islamic accepted bills
- Share purchase financing
- Credit card receivables
- Revolving credit
Other assets
Amount due from related companies

USD

Others
RM'000

RM'000

Total nonMYR
RM'000

Grand total
RM'000

6,150,265

127,683

18,381

146,064

6,296,329

447,628

153,707

153,707

601,335

5,668,344
448,704

5,668,344
448,704

1,215,382
1,526,804

34,262
20,314

34,262
20,314

1,249,644
1,547,118

652,390

652,390

139,922
9,374

10,196
-

8,868
-

19,064
-

158,986
9,374

447,035

447,035

30,686,880
3,764
33,021

30,686,880
3,764
33,021

326,677
35,057
96,311
1,444,537
86,720
431

326,677
35,057
96,311
1,444,537
86,720
431

49,419,246

144

346,162

27,249

373,411

49,792,657

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.3 Foreign exchange risk (Continued)

(a)

Foreign exchange risk (Continued)

SGD

USD

Others

RM'000

RM'000

RM'000

Total nonMYR
RM'000

462

616,029

35,267,899

1,243,086

11,660,728

31 December 2012
MYR
RM'000
Financial liabilities
Deposits from customers
Deposits and placements of banks and other
financial institutions
Islamic derivative financial instruments:
- Trading derivatives
- Hedging derivatives
Amount due to holding company
Amount due to related companies
Other liabilities
Subordinated sukuk

Financial guarantees
Credit related commitments and contingencies

615,400

Grand total
RM'000

34,651,870

167

10,417,642

1,243,086

107,965
252,307
298,352
3,554
19,113
863,557

10,113
1,276
-

8,868
-

18,981
1,276
-

126,946
253,583
298,352
3,554
19,113
863,557

46,614,360

167

1,869,875

9,330

1,879,372

48,493,732

195,060
4,762,991
4,958,051

14
14

104,129
104,129

18,375
18,375

122,518
122,518

195,060
4,885,509
5,080,569

145

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.3 Foreign exchange risk (Continued)

(a)

Foreign exchange risk (Continued)

31 December 2011
MYR
RM'000

Financial assets
Cash and short-term funds
Deposits and placements with banks and other
financial institutions
Financial assets held for trading:
- Money market instruments
- Unquoted securities
Financial investments available-for-sale:
- Money market instruments
- Unquoted securities
Financial investments held-to-maturity:
- Unquoted securities
Islamic derivative financial instruments:
- Trading derivatives
- Hedging derivatives
Financing, advances and other financing/loans:
- Cashline
- Term financing
- Bills receivable
- Islamic trust receipts
- Claim on customers under Islamic accepted bills
- Credit card receivables
- Revolving credit
Other assets
Amount due from related companies

USD

Others
RM'000

RM'000

7,457,961

96,394

804,103

286,280

530
-

Total nonMYR
RM'000

Grand total
RM'000

96,924

7,554,885

286,280

1,090,383

2,582,589
170,480

2,582,589
170,480

484,297
720,181

33,697
4,918

33,697
4,918

517,994
725,099

690,066

690,066

115,249
8,195

20,910
-

3,254
-

24,164
-

139,413
8,195

358,854

358,854

26,945,758
2,581
33,772

26,945,758
2,581
33,772

218,370
96,626
418,143
202,495
1,760

218,370
96,626
418,143
202,495
1,760

41,311,480

146

442,199

3,784

445,983

41,757,463

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.3 Foreign exchange risk (Continued)

(a)

Foreign exchange risk (Continued)

31 December 2011
MYR
RM'000
Financial liabilities
Deposits from customers
Deposits and placements of banks and other
financial institutions
Islamic derivative financial instruments
- Trading derivatives
- Hedging derivatives
Amount due to holding company
Amount due to related companies
Other liabilities
Subordinated sukuk

Financial guarantees
Credit related commitments and contingencies

SGD

USD

Others

RM'000

RM'000

RM'000

Total nonMYR
RM'000

Grand total
RM'000

28,798,187

440,283

440,283

29,238,470

9,541,245

709,588

709,588

10,250,833

131,148
262,009
393,673
139
48,609
564,679

421
420
-

1,856
-

2,277
420
-

133,425
262,429
393,673
139
48,609
564,679

39,739,689

1,150,712

1,856

1,152,568

40,892,257

221,115
221,115

48,387
48,387

269,513
269,513

28,489
2,605,425
2,633,914

28,489
2,335,912
2,364,401

147

11
11

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.3 Foreign exchange risk (Continued)

(a)

Foreign exchange risk (Continued)

1 January 2011
MYR
RM'000

Financial assets
Cash and short-term funds
Deposits and placements with banks and other
financial institutions
Financial assets held for trading:
- Money market instruments
- Unquoted securities
Financial investments available-for-sale:
- Money market instruments
- Unquoted securities
Financial investments held-to-maturity:
- Unquoted securities
Islamic derivative financial instruments:
- Trading derivatives
- Hedging derivatives
Financing, advances and other financing/loans:
- Cashline
- Term financing
- Bills receivable
- Islamic trust receipts
- Claim on customers under Islamic accepted bills
- Credit card receivables
- Revolving credit
Other assets
Amount due from holding company
Amount due from related companies

7,276,964

USD

Others
RM'000

RM'000

467,443

Total nonMYR
RM'000

467,443

Grand total
RM'000

7,744,407

950,000

950,000

2,214,415
133,479

2,214,415
133,479

201,064
454,369

201,064
454,369

898,714

898,714

127,366
11,136

8,796
-

3,390
-

12,186
-

139,552
11,136

310,925

310,925

21,395,426
2,235
54,886

21,395,426
2,235
54,886

176,123
86,591
398,391
120,808
245,034
828

374
-

374
-

176,123
86,591
398,391
121,182
245,034
828

35,058,754

476,613

480,003

35,538,757

148

3,390

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.3 Foreign exchange risk (Continued)

(a)

Foreign exchange risk (Continued)

1 January 2011
MYR
RM'000
Financial liabilities
Deposits from customers
Deposits and placements of banks and other
financial institutions
Islamic derivative financial instruments
- Trading derivatives
- Hedging derivatives
Other liabilities
Subordinated sukuk

Financial guarantees
Credit related commitments and contingencies

SGD

USD

Others

RM'000

RM'000

RM'000

Total nonMYR
RM'000

Grand total
RM'000

22,551,470

126,485

126,485

22,677,955

10,071,078

1,053,950

1,053,950

11,125,028

126,886
60,141
22,187
300,000

8,782
868
-

3,390
-

12,172
868
-

139,058
60,141
23,055
300,000

33,131,762

1,190,085

3,390

1,193,475

34,325,237

48
96,378
96,426

6,537
6,537

48
103,214
103,262

36,420
3,303,964
3,340,384

36,372
3,200,750
3,237,122

149

299
299

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.2

Market risk (Continued)

36.2.3 Foreign exchange risk (Continued)

(b)

Sensitivity of profit
The table below shows the sensitivity of the Banks profit to movement in foreign
exchange rates:

Year

Impact to profit (after tax)

Impact to profit (after tax)

31 December 2012
31 December 2011

1%
appreciation
RM'000

629
1

1%
depreciation
RM'000

(629)
(1)

The impact on profit arises from transactional exposures from parallel shifts in foreign
exchange rates.
The projection assumes that foreign exchange rates move by the same amount and,
therefore, do not reflect the potential impact on profit of some rates changing while
others remain unchanged. The projections also assume that all other variables are held
constant and are based on a constant reporting date position and that all positions run to
maturity.

150

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk

Liquidity risk is defined as the current and prospective risk to earnings, shareholders fund or the
reputation arising from the Banks inability to efficiently meet its present and future (both
anticipated and unanticipated) funding needs or regulatory obligations when they come due,
which may adversely affect its daily operations and incur unacceptable losses. Liquidity risk
primarily arises from mismatches in the timing of cash flows.
The objective of the Banks liquidity risk management is to ensure that the Bank can meet its
cash obligations in a timely and cost-effective manner. To this end, the Banks liquidity risk
management policy is to maintain high quality and well diversified portfolios of liquid assets
and sources of funds under both normal business and stress conditions. Due to its large delivery
network and marketing focus, the Bank is able to maintain a diversified core deposit base
comprising savings, demand, and term deposits. This provides the Bank a stable large funding
base.
Liquidity risk management at CIMB is managed on Group basis. The day-to-day responsibility
for liquidity risk management and control is delegated to the RLRC. RLRC meets at least once a
month to discuss the liquidity risk and funding profile of the Group and each individual entity
under the Group. The Asset-Liability Management function, which is responsible for the
independent monitoring of the Group liquidity risk profile, works closely with Group Treasury
in its surveillance on market conditions. Business units are responsible for establishing and
maintaining strong business relations with their respective depositors and key providers of
funds. Overseas branches and subsidiaries should seek to be self-sufficient in funding at all
times. Group Treasury only acts as a global provider of funds on a need-to or contingency basis.
Each entity has to prudently manage its liquidity position to meet its daily operating needs. To
take account of the differences in market and regulatory environments, each entity measures and
forecasts its respective cash flows arising from the maturity profiles of assets, liabilities, off
balance sheet commitments and derivatives over a variety of time horizons under normal
business and stress conditions on a regular basis.
Liquidity risk undertaken by the Group is governed by a set of established risk tolerance levels.
Management action triggers have been established to alert management to potential and
emerging liquidity pressures. The Group Liquidity Risk Management Policy is subject to annual
review while the assumptions and the thresholds levels are regularly reviewed in response to
regulatory changes and changing business needs and market conditions.

151

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

Liquidity positions are monitored on a daily basis for compliance with internal risk thresholds.
The Groups contingency funding plan is in place to alert and to enable the management to act
effectively and efficiently during a liquidity crisis and under adverse market conditions. The
plan consists of two key components: an early warning system and a funding crisis management
team. The early warning system is designed to alert the Groups management whenever the
Groups liquidity position may be at risk. It provides the Group with the analytical framework to
detect a likely liquidity problem and to evaluate the Groups funding needs and strategies in
advance of a liquidity crisis. The early warning system is made up of a set of indicators
(monitored against pre-determined thresholds) that can reliably signal the financial strength and
stability of the Group.
The Group performs liquidity risk stress testing on a monthly basis to identify vulnerable areas
in its portfolio, gauge the financial impact and enable management to take pre-emptive actions.
The stress tests are modeled based on three scenarios namely bank specific crisis, market wide
crisis and combined crisis. The assumptions used includes run-off rates on deposits, draw down
rates on undrawn commitments, and hair cuts for marketable securities are documented and the
test results are submitted to the RLRC, the GRC and BRC of the Group. The test results to date
have indicated that the Group does possess sufficient liquidity capacity to meet the liquidity
requirements under various stress test conditions. In addition, the Group computes Basel III
liquidity ratios namely liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) at
least on quarterly basis, in line with BNM observation period for Basel III liquidity ratios which
started in June 2012

152

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2011 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

36.3.1 Contractual maturity of assets and liabilities

The table below analyses the assets and liabilities of the Bank based on the remaining period at the end of the reporting period to the contractual
maturity dates in accordance with the requirements of BNM GP8i:
Up to 1
month
RM'000

>13
months
RM'000

>36
months
RM'000

> 6 12
months
RM'000

>15
years
RM'000

Over 5
years
RM'000

No-specific
maturity
RM'000

Total
RM'000

354,532
1,946,861
118,383
19,578
1,113,411
-

93,096
1,301,768

Financing , advances and other financing/loans

Other assets
Deferred taxation
Statutory deposits with Bank Negara Malaysia
Amount due from related companies
Goodwill
Intangible assets
Property, plant and equipment

6,296,329
1,809,637
8,262
924,741
254,882
431
-

20,105
2,928
247,020
-

153,707
445,000
115,057
3,514
275,667
-

360,869
892,267
4,998
54,247
4,104,316
-

252,913
1,789,438
508,904
79,831
26,408,127
-

575
10,731
1,104,097
136,000
7,328
5,490

6,296,329
601,335
6,117,048
2,797,337
652,390
168,360
33,073,282
254,882
10,731
1,104,097
431
136,000
7,328
5,490

Total assets

9,294,282

3,552,765

1,664,917

992,945

5,416,697

29,039,213

1,264,221

51,225,040

31 December 2012
Assets
Cash and short-term funds
Deposits and placements with banks and other financial institutions
Financial assets held for trading
Financial investments available-for-sale
Financial investments held-to-maturity
Islamic derivative financial instruments

153

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2011 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

36.3.1 Contractual maturity of assets and liabilities (Continued)

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

No-specific
maturity

Total

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

Amount due to holding company

Amount due to related companies
Other liabilities
Provision for taxation and zakat
Subordinated sukuk

28,345,944
2,645,834
9,163
298,352
3,554
397,107
9,870
-

4,108,537
3,175,306
17,470
-

1,142,559
182,082
1,861
-

821,283
172,271
1,166
-

611,943
5,485,235
47,849
558,880

237,633
303,020
304,677

35,267,899
11,660,728
380,529
298,352
3,554
397,107
9,870
863,557

Total liabilities

31,709,824

7,301,313

1,326,502

994,720

6,703,907

845,330

48,881,596

(22,415,542)

(3,748,548)

338,415

(1,775)

(1,287,210)

28,193,883

1,264,221

31 December 2012
Liabilities
Deposits from customers
Deposits and placements of banks and other financial institutions
Islamic derivative financial instruments

Total liquidity gap

154

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2011 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

36.3.1 Contractual maturity of assets and liabilities (Continued)

Up to 1
month
RM'000

>13
months
RM'000

>36
months
RM'000

> 6 12
months
RM'000

>15
years
RM'000

Over 5
years
RM'000

No-specific
maturity
RM'000

Total
RM'000

Financing , advances and other financing/loans

Other assets
Deferred taxation
Statutory deposits with Bank Negara Malaysia
Amount due from related companies
Goodwill
Intangible assets
Property, plant and equipment

7,554,885
855,608
4,272
470,008
299,017
1,760
-

898,287
813,862
17,443
363,959
-

192,096
807,929
130,038
3,264
60,372
-

88,374
15,122
3,800
248,829
-

171,837
644,097
481,335
51,190
2,794,796
-

15,459
453,836
208,731
67,639
24,136,140
-

575
6,359
1,097,797
136,000
4,170
3,899

7,554,885
1,090,383
2,753,069
1,243,668
690,066
147,608
28,074,104
299,017
6,359
1,097,797
1,760
136,000
4,170
3,899

Total assets

9,185,550

2,093,551

1,193,699

356,125

4,143,255

24,881,805

1,248,800

43,102,785

31 December 2011
Assets
Cash and short-term funds
Deposits and placements with banks and other financial institutions
Financial assets held for trading
Financial investments available-for-sale
Financial investments held-to-maturity
Islamic derivative financial instruments

155

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

36.3.1 Contractual maturity of assets and liabilities (Continued)

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

No-specific
maturity

Total

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

Amount due to ultimate holding company

Amount due to related companies
Other liabilities
Provision for taxation and zakat
Subordinated sukuk

19,982,138
2,204,176
1,769
393,673
139
308,946
16,614
-

5,990,035
2,581,421
9,600
-

1,420,559
47,816
479
-

674,332
856
-

578,433
5,417,420
17,917
260,002

592,973
365,233
304,677

29,238,470
10,250,833
395,854
393,673
139
308,946
16,614
564,679

Total liabilities

22,907,455

8,581,056

1,468,854

675,188

6,273,772

1,262,883

41,169,208

(13,721,905)

(6,487,505)

(275,155)

(319,063)

(2,130,517)

23,618,922

1,248,800

31 December 2011
Liabilities
Deposits from customers
Deposits and placements of banks and other financial institutions
Islamic derivative financial instruments

Total liquidity gap

156

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

36.3.1 Contractual maturity of assets and liabilities (Continued)

Up to 1
month
RM'000

>13
months
RM'000

>36
months
RM'000

> 6 12
months
RM'000

>15
years
RM'000

Over 5
years
RM'000

No-specific
maturity
RM'000

Total
RM'000

Financing , advances and other financing/loans

Other assets
Deferred taxation
Statutory deposits with Bank Negara Malaysia
Amount due from holding company
Amount due from related companies
Goodwill
Intangible assets
Property, plant and equipment

7,744,407
719,040
311
660,568
334,228
245,034
828
-

800,000
1,139,500
5,034
1,851
283,502
-

150,000
216,357
9,858
3,468
507,131
-

50,370
10,069
464,907
6,975
430,971
-

222,627
276,361
233,807
96,268
2,386,124
-

354,111
200,000
41,815
18,156,281
-

575
4,307
143,406
136,000
4,287
1,862

7,744,407
950,000
2,347,894
656,008
898,714
150,688
22,424,577
334,228
4,307
143,406
245,034
828
136,000
4,287
1,862

Total assets

9,704,416

2,229,887

886,814

963,292

3,215,187

18,752,207

290,437

36,042,240

1 January 2011
Assets
Cash and short-term funds
Deposits and placements with banks and other financial institutions
Financial assets held for trading
Financial investments available-for-sale
Financial investments held-to-maturity
Islamic derivative financial instruments

157

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

36.3.1 Contractual maturity of assets and liabilities (Continued)

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

No-specific
maturity

Total

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

Other liabilities
Provision for taxation and zakat
Subordinated sukuk

15,245,012
2,470,970
6,212
384,556
12,989
-

4,637,984
2,927,735
7,794
-

312,880
480,108
3,105
-

377,082
6,039
-

1,576,731
5,246,215
20,625
-

528,266
155,424
300,000

22,677,955
11,125,028
199,199
384,556
12,989
300,000

Total liabilities

18,119,739

7,573,513

796,093

383,121

6,843,571

983,690

34,699,727

Total liquidity gap

(8,415,323)

(5,343,626)

90,721

580,171

(3,628,384)

17,768,517

290,437

1 January 2011
Liabilities
Deposits from customers
Deposits and placements of banks and other financial institutions
Islamic derivative financial instruments

158

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

36.3.2 Contractual maturity of financial liabilities on an undiscounted basis

Non-derivative financial liabilities
The tables below present the cash flows payable by the Bank under non-derivative financial liabilities by remaining contractual maturities at the end
of the reporting period. The amounts disclosed in the table are the contractual undiscounted cash flow.
31 December 2012

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Total

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

28,355,060
2,647,779
298,352
3,554
15,389
-

4,119,255
3,188,098
14,775

1,149,842
182,679
5,250

837,689
173,551
20,025

621,120
6,240,290
710,200

240,153
519,600

35,323,119
12,432,397
298,352
3,554
15,389
1,269,850

31,320,134

7,322,128

1,337,771

1,031,265

7,571,610

759,753

49,342,661

Non-derivative financial liabilities

Deposits from customers
Deposits and placements of banks and other financial institutions
Amount due to holding company
Amount due to related companies
Other liabilities
Subordinated sukuk

Financial guarantees
Credit related commitments and contingencies

195,060

195,060

3,894,665

59,227

23,019

932

59,049

848,617

4,885,509

4,089,725

59,227

23,019

932

59,049

848,617

5,080,569

159

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

36.3.2 Contractual maturity of financial liabilities on an undiscounted basis

Non-derivative financial liabilities (Continued)
31 December 2011

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Total

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

19,996,847
2,207,477
393,673
139
48,609
-

6,020,293
2,594,052
8,775

1,437,696
48,032
5,250

689,446
14,025

608,788
6,394,087
362,200

686,077
487,650

29,439,147
11,243,648
393,673
139
48,609
877,900

22,646,745

8,623,120

1,490,978

703,471

7,365,075

1,173,727

42,003,116

Non-derivative financial liabilities

Deposits from customers
Deposits and placements of banks and other financial institutions
Amount due to holding company
Amount due to related companies
Other liabilities
Subordinated sukuk

Financial guarantees
Credit related commitments and contingencies

28,489

28,489

1,494,493

30,699

1,144

36,349

189,002

853,738

2,605,425

1,522,982

30,699

1,144

36,349

189,002

853,738

2,633,914

160

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

36.3.2 Contractual maturity of financial liabilities on an undiscounted basis (Continued)

Non-derivative financial liabilities (Continued)

1 January 2011

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Total

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

15,273,845
2,473,997
23,055
-

4,671,354
2,941,467
8,775

320,329
484,035
-

387,603
8,775

1,807,865
6,229,122
70,200

581,939
457,950

23,042,935
12,128,621
23,055
545,700

17,770,897

7,621,596

804,364

396,378

8,107,187

1,039,889

35,740,311

Non-derivative financial liabilities

Deposits from customers
Deposits and placements of banks and other financial institutions
Other liabilities
Subordinated sukuk

Financial guarantees
Credit related commitments and contingencies

36,420

36,420

1,698,569

5,894

1,182

186,718

564,674

846,927

3,303,964

1,734,989

5,894

1,182

186,718

564,674

846,927

3,340,384

161

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

36.3.2 Contractual maturity of financial liabilities on an undiscounted basis (Continued)

Derivative liabilities
The table below analyses Banks trading derivative financial liabilities and hedging derivative financial liabilities that will be settled on a net basis.
All trading derivatives, whether net or gross settled are analysed based on the expected maturity as the contractual maturity is not considered to be
essential to the understanding of the timing of the cash flows. The amounts disclosed in respect of such contracts are the fair values. The
comparatives were not restated as allowed by the transitional provision arising from the adoption of Amendment to MFRS 7 Financial Instruments:
Disclosures Improving Disclosures about Financial Instruments. As such, the prior year disclosure analyses the trading derivatives based on the
remaining contractual maturities and whether it was net or gross settled.
Hedging derivatives are disclosed based on remaining contractual maturities as the contractual maturities of such contracts are essential for an
understanding of the timing of the cash flows. The amounts disclosed in respect of such contracts are the contractual undiscounted cash flows.

162

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

36.3.2 Contractual maturity of financial liabilities on an undiscounted basis (Continued)

Derivative liabilities (Continued)
31 December 2012

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Total

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

- Profit rate derivatives

52,354

52,354

- Equity related derivatives

15,856

15,856

Derivative financial liabilities

Derivatives held for trading:

Hedging derivatives:
- Profit rate derivatives

714

(28,982)

60,977

34,753

270,779

154,590

492,831

68,924

(28,982)

60,977

34,753

270,779

154,590

561,041

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Total

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

- Profit rate derivatives

95,791

95,791

- Equity related derivatives

10,555

10,555

31 December 2011

Derivative financial liabilities

Derivatives held for trading:

Hedging derivatives:
- Profit rate derivatives

5,531

(22,654)

47,066

31,341

239,613

199,741

500,638

111,877

(22,654)

47,066

31,341

239,613

199,741

606,984

163

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

36.3.2 Contractual maturity of financial liabilities on an undiscounted basis (Continued)

Derivative liabilities (Continued)

1 January 2011

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

Total

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

96,593

96,593

6,342

6,342

11,894

(11,517)

22,479

22,623

207,855

171,623

424,957

114,829

(11,517)

22,479

22,623

207,855

171,623

527,892

Derivative financial liabilities

Derivatives held for trading:
- Profit rate derivatives
- Equity related derivatives
Hedging derivatives:
- Profit rate derivatives

164

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

36.3.2 Contractual maturity of financial liabilities on an undiscounted basis (Continued)

Derivative liabilities (Continued)
The Banks derivatives that will be settled on a gross basis include foreign exchange derivatives, such as currency forward, currency swap, currency
options, cross currency profit rate swaps.
The table below analyses the cash flows payable by the Bank in relation to the Banks derivative financial liabilities that will be settled on a gross
basis into relevant maturity groupings by remaining contractual maturities at the end of the reporting period. The amounts disclosed in the table are
the contractual undiscounted cash flows.

31 December 2012

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

58,736

58,736
58,736

58,736

Total No-specific maturity

Derivative financial liabilities

Derivatives held for trading
Foreign exchange derivatives:

165

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.3

Liquidity risk (Continued)

36.3.2 Contractual maturity of financial liabilities on an undiscounted basis (Continued)

Derivative liabilities (Continued)

31 December 2011

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

Total No-specific maturity

RM'000

RM'000

Derivative financial liabilities

Derivatives held for trading
Foreign exchange derivatives:

1 January 2011

27,079

27,079

27,079

27,079

Up to 1
month

>13
months

>36
months

> 6 12
months

>15
years

Over 5
years

RM'000

RM'000

RM'000

RM'000

RM'000

RM'000

23,866

23,866

23,866

23,866

Total No-specific maturity

RM'000

RM'000

Derivative financial liabilities

Derivatives held for trading
Foreign exchange derivatives:

166

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.4 Fair value of financial instruments

Financial instruments comprise financial assets, financial liabilities and items not
recognised in the statement of financial position. Fair value is the amount at which a
financial asset could be exchanged or a financial liability settled, between
knowledgeable and willing parties in an arms length transaction.
36.4.1 Determination of fair value and fair value hierarchy
With effective from 1 January 2011, the Bank adopted the Amendments to FRS 7
which requires disclosures of fair value measurements by level of the following fair
value measurement hierarchy:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2 - Other techniques for which all inputs which have a significant effect
on the recorded fair value are observable for the asset or liability, either
directly or indirectly; and
Level 3 - Techniques which use inputs which have a significant effect on the
recorded fair value that are not based on observable market data (unobservable
inputs)
Comparative figures for the Bank are not presented for 1 January 2011 as allowed by
the transitional provision arising from the adoption of Amendment to MFRS 7
Financial Instruments: Disclosures Improving Disclosures about Financial
Instruments.
The following table represents assets and liabilities measured at fair value and
classified by level with the following fair value measurement hierarchy:
Fair Value
Carrying
amount
RM'000
31 December 2012
Financial assets
Financial assets held for trading:
-Money market instruments
-Unquoted securities
Financial investments available-for-sale:
-Money market instruments
-Unquoted securities
Derivative financial instruments:
-Trading derivatives
-Hedging derivatives
Total
Financial liabilities
Derivative financial instruments:
Trading derivatives
Hedging derivatives
Total

Level 1
RM'000

Level 2
RM'000

Level 3
RM'000

Total
RM'000

5,668,344
448,704

5,668,344
448,704

5,668,344
448,704

1,249,644
1,547,118

1,249,644
1,547,118

1,249,644
1,547,118

158,986
9,374
9,082,170

158,986
9,374
9,082,170

158,986
9,374
9,082,170

4,087,789
126,946
253,583
380,529

3,273
-

4,084,516
126,946
253,583
380,529

4,087,789
126,946
253,583
380,529

167

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.4 Fair value of financial instruments (Continued)

36.4.1 Determination of fair value and fair value hierarchy (Continued)
Fair Value
Carrying
amount
RM'000

31 December 2011
Financial assets
Financial assets held for trading:
-Money market instruments
-Unquoted securities
Financial investments available-for-sale:
-Money market instruments
-Unquoted securities
Derivative financial instruments:
-Trading derivatives
-Hedging derivatives
Total
Financial liabilities
Derivative financial instruments:
Trading derivatives
Hedging derivatives
Total

Level 1
RM'000

Level 2
RM'000

Level 3
RM'000

78,640

Total
RM'000

2,582,589
170,480

2,582,589
91,840

517,994
725,099

517,994
725,099

517,994
725,099

139,413
8,195

139,413
8,195

4,143,770

4,065,130

78,640

139,413
8,195
4,143,770

133,425
262,429
395,854

133,425
262,429
395,854

2,582,589
170,480

133,425
262,429

395,854

Fair Value
Carrying
amount
RM'000

1 January 2011
Financial assets
Financial assets held for trading:
-Money market instruments
-Unquoted securities
Financial investments available-for-sale:
-Money market instruments
-Unquoted securities
Derivative financial instruments:
-Trading derivatives
-Hedging derivatives
Total
Financial liabilities
Derivative financial instruments:
Trading derivatives
Hedging derivatives
Total

Level 1
RM'000

Level 2
RM'000

Level 3
RM'000

2,214,415
133,479

2,214,415
59,809

201,064
454,369

201,064
454,369

201,064
454,369

139,552
11,136

139,552
11,136

3,154,015

3,080,345

73,670

139,552
11,136
3,154,015

139,058
60,141
199,199

139,058
60,141
199,199

168

73,670

Total
RM'000

2,214,415
133,479

139,058
60,141

199,199

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.4 Fair value of financial instruments (Continued)

36.4.1 Determination of fair value and fair value hierarchy (Continued)
Financial instruments are classified as Level 1 if their value is observable in an active
market. Such instruments are valued by reference to unadjusted quoted prices for
identical assets or liabilities in active markets where the quoted prices is readily
available, and the price represents actual and regularly occurring market transactions.
An active market is one in which transactions occur with sufficient volume and
frequency to provide pricing information on an on-going basis. These would include
actively traded listed equities and actively exchange-traded derivatives.
Where fair value is determined using unquoted market prices in less active markets or
quoted prices for similar assets and liabilities, such instruments are generally
classified as Level 2. In cases where quoted prices are generally not available, the
Bank then determines fair value based upon valuation techniques that use as inputs,
market parameters including but not limited to yield curves, volatilities and foreign
exchange rates. The majority of valuation techniques employ only observable market
data and so reliability of the fair value measurement is high. These would include
certain bonds/sukuks, government bonds, corporate debt securities, repurchase and
reverse purchase agreements, financing, derivatives, certain issued notes and the
Banks over the counter (OTC) derivatives.
Financial instruments are classified as Level 3 if their valuation incorporates
significant inputs that are not based on observable market data (unobservable inputs).
Such inputs are generally determined based on observable inputs of a similar nature,
historical observations on the level of the input or other analytical techniques.
This category includes private equity investments, certain OTC derivatives (requiring
complex and unobservable inputs such as correlations and long dated volatilities) and
certain bonds/sukuks.

169

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.4 Fair value of financial instruments (Continued)

36.4.1 Determination of fair value and fair value hierarchy (Continued)
The following represents the changes in Level 3 instruments for the Bank.
Financial assets held-for-trading

31 December 2012
Unquoted
securities
RM'000

At 1 January
Total gains recognised in statement of income
Settlements
At 31 December

31 December 2011
Unquoted
securities
RM'000

78,640

73,670

1,376
(80,016)
-

4,970
78,640

36.4.2 Financial instruments not measured at fair value

The fair values are based on the following methodologies and assumptions:
Short-term funds and placements with financial institutions
For short-term funds and placements with financial institutions with maturities of less
than six months, the carrying value is a reasonable estimate of fair value. For deposits
and placements with maturities of six months and above, the estimated fair value is
based on discounted cash flows using prevailing Islamic money market profit rates at
which similar deposits and placements would be made with financial institutions of
similar credit risk and remaining period to maturity.
Financial investments held-to-maturity
The estimated fair value is generally based on quoted and observable market prices.
Where there is no ready market in certain securities, the Bank establishes fair value by
using valuation techniques. These include the use of recent arms length transactions,
discounted cash flow analysis, option pricing models and other valuation techniques
commonly used by market participants

170

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.4 Fair value of financial instruments (Continued)

36.4.2 Financial instruments not measured at fair value (Continued)
Financing, advances and other financing/loans
For variable rate financing, the carrying value is generally a reasonable estimate of fair
value.
For fixed rate financing with maturities of six months or more, the fair value is
estimated by discounting the estimated future cash flows using the prevailing market
rates of financing with similar credit risks and maturities.
The fair values of impaired variable and fixed rate financing are represented by their
carrying value, net of individual impairment allowance, being the expected
recoverable amount.
Amount due (to)/from subsidiaries and related companies
The estimated fair values of the amount due from subsidiaries and related companies
approximate the carrying values as the balances are either recallable on demand or are
based on the current rates for such similar financing.
Amount due (to)/from holding company and ultimate holding company
The estimated fair value of the amount due from holding company approximates the
carrying value as the balances are payable on demand.
Deposits from customers
For deposits from customers with maturities of less than six months, the carrying
amounts are a reasonable estimate of their fair value. For deposit with maturities of six
months or more, fair values are estimated using discounted cash flows based on
prevailing market rates for similar deposits from customers.
Deposits and placements of banks and other financial institutions
The estimated fair values of deposits and placements of banks and other financial
institutions with maturities of less than six months approximate the carrying values. For
deposits and placements with maturities of six months or more, the fair values are
estimated based on discounted cash flows using prevailing money market profit rates for
deposits and placements with similar remaining period to maturities.
171

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.4 Fair value of financial instruments (Continued)

36.4.2 Financial instruments not measured at fair value (Continued)
Bills and acceptances payable
The estimated fair values of bills and acceptances payable with maturities of less than
six months approximate the carrying values. For bills and acceptances payable with
maturities of six months or more, the fair values are estimated based on discounted cash
flows using prevailing money market profit rates for bills and acceptance payable with
similar remaining period to maturity
Sukuk, subordinated obligations and others
The fair values for the quoted Sukuk and subordinated obligations are obtained from
quoted market prices while the fair values for unquoted Sukuk and subordinated
obligations are estimated based on discounted cash flow models.
The estimated fair values of other financings with maturities of less than six months or
with variable rates approximate the carrying values. For other financing with maturities
of six months or more, the fair values are estimated based on discounted cash flows
using prevailing money market profit rates with similar remaining period to maturity.
Redeemable preference shares
The estimated fair value of redeemable cumulative preference shares (RCPS)
approximates the carrying value based on Directors estimate as the effective profit rate
of the RCPS is a fair reflection of the current rate for such similar instrument.
Derivative financial instruments
The fair values of derivative financial instruments are obtained from quoted market
prices in active markets, including recent market transactions and valuation techniques,
including discounted cash flow models and option pricing models, as appropriate.
Credit related commitment and contingencies
The net fair value of these items was not calculated as estimated fair values are not
readily ascertainable. These financial instruments generally relate to credit risks and
attract fees in line with market prices for similar arrangements. They are not presently
sold nor traded. The fair value may be represented by the present value of fees
expected to be received, less associated costs.
172

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.4 Fair value of financial instruments (Continued)

36.4.2 Financial instruments not measured at fair value (Continued)
Credit related commitment and contingencies (Continued)
The net fair value of these items was not calculated as estimated fair values are not
readily ascertainable. These financial instruments generally relate to credit risks and
attract fees in line with market prices for similar arrangements. They are not presently
sold nor traded. The fair value may be represented by the present value of fees
expected to be received, less associated costs.
The total fair value of each financial assets and liabilities presented on the statements
of financial position of the Bank approximates the total carrying value as at the
reporting date, except for the following:
31 December 2012
Financial assets
Deposits and placements with banks and other
financial institutions
Financial investments held-to-maturity
Financing, advances and other financing/loans

Financial liabilities
Deposits from customers
Subordinated sukuk
Deposits and placements of banks and other
financial institutions

31 December 2011
Financial assets
Financial investments held-to-maturity
Financing, advances and other financing/loans
Financial liabilities
Deposits from customers
Deposits and placements of banks and other
financial institutions
Subordinated sukuk

173

Carrying
amount
RM'000

Fair value
RM'000

601,335
652,390
33,073,282

601,736
682,508
35,185,908

35,267,899
863,557

35,236,046
924,614

11,660,728

11,816,569

Carrying amount
RM'000

Fair value
RM'000

690,066
28,074,104

711,065
30,028,814

29,238,470

29,203,915

10,250,833
564,679

10,467,699
621,525

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
36

Financial Risk Management (Continued)

36.4 Fair value of financial instruments (Continued)

36.4.2 Financial instruments not measured at fair value (Continued)

1 January 2011
Financial assets
Financial investments held-to-maturity
Financing, advances and other financing/loans
Financial liabilities
Deposits from customers
Subordinated sukuk

Carrying amount
RM'000

Fair value
RM'000

898,714
22,424,577

928,786
23,412,463

22,677,955
300,000

22,536,032
324,326

The carrying amount of the financial assets at the statement of financial position data
were not reduced to their estimated fair value as the Directors are of the opinion that the
amounts will be recoverable in full on maturity.

174

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
37

Critical accounting estimates and judgements in applying accounting

policies

The Bank makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, rarely equal the related actual results. To enhance the
information content of the estimates, certain key variables that are anticipated to have
material impact to the Banks results and financial position are tested for sensitivity to
changes in the underlying parameters. The estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying amount of assets and liabilities within the
next financial year are outlined below:
(a)

Impairment of available-for-sale equity investments

The Bank determines that available-for-sale equity investments are impaired when
there has been a significant and prolonged decline in the fair value below its costs.
This determination of what is significant and prolonged required judgement. The
Bank evaluate, among other factors, the duration and extent to which the fair value of
the investment is less than cost; and the financial health and near-term business
outlook for the investee, including factors such as industry and sector performance,
changes in technology and operational and financial cash flow.

(b)

Impairment losses on financing, advances and other financing/loans

The Bank makes allowance for losses on financing, advances and other
financing/loans based on assessment of recoverability. Whilst management is guided
by the relevant BNM guidelines and accounting standards, management makes
judgement on the future and other key factors in respect of the estimation of the
amount and timing of the cash flows in assessing allowance for impairment of
financing, advances and other financing/loans. Among the factors considered are the
Banks aggregate exposure to the customers, the net realisable value of the
underlying collateral value, the viability of the customers business model, the
capacity to generate sufficient cash flow to service their obligations and the aggregate
amount and ranking of all other creditor claims.

175

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
37

Critical accounting estimates and judgements in applying accounting

policies (Continued)

(c)

Goodwill impairment
The Bank tests annually whether goodwill has suffered any impairment in accordance
with the accounting policy stated in Note J(a) of the Summary of Significant
Accounting Policies.
The first step of the impairment review process requires the identification of
independent operating units, dividing the Groups business into the various business
segments. The goodwill is then allocated to these various business segments. The first
element of this allocation is based on the areas of the business expected to benefit
from the synergies derived from the acquisition. The second element reflects the
allocation of the net assets acquired and the difference between the consideration paid
for those net assets and their fair value. This allocation is reviewed following business
reorganisation. The carrying value of the business segment, including the allocated
goodwill, is compared to fair value less cost to sell and value in use to determine
whether any impairment exists. Detailed calculations may need to be carried out
taking into consideration changes in market in which a business operates. In the
absence of readily available market data, this calculation is usually based upon
discounting expected pre-tax cash flows at the Groups and the Banks cost of capital,
which requires exercise of judgement.
Changes to the assumptions used by management, particularly the discount rate and
the terminal growth rate, may significantly affect the results of the impairment.

(d)

Fair value of financial instruments

The majority of the Banks financial instruments reported at fair value are based on
quoted and observable market prices. Where the fair values of financial assets and
financial liabilities recorded on the statement of financial position cannot be derived
from active markets, they are determined using a variety of valuation techniques that
include the use of mathematical models. The inputs to these models are derived from
observable market data where possible, but where observable market data are not
available, judgment is required to establish fair values. The judgments include
considerations of liquidity and model inputs such as volatility for longer dated
derivatives and discount rates, prepayment rates and default rate assumptions for asset
backed securities. The valuation of financial instruments is described in more detail in
Note 36.4.

176

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
38

Segment reporting
Operating segments are reported in a manner consistent with the internal reporting
provided to the chief operating decision-maker. The chief operating decision-maker is
the person or group that allocates resources to and assesses the performance of the
operating segments of an entity. The Bank has determined the Group Management
Committee as its chief operating decision-maker.
Segment information is presented in respect of the Banks business segment and
geographical segment.
The business segment results are prepared based on the Banks internal management
reporting, which reflect the organisations management reporting structure.
Business segment reporting
Definition of segments
As a result of an internal reorganisation, there is a change in business segment
reporting. The Bank has been reorganised into the following five major operating
divisions. The divisions form the basis on which the Bank reports its segment
information.
Consumer Banking
Consumer Banking provides full-fledged financial services to individual and
commercial customer. The divisions which make up the Consumer Banking are Retail
Financial Services and Commercial Banking.
Retail Financial Services and Cards focuses on innovative products and services to
individual customers. It offers products such as financing facilities (residential
properties, personal financing, share financing, credit card and hire purchase),
remittance services, deposit collection and wealth management.
Commercial Banking is responsible for offering products and services for customer
segments comprising micro-enterprises, small and medium-scale enterprises
(SMEs) and mid-sized corporations. Their products include financing facilities
(financing, accepted bills, revolving credit, ijarah, factoring, hire purchase),
remittance services and deposit collection.

177

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
38

Segment reporting (Continued)

Business segment reporting (Continued)

Wholesale Banking
Wholesale Banking comprises Investment Banking and Corporate Banking, Treasury
and Markets.
Corporate Banking, Treasury and Markets (CBTM) is responsible for corporate
financing and deposit taking, transaction banking, treasury and markets activities.
Treasury focuses on treasury activities and services which include foreign exchange,
money market, derivatives and trading of capital market instruments. It includes the
Groups equity derivatives which develops and issues new equity derivatives
instruments such as structured warrants and over-the-counter options to provide
investors with alternative investment avenues.
Investments
Investments focus on Group Strategy and Strategic Investments (GSSI) including
funding operations for the Group. GSSI consists of Group Strategy, Private Equity and
Strategic Investments which focuses in defining and formulating strategies at the
corporate and business unit levels, oversee the Banks strategic and private equity
fund management businesses. It also invests in the Banks proprietary capital.
Support and others
Support services comprises unallocated middle and back-office processes and cost
centres and other subsidiaries whose results are not material to the Bank.

178

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
38

Segment reporting (Continued)

Business segment reporting (Continued)

Wholesale Banking

Consumer Banking
31 December 2012

Net income:
- external
- inter-segment

Retail
Corporate
Commercial
Financial
Banking,
Banking Services and Treasury and
Cards
Markets
RM'000
RM'000
RM'000

Investment
Banking
RM'000

Support
Investment and others

Total

RM'000

RM'000

RM'000

41,044
73,047
114,091
9,873
123,964
(60,356)

1,050,989
(523,597)
527,392
62,110
589,502
(329,921)

(211,314)
409,703
198,389
72,845
271,234
(51,742)

2,027
(989)
1,038
507
1,545
(34)

8,639
41,836
50,475
3,506
53,981
(1,263)

(29,280)

891,385
891,385
148,841
1,040,226
(472,596)

(231)

(796)

(631)

(1)

(1)

(1,660)

(231)
63,608

(1,214)
259,581

(1,365)
219,492

1,511

(1)
52,718

(29,280)

(2,811)
567,630

(10,046)
53,562

(19,654)
239,927

(2,203)
(29)
217,260

(166)
1,345

24
52,742

(64)
(29,344)

(32,045)
(93)
535,492
(134,422)
401,070

Segment assets
Unallocated assets
Total assets

2,828,146

19,006,976

27,844,166

26,793

- 49,706,081
1,518,959
51,225,040

Segment liabilities
Unallocated liabilities
Total liabilities

4,964,819

4,290,709

38,917,092

93

- 48,172,713
708,883
48,881,596

2,051

6,683

598

Other income
Operating income
Overhead expenses
Consist of :
Depreciation of property,
plant and equipment
Amortisation of intangible
assets
Profit/(loss) before allowances
Impairment allowance on
financing, advances and other
financing/loans
Impairment loss on other receivables
Segment results
Taxation
Net profit for the financial year

Other segment items

Capital expenditure

179

9,337

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012 (Continued)
38

Segment reporting (Continued)

Business segment reporting (Continued)

Consumer Banking

Wholesale Banking
Corporate
Banking,
Treasury and
Investment
Markets
Banking
RM'000
RM'000

RM'000

Retail
Financial
Services and
Cards
RM'000

37,427
52,065
89,492
7,295
96,787
(37,370)

941,068
(459,751)
481,317
64,910
546,227
(222,717)

(163,029)
341,593
178,564
37,264
215,828
(37,269)

(1)
3
2
4
6
(553)

(46,463)
66,090
19,627
5,136
24,763
(1,067)

(23,667)

769,002
769,002
114,609
883,611
(322,643)

(120)

(845)

(70)

(4)

(1,039)

(124)
59,417

(1,069)
323,510

(87)
178,559

(547)

23,696

(23,667)

(1,280)
560,968

6,724
66,141

(128,945)
194,565

8,398
(1)
186,956

(547)

14
23,710

(22)
(20)
(23,709)

(113,831)
(21)
447,116
(111,384)
335,732

Segment assets
Unallocated assets
Total assets

2,298,003

16,535,454

22,720,326

41,553,783
1,549,002
43,102,785

Segment liabilities
Unallocated liabilities
Total liabilities

4,188,653

3,459,816

32,801,131

237

40,449,837
719,371
41,169,208

504

3,462

271

4,239

31 December 2011

Net income:
- external
- inter-segment
Other income
Operating income
Overhead expenses
Consist of :
Depreciation of property,
plant and equipment
Amortisation of intangible
assets
Profit/(loss) before allowances
Impairment allowance on
financing, advances and other
financing/loans
Impairment loss on other receivables
Segment results
Taxation
Net profit for the financial year

Other segment items

Capital expenditure

Commercial
Banking

180

Investment

Support
and others

Total

RM'000

RM'000

RM'000

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012(Continued)
38

Segment reporting (Continued)

Business segment reporting (Continued)

Consumer Banking

Wholesale Banking
Corporate
Banking,
Treasury and
Investment
Markets
Banking
RM'000
RM'000

RM'000

Retail
Financial
Services and
Cards
RM'000

Segment assets
Unallocated assets
Total assets

1,743,593

13,373,426

20,055,269

35,172,288
869,952
36,042,240

Segment liabilities
Unallocated liabilities
Total liabilities

4,224,971

2,452,704

27,624,507

34,302,182
397,545
34,699,727

478

3,280

257

4,017

1 January 2011

Other segment items

Capital expenditure

Commercial
Banking

Investment

Support
and others

Total

RM'000

RM'000

RM'000

Basis of pricing for inter-segment transfers:

Intersegmental charges are computed on the profit-bearing assets and liabilities of
each business segment with rates applied based on the profit yield curve according to
the term structure of maturity.

181

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012(Continued)
39

Change in comparatives
(A)

Adoption of the MFRS 1 mandatory exceptions and exemption options

(i)

MFRS 1 mandatory exceptions

(a)

Estimates

MFRS estimates as at transition date are consistent with the estimates as at

the same date made in conformity with FRS.
(b)

Hedge accounting

Hedge accounting can only be applied prospectively from the transition date
to a hedging relationship that qualifies for hedge accounting under MFRS 139
Financial Instruments: Recognition and Measurement (MFRS 139) at that
date. Hedging relationships cannot be designated retrospectively.
(ii)

MFRS 1 exemption options

Designation of previously recognised financial instruments
MFRS 1 First-time Adoption of MFRS allows an entity to designate a
previously recognised financial instrument as available-for-sale or fair value
through profit or loss on the transition date, provided the criteria in MFRS
139 Financial Investment: Recognition and Measurement are met.
Consequently, the Bank has designated previously recognised financial
investments held-to-maturity with carrying amount of RM194,921,000 and
fair value of RM200,048,000 as available-for-sale at transition date.

(iii)

Segment reporting
As a result of an internal reorganisation, there is a change in business segment
reporting, and the comparatives for segment reporting have been restated to
reflect this new group structure. Refer to Note 38.

182

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012(Continued)
39
(A)

Change in comparatives (Continued)

Adoption of the MFRS 1 mandatory exceptions and exemption options
(Continued)
The adoption of MFRS 1 mandatory exceptions and exemption options affected the
following items:
(i) Impact on the Banks statement of financial position as at 31 December 2011 and
1 January 2011:
Balances as at 31 December 2011
As previously
Effects of
reported
adopting MFRS 1
As restated
RM'000
RM'000
RM'000
Assets

Financial investments available-for-sale

Financial investments held-to-maturity
Deferred taxation
Total assets
Equity
Reserves
Total equity

749,674
1,177,357
8,035
43,097,758

493,994
(487,291)
(1,676)
5,027

1,243,668
690,066
6,359
43,102,785

858,550
1,928,550

5,027
5,027

863,577
1,933,577

Balances as at 1 January 2011

As previously
Effects of
reported
adopting MFRS 1
As restated
RM'000
RM'000
RM'000
Assets

Financial investments available-for-sale

Financial investments held-to-maturity
Deferred taxation
Total assets
Equity
Reserves
Total equity

183

455,959
1,093,635
5,589
36,038,394

200,049
(194,921)
(1,282)
3,846

656,008
898,714
4,307
36,042,240

518,667
1,338,667

3,846
3,846

522,513
1,342,513

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012(Continued)
39

Change in comparatives (Continued)

(A)

Adoption of the MFRS 1 mandatory exceptions and exemption options

(Continued)
(ii)

Impact on the Banks statements of changes in equity as at 31 December 2011

and 1 January 2011:
Balances as at 31 December 2011
As previously
Effects of
reported
adopting MFRS 1
As restated
RM'000
RM'000
RM'000
Revaluation reserve- financial investments
available-for-sale

8,268

5,027

13,295

Balances as at 1 January 2011

As previously
Effects of
reported
adopting MFRS 1
As restated
RM'000
RM'000
RM'000
Revaluation reserve- financial investments
available-for-sale

(iii)

5,082

3,846

8,928

Impact on the Banks statement of income for the financial year ended 31
December 2011:
Amount for the financial year 31 December 2011
As previously
Effects of
reported
adopting MFRS 1
As restated
RM'000
RM'000
RM'000
Profit income
- Financial investments available-for-sale
- Financial investments held-to maturity

(iv)

24,831
24,665

13,473
(13,473)

38,304
11,192

Impact on the Banks statement of comprehensive income for the financial

year ended 31 December 2011:
Amount for the financial year 31 December 2011
As previously
Effects of
reported
adopting MFRS 1
As restated
RM'000
RM'000
RM'000
Revaluation reserve of financial investments
available-for-sale
- Net gain from changes in fair value
- Income tax effects

10,929
(1,062)

184

1,574
394

12,503
(668)

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012(Continued)
39

Change in comparatives (Continued)

B)

Reconciliation of MFRS1 adjustments to total equity, total comprehensive

income and statement of cash flows
MFRS 1 requires an entity to reconcile equity and total comprehensive income and
cash flows for prior years. The following tables represent the reconciliations from
Financial Reporting Standards (FRS) to MFRSs for the respective years noted for
total equity, total comprehensive income, and statement of cash flows.
(i)

Reconciliation of total equity

Total equity as reported under FRS

1 January
2011
(Date of
transition)
RM'000
1,338,667

31 December
2011

3,846

5,027

1,342,513

1,933,577

RM'000
1,928,550

Add transitioning adjustments:

Designation of previously recognised financial instruments
- Revaluation reserve -financial investments available -for-sale
Total equity on transition to MFRS

(ii)

Reconciliation of total comprehensive income

Total comprehensive income as reported under FRS

31 December
2011
RM'000
338,919

Add/(less) transitioning adjustments:

Designation of previously recognised financial instruments
- Revaluation reserve -financial investments available -for-sale
- Income tax effects
Total comprehensive income upon transition to MFRS

185

1,574
(394)
340,099

Company No: 671380-H

CIMB Islamic Bank Berhad

(Incorporated in Malaysia)

Notes to the Financial Statements

for the financial year ended 31 December 2012(Continued)
39

Change in comparatives (Continued)

B)

Reconciliation of MFRS1 adjustments to total equity, total comprehensive

income and statement of cash flows (Continued)
(iii)

Reconciliation of statement of cash flows

The transition from FRS to MFRS has had no effect on the reported cash
flows generated by the Bank.

40

Significant event during the financial year

Issue of subordinated Sukuk
On 18 September 2012, the Bank had issued the third tranche of Sukuk of RM300
million at par and is due on 18 September 2022, with the optional redemption on 18
September 2017 or any periodic payment date thereafter. The Sukuk bears a profit
rate of 4.00% per annum, payable semi-annually in arrears.

41

Authorisation for issue of Financial Statements

The Financial Statements have been authorised for issue by the Board of Directors
in accordance with a resolution of the Directors on 12 March 2013.

186