2015

WORKSHOP ON CAPITAL ADEQUACY REQUIREMENTS

FOR ISLAMIC BANKS 24 – 29 MAY 2015

Sasana Kijang, Kuala Lumpur

6 Programme Agenda

18 Profile of Speakers

25 List of Participants

29 Programme Managers

3 Programme Overview

PROGRAMME OVERVIEW

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LEARNING OBJECTIVES

At the end of the programme, participants will be able to: • Describe capital adequacy requirements of Islamic banks in comparison

with conventional banks. • Identify approaches and strategies to implement capital adequacy

requirements for Islamic banks. • Discuss supervisory review process on capital adequacy requirements of

Islamic banks.

LEARNING METHODOLOGY

A blend of lectures and group discussions, drawing from the Malaysian experience. Participants are expected to contribute actively from their own experiences during the programme.

TARGET AUDIENCE

The programme is targeted at middle level officials of central banks and supervisory agencies involved in the formulation of prudential policy or supervision of Islamic banks. This programme is conducted as a workshop and therefore requires participants to have working knowledge of Islamic Finance concepts. This programme is specifically designed to benefit countries which have Islamic banks established in their markets.

Programme Venue Training Room 3.1 - 3.2 Level 3 Sasana Kijang Bank Negara Malaysia 2, Jalan Dato’ Onn 50480 Kuala Lumpur Tel: +60(3) 9179 2888

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Welcome Lunch (25 May 2015) Conference Hall 2 Lower Ground 2 Sasana Kijang

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Accommodation Venue Seri Pacific Hotel Kuala Lumpur Jalan Putra 50350 Kuala Lumpur Tel: +60(3) 4042 5555

VENUE DETAILS

PROGRAMME AGENDA

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DAY 1: SUNDAY, 24 MAY 2015

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Ice-breaking BNM Museum & Art Gallery Theatrette, Ground Floor

11:00-11:30

The session will give an overview of the programme, setting of expectations and provide participants an opportunity to get to know each other. Ms. Hasmawati Hashim Central Banking Services Bank Negara Malaysia

Tour of BNM Museum & Art Gallery

11:30-12:15

Mr. Muhammad Zaki Shah bin Ahmad Shuhaimi Central Banking Services Bank Negara Malaysia

Depart for KL Experience Tour & Visit to KLCC Skybridge

13:00

Participants will be exposed to Kuala Lumpur as the business, finance and tourism hub of Malaysia.

Light Lunch BNM Museum & Art Gallery Cafe, Ground Floor

12:15-13:00

Depart for Hotel

17:00

DAY 2: MONDAY, 25 MAY 2015

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Do’a Recital Programme Opening by MTCP Secretariat Group Photography Session

10:30-11:00

Context Setting

09:45-10:30

The session will give an overview of the programme, setting of expectations. Ms. Hasmawati Hashim Central Banking Services Bank Negara Malaysia

Session 1: Overview of Malaysian Financial System

11:15-12:30

This session will expose participants to the Malaysian financial system and key milestones from the birth leading to the current state of Islamic finance in Malaysia. Ms. Ruziana Mohd Mokhtar Central Banking Services Bank Negara Malaysia

Imbibe & Interact

11:00-11:15

Welcome Lunch Prayer

12:30-14:15

DAY 2: MONDAY, 25 MAY 2015

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Session 2: Shari’ah Contracts Used in Malaysian Islamic Financial Transactions

14:15-16:15

Summarise & Prepare

Summary of the day’s sessions, prompt on country action plan and assignment of participants to recap the next day. Central Banking Services Bank Negara Malaysia

This session will explain Shari’ah principles and application in Islamic financial transactions. Associate Professor Dr. Rusni Hassan International Islamic University of Malaysia

16:30-16:35

Energise & Engage

16:15-16:30

Depart for Hotel

16:35

DAY 3: TUESDAY, 26 MAY 2015

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Session 3: Capital Requirements & Capital Assessment – Evolution of Requirements in Malaysia & Foundation for Effective Regulation of Islamic Banks

09:15-10:45

Pause & Percolate

10:45-11:00

11:00-12:30

This session will provide an overview of IFSB capital standards for banks and the rationale behind the standards. Mr. Abozer Majzoub Mohammed Islamic Financial Services Board

Refuel & Relate Prayer

12:30-14:15

This session will illustrate the evolution of capital requirements and assessments in Malaysia, as well as explain key enablers for effective regulation of Islamic banks from the Malaysian context. Ms. Nurhayati Mohd. Khalid Islamic Banking & Takaful Department Bank Negara Malaysia

Session 4: IFSB Standards on Capital Requirements for Islamic Financial Institutions

Review & Reiterate

09:00-09.15

Recap of Day 2 sessions by pre-assigned participants.

DAY 3: TUESDAY, 26 MAY 2015

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Imbibe & Interact

15:45-16:00

Session 6: Implementation of BCBS and IFSB capital standards (continuation)

16:00-17:00

Summary of the day’s sessions, prompt on country action plan and assignment of participants to recap the next day Central Banking Services Bank Negara Malaysia

Session 5: Implementation of BCBS and IFSB capital standards

14:15-15:45

This session will describe BNM’s approach towards implementation of capital requirements based on BCBS Basel II and IFSB CAS. The session will cover implementation approach, issues and challenges; validation of CAFIB implementation and key initiatives moving forward. Mr. Mohd Zsa Zsa Zahirruddin Mustapah Specialist Risk Unit Bank Negara Malaysia

Summarise & Prepare

17:00-17:05

Depart for Hotel

17:05

DAY 4 : WEDNESDAY, 27 MAY 2015

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Session 7: Briefing by MTCP Secretariat

09:30-12:00

Depart for Sasana Kijang Refuel & Relate Prayer

12:00-14:30

Review & Reiterate

14:30-14:45

Recap of Day 3 sessions by pre-assigned participants.

This session will explain the spirit of cooperation embraced by Malaysia and initiatives taken by MTCP. MTCP Secretariat Ministry of Foreign Affairs Malaysia

Depart for Putrajaya

08:30

Session 8: Capital Adequacy Framework for Islamic Banks

14:45-16:15

This session will focus on Malaysia’s Capital Adequacy Framework for Islamic Banks and will state specific requirements for Islamic banks, explain types of capital instrument, go through calculations of risk-weighted assets, capital adequacy ratio and illustrate risk absorbent requirements. Ms. Nurhayati Mohd. Khalid Mr. Mohammad Hafiz Norazmar Islamic Banking & Takaful Department Bank Negara Malaysia

DAY 4 : WEDNESDAY, 27 MAY 2015

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Depart for Hotel

16:35

Imbibe & Interact

16:20-16:35

Summary of the day’s sessions, prompt on country action plan and assignment of participants to recap the next day Central Banking Services Bank Negara Malaysia

Summarise & Prepare

16:15-16:20

DAY 5: THURSDAY, 28 MAY 2015

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Energise & Engage

10:15-10:30

Session 10: Capital Adequacy for Islamic Banks – Assessment Criteria & Supervisory Approaches

10:30-12:30

This session will provide an overview of the supervisory approaches undertaken by BNM in assessing capital adequacy for Islamic banks. Ms. Nordalilah Abdullah Banking Supervision Department Bank Negara Malaysia

Session 9: Developing Capital Framework – Strategy and Policy Considerations

09:15-10:15

This session will provide a platform for practical discussion between participants and facilitators on developing capital framework. Mr. Mohd Zsa Zsa Zahirruddin Mustapah Specialist Risk Unit Ms. Norhayati Mohd. Khalid Islamic Banking & Takaful Department Bank Negara Malaysia

Presentation by Islamic Financial Services Board

12:30-13:00

Review & Reiterate

09:00-09:15

Recap of Day 4 sessions by pre-assigned participants.

DAY 5: THURSDAY, 28 MAY 2015

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This session will describe supervisors’ expectations on financial institutions’ process for risk identification, assessment of materiality, and treatment of risks as part of the ICAAP and Basel II Pillar 2 Framework. Mr. Noor Hafiz Noor Eing Ms. Nur Azlina Rosli Mr. Mohd Akmal Amri Ms. Umi Kalthom Abu Musa Banking Supervision Department Bank Negara Malaysia

Session 12: Supervisory Review & Evaluation Process (SREP) – Risk Identification and Materiality, and Risk Measurement

16:00-17:00

Imbibe & Interact

15:45-16:00

This session will provide an overview of banking supervisors’ expectations on the process by which a financial institution sets its risk appetite statement, the underlying considerations, and the key elements of the statement. Mr. Noor Hafiz Noor Eing Ms. Nur Azlina Rosli Mr. Mohd Akmal Amri Ms. Umi Kalthom Abu Musa Banking Supervision Department Bank Negara Malaysia

Session 11: Supervisory Review & Evaluation Process (SREP) – Development of Risk Appetite Statement

14:15-15:45

Refuel & Relate Prayer

13:00-14:15

DAY 5: THURSDAY, 28 MAY 2015

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Summarise & Prepare

17:00-17:05

Summary of the day’s sessions, prompt on country action plan and assignment of participants to recap the next day. Central Banking Services Bank Negara Malaysia

Depart for Hotel

17:05

DAY 5: FRIDAY, 29 MAY 2015

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Session 13: Supervisory Review & Evaluation Process (SREP) – Capital Management & Planning, Independent Review, and Supervisory Action

9:15-10:15

This session will focus on supervisors’ approaches in reviewing financial institutions’ overall capital adequacy assessments as well as expectations on the independent review conducted on ICAAP. Mr. Noor Hafiz Noor Eing Ms. Nur Azlina Rosli Mr. Mohd Akmal Amri Ms. Umi Kalthom Abu Musa Banking Supervision Department Bank Negara Malaysia

Energise & Engage

10:15-10:30

Session 14: Supervisory Review & Evaluation Process (SREP) – Capital Management & Planning, Independent Review, and Supervisory Action (continuation)

10:30-11:30

Review & Reiterate

09:00-09:15

Feedback & Evaluation

11:30-12:00

Recap of Day 5 sessions by pre-assigned participants.

Programme wrap, submission of country action plans & certificate presentation

12:00-12:15

Refuel & Relate Friday Prayers

12:15-14:30

Programme Ends Depart for Hotel

14:30

PROFILE OF SPEAKERS

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MS. RUZIANA MOHD MOKHTAR Deputy Director, Central Banking Services Bank Negara Malaysia ruziana@bnm.gov.my

Ruziana is currently a Deputy Director in the Central Banking Services (CBS) unit which is responsible for international technical cooperation initiatives with other central banks and regulatory agencies. Prior to joining CBS, Ruziana served as a Deputy Director in Prudential Financial Policy Department and Financial Sector Development Department with over 15 years experience in financial sector regulating framework, legal reform, strategic policy and financial sector liberalisation. She was a member of the IMF team which conducted Financial Sector Assessment Programme in a regional country in 2010. Ruziana joined the Bank in 1998 in the Bank Regulation Department. She holds an accounting degree from the University of Melbourne and is a member of CPA Australia.

ASSOCIATE PROFESSOR DR. RUSNI HASSAN Deputy Dean, IIUM Institute of Islamic Banking and Finance International Islamic University Malaysia hrusni@iium.edu.my

Dr. Rusni Hassan graduated with LLB (Honours) and LLB (Shariah) (First Class), Master of Comparative Laws (MCL) and Ph.D. in Law. Her area of specialization includes Islamic Banking, Finance and Islamic Documentations, Islamic Capital Market, Takaful and Islamic Law of Transactions. She was a Coordinator for Research and Publication and Course Coordinator for Islamic Law of Transactions and Islamic Banking and Takaful. She was a Research Committee for Review of Islamic Banking Laws, Central Bank of Malaysia and an examiner for Financial Planner Association of Malaysia. Presently she is the examiner for Chartered Institute of Management Accountants (CIMA) United Kingdom. She is a member of Shariah Advisory Council Bank Negara Malaysia and Shariah Advisor for Association of Islamic Banking Institutions Malaysia (AIBIM), and a registered Shariah Advisor with the Securities Commission. She is the Secretary for the Association of Shariah Advisors in Islamic Finance Malaysia (ASAS). In her capacity as Shariah Committee she has advised numerous Islamic Financial Institutions locally and internationally on Shariah compliance aspects on product development and structuring, legal documentations and Shariah audit. Her publication includes books on Islamic Banking and Takaful, Islamic Banking under Malaysian Law, articles of journals, Shariah Law Reports and other publications.

MS. NURHAYATI MOHD. KHALID Manager, Islamic Banking & Takaful Department Bank Negara Malaysia nurhayati@bnm.gov.my

Nurhayati Mohd. Khalid is a Manager of the Islamic Banking & Takaful Department, Bank Negara Malaysia. Her focus is on formulating prudential policies in the area of regulatory capital, liquidity risk management and operationalization of Shariah contracts for application by Islamic banking institutions in Malaysia. She was involved in the formulation and implementation of the Basel II capital framework, focusing on credit risks, securitization and rate of return risk in the banking book. She was also involved in the implementation of Basel III standards on regulatory capital instruments and Liquidity Coverage Ratio as well as the Musyarakah & Mudarabah contracts operational framework.

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MR. ABOZER MAJZOUB MOHAMMED Project Manager, Technical and Research Islamic Financial Services Board abozer@ifsb.org

Abozer has been seconded to the Islamic Financial Services Board (IFSB) since August 2010. He is Co-Project Manager for IFSB Revised Capital Adequacy Standard based on Basel III (IFSB-15) and Co-Project Manger for the Core Principles for Islamic Finance Regulation (IFSB-17). He is also in charge of Facilitating the Implementation of the IFSB standards initiative (FIS) Prior to joining IFSB, Abozer was working with the Central Bank of Sudan, in the banking supervision department. Abozer also in charge of the Editing Committee (EC) as well as Shari’ah Advisory Committee (SAC) where he liaise between the Shari’ah Board and the IFSB in overseeing the Shari’ah issues in the IFSB standards. He also provides technical assistance and has conducted workshops in more than 15 IFSB member Central Banks and Supervisory authorities to facilitate implementation of the IFSB Standards. Abozer joined the list of experts at the IMF following his mission in Tunisia in 2012, where he provided Technical Assistant to many jurisdictions which are in process of implementing Islamic Finance, especially in Middle East and North Africa regions. Following his mission in Tunisia the IMF requested the IFSB to provide Abozer as an expert to facilitate the transformation of Libyan banking sector to full-fledge Islamic banking system. Abozer holds a Master’s Degree in Pure Economics (Performance of the Stock Exchange Market) from University of Khartoum, (2005) and BSc Honour degree in Pure Economics from University of Khartoum, Sudan (2002).

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MR. MOHD ZSA ZSA MUSTAPAH Credit Risk Specialist, Specialist Risk Unit Bank Negara Malaysia zsazsa@bnm.gov.my

Mr. Mohd Zsa Zsa has 16 years of experience in credit risk related banking supervision work. Prior to specialising in credit risk, Mr. Mohd Zsa Zsa started his career as a banking supervisor who was directly involved in the assessment of lending and treasury activities and risk management of banking institutions. After spending about seven years in banking supervision, Mr. Mohd Zsa Zsa was involved in Bank Negara Malaysia’s Basel II implementation for Malaysia, in which he was directly involved in the policy making for both the conventional and Islamic banking institutions in Malaysia. Now, in his role as a credit risk specialist Mr. Mohd Zsa Zsa conducts review of banking institutions’ implementation of the internal ratings-based approach (IRB), horizontal surveillance of credit risk management practices and provides advisory work to banking and insurance supervisors on matters pertaining to complex and technical credit risk issues.

MR. MOHAMMAD HAFIZ NORAZMAR Associate Analyst, Islamic Banking & Takaful Department Bank Negara Malaysia mhn@bnm.gov.my

Mr. Mohammad Hafiz joined Bank Negara Malaysia in 2012 and currently holds the position of Associate Analyst in Islamic Banking and Takaful Department. He is responsible in the formulation of prudential policies for Islamic banking institutions. Mr. Mohammad Hafiz holds a Bachelors degree in Public Affairs from School of Public and Environmental Affairs of Indiana University Bloomington.

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Nordalilah Abdullah is responsible to supervise financial institutions (FIs) under her purview to prevent unanticipated amber FIs through implementation of effective supervisory intervention and resolution actions. Her current portfolio involves supervision of the large foreign bank with its Islamic subsidiary which form parts of the foreign banking group classified as Domestically Systemic Important Bank. She joined Bank Negara Malaysia in November 1997 and has extensive experience in the supervision of foreign banks and financial conglomerates financial institutions. She was involved in the Basel II implementation project in 2005 to 2006 specialising in operational risk. She holds a Bachelor’s Degree in Accountancy and Finance from University of Lincolnshire and Humberside, United Kingdom and is a Fellow of Chartered Islamic Finance Professional.

MS. NORDALILAH ABDULLAH Senior Supervisor, Banking Supervision Department Bank Negara Malaysia nordalilah@bnm.gov.my

MR. NOOR HAFIZ NOOR EING Supervisor, Banking Supervision Department Bank Negara Malaysia nhafiz@bnm.gov.my

Nor Hafiz Noor Eing started his career in Bank Negara in 2008. His experience includes ensuring safety and soundness of banking institutions (BI) through continuous and consolidated on-site and off-site surveillance. Hafiz contributed in the issuance of several prudential-measure guidelines for retail banking which includes Responsible Financing Guideline, Sustainability of Property Market Guideline, and Personal Financing Guideline. He was also appointed as reference point and committee for bank-wide implementation of Basel 3 (Capital and Liquidity), ICAAP, responsible financing and International Islamic Bank (IIB). Hafiz holds a Bachelor’s Degree in Accountancy from University Putra Malaysia.

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MR. MOHD AKMAL AMRI Associate Supervisor, Banking Supervision Department Bank Negara Malaysia akmalamri@bnm.gov.my

Mohd Akmal Amri joined Bank Negara Malaysia in 2010 and currently holds the position of Associate Supervisor in Banking Supervision Department. He is responsible for the supervision of financial institutions in Malaysia, with experience mainly in the supervision of stand-alone Islamic banks. In the past, he was also involved in processing regulatory approvals to Islamic banks pursuant to the prevailing laws and regulations. Akmal holds a Bachelor’s Degree in Accounting and Finance from The University of Warwick, United Kingdom.

MS. UMI KALTHOM ABU MUSA Supervisor, Banking Supervision Department Bank Negara Malaysia umikalthom@bnm.gov.my

Umi Kalthom is a banking supervisor responsible of the supervision of safety and soundness of localised incorporated foreign banks (LIFBs) in Malaysia. Her experience in the Banking Supervision department includes the supervision of Top 5 LIFBs and its Islamic subsidiaries as well as involvement in the subject matter expert team that led the thematic review on the industry’s Internal Capital Adequacy Assessment Process (ICAAP) in 2012. She also contributes in various internal projects such as Outsourcing Review project, Review on Custody Services, Shariah Governance review, tender evaluation for vendor selection and many more. Prior to joining the Banking Supervision department in 2013, she worked in the Prudential Financial Policy department for four years formulating policy requirements and regulatory framework relating to financial reporting, loans classification and impairment provisions as well as Basel 3 capital adequacy framework for financial institutions. Umi Kalthom received her Bachelor’s Degree in Accountancy (Hons.) in 2008 from Universiti Teknologi MARA (UiTM).

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MS. NUR AZLINA ROSLI Supervisor, Banking Supervision Department Bank Negara Malaysia nar@bnm.gov.my

Ms. Nur Azlina Rosli joined Bank Negara Malaysia in 2005 and currently holds the position of Supervisor in Banking Supervision Department, which is responsible for ensuring safety, soundness and robustness of the financial institutions. Nur Azlina holds a Bachelor degree in Accounting from International Islamic University Malaysia.

LIST OF PARTICIPANTS

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Gambia

Ida Fye-Touray Deputy Director Financial Supervision Department ifye@cbg.gm

Central Bank of The Gambia Gambia

Sulayman J.K. Cham Bank Examiner Financial Supervision Department sjkcham@cbg.gm

Central Bank of The Gambia

Guinea

Souleymane Tall Deputy Director Banking Supervision Department souleymane.tall@bcrg-guinee.org

Central Bank of Guinea

Guinea

Fode Mourana Soumah Banking Supervisor Banking Supervision Department soumahfodemourana@gmail.com

Central Bank of Guinea

Indonesia

Siti Nurfalinda Licensing Division Islamic Banking Department snurfalinda@ojk.go.id

Indonesia Financial Services Authority (OJK)

Indonesia

Riska Jatmika Taswir Bank Supervisor Islamic Banking Department riska_jt@ojk.go.id

Indonesia Financial Services Authority (OJK)

Kazakhstan

Bakyt Kudabayev Chief Specialist Islamic Finance Development Division bakyt.kudabayev@nationalbank.kz

National Bank of Kazakhstan Kazakhstan

Zhanar Amanzholova Specialist Islamic Finance Development Division Zhanar.Amanzholova@nationalbank.kz

National Bank of Kazakhstan

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Kuwait

Marzouq G. Alotaibi Senior Banking Supervisor Off-Site Supervision Department mgalotaibi@cbk.gov.kw

Central Bank of Kuwait

Malawi

Titus Chima Principal Bank Examiner Bank Supervision Department tchima@rbm.mw

Reserve Bank of Malawi

Pakistan

Ahsin Waqas Joint Director Banking Policy and Regulations Ahsin.Waqas@sbp.org.pk

State Bank of Pakistan

Pakistan

Muhammad Islam Ahmed Senior Joint Director (Head-Policy Division) Islamic Banking Department islam.ahmed@sbp.org.pk

State Bank of Pakistan

Sierra Leone

Yusuf Umaru Dalhatu Senior Banking Officer Bank Supervision Department ydalhatu@bsl.gov.sl

Bank of Sierra Leone

Sudan

Mohammed Abdalla Hammad Tebeique Banking Supervisor Assistant Banking System Regulation & Development Mohamed.Hamad@cbos.gov.sd

Central Bank of Sudan

Sudan

Maison Ibrahim Mohamed Abdalla Banking Supervisor Assistant Banking System Regulation & Development Maison.Mohmmed@cbos.gov.sd

Central Bank of Sudan

Tajikistan

Muslim Berdiev Chief Expert, Licensing Division Banking Supervision Department m_berdiev@nbt.tj

National Bank of Tajikistan

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Tajikistan

Kibriyo Urakova Chief Inspector, Inspection Division Banking Supervision Department K_Uroqova@nbt.tj

National Bank of Tajikistan

Tanzania

Omar Athman Msuya Assistant Manager Policy Review and Licencing Directorate of Banking Supervision oamsuya@bot.go.tz

Bank of Tanzania

Tanzania

Ephraim Asumwisye Mwasanguti Bank Examiner Directorate of Banking Supervision eamwasanguti@bot.go.tz

Bank of Tanzania

Tunisia

Sonia Zoghlami Director (General Direction of Financing) sonia.zoghlami@hotmail.fr

Ministry of Finance

Uzbekistan

Farrukh Botirov Head of Division Licensing and Supervision of Credit Organizations Department farrukhbotirov@yahoo.com

Central Bank of Uzbekistan

PROGRAMME MANAGERS

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CENTRAL BANKING SERVICES Programme Managers

Name : Muhammad Zaki Shah bin Ahmad Shuhaimi Office : +60 (3) 9179 2570 H/P : +60 (19) 304 7155 Email : zakishah@bnm.gov.my

Name : Hasmawati Hashim Office : +60 (3) 9179 2553 H/P : +60 (13) 342 0533 Email : hasmawati@bnm.gov.my