BNM: Islamic banks no longer required to keep reserve fund

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KUALA LUMPUR: Bank Negara Malaysia (BNM) announced that Islamic banks are no longer required to maintain a reserve fund effective May 3.

The Islamic banks were expected to exercise prudence before submitting an application to distribute the reserves as dividends, the central bank announced on its website.

“BNM wishes to inform that in considering the dividend application, the bank shall consider, among others, the Islamic bank’s ability to comply with the fully phased-in capital conservation buffer requirement and any other buffers that the bank may specify,” it said.

The policy was introduced to ensure a banking institution maintains a minimum size of capital to operate and perform its intermediation function effectively.

However, the requirement was no longer relevant given the implementation of the capital conservation buffer under the capital adequacy framework, BNM explained. - Bernama