1.0 Introduction

According to the explanation that contributed by Justin Hawkins, David Blaine, Daniel

Nielson, and Tommy Tiernan (2006), the Guidelines on the Specimens Reports and

Financial statements for Licensed Banks (GP8) is set out the minimum requirements for

the presentation and disclosure of reports and financial statements of commercial bank in

Malaysia. First at all, Guidelines on the Specimens Reports and Financial statements for

Licensed Banks (GP8) was first introduced in year 1988 primarily to ensure the financial

institutions comply with the provisions of the Companies Act 1965 and the required

accounting standards. Jaffe, A.B. and R. N Stavins (1994) also explained that Guidelines

on the Specimens Reports and Financial statements for Licensed Banks (GP8) places the

primary responsibility for the preparation of financial statement on the Board that is

expected to develop a sound financial reporting structure to ensure the integrity and

reliability of its accounts.

Although Guidelines on the Specimens Reports and Financial statements for Licensed

Banks (GP8) recognize a self regulatory stance, Green, J. R. and N. L. Stokey. (1983)

believed that it is also less prescriptive, thus enabling the banking institution to have

some flexibility in disclosing their policies and reporting their financial performance as

well as business operations according to the specific circumstance pertaining to the

institution. It is agreed by Granovetter, Mark (1985) and he also explained that

Guidelines on the Specimens Reports and Financial statements for Licensed Banks (GP8)

is a very important set of regulatory guidelines pertaining to disclosure requirements. The

guidelines that proposed under Guidelines on the Specimens Reports and Financial

statements for Licensed Banks (GP8) requires financial institutions to disclose material

and exceptional facts to facilitate users in their assessment of the financial position and

performance of the financial institution.

Due to that, a systematic and intensive research will be planned and carried out to

investigate how far two of the local financial institutions, namely Ambank Berhad and

Maybank Berhad’s financial reports follow the disclosure requirements that been

proposed under Guidelines on the Specimens Reports and Financial statements for

Licensed Banks (GP8). All the discussion will be supported by various kinds of

examples.

2.0 Background Introduction of Ambank Berhad

According to the information that been written in annual report of Ambank Berhad year

2014, Ambank Berhad commenced operations on 1 April 1976, and in December 1983

became known as Arab-Malaysian Merchant Bank Berhad, a name by which they were

known for over three decades until our rebranding in June 2002. Today, they have grown

into a Group with staff strength of more than 12,000. With the extensive nationwide

branch network, ATMs, and Internet banking services, Ambank Berhad proud to

acknowledge that AmBank Group, as one of the largest financial services group in the

country, is only a brick and click away.

Apart of that, AmBank Group is one of Malaysia’s premier financial solutions Groups

with nearly 40 years of legacy in understanding Malaysian customers and provides a

wide range of both conventional and Islamic financial products and services, including

retail banking, wholesale banking, as well as the underwriting of general insurance, life

assurance and family takaful.

The Group’s mission of “Connecting, Growing and Outperforming” accentuates our

commitment in connecting with customers, people as well as stakeholders and the

Group’s continuous initiatives in growing to further cement our position in the industry

as we aspire to exceed expectations by consistently outperforming. This mission

underpins the Group’s vision as Malaysia’s preferred diversified, internationally

connected financial solutions group. The recent repositioning of our brand – “Your

Brand. Malaysia’s Bank. AmBank.” portrays us as a modern Malaysian diversified

financial solutions partner that understands and meets the diverse needs of modern

Malaysians.

3.0 Background Introduction of CIMB Bank Berhad

As mentioned and explained in the annual report, CIMB Group is a leading ASEAN

universal bank, with arguably the largest Asia Pacific investment banking network. It is

also a world leader in Islamic finance. The Group is headquartered in Kuala Lumpur,

Malaysia, and offers consumer banking, wholesale banking, Islamic banking and asset

management products and services. It is the fifth largest banking group by assets in

ASEAN and, as at the end of 2014, has over 40,000 staff and approximately 13 million

customers. Products and services are complemented by partnerships and alliances with

various leading companies including AirAsia Indonesia, AIS, Howden and Sun Life

Malaysia. CIMB Group Holdings Berhad has been listed on the main market of Bursa

Malaysia since 1987 and was one of the largest companies at the end of 2014 with a

market capitalisation of RM46.3 billion. Total assets at the end of 2014 were RM414.2

billion, with total shareholders’ funds of RM37.4 billion and total Islamic assets of

RM61.3 billion. Major shareholders at the end of 2014 were Khazanah Nasional with

29.31%, Employees Provident Fund (EPF) with 14.65%, Kumpulan Wang Persaraan

(KWAP) with 3.58% and Mitsubishi UFJ Financial Group with 4.61%.

Apart of that, CIMB Group and its employees adhere to Bank Negara Malaysia’s Code of

Ethics BNM/GP8, which promotes proper standards of conduct and sound and prudent

business practices among financial institutions. As a custodian of public funds, a financial

institution has the responsibility to safeguard its integrity and credibility. In the business

of banking, the vital ingredient is confidence: confidence of the public in the safety of

their deposits, and confidence in the integrity and professional conduct of their bankers.

4.0 BNM / GP 8 Disclosure Requirements

According to the explanation that contributed by ustin Hawkins, David Blaine, Daniel

Nielson, and Tommy Tiernan (2006), Guidelines on the Specimens Reports and Financial

statements for Licensed Banks (GP8) disclosure requirements that been established and

fixed by Bank Negara includes few components. These components include:

Market risk policy

o This document aims to present the market risk management structure and

operation in order to ensure its proper functioning in the PINE

Conglomerate.

Credit risk policy

o This sample outlines a set of policies and procedures formalizing the

credit risk management process

Net Inter – bank market transactions

o It is a market in which banks extend loans to one another for a specified

term. Most interbank loans are for maturities of one week or less, the

majority being overnight.

Dealing Securities

o It is a category of securities that includes both debt and equity securities,

and which an entity intends to sell in the short term for a profit  that it

expects to generate from increases in the price of the securities.

Contingent liabilities

o It refers to liabilities that may be incurred by an entity depending on the

outcome of an uncertain future event such as a court case.

Off balance sheet items

o An asset or debt that does not appear on a company's balance

sheet. Items that are considered off balance sheet are generally ones in

which the company does not have legal claim or responsibility for.

Related party transactions

o A business deal or arrangement between two parties who are joined by a

special relationship prior to the deal.

Material disclosures

Loan loss reserves

o It refers to accounting entries banks make to cover

estimated losses on loans due to defaults and nonpayment.

Segmental analysis

o A component of a business that is or will generate revenues and costs

related to operations.

Net interest margins

o It is a measure of the difference between the interest income generated by

banks or other financial institutions and the amount of interest paid out to

their lenders (for example, deposits), relative to the amount of their

(interest-earning) assets.

Share of non interest incomes

o Bank and creditor income derived primarily from fees. Examples of non-

interest income include deposit and transaction fees, insufficient funds

(NSF) fees, annual fees, monthly account service charges; inactivity fees,

check and deposit slip fees, etc. 

Subordinated bonds

o It refers to debt which ranks after other debts if a company falls into

liquidation or bankruptcy.

Unsecured subordinated bonds

o It refers to debt which ranks after other debts if a company falls into

liquidation or bankruptcy.

At the mean time, the binary entries of the disclosure requirements under Guidelines on

the Specimens Reports and Financial statements for Licensed Banks (GP8) are as shown

in table below:

No Component Binary Entries

1 Market risk policy Disclosed = 1

2 Credit risk policy Disclosed = 1

3 Net Inter – bank market transactions Positive = 1

4 Dealing Securities Disclosed = 1

5 Contingent liabilities Disclosed = 1

6 Off balance sheet items Disclosed = 1

7 Related party transactions Disclosed = 1

8 Material disclosures Bad news = 0

9 Loan loss reserves Disclosed = 1

10 Segmental analysis Disclosed = 1

11 Net interest margins Rising = 1

12 Share of non interest incomes Rising = 1

13 Subordinated bonds Positive = 0

14 Unsecured subordinated bonds Positive = 0

Table 1.0 Disclosure Requirements under Guidelines on the Specimens Reports and

Financial statements for Licensed Banks (GP8)

5.0 Analysis of Conformity of BNM / GP8 for Ambank Berhad

According to the analysis results, most of the disclosure requirements under Guidelines

on the Specimens Reports and Financial statements for Licensed Banks (GP8) were

complied in the annual report. The detail of the analysis of conformity of BNM / GP8

Disclosure requirements for Ambank Berhad as discussed below:

No Component AMBANK BERHAD Binary Entries

1 Market risk policy Undisclosed market

risk policy. However,

the annual report did

disclose market risk

management for

Ambank Berhad.

0

2 Credit risk policy Disclosed. Amban Berhad did disclose the credit risk policy in the annual report respectively.

1

3 Net Inter – bank market transactions Did not disclose in the annual report.

0

4 Dealing Securities Disclosed = 1. The annual report did mention how to deal and manage the securities in the bank.

1

5 Contingent liabilities Disclosed. Ambank Berhad did disclose the contingent liabilities and contingent assets in the annual report.

1

6 Off balance sheet items Disclosed. Ambank Berhad did disclose the off balance sheet items in the annual report.

1

7 Related party transactions Disclosed. Ambank Berhad did disclose related party transaction under 43 in the annual report.

1

8 Material disclosures In the annual reports, Ambank Berhad did not disclose any material disclosures.

9 Loan loss reserves Disclosed. Ambank Berhad did disclose the loan loss reserve in the annual report.

1

10 Segmental analysis Disclosed. Ambank Berhad segmental reporting is based on retail banking, business banking, investment banking, corporate and institutional banking, insurance, markets with minor segment aggregated under group functions and others.

1

11 Net interest margins The net interest margins of Ambank Berhad was increased from RM2, 218, 448, 000 to RM2, 271, 927, 000

1

12 Share of non interest incomes The share of non interest incomes of Ambank Berhad was increased.

1

13 Subordinated bonds The subordinated bonds of Ambank Berhad in year 2014 are RM21, 754, 000. Thus, it is positive.

0

14 Unsecured subordinated bonds The unsecured subordinated bonds of Ambank Berhad in year 2014 are RM548, 526, 000. Thus, it is positive.

0

Table 2.0 The Analysis of Conformity of BNM / GP8 for Ambank Berhad

According to the table 1.0, the total scored point for Ambank Berhad for the disclosure

requirements under Guidelines on the Specimens Reports and Financial statements for

Licensed Banks (GP8) was 9. Most of the items that been required under Guidelines on

the Specimens Reports and Financial statements for Licensed Banks (GP8) was complied

under the annual report of Ambank Berhad

6.0 Analysis of Conformity of BNM / GP8 for CIMB Bank Berhad

According to the analysis results, most of the disclosure requirements under Guidelines

on the Specimens Reports and Financial statements for Licensed Banks (GP8) were

complied in the annual report. The detail of the analysis of conformity of BNM / GP8

Disclosure requirements for CIMB Bank Berhad as discussed below:

No Component CIMB BERHAD Binary Entries

1 Market risk policy The market policy of

CIMB BANK was

disclosed. According

to the report, The

policy prescribes a

consistent Group-wide

framework to manage

market risk across all

CIMB entities.

It serves as a primary

reference document

for the Group in

establishing a sound

operating environment

for market risk

activities that is

consistent with the

1

governance and

control standards of

the Group Risk

Appetite

Statement.

2 Credit risk policy Disclosed. CIMB Bank Berhad did disclose the credit risk policy in the annual report under section 10.1

1

3 Net Inter – bank market transactions Did not disclose in the annual report.

0

4 Dealing Securities The annual report did mention how to deal and manage the securities in the bank.

1

5 Contingent liabilities Disclosed. CIMB Bank Berhad did disclose the contingent liabilities and contingent assets in the annual report.

1

6 Off balance sheet items Disclosed. CIMB Bank Berhad did disclose the off balance sheet items in the annual report.

1

7 Related party transactions Disclosed. CIMB Berhad did disclose related party transaction under section 42 in the annual report.

1

8 Material disclosures In the annual reports, CIMB Bank Berhad did not disclose any material disclosures.

0

9 Loan loss reserves Disclosed. CIMB Bank Berhad did disclose the loan loss reserve in the annual report.

1

10 Segmental analysis Did not disclose in this 0

annual report. CIMBANK Bank Berhad put all account in one lump sum and did not separate into different segment.

11 Net interest margins The net interest margins of CIMB Bank Berhad was decreased from RM2,850 to RM2,850

0

12 Share of non interest incomes The share of non interest incomes of Ambank Berhad was decreased from RM5, 124, 826, 000 to RM4, 029, 098, 000

0

13 Subordinated bonds The subordinated bonds of Ambank Berhad in year 2014 are RM800, 000, 000. Thus, it is positive.

0

14 Unsecured subordinated bonds The unsecured subordinated bonds of Ambank Berhad in year 2014 are RM4 million. Thus, it is positive.

0

Table 2.0 The Analysis of Conformity of BNM / GP8 for CIMB Bank Berhad

According to the table 2.0, the total scored point for CIMBK Bank Berhad for the

disclosure requirements under Guidelines on the Specimens Reports and Financial

statements for Licensed Banks (GP8) was 7. Most of the items that been required under

Guidelines on the Specimens Reports and Financial statements for Licensed Banks (GP8)

was complied under the annual report of CIMB Band Berhad

7.0 Conclusion

As a conclusion, the Guidelines on the Specimens Reports and Financial statements for

Licensed Banks (GP8) are set out the minimum requirements for the presentation and

disclosure of reports and financial statements of commercial bank in Malaysia. The

guidelines that proposed under Guidelines on the Specimens Reports and Financial

statements for Licensed Banks (GP8) requires financial institutions to disclose material

and exceptional facts to facilitate users in their assessment of the financial position and

performance of the financial institution. According to the research outcomes, both of the

company namely Ambank Berhad and CIMB Bank Berhad achieve majority of the

requirements under Guidelines on the Specimens Reports and Financial statements for

Licensed Banks (GP8) that been set up by Bank Negara Malaysia. Thus, the annual report

that produced by both banks namely Ambank Berhad and CIMB Bank Berhad was

reliable and comply with Guidelines on the Specimens Reports and Financial statements

for Licensed Banks (GP8)

8.0 Reference

Fukuyama, Francis. (1995).Trust: The Social Virtues and the Creation of Prosperity,

Hamish Hamilton: London

Granovetter, Mark (1985). “Economic Action and Social Structure: The Problem of

Embeddedness”, American Journal of Sociology 91:3, p481-510

Green, J. R. and N. L. Stokey. (1983). "A Comparison of Tournaments and Contracts",

Journal of Political Economy, 91, 349-364.

IEA (2007) Mind the Gap- Quantifying Principal-Agent Problems in Energy Efficiency

Justin Hawkins, David Blaine, Daniel Nielson, and Tommy Tiernan (2006). Delegation

and Agency in Internaitonal Organizations. Cambridge University Press.

Jaffe, A.B. and R. N Stavins (1994). The energy-efficiency gap - What does it mean?, in

Energy Policy 22 (10) 804-810