A Identification & determination of pools of

assets
Initially from the general pool and subsequently from
already created specific pools
A-1 What is the basis of pool managements
mode(s) i.e. Mudaraba, Musharakah, Mudaraba
Musharakah, Wakala or any hybrid mode?
Basically Musharakah based on a structure designed in
such a manner that the Bank being Mudarib represents
itself as Shareek/partner on behalf of its Rabb-ul-Maal
while dealing with other financial Institutions. On the other
hand Banks equity (including current account deposits)
used to finance assets represent banks contribution in the
Musharakah with the deposits of corporate customers/high
net worth individuals ,
A-2 What type(s) of Pools is being maintained i.e.
whether there is a single pool or multiple pools?
There are multiple pools specially to avoid Bai inah (buy
back) to fulfill customers and FIs demand for specific returns
A-3 Do you have separate / same policy for local &
foreign currency deposits.
Since there are less avenues for creation of assets funded
by foreign currencies thus foreign currency deposits based
specific pools are normally created through FE 25
Murabahas and FCY deposits monetary value converted into
PKR is used to fulfill Shariah requirement of at least 20%
illiquid assets in the specific pool through pooling PKR
Ijarah/DM
A-4 What are the maturities / tenors of different
pools? What is the treatment of profit accrued
on payment-on-maturity against a deposit and
periodical payment of profits against a deposit?
The maturities of pools may depended upon the maturities
of the deposits/inter-bank deals for which specific pools are
created or may be more than the maturities of the
deposits/inter-bank deals. Earning assets are selected with
the higher than expected returns to make profit payments
to the deposits. Accordingly, assets having periodical profits
payments are used for making profits payments to deposits
which require matching periodical profits payments
A-5 Does bank treat current A/cs and other A/cs e.g.
margin A/cs as part of its own investment/
equity in the pool. If not what treatment in the
pool.
Yes. Current accounts deposits are treated as banks equity,
while creating specific pools.
A Identification & determination of pools of
assets
Initially from the general pool and subsequently from
already created specific pools
A-6 What is the policy for giving priority to Banks
funds /investment over depositors funds
It is tried to maintain return on banks equity similar to
general pool. However, probability exists to bear non-
performing assets loss and abnormal expenses by the
banks equity (without disclosing this fact as contractual
obligation) to maintain liability side customers confidence
upon bank performance
A-7 In case of multiple pools, what is the criteria for
developing a new pool and what are the
authorization controls and approval processes
for developing a new pool.
The assets are selected for any new pool on the basis of
tenor of transaction and the profit rates desired by the
depositor/FI. Back Office Treasury/Transactional Operations
Department approves the new pool which is developed
with the help of Financing Control and Products
Development teams.
A-8 How it is ensured that a new pool is created
before accepting a deposit and before allocating
the assets?
Back Office Treasury/Transactional Operations Department
is informed by the liability sales team/Treasury Division
regarding the fresh deposits deals to quickly create the
desired pool
B Pool composition & allocation of assets
B-1 Briefly elaborate avenues of Assets deployment
/ uses of funds for each pool
Mainly FIs, corporate customers and high net worth
individuals.
B-2 What is Ratio of illiquid assets prescribed for
each pool. Pls. give brief description, as to how
it is ensured that the ratio of illiquid assets is
maintained..
At least 20% illiquid assets.
B-3 What controls are in place for Tagging of assets
to different pools( in case of multiple pools)
Pool management is system based. Each asset of different
pools is given a separate distinctive number, based on the
date of asset creation and its maturity. There are flags of
different colors to identify different pools along with their
date of creation and date of maturity. Each pool is given a
separate distinctive number.
B-4 What is the mechanism of movement of
allocated/tagged assets from general pool to
specific pool & vice versa?
General pool assets are sold/transferred to different pools
based on profit yield of each asset to make profit payments
based on return desired by respective Rabb ul Maal
B-5 What is the treatment of any expenses and
losses related to assets of a specific pool,
particularly in case of non-performing assets?
In each pool banks Equity (including current accounts
deposits) is mixed in such a manner that with out
contractual obligation it could absorb the loss of non-
performing assets on behalf of other Shareek of the specific
pool and to bear abnormal expenses like destruction of
asset subject to Ijarah, based on Tabarru. However, if
equity becomes unable to bear such kinds of
losses/expenses then the remaining loss/expanse are
distributed among the Shareek based on ratio of investment
B-6 How the bank ensures the there is no buy-back
of assets between / amongst pools?
There is a lock in system, should be introduced in the
system. Since there are many pools, therefore one asset
once sold by general pool to a specific pool is not sold back
to general pool unless one year is lapsed. The system does
not allow buy back of an asset by the general pool before
one year is lapsed for the first sale of asset by general pool
C Identification & determination of pools related income
C-1 On what basis the income streams (funded &
non funded) are shared and not shared with
Depositors?
Only fund based income is shared as the earning assets are
the main source to develop specific pools.
C-2 How sources of income are identified and what
is the method of its allocation?
Income of earning assets having similar or more than the
maturity date of TDRs/FI deal maturity date are selected to
create specific pool
C-3 What are the dates of profit calculation &
distribution? When the computations are
finalized and when the returns are credited to
respective depositors accounts?
Income stream attached with the earning assets are
examined while creating a specific pool to give profits
payments to the depositors/FIs taking care that the
promised frequency of profit payments to TDRS/FIs deal
should match with the income stream of earning assets .
C-4 What is the basis of profit calculation i.e. either
minimum balance / weighted average balance
for different types of saving deposits?
The basis of profit calculation on liability side is examined
in monetary value to match with the income stream of
earning assets
D Policy for Charging of Expenses to the pool
D-1 Brief description of policy for allocation of
expenses to different pools.
Expenses of earning assets are allocated to the relevant
pool, based on risk and reward principle.
D-2 What type of expenses are charged (in detail)
for determination and appropriation of profit or
loss?
Cost of goods, depreciation of tangible assets and
provisioning for bad debts related to the earning assets are
charged to the relevant pool
E Profit sharing ratio & Weightages
E-1 What is the mechanism of Profit sharing Ratios
between Mudarib & Depositor, for general /
specific pool
Profit sharing ration for specific pool is based on profit yield
desired by depositor/FI followed by assignment of
weightages
E-2 How weightages worked out for distribution of
profit? Provide the methodology of computation
of the same.
Based on the profit yield of each earning asset of a specific
pool, the weightages are assigned to make sure that the
weightage average return of all earning assets of a specific
pool fulfill the requirements of profit yield desired by
depositor/FI