CM-A.1.1

The purpose of this Module is to provide a checklist of the key elements of a sound credit risk management system which supervisors can expect their banks to observe. This requirement is supported by Article 44(c) of the Central Bank of Bahrain and Financial Institutions Law (Decree No. 64 of 2006).

CM-A.1.2

This Module provides support for certain other parts of the Rulebook, mainly:

Legal Basis

CM-A.2.1

Overseas conventional bank licensees are expected to maintain provisions against potential loan losses on their books in Bahrain. Head offices of banks that do not wish to maintain provisions on books of their branch(es) in Bahrain must advise the CBB, on an annual basis and in writing, of the amount of provisions set aside for the bad debts of Bahrain branch(es) (see Section CM-4.3).

CM-A.2.2

The CBB requires all Bahraini conventional bank licensees to set out their policy on large exposures, including limits for differing types of exposures to individual customers, banks, corporates, countries and economic and market sectors, in a policy statement which must be formally approved by the Board of Directors (see Section CM-5.8).

CM-A.2.2A

The CBB requires that any large exposure, as defined in Paragraph CM-5.5.1, must be priorly approved by the bank's Board of Directors (see Paragraph CM-5.5.3A).

CM-A.2.3

The aggregate of large exposures may not exceed 800% of the bank's consolidated Total Capital (see Paragraph CM-5.5.3). A bank may not incur an exposure to an individual counterparty or group of closely related counterparties which exceeds 15% of the reporting bank's consolidated Total Capital (see Paragraph CM-5.5.4).

CM-A.2.4

Exposures to all connected counterparties when taken together, may not exceed 25% of consolidated Total Capital. Controllers and subsidiaries of controllers are not allowed to borrow from the bank (i.e. a 0% limit), however smaller shareholders will be subject to a 15% limit on an individual basis (see Paragraph CM-5.5.4). Directors who are also controllers with significant ownership are subject to the 0% limit (see Paragraphs CM-5.5.11 and CM-5.5.12).

CM-A.2.5

All Bahraini conventional bank licensees are required to report (for the attention of the Director of Banking Supervision Directorate) all large exposures, (whether exempt or not) on a quarterly basis using the Form PIR provided in Appendix BR-5 (see Section CM-5.7).

CM-A.2.6

The CBB's prior written consent must be obtained for any loan to an employee where the amount of such loan, either singly or when added to an existing loan(s) outstanding to that employee at that date, would be equal to or in excess of BD 100,000 (or its equivalent) (see Section CM-6.1).

CM-A.2.7

The CBB requires that banks only provide a new consumer facility (or renew, extend or otherwise modify an existing consumer facility) for an amount such that the borrower's total monthly repayments on all his consumer finance commitments do not exceed 50% of his monthly gross income (see Section CM-8.4).

CM-A.2.8

[This Paragraph was deleted in April 2014 as this requirement has been moved to Module BC].

CM-A.2.9

The CBB's prior written consent must be obtained before writing off any loan to a senior employee/officer/Director of the reporting bank or other bank(s) who fails to discharge his/her repayment obligations to the reporting bank (see Section CM-7.1 for details).

CM-A.2.10

All Bahraini conventional bank licensees must notify the CBB of any write-off of a credit facility, (i.e., loan, overdraft and any other credit facility) of an amount in excess of BD 100,000 (or its equivalent). Chapter CM-7 contains Rules relating to the write-off of credit facilities.

CM-A.2.11

All banks which provide credit to resident natural persons in Bahrain must become members of the Credit Reference Bureau and follow the CRB Code of Practice (see Paragraph CM-1.2.4).

CM-A.2.12

All banks are required to follow the CBB's requirements concerning refund of insurance on loan prepayments and top-ups and early repayment fees/charges as outlined in Section CM-8.6.

CM-A.2.13

CM-A.3.1

This Module was first issued in July 2004 as part of the conventional principles volume. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG 3 provides further details on Rulebook maintenance and version control.

CM-A.3.2

The most recent changes made to this Module are detailed in the table below:

Summary of Changes

[deleted]

Effective Date