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  • CA-A CA-A Introduction

    • CA-A.1 CA-A.1 Purpose

      • Executive Summary

        • CA-A.1.1

          The purpose of this module is to set out the Central Bank of Bahrain (CBB)'s capital adequacy Rules and provide guidance on the risk measurements for the calculation of capital requirements by Bahraini conventional bank licensees. This requirement is supported by Article 44(c) of the Central Bank of Bahrain and Financial Institutions Law (Decree No. 64 of 2006).

          January 2015

        • CA-A.1.2

          Principle 9 of the Principles of Business requires that conventional bank licensees maintain adequate human, financial and other resources, sufficient to run their business in an orderly manner (see Section PB-1.9). In addition, Condition 5 of CBB's Licensing Conditions (Section LR-2.5) requires conventional bank licensees to maintain financial resources in excess of the minimum requirements specified in Module CA (Capital Adequacy).

          January 2015

        • CA-A.1.3

          This Module also sets out the minimum leverage requirements which relevant banks (referred to in Section CA-B.1) must meet as a condition of their licensing.

          January 2015

        • CA-A.1.4

          The requirements specified in this Module vary according to the inherent risk profile of a licensee, and the volume and type of business undertaken. As one of the principal objectives of the CBB (as outlined in Article 3 of the CBB Law 2006) is the protection of depositors, it is essential to ensure that the capital recognised in regulatory capital measures is readily available for those depositors and to ensure that conventional bank licensees hold sufficient capital to provide some protection against unexpected losses in the normal course of business, and otherwise allow conventional banks to effect an orderly wind-down of their operations. The minimum capital requirements specified here may not be sufficient to absorb all unexpected losses. The CBB therefore may impose more stringent capital requirements than those stated in this Module on certain banks taking into account the riskiness of the activities conducted by the concerned bank (see Paragraph CA-A.1.5A).

          January 2015

        • CA-A.1.5

          The CBB requires that conventional bank licensees maintain adequate capital, in accordance with the requirements of this Module, against their risks. In particular, all Bahraini conventional bank licensees are required to maintain capital adequacy ratios or CARs (both on a solo and a consolidated basis where applicable) above the minimum levels set out in Chapters CA-B and CA-2. Failure to remain above these ratios will result in enforcement and other measures as outlined in Section CA-1.2 and Module EN. The detailed methodology for calculating the CARs is set out in the instructions for the form PIR.

          January 2015

        • CA-A.1.5A

          All Bahraini conventional bank licensees must maintain their own target capital ratios above the supervisory CARs mentioned in Section CA-B.2 (on a solo and on a consolidated basis). Each concerned licensee must observe individual target ratios as agreed with the CBB on a case-by-case basis subject to a methodology to be disclosed in due course.

          January 2015

        • CA-A.1.6

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

          (a) Prudential Consolidation and Deduction Requirements;
          (b) Licensing and Authorisation Requirements;
          (c) CBB Reporting Requirements;
          (d) Credit Risk Management;
          (e) Operational Risk Management;
          (f) High Level Controls:
          (g) Relationship with Audit Firms; and
          (h) Enforcement.
          January 2015

      • Legal Basis

        • CA-A.1.7

          This Module contains the CBB's Directive (as amended from time to time) relating to the capital adequacy of conventional bank licensees, and is issued under the powers available to the CBB under Article 38 of the CBB Law. The Directive in this Module is applicable in its entirety to all Bahraini conventional bank licensees.

          January 2015

        • CA-A.1.8

          For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.

          January 2015

    • CA-A.2 CA-A.2 Module History

      • CA-A.2.1

        This module was first issued in July 2004 as part of the conventional principles volume. Material changes took place in January 2008 to implement Basel II. Other changes that have subsequently been made to this module are annotated with the calendar quarter date in which the changes were made. Chapter UG-3 provides further guidance on Rulebook maintenance and version control.

        January 2015

      • CA-A.2.1A

        The most recent changes are detailed in the Table below.

        Summary of Changes

        Module Ref. Change Date Description of Changes
        CA-A.2 10/07 Change categorising Module as a Directive
        CA-1 to CA-8 01/08 Extensive changes to implement Basel II
        CA-3.4 04/08 Recognition and mapping of grades for Capital Intelligence
        CA-3.2.15-18 01/09 New guidance and rules on SMEs
        CA-A 01/2011 Various minor amendments to ensure consistency in CBB Rulebook.
        CA-A.2.7 01/2011 Clarified legal basis.
        CA-6, CA-8, CA-9, CA-10, CA-14 & CA-16 01/2012 Changes in respect of July 2009 and February 2011 amendments to Basel II.
        CA-3.2.10 and CA-3.2.11A 04/2012 Amendment made for claims on banks dealing with self-liquidating letters of credit.
        CA-2.1.5, CA-2.1.5A and CA-2.1.5B 04/2013 Clarified Rules dealing with subordinated debt issued.
        CA-2.1.5(h) 10/2013 Added Rule to include limited general provision against unidentified future losses as part of Tier 2.
        CA-11.3.7 10/2013 Clarified Rules for excluding positions of a structural nature from the calculation of the net open currency positions.
        Module CA 01/2015 Extensive changes to implement Basel III.
        CA-1.3.3 04/2015 Existing exemptions in respect of PIR review will cease as at 31st December 2014 for all Bahraini conventional bank licensees.
        CA-2.1.2 04/2015 Underlined the term 'financial instruments' so that it is linked to the glossary definition.
        CA-2.3.5 04/2015 Corrected cross reference.
        CA-2.4.2 04/2015 Clarified that intangible assets other than goodwill and mortgage servicing rights are subject to transitional arrangements and are phased out as regulatory adjustments as outlined in Subparagraph CA-B.2.1(d).
        CA-2.4.12 04/2015 Clarified that shares of the bank held as collateral are considered as shares held indirectly and are subject to deduction under regulatory adjustments.
        CA-2.4.23 and CA-3.2.19A 04/2015 Corrected reference to conventional bank licensee.
        CA-2.4.25 04/2015 Clarified the rule on significant investments in commercial entities by adding cross reference to the definition.
        CA-2A.3.3 04/2015 Paragraph deleted as not applicable on the implementation of the capital conservation buffer.
        CA-B.2.1(d) 07/2015 Amendment made to clarify that during the transition period, the remainder not deducted from capital is subject to the risk weights outlined in the October 2014 version of Chapter CA-3.
        CA-2.4.25 and CA-2.4.26 07/2015 Amendment made to reflect the treatment of the risk weighting for exposures below the threshold limits.
        CA-2.1.6 and CA-2.1.10 01/2016 Updated criteria for AT1 and T2 instruments.
        CA-3.2.4, CA-3.2.4A and CA-3.2.4B 04/2016 Updated risk weightings for claims on non-central government public sector entities (PSEs).
        CA-2.4.25 10/2016 Updated reference of CM Module
        CA-B.1.5 and CA-B.1.6 07/2017 Deleted the term 'financial entity'.
        CA-15 10/2018 Added new Section on Leverage Ratio Requirements.
        CA-3.2.19B 07/2019 Added a new Paragraph on exposures to Social Housing Schemes.
        CA-1.1.6 01/2022 Amended Paragraph.
        CA-1.1.6A 01/2022 Added new Paragraph on reverting from standardised approach to basic indicator approach.
        CA-3.2.19B 10/2022 Amended Paragraph on the implementation of social housing schemes.
        CA-15.7 10/2022 Amended Section on Gearing.
        CA-4.5.7A 01/2023 Added a new Paragraph on recognition of credit default guarantees provided by Tamkeen.

      • Evolution of Module

        • CA-A.2.2

          The contents retained from the previous Module (Capital Adequacy — Conventional Banks) are effective from the dates depicted above.

          January 2015

    • CA-A.3 – CA-A.5

      [Sections CA-A.3 to CA-A.5 were deleted in January 2015.]

      Deleted: January 2015