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  • CA-1 CA-1 General Requirements

    • CA-1.1 CA-1.1 Capital Adequacy Ratio (Definition and Methodology)

      • CA-1.1.1

        A conventional bank licensee's consolidated capital adequacy ratio is calculated by dividing its Consolidated Total Capital by its consolidated risk-weighted assets (RWAs). These items are defined and described in Paragraphs CA-1.1.2 to CA-1.1.8. A diagrammatic description of the formula used to calculate the consolidated CAR is given below.

                          Consolidated Total Capital                 
        RWAs (Credit + Market + Operational Risks)
        January 2015

      • Consolidated Total Capital

        • CA-1.1.2

          Consolidated Total Capital consists of the sum of the following elements:

          (a) T1 (Going-concern):
          (i) CET1 (as defined in Paragraph CA-2.1.2);
          (ii) AT1 (as defined in Paragraph CA-2.1.4); and
          (b) T2 (Gone-concern) as defined in Paragraph CA-2.1.8.
          January 2015

      • Consolidated Risk-Weighted Assets

        • CA-1.1.3

          Consolidated Total RWAs are determined by:

          (a) Multiplying the capital requirements for market risk (see CA-1.1.7) and operational risk (see CA-1.1.6) by 12.5 for the conventional bank licensee and all its consolidated subsidiaries; and
          (b) Adding the resulting figures to the sum of RWAs for credit risk (see CA-1.1.4) and securitisation risk for the conventional bank licensee and all its consolidated subsidiaries (see CA-1.1.5).
          January 2015

        • CA-1.1.4

          For the measurement of their credit risks, conventional bank licensees measure the risks in the standardised approach, applying the measurement framework described in Chapter CA-3 and subject to the credit mitigation techniques outlined in Chapter CA-4 of this Module.

          January 2015

        • CA-1.1.5

          The securitisation framework is set out in Chapter CA-6. Conventional bank licensees must apply the securitisation framework for determining regulatory capital requirements on exposures arising from traditional and synthetic securitisations or similar structures that contain features common to both.

          January 2015

        • CA-1.1.6

          For the measurement of their operational risks, conventional bank licensees have a choice, subject to notification to the CBB, between two broad methodologies:

          (a) The basic indicator approach, by applying the measurement framework described in Chapter CA-7 of this Module; and
          (b) The standardised approach (also in Chapter CA-7) this approach is subject to certain conditions (outlined in Chapter OM-8) and requires the explicit approval of the CBB.
          Amended: January 2022
          Added: January 2015

        • CA-1.1.6A

          For the purpose of Sub-paragraph CA-1.1.6 (b), a licensee must provide appropriate justification and seek CBB’s prior approval, if it wishes to revert from the standardised approach to the basic indicator approach.

           

          Added: January 2022

        • CA-1.1.7

          For the measurement of their market risk, conventional bank licensees have a choice, subject to the written approval of the CBB, between two broad methodologies:

          (a) One alternative is to measure the risks in a standardised approach, applying the measurement frameworks described in Chapters CA-9 to CA-13 of this Module; and
          (b) The second alternative methodology (i.e. the IMM or internal models approach) is set out in detail in Chapter CA-14 including the procedure for obtaining the CBB's approval. This methodology is subject to the fulfilment of certain conditions. The use of this methodology is, therefore, conditional upon the explicit approval of the CBB.
          January 2015

        • CA-1.1.8

          In light of Paragraphs CA-1.1.3 to CA-1.1.7, each conventional bank licensee's overall capital requirement consists of:

          (a) The credit risk requirements laid down in Chapters CA-2 to CA-6, and including the credit counterparty risk on all over-the-counter derivatives whether in the trading or the banking books (see Chapter CA-8);
          (b) The capital charges for operational risk described in Chapter CA-7; and
          (c) The capital charges for market risks:
          (i) Described in Chapters CA-9 to CA-13 summed arithmetically;
          (ii) Derived from the models approach set out in Chapter CA-14; or
          (iii) A mixture of (i) and (ii) summed arithmetically.
          January 2015

        • CA-1.1.9

          All transactions, including forward sales and purchases, must be included in the calculation of capital requirements as from the date on which they were entered into. Although regular reporting takes place quarterly, conventional bank licensees must manage their risks in such a way that the capital and leverage requirements are being met on a continuous basis, i.e. at the close of each business day. Conventional bank licensees must not "window-dress" by showing significantly lower credit or market risk positions on reporting dates. Conventional bank licensees must maintain strict risk management systems to ensure that intra-day exposures are not excessive. If a conventional bank licensee fails to meet the capital requirements of this Module, the bank must take immediate measures to rectify the situation as detailed in Section CA-1.2.

          January 2015

      • Solo Capital Adequacy Ratio

        • CA-1.1.10

          A conventional bank licensee's solo capital adequacy ratio is calculated by dividing its Solo Total Capital by its Solo RWAs as described in Paragraph CA-1.1.11 and CA-1.1.12 without consolidating the assets and liabilities of subsidiaries referred to Paragraph CA-B.1.2A into the balance sheet of the parent bank.

          January 2015

      • Solo Total Capital

        • CA-1.1.11

          Solo Total Capital consists of the sum of the following elements:

          (a) T1 (Going-concern):
          (i) CET1 for the parent bank only (as defined in Paragraph CA-2.1.2 but deducting item (c) before applying regulatory adjustments in item (d);
          (ii) AT1 for the parent bank only (as defined in Paragraph CA-2.1.4 but deducting item (c) before applying regulatory adjustments in item (d); and
          (b) T2 (Gone-concern) for the parent bank only as defined in Paragraph CA-2.1.8 but deducting item (c) before applying regulatory adjustments in item (d).
          January 2015

      • Solo Risk-Weighted Assets

        • CA-1.1.12

          Solo Total RWAs are determined by:

          (a) Multiplying the capital requirements for market risk (see CA-1.1.7) and operational risk (see CA-1.1.6) by 12.5 for the parent bank alone; and
          (b) Adding the resulting figures to the sum of risk-weighted assets for credit risk (see CA-1.1.4) and securitisation risk for the parent bank alone (see CA-1.1.5).
          January 2015

        • CA-1.1.13

          For the purpose of this Module the solo CAR may be shown diagrammatically as below.

                                      Total Capital                           
          RWAs (Credit + Market + Operational Risks)
          January 2015

    • CA-1.2 CA-1.2 Reporting

      • CA-1.2.1

        Formal reporting to the CBB of capital adequacy must be made in accordance with the requirements set out under Section BR-3.1.

        January 2015

      • CA-1.2.2

        All Bahraini conventional bank licensees must provide the CBB, with immediate written notification (i.e. by no later than the following business day) of any actual breach of the minimum ratios outlined in Subparagraph CA-B.2.1 (a). Where such notification is given, the conventional bank licensee must also:

        (a) Provide the CBB no later than one calendar week after the notification, with a written action plan setting out how the conventional bank licensee proposes to restore the relevant ratios to the required minimum level(s), further, describing how the conventional bank licensee will ensure that a breach of such ratios will not occur again in the future;
        (b) Provide the CBB with weekly reports basis thereafter on the conventional bank licensee's relevant ratios until such ratios have reached the required minimum, level(s) described in Subparagraph CA-B.2.1(a); and
        (c) Take additional note of the Capital Conservation plan requirements in Chapter CA-2A where additional action is required when the Capital Conservation Buffer has been breached.
        January 2015

      • CA-1.2.3

        The conventional bank licensee is required to submit form PIR to the CBB on a weekly basis, until the concerned CARs identified in Paragraph CA-1.2.2 exceed the required minimum ratios.

        January 2015

      • CA-1.2.4

        The CBB will notify conventional bank licensees in writing of any action required of them with regard to the corrective and preventive action (as appropriate) proposed by the conventional bank licensee pursuant to the above, as well as of any other requirement of the CBB in any particular case.

        January 2015

      • CA-1.2.5

        Conventional bank licensees must note that the CBB considers the breach of regulatory CARs to be a very serious matter. Consequently, the CBB may (at its discretion) subject a conventional bank licensee which breaches its CAR(s) to a formal licensing reappraisal. Such reappraisal may be effected either through the CBB's own inspection function or through the use of appointed experts, as appropriate. Following such appraisal, the CBB will notify the conventional bank licensee concerned in writing of its conclusions with regard to the continued licensing of the conventional bank licensee.

        January 2015

      • CA-1.2.6

        The CBB recommends that the conventional bank licensee's compliance officer support and cooperate with the CBB in the monitoring and reporting of the CARs and other regulatory reporting matters. Compliance officers should ensure that their conventional bank licensees have adequate internal systems and controls to comply with these rules.

        January 2015

    • CA-1.3 CA-1.3 Review of Prudential Information Returns

      • CA-1.3.1

        The CBB requires all conventional bank licensees to request their external auditor to conduct a review of the prudential returns on a quarterly basis in accordance with the requirements set out under Section BR-3.1.

        January 2015

      • CA-1.3.2

        If a conventional bank licensee provides prudential returns without any reservation from auditors for two consecutive quarters, it can apply for exemption from such review for a period to be decided by CBB.

        January 2015

      • CA-1.3.3

        For Bahraini conventional bank licensees, all existing exemptions in respect of PIR review as at 31st December 2014 will cease.

        Amended: April 2015
        January 2015

      • CA-1.3.4

        Conventional bank licensees' daily compliance with the capital requirements for credit and market risk must be verified by the independent risk management department and the internal auditor.

        January 2015