• LM-12 LM-12 Net Stable Funding Ratio

    • LM-12.1 LM-12.1 Introduction

      • LM-12.1.1

        The content of this section is applicable to all locally incorporated conventional banks licensed by the Central Bank of Bahrain.

        August 2018

      • LM-12.1.2

        The objective of the Net Stable Funding Ratio (NSFR) is to promote the resilience of banks' liquidity risk profiles and to incentivise a more resilient banking sector over a longer time horizon. The NSFR will require banks to maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities. A sustainable funding structure is intended to reduce the likelihood that disruptions to a bank's regular sources of funding will erode its liquidity position in a way that would increase the risk of its failure and potentially lead to broader systemic stress. The NSFR limits overreliance on short-term wholesale funding, encourages better assessment of funding risk across all on-balance sheet and off-balance sheet items, and promotes funding stability.

        August 2018

    • LM-12.2 LM-12.2 Scope of Application

      • LM-12.2.1

        Bahraini conventional bank licensees shall calculate the NSFR

        separately for each of the following levels:

        (a) Level (A): The NSFR for the bank on solo basis; and
        (b) Level (B): The NSFR for the bank on a consolidated basis.
        August 2018

      • LM-12.2.2

        When applying these requirements on a consolidated basis, the available stable funding ('ASF') factors applied for branches and subsidiaries outside Bahrain must be as per the requirements in this Module.

        August 2018

    • LM-12.3 LM-12.3 Requirements and Calculation Methodology

      • LM-12.3.1

        The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. This ratio must be equal to at least 100 percent on an ongoing basis. 'Available stable funding' is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to 1 year. 'Required stable funding' is defined as the portion of assets and OBS exposures expected to be funded on an ongoing basis over a 1-year horizon. The amount of such stable funding required of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution, as well as those of its OBS exposures.

        August 2018

      • LM-12.3.2

        The NSFR (as a percentage) must be calculated as follows:

        Available stable funding >=100
        Required stable funding
        August 2018

      • LM-12.3.3

        The NSFR definitions mirror those outlined in the section LM-11 'Liquidity Coverage Ratio unless otherwise specified.

        August 2018

    • LM-12.4 LM-12.4 NSFR Components

      • A) Available Stable Funding

        • LM-12.4.1

          The amount of ASF is measured based on the broad characteristics of the relative stability of an institution's funding sources, including the contractual maturity of its liabilities and the differences in the propensity of different types of funding providers to withdraw their funding. The amount of ASF is calculated by first assigning the carrying value of a bank's capital and liabilities to one of five categories, as presented below in Table (1), before the application of any regulatory deductions, filters or other adjustments. The amount assigned to each category is then multiplied by an ASF factor, and the total ASF is the sum of the weighted amounts.

          August 2018

        • LM-12.4.2

          When determining the maturity of an equity or liability instrument, investors are assumed to redeem a call option at the earliest possible date. In particular, where the market expects certain liabilities to be redeemed before their legal final maturity date, banks must assume such behaviour for the purpose of the NSFR and include these liabilities in the corresponding ASF category. For long-dated liabilities, only the portion of cash flows falling at or beyond the 6-month and 1-year time horizons must be treated as having an effective residual maturity of 6 months or more, and 1 year or more, respectively.

          August 2018

      • Calculation of Derivative Liability Amounts

        • LM-12.4.3

          Derivative liabilities are calculated first based on the replacement cost for derivative contracts (obtained by marking to market) where the contract has a negative value. When an eligible bilateral netting contract is in place that meets the conditions as specified in the 'bilateral netting agreements' conditions specified in Appendix F, the replacement cost for the set of derivative exposures covered by the contract will be the net replacement cost.

          August 2018

        • LM-12.4.4

          In calculating NSFR derivative liabilities, collateral posted in the form ofvariation margin in connection with derivative contracts, regardless of the asset type, must be deducted from the negative replacement cost amount.8, 2


          8 NSFR derivative liabilities = (derivative liabilities) - (total collateral posted as variation margin on derivative liabilities).

          2 To the extent that the bank's accounting framework reflects on the balance sheet, in connection with a derivative contract, an asset associated with collateral posted as variation margin that is deducted from the replacement cost amount for purposes of the NSFR, that asset should not be included in the calculation of a bank's required stable funding ('RSF') to avoid any double-counting.

          August 2018

      • Liabilities and Capital Receiving a 100 percent ASF Factor

        • LM-12.4.5

          Liabilities and capital instruments receiving a 100 percent ASF factor comprise:

          (a) The total amount of regulatory capital, before the application of capital deductions9, including general provisions calculated under the regulatory capital and excluding the proportion of Tier 2 instruments with residual maturity of less than 1 year. With regards to branches of foreign banks, this category includes the actual value of funds designated for the branch/branches;
          (b) The total amount of any capital instrument not included in (a ) that has an effective residual maturity of 1 year or more, but excluding any instruments with explicit or embedded options that, if exercised, would reduce the expected maturity to less than 1 year; and
          (c) The total amount of secured and unsecured borrowings and liabilities (including term deposits) with effective residual maturities of 1 year or more. Cash flows falling below the 1-year horizon, but arising from liabilities with a final maturity greater than 1 year do not qualify for the 100 percent ASF factor.

          9 Capital instruments reported here should meet all requirements outlined in CBB Capital Adequacy Ratio—Basel III Guidelines.

          August 2018

      • Liabilities Receiving a 95 percent ASF Factor

        • LM-12.4.6

          Liabilities receiving a 95 percent ASF factor comprise of 'stable' non-maturing deposits (demand) deposits, saving deposits and/or term deposits with residual maturities of less than 1 year provided by retail customers.

          August 2018

        • LM-12.4.7

          Stable deposits for this purpose are the amount of the deposits that are fully insured10 by a deposit insurance scheme, and where:

          (a) The depositors have other established relationships with the bank that make deposit withdrawal highly unlikely; or
          (b) The deposits are in transactional accounts (e.g. accounts where salaries are automatically deposited).

          All other deposits and accounts that do not satisfy these criteria shall be treated as less stable deposits.


          10 'Fully insured' means that 100 percent of the deposit amount is covered by an effective deposit insurance scheme. Deposit balances up to the deposit insurance limit can be treated as "fully insured". However, any amount in excess of the deposit insurance limit is to be treated as 'less stable'. For example, if a depositor has a deposit of BD 150,000 that is covered by a deposit insurance scheme, which has a limit of BD 100,000, where the depositor would receive at least BD 100,000 from the deposit insurance scheme if the bank were unable to pay, then BD 100,000 would be considered "fully insured" and treated as stable deposits, while BD 50,000 would be treated as less stable deposits.

          August 2018

        • LM-12.4.8

          The presence of deposit insurance alone is not sufficient to consider a deposit 'stable' if it does not satisfy all of the conditions previously outlined.

          August 2018

      • Liabilities Receiving a 90 Percent ASF Factor

        • LM-12.4.9

          Liabilities receiving a 90 percent ASF factor comprise of 'less stable' demand deposits, saving deposits and/or term deposits with residual maturities of less than 1 year provided by retail and small business customers.

          August 2018

      • Liabilities Receiving a 50 Percent ASF Factor

        • LM-12.4.10

          Liabilities receiving a 50 percent ASF factor comprise:

          (a) Funding (secured and unsecured) with a residual maturity of less than 1 year provided by non-financial corporate customers;
          (b) Operational deposits (as defined in Appendix E);
          (c) Funding with residual maturity of less than 1 year from sovereigns, public sector entities (PSEs), and multilateral and national development banks; and
          (d) Other funding (secured and unsecured) not included in the categories above with a residual maturity of between 6 months to less than 1 year, including funding from central banks and financial institutions.

          'Funding' refers to all sources of funding including deposits, loans and others.

          August 2018

      • 5) Liabilities Receiving a 0 Percent ASF Factor

        • LM-12.4.11

          Liabilities receiving a 0 percent ASF factor comprise:

          (a) All other liability categories not included in the above categories, including other funding with residual maturity of less than 6 months from the central bank and financial institutions;
          (b) Other liabilities without a stated maturity. This category may include short positions and open maturity positions. Two exceptions can be recognized for liabilities without a stated maturity:
          i. First, deferred tax liabilities, which must be treated according to the nearest possible date on which such liabilities could be realized; and
          ii. Second, minority interest, which must be treated according to the term of the instrument, usually in perpetuity.
          These exceptions would then be assigned either a 100 percent ASF factor if the effective maturity is 1 year or greater, or 50 percent, if the effective maturity is between 6 months and less than 1 year.
          (c) NSFR derivative liabilities, as calculated according to LM-12.4.3 and LM-12.4.4, and NSFR derivative assets, as calculated according to LM-12.4.21 and LM-12.4.22, if the NSFR derivative liabilities are greater than NSFR derivative assets;11 and
          (d) 'Trade date' payables arising from purchases of financial instruments, foreign currencies and commodities that (i) are expected to settle within the standard settlement cycle or period that is customary for the relevant exchange or type of transaction, or (ii) have failed to, but are still expected to, settle.

          11 In this case, ASF = 0% x MAX ((NSFR derivative liabilities - NSFR derivative assets), 0).

          August 2018

        • LM-12.4.12

          Table (1) below summarizes the components of each of the ASF categories and the associated maximum ASF factor to be applied in calculating a bank's total amount of available stable funding.

          Table 1: Summary of Liability Categories and Associated ASF Factors

          ASF Factor Components of ASF Category
          100%
          •   Total regulatory capital (excluding Tier 2 instruments with a residual maturity of less than 1 year);
          •   Other capital instruments and liabilities with an effective residual maturity of 1 year or more;
          •   Deferred tax liabilities with a residual maturity of 1 year or greater; and
          •   Minority interest with a residual maturity of 1 year or more.
          95% Stable demand deposits, saving deposits and term deposits with a residual maturity of less than 1 year provided by retail customers.
          90% Less stable demand deposits, saving deposits and term deposits with a residual maturity of less than 1 year provided by retail and small business customers.
          50%
          •   Funding with a residual maturity of less than 1 year provided by non-financial corporate customers;
          •   Operational deposits;
          •   Funding with a residual maturity of less than 1 year from sovereigns, PSEs, and multilateral and national development banks, Bahrain's Social Insurance Organization and GCC PIFs (where the PIF is a controller of the bank);
          •   Other secured or unsecured funding with a residual maturity between 6 months and less than 1 year not included in the above categories, including funding provided by central banks and financial institutions;
          •   Deferred tax liabilities with a residual maturity of between 6 months and less than 1 year; and
          •   Minority interest with residual maturity between 6 months and less than 1 year.
          ASF Factor Components of ASF Category
          0%
          •   All other liabilities and equity not included in the above categories, including liabilities without a stated maturity (with a specific treatment for deferred tax liabilities and minority interests);
          •   NSFR derivative liabilities net of NSFR derivative assets if NSFR derivative liabilities are greater than NSFR derivative assets; and
          •   'Trade date' payables arising from purchases of financial instruments, foreign currencies and commodities.
          Amended: January 2020
          August 2018

      • Required Stable Funding (RSF)

        • LM-12.4.13

          The amount of RSF funding is measured based on the broad characteristics of the liquidity risk profile of an institution's assets and OBS exposures. The amount of required stable funding is calculated by first assigning the carrying value of an institution's assets to the categories listed in Table 2 below. The amount assigned to each category is then multiplied by its associated RSF factor, and the total RSF is the sum of the weighted amounts added to the amount of OBS activity (or potential liquidity exposure) multiplied by its associated RSF factor.

          August 2018

        • LM-12.4.14

          Definitions mirror those outlined in the LCR, unless otherwise specified12.


          12 For the purposes of calculating the NSFR, HQLA are defined as all HQLA without regard to LCR operational requirements and LCR caps on Level 2 and Level 2B assets that may otherwise limit the ability of some HQLA to be included as eligible HQLA in calculation of the LCR.

          August 2018

        • LM-12.4.15

          The RSF factors assigned to various types of assets are intended to approximate the amount of a particular asset that would have to be funded, either because it will be rolled-over, or because it could not be monetised through sale or used as collateral in a secured borrowing transaction over the course of 1 year without significant expense. Such amounts are expected to be supported by stable funding.

          August 2018

        • LM-12.4.16

          Assets must be allocated to the appropriate RSF factor based on their residual maturity or liquidity value. When determining the maturity of an instrument, investors must be assumed to exercise any option to extend maturity. In particular, where the market expects certain assets to be extended in their maturity, banks must assume such behaviour for the purpose of the NSFR and include these assets in the corresponding RSF category. For amortizing loans, the portion that comes due within the 1-year horizon can be treated in the less-than-1-year residual maturity category.

          August 2018

        • LM-12.4.17

          For the purposes of determining its required stable funding, a bank must; (i) include financial instruments, foreign currencies and commodities for which a purchase order has been executed, and (ii) exclude financial instruments, foreign currencies and commodities for which a sales order has been executed, even if such transactions have not been reflected in the balance sheet under a settlement-date accounting model, provided that; (i) such transactions are not reflected as derivatives or secured financing transactions in the bank's balance sheet, and (ii) the effects of such transactions will be reflected in the institution's balance sheet when settled.

          August 2018

      • Encumbered Assets

        • LM-12.4.18

          Encumbered assets receive RSF factors as follows:

          (a) Assets on the balance sheet that are encumbered for 1 year or more receive a 100 percent RSF factor;
          (b) Assets encumbered for a period of between 6 months and less than 1 year receive the following RSF factors:
          i. 50 percent RSF factor if these assets would receive an RSF factor lower than or equal to 50 percent if unencumbered; and ii. If these assets receive an RSF factor higher than 50 percent if unencumbered, the higher RSF factor is applied.
          (c) Where assets have less than 6 months remaining in the encumbrance period, those assets may receive the same RSF factor as an equivalent asset that is unencumbered.

          Assets that are encumbered for exceptional13 central bank liquidity operations receive 0 percent RSF factor.


          13 In general, exceptional central bank liquidity operations are considered to be non-standard, temporary operations conducted by the central bank in a period of market-wide financial stress and/or exceptional macroeconomic challenges.

          August 2018

      • Secured Financing Transactions

        • LM-12.4.19

          For secured funding arrangements, including securities financing transactions, the following applies:

          (a) Banks must include securities that have been borrowed in securities financing transactions (such as reverse repos and collateral swaps), that appear on the banks' balance sheets and where the banks retain beneficial ownership. Otherwise, banks must not include the securities; and
          (b) Where banks have encumbered securities in repos or other securities financing transactions, but have retained beneficial ownership and those assets remain on the bank's balance sheet, the bank must allocate such securities to the appropriate RSF category.
          August 2018

        • LM-12.4.20

          Securities financing transactions with a single counterparty may be measured net when calculating the NSFR, provided that the netting conditions are as set out below:

          (a) Transactions have the same final settlement date;
          (b) The right to net the amount owed to the counterparty with the amount owed by the counterparty is legally enforceable both currently in the normal course of business and in the event of; (i) default; (ii) insolvency; and (iii) bankruptcy; and
          (c) Transactions are settled net, settled simultaneously, or are subject to a settlement mechanism that results in a single net amount on the settlement date.
          August 2018

      • Calculation of Derivative Asset Amounts

        • LM-12.4.21

          Derivative assets are calculated first based on the replacement cost for derivative contracts (obtained by marking to market) where the contract has a positive value. When an eligible bilateral netting contract is in place that meets the conditions as specified, as per the 'bilateral netting agreements' conditions specified in Appendix F, the replacement cost for the set of derivative exposures covered by the contract will be the net replacement cost.

          August 2018

        • LM-12.4.22

          In calculating NSFR derivative assets, collateral received in connection with derivative contracts may not offset the positive replacement cost amount, regardless of whether or not netting is permitted under the bank's operative accounting or risk-based framework, unless it is received in the form of a cash variation margin and meets the conditions as specified in Appendix G14. Any remaining balance sheet liability associated with; (a) variation margin received that does not meet the criteria above, or (b) initial margin received, may not offset derivative assets and must be assigned a 0 percent ASF factor.


          14 NSFR derivative assets = (derivative assets) - (cash collateral received as variation margin on derivative assets).

          August 2018

      • 1) Assets Assigned a 0 Percent RSF Factor

        • LM-12.4.23

          Assets assigned a 0 percent RSF factor comprise:

          (a) Coins and banknotes immediately available to meet obligations;
          (b) All central bank reserves (including required reserves and excess reserves);
          (c) All claims on central banks with residual maturities of less than 6 months; and
          (d) 'Trade date' receivables arising from the sales of financial instruments, foreign currencies and commodities that; (i) are expected to settle within the standard settlement cycle or period that is customary for the relevant exchange or type of transaction, or (ii) have failed to, but are still expected to, settle.
          August 2018

      • 2) Assets Assigned a 5 Percent RSF Factor

        • LM-12.4.24

          Assets assigned a 5 percent RSF factor comprise unencumbered level 1 HQLA, as defined in Appendix H, excluding assets receiving a 0 percent RSF factor as specified above, and including:

          (a) Marketable securities representing claims on or guaranteed by sovereigns, central banks, PSEs and MDBs that are assigned a 0 percent risk weight under Appendix I, Government of Bahrain, the CBB, the BIS, the IMG, the ECB and the EC; and
          (b) Marketable securities representing claims on, or guaranteed by, certain non-0 percent risk-weighted sovereign or central bank debt securities, as specified in Appendix I.
          August 2018

      • 3) Assets Assigned a 10 Percent RSF Factor

        • LM-12.4.25

          Unencumbered loans and deposits with financial institutions with residual maturities of less than 6 months, where the loan is secured against level 1 HQLA as defined in Appendix H, and where the bank has the ability to freely re-hypothecate the received collateral for the life of the loan.

          August 2018

      • 4) Assets Assigned a 15 Percent RSF Factor

        • LM-12.4.26

          Assets assigned a 15 percent RSF factor comprise of:

          (a) Unencumbered level 2A HQLA, as defined in Appendix H, including:
          (i) Marketable securities representing claims on or guaranteed by sovereigns, central banks, PSEs or MDBs that are assigned a 20 percent risk weight under Appendix I; and
          (ii) Corporate debt securities/Sukuk (including commercial paper) and covered bonds with a credit rating equal or equivalent to at least AA-.
          (b) Other unencumbered loans and deposits with financial institutions with residual maturities of less than 6 months, not included in LM-12.4.25.
          August 2018

      • 5) Assets Assigned a 50 Percent RSF Factor

        • LM-12.4.27

          Assets assigned a 50 percent RSF factor comprise:

          (a) Unencumbered level 2B HQLA, as defined and subject to the conditions set forth in Appendix H, including:
          (i) Corporate debt securities/Sukuk (including commercial paper) with a credit rating of between A+ and BBB-;
          (ii) Exchange-traded common equity shares not issued by financial institutions or their affiliates.
          (b) Any HQLA, as defined in Appendix H, that are encumbered for a period of between 6 months and less than 1 year;
          (c) All loans and deposits with financial institutions and central banks with residual maturity of between 6 months and less than 1 year;
          (d) Deposits held at other deposit-taking financial institutions for operational purposes that are subject to the 50 percent ASF factor in LM-12.4.10; and
          (e) All other non-HQLA not included in the above categories that have a residual maturity of less than 1 year, including loans to non-financial corporate clients, loans to retail customers (i.e. natural persons) and small business customers, and loans to sovereigns and PSEs.
          August 2018

      • 6) Assets Assigned a 65 Percent RSF Factor

        • LM-12.4.28

          Assets assigned a 65 percent RSF factor comprise of:

          (a) Unencumbered residential mortgages with a residual maturity of 1 year or more that would qualify for a 35 percent or lower risk weight under the Capital Adequacy Ratio Guidelines; and
          (b) Other unencumbered loans and deposits not included in the above categories, excluding loans and deposits with financial institutions, with a residual maturity of 1 year or more that would qualify for a 35 percent or lower risk weight under the CBB Capital Adequacy Ratio Guidelines.
          August 2018

      • 7) Assets Assigned a 85 Percent RSF Factor

        • LM-12.4.29

          Assets assigned an 85 percent RSF factor comprise:

          (a) Cash, securities or other assets posted as initial margin for derivative contracts15 and cash or other assets provided to contribute to the default fund of a central counterparty ('CCP'). Where securities or other assets, posted as initial margin for derivative contracts, would otherwise receive a higher RSF factor, they must retain that higher factor.
          (b) Other unencumbered performing loans16 that do not qualify for the 35 percent or lower risk weight under the CBB Capital Adequacy Ratio Guidelines and have residual maturities of 1 year or more, excluding loans and deposits with financial institutions;
          (c) Unencumbered securities with a remaining maturity of 1 year or more and exchange-traded equities, in cases where the issuer is not in default and where the securities do not qualify as HQLA according to the LCR; and
          (d) Physical traded commodities, including gold.

          15 Initial margin posted on behalf of a customer, where the bank does not guarantee performance of the third party, would be exempt from this requirement.

          16 Performing loans are considered to be those that are not past due for more than 90 days. Conversely, non-performing loans are considered to be loans that are more than 90 days past due.

          August 2018

      • 8) Assets Assigned a 100 Percent RSF Factor

        • LM-12.4.30

          Assets assigned a 100 percent RSF factor comprise:

          (a) All assets that are encumbered for a period of 1 year or more;
          (b) NSFR derivative assets, as calculated according to LM-12.4.21 and LM-12.4.22, and NSFR derivative liabilities, as calculated according to LM-12.4.3 and LM-12.4.4, if NSFR derivative assets are greater than NSFR derivative liabilities;17
          (c) All other assets not included in the above categories, including non-performing loans (net of specific provisions), loans and deposits with financial institutions with a residual maturity of 1 year or more, non-exchange-traded equities, fixed assets, items deducted from regulatory capital, insurance assets and defaulted securities; and
          (d) 20 percent of derivative liabilities (i.e. negative replacement cost amounts), as calculated according to LM-12.4.3 (before deducting variation margin posted). The CBB has the discretion to lower the value of this factor, with a floor of 5%.

          17 RSF = 100% x MAX ((NSFR derivative assets - NSFR derivative liabilities), 0).

          August 2018

        • LM-12.4.31

          Table 2 summarizes the specific types of assets to be assigned to each asset category and their associated RSF factor.

          Table 2: Summary of Asset Categories and Associated RSF Factors

          RSF Factor Components of RSF Factor
          0%
          •   Coins and banknotes;
          •   All central bank reserves;
          •   All claims on central banks with residual maturities of less than 6 months; and
          •   'Trade date' receivables arising from the sales of financial instruments, foreign currencies and commodities.
          5% Unencumbered level 1 HQLA, excluding coins, banknotes and central bank reserves.
          10% Unencumbered loans and deposits with financial institutions with residual maturities of less than 6 months, where the loan is secured against level 1 HQLA and where the bank has the ability to freely rehypothecate the received collateral for the life of the loan.
          15%
          •   Unencumbered level 2A HQLA;
          •   All other unencumbered loans and deposits with financial institutions with residual maturities of less than 6 months not included in the above categories.
          50%
          •   Unencumbered level 2B HQLA;
          •   HQLA encumbered for a period of 6 months or more, and less than 1 year;
          •   Loans and deposits with financial institutions and central banks with residual maturities between 6 months and less than 1 year;
          •   Deposits held at other financial institutions for operational purposes; and
          •   All other assets not included in the above categories with residual maturity of less than 1 year, including loans to non-financial corporate clients, loans to retail and small business customers, and loans to sovereigns and PSEs.
          65%
          •   Unencumbered residential mortgages with a residual maturity of 1 year or more, and with a risk weight of less than or equal to 35 percent, as per the CBB Capital Adequacy Ratio Guidelines; and
          •   Other unencumbered loans and deposits not included in the above categories, excluding loans and deposits with financial institutions, with a residual maturity of 1 year or more, and with a risk weight of less than or equal to 35 percent, as per the CBB Capital Adequacy Ratio Guidelines.
          85%
          •   Cash, securities or other assets posted as initial margin for derivative contracts and cash or other assets provided to contribute to the default fund of a CCP;
          •   Other unencumbered performing loans with risk weights greater than 35 percent, as per the CBB Capital Adequacy Ratio Guidelines and residual maturities of 1 year or more, excluding loans and deposits with financial institutions;
          Unencumbered securities that are not in default and do not qualify as HQLA with a remaining maturity of 1 year or more, and exchange-traded equities in cases where the issuer is not in default and where the securities do not qualify as HQLA according to the LCR; and
          •   Physical traded commodities, including gold.
          100%
          •   All assets that are encumbered for a period of 1 year or more;
          •   NSFR derivative assets net of NSFR derivative liabilities, if NSFR derivative assets are greater than NSFR derivative liabilities;
          •   20 percent of derivative liabilities (net of eligible cash variation margin); The CBB has discretion to lower the value of this factor, with a floor of 5%; and
          •   All other assets not included in the above categories, including non-performing loans (net of specific provisions), loans and deposits with financial institutions with a residual maturity of 1 year or more, non-exchange-traded equities, fixed assets, items deducted from regulatory capital, insurance assets and defaulted securities.
          August 2018

      • Off-balance Sheet Exposures

        • LM-12.4.32

          Many potential OBS liquidity exposures require little direct or immediate funding, but can lead to significant liquidity drains over a longer time horizon. The NSFR assigns an RSF factor to various OBS activities in order to ensure that institutions hold stable funding for the portion of OBS exposures that may be expected to require funding within a 1-year horizon.

          August 2018

        • LM-12.4.33

          Consistent with the LCR, the NSFR identifies OBS exposure categories based broadly on whether the commitment is a credit or liquidity facility, or some other contingent funding obligation. Table 3 identifies the specific types of OBS exposures to be assigned to each OBS category and their associated RSF factor.

          Table 3: Summary of OBS Categories and Associated RSF Factors

          RSF Factor RSF Category
          5% of the currently undrawn portion
          •   Irrevocable and conditionally revocable credit and liquidity facilities;
          •   Other contingent funding obligations, including products and instruments such as:
          •   Unconditionally revocable credit and liquidity facilities;
          •   Trade finance-related obligations (including guarantees and letters of credit);
          •   Guarantees and letters of credit unrelated to trade finance obligations;
          •   Non-contractual obligations such as:
          •   Potential requests for debt repurchases of the bank's own debt, or that of related conduits, securities investment vehicles and other such financing facilities;
          •   Structured products where customers anticipate ready marketability, such as adjustable rate notes and variable rate demand notes ('VRDNs').
          •   Managed funds that are marketed with the objective of maintaining a stable value.
          August 2018

    • LM-12.5 LM-12.5 General Disclosure Requirements

      • LM-12.5.1

        Bahraini conventional bank licensees must report their NSFR ratios to the CBB on a quarterly basis within 14 calendar days of the quarter end as per Appendix BR-24.

        Amended: January 2020
        August 2018

      • LM-12.5.2

        Bahraini conventional bank licensees must disclose the NSFR on a consolidated basis in their quarterly and year-end financial statements as per Appendix C. Banks must also make previous NSFR reports available on their websites.

        Amended: January 2020
        August 2018

      • LM-12.5.3

        Bahraini conventional bank licensees must must provide sufficient qualitative disclosures relevant to the NSFR, in their quarterly and year-end financial statements, to facilitate understanding of the results and data disclosed. This may include analysis of the main drivers of the NSFR results, changes during the period for which the data is prepared or compared to the date of the last disclosure (such as changes to the bank's strategy, funding structure or any other circumstances).

        Amended: January 2020
        August 2018