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.

CM-A.1.2

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

CM-A.2.1

Branches of foreign banks in Bahrain are expected to maintain provisions against potential credit 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 should advise the Agency, on an annual basis and in writing, of the amount of provisions set aside for the bad debts of Bahrain branch(es).

CM-A.2.2

The Agency requires all banks incorporated in Bahrain 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 should be formally approved by the Board of Directors.

CM-A.2.3

The aggregate of large exposures may not exceed 800% of the bank's (consolidated) capital base. A bank may not incur a combined exposure (funded by unrestricted investment accounts, the bank's own funds and restricted investment accounts) to an individual counterparty or group of closely related counterparties which exceeds 35% of the reporting bank's (consolidated) capital base.

CM-A.2.4

The aggregate exposures to all connected counterparties when taken together, may not exceed 60% of (consolidated) capital base.

CM-A.2.5

No Islamic financing provided by a bank to its own external auditors shall be permitted.

CM-A.2.6

All banks incorporated in Bahrain are required to report (for the attention of the Director of Financial Institutions Supervision Directorate) all large exposures, (whether exempt or not) on a quarterly basis using the return provided in Appendix BR 3.

CM-A.2.7

The Agency's prior written consent should be obtained for any credit facility to an employee where the amount of such facility, either singly or when added to an existing facility/existing facilities outstanding to that employee at that date, would be equal to or in excess of BD 100,000 (or its equivalent).

CM-A.2.8

Licensees may only provide a new consumer facility (or renew, extend or otherwise modify an existing consumer facility) for an amount such that the counterparty's total monthly repayments on all his consumer finance commitments do not exceed 50% of his monthly gross income.

CM-A.2.9

Licensees must make clear to potential counterparties, prior to entering into a consumer finance agreement, all relevant key terms of the agreement.

CM-A.2.10

The Agency's prior written consent should be obtained before writing off any credit facility provided to senior employee/officer/Director of the reporting bank or other bank(s) who fails to discharge his/her repayment obligations to the reporting bank.

CM-A.2.11

The bank should notify the Agency of any write-off of a credit facility, (i.e., Murabaha or any other credit facility) of an amount in excess of BD 100,000 (or its equivalent).

CM-A.3.1

This module was first issued on 1st January 2005 as part of the Islamic principles volume. All regulations in this volume have been effective since this date. All subsequent changes are dated with the month and year at the base of the relevant page and in the Table of Contents. Chapter 3 of Module UG provides further details on Rulebook maintenance and control.

CM-A.3.2

A list of most recent changes made to this module are detailed in the table below:

Summary of changes

Evolution of the Module

Effective date