• LM LM Liquidity Risk Management [Version 1 October 2007 to 31 July 2018]

    • LM-A LM-A Introduction [Version 1 October 2007 to 31 July 2018]

      • LM-A.1 LM-A.1 Purpose [Version 1 October 2007 to 31 July 2018]

        • Executive Summary [Version 1 October 2007 to 31 July 2018]

          • LM-A.1.1 [Version 1 October 2007 to 31 July 2018]

            The purpose of this Module is to provide a checklist of the key elements of a sound Liquidity Risk Management system which supervisors can expect their banks to observe.

            October 07

          • LM-A.1.2 [Version 1 October 2007 to 31 July 2018]

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

            (a) Licensing Requirements;
            (b) Principles of Business;
            (c) CBB Reporting Requirements;
            (d) Audit Firms; and
            (e) High-Level Controls.
            October 07

        • Legal Basis [Version up to 31 July 2018]

          • LM-A.1.3 [Version up to 31 July 2018]

            This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) on liquidity risk management requirements for Islamic bank licensees, and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 (CBB Law). The directive in this Module is applicable to all Islamic bank licensees.

            Amended: April 2011
            Added: January 2011

          • LM-A.1.4 [Version up to 31 July 2018]

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

            Added: January 2011

      • LM-A.2 LM-A.2 Key Requirements [Version up to 31 July 2018]

        • LM-A.2.1 [Version up to 31 July 2018]

          It is the responsibility of the bank's Board of Directors and management to ensure that the bank has sufficient liquidity to meet its obligations as they fall due.

          October 07

        • LM-A.2.2 [Version 31 July 2018]

          A bank must inform the CBB of any concerns it has about its current or future liquidity profile, and of its plans to rectify/deal with any problems.

          Amended: January 2011
          October 2007

        • LM-A.2.3 [Version to 31 July 2018]

          The CBB has established certain limits for negative maturity mismatch positions. Positions within such periods should be reported on a quarterly basis.

          Amended: April 2014
          Amended: January 2011
          October 2007

        • LM-A.2.4 [Version up to 31 July 2018]

          Currencies should be translated into the reporting currency of the bank (which in any case would be either Bahrain Dinar or US Dollar) at the closing spot mid price on the reporting date and entered in the relevant time band. However, the CBB may also require institutions to provide management information on positions in individual currencies in the event of difficulties either in the individual institution or with the currency in question.

          Amended: January 2011
          October 2007

      • LM-A.3 LM-A.3 Regulation history [Version up to 31 July 2018]

        • LM-A.3.1 [Version up to 31 July 2018]

          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.

          October 07

        • LM-A.3.2 [Version up to 31 July 2018]

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

          Summary of Changes

          Module Ref. Change Date Description of Changes
          LM 01/2011 Various minor amendments to ensure consistency in CBB Rulebook.
          LM-A.1.3 and LM-A.1.4 01/2011 Added legal basis
          LM-A.2.3 and LM-1.3.3 04/2014 Corrected frequency of reporting.
          LM-1.1.3 04/2014 Corrected cross reference.
          LM-1.1 and LM-1.4 04/2015 Corrected reference to PIRI.

        • Evolution of the Module [Version up to 31 July 2018]

          • LM-A.3.3 [Version up to 31 July 2018]

            The module incorporates the requirements set out under Section F of the Prudential Information Returns for Islamic Banks (PIRI) pack.

            Amended July 09
            October 07

        • Effective Date [Version up to 31 July 2018]

          • LM-A.3.4 [Version up to 31 July 2018]

            The contents in this Module are effective from the date depicted in the original circulars/pack (see Paragraph LM-A.3.3) from which the requirements are compiled.

            October 07

    • LM-1 LM-1 Prudential Information [Version up to 31 July 2018]

      • LM-1.1 LM-1.1 Introduction [Version up to 31 July 2018]

        • LM-1.1.1 [Version up to 31 July 2018]

          An important element of banking is managing liquidity. Long-term financing contracts may be financed by amounts received from customers for short-term investments. As a result of this, a bank is exposed to the risk that investors' demands for repayment might outstrip its ability to transform assets into cash.

          October 07

        • Liquidity Risk Management Reporting under Section E of the PIRI [Version up to 31 July 2018]

          • LM-1.1.2 [Version up to 31 July 2018]

            The purpose of this Chapter is to introduce the CBB's supervisory approach with respect to reporting requirements and bank's obligations in terms of its liquidity management practices.

            Amended: January 2011
            October 2007

          • LM-1.1.3 [Version up to 31 July 2018]

            The contents of this Chapter should be read in conjunction with the guidelines set out under Section E of the PIRI (in Appendix BR-4) and PIRI reporting forms (in Appendix BR-5).

            Amended: April 2015
            April 2014

      • LM-1.2 LM-1.2 The Bank's Prudential Obligation [Version up to 31 July 2018]

        • LM-1.2.1 [Version up to 31 July 2018]

          It is the responsibility of the bank's Board of Directors and management to ensure that the bank has sufficient liquidity to meet its obligations as they fall due.

          October 07

        • LM-1.2.2 [Version up to 31 July 2018]

          A bank must inform the CBB of any concerns it has about its current or future liquidity profile, and of its plans to rectify/deal with any problems.

          Amended: January 2011
          October 2007

        • LM-1.2.3 [Version up to 31 July 2018]

          Banks will be expected to have formal written policies which limit liquidity risk to acceptable levels; appropriate liquidity measurement and information systems and clearly defined managerial responsibilities for managing liquidity. These policies, controls and systems are to be observed on a daily basis and reviewed to take account of changing circumstances.

          October 07

      • LM-1.3 LM-1.3 The CBB's Obligation [Version up to 31 July 2018]

        • LM-1.3.1 [Version up to 31 July 2018]

          The CBB will review with banks their policies, systems and controls for managing their liquidity.

          Amended: January 2011
          October 2007

        • LM-1.3.2 [Version up to 31 July 2018]

          Banks are expected to monitor and maintain adequate liquidity not only for meeting the requirements of the unrestricted investment account holders, but also that arising for the restricted investment account holders.

          October 07

        • LM-1.3.3 [Version up to 31 July 2018]

          The CBB has established the following limits for negative maturity mismatch positions. Positions within such periods should be reported on a quarterly basis as part of the PIRI (see Section BR-3):

          (i)
          Self Financed and Current Accounts Only
          Period Limit*
          0-8 days 10%
          8 days - 1 month 20%
          (ii)
          Unrestricted Investment
          Period Limit*
          0-8 days 10%
          8 days - 1 month 20%
          (iii)
          Restricted Investment Accounts Only
          Period Limit*
          0-8 days 10%
          8 days - 1 month 20%
          (iv)
          Self Financed, Restricted/ Unrestricted Investment Accounts & Current Accounts
          Period Limit*
          0-8 days 15%
          8 days - 1 month 25%
          Amended: April 2014
          Amended: January 2011
          October 2007

      • LM-1.4 LM-1.4 Liquidity Reporting in Individual Currencies [Version up to 31 July 2018]

        • LM-1.4.1 [Version up to 31 July 2018]

          Section E of the PIRI (Appendix BR-5) should be completed on the basis of all currencies combined.

          Amended: April 2015
          July 09
          October 07

        • LM-1.4.2 [Version up to 31 July 2018]

          Currencies should be translated into the reporting currency of the bank (which in any case would be either Bahrain Dinar or US Dollar) at the closing spot mid price on the reporting date and entered in the relevant time band. However, the CBB may require institutions to provide management information on positions in individual currencies in the event of difficulties either in the individual institution or with the currency in question.

          Amended: January 2011
          October 2007