PCD-A.2.1

A banking group is a parent bank and all its subsidiaries.

PCD-A.2.2

A subsidiary is an entity, including an unincorporated entity such as a partnership, that is controlled by another bank (known as the parent bank).

PCD-A.2.3

A parent bank is a bank which has one or more subsidiaries.

PCD-A.2.4

Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

PCD-A.2.5

Control is presumed to exist when the parent bank owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity unless, in exceptional circumstances, the bank can clearly demonstrate that such ownership does not constitute control. Control also exists when the parent owns half or less of the voting power of an entity when there is power:

PCD-A.2.6

A bank may own share warrants, share call options, equity instruments that are convertible into ordinary shares, or other similar instruments that have the potential, if exercised or converted, to give the bank voting power or reduce another party's voting power over the financial and operating policies of another entity (potential voting rights). The existence and effect of potential voting rights that are currently exercisable or convertible, including potential voting rights held by another entity, are considered when assessing whether the bank has the power to govern the financial and operating policies of another entity. Potential voting rights are not currently exercisable or convertible when, for example, they cannot be exercised or converted until a future date or until the occurrence of a future event.

PCD-A.2.7

In assessing whether potential voting rights contribute to control, the bank examines all facts and circumstances (including the terms of exercise of the potential voting rights and any other contractual arrangements whether considered individually or in combination) that affect potential voting rights, except the intention of management and the financial ability to exercise or convert.

PCD-A.2.8

A parent bank loses control when it loses the power to govern the financial and operating policies of an investee so as to obtain benefit from its activities. The loss of control can occur with or without a change in absolute or relative ownership levels. It could occur, for example, when a subsidiary becomes subject to the control of a government, court, administrator or regulator. It could also occur as a result of a contractual agreement.

PCD-A.2.9

Significant investments include investments in:

¹ Securities entities include category one and category two investment firms incorporated in Bahrain and equivalent entities incorporated outside Bahrain.

PCD-A.2.10

For the sake of clarity, investment management entities must be treated as financial entities (for further information, see paragraph PCD-1.1.2).

PCD-A.2.11

Minority interest is that portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent bank.

PCD-A.2.12

Although consolidation and pro-rata consolidation rules outlined in this module are prescribed only for computing regulatory minimum capital, the procedures applied for such consolidation and pro-rata consolidation are performed in accordance with applicable accounting standards and best practices which may be subject to change from time to time.

PCD-A.2.13

A "qualifying holding" is defined (see Section CM-4.4 for associated terms) as any investment in the capital instruments of another entity by a locally incorporated bank which is equivalent to or more than 10% of the locally incorporated bank's capital base (as reported in the most recent PIR submitted to the CBB.