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  • RM-A RM-A Introduction

    • RM-A.1 RM-A.1 Purpose

      • Executive Summary

        • RM-A.1.1

          This Module sets out principles of risk management for Islamic bank licensees. Apart from a general requirement in RM-1.1.1 below, all other principles are grouped into six categories of risks, and are to be used as the basis for Islamic bank licensees' risk management processes.

          January 2013

      • Introduction

        • RM-A.1.2

          This Module provides a set of guidelines of best practice for establishing and implementing effective risk management in Islamic bank licensees. This Module follows the Guiding Principles included in the Islamic Financial Services Board (IFSB) (Risk Management Standard issued in December 2005) and risk management principles issued by the Basel committee.

          January 2013

        • RM-A.1.3

          This Module sets out fifteen principles of risk management that give practical effect to managing the risks underlying the business objectives that Islamic bank licensees may adopt. The Module provides some examples of current practices, recognising that these practices may change as markets change and as technology, financial engineering and improved coordination between regulatory authorities makes other strategies available. However, the Module does not detail every possible control procedure.

          January 2013

        • RM-A.1.4

          The Module provides specific guidance and outlines a set of principles applicable to six categories of risk:

          (a) Credit risk;
          (b) Equity investment risk;
          (c) Market risk;
          (d) Liquidity risk;
          (e) Rate of return risk; and
          (f) Operational risk .
          January 2013

        • RM-A.1.5

          The Central Bank of Bahrain ('the CBB') recognises that the specific risk management practices of each Islamic bank licensee will vary in scope and content depending on its activities. All Islamic bank licensees are expected to make meaningful risk assessments based on the principles described in this Module.

          January 2013

        • RM-A.1.6

          It is crucial for Islamic bank licensees to recognise and evaluate the overlapping nature and transformation of risks that exist between and among the categories of the risks noted in Paragraph RM-A.1.4. In addition, Islamic bank licensees may face consequential business risks relating to developments in the external marketplace. Adverse changes in Islamic bank licensees markets, counterparties, or products as well as changes in the economic and political environments in which Islamic bank licensees operate and the effects of different Shari a rulings are examples of business risk. These changes may affect Islamic bank licensees business plans, supporting systems and their financial position. In this regard, Islamic bank licensees are expected to view the management of these risks from a holistic perspective.

          January 2013

        • RM-A.1.7

          Islamic bank licensees are also exposed to reputational risk arising from failures in governance, business strategy and processes. Negative publicity about the concerned Islamic bank licensees business practices, particularly relating to Shari a non-compliance in products and services, could have an impact upon market position, profitability and liquidity.

          January 2013

      • Legal Basis

        • RM-A.1.8

          This Module contains the CBB s Directive (as amended from time to time) relating to risk management 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 (including their approved persons).

          January 2013

        • RM-A.1.9

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

          January 2013

    • RM-A.2 RM-A.2 Module History

      • Evolution of the Module

        • RM-A.2.1

          This Module was first issued in January 2013. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.

          January 2013

        • RM-A.2.2

          The most recent changes made to this Module are detailed in the table below:

          January 2013

      • Summary of Changes

        Module Ref. Change Date Description of Changes
        RM-2.1.2,
        RM-2.1.13,
        RM-2.2.15,
        RM-3.3.4, and
        RM-7.2.4         		04/2013 Minor corrections.
        RM-1.1.3 01/2020 Amended Paragraph on approval of the banks policies and procedures.
        RM-6.2.2. 01/2020 Amended Paragraph on approval of the banks policies and procedures.
             
        Amended: January 2020
        Amended: April 2013
        January 2013

      • Superseded Requirements

        • RM-A.2.3

          This Module does not replace any regulations or circulars in force prior to January 2013.

          January 2013