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  • Liquidity Management Policy

    • RM-5.3.2

      Islamic bank licensees must maintain adequate liquidity to meet their obligations at all times. In this regard and taking into consideration the nature of the Islamic bank licensees, its business activities and its capital market environment, the Islamic bank licensees must have in place liquidity management policies, which must be reviewed periodically by the Board, covering:

      (a) Strategy for managing liquidity involving effective board of directors (BOD) and senior management oversight;
      (b) A framework for developing and implementing sound processes for measuring and monitoring liquidity;
      (c) Adequate systems in place for monitoring and reporting liquidity exposures on a periodic basis;
      (d) Adequate funding capacity, with particular reference to the board s assessment of the willingness, ability and likely support of shareholders to provide additional capital when necessary;
      (e) Access to liquidity through fixed asset realizations and arrangements such as sale and lease-back; and
      (f) Liquidity crisis management.
      January 2013

    • RM-5.3.3

      The policies should incorporate both quantitative and qualitative factors. Quantitative factors include the extent of diversity and sources of funds, mismatches of liabilities and assets concentration of the funding base, reliance on marketable assets, or availability of standby lines of external funding. Qualitative factors include assessing the general ability of the management, the particular skills in treasury management and public relations, the quality of MIS, Islamic bank licensees' reputation in the market, the willingness and ability of shareholders to provide additional capital and, in the case of a branch or subsidiary the willingness and ability of the head office or parent to provide liquidity.

      January 2013

    • RM-5.3.4

      Since liquidity infrastructures vary from country to country, the Islamic bank licensees operating across jurisdictions are expected to adhere to local requirements for liquidity management. In this regard, Islamic bank licensees which are part of a group should normally be expected to be able to stand alone, and thus, to monitor and manage their own liquidity separately. However, with the agreement of the CBB, branches of foreign banks operating in Bahrain may take into account the assurance of liquidity provision by head office to the Bahrain branch.

      January 2013