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  • CA-B.1 CA-B.1 Scope

    • CA-B.1.1

      All Bahraini Islamic bank licensees are required to measure and apply capital charges with respect to their credit risk, operational risk and market risks capital requirements.

      January 2015

    • CA-B.1.2

      Rules in this Module are applicable to Bahraini Islamic bank licensees on both a solo (i.e. including their foreign branches) and on a consolidated group basis as described below. The applicable ratios and methodology are described in this Chapter and Chapters CA-1 and CA-2 for solo and consolidated CAR calculation.

      January 2015

    • CA-B.1.2A

      The scope of this Module includes the parent bank and all its banking subsidiaries and any other financial entities such as Special Purpose Vehicles (SPVs) which are required to be consolidated for regulatory purposes by the CBB. The assets and liabilities of all such subsidiaries must be fully consolidated on a line-by-line basis. In some cases, the assets of foreign banking subsidiaries will be allowed to be included by way of aggregation (see CA-B.1.4 onward). All other financial activities (both regulated and unregulated) must be captured through consolidation. Generally, majority-owned or controlled banking and other financial entities must be fully consolidated according to the methodologies outlined in this Module. If any majority-owned financial entities are not consolidated for capital purposes, all equity and other regulatory capital investments in those entities must be deducted and the assets and liabilities as well as third-party capital investments in the entity must be removed from the Islamic bank licensee's balance sheet.

      January 2015

    • CA-B.1.2B

      In addition, this Module applies to Islamic bank licensees on a solo basis (also including their foreign branches). This means that the assets and liabilities of subsidiaries referred to in Paragraph CA-B.1.2A must not be included in the balance sheet of the parent bank for the solo capital calculation and all equity and other regulatory capital investments in those entities must be deducted from the applicable components of Total Capital of the parent bank.

      January 2015

    • CA-B.1.2C

      Where an Islamic bank licensee has no subsidiaries as referred to in Paragraph CA-B.1.2A, then the consolidated CAR requirements of this Module apply to the Islamic bank licensee on a stand-alone basis.

      January 2015

    • CA-B.1.2D

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

      January 2015

    • CA-B.1.3

      If Islamic bank licensees have investments in or control over banking or financial entities, including SPVs, they will also need to apply rules set out in Section CA-2.4 of this Module for the calculation of their solo and consolidated Capital Adequacy Ratios (CAR).

      January 2015

    • Full Consolidation Versus Aggregation

      • CA-B.1.4

        Generally, wherever possible, the assets and liabilities of banking subsidiaries must be consolidated on a line-by-line basis using the risk-weighting and other rules and guidance in this Module. In some cases, foreign banking subsidiaries are subject to slightly differing rules by their host regulator. In such cases it may be more convenient to add in the risk-weighted assets of the subsidiary as calculated by host rules rather than by adding in the assets of the subsidiary and subjecting them to CBB requirements and risk weights. This process of using host risk-weights instead of CBB risk-weights is termed 'aggregation'. Also host rules may treat some capital items differently to CBB rules. For example, T2 instruments may have different rules in host countries. There may therefore need to be a 'haircut' to such capital instruments, if the amount allowed by the host regulator is different to the amount of the investment by the parent bank.

        January 2015

      • CA-B.1.5

        For the reasons outlined in CA-B.1.2A to CA-B.1.4, banks must agree the proposed regulatory consolidation or aggregation approach for banking subsidiaries with the CBB and their external auditor.

        Amended: July 2017
        January 2015

      • CA-B.1.6

        If a banking subsidiary is to be consolidated by way of aggregation, the capital and risk weighted assets (RWAs) of the non-resident entity must be shown separately. The parent bank will be required to aggregate the subsidiary's eligible capital and RWAs (based on the risk weighting of assets reported by the subsidiary to its host central bank) with its own eligible capital and RWAs respectively.

        Amended: July 2017
        January 2015

      • CA-B.1.7

        Appropriate adjustments must be made to eliminate intra-group exposures.

        January 2015

      • CA-B.1.8

        If a bank in Bahrain is a subsidiary of a non-resident parent bank, the capital adequacy of such bank must be determined on a standalone basis.

        January 2015

      • CA-B.1.9

        Majority-owned or controlled financial entity subsidiaries must be adequately capitalised to reduce the possibility of future potential losses to the parent bank. The parent bank must monitor actions taken by the subsidiary to correct any capital shortfall and, if it is not corrected in a timely manner, the shortfall must also be deducted from the parent bank's solo and consolidated capital for regulatory capital purposes.

        January 2015