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  • Resolution Plan

    • DS-2.1.13

      Bahraini Islamic bank licensees must establish Resolution Plan intended to facilitate smooth resolution making it feasible without severe market disruption. It must include a substantive resolution strategy approved by the Board and agreed with the CBB, and an operational plan for its implementation. It must identify, in particular:

      (a) Financial and economic functions for which continuity during the resolution process is critical and suitable resolution options to preserve those functions, or wind them down in an orderly manner;
      (b) Data requirements on the bank's business operations, structures and systemically important functions;
      (c) Potential legal, Shari'a, strategic or technical barriers to effective resolution and actions to mitigate those barriers; and
      (d) Actions to protect insured depositors and ensure the rapid return of segregated client assets.
      July 2018

    • DS-2.1.14

      Bahraini Islamic bank licensees must consider the following important elements in their analysis leading to the development of the resolution plan:

      (a) The corporate and group structure
      (b) Relevant entities and the identification of material entities;
      (c) Balance sheet profile including on and off balance sheet;
      (d) Funding, liquidity and capital needs;
      (e) Business model of the parent and material entities;
      (f) Core business lines;
      (g) Operational, financial, legal, Shari'a and structural dependencies;
      (h) External dependencies;
      (i) Financial functions mapping each material entity and business lines;
      (j) Resolution strategies and options.
      July 2018

    • DS-2.1.15

      For the purpose of DS-2.1.13(a), banks shall consider in their recovery and resolution planning processes for identification and the development of suitable resolution options for 'critical functions' and 'critical shared services. The resolution strategy and operational plan should encompass appropriate actions which help maintain continuity of these functions while avoiding unnecessary loss of value and minimising, where possible, the costs of resolution.

      July 2018

    • DS-2.1.16

      Critical functions are activities performed for third parties not affiliated to the bank, the failure of which would lead to a disruption of services that are vital for the functioning of the real economy and for financial stability due to the bank/banking group's size or market share, interconnectedness, complexity and cross-border activities.

      July 2018

    • DS-2.1.17

      The designation of a function as critical does not imply that the function and all related liabilities will be protected in a resolution. Rather, the designation is meant to assist the CBB and relevant authorities in developing resolution strategies that minimise systemic disruption and preserve value. It is important to note that the institution specific lists of critical functions will an important input into the resolution planning process and the resolvability assessments.

      July 2018

    • DS-2.1.18

      The criticality of a function can be assessed in a three-step process: —

      a) Impact assessment: It will include understanding the nature and extent of the activity and assessing the impact of the failure of the function on the market and infrastructure, on customers, on other market participants and finally the interdependencies of the market;
      b) Evaluating the market for that function: This will encompass understanding how quickly the market is able to substitute the service providers of the failed function. Such an assessment will include supply side analysis of service providers covering market concentration;
      c) Firm-specific test: The analysis will determine whether the bank's failure would have a material impact on third parties, on the potential for contagion and on the general confidence of market participants which will be based on understanding of the overall market share of the firm for that specific function etc.
      July 2018

    • DS-2.1.19

      These critical functions are assessed in the following five broad categories with distinct economic objectives and characteristics: (a) Deposit Taking, (b) lending and loan servicing; (c) payments, clearing custody and settlement, (d) lending and borrowing to and from financial institutions; and (e) Capital markets and investment activities.

      July 2018

    • DS-2.1.20

      Critical shared services are activities performed within the bank or by another unit within the group or outsourced to third parties and their failure would lead to the inability to perform critical functions and, therefore, to the disruption of functions vital for the functioning of the real economy or for financial stability.

      July 2018

    • DS-2.1.21

      Critical shared services are related to the critical functions a bank performs. They provide the internal and essential infrastructure the bank needs to continue operating. Their designation should therefore follow from the identification of the critical functions. The prioritising of the critical shared services, starts with answering the following questions first:

      a) How severe are the consequences of the failure of a particular service on one or more critical functions?
      b) How quickly will the failure of a particular shared service lead to a collapse of one or more critical functions?
      July 2018

    • DS-2.1.22

      For the purposes of this analysis, there should be a clear understanding of the following aspects of the shared services at legal entity level:

      i. the provider and the recipient of the services;
      ii. the nature of the services being provided;
      iii. the financial terms on which those services are offered;
      iv. the existence of service level agreements and the validity of such agreements in the event of failure; and
      v. the impact of default on the ability of the bank to maintain these services.
      vi. the substitutability of the services being provided (see above).
      July 2018

    • DS-2.1.23

      Bahraini Islamic bank licensees must ensure that key Service Level Agreements (SLAs) can be maintained in crisis situations and in resolution, and that the underlying contracts include provisions that prevent termination triggered by recovery or resolution events, and facilitate transfer of the contract to a bridge institution or a third party acquirer.

      July 2018

    • DS-2.1.24

      Nothing in this Module will preclude CBB from devising other resolution strategies, options or plans recognised under the CBB Law should it believe it is necessary under the circumstances.

      July 2018