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  • Measurement Requirements

    • CM-1.8.22

      The credit impairment assessment under FAS 30 is based on an expected loss approach, i.e. it is not necessary for a loss event to occur before an ECL is recognised. As a result, all financial assets are generally expected to attract an ECL. For the purpose of Section CM 1.8, any direct credit exposures to the government of Bahrain (or exposures explicitly guaranteed by the government of Bahrain) are exempted from the application of the expected credit loss model.

      Added: June 2022

    • CM-1.8.22A

      For the purpose of Section CM-1.8, the portion of the exposure that is explicitly guaranteed by Tamkeen is exempted from the application of the expected credit loss model.

      Added: January 2023

    • CM-1.8.23

      FAS 30 requires a three-stage approach to recognise and measure ECL at each reporting date, which is based on changes observed in credit quality of financial assets since origination. The standards prescribe two measures of ECL to be carried by licensees:

      (a) Twelve-month ECL: The expected credit losses that result from default events that are possible within 12 months after the reporting date. It is not the expected cash shortfalls over the 12-month period, but the entire credit loss on an asset weighted by the probability that the loss will occur in the next 12 months; and
      (b) Life-time ECL: The expected credit losses that result from all possible default events over the life of the financial instrument.
      Added: June 2022

    • CM-1.8.24

      The below staging classification must represent migration in credit quality and dictates the level of ECL to be recognised. The following must be followed:

      Staging Description ECL measure
      Stage 1 Performing assets with no significant deterioration in credit risk since origination or with very low credit risk. 12-month ECL
      Stage 2 Performing assets that have exhibited significant increase in credit risk since origination. Life-time ECL
      Stage 3 Non-performing exposures that are considered credit impaired. Life-time ECL
      Added: June 2022

    • CM-1.8.25

      The staging classification should normally apply to the entire balance of an outstanding facility because if a problem exists with one credit, it normally applies to the whole facility and not just the payment or individual credit which may be overdue. This is a conservative approach, which will alert licensee management and the Board to the full extent of a potential problem.

      Added: June 2022