Appendix D Definitions

Appendix D: Definitions19

In the context of these Guidelines, the following terminologies take the meanings corresponding to each of them:

1. 'Bank' means any bank fully recognized as such by the relevant regulator of the country in which it is registered, except such a bank which:
a. In the opinion of the central bank, is not adequately supervised by the relevant banking supervisory authority;
b. The license or other authorization of which to carry on banking business is, for the time being, suspended.
2. 'Banking groups' are groups that engage predominantly in banking activities and are registered as banks in the relevant jurisdiction.
3. 'PSE' means a public sector entity which is specified as such either by the central bank ('domestic PSE') or by an overseas banking supervisory authority ('foreign PSE'). Domestic PSEs include those entities owned by the government, excluding the subsidiaries of such institutions undertaking commercial activities.
4. 'Financial Institutions' are institutions defined as financial institutions by the CBB (local financial institutions) or by foreign banking regulators (foreign financial institutions); examples of financial institutions include investment companies, insurance companies and currency exchange companies.
5. 'MDB' means a multilateral development bank, which refers to any bank or lending or development body established by agreement between, or guaranteed by, two or more countries, territories or international organizations, other than for purely commercial purposes.
6. 'Off-balance Sheet ('OBS') Activities" refers to a banks' business that does not generally involve booking assets or liabilities. Examples include the granting of standby commitments, letters of credit and guarantees.
7. 'Repo-style Transactions' means transactions involving the sale and repurchase ('repo') of assets, purchase and resale ('reverse repo') of assets, as well as securities lending and securities borrowing. The term 'repo-style transactions' is generally taken to refer to any of the following transactions of a bank:
i Sale and repurchase ('repo') of securities—the bank agrees to sell securities to a third party for cash with a commitment to repurchase the securities at an agreed price on an agreed future date.
ii Securities lending—the bank lends securities to a third party and receives either cash or other securities from that party in exchange as collateral.
iii Purchase and resale ('reverse repo') of securities—the bank agrees to acquire securities from a third party for cash, with a commitment to resell the securities at an agreed price on an agreed future date (i.e. the reverse of repo transactions).
iv Securities borrowing—the bank borrows securities from a third party and gives cash or other securities to that party in exchange as collateral.
8. 'Secured Obligations' means obligations that are secured by legal rights on specifically designated assets owned by the bank which are used in the case of bankruptcy, insolvency or liquidation.
9. 'High-Quality Liquid Asset ('HQLA')' an asset is considered to be HQLA if it can be easily and immediately converted into cash at little or no loss of value under stress scenarios.
10. 'Operational Deposits' are the deposits generated by clearing, custody and cash management activities.
11. 'Stable Deposits' are the amounts of the deposits that are fully insured by a deposit insurance scheme which represents a portion from the deposits in the transactional accounts (e.g. accounts where salaries are automatically deposited), as per the provisions of those regulations.
12. 'Transactional Accounts' are defined as the accounts used to settle transactions pertaining to salaries and customer income.
13. 'Unencumbered Assets' means assets free of legal, regulatory, contractual or other restrictions on the ability of the bank to liquidate, sell or transfer these assets. Liquid assets should not be used to cover trading positions or to secure, collateralize or credit-enhance any transaction, nor be designated to cover operational costs (such as rents and salaries).
14. 'Retail Deposits' are defined as deposits placed with a bank by a natural person. Deposits from legal entities, sole proprietorships or partnerships are captured in wholesale deposit categories.
15. 'Wholesale Funding' is defined as those deposits and obligations that are raised from non-natural persons (i.e. legal entities, including sole proprietorships and partnerships).
16. 'Small Business Deposits' are the deposits that are considered as having similar characteristics to retail accounts, provided the total aggregated funding raised from one small business customer is less than BHD 500,000 (on a consolidated basis where applicable).
17. 'Default Funds', also known as clearing deposits or guarantee fund contributions (or any other names), are clearing members' funded or unfunded contributions towards, or underwriting of, a CCP's mutualized loss-sharing arrangements.
18. 'Central Counterparty (CCP)' is the party that intermediates in the settlement process between counterparties to contracts related to financial instruments, becoming the buyer to every seller, and the seller to every buyer in the market.
19. 'Principal Amount' means the amount of any outstanding claim (excluding any interest and other expenses) on, or contingent liability in respect of, the relevant counterparty.
20. 'Variation Margin' means a clearing member's or client's funded collateral posted on a daily or intraday basis, to a CCP based upon price movements of their transactions.
21. 'Initial Margin' means a clearing member's or client's funded collateral posted to the CCP to mitigate the potential future exposure of the CCP to the clearing member, arising from the possible future change in the value of the transactions.
22. 'Fiduciary' is a legal entity that is authorised to manage assets on behalf of a third party. Fiduciaries include asset management entities such as pension funds and other collective investment vehicles.

19 Definitions mirror those in the Capital Adequacy Ratio—Basel III and the LCR guidelines.

August 2018