Ithmaar B S C : Public Disclosure – 30 June 2022

ITHMAAR BANK B.S.C. (C)

Public Disclosures as at 30 June 2022

Ithmaar Bank B.S.C. (C)

Public Disclosures at 30 June 2022

	INDEX
S. No.	Description	Page No
1	Background	3
2	Basel III Framework	3
3	Capital management	3 - 4
4	Approaches adopted for determining regulatory capital requirements	4
5	Regulatory Capital components	4 - 6
6	Tier one capital ratios and Total capital ratios	7
7	Risk Management	8 - 14
	Disclosure of the regulatory capital requirements for credit risk under
8	standardized approach	15
9	Gross credit exposures	16
10	Geographical distribution of credit exposures	17
11	Industrial distribution of credit exposures	18
12	Maturity breakdown of credit exposures	19
13	Related-party balances under credit exposure	20
14	Past due and impaired financings and related provisions for impairment	21
15	Past due and impaired financings by geographical areas	22
	Details of credit facilities outstanding that have been restructured during the
16	period	22
17	Credit exposures which are covered by eligible financial collateral	22
18	Market Risk	23 - 24
	Disclosure of regulatory capital requirements for market risk under	the
19	standardized approach	25
20	Currency risk	25
21	Equity positions in Banking book	25
22	Profit Rate Risk in the Banking Book	26
23	Operational Risk	27 - 28
	Disclosure of regulatory capital requirements for operational risk under the
24	basic indicator approach	29
25	Liquidity Risk	29 - 32
26	Legal contingencies and compliance	32
27	Displaced Commercial Risk	32
	Gross income from Mudaraba and profit paid to Unrestricted Investment
28	Accountholders (URIA)	33
29	Average declared rate of return on General Mudaraba deposits	33
30	Movement in Profit Equalization Reserve and Provisions - URIA	34
31	Performance ratios	34
32	Other disclosures	34

Ithmaar Bank B.S.C. (C)

Public Disclosures at 30 June 2022

1. Background
   The public disclosures under this section have been prepared in accordance with the Central Bank of Bahrain (CBB) requirements outlined in its Public Disclosure Module (PD), CBB Rule Book, Volume II for Islamic Banks. The disclosures in this report are in addition to the disclosures set out in Ithmaar Bank B.S.C (C)'s (Ithmaar Bank/Bank/Group) consolidated financial statements for the period ended 30 June 2022, presented in accordance with Financial Accounting Standards (FAS) issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and applicable rules and regulations issued by the Central Bank of Bahrain ("CBB") including the circulars issued by the CBB during 2020 and 2021 on regulatory concessionary measures and treatment of modification losses and financial assistance received from the government and/ or regulators in response to COVID-19.
2. Basel III Framework
   CBB has issued Basel III guidelines for the implementation of Basel III capital adequacy framework for Banks incorporated in the Kingdom of Bahrain.
   The Basel III framework provides a risk based approach for calculation of regulatory capital. The Basel III framework is expected to strengthen the risk management practices across the financial institutions.
   The Basel III framework is based on three pillars as follows:-
3. • Pillar I: Minimum capital requirements including calculation of the capital adequacy ratio
   • Pillar II: Supervisory review process which includes the Internal Capital Adequacy Assessment Process
   • Pillar III: Market discipline which includes the disclosure of risk management and capital adequacy information.
4. Capital management
   Ithmaar Bank's Internal Capital Adequacy Assessment Process (ICAAP) policy provides the required guidelines and methodologies to assess the Bank's capital requirements for Pillar 1 and Pillar 2 risks and thereby ensures that the Bank meets the capital requirements as mandated by the CBB in line with the Capital Adequacy (CA) module for Pillar 1 risks and the ICAAP Module for all pillar 2 risks. Capital management also
   The Bank adopts a Pillar I + Pillar II approach for capital estimation as recommended under CBB guidelines. Under this approach, the Bank calculates the Pillar I capital or minimum regulatory capital requirements in accordance to CBB's capital adequacy guidelines as prescribed in the CA module of the CBB rulebook. Secondly, additional capital or pillar II capital requirement is calculated separately based on an "add-on" approach, where the additional capital requirements are added onto the calculated Pillar I capital requirements, to arrive at the Bank's internal capital requirements as per CBB guidelines. To ensure that the business model is thoroughly examined and subject to sufficient analysis, ICAAP is supported with comprehensive Stress Testing.
   A comprehensive risk assessment of the Business and Budget Plans is independently performed by the Risk Management Department (RMD), which among others, assesses the capital requirement of Ithmaar Bank supporting both current and future activities. Ithmaar Bank's capital position is monitored on a regular basis and reported to the Asset Liability Management Committee (ALCO), the Audit, Governance and Risk Management Committee (AGRMC) and the Board of Directors.

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Ithmaar Bank B.S.C. (C)

Public Disclosures at 30 June 2022

(Expressed in thousands of Bahraini Dinars unless otherwise stated)

1. Capital management (continued)Capital Adequacy Methodology:
   As per the requirements of CBB's Basel III capital adequacy framework, the method for calculating the consolidated capital adequacy ratio for the Group is summarized as follows:
2. • Line by line consolidation is performed for the risk exposures and eligible capital of all the Financial Institutions subsidiaries within the Group with the exception of the Bank's banking subsidiaries incorporated outside Kingdom of Bahrain which are operating under Basel III compliant jurisdictions, where full aggregation is performed of the risk weighted exposures and eligible capital as required under CA module of CBB rulebook.
   • All significant investments in commercial entities are risk weighted if these are within 15% of the capital base at individual level and 60% at aggregate level. Any exposure over and above the threshold of 15% are risk weighted at 800%.
   • All exposures exceeding the large exposure limit as per Credit Risk Management (CM) module of CBB rulebook are risk weighted 800%.
3. Approaches adopted for determining regulatory capital requirements
   The approach adopted for determining regulatory capital requirements under CBB's Basel III guidelines is summarised as follows:

Credit Risk	Standardised approach
Market Risk	Standardised approach
Operational Risk	Basic Indicator approach

5. Regulatory Capital components

Step 1: Disclosure of Balance Sheet under Regulatory scope of Consolidation

The Bank's subsidiaries (consolidated line by line for accounting purposes) have the following treatment for regulatory purposes

					Principal
				Country of	business	Regulatory
Name	Total assets	Total Equity	Ownership	Incorporation	activity	Treatment
Faysal Bank Limited	1,827,133	114,104	67%	Pakistan	Banking	Aggregation
				Cayman
Dilmunia Development Fund I L.P.	74,069	62,446	91%	Islands	Real estate	Risk weight

The reconciliation from published financial information to regulatory return is as follows:

Balance sheet as per published financial statements	3,280,063
FAS 30 Transitional impact	21,630
Modification loss transitional impact	18,403
Aggregation	37,832
Balance sheet as in Regulatory Return	3,357,928

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Ithmaar Bank B.S.C. (C)

Public Disclosures at 30 June 2022

(Expressed in thousands of Bahraini Dinars unless otherwise stated)

5. Regulatory Capital components (continued)

Step 2: Reconciliation of published financial balance sheet to regulatory reporting as at 30 June 2022

	As per published
	financial	As per
Assets	statements	Consolidated PIRI	Reference
Cash and balances with banks and central banks	240,933	240,933
Commodity and other placements with banks, financial
and other institutions	30,010	30,010
Murabaha and other financings	943,560	943,560
Musharaka financing	583,976	583,976
Sukuk and investment securities	711,277	711,277
Investment in associates	1,433	1,433
Assets acquired for leasing	1,206	1,206
Other assets	61,641	61,641
Investment in real estate	4,104	4,104
Development Properties	65,551	65,551
Fixed assets	44,253	44,253
Intangible assets	10,081	10,081
Assets classified as held for sale	582,038	582,038
FAS 30 Transitional impact	-	21,630
Modification loss transitional impact	-	18,403
Aggregation	-	37,832
Total Assets	3,280,063	3,357,928	-
Liabilities & Unrestricted Investment Accounts (URIA)
Unrestricted Investment Accounts	1,699,296	1,699,296
Other liabilities	1,499,685	1,499,685
Total Liabilities & URIA	3,198,981	3,198,981	-
Non-controlling interest	47,920	47,920
Owners' Equity
Share capital	100,000	100,000
Reserves	(52,182)	(52,182)
of which eligible for CET1	-	(31,425)
Accumulated losses	(14,656)	(14,656)
of which eligible for CET1	-	(46,804)
FAS 30 Transitional impact	-	21,630
Modification loss & ECL transitional impact	-	18,403
Aggregation	-	37,832
Total Owners' Equity	33,162	111,027
Total Liabilities + Owners' Equity	3,280,063	3,357,928

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