National Bank of Ras Al Khaimah P S C : Q4 Pillar 3 Disclosures

PILLAR 3 DISCLOSURES

For the year ended 31 December, 2021

The National Bank of Ras Al-Khaimah (P.S.C.)

1. Introduction

On 12th November 2020, the Central Bank of UAE published final Capital Adequacy Standards and Guidance along with Notice 4980/2020. This included revised Standards and Guidance with respect to Pillar 3 - Market Disclosures. Further to this, the Central Bank of UAE provided explanatory notes and disclosure templates for Pillar 3 on 30th November 2021 as part of Notice 5508/2021. The Standards prescribed the effective date of these disclosures to be 31st December 2021 and quarterly thereon.

The Bank has a formal disclosure policy in place which highlights the roles and responsibilities of the management and Board of Directors with respect to internal controls and procedures for information reported under Pillar 3 disclosures.

The scope of consolidation for Pillar 3 disclosures is different compared to the scope of consolidation for financial reporting. Under the scope of regulatory consolidation, all subsidiaries of the Bank are consolidated with the exception of Ras Al Khaimah National Insurance Company PSC. All sections of the following document have been prepared under the scope of regulatory consolidation unless specifically mentioned.

2. Overview of risk management, key prudential metrics and RWA

				Amounts in AED'000		a	b
						31 Dec'21	30 Sep'21
				Available capital (amounts)
1			Common Equity Tier 1 (CET1)	7,889,152	8,145,217
	1a		Fully loaded ECL accounting model	7,889,152	8,060,377
2			Tier 1	7,889,152	8,145,217
	2a		Fully loaded ECL accounting model	7,889,152	8,060,377
		Tier 1
3			Total capital	8,434,886	8,682,434
	3a		Fully loaded ECL accounting model	8,434,886	8,596,534
		total capital
				Risk-weighted assets (amounts)
4			Total risk-weighted assets (RWA)	49,523,321	48,854,950
				Risk-based capital ratios as a percentage of RWA
5			Common Equity Tier 1 ratio (%)	15.9%	16.7%
	5a		Fully loaded ECL accounting model	15.9%	16.5%
		CET1 (%)
6			Tier 1 ratio (%)	15.9%	16.7%
	6a		Fully loaded ECL accounting model	15.9%	16.5%
		Tier 1 ratio (%)
7			Total capital ratio (%)	17.0%	17.8%
	7a		Fully loaded ECL accounting model	17.0%	17.6%
		total capital ratio (%)
				Additional CET1 buffer requirements as a percentage of RWA
8			Capital conservation buffer	2.5%	2.5%
		requirement (2.5% from 2019) (%)
9			Countercyclical buffer requirement	0.0%	0.0%
	(%)
10			Bank D-SIB additional requirements	0.0%	0.0%
	(%)
11			Total of bank CET1 specific buffer	2.5%	2.5%
		requirements (%)

c		d	e
30 Jun'21		31 Mar'21	31 Dec'20
7,954,695	7,787,899	7,678,712
7,816,080	7,598,041	7,479,512
7,954,695	7,787,899	7,678,712
7,816,080	7,598,041	7,479,512
8,490,887	8,301,074	8,170,892
8,350,540	8,108,843	7,969,202
47,731,422	45,941,944	43,869,813
16.7%	17.0%	17.5%
16.4%	16.6%	17.1%
16.7%	17.0%	17.5%
16.4%	16.6%	17.1%
17.8%	18.1%	18.6%
17.5%	17.7%	18.2%
2.5%	2.5%	2.5%
0.0%	0.0%	0.0%
0.0%	0.0%	0.0%
2.5%	2.5%	2.5%

The National Bank of Ras Al-Khaimah (P.S.C.) | 2

		CET1 available after meeting the
12		bank's minimum capital	6.5%		7.3%		7.3%		7.6%		8.1%
		requirements (%)
		Leverage Ratio*
13		Total leverage ratio measure	62,970,840
14		Leverage ratio (%)	12.5%
14a		Fully loaded ECL accounting model	12.5%
	leverage ratio (%)
		Leverage ratio (%) (excluding the
14b		impact of any	12.5%
	applicable temporary exemption of
		central bank reserves)
		Liquidity Coverage Ratio
15		Total HQLA
16		Total net cash outflow
17		LCR ratio (%)
		Net Stable Funding Ratio
18		Total available stable funding
19		Total required stable funding
20		NSFR ratio (%)
		ELAR
21		Total HQLA	5,476,267		4,750,558		4,404,492		4,701,854		6,426,291
22		Total liabilities	47,259,762		45,720,359		45,749,164		44,737,329		44,345,236
23		Eligible Liquid Assets Ratio (ELAR)	11.6%		10.4%		9.6%		10.5%		14.5%
(%)
		ASRR
24		Total available stable funding	45,269,869 44,292,196 43,698,781 43,373,569 43,301,738
25		Total Advances	37,508,892		37,147,070		36,572,054		37,079,158		34,927,178
26		Advances to Stable Resources Ratio	82.9		83.9		83.7		85.5		80.7
(%)

*Leverage Ratio went live starting 31st December 2021 and hence, columns for previous periods have been left blank

The National Bank of Ras Al-Khaimah (P.S.C.) | 3

The Bank's Risk Management strategy is intrinsically interlinked with Bank's business strategy, i.e. Bank's risk appetite and its business strategy co-exist to achieve and enhance shareholder value. The Enterprise-wide Risk Management (ERM) structure of the Bank incorporates the effective participation of the Board and Senior Management at different levels to provide oversight functions and ensures the creation and sustenance of a proper risk management environment. The Bank's philosophy is to proactively manage risks to ensure that risk-taking activities are commensurate with its size and complexity of operations.

The Bank ensures considerable due diligence on risk monitoring to ensure on-going compliance with the approved risk limits. The Bank has an effective structure in place for reporting to relevant committees and management bodies, including the Board on development of risks, liquidity, credit portfolio and details on the non-performing loans among others. The Bank's Enterprise Risk Management Policy provides in details the Risk Governance Framework of the Bank. Below is an overview of the Framework:

RISK FRAMEWORK

Lines of Defense	A three line of defense mechanism for managing risk is followed in the bank
	1. First Line - Is the business unit responsible for maintaining internal controls for their
	processes.
	2. Risk Management/Compliance: The teams function as independent monitoring
	units for the business units.
	3. Internal Audit: Reviews first and second line of defense and provides assurance to
	the management and Board of Directors.
Board Responsibility	Board is responsible for providing oversight on the effective management of the
	Bank's overall risk. While recognizing the risks to which the Bank is exposed, they
	provide the required human resources, environment, practices and systems to
	address such risks.
Management Committees	Specific risks are covered by specific management committees of the bank like ALCO
	is responsible for Asset Liability Management, Interest Rate, and Liquidity.
Policies and Procedures	The Risk Management Department has policies like Enterprise Risk Management
	Framework, Market Risk Policy, Credit Risk Policies, Information Security Policy,
	Operational Risk Policy enabling definition of the roles, responsibilities and operating
	procedures for Risk Management.
Risk Appetite	Board Risk Committee approved Risk Appetite statement specifies category-wise risk
	limits/thresholds, which serves as an overall encompassing document for Risk
	Management
RISK MITIGATION
Monitoring	Risk monitoring is done by establishment of Risk limits and monitoring the utilisation
	to ensure compliance and remedial action in case of breach. Limits are set for each
	type of risk and monitored on a daily, monthly, quarterly basis and annual basis
Reporting	Reporting of the risk triggers is done at Board, CEO, Management and Department
	head level. Reporting is ensured through information shared at regular intervals or on
	need basis with Board and Management committees.
Mitigation	Risk mitigation is ensured through management triggers, risk appetite triggers , early
	warning indicators, contingency funding plans, forward looking estimates and other
	remedial measures

The National Bank of Ras Al-Khaimah (P.S.C.) | 4

The Bank's risk governance is built upon the premise that each business line is responsible for monitoring the risks inherent in its business activities, which is augmented by the oversight provided by the Board and its relevant committees. The Bank operates in accordance with the statutory requirements and is committed to adopting and complying with good corporate governance practices.

The organizational chart is as below.

Board of Directors regularly review the Bank's financial performance as well as the performance of the individual areas. The Board agenda typically includes:

1. Strategy and risk management, market trends and developments and new business opportunities
2. Implication of developments in international sanctions, compliance and central bank regulations
3. Enhancements in governance structure and practices

The National Bank of Ras Al-Khaimah (P.S.C.) | 5