International Investment Bank: Regulatory Capital Disclosures - 30 September 2017

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1. International Investment Bank B .S.C. (c) Regulatory Capital Disclosures As at 30 September 2017
2. International Investment Bank B .S.C. (c) Regulatory Capital Disclosures As at 30 September 2017 1. Introduction In order to support its business and mazimise shareholder value, the Group's capital management ensures that the Group maintains adequate risk capital and complies with the capital requirements mandated by the Central Bank of Bahrain ("CBB") that include a healthy capital ratio. The primary concern is capital protection from loss. The Group manages the risk capital to cover risks inherent in the business, especially credit, market and operational risks. The adequacy of the Group's regulatory capital base is monitored primarily using the rules and ratios established by the Basel Committee on Banking Supervision as adopted by the CBB in supervising Bahrain-incorporated banks. The principal ratio is the Capital Adequacy Ratio that measures total qualifying capital held by an institution in relation to its risk-weighted assets. Regulatory capital consists of Tier 1 capital and Tier 2 capital. The Group's capital base is all classified as Tier 1 capital and comprises share capital net of treasury shares, statutory reserve, share premium, accumulated deficit, current year loss and investment fair value reserve. There have been no changes to the capital structures during the year. The Bank manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Bank may issue ordinary shares, buy back ordinary shares or adjust the amount of dividend payment to shareholders. No changes have been made in the objectives, policies and processes from the previous years. The Group has adopted the “Standardised” approach for credit risk and market risk and “Basic Indicator” approach for operational risk for regulatory reporting purposes. These disclosures have been prepared in accordance with the "Composition of Capital Disclosure Requirements" for Islamic banks in the Public Disclosure Module of Volume 2 of the CBB Rulebook (the 'PD Module"). Rules concerning the disclosures under this section are applicable to International Investment Bank B.S.C. (c) (IIB/the "Bank”) being a locally incorporated Bank with an Islamic Wholesale banking license and subsidiaries (together known as “the Group”). This document should be read in conjunction with the condensed consolidated interim financial information as at 30 September 2017.
3. 2 . Basis of Consolidation for Accounting and Regulatory Purposes For the purpose of preparation of consolidated financial statements, the Bank consolidates all subsidiaries which are majority owned and exercises significant control over them. The subsidiaries are consolidated from date of acquisition being the date on which the group obtains control and continues until the control ceases. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. For the purpose of preparation of regulatory capital and the calculation of the Capital Adequacy Ratio, the Bank risk weights all unconsolidated assets including investments in subsidiaries and associates in accordance with the CBB Rulebook.
4. 3 . Composition of capital disclosure Table – 1. Statement of financial position under the regulatory scope of consolidation The table below shows the link between the statement of financial position in the published financial statements (accounting statement of financial position) and the regulatory statement of financial position. Statement of financial position as in published 30 September 2017 Statement of financial position as per regulatory financial statements (USD '000) (USD '000) Cash and balances with banks 2,898 1,318 Placements with financial institutions 3,450 3,450 52,792 59,791 reporting Reference Assets Investment securities Of which related to insignificant investments in financial entities under CET1 656 Of which related to significant investments in financial entities under CET1 - Of which related to other investments 59,135 Assets acquired for leasing 65,990 Assets held-for-sale 20,421 - 4,202 4,202 Investment in real estate Equity-accounted investees G 9,642 830 830 Other assets 1,770 1,067 Total assets 152,353 80,300 Liabilities related to assets acquired for leasing 57,854 - Liabiliies related to assets-held-for-sale 14,487 - Other liabilities 2,078 10,171 Total liabilities 74,419 10,171 109,996 109,996 Liabilities Shareholders' Equity Share capital A Treasury shares (6,798) (6,798) B Share premium 19,645 26,603 C 6,980 5,588 D (58,561) (52,508) F (12,752) E Statutory reserve Accumulated losses Investment fair value reserve Equity attributable to shareholders of the Bank 84 71,346 70,129 Non-controlling interests 4,247 - Non-controlling interests held for sale 2,341 - 77,934 70,129 152,353 80,300 Total owners' equity Total liabilities and owners' equity
5. The table below provides a detailed breakdown of the Bank ’s regulatory capital components, including all regulatory adjustments. The table also provides reference to the comparison displayed in Table 1 between accounting and regulatory statement of financial positions. 30 September 2017 Amounts subject Components of regulatory capital (USD '000) to pre-2015 treatment (USD '000) Reference Common Equity Tier 1 capital: instruments and reserves Directly issued qualifying common share capital plus related stock surplus 109,996 Retained earnings (52,508) F Treasury shares (6,798) B Share premium 26,603 C Accumulated other comprehensive income (and other reserves) (7,164) =D+E Common Equity Tier 1 capital before regulatory adjustments 70,129 A Common Equity Tier 1 capital: regulatory adjustments Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold) - 656 - - Regulatory adjustments applied to common equity Tier 1 in respect of amounts subject to pre-2015 treatment - - Total regulatory adjustments to common equity Tier 1 - 656 Significant investments in the common stock of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions (amount above 10% threshold) Common Equity Tier 1 capital (CET1) Additional Tier 1 capital (AT1) Tier 1 capital (T1 = CET1 + AT1) 70,129 70,129 Tier 2 capital: instruments and provisions Provisions - Tier 2 capital before regulatory adjustments - Tier 2 capital (T2) - Total capital (TC = T1 + T2) 70,129 G
6. Risk weighted assets in respect of amounts subject to pre2015 treatment 823 Of which : Insignificant investments in the common shares of financial entities <10% - Listed (RW at 100%) 323 Of which: Insignificant investments in the common shares of financial entities <10% - Unlisted (RW at 150%) 500 Of which: Significant investment in the common shares of financial entities >10% (RW at 250%) - Total risk weighted assets 337,925 Capital ratios and buffers Common Equity Tier 1 (as a percentage of risk weighted assets) 20.75% Tier 1 (as a percentage of risk weighted assets) 20.75% Total capital (as a percentage of risk weighted assets) 20.75% National minima including CBB (where different from Basel III) CBB Common Equity Tier 1 minimum ratio 6.50% CBB Tier 1 minimum ratio 8.00% CBB total capital minimum ratio 10.00% Disclosure template for main feature of regulatory capital instruments as at 30 September 2017: 1 2 3 Issuer Unique identifier (e.g. CUSIP, ISIN or Bloomberg identifier for private placement) Governing law(s) of the instrument International Investment Bank BSC (c) N/a All applicable laws and regulations of the Kingdom of Bahrain Regulatory treatment 4 Transitional CBB rules Common Equity Tier 1 5 Post-transitional CBB rules Common Equity Tier 1 6 Eligible at solo/group/group & solo Group & solo 7 Instrument type (types to be specified by each jurisdiction) Equity shares 8 Amount recognised in regulatory capital (Currency in mil, as of most recent reporting date) USD 109 Million 9 Par value of instrument USD 1.0 10 Accounting classification Shareholder's equity 11 Original date of issuance 4 October 2003 12 Perpetual or dated Perpetual 13 14 15 16 Original maturity date Issuer call subject to prior supervisory approval Optional call date, contingent call dates and redemption amount Subsequent call dates, if applicable No maturity NA NA NA
7. Coupons / dividends 17 Fixed or floating dividend/coupon NA 18 19 Coupon rate and any related index Existence of a dividend stopper NA NA 20 Fully discretionary, partially discretionary or mandatory Fully discretionary 21 Existence of step up or other incentive to redeem Non-cumulative or cumulative No NA 22 23 Convertible or non-convertible 24 If convertible, conversion trigger (s) NA 25 If convertible, fully or partially NA 26 If convertible, conversion rate NA 27 If convertible, mandatory or optional conversion NA 28 If convertible, specify instrument type convertible into NA If convertible, specify issuer of instrument it converts into NA 29 30 Write-down feature 31 If write-down, write-down trigger (s) NA 32 If write-down, full or partial NA 33 If write-down, permanent or temporary NA 34 If temporary write-down, description of write-up mechanism Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument) NA 36 Non-compliant transitioned features NA 37 If yes, specify non-compliant features NA 35 NA