ANNUAL REPORT

Transcription

ANNUAL REPORT

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Boubyan Bank Annual Report 2015
A NN U A L REPORT
In the Name of Allah, Most Gracious, Most Merciful
True are the words of Allah, the Almighty
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“Verily, Allah is the All-Provider,
Possessor of Power, the Mighty”
H.H. Sheikh
Sabah Al-Ahmad Al-Jaber Al-Sabah
Emir of the State of Kuwait
Contents
Board of Directors
Executive Management
Fatwa & Shari’a Supervisory Board
Chairman’s Message
Management Discussion and Analysis Report
Corporate Governance Report
Social Responsibity
Risk Management
Report of Fatwa & Shari’a Supervisory Board
Consolidated Financial Statements and
Independent Auditors’ Report
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H.H. Sheikh
Nawaf Al-Ahmad Al-Jaber Al-Sabah
Crown Prince
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H.H. Sheikh
Jaber Al-Mubarak Al-Hamad Al-Sabah
Prime Minister
Board of Directors
Abdulaziz Abdullah Al-Shaya
Board Member
Ahmad Khalid Al-Humaizi
Board Member
Mahmoud Yousef Al-Fulaij
Chairman
Ahmed Yousef Al-Sager
Board Member
Farid Soud Al-Fozan
Board Member
Adel Abdul Wahab Al-Majed
Vice-Chairman & CEO
Abdulla Al-Najran Al-Tuwaijri
Deputy Chief Executive Officer
Abdul-Salam Mohammed Al-Saleh
Waleed Khalid Al-Yaqout
General Manager - Administration Group
Adel Abdullah Al Hammad
General Manager - Human Resources Group
Dr. Waleed Eisa Al-Hasawi
General Manager - Information Technology Group
Ashraf Abdallah Sewilam
General Manager – Corporate Banking Group
Leslie James Rice
General Manager - Risk Management
Abdul Rahman Hamza Mansour General Manager - Internal Audit
Mohamed Ibrahim Ismail
General Manager - Financial Control Group
Rajeev Kale
General Manager - Banking Operations Group
Mukkulam Jamal Jaffar
Deputy General Manager - Treasury Services
Saleh Ahmad Al-Ateeqi
Chief Executive Officer - Boubyan Capital
Fatwa & Shari’a Supervisory Board
Sheikh Dr. Abdulaziz Khalifa Al-QasarChairman
Sheikh Dr. Esame Khalaf Al-Enezi
Member/Reporter
Sheikh Dr. Mohammed Awad Al-FuzaieMember
Waleed Mishari Al-Hamad
Board Member
Nasser Abdulaziz Al-Jallal
Board Member
Sheikh Dr. Ali Ibrahim Al-Rashid
Member
Hazim Ali Al-Mutairi
Board Member
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Vice-Chairman & CEO
Continuing Our Journey of Growth and Success
Boubyan Bank has continued its growing profits,
reaching an increased growth rate of 25% at the end
of 2015. The Bank’s net profits amount to KD 35.2
million compared with KD 28.2 million in 2014, while
the earning per share amounts to 17.09 fils compared
with 13.70 fils for 2014.
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It is worth mentioning that this growth in the Bank’s
profitability is mainly attributed to the success
bestowed by Allah, the Almighty, upon us as well as
shareholders’ and customers’ confidence in the Bank,
and the efforts exerted by all the Bank staff and their
unwavering dedication and keenness on delivering
the highest service levels to customers coupled with
innovation and creativity, which have been adopted by
the Bank since the launch of the first 5-year strategy
in 2010.
All the Bank’s indicators witnessed a remarkable
growth during 2015 where the total assets increased
to KD 3.1 billion at a growth rate of 18% while the
operational revenues increased to hit KD 91.4 million
with a growth rate of 17% in addition to the increase
in customers’ deposits by 15%, amounting to KD 2.4
billion.
As a result of the financial performance of the year
ended December 31st 2015, the Board recommended
the distribution of cash dividends of 5% per nominal
share value (i.e., 5 fils per share) and 5% in bonus
shares (i.e., 5 shares per each 100 shares).
With regard to the market share, our market share in
local finance increased generally to approximately
6.5% in the meantime, while the share of the retail
finance increased specifically to approximately 10%.
Enhancing the Capital Base
As a part of our efforts to enhance our capital
base, Boubyan Bank obtained the initial approval
of the Central Bank of Kuwait to proceed with
sukuk issuance in order to enhance its capital base
through Common Equity Tier 1 (CET1) as per Basel III
instructions on a mudaraba basis, and it is expected
that the total issuance would amount to USD 250
million approximately. Boubyan Bank will take the
final decision on the said issuance and the timing
thereof after obtaining the final approvals from the
regulatory authorities.
This issuance coincides the completion of the 1st year
of the 2020 strategy that followed the 5-year strategy
(2010-2014) which witnessed a lot of achievements
and goals made by the bank.
The Best in Technology
During the past years, creativity and innovation have
been two of the main values adopted in the Bank’s
business philosophy. The Bank was most keen on
reinforcing such values by embodying them in the
innovative digital and electronic products and services
which were usually introduced by the Bank for the first
time in the Kuwaiti market such as the operation of
advanced MiniBank machines that provide multiple
services in addition to other services such as Cardless &
Civil ID Withdrawal, updating customers’ information
via the ATMs, issuance of virtual cards, and use of
fingerprints in smart phone applications to enable
customers’ login, etc.
This strategy has crowned the Bank with many
achievements such as earning a number of international
awards, the most prominent of which was “the
World’s Best Islamic Digital Bank” award in the field
of e-banking “digital” services from Global Finance for
the year 2015.
Boubyan Bank’s achievement in the field of e-banking
services or digital services is the fruit of many years
of efforts and investments injected by the Bank’s
management which emphasized the management’s
foresight, and its strategy which bears fruit currently,
especially since focusing on investing in technology is
part of the Bank’s strategy which focuses on customers
and considers them the main pillar of development
sought by the Bank as well as the pillar of any targeted
success.
Leadership, Exclusiveness of Distinguished
Services and Customer Service
In addition to being the leader in digital and e-banking
services, the Bank has a number of exclusive and
outstanding banking products and services which were
first introduced in the Kuwaiti market by the Bank.
The Bank managed to establish itself as one of the
best institutions in the Kuwaiti private sector in the
field of customer service evidenced by its recent
accomplishments whereby the Bank has received three
awards from Service Hero, the international consumerdriven customer satisfaction index. The most prominent
of these awards was the 1st Place in Customer Service
atop all companies in Kuwait.
This kind of awards, once more, reiterates our Bank’s
superb competitive abilities, and its ability to provide
customers with the highest levels of service and the
best products customers may seek, whether they are
existing or potential customers targeted in the Kuwaiti
market.
Being the leader, in terms of customer service, was
perfectly timed with the geographical expansion as
the number of branches reached 32 by the end of the
year in line with our plan which targets 40 branches
by the end of 2016.
Outstanding Corporate Services
Boubyan Bank set a goal to be “the first choice and
preferred destination for customers seeking corporate
banking services”. Currently, the Corporate Banking
Group maintains strong relationships with a number of
national companies working in productive economic
sectors, while still targeting medium and large sized
companies in order to provide the best banking
service.
As a part of our Bank’s continuous efforts to develop
services and ensure customers’ satisfaction in a
manner that suits their banking expectations and
needs, the Corporate Banking Group has launched
the first service offered by a Kuwaiti bank to enable
bank customers to open documentary credits and
issue guarantees over the internet in addition to
the ability to develop a working capital murabaha,
which provides flexibility in terms of withdrawal and
deposits for companies in a manner that matches their
cash flows.
Boubyan Bank managed to achieve remarkable
growth rates in 2015 where the credit portfolio
reached 17% via attracting a number of operational
companies known for their financial and economic
creditworthiness while continuing to maintain the
high standards of credit quality and studying and
diversifying risks.
For myself, and on behalf of the Board members, and
the executive management of the Bank, I am pleased to
share with you the 2015 Annual Report which includes
the financial statements of the Bank and a summary of
the Bank’s activities during the said year, highlighting
the Bank’s achievements and successes at various
levels.
The total equity of the Bank increased to KD 318 million
compared with KD 269 million last year and there was
a notable increase in the financing portfolio up to KD
2.2 billion at a growth rate of 20% in line with the
continuous growth of the Bank’s customers base.
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By the Grace of Allah, the Almighty, Boubyan Bank
managed to perform well and to achieve profitable
financial results during 2015 despite the domestic
and regional economic challenges resulting from the
decline in oil and gas prices in addition to the tight
competition in the banking industry.
Our Human Resources
Boubyan Bank gives a special attention to its human
resources as a part of the Bank’s approach being
a developed and modern bank keeping up with
international and regional changes through having a
young management, and the Consumer Banking Group,
which comprised mostly of youths, testifies to this.
Our Social Responsibility
The Bank continued its interaction with various
segments of the society, especially the youth, who
received support from the Bank at various levels and in
different domains. There were more than 100 events
and activities organized or sponsored by the Bank’s
departments in addition to the effective role played
by the Bank’s branches in providing services to their
neighborhoods and interacting with various sectors.
The Bank is distinguished by entrusting the youths with
more distinguished and leading roles, especially that
all training and academic facilities and capabilities are
available to provide them with a unique opportunity
to gain professional and practical expertise that would
boost their experiences despite their young age.
Furthermore, Boubyan Bank has succeeded over the
past years in creating many vacancies for ambitious
Kuwaiti youths as a result of expanding the Bank’s
services provided to retail customers by opening more
branches.
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This made our Bank an attractive choice to the Kuwaiti
youths who are interested in working for the private
sector in general, and the banking industry in specific,
due to the environment of creativity and innovation
prevalent at the Bank, which unleashes the youths’
energy.
This has further helped Boubyan Bank earn the
award for the “Replacement and Nationalization of
Manpower in Kuwait” for the second year in a row. The
award is given on an annual basis by the Council for the
Ministers of Labor for the best GCC institution.
Social responsibility is the cornerstone of the Bank’s
dealings with all groups of the society in contribution
to development, and to building a society which is
able to keep pace with all regional and international
changes. Therefore, the Bank took the lead in
launching a variety of social initiatives and sponsoring
many activities and events targeting various groups of
the society.
The Bank’s social responsibility emanates from the
fact that the bank operates in compliance with the
principles of the Noble Islamic Shari’ah, and based
on the spirit of Islam that enjoins cooperation,
selflessness and helping various groups of the society,
especially those in need or suffering from shortage in
resources needed for daily life.
Sound Governance
Boubyan Bank is committed to following a sound and
effective governance framework through adopting
the best sound governance and risk management
standards. The Bank complies with these standards
in concluding all transactions according to the
principles and rulings of the Islamic Shari’ah. Boubyan
Bank successfully follows in the path of updating its
governance structure in a manner that meets the
requirements of the Central Bank of Kuwait, and the
banking industry-specific governance procedures.
Furthermore, the National Bank of Kuwait’s acquisition
of a significant stake in the Bank’s shares back in 2009,
with all its long-established expertise and deeplyrooted history, played a major role in supporting the
Bank’s new strategy and the new launch and expansion
in the Kuwaiti market without compromising the
Bank’s crystal-clear Islamic identity while maintaining
full operational segregation between both banks in
order to comply with the principles and rulings of the
Noble Islamic Shari’ah and, thus, enhancing the sound
governance environment at Boubyan Bank.
Thank You!
Finally, for myself and on behalf of all Boubyan Bank’s
employees, I would like to seize the opportunity
to express deepest thanks, and appreciation to His
Highness, the Amir of Kuwait, Sheikh Sabah Al-Ahmad
Al-Jaber Al-Sabah, may Allah protect him as well as
to H.H., the Crown Prince, Sheikh Nawaf Al-Ahmad
Al-Jaber Al-Sabah, and H.H the Prime Minister, Sheikh
Jaber Al-Mubarak Al-Hamad Al-Sabah, may Allah
protect them all.
Moreover, I would like to express the deepest thanks
to the executives of the Central Bank of Kuwait,
headed by H.E., the Governor, Dr. Mohammad
Al-Hashel, who spared no effort to take the actions
deemed appropriate to develop and safeguard the
Kuwaiti banking system.
I would also like to express deepest thanks to all the
Bank’s esteemed shareholders and customers who
have always been the key element behind its support
and who enabled it to confront the challenges. My
deepest thanks are also extended to all members of
the Bank’s Fatwa and Shari’ah Supervisory Board,
headed by Sheikh Dr. Abdulaziz Khalifa Al-Qasar, for
their great efforts representing the guidelines for all
the Bank’s Islamic activities, services and dealings.
Finally, I would like to extend deepest appreciation to
all Boubyan Bank’s management and employees and
thank them for their dedication as they spared no
effort all through the past years, and I am pleased to
express my appreciation of their constant adherence
to the one-team spirit, to realize more success for our
promising Bank. I hope that the coming years will be a
new stage driving the Bank towards an unprecedented
development leading it to more achievements and
realization of objectives that place it among the
leading Islamic banks in the region.
Peace be with you!
Chairman
Receiving this outstanding award was the fruit of
ceaseless efforts throughout the past years where
the Bank managed to increase the levels of national
manpower up to 75%. This percentage is not only
considered among the highest at the level of Kuwaiti
banks, but also at the level of the Kuwaiti private
sector. The Bank has become a role model to follow
in the field of recruiting domestic manpower and
creating distinctive job opportunities region-wise.
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Furthermore, the Corporate Banking Group managed
in 2015 to arrange and manage a number of
syndicated loans with local and regional Banks such
as cooperating with the Arab Banking Corporation to
arrange and manage a syndicated loan amounting to
USD 320 million to Kuwait International Bank. The
Corporate Banking Group arranged and managed as
well a finance to Türkiye Finans Bank in collaboration
with HSBC and Standard Chartered.
Contents
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Introduction
Economic Outlook
Global Economy
Regional Economy
Kuwait Economy
Banking Sector
Strategy Highlights
Financial Highlights
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On the monetary policy, the Federal Reserve in the
United States raised interest rates by a quarter percent
for the first time nearly in a decade and has indicated
a gradual pace of further increases. The European
Central Bank has decided to leave the interest rates
unchanged. Investment and productivity is projected
to improve in the Eurozone in the coming decade,
paving the way for somewhat of an acceleration in
growth. Year 2015 has been a rough year for emerging
markets. Brazil and Russia, are experiencing a recession
due to a collapse in commodity prices and geopolitical
issues. Inflation has generally remained below central
bank targets in advanced economies, an indication of
continued substantial economic slack.
In its latest World Economic Outlook, the International
Monetary Fund forecasts for global growth have been
projected downward by 0.2% each in 2016 and 2017
due to gradual slowdown of economic activity in
China, lower prices of energy and other commodities
and gradual tightening of monetary policy in the United
States. International Monetary Fund has projected
global growth of 3.4% in 2016 and 3.6% in 2017. The
drop in oil prices is expected to have some positive
impact on oil importing countries. Falling oil prices
could also curtail inflation around the world.
Regional Economy
Oil prices have declined significantly since September
2015 thereby continuing to put pressure on fiscal and
current account balances of GCC economies. Moody’s
expects that the GCC region will post a combined fiscal
deficit of close to 10 percent of regional GDP in 2015
and 2016, compared to an average aggregate surplus
of almost 9 percent between 2010 to 2014. Policy
adjustments such as reductions in subsidy spending
and measures to broaden the non-oil revenue base are
Research analysts estimate the growth in GCC
countries, to average about 3.6 percent in 2015–16,
with non-oil GDP growing by 4.7 percent and oil GDP
rising by 2 percent. They also expect non-oil GDP
growth in 2016 and 2017. If lower oil prices continues
to be persistent, GCC economies will see their first
fiscal deficits in years and may resort to debt. In the
medium term GCC governments are keen on tackling
subsidy reform, starting with fuel subsidies and may
further rationalize spending and reduce economic
inefficiencies. Gradual increase in interest rates are
also expected.
Fitch expects 2016 to be a challenging year for
GCC banks due to lower oil prices which is slowing
economic growth thereby impacting liquidity and
profitability. Liquidity position across banks are
adequate but are coming under pressure due to fall in
public sector deposits.
Moody’s forecasts credit growth in the 4-10% range,
as private sector declines are moderated by new
government borrowings from local banks, helping
to support profitability and margins. Robust capital
levels of banks in the region will cushion the impact
of further weaknesses in oil prices, economic growth
and asset quality. Decline in loan growth and higher
cost of funds are expected to reflect on banking sector
profitability in the region.
Kuwait Economy
Kuwait’s fiscal position remains healthy. Kuwait’s
credit profile is expected to remain the most resilient,
followed by Qatar and the UAE as per Moody’s.
Research analysts believe that non-oil growth is
expected to grow at 4-5% in 2016 and 2017 despite
pressure from lower oil prices. While the government
has taken some initiatives to rationalize current
spending the impact on domestic economy is expected
to be limited. Based on published research reports
GDP growth is expected to be at 1.6% in 2015 and is
expected to grow at 2.4% and 2.5% respectively in
year 2016 and 2017. The fiscal deficit is not expected
to exceed 6.2% of GDP in FY 2015/16 and could
narrow down to 3.8% in FY 2016/17. The government
Economic Outlook
Global Economy
The world economy has been more sluggish than
expected driven by slow investment growth, lack of
business and consumer confidence, weak productivity
and several other business challenges. This puts
pressure on the growth of global economy at least for
the immediate future. International Monetary Fund
expects the global growth projections for 2015 to be
3.1 percent.
expected in these economies. Debt issuances volumes
are also expected to rise as financing needs increase.
The recovery in the MENA region as a whole has
been fragile, owing to ongoing political transitions
and recently intensified conflicts. The economies of
countries in the MENA region, such as Egypt, Libya,
Syria, Tunisia, Lebanon and Jordan, continue to suffer
from these issues.
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Introduction
Management Discussion and Analysis report provides
an overview of the economic outlook, which directly
influence the performance of banking sector in
general, and then presents highlights on our strategy
and financial performance.
Financial Highlights
The consumer segment is a main source of growth
in non-oil activity and the same trend is expected to
continue in 2016 and 2017 which is supported by
growth in employment and salaries particularly in the
government sector. Real estate market is also expected
to cool off in 2016.
Banking Sector
The deposit portfolio of the local banks reached KD 39
billion by end of year 2015 with a compounded annual
growth rate of 6% over the last five years. On the other
side, the respective credit portfolio has reached KD 34
billion by end of year 2015 with a compounded annual
growth rate of 5% over the last five years.
The banking sector in Kuwait has potentials for growth;
however, the local market is highly competitive driven
by the available resources of the banks and the entry
of foreign and regional banks into the market. Hence,
some of the local banks have increased their investment
aboard, and may continue looking for opportunities
abroad for expansion. Kuwaiti banks have lately seen
some tightening in liquidity due the impact of lower
oil prices.
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On the monetary front, The Central Bank of Kuwait
raised its benchmark discount rate by 25 bps to
2.25 percent on 16 December 2015 to maintain the
competitiveness and attractiveness of the national
currency and to avoid a massive capital outflow and
the currency depreciation after the Federal Reserve
raised rates for the first time in nine years.
On the regulatory front, there were no major changes
except for the application of two new liquidity ratios
under the Basel III framework; one is a short-term
Strategy Highlights
Boubyan Bank’s first five year strategy which was
developed in 2010 had completed its term in year
2014. The strategy emphasized on building Boubyan’s
franchise in Kuwait by focusing on specific consumer
and corporate segments through providing superior
customer services along with new and innovative
products. The strategy of the Bank has been fruitful.
Boubyan managed to improve on many fronts, and the
transformation has been recognized by many regional
and international bodies.
The Bank is currently implementing its second five
year strategy - “Boubyan 2020” - which will focus on
additional growth in Kuwait while exploring regional
and international markets with strong Islamic banking
potential. In Kuwait, the focus will be on introducing
new products and targeting horizontal expansion
in untapped banking and financing activities.
Internationally, Boubyan is exploring markets with
strong potential where the Bank is uniquely positioned.
Boubyan’s success is highlighted through a number of
achievements:
• Steady growth in profitability and financial position
since the turnaround in year 2010.
• Moody’s assigned credit rating of D+ for the Bank
financial strength, Baa1 for long-term deposits and
a stable outlook.
• Fitch assigned Long term IDR of A+ and Viability
rating of BB+.
• Fastest growing bank in Kuwait with total assets
compounded annual growth rate of 25% between
2009-2015
• Non-Performing Financing ratio dropped to 0.9% in
2015 which is one of the lowest rates in the industry
• Awards from reputable organization such as Banker
Middle East, Global Finance, EIS, VISA and Service
Hero on growth and services respectively
• Reaching 32 branches, with additional 8 branches in
the pipeline for 2016
Financial performance
Net financing income
Operating income
Net profit attributable to Equity holders of the Bank
Earnings per share – fils
Financial position
Total assets
Financing receivables
Investments
Total depositors’ accounts
Total equity
Key performance ratios
Return on average assets
Return on average equity
Non-performing financing ratio
2015
2014
2013
79,342
91,353
35,235
17.1
66,208
78,405
28,239
13.7
60,742
67,072
13,408
6.5
3,132,885
2,171,794
244,805
2,398,935
318,232
2,647,930
1,805,115
237,955
2,092,028
296,027
2,191,986
1,478,700
184,846
1,657,398
263,944
1.2%
11.5%
0.9%
1.2%
10.1%
1.1%
0.7%
5.2%
1.9%
For the year ended December 31, 2015, net profit attributable to Equity holders of the Bank increased by 25%
to KD 35.2 Million, or 17.1 fils per share, from KD 28.2 Million, or 13.7 fils per share, in 2014.
Operating income increased by 17 % from 2015 to KD
91.3 Million compared to KD 78.4 Million in the year
2014. This increase was mainly driven by the growth
in the net financing income and fees and commission
income which represents the core businesses of the
Bank. Net financing income rose by 20% to reach KD
79.3 Million compared to KD 66.2 Million in year 2014
and net fees and commission income grew by KD 1.9
Million; a growth of 32%. The improvement is resulting
from strong balance sheet growth during 2015 which
was driven by the successful implementation of Strategy.
Operating expenses increased by 10.6% to KD 39.2
Million, compared to KD 35.4 Million in 2014, driven
primarily by the growth in business volumes and
opening of new branches. However, as the growth in
operating income was higher than the corresponding
increase in operating expenses, the operating expenses
to operating income ratio, which is the primary
measure of efficiency, has been decreased to 42.9% in
2015 from 45.2% in 2014.
Provision for impairment increased by 16.2% to KD
15.1 Million as a result of conservative approach and to
stabilize the bank’s balance sheet. This led to reducing
the non-performing financing ratio to 0.9% from 1.1%
in 2014, which is one of the lowest rate in the market,
along with higher coverage ratio.
Total assets grew by 18% in 2015 to reach KD 3.13
Billion. The growth is mainly driven by increase in
financing portfolio which grew by 20% in 2015 to
reach KD 2.2 Billion. Consumer and corporate finance
grew by 27% and 16% respectively in 2015. Credit
facilities growth was mainly from resident customers.
The Bank continued to sustain asset quality of the
credit growth thereby reducing NPL’s.
Investments portfolio grew by 2.9% in 2015 to reach
KD 245 Million. The growth is mainly from liquid
Sukuk’s which the bank uses to deploy surplus funds.
The liquid assets to total assets was maintained at 25
% in 2015.
During 2015, customer deposits grew by 15% to
reach KD 2.4 Billion.
The shareholders equity increased to KD 318 Million;
a growth of 8% in 2015. The Board of Directors have
proposed cash dividends of 5 Fils per share and stock
dividends of 5% for the year 2015 which are subject
to approval at the forthcoming Annual General
Assembly meeting.
The Bank is strongly capitalized with a Capital
Adequacy Ratio of 17.04%.
A weaker oil price scenario may put additional pressure
on fiscal position and may result in expenditure cuts
and delays in capital spending. Inflation is expected
to average around 3.4% in 2015 and cool off to
around 3% in 2016 and 2017. The Kuwaiti Dinar has
strengthened along with the stronger dollar.
liquidity ratio, i.e. liquidity coverage ratio, and the
other is a long-term liquidity ratio, i.e. the net stable
funding ratio” which are expected to be applicable in
the short term.
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has sufficient liquid funds to finance these deficits in
the medium term without raising debt.
Governance Statement
Governance is one of the key three pillars – in
addition to Internal Control and Risk Management –
to ensure achievement of goals and objectives of any
organization. The governance is reflected in the set
of processes, practices and structures, which affect
the way an organization is directed, controlled, and
monitored, and how its activities are reported for making
proper decisions. It encompasses the Board structure,
ethical values and practices, group structure, policies
and procedures, internal control, risk management,
transparency and disclosures, and protection of the
interests of shareholders and stakeholders.
Governance Statement
Governance Framework
Board of Directors
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Governance Framework
Shareholders
Board of Directors
Sharia’a
Committee
Board Committees
External
Auditors
Audit Committee
Governance
Committee
Executive
Committee
Nomination &
Remuneration
Committee
Risk &
Compliance
Committee
Regulatory Bodies and Customers
Directors
Structure and Independence
Approach to Governance
Authorities
Reporting of Information
Board Assessment
Board Committees
Meetings of Board and Board Committees
Management Team
Management Committees
Internal Control
Internal Control Review
Internal Control Review Report
Risk Management
Risk Management Framework
Risk Management Division
Remuneration Policy and Remuneration Package
Remuneration Scheme
Board Remuneration
Employee Remuneration
Major Shareholders
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In year 2015, Boubyan Bank ensured proper
implementation of the “Governance Framework” in line
with its “Governance Manual”. Further, we successfully
met the Corporate Governance requirements of the
Central Bank of Kuwait (“CBK”). This is driven by
our continuous endeavor for adopting professional
practices in management and control under the prime
objective of delivering the best to our shareholders and
stakeholders.
Internal Audit
Function
Governance
Function
Board of Directors
Boubyan Bank is managed by a Board of Directors (the
‘Board’), which consists of nine Directors elected by the
shareholders under a mandate to deliver sustainable
value to all stakeholders, including depositors /
customers, shareholders, employees, and society.
The Board is granted the highest authorities and overall
responsibilities by the shareholders to manage the Bank.
The Board operates in line with the by-laws of the Bank
Compliance
Function
Risk
Management
Function
and its charter, where its scope of work includes but is
not limited to:
• Setting the strategies and risk appetite for the Bank.
• Approving capital and operating plans presented
by management for the achievement of the Bank’s
strategic objectives.
• Ensuring efficient application of the resources for the
achievement of the objectives.
• Monitoring the performance of Executive Management.
Contents
Accordingly, we are committed at Boubyan Bank to
have a sound and effective governance framework, in
line with our aim toward perfection, as it provides us
the confidence that we are doing the right things to our
shareholders and customers.
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Governance Report
Further, we believe that the governance is an ongoing
journey, which reaches milestones but continues to
develop in line with the changes of control practices,
business model, markets, and emerging risks. Our
commitment toward sound governance commences
from the top at Board level through adopting and
implementing a well-developed and structured
governance framework with high standards and
professional practices; this is reflected across all levels
of the Boubyan and its Group in line with the principles
of professional responsibility and accountability.
Governance Report
Skills and Experience:
Mr. Al-Fulaij is a well-known businessman in Kuwait
with more than 34 years of experience; he manages two
general trading and contracting companies in Kuwait.
He graduated with a bachelor’s degree in Business
Administration from the United States of America in
1980.
Other current posts:
• Board Director – Arcadia Real Estate Company, KSCC
(Kuwait)
Vice-Chairman & Chief Executive Officer (Executive)
Year of joining: 2010
Mr. Al-Majed joined Boubyan Bank in August 2009
with more than 34 years of banking experience. In the
course of his career, he worked for National Bank of
Kuwait (NBK) where he held several positions including
Deputy Chief Executive Officer and General Manager Consumer Banking Group. Mr. Al-Majed graduated from
the University of Alexandria with a Bachelor’s degree in
Accounting and attended various executive management
development programs at various universities, including
Harvard, Wharton and Stanford.
• Chairman – Bank London & Middle East (UK)
18
Director (Non-Executive)
Mr. Al-Shaya is a well-known businessman with more
than 37 years of experience in trading and real estate
sectors; he manages a trading company in Kuwait. Mr.
Al-Shaya holds a bachelor’s degree in Economics from
Kuwait University.
Ahmad Khalid Al-Homaizi
Mr. Al-Homaizi has a well diversified experience in
banking, investment and consultancy. He is the General
Manager of a consultancy company in Kuwait. Mr. AlHomaizi obtained his bachelor’s degree in Finance and
Management Information System from Northeastern
University in the United States of America, and his MBA
from London Business School.
• Board Director – Combined Group Contracting
Company, KSPC (Kuwait)
• Board Director – Boubyan Capital Investment
Company, KSCC (Kuwait)
Mr. Al-Sager is an entrepreneur with more than 30 years
of experience. He is currently the Managing Partner of
a well-known food trading company in Kuwait. Mr. AlSager graduated from the United States of America
with a bachelor’s degree in Economics from Claremont
McKenna College.
• Vice-Chairman – Al-Yasra International Food Group,
KSCC (Kuwait)
• Board Director – Al-Shall Investment Company, KSCC
(Kuwait)
• Board Director – United Electronics Company – EXTRA
(Saudi Arabia)
• Board Director – Göknur Foodstuff Company (Turkey)
• Board Director – BiscoMisr Company (Egypt)
Farid Soud Al-Fozan
Mr. Al-Fozan possesses more than 27 years of
experience in various sectors such as contracting, real
estate development, and industry and energy services.
He manages operations of companies in Kuwait and
Kingdom of Saudi Arabia. Mr. Al-Fozan graduated from
Kuwait University with a bachelor’s degree in Finance
and Banking.
• Vice Chairman – Gulf Group Holding Company, KSCC
(Kuwait)
• Vice Chairman – Inovest Investment Company, BSC
(Bahrain)
• Board Director – SAFCORP Holding Company, KSCC
(Kuwait)
• Board Director – Gulf Real Estate Company (Saudi
Arabia)
Mr. Al-Mutairi has a diversified experience for more
than 23 years in the fields of financing, investment, and
treasury. He is currently the CEO of CreditOne Kuwait
Holding Company. He graduated from the United States
of America with a bachelor’s degree in Finance.
• Board Director – Warba Insurance Company, KPSC
(Kuwait)
• Board Director – Idafa Holding Company, KSCC
(Kuwait)
Mr. Al- Jallal is a well-known banker with more than 32
years of banking, investment, and business experience;
he possessed several executive positions in banking,
including the General Manager-Corporate Banking and
Treasury at Ahli United Bank in Kuwait. He is currently
the CEO of a general trading company in Kuwait. He
graduated from the United States of America with a
degree in Economics.
• Board Director – Al-Mustaqbal Investment Company,
KSCC (Kuwait)
Mr. Al-Hamad has more than 22 years of experience,
including 11 years in banking and the remaining in the
investment sector; he is the Managing Director of a
holding company in Kuwait. Mr. Al-Hamad possesses a
bachelor’s degree in Economics, and a master’s degree
in Finance from the United States of America.
• Chairman – Boubyan Capital Investment Company,
KSCC (Kuwait)
• Managing Director – Helvetia Arab Holding Company,
KSCC (Kuwait)
Structure and Independence
The Board possesses a collective experience from
various industries and business sectors brought by
all the Board Directors who are elected rather than
appointed by the shareholders. Within the Board, only
the Vice-Chairman & CEO is entrusted with executive
role; all other Board Directors are Non-Executive
Directors, who are not acting as employees and do not
participate in the day-to-day business management and
activities of Boubyan.
Accordingly, the Non-Executive Directors bring an
independent perspective, with constructive challenges
to develop proposals on strategy, scrutinize the
performance of management in meeting agreed goals
and objectives, and monitor the risk profile and the
reporting of performance, where the decisions of the
Board are not dominated by certain individuals or
groups.
Chairman (Non-Executive)
• Vice Chairman – Awtad Real Estate Company, KSCC
(Kuwait)
• Board Director – Mabanee Company, KPSC (Kuwait)
• Board Director – Orient Education Services Company,
KSCC (Kuwait)
• Vice Chairman – Enmaa Real Estate Company (Oman)
19
Directors
Governance Report
Accordingly, the Board is committed to implement
proper governance practices, which meet the relevant
governance regulatory requirements and extend to
reflect applicable leading practices. The Board ensures
the implementation of the corporate governance
practices through its supervisory role without stepping
onto the day-to-day activities, which are delegated to
the Executive Management.
20
Authorities
The Board is responsible for managing the business of
Boubyan Bank and, in doing so, may exercise its full
authorities, subject to any relevant laws and regulations
and to the Articles of Association and By-laws of the
Bank. In particular, the Board may exercise the authority
to obtain financing and to mortgage or charge all or
any part of the undertaking, property or assets (present
or future) of Boubyan Bank, and may also exercise any
of the authorities delegated by the shareholders in a
General Assembly.
On the other hand, the Board is able to assign to
Directors, Executives and/or Committees any of its
powers, authorities and discretions (including the power
to sub-delegate); accordingly, the Board delegated the
1. The approval of critical matters including business
plans, risk appetite and performance targets, and
procedures for monitoring and controlling operations.
2. The authority or the delegation of authority to
approve credit and market risk limits, acquisitions,
disposals, investments, capital expenditure or
realization or creation of a new venture.
3. Appointment of the Executive Management team.
4. Any changes on the accounting policies, which
would have material impact on the financial position.
Reporting of Information
The Board regularly reviews the financial and
management reports compared to financial budgets and
business plans. Further, the Board Committees report to
the Board on a quarterly basis on their activities.
Board Assessment
As part of its Board assessment approach, Boubyan
Bank followed up in 2015 on the actions for potential
improvements at Board level as advised last year by
an external consulting firm, and ensured successful
implementation of the key recommendations. Once
every three years, Boubyan Bank will engage an external
consultant to conduct a Board assessment.
Board Committees
To assist in fulfilling its duties, the Board established five
Board Committees and delegated to them responsibilities
to act on its behalf. The respective committees were
established in line with proper corporate governance
Further, all Board Directors have full access to all
relevant information, and may take independent
professional advice as needed; they can also contact
management and employees at all levels.
Each Board Committee has clear role, duties, and
authorities as determined by the Board and reflected
within the respective charter. The chairperson of each
Board Committee regularly reports to the Board on
the performance of activities of the respective Board
Committee.
Except for acting as the chairperson of the Board
Governance Committee, the Chairman does not
participate in any other Board Committee.
Composition of Committees
Board Executive Committee (BEC)
The Board ensures the receipt of reliable, relevant,
adequate, useful and timely information that enables
them taking appropriate decisions; such information
included:
• The agenda and supporting documents of Board and
Committee meetings.
• Regular reports and presentations on strategy, budgets
and developments in the businesses.
• Regular reports on the Group’s risk appetite profile,
top and emerging risks, risk management, credit
exposures and the bank’s finance portfolio, asset and
liability management, liquidity, litigation, compliance,
anti-money laundry and reputational issues.
• Reports on capital management and succession
planning.
principles and the applicable corporate governance
regulatory requirements.
Board of Directors
* Chairperson
Adel Abdul Wahab Al-Majed *
Board Nomination & Remuneration
Committee (BNRC)
Nasser Abdulaziz Al-Jallal *
Board Governance Committee (BGC)
Mahmoud Yousef Al-Fulaij *
Farid Soud Al-Fozan
Board Audit Committee (BAC)
Farid Soud Al-Fozan*
Board Risk and Compliance
Committee (BRCC)
Ahmed Yousef Al-Sager *
Approach to Governance
The Board understands that sound governance
framework is one of the key pillars for ensuring
achievement of goals and objectives of the Bank,
along with maintaining the trust with the shareholders
to maintain business growth, sustainability, and
profitability.
management and day-to-day activities of the Bank
to the Executive Management but retained certain
authorities among of which:
21
Further, Non-Executive Directors are independent in
post and judgment as supported by the Board “Code of
Conduct” and “Conflict of Interest” policies. The Board
has ensured that any potential incidence of conflict
of interest that may jeopardize the independence and
objectivity of any Board Directors will be managed and
cleared as per the adopted policies. Hence, the Bank
confirms the independency of its Board Directors on
their judgments and decisions.
Governance Report
As per the charter of the BEC, the Committee should
meet at least six times a year. The main role of the BEC
is to review and approve limits and transactions related
to financing and investment activities as set within the
authority matrices of Boubyan Bank. The BEC reviews as
well as related policies such as finance policies.
Activities during the year:
During 2015, the BEC met thirty-nine times, which is
almost on a weekly basis; the Committee performed
various activities, which included but were not limited to:
•Approve financing transactions in line with the
approved authority limits.
•Recommend settlement and/or legal cases of corporate
customers to the Board for approval.
•Approve related party transactions and investment
transactions within its authority limits.
22
Board Nomination and Remuneration Committee
(BNRC)
The BNRC comprises of three Board Directors; the
members of the BNRC have collective experience in
banking, business, and Islamic Sharia’a.
As per the charter of the BNRC, the Committee should
meet at least four times a year. The main role of the BNRC
includes assessing the nominees for the Board based on
set criteria, administering the assessment of the Board,
revising the Remuneration Policy and the assessment of
Executive Management performance, and ensuring the
presence of proper employee succession plan.
During 2015, the BNRC met five times; the activities of
the BNRC included but were not limited to:
Board Governance Committee (BGC)
The BGC comprises of four Board Directors; the
Chairman is the chairperson on the BGC, whose
members have collective experience in banking,
business, and governance.
The Committee should meet at least twice a year. The
main role of the BGC includes developing and updating
the Governance Manual, ensuring that the Governance
Manual is adequately followed, reviewing annual
governance report, and following-up on governance
related recommendations/actions.
During 2015, the BGC met twice in line with the
minimum requirements; the BGC covered the following
activities:
•Approve the governance report.
•Discuss the governance review reports of the
Corporate Governance Unit and follow up on the
status of respective actions.
•Ensure that the Board and Board Committees held
adequate number of meetings.
•Follow-up the actions taken based on the Board
Assessment report.
Board Audit Committee (BAC)
The BAC comprises of three Board Directors, whose
members have collective experience in banking,
business, governance, and audit. None of the BAC
members is a member of Board Executive Committee.
The BAC should meet at least on a quarterly basis; and
its main role includes:
•Reviewing internal audit charter and manual, and
accounting policies.
•Assessing and recommending appointment of external
auditors.
•Reviewing quarterly financial statements.
•Approving internal audit plan, discussing internal audit
report, and following up on audit corrective actions.
•Providing support to the Internal Audit Division to
ensure fulfilling its scope of work effectively and
independently.
•Approving the appointment and/or resignation of the
GM – Internal Audit Division, and assessing his annual
performance.
The BAC met six times during 2015, including a meeting
every quarter in line with the corporate governance
regulatory requirements, the activities of the BAC
included but were not limited to:
•Approve internal audit plan.
•Discuss internal audit reports, management letters of
external auditors, and ICR report.
•Review quarterly financial statements.
•Approve the accounting policies.
•Follow up on internal audit, management letter, ICR,
and CBK observations and respective actions.
Board Risk Management and Compliance Committee
(BRCC)
The BRCC comprises of three Board Directors; and
none of its members is a member of Board Executive
Committee.
As per its charter, the BRCC meets at least four times
a year, and reports on its activities to the Board on a
periodic basis. The role of the BRCC includes:
• Assessing the Risk Appetite measures, Risk Strategy,
and other risk related measures, and proposing
recommendations to the Board.
• Reviewing and discussing the reports of the Risk
Management Division, including the Capital Adequacy
Ratio, Internal Capital Adequacy Assessment Process
(ICAAP), Stress Testing, and other risk assessment
reports.
• Providing support to the Risk Management Division
to ensure fulfilling its scope of work effectively and
independently.
• Approving the appointment and/or resignation of the
GM – Risk Management Division, and assessing his
annual performance.
During 2015, the BRCC met seven times; and its
activities included but were not limited to the following:
• Propose the Capital Management Plan for Board
approval.
• Approve various policies including credit risk policy
and corporate finance policy.
• Discuss quarterly Risk Profile reports.
• Review periodic ICAAP & Stress Testing reports.
• Discuss Risk Asset Review reports.
• Discuss activity reports pertaining to Compliance and
AML functions.
Meetings of Board and Board Committees
Attendance
Number of Meetings
Minimum Required Meetings
Farid Soud Al-Fozan
Board
11
6
11
11
9
9
9
8
7
8
7
BEC
39
6
36
34
BNRC
5
4
BCGC
2
2
BAC
6
4
BRCC
7
4
3
7
7
2
2
5
4
37
25
1
2
6
5
6
6
Board Executive Committee (BEC)
The BEC comprises of four Board Directors, and is
headed by the Vice-Chairman & CEO. The members of
the BEC are not members in Board Audit Committee
or Board Risk and Compliance Committee; and they
possess collective experience in banking, business, real
estate, credit financing, and Islamic Sharia’a.
• Review the proposed remuneration schemes and
propose recommendations to the Board.
• Ensure that performance assessment was conducted
for Executive Management.
• Review the employee succession plan.
• Identify training programs to the Board.
• Approve a set of policies related mainly to the HRG.
23
Details of Committees
Governance Report
Management Team
Boubyan Bank
Vice-Chairman & Chief Executive Officer
Mr. Al-Majed joined Boubyan Bank in August 2009, and
has more than 34 years of banking experience. In the
course of his career, he worked for National Bank of
Kuwait (NBK) where he held several positions including
Deputy Chief Executive Officer and General Manager
- Consumer Banking Group. Mr. Al-Majed graduated
from the University of Alexandria with a bachelor’s
degree in accounting, and attended various executive
management development programs at various
universities, including Harvard, Wharton and Stanford.
Abdulla Al-Najran Al-Tuwaijri
24
Mr. Al-Tuwaijri joined Boubyan Bank in December 2011
and has more than 27 years of banking experience,
including 23 years at NBK. During his time with NBK,
he held different leadership roles in retail banking in
Kuwait and London, where his last position was the
Deputy General Manager - Consumer Banking Group.
Mr. Al-Tuwaijri got his bachelor’s degree in Finance
from Kuwait University, and attended several executive
development programs at Harvard Business School,
INSEAD, and other reputable institutions.
Abdul-Salam Mohammed Al-Saleh
Mr. Al-Saleh joined Boubyan Bank in October 2012,
and has more than 28 years of banking experience. He
worked for 18 years at NBK, where he gained experience
in Financial Control and Corporate Banking; and his last
Waleed Khalid Al-Yaqout
General Manager - Administration Group
Mr. Al-Yaqout joined Boubyan in February 2010, and has
more than 34 years of banking experience. His previous
position was General Manager – Administration
and Human Resources Group at NBK. Mr. Al-Yaqout
graduated with a bachelor’s degree in Business
Administration and Marketing from the University of
Ashland in USA, and participated in various executive
management development programs at Harvard,
Wharton, Stanford and Columbia.
Adel Abdullah Al Hammad
General Manager - Human Resources Group
Mr. Al-Hammad joined Boubyan Bank in December
2006, and has more than 32 years of experience in
Human Resources Management, out of which 23 years
were at NBK, where he held several key positions,
the last of which was the Head of Human Resources.
Mr. Al-Hammad graduated with a bachelor’s degree
in Economics from Kuwait University, and attended
several executive management development programs
at Harvard and Stanford.
Dr. Waleed Eisa Al-Hasawi
General Manager - Information Technology Group
Dr. Al-Hasawi joined Boubyan Bank in February 2011,
and has more than 38 years of experience. He held
many positions in different institutions, the last of
which was the Assistant General Manager for the IT
Sector at Kuwait Finance House. Dr. Al-Hasawi studied
at Worcester Polytechnic Institute in USA and continued
his master’s study at Lehigh University; and he got his
PhD. from Loughborough University of Technology in
UK. All his studies were in the area of Electronics and
Computer Engineering.
Ashraf Abdallah Sewilam
General Manager – Corporate Banking Group
Mr. Sewilam joined Boubyan Bank in 2013, and has
over 21 years of experience in banking sector. Before
joining Boubyan, Mr. Sewilam was CEO of Al Rajhi BankKuwait. He occupied the position of the CEO of UBCI
(a subsidiary of Ahli United Bank (AUB) in Libya) and
was a Deputy CEO for Corporate and Treasury at AUB in
Kuwait. He worked as well for 10 years at NBK, where
he progressed in several managerial positions, the last
of which was Executive Manager. Mr. Sewilam holds
bachelor’s degree in Economics from Cairo University.
Leslie James Rice
General Manager - Risk Management
Mr. Rice joined Boubyan Bank in 2010, having over 31
years banking experience. He started his banking career
with Grindlays Bank in London. Before joining Boubyan,
Mr. Rice was the Group Chief Risk and Compliance
Officer at SHUAA Capital in the UAE. His regional
experience includes senior positions with National Bank
of Dubai and Riyad Bank. He is an Economics graduate
and a fellow of the Chartered Institute of Management
Accountants.
Abdul Rahman Hamza Mansour
General Manager - Internal Audit
Mr. Hamza joined the Bank in year 2006 and has more
than 30 years of professional experience with financial
institutions. Prior to joining Boubyan, he held a position
as Audit Manager at Kuwait Investment Authority, and
worked before that at Al-Ahli Bank of Kuwait. Mr. Hamza
holds a bachelor’s degree in Accounting, and he is a
Certified Public Accountant (CPA), a Certified Internal
Auditor (CIA) and a Certified Fraud Examiner (CFE).
Mohamed Ibrahim Ismail
General Manager – Financial Control Group
Mr. Ismail joined Boubyan Bank in 2005 and has about
20 years of banking and financial services experience.
He started his career as an external auditor with Deloitte
& Touche and then Ernst & Young. In the course of his
career, he worked at Kuwait Finance House and Gulf
Investment House. Mr. Ismail is a Certified Public
Accountant (CPA) and a Certified Internal Auditor (CIA),
and holds MBA in Finance from Manchester Business
School.
Rajeev Kale
General Manager – Banking Operations Group
Rajeev Kale has over 30 years of banking experience.
He joined Boubyan in December 2015. Before joining
Boubyan Bank, Mr. Kale worked as the Head of
Operations at National Bank of Abu Dhabi. He held
senior positions with top banks in the Middle East,
UK, and South East Asia, including Citi-Bank, Deutsche
Bank, and American Express. Mr. Kale holds MBA in
Finance and MIS, and Bachler’s degree in Engineering –
Electronics and Telecommunication.
Mukkulam Jamal Jaffar
Deputy General Manager - Treasury Services
Mr. Jaffar joined the Bank in March 2005 and has over
37 years of experience in banking sector, mainly in
treasury services. Prior to joining Boubyan, he held the
position as the Assistant Treasurer at Burgan Bank. Mr.
Jaffar holds a master’s degree in Physics and a diploma
in Bank Management.
Boubyan Group
Saleh Ahmad Al-Ateeqi
Chief Executive Officer – Boubyan Capital
Mr. Al-Ateeqi joined Boubyan Group in 2010, and
he is the CEO of Boubyan Capital – the investment
management arm of Boubyan Bank. Prior to Boubyan,
he held various positions in the fields of investment,
real estate and management consultancy. Mr. Al-Ateeqi
was a Deputy GM in charge of corporate strategy and
business development at Mabanee Company, and an
Engagement Manager with McKinsey & Company.
He also worked as a Senior Advisor with Tony Blair &
Associates. Mr. Al-Ateeqi holds an MBA in Strategic
Management and Finance from Wharton School
of Business and a Bachelor’s degree with honors in
Accounting from Georgetown University.
The Board of Directors delegated to the Executive
Management, which is headed by the Vice-Chairman
& Chief Executive Officer, the implementation of the
adopted strategy and business plan.
position was the Head of Domestic Corporate Banking.
Prior to joining the Bank, he worked over 7 years for
National Bank of Abu Dhabi (NBAD) as the Regional
Manager of its branch in Kuwait. Mr. Al-Saleh got his
bachelor’s degree in Finance from Kuwait University, and
attended various executive management development
programs over the course of his career.
25
Governance Report
The Executive Management works in a teamwork spirit,
where collective efforts and decisions would be required
for ensuring effective and efficient management
of integrated functions and activities. Accordingly,
Boubyan Bank has a set of Management Committees to
assist in fulfilling the duties and responsibilities of the
Executive Management. The Management Committees
derive their authorities mainly from the Vice-Chairman
& CEO, and based on authorities and limits delegated by
the Board of Directors.
Key Management Committees
The Key Management Committees are as follows:
Key Management
Committees
Provisions
Committee
Asset and Liability
Management
Committee
Management
Executive
Committee
Management
Credit
Committee
Management
Investment
Committee
Management Executive Committee (MEC)
This committee deals with all significant management
level matters other than those handled by other
management committees. The MEC meets almost on a
weekly basis.
Management Investment Committee (MIC)
The MIC discusses and makes decisions within its
authorized limits on investment proposals submitted by
the concerned business groups. The MCC usually meets
on a weekly basis.
Assets and Liability Management Committee (ALCO)
The ALCO reviews the assets and liability composition of
the bank, liquidity, market risks, trends and their impact
on the Bank. The ALCO meets on a monthly basis.
Provisions Committee (PVC)
The Provisions Committee reviews and evaluates the
outstanding investments and financing transactions for
each customer, to determine any issues or difficulties
relating to the customer position that require to
classify such investments and financing transactions as
irregular and hence determining the required provisions
in accordance with CBK instructions and International
Financial Reporting Standards. The PVC meets at least
once every quarter.
27
Internal Control Review
In year 2015, Boubyan Bank engaged an external
auditor in line with the CBK regulation to conduct an
independent internal control review for year 2014
activities. Based on the review of the external auditor,
no exceptions pertaining to governance aspects were
noted. Also, the report of the external auditor conveyed
that Boubyan Bank maintained in all material aspects,
effective internal control system, where no high risk
issues were even noted; the Internal Control Review
report is attached in the next page.
In line with its duties and responsibilities toward
ensuring adequate internal control systems, the Board
provided all needed support and ensured fulfillment of
the roles of the various functions involved in the internal
control, including:
• Sharia’a Board.
• External Audit.
• Independent Internal Control Review.
• Internal Audit.
• Risk Management.
• Compliance.
• Governance.
26
Management Credit Committee (MCC)
The main objective of MCC is to discuss and make
decisions within its authorized limits on financing
proposals submitted by the business groups. The MCC
usually meets on a weekly basis.
Internal Control
The Board is responsible for ensuring the adequacy of
the Group’s internal control framework. This includes,
but is not restricted to, the approval and oversight of the
implementation of the strategy via policies that reflect
the prudent Sharia’a compliant approach to conducting
its businesses. The internal control processes include
controls and limits that are embedded in all processes;
risk and control reports are integral parts of the Group‘s
daily activities. Such procedures were designed to
manage and mitigate risk of failure to achieve business
objectives and can only provide reasonable and rather
than absolute assurance against material misstatements,
errors, losses, or fraud.
Governance Report
28
29
Internal Control Review Report
Governance Report
Risk Management Framework
Risk management is a core focus at Boubyan Bank. This
is driven by the responsibility of the Board of Directors to
ensure having a “fit for the purpose” Risk Management
function to protect the best interests of all stakeholders,
especially the depositors / customers. Boubyan Bank has
ERM and Risk Appetite
Framework
Risk Strategy
and Policies
Operational
Policies and
Procedures
3rd Line of Defence
• Board Oversight
• Internal Audit
Function
Risk Report and
Independent Assessment
2nd Line of Defence
• Board Risk Management Committee
• Risk Management Division
1st Line of Defence
• Each Business Group / Division / Department / Unit
(Based on Risk Appetite)
In line with the “Three Lines of Defence” approach,
Boubyan Bank introduced its Enterprise Risk Management
(ERM) framework through updating the Risk appetite
measures and linking them to the ERM index.
30
Boubyan Bank perceives Risk Management as an
integrated function with the business activities,
which is guided by a well-balanced Risk Appetite
model; accordingly, we adopt the philosophy of “risk
is everyone’s business”, and this is reflected in the
following “Three-Lines of Defence” approach:
Stress Testing
In line with best practices for risk management,
Boubyan Bank conducts stress testing to measure the
Bank’s vulnerability to exceptional but plausible events.
The respective stress testing is conducted on a quarterly
basis, where the results are discussed at management
level and presented to the Board Risk Management and
Compliance Committee. Further, the results of Stress
Testing are reported on a semi-annual basis to the Board
and Central Bank of Kuwait.
Risk Management Division
The Risk Management Division (RMD) operates
independently from the business, and is headed by
Risk Assessment and
Monitoring
Risk Identification
and Acceptance
a General Manager, who reports to the Board Risk
Management and Compliance Committee and the
CEO. The RMD comprises of the following functional
departments:
• Financial and Market Risk Department
• Operational Risk Department
• Technology Risk Department
• Credit Risk Review Department
• Corporate Financing Risk Analytics Department
• Consumer Financing Risk Analytics Department Remuneration Policy and Remuneration Package
Remuneration Scheme
Boubyan Bank always considers adopting a balanced
“Remuneration Scheme” to be competitive enough to
attract and maintain qualified and skilled employees,
who are key success factors in banking sector, and, at
the same time, to be reasonably linked to sustainable
progressive performance, and achievement of both
short and long-term targets.
The current “Employee Incentive Plan” of Boubyan Bank
takes into consideration:
• Both financial and risk measures
• Link to long term targets (Strategic Objectives)
• Sensitivity to time horizons of risks
• Claw back feature
Board Remuneration
As per the by-laws and Article of Associations and in line
with the Companies’ Laws of the State of Kuwait, the
Board of Directors may propose annual remuneration
up to 10% of annual Net Profit after deducting the
following appropriations:
- 10% of Net Profit as Statutory Reserves
- 10% of Net Profit as Voluntary Reserves
- 1% of Net Profit as Contribution to KFAS
- 5% of capital as preliminary dividends to the
Shareholders
In any case, Remuneration to the Board should be
subject to the approval of the Shareholders in the
Annual General Assembly.
As current practice, the Board Directors are not entitled to
attendance fees for the Board and/or Board Committees
meetings, and/or any material in-kind benefits. Further,
none of the Board Directors is entitled to any fixed
salaries, except for the Vice-Chairman & CEO, who earns
benefits as employee for his executive role.
For year 2015, the Board has proposed annual
remuneration of KD 310 thousands to be allocated
among the Board Directors as follows: KD 50 thousands
to the Chairman, KD 40 thousands for each member of
the Board Executive Committee, and KD 25 thousands
for each other Board Directors. This proposal is subject
to the approval of the shareholders.
Employee Remuneration
The employees of the Bank are entitled to two
categories of remuneration, which are as follows:
• Fixed remuneration: such remuneration are defined
in the employment agreements, and may include
fixed salaries (i.e. basic salary , allowances and
annual fixed pay as a percentage of basic salary) and
other benefits (i.e. medical insurance, air-tickets, and
schooling support),.
• Variable remuneration: such remuneration are driven
mainly by performance and guided by the “Employee
Incentive Plan”. This could be in the form of cash
bonus and/or Employee Stock Options (ESOP). The
variable remuneration are reviewed by the Board
Nomination and Remuneration Committee and
approved by the Board of Directors.
The following table details the remuneration paid to certain employee categories for year ended 31 December 2015:
Employees
Categories
Number of
Employees
Fixed
Remuneration
KD’000
Variable
Remuneration
KD’000
Cash
ESOP
Total
KD’000
Senior Management
33
3,630
729
730
5,089
Material Risk Takers
23
2,296
508
505
3,309
Financial and
Risk Control
13
855
106
101
1,062
a Board Risk Management and Compliance Committee
(BRCC), which oversees the Risk Management function.
31
Risk Management
Governance Report
Major Shareholders
As of December 31, 2015, the major shareholders
owning or controlling more than 5% of capital were
as follows:
Percentage of Ownership
National Bank of Kuwait S.A.K
58.3%
The Commercial Bank of Kuwait S.A.K
11.94%
Our Society…Our Responsibility
Social responsibility is the cornerstone of the Bank’s
dealings with all groups of the society in contribution to
development, and to building a society which is able to
keep pace with all regional and international changes.
Therefore, the Bank took the lead in launching a variety
of social initiatives and sponsoring many activities and
events targeting various groups of the society.
During the period extending from 2010 through the end
of 2015, the Bank sponsored and participated in over
550 different activities targeting different social groups
with a special focus on youth and people with special
needs.
Boubyan Bank’s Most Prominent Social Campaigns
in 2015:
Steps Campaign
For the second year in a row, Boubyan Bank organized
the Steps Campaign during the Holy month of Ramadan
in cooperation with Project 5 Miles, aiming to support
people with special needs in Kuwait by encouraging
everyone to exercise walking at Al-Hamra tower
in Kuwait. The Bank donated KD 1 for every 5 laps
completed by the participants.
This campaign was the most distinguished among its
peers since it combined both walking during the holy
month of Ramadan, with its positive impact on the
health of those who exercise it, and the humanitarian
goal of the campaign represented in supporting people
with special needs.
32
The campaign succeeded to attract 4000+ participants
from various ages over the whole month, managing by
that to alleviate the pains of those with special needs via
the Bank’s donations.
The Big Tree Society
For the 4th year in a row, Boubyan Bank organized the
Big Tree Society Competition in collaboration with the
United Nations Educational, Scientific and Cultural
Organization (UNESCO) under the patronage of the
Minister of Education and Minister of Higher Education,
His Excellency Dr. Bader Hamad Al-Essa. More than
300 schools participated in the competition and 208 of
them reached the final stages.
The Big Tree Society is not just a competition between
schools, rather, it is an integral program that aims at
implanting many values pertinent to environmental
protection in children’s minds.
The competition urges students, of different ages and
at all school levels, to shape their future. The program
gives the students an opportunity to realize their
potentials and to take part in a competition whose
goal is to improve environmental awareness and be
influential as regards environmental matters.
Encouraging Kuwaiti Youth Projects
Boubyan Bank continued its support to the Kuwaiti
youths via encouraging their private projects at various
domains. This was embodied in cooperating with them
and purchasing their products in the bank’s special
events. This has also contributed to increasing their
marketing levels in addition to employing the bank’s
social media channels to promote their projects.
Architectural Design Exhibition
For the fifth year in a row, Boubyan Bank continued
its support to the graduation projects of the students
of the College of Engineering & Petroleum - Kuwait
University. The Bank was named the “Most Prominent
Supporter of the 2015 Graduation Projects” due to its
support and contribution to the sponsorship of 50+
engineering projects where 200+ students participated.
Various Activities and Events
In 2015, the bank continued its encouragement and
financial support for many initiatives, campaigns and
exhibitions which are considered a matter of interest
for various groups of the society, the most important
of which was Kuwait Grand Photography Contest, the
Islamic Art Category, and the distinguished project of
“Thameen of Kuwait” Encyclopedia.
Name of Shareholder
The five senior executives who received the highest
remuneration packages, plus the heads of Financial
Control, Internal Audit and Risk Management groups
(i.e., 8 executives in total) received together as a group
remuneration package of KD 2,518 thousand for the
year ended 31 December 2015.
33
Categories Definitions:
• Senior Management includes all staff in the positions
of Assistant General Manager and above and staff
whose hiring are subject to approval of regulators.
• Material Risk Takers includes all staff whose activities
and decisions have a material impact on the risk
profile of the bank.
• Financial and Risk Control includes all head of
divisions and head of groups in Financial Control, Risk
Management, Compliance, Internal Audit and AntiMoney Laundering functions.
Social Responsibility
Boubyan Bank K.S.C.P. and Subsidiaries
34
35
Risk Managment
For the year ended 31 December 2015
BOUBYAN BANK K.S.C.P. AND SUBSIDIARIES
RISK MANAGEMENT
RISK MANAGEMENT
1. INRODUCTION AND OVERVIEW
In June 2014, Central Bank of Kuwait (CBK) issued directives on the adoption of the Capital Adequacy Standards (Basel
III) under the Basel Committee framework applicable to licensed Islamic banks in Kuwait, effectively replacing and
superseding the earlier requirements under the circular issued in 2009 Basel framework (Basel II). The reforms strengthen
the quality of capital and introduced several buffer requirements in line with proposals made by the Basel Committee on
Banking Supervision (BCBS). The CBK Basel framework consists of three Pillars. Pillar 1 provides a framework for
measuring capital requirements for credit, operational and market risks under the “Standardised Approach”. Pillar 2
pertains to the Supervisory Review Process and emphasises the importance of Internal Capital Adequacy Assessment
Process (ICAAP) performed by banks. As such, and in compliance with the aforementioned instructions, Boubyan Bank
K.S.C.P (the “Bank”) has developed an ICAAP and Stress Testing framework along with its underlying models, policies
and procedures. Boubyan Bank continually enhances its ICAAP and Stress Testing framework to maintain its capital
commensurate with the overall risks to which the Bank is exposed. Pillar 3 aims to complement the above capital adequacy
requirements under Pillar 1 and Pillar 2 by requiring banks to provide a consistent and understandable disclosure
framework which facilitates comparison, thus enhancing the safety and soundness of the banking sector in Kuwait.
3. CAPITAL STRUCTURE
The Group’s regulatory capital comprises:
2. REGULATORY SCOPE OF CONSOLIDATION
The core activities of the Bank and its subsidiaries (collectively the “Group”) are retail, corporate and, investment banking,
and asset management, in accordance with Codes of the Islamic Sharia’a, as approved by the Bank’s Sharia’a Supervisory
Board. For further details on the Group’s activities, please refer to note 29 of the Group’s consolidated financial
statements.
The consolidated financial statements and capital adequacy regulatory reports of the Group have been prepared and
consolidated on a consistent basis, unless otherwise disclosed. For additional information on the basis of preparation and
basis of consolidation please refer to notes 2 and 3.1 of the Group’s consolidated financial statements for the year ended 31
December 2015.
The principal subsidiaries of the Group are presented in the note 15 of the Group’s consolidated financial statements.
All subsidiaries have been fully consolidated under the regulatory scope of consolidation for regulatory capital
calculations.
Significant investments in banking, financial and insurance entities that are outside the scope of regulatory consolidation
are required to be subject to the threshold treatment prescribed under the CBK Basel III rules and are risk-weighted and/or
capital deducted.
 All the significant investments in banking and financial entities classified as associates under Note 16 of the Group’s
consolidated financial statements have been subject to the threshold treatment and risk-weighted as prescribed.
 Other significant investments in banking and financial entities classified as equities have been subject to the
threshold treatment and risk-weighted as prescribed.
b) Additional Tier 1 (AT1) Capital which consists of eligible portion of non-controlling interests, and,
c) Tier 2 (T2) capital which consists of the allowed portions of general provisions and eligible portion of non-controlling
interests.
The Bank’s share capital as at 31 December 2015 comprised 2,063,251,570 issued and fully-paid up equity shares.
The regulatory capital for the Group is detailed below:
2015
KD’000
Table 1
Regulatory Capital
Common Equity Tier 1 Capital
Additional Tier 1 Capital
Tier 1 Capital
Tier 2 Capital
Total Regulatory Capital
259,364
230
259,594
18,332
277,926
229,050
731
229,781
15,148
244,929
Table 2
Common Equity Tier 1 Capital (CET1)
Tier 1 Capital (Tier 1)
Total Regulatory Capital
MCR*
9.00%
10.50%
12.50%
2015
CAR
15.90%
15.91%
17.04%
2014
MCR*
8.50%
10.00%
12.00%
CAR
16.88%
16.94%
18.05%
* includes a 2.5% capital conservation buffer which is to be met through CET1 capital.
The countercyclical capital Buffer has not been required for the year ended 31 December 2015 in the MCR. The MCR
including capital conservation buffer is to be increased to 13% through a transitional phased-in period until 2016.
2
3
37
36
2014
KD’000
4. CAPITAL ADEQUACY RATIOS
The Group ensures adherence to CBK’s requirements by monitoring its capital adequacy. The Group’s capital forecasting
process ensures pro-active actions and plans are in place to ensure a sufficient capital buffer above minimum levels is in
place at all times. This process takes into consideration regulatory capital requirements, stress-testing and the Bank’s
business plans.
The Minimum Capital Requirements (MCR) and The Capital Adequacy Ratios’(CAR) for the Group under the various
levels of regulatory capital expressed as a percentage of risk-weighted assets are detailed below:
Other ‘minority’ investments in banking, financial and insurance entities classified as equities have been subject to the
prescribed threshold treatment and risk-weighted as required.
a) Common Equity Tier 1 (CET1) Capital which is considered as the core measure of the Group's financial strength and
includes share capital, share premium, eligible reserves and retained earnings net of regulatory adjustments,
5.1 Credit risk
PROFILE
5. OF
PROFILE
RISK-WEIGHTED
5. OF
PROFILE
RISK-WEIGHTED
ASSETS
OF RISK-WEIGHTED
AND
ASSETS
CAPITAL
AND
ASSETS
CHARGE
CAPITAL
ANDCHARGE
CAPITAL CHARGE
The Group’s
capital charge
in requirements
respect
of credit
risk
asmarket
atrequirements
wascredit,
KDoperational
179,917
thousand,
2014:
KD
thousand)
The Group’s risk-weighted
The
The
risk-weighted
capital
Group’s
risk-weighted
capital
requirements
for credit,
capital
for
and
market
for credit,
and
risks
operational
market
are (31
shown
andDecember
risks
operational
below.
are shown
risks
below.
are141,474
shown below.
as detailed below:
5.1 Credit risk
5.1 Credit risk
5.1 Credit risk
2014
The capital charge
The capital
in respect
charge
Theofcapital
credit
in respect
charge
risk of
as in
credit
at respect
wasrisk
KDof
as179,917
credit
at wasrisk
KD
thousand,
as179,917
at2015
was
(31
KD
thousand,
December
179,917
(31
2014:
thousand,
December
KD 141,474
(31
2014:
December
thousand)
KD
141,474
2014: thousand)
KD 141,474 thousand)
Gross
Risk
Gross
Risk
as detailed below:
as detailed below:
as detailed below:
credit
weighted
Capital
credit
weighted
Capital
exposure
assets
charge
exposure
assets
charge
2014
2014
2014
2015
2015
2015
KD’000
KD’000
KD’000
Table 3
KD’000
KD’000
KD’000
Gross
Gross
Risk
Gross
Risk
Risk
Gross
Gross
Risk
Gross
Risk
Risk
Cash
24,555 weighted
25,598 weighted
credit - Capital
weighted
credit
Capital
credit - weighted
Capital Capital
credit
weighted
credit
credit
Capital - weighted
Capital
Claims on sovereigns
171,279 exposure
165,776 exposure
353
exposure
assets
charge
assets charge
assets charge
exposure
exposure
assets
assets
charge
assets
charge44 exposure
charge
Claims3on international
38,099 KD’000 - KD’000 - KD’000
39,513 KD’000
KD’000 - KD’000
KD’000
Table 3
Table
Table 3 organisations
KD’000
KD’000
KD’000
KD’000
KD’000- KD’000
KD’000
6,613
6,129Claims on public
Cash
Cash
Cashsector Entities 25,598
24,555
24,555
24,555-25,598
25,598- -Claims on sovereigns
171,279
171,279
171,279165,776
165,776
353
165,776
353
44
353
4444MDBs
6,064
Claims on international
Claims on organisations
international
organisations
organisations
38,099
38,09938,099
39,513
39,51339,513
-banks
405,199
60,1077,213533,412
76,299- 9,537
6,613
6,6136,6136,129
6,1296,129- -Claims
on public
corporates
794,502
345,675
41,481405,255
50,657
Claims on public
sector
Entities
Claims
sector
on public
Entitiessector
Entities 931,421
Regulatory
retail
exposure
771,959
484,972
58,197
974,557
625,340
78,169
Claims on MDBs
Claims
on MDBs
Claims
on MDBs
6,064
6,0646,064- -Past dueonexposure
15,691
7,523
903
10,666
6,219
777
Claims on banks
Claims
banks
Claims on banks 533,412
405,199
405,199
60,107
405,199
60,107
7,213
60,107
7,213
7,213
533,412
76,299
533,412
76,299
9,537
76,299
9,537
9,537
Investments
in
real estate
25,637
51,275
6,153
23,397
46,794
5,849
Claims on corporates
Claims
on corporates
Claims
on corporates
794,502
345,675
794,502
345,675
794,502
41,481
345,675
41,481
41,481
931,421
931,421
405,255
931,421
405,255
50,657
405,255
50,657
50,657
Investments
and
financing
to customers
337,252
99,735
11,968
386,268
152,554
19,069
Regulatory retail
Regulatory
exposure
retail
Regulatory
exposure
retail
exposure
771,959
484,972
771,959
484,972
771,959
58,197
484,972
58,197
58,197
974,557
974,557
625,340
974,557
625,340
78,169
625,340
78,169
78,169
Sukuk
27,037
18,324
2,199
19,045
10,987
1,373
Past due exposure
Past
dueexposures
exposure
Past due exposure 10,666
15,691
15,691
7,523
15,691
7,523
903
7,523
903
903
10,666
6,219
10,666
6,219
777
6,219
777
777
Other
exposures*
103,638
111,337
13,360
108,998
115,537
14,442
Investments in
Investments
real estate
in
Investments
real estate in real estate
25,637
51,275
25,637
51,275
25,637
6,153
51,275
6,153
6,153
23,397
23,397
46,794
23,397
46,794
5,849
46,794
5,849
5,849
2,721,461
141,474
3,230,844
179,917
Investments and
Investments
financingand
Investments
to customers
financingand
to customers
financing
337,252
337,252
99,735 1,178,948
337,252
11,968
99,735
11,968
99,735
11,968
386,268to customers
386,268
152,554 1,439,338
386,268
152,554
19,069
152,554
19,069
19,069
Sukuk exposures
Sukuk exposures
Sukuk exposures
27,037
18,324
27,037
18,324
27,037
2,199
18,324
2,199
2,199
19,045
19,045
10,987
19,045
10,987
1,373
10,987
1,373
1,373
Other exposures*
Other
exposures*
Other exposures*
103,638
103,638
111,337
103,638
13,360
13,360
13,360
108,998
108,998
115,537
115,537
115,537
14,442
14,442
*”Other
exposures”
above includes
Threshold
Deduction108,998
of14,442
KD 28,052
thousand 111,337
(31
December
2014: KD 111,337
25,823
2,721,461
2,721,461
1,178,948
2,721,461
141,474
1,178,948
141,474
141,474
3,230,844
3,230,844
1,439,338
3,230,844
1,439,338
179,917
1,439,338
179,917
179,917 negative
thousand) and an amount of KD
23,729 thousand
(31 December
2014:
KD
21,204 1,178,948
thousand)
representing
the
amount of general provision in excess of a maximum of 1.25% of Credit Risk-Weighted Assets, which is allowed in
arrivingabove
at
Tier
2 Capital.
*”Other exposures”
*”Other
exposures”
*”Other
includes
above
exposures”
Threshold
includes
above
Deduction
Threshold
includes
ofDeduction
KD
Threshold
28,052
ofDeduction
thousand
KD 28,052
of
(31thousand
KD
December
28,052
(31thousand
2014:
December
KD (31
25,823
2014:
December
KD 25,823
2014: KD 25,823
thousand) andthousand)
an amount
and
of
thousand)
an
KD
amount
23,729
and
ofan
thousand
KD
amount
23,729
(31
of thousand
KD
December
23,729
(31
2014:
thousand
December
KD 21,204
(31
2014:
December
thousand)
KD 21,204
2014:
negative
thousand)
KD 21,204
representing
negative
thousand)
the
representing
negative the
representing the
5.2general
Market
amount of
amount
provision
ofrisk:
general
amount
in excess
provision
of general
of in
a maximum
excess
provision
of in
of
a maximum
excess
1.25% of
of Credit
of
a maximum
1.25%
Risk-Weighted
of of
Credit
1.25%
Risk-Weighted
Assets,
of Credit
which
Risk-Weighted
Assets,
is allowed
whichin
Assets,
is allowed
whichinis allowed in
The
total
charge
in respect
of market risk was KD 5,522 thousand arising only from foreign exchange risk, (31
arriving at Tier
arriving
2 Capital.
at capital
Tier
arriving
2 Capital.
at Tier
2 Capital.
December 2014: KD 5,803 thousand).
5.2 Market5.2
risk:Market5.2
risk:Market risk:
Operational
Risk:
The total5.3
capital
Thecharge
total capital
in The
respect
charge
totalofcapital
market
in respect
charge
riskofwas
market
in respect
KD 5,522
riskofwas
market
thousand
KD risk
5,522
arising
was
thousand
KD
only5,522
from
arising
thousand
foreign
only exchange
from
arising
foreign
only
risk,from
exchange
(31 foreign
risk,exchange
(31
risk, (31
TheKD
capital
charge
respect
of operational
risk was KD 18,489 thousand, (31 December 2014: KD 15,515 thousand).
December 2014:
December
5,803
2014:
December
thousand).
KDin5,803
2014:
thousand).
KD
5,803 thousand).
This capital charge was computed using the Basic Indicator Approach by multiplying the three-year average gross income
by a pre-defined
beta factor.
5.3 Operational
5.3 Operational
Risk:
5.3 Operational
Risk:
Risk:
The capital charge
The capital
in respect
charge
Theofcapital
in
operational
respect
charge
ofrisk
in
operational
respect
was KD
ofrisk
18,489
operational
wasthousand,
KD risk
18,489
was
(31
thousand,
KD
December
18,489(31
2014:
thousand,
December
KD 15,515
(31
2014:
December
thousand).
KD 15,515
2014:thousand).
KD 15,515 thousand).
This capital charge
This capital
was computed
charge
This capital
was
using
computed
charge
the Basic
was
using
Indicator
computed
the Basic
Approach
using
Indicator
the by
Basic
Approach
multiplying
Indicator
bythe
Approach
multiplying
three-year
bythe
multiplying
average
three-year
gross
the
average
income
three-year
grossaverage
incomegross income
by a pre-defined
by abeta
pre-defined
factor.
by abeta
pre-defined
factor. beta factor.
38
5.
6. RISK MANAGEMENT
The Bank’s business operations require identification, measurement, aggregation and effective management of risks and
efficient allocation of capital to derive an optimal risk/return ratio. The Bank manages its risks in a structured, systematic
and transparent manner through a risk policy which embeds comprehensive risk management into the organisational
structure, risk measurement and monitoring processes. The Bank’s Risk Management function is independent of business
units; it reports directly to the Risk and Compliance Committee of the Board and takes a holistic and objective approach to
assist the Board and Executive Management in managing the Bank’s risks.
During 2009 the Bank augmented its overall framework for governance and capital planning and management by
undertaking an Internal Capital Adequacy Assessment Process (ICAAP), which includes “scenario testing” at periodic,
regular intervals. Amongst the key objectives of the ICAAP is to quantify potential risks that the Bank faces and are not
covered under Pillar I.
In line with the guidelines from the Basel Committee and Central Bank of Kuwait, key principles of the Bank’s ICAAP
include:
 Responsibilities of the Board and Senior Management.
 Sound Capital Management.
 Comprehensive assessment of Pillar II risks, e.g., Credit (sector and name concentration), Liquidity, Legal,
Reputational and Strategic Risks, etc.
 Monitoring and reporting.
 Control and review of the process.
The key features of the Bank’s comprehensive risk management policy are:
 The Board of Directors provides overall risk management direction and oversight.
 The Bank’s Risk Appetite is proposed by the Management Executive Committee and approved by the Board of
Directors.
 Risk management is embedded in the Bank as an intrinsic process and is a core competency of all its employees.
 The Bank manages its credit, market, operational and liquidity risks in a co-ordinated manner within the
organisation.
 The Bank’s Internal Audit function reports to the Board Audit Committee and provides independent validation of
the business units' compliance with risk policies and procedures and the adequacy and effectiveness of the Risk
Management Framework on a bank-wide basis.
The risk management function assists Executive Management in controlling and actively managing the Bank’s overall
risks. The function also ensures that:
 The Bank’s overall business strategy is consistent with its Risk Appetite approved by the Board of Directors.
 Risk policies, procedures and methodologies are consistent with the Bank’s Risk Appetite.
 Appropriate risk management architecture and systems are developed and implemented.
 Risks and limits of the portfolio are monitored throughout the Bank.
The Bank regularly assesses the adequacy and effectiveness of its Risk Management Framework in the light of the
changing risk environment.
6.1
Scope and nature of risk reporting tools
The comprehensive Risk Management Framework enables the Bank to identify, assess, limit and monitor risks using a
comprehensive range of quantitative and qualitative tools. Some of these tools are common to a number of risk
categories, while others are tailored to the particular features of specific risk categories and enable generation of
information such as:
 Credit risk in corporates and consumer financing and other asset exposures, such as collateral coverage ratio, limit
utilisation, past-due alerts, etc.
 Quantification of the susceptibility of the market value of single positions or portfolios to changes in market
parameters (commonly referred to as sensitivity analysis).
 Quantification of exposure to losses due to extreme movements in market prices or rates.
The Bank regularly assesses the adequacy and effectiveness of its reporting tools and metrics in light of the changing risk
environment.
4
5
RISK MANAGEMENT
RISK
MANAGEMENT
RISK
5. PROFILE
OF MANAGEMENT
RISK-WEIGHTED ASSETS AND CAPITAL CHARGE
The
Group’s
risk-weighted
capital
requirements
For the year ended
For the
31year
December
ended
For the
31
2015
year
December
ended 31
2015
December
2015 for credit, market and operational risks are shown below.
RISK MANAGEMENT
39
RISK MANAGEMENT
For
the year
ended
31AND
December
2015
BOUBYANBOUBYAN
BANK
K.S.C.P.
BOUBYAN
BANK
K.S.C.P.
BANK
SUBSIDIARIES
AND
K.S.C.P.
SUBSIDIARIES
AND SUBSIDIARIES
BOUBYAN
BOUBYANBANK
BANK K.S.C.P.
K.S.C.P.AND
ANDSUBSIDIARIES
SUBSIDIARIES
BOUBYAN
BANK
K.S.C.P.
AND
SUBSIDIARIES
BOUBYAN
BANK
K.S.C.P.
AND
SUBSIDIARIES
RISK
MANAGEMENT
RISK MANAGEMENT
ForFor
the the
yearyear
ended
31 December
2015
ended
31 December
2015
6.6. RIAK
MANAGEMENT (CONTINUED)
RISK MANAGEMENT
6.2 Risk management processes
Through the comprehensive Risk Management Framework, transactions and outstanding risk exposures are quantified and
and transparent manner through a risk policy which embeds comprehensive risk management into the organisational
compared against authorised limits, whereas non-quantifiable risks are monitored against policy guidelines and key risk
and control indicators. Any discrepancies, excesses or deviations are escalated to management for appropriate action.
units; it reports directly to the Risk and Compliance Committee of the Board and takes a holistic and objective approach to
assistkey
therisks
Board
and Executive
Management
in operations
managing the
The
assumed
by the Bank
in its daily
are Bank’s
outlinedrisks.
below:
6. 6. RIAK
RISK MANAGEMENT
6.2 Risk management processes (continued)
and transparent
manner through
riskmanagement
policy which embeds comprehensive risk management into the organisational
6.2.5 Key
features of consumer
credit arisk
units;
Oversight
consumer
finance
risk Compliance
is undertakenCommittee
by an independent
unitand
directly
Bank
Management.
it reportsofdirectly
to the
Risk and
of the Board
takes within
a holistic
andRisk
objective
approach to
Within
this framework,
limits
and approval
authorities
exercised
assist
the Board
and Executive
Management
in managing
theare
Bank’s
risks. by Consumer Banking officers with defined
approval
During
2009authorities.
the Bank augmented its overall framework for governance and capital planning and management by
40
line with
guidelines strategy
from the Basel Committee and Central Bank of Kuwait, key principles of the Bank’s ICAAP
6.2.2InCredit
riskthe
management
include:
The approach to credit risk is based on the foundation to preserve the independence and integrity of the credit risk
assessment, management and reporting processes, combined with clear policies, limits and approval structures which
Responsibilities
of the Board
and Senior Management.
guide the
day-to-day initiation
and management
of the Bank’s credit risk exposure. This approach comprises credit limits
 are
Sound
Capital Management.
which
established
for all customers after a careful assessment of their credit worthiness.
 Comprehensive assessment of Pillar II risks, e.g., Credit (sector and name concentration), Liquidity, Legal,
Standing
procedures,and
outlined
in the
Bank’s
Reputational
Strategic
Risks,
etc. Credit Policies and Manuals, require that all credit proposals be subjected to
detailed
screening and
pending
submission to the appropriate credit committee. Whenever necessary, credit facilities are
 Monitoring
reporting.
secured
by acceptable
forms
of collateral
 Control
and review
of the
process. to mitigate the related credit risks. The Board of Directors defines the Bank’s
credit risk management strategy and approves credit risk policies to ensure alignment of the Bank’s exposure with its
The
features of the Bank’s comprehensive risk management policy are:
Riskkey
Appetite.
 The Board of Directors provides overall risk management direction and oversight.
6.2.3 Credit
riskBank’s
management
structure
and governance
 The
Risk Appetite
is proposed
by the Management Executive Committee and approved by the Board of
Senior Directors.
management implements the Board of Directors’ credit risk strategy and develops policies and procedures for
identifying, assessing, monitoring and controlling credit risk.
The Bank’s
Creditmanages
Committee,
chaired
by theoperational
Bank’s CEO
comprising
executives manner
from the
business
The Bank
its credit,
market,
and and
liquidity
risks insenior
a co-ordinated
within
the
divisions,
meets regularly and reviews the Bank’s financing portfolios and advises the Board appropriately.
organisation.
 The Bank’s Internal Audit function reports to the Board Audit Committee and provides independent validation of
In compliance with CBK regulations, financing to individual Board Members and related parties is fully secured and
monitored by the Board Executive Committee. Such transactions are made on substantially the same terms, including
Management
Framework
on aprevailing
bank-wideatbasis.
profit rates
and collateral,
as those
the time for comparable transactions with unrelated parties. All such
facilities
are approvedfunction
by the Board
DirectorsManagement
in line with in
thecontrolling
relative authorities
frommanaging
the Shareholders’
The
risk management
assists of
Executive
and actively
the Bank’sGeneral
overall
Assembly.
risks.
The function also ensures that:
 The Bank’s overall business strategy is consistent with its Risk Appetite approved by the Board of Directors.
Country limits are determined based on the outlook of economic and political factors, along with the review of reports by
 Risk policies, procedures and methodologies are consistent with the Bank’s Risk Appetite.
rating agencies
on the
(wherearchitecture
available) and
local business
and market knowledge. Country limit
Appropriate
riskcountry
management
and application
systems are of
developed
and implemented.
exposures
areand
subject
approval
the Board
of Directors
the Board Executive Committee.
 Risks
limitstoofperiodic
the portfolio
are by
monitored
throughout
the or
Bank.
6.2.4The
Key
features
of corporate
risk management
Bank
regularly
assesses credit
the adequacy
and effectiveness of its Risk Management Framework in the light of the
changing risk environment.
 Credit facilities are granted based on detailed credit risk assessments which consider the purpose of the facility and
6.1 Scope
and nature
of risk reporting
source
of repayment,
prevailingtools
and potential macro-economic factors, industry trends and the customer’s
Thepositioning
comprehensive
Management
withinRisk
its industry
peer. Framework enables the Bank to identify, assess, limit and monitor risks using a
comprehensive range of quantitative and qualitative tools. Some of these tools are common to a number of risk
categories,
others models
are tailored
to the particular
of specific
risk categories
andinenable
generation
 Internal while
credit-rating
are regularly
reviewed features
by the Bank
risk management
function
co-ordination
withof
information
such as: and the Management Credit Committee and continually enhanced in line with industry credit risk
line management
 Credit risk in corporates and consumer financing and other asset exposures, such as collateral coverage ratio, limit
management “best practices”.
utilisation, past-due alerts, etc.

Quantification
of the
of the market
valuecredit
of single
positions
or portfolios
to changes
market
 All
new proposals
and susceptibility
/ or material changes
to existing
facilities
are reviewed
and approved
byineither
the
parameters
(commonly
referred
to
as
sensitivity
analysis).
Board Executive Committee or the Management Credit Committee.
 Quantification of exposure to losses due to extreme movements in market prices or rates.
 The credit facility administration process is undertaken by a segregated function to ensure proper execution of all
The Bank regularly assesses the adequacy and effectiveness of its reporting tools and metrics in light of the changing risk
credit approvals and maintenance of documentation, and proactive control over maturities, expiry of limits,
environment.
collateral valuation and contractual covenants.
65
Internal
Adequacy
Assessment
(ICAAP),
which
includes
testing” at
periodic,
undertaking
Consumerancredit
riskCapital
management
functional
areas Process
are aligned
with key
concepts
of “scenario
risk management,
namely,
regular intervals. Amongst the key objectives of the ICAAP is to quantify potential risks that the Bank faces and are not
governance,
control,
covered
under Pillar
I. measurement and reporting.
In line
Consumer
credit
risk is from
managed
with three
lines ofand
defence.
the first
line of defence,
Consumer
with the
guidelines
the Basel
Committee
CentralAsBank
of Kuwait,
key principles
of theBanking
Bank’s (i.e.,
ICAAP
include:
underwriting) is responsible for adherence to CBK regulations and guidelines, the credit policies, controls and
processes.
As second
of defence,
the consumer
credit risk management team, working independently of the
 Responsibilities
of line
the Board
and Senior
Management.
business
unit,
assesses
and ensures implementation of credit risk management discipline & policies. The third line
 Sound
Capital
Management.
Comprehensive
assessment
of Pillar
II risks, e.g.,
Credit
(sector
name controls
concentration),
Liquidity,
of defence,
the Internal
Audit function,
independently
tests,
verifies
and and
evaluates
for effective
creditLegal,
risk
Reputational
and Strategic Risks,
etc. & procedures.
management
and implementation
of policies
 Monitoring and reporting.
 All significant
and amendments to policies are reviewed annually by the Management Executive
Control andfinancing
review ofpolicies
the process.
Committee and approved by the Board.
The key features of the Bank’s comprehensive risk management policy are:
 The
Board of
Directorsrisk
provides
overall for
risk applicants
management
direction
and oversight.
 The
Consumer
Financing
assessment
uses
risk “scorecard”
customer-centric methodologies
 The
Bank’s Risk
Appetite
is proposed
by the
Executive
approved
by the such
Boardasof
which
incorporate
CBK
regulatory
guidelines
andManagement
Bank policies
related toCommittee
consumer and
financing
facilities,
Directors.
debt-to-income ratio, minimum qualifying income and limits on advances by product type. Additional inputs
utilised
applicantitscharacteristics
obtained
from and
financing
bureaus,
Kuwait
Creditwithin
Bureau
 The include
Bank manages
credit, market,
operational
liquidity
risks inparticularly
a co-ordinated
manner
the
statistics,
to assist in assessing an applicant’s ability to repay and the probability of default. This model is reviewed
organisation.
 refined
The Bank’s
Internal Audit function reports to the Board Audit Committee and provides independent validation of
and
continually.
6.2.6 Bank’s Management
credit risk monitoring
Framework on a bank-wide basis.
The Bank’s exposures are continuously monitored through a system of triggers and early-warning signals aimed at
The risk management
function
assists
Executive
and actively
managing
Bank’s overall
detecting
adverse symptoms
which
could
result inManagement
deterioration in
of controlling
credit risk quality.
The triggers
andthe
early-warning
risks. The
also ensures
that: utilisation and collateral valuation monitoring together with a review of upcoming
systems
arefunction
supplemented
by facility
The Bank’s
overall
is consistent
its Risk
Appetite
approved
by the BoardThe
of Directors.
creditfacility
expiration
andbusiness
market strategy
intelligence
to enablewith
timely
corrective
action
by management.
results of the
monitoring
areprocedures
reflected inand
themethodologies
internal rating are
process.
 Riskprocess
policies,
consistent with the Bank’s Risk Appetite.
Appropriate
risk on
management
and systems
are and
developed
andreporting
implemented.
Creditrisk
is monitored
an ongoingarchitecture
basis with formal
monthly
quarterly
to ensure senior management
 Risks
and limits
of thequality
portfolio
monitored
throughout
the Bank.
awareness
of shifts
in credit
andare
portfolio
performance
along
with changing external factors such as economic
and
cycles. assesses the adequacy and effectiveness of its Risk Management Framework in the light of the
The business
Bank regularly
changing risk
environment.
Consumer
credit
risk reporting also includes a “dashboard” for consumer financing, classification and delinquency
6.1 monitoring.
Scope and nature of risk reporting tools
comprehensive
Risk Management
Framework
enables thehandles
Bank tothe
identify,
assess, limit
monitor
using a
A The
specialised
and focused
team on recovery
and collections
management
and and
collection
ofrisks
problem
comprehensive
range
of
quantitative
and
qualitative
tools.
Some
of
these
tools
are
common
to
a
number
of risk
financing facilities.
categories, while others are tailored to the particular features of specific risk categories and enable generation of
6.2.7 Bank’s
credit such
risk mitigation
strategy
information
as:
Portfolio
diversification
is the cornerstone
of financing
the Bank’sand
credit
mitigation
strategy
which
is implemented
through
 Credit
risk in corporates
and consumer
otherrisk
asset
exposures,
such as
collateral
coverage ratio,
limit
customer,
industrypast-due
and geographical
utilisation,
alerts, etc.limit structures.
 Quantification
of theat susceptibility
the market
valuecompanies
of single positions
portfolios
to changes
in market
To ensure
diversification
the portfolio oflevel,
interrelated
with the or
same
management
or ownership
parameters
(commonly
referredasto one
as sensitivity
analysis).
structure
are classified
and treated
entity. The
Risk Appetite requires that the Bank limits its financing
 Quantification
of to
exposure
losses dueof
tothe
extreme
movements
market prices or rates.
concentration
per entity
specifictopercentage
Bank’s
regulatoryincapital.
The Bank
regularlysuch
assesses
the adequacy
and effectiveness
of its reporting
tools
and metrics
in light
of the
changing
Credit
risk mitigants
as collateral
and guarantees
are effective
mitigating
factors
within the
Bank’s
portfolio
andrisk
environment.
collateral
quality is continuously monitored and assessed. Risk transfer in the form of syndications and risk
participation arrangements with other banks are used to manage the Bank’s exposures.
7 5
6.2.1During
Credit 2009
risk the Bank augmented its overall framework for governance and capital planning and management by
undertaking
Internal as
Capital
Adequacy that
Assessment
Process
(ICAAP), which
includes
“scenario
testing” atfinancial
periodic,
Credit risk an
is defined
the likelihood
a customer
or counterparty
is unable
to meet
the contracted
regular
intervals.
Amongst
key objectives
of the financial
ICAAP isloss.
to quantify
potential
thatGroup’s
the Banknormal
faces and
are not
obligations
resulting
in a the
default
situation and/or
These risks
ariserisks
in the
course
of
covered
under Pillar I.
business.
41
RISK
RISKMANAGEMENT
MANAGEMENT
For
Forthe
theyear
yearended
ended31
31December
December2015
2015
BOUBYAN BOUBYAN
BANK K.S.C.P.
BOUBYAN
BANK
AND
K.S.C.P.
SUBSIDIARIES
BANK
AND
K.S.C.P.
SUBSIDIARIES
AND SUBSIDIARIES
RISK MANAGEMENT
RISK MANAGEMENT
RISK MANAGEMENT
For the year ended
For the
31 year
December
ended
For the
2015
31 year
December
ended 2015
31 December 2015
For theMANAGEMENT
year ended 31 December 2015
RISK MANAGEMENT
RISK
For the year ended
For31the
December
year ended
2015
31 December 2015
6.
RISK MANAGEMENT (CONTINUED)
Risk management
6.2
processes
management
(Continued)
processes
(Continued)
6.2.8 Risk
Management
of credit
collateral
and valuation
The
main
types
of
collateral
accepted
the Bank include:
6.2.8 Management
6.2.8of Management
credit collateral
of credit
and valuation
collateral andbyvaluation
1.accepted
Cash
collateral
The main types ofThe
collateral
main types
of collateral
by the Bank
accepted
include:
by the Bank include:
2. Cash
Equity
shares
1. Cash collateral
1.
collateral
3.
Bank
guarantees
2. Equity shares2. Equity shares
4. Bank
Real estates
3. Bank guarantees
3.
guarantees
5.
Sovereign
4. Real estates 4. Real
estatesdebt instruments
6. instruments
Bank debt debt
instruments
5. Sovereign debt
5.
Sovereign
instruments
7. Bank
Collective
investment schemes
6. Bank debt instruments
6.
debt instruments
The Group’s credit
Theexposures
Group’s were
creditcovered
exposures
by were
the following
covered by
eligible
the following
financial eligible
collateral:
financial collateral:
2014
2015
2014 Eligible
2015
2015 Eligible 2014
Gross
credit
Credit
Risk
Gross
credit Credit
Risk
Eligible
Eligible
Eligible
Eligible
exposure
Mitigation
exposure
Mitigation
Gross Risk
credit
Gross
Credit
credit
Risk
Credit
Risk
Gross credit Credit
Gross
credit
Risk
Credit
KD’000
KD’000
KD’000
KD’000
exposure
exposure
Mitigation
Mitigation
exposure
Mitigation
exposure
Mitigation
24,555
25,598
KD’000KD’000
KD’000
KD’000 KD’000
KD’000
KD’000
Cash
25,598
Claims on
on sovereigns
international organisations 165,776
Claims
Claimsorganisations
on international
public sector organisations
Entities
Claims
on
39,513
Claims
on public
MDBssector Entities
Claims on publicClaims
sector Entities
on
6,129
Claims on
on MDBs
banks
Claims on MDBsClaims
6,064
corporates
Claims on banks Claims on banks
Regulatory
retail exposure
Claims
on corporates
Past
due exposure
Regulatory retail Regulatory
exposure
retail exposure
533,412
931,421
974,557
Investments
in real estate
Past due exposurePast
due exposure
10,666
Investments
and
financing
Investments in real
Investments
estate
in
real
estate to customers23,397
Sukuk exposures
Investments and financing
Investments
to customers
and financing to customers386,268
Sukuk exposuresSukuk
exposures
Other exposures
Other exposures Other exposures
19,045
108,998
3,230,844
165,776
25,59839,513165,776
6,12939,513
24,555
-171,279
-38,099
--
171,279
24,55538,099171,279
6,61338,099
931,421
533,412
1,902
974,557
931,421
350,645
350,645
405,199
1,902
794,502
350,645
794,502
405,199
915
771,959
794,502
290,990
6,0646,129
533,412
6,064-
10,666974,557
23,397
10,666
234
386,268
23,39719,045
386,268
227,770
108,998
19,045-
108,9983,230,844
3,230,844
580,551
6,613
-1,902- -
234771,959
15,691
234-
227,770
25,637
337,252
227,770
27,037
-103,638
580,551-
2,721,461
580,551
6,613405,199--
15,691771,959
25,637
15,691
3,395
---
290,990
915
290,990-
3,3953,395-
231,416231,416-
103,6382,721,461
526,716-
2,721,461
526,716
--
526,716
Table 6
Cash
Claims on international organisations
Claims on public sector Entities
Claims on MDBs
Claims on banks
8
Past due exposure
Investments in real estate
Investments and financing to customers
Sukuk exposures
Other exposures
4,917-290,532-
526,650
915
573,975
290,990
11,6673,395-
250,757231,41619,663-
2,721,461 580,551
2,721,461
526,716 2,721,461
526,716
3,230,844
580,551 3,230,844
580,551
2014
2015
Funded
through
Average
SelfAverage
investments
credit
funded
Self-funded
credit
accounts
exposure
exposure
exposure *
exposure
exposure
KD’000
KD’000
KD’000
KD’000
KD’000
29,714
9,153
23,913
6,265
17,648
103,679
33,361
160,077
60,399
99,678
20,573
20,573
39,655
39,655
7,006
2,104
5,934
1,540
4,394
960
960
6,042
6,042
439,394
146,433
473,055
131,897
341,158
778,355
291,996
884,3038
301,0098
583,294
716,807
212,699
895,416
233,548
661,868
18,485
5,628
12,174
3,162
9,012
21,663
21,663
24,390
24,390
332,813
99,679
380,781
99,033
281,748
26,765
26,765
20,744
20,744
99,364
80,694
106,945
83,776
23,169
526,716
1,011,460
* Based on quarterly average balances
42
121,279--
1,817,697-
3,033,429
8
6,613 114,667
- 267,852
405,199
915
197,984
794,502
290,990
4,024771,959
25,637
15,691
3,395
86,49525,637
27,037
337,252
231,416
83,97527,037
3,230,844
Regulatory retail exposure
8
8
2,721,461
103,638
-
50,00024,555
38,099171,279
1,69638,099
903,764103,638
3,230,844108,998
1,132,071
2,098,773
108,998
- 108,998103,638
-
Other exposures
Other exposures
Other exposures
--915-
337,252
25,63727,037
337,252
231,416
103,638
27,037-
Table 5
Cash
Table
4
Table 4
Cash
Cash
24,555
25,598165,776 25,598 70,034
25,59824,555
-95,742
-171,279Claims
international
organisations 165,776 39,513165,776 39,513
Claims
on on
sovereigns
- 171,279
- 165,776171,279
- 38,099Claims
on
public
Entities
Claims
onorganisations
international
Claimssector
onorganisations
international
organisations
38,099
39,513 6,129 39,513 -1,73739,51338,099
- 4,392
- 6,613Claims
on
MDBs
Claims on public
Claims
sector
onEntities
public
Claims
sector
onEntities
public sector Entities
6,064
6,064
6,613
6,613
-6,129
6,129 6,129 Claims
banks
Claims on MDBs
Claims
on on
MDBs
Claims on MDBs
405,199
533,412
157,774
375,638
6,064
6,064 6,064 - - - Claims
corporates
Claims on banks
Claims
on on
banks
Claims on banks
794,502
333,286
598,135 1,902
405,199
405,199
915
533,412931,421533,412
1,902
533,412
1,902
Regulatory
retail exposure
Claims
on corporates
Claims
on corporates
771,959
276,122
698,435350,645
794,502
794,502
290,990
931,421974,557931,421
350,645
931,421
350,645
Past
due retail
exposure
Regulatory retail
Regulatory
exposure
Regulatory
exposureretail exposure 974,557 10,666974,557 -3,022
974,557771,959
- 7,644 771,959
- 15,691Investments
in real
Past due exposure
Past due exposure
Past
dueestate
exposure
25,637
23,39710,666234
15,691 15,691
3,395
10,666 23,397 10,666234
234
Investments
and estate
financing
to customers
Investments inInvestments
real
estate inInvestments
real
in real
estate 23,397386,268 23,397 109,442
276,826
25,637
23,39725,637
-337,252Sukuk exposures
27,037
19,045386,268
19,045
Investments and
Investments
financing
and
toInvestments
customers
financing to
andcustomers
financing 386,268
to customers
337,252 -227,770
337,252
231,416
227,770
386,268
227,770
Other
exposures
Sukuk exposures
Sukuk
exposures
Sukuk exposures
27,037
19,045108,998 19,045 85,382
19,04527,037
-23,616
-103,638-
Table 4
Cash
9
2,021,969
2,595,578
951,708
Funded
through
investments
accounts
exposure
KD’000
20,561
70,318
-
4,902
-
292,961
486,359
504,108
12,857
-
233,134
-
18,670
1,643,870
independent of the
independent
business units.
of theReal
business
estateunits.
collateral
Realisestate
valued
collateral
on an annual
is valued
basis.
on an annual basis.
The Group’s credit exposures were covered by the following eligible financial collateral:
2014
Funded
Funded
through
through
SelfGross
investments
2014
2014 investments
2015
2015
2015 2014
Gross
credit Eligible
funded
accounts
Self-funded
credit Eligible
Eligible
Eligible
Eligibleaccounts
Eligible
exposure
exposure
exposure
exposure
exposure
exposure
Gross
credit
Gross
Credit
credit
RiskGross
Credit
credit
Risk Credit
Risk
Gross credit
Gross
Credit
credit
Risk
Gross
Credit
credit
Risk
Credit
Risk
KD’000exposure
KD’000 Mitigation
KD’000
KD’000
KD’000
exposure
exposure
Mitigation
Mitigation
exposureKD’000
exposure
Mitigation
exposure
Mitigation
Mitigation
24,555 KD’000
6,298
18,257
KD’000
KD’000
KD’000
KD’000
KD’000
18,345
KD’000 25,598
KD’000
KD’000 7,253
KD’000
KD’000
KD’000
43
areaccordance
accepted
guarantor
counterparties,
subject
to credit
risk assessment.
Furthermore,
in net
accordance
withnet
theworth
CBK
In accordance with
In
the
Bank'sascredit
with
the
policies,
Bank's
banks
creditand
policies,
creditworthy
banks
and
companies
creditworthy
and individuals
companies
with
and individuals
high
worth
with high
Basel
framework,
cash collateral,
shares,
real
estates,
debt
instruments
of sovereigns
andCBK
banks with
and collective
are accepted as guarantor
are
accepted
counterparties,
as guarantor
subject
counterparties,
toquoted
credit subject
risk assessment.
to credit
risk
Furthermore,
assessment.
in accordance
Furthermore,
with
in accordance
the
the CBK
investment
schemes
are collateral,
recognised
asestates,
riskshares,
mitigation
for
capitaldebt
purposes.
Basel framework,Basel
cash framework,
collateral,
quoted
cash
shares, real
quoted
debtreal
instruments
estates,
ofadequacy
sovereigns
instruments
andofbanks
sovereigns
and collective
and banks and collective
investment schemes
investment
are
recognised
schemes
as
are
risk
recognised
mitigation
as
for
risk
capital
mitigation
adequacy
for
capital
purposes.
adequacy
purposes.
The custody and daily "mark to market" (revaluation) of financial collateral, inclusive of shares, are performed
independent
ofand
the market"
business
units.
estate
collateral collateral,
is valued
on
an annual
The custody andThe
daily
custody
"mark
to
daily
"mark
(revaluation)
toReal
market"
of (revaluation)
financial
of financial
inclusive
collateral,
ofbasis.
shares,
inclusive
are performed
of shares, are performed
Table 4
Cash
Risk management
6.2 Risk management
processes
6.2 Risk
(Continued)
processes
management
(Continued)
processes (Continued)
The Group’s
exposures
credit
The
were
Group’s
exposures
covered
credit
by
were
the
exposures
covered
following
by
were
eligible
thecovered
following
financial
by eligible
thecollateral:
following
financial
eligible
collateral:
financial collateral:
2015
7. Collective
investment
7. Collective
investment
In accordance
with schemes
the Bank's
creditschemes
policies, banks and creditworthy companies and individuals with high net worth
Table 4
Cash 4
Table
6.2
In accordanceInwith
accordance
the Bank's
In
with
accordance
credit
the policies,
Bank's
with
credit
banks
the policies,
Bank's
and creditworthy
credit
bankspolicies,
and companies
creditworthy
banks and
andcompanies
creditworthy
individuals
and
with
companies
individuals
high net
and
with
worth
individuals
high net with
worthhigh net worth
6.
are accepted as
areguarantor
accepted counterparties,
as
areguarantor
acceptedcounterparties,
as
subject
guarantor
to credit
counterparties,
subject
risk assessment.
to credit
subject
riskFurthermore,
assessment.
to credit riskin
Furthermore,
assessment.
accordance in
Furthermore,
with
accordance
the CBKin
with
accordance
the CBKwith the CBK
Basel framework,
Baselcash
framework,
collateral,
Basel
cash
framework,
quoted
collateral,
shares,
cash
quoted
real
collateral,
estates,
shares,debt
quoted
real instruments
estates,
shares,debt
real
ofinstruments
estates,
sovereigns
debtof
and
instruments
sovereigns
banks andof
and
collective
sovereigns
banks andand
collective
banks and collective
6.2
Risk
management
processes
(continued)
investment schemes
investment
are recognised
schemes
investment
are
as risk
recognised
schemes
mitigation
are
as risk
recognised
for mitigation
capital as
adequacy
risk
for mitigation
capital
purposes.
adequacy
for capital
purposes.
adequacy purposes.
6.2.9 Gross, average and net credit exposures
The
Group’s
gross
credit
exposures,
average
credit
exposures
and
netofcredit
exposures,
the former
adjusted
The custody The
and daily
custody
"mark
and
The
to
daily
custody
market"
"mark
and
(revaluation)
to
daily
market"
"mark(revaluation)
ofto
financial
market"
collateral,
of
(revaluation)
financial
inclusive
collateral,
of financial
shares,
inclusive
collateral,
areofperformed
shares,
inclusive
areofperformed
shares, for
are credit
performed
risk
mitigation
respectively,
areReal
detailed
below:
independent ofindependent
the business
ofunits.
independent
the business
Real factors,
estate
ofunits.
thecollateral
business
Real estate
isunits.
valued
collateral
on estate
anisannual
valued
collateral
basis.
on anisannual
valuedbasis.
on an annual basis.
RISK MANAGEMENT
6.
MANAGEMENT
(CONTINUED)
(CONTINUED)
6.2 RISK
Risk management
processes
(Continued)
6.2
RISK MANAGEMENT
6.
RISK MANAGEMENT
6. (CONTINUED)
RISK MANAGEMENT
(CONTINUED)
(CONTINUED)
6.2.8 Management
6.2.8 Management
of credit
6.2.8
collateral
Management
of credit
andcollateral
valuation
of credit
andcollateral
valuationand valuation
The main types
The
of main
collateral
typesThe
accepted
of collateral
main by
types
the
accepted
of
Bank
collateral
include:
by theaccepted
Bank include:
1. Cash collateral
1. Cash collateral
1. Cash collateral
2. Equity shares
2. Equity shares
2. Equity shares
3. Bank guarantees
3. Bank guarantees
3. Bank guarantees
4. Real estates
4. Real estates
4. Real estates
5. Sovereign5.debtSovereign
instruments
5.debtSovereign
instruments
debt instruments
MANAGEMENT
6. BankRISK
debt6.instruments
Bank debt6.instruments
Bank debt instruments
7. Collective
7.investment
Collective
7.investment
Collective
schemes
investment schemes
For the
year
endedschemes
31
December
2015
BOUBYAN BANK
BOUBYAN
BANK
AND K.S.C.P.
SUBSIDIARIES
AND SUBSIDIARIES
RISK K.S.C.P.
MANAGEMENT
6.
6.
BOUBYAN BOUBYAN
BANK K.S.C.P.
BOUBYAN
BANK
AND
K.S.C.P.
SUBSIDIARIES
BANK
AND
K.S.C.P.
SUBSIDIARIES
AND SUBSIDIARIES
RISK MANAGEMENT
RISK MANAGEMENT
RISK MANAGEMENT
For the year ended
For the
31 year
December
ended
For the
2015
31 year
December
ended 2015
31 December 2015
6.2
Risk management
6.2 Risk processes
management
6.2 Risk
(Continued)
processes
management
(Continued)
processes (Continued)
6.2.8 Management
6.2.8 Management
of credit
6.2.8
collateral
Management
of credit
andcollateral
valuation
of credit
andcollateral
valuationand valuation
The main typesThe
of collateral
main typesaccepted
The
of collateral
mainby
types
theaccepted
of
Bank
collateral
include:
by theaccepted
Bank include:
1. Cash collateral
1. Cash collateral
1. Cash collateral
2. Equity shares
2. Equity shares
2. Equity shares
BOUBYAN BOUBYAN
BANK K.S.C.P.
AND
SUBSIDIARIES
BANK
BOUBYAN
K.S.C.P.
BANK
AND
K.S.C.P.
SUBSIDIARIES
AND SUBSIDIARIES
3. Bank guarantees
3. Bank guarantees
3. Bank guarantees
RISK4.
MANAGEMENT
Real
estates
4.
RealRISK
estates
4.
Real estates
RISK
MANAGEMENT
MANAGEMENT
Sovereign
instruments
5.debt
instruments
instruments
For the5.yearSovereign
ended
315.debt
December
2015
For the
year
ended
For the
31
December
yearSovereign
ended2015
31 debt
December
2015
6. Bank
debt6.instruments
Bank
debt6.instruments
Bank debtAND
instruments
BOUBYAN
BANK
K.S.C.P.
SUBSIDIARIES
6.
RISK
MANAGEMENT
6.
RISK
MANAGEMENT
6. (CONTINUED)
RISK
MANAGEMENT
(CONTINUED)
7.
Collective
7.
investment
Collective
schemes
7.
investment
Collective
schemes
investment (CONTINUED)
schemes
RISK MANAGEMENT
6.2 RiskIn
management
processes
(continued)
6.2the
Risk
management
6.2the31
Risk
processes
management
(continued)
processes
(continued)
In accordance
with
accordance
with
credit
accordance
policies,
Bank's
with
credit
banks
the2015
policies,
Bank's
and
creditworthy
credit
bankspolicies,
and
companies
creditworthy
banks and
andcompanies
creditworthy
individualsand
with
companies
individuals
high netand
with
worth
individuals
high net with
worthhigh net worth
For
theBank's
yearIn
ended
December
are 6.2.9
accepted
asareguarantor
acceptedcounterparties,
asareguarantor
accepted
counterparties,
as
subject
guarantor
to credit
counterparties,
subject
risk assessment.
to credit
subject
riskFurthermore,
assessment.
to credit risk
in
Furthermore,
assessment.
accordance in
Furthermore,
with
accordance
the CBKin
with
accordance
the CBKwith the CBK
Gross,
average
and
net
credit
exposures
(continued)
6.2.9 Gross, average
6.2.9 Gross,
and net
average
creditand
exposures
net credit
(continued)
exposures (continued)
Basel framework,
Basel
framework,
collateral,
Basel
cash
quoted
framework,
collateral,
shares,
cash
quoted
real
collateral,
estates,
shares,debt
quoted
realinstruments
estates,
shares,debt
real
ofinstruments
estates,
sovereigns
debtof
and
instruments
sovereigns
banks andof
and
collective
sovereigns
banks andand
collective
banks and collective
6.cash
RISK
MANAGEMENT
(CONTINUED)
investment schemes
investment
are recognised
schemes
investment
are
as risk
recognised
schemes
mitigation
are
as risk
recognised
for mitigation
capital as
adequacy
risk
for mitigation
capital
purposes.
adequacy
for capital
purposes.
adequacy purposes.
2014
2015
2014
2014
2015
2015
The custody and
The daily
custody
"mark
and
Thetodaily
custody
market"
"mark
and
(revaluation)
todaily
market"
"markof
(revaluation)
tofinancial
market"collateral,
of
(revaluation)
financial
inclusive
collateral,
of financial
of shares,
inclusive
collateral,
areFunded
ofperformed
shares,
inclusive
areofperformed
shares, are Funded
performed
Funded
Funded
Funded
Funded
Gross,
and
net
credit
independent ofindependent
the6.2.9
business
ofunits.
independent
theaverage
business
Real estate
ofunits.
the
collateral
business
Real
estate
isexposures
units.
valued
collateral
Real
on(continued)
estate
anisannual
valued
collateral
basis.
on anisannual
valuedbasis.
on an annual basis.
through
through
through
through
through
through
Selfinvestments
investments investments investments
Selfinvestments
Selfinvestments
The Group’s
exposures
credit
The
were
Group’s
exposures
covered
credit
by
were
the
exposures
covered
following
were
eligible
the
covered
following
financial
by eligible
thecollateral:
following
financial
eligible
collateral:
2014
2015
Net financial
credit collateral:
funded
accounts
Net
creditby
Self-funded
Net
credit
Net
funded
credit
accounts
funded
accounts
Net
credit Self-funded
Netaccounts
credit Self-funded
accounts
accounts
Funded
Funded
exposure
exposure
exposure
exposure
exposure
exposure exposure
exposure
exposure
exposure
exposure
exposure
exposure
exposure
exposure
exposure
through
through
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Table 7
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Table 7
Table 7
Selfinvestments
investments
Cash
Cash
Cash
2014
2014
2014
2015
2015
2015
24,555
6,298
18,257
25,598
7,253
18,345
24,555
24,555
6,298
18,257
6,298
18,257
25,598
25,598
7,253
18,345
7,253
18,345
Net credit
funded
accounts
Net creditEligible
Self-funded
accounts
Eligible
Eligible
Eligible
EligibleEligible
171,279
50,000
121,279
165,776
70,034
95,742
171,279
171,279
50,000
121,279
50,000
121,279
165,776
165,776
70,034
70,034
95,742
95,742
exposure
exposure
exposure
exposure
exposure
exposure
Gross
credit
Gross
Credit
credit
RiskGross
Credit
credit
Risk Credit Risk
Gross credit Gross
Credit
credit
RiskGross
Credit
credit
Risk
Credit
Risk
Claims
international
Claims onorganisations
international
organisations
KD’000
KD’000
KD’000
38,099
KD’000
KD’000
Table 7onorganisations
39,513
39,513
- exposure
38,099
38,099
38,099- Mitigation
38,09939,513
39,513
39,513
39,513
- exposure
- exposure
Mitigation
Mitigation
exposureKD’000
exposure
Mitigation
exposure
Mitigation
Mitigation
Cash
Claims
sector
Claims
public
Claims
sector
public sector
Entities 25,598
24,555
6,298
18,257
6,613
1,696 KD’000
4,917
7,253
18,345
6,129
1,737
4,392
6,613
1,696
6,613
1,696
4,917
4,917
6,129
1,737
1,737
4,392
4,392
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’0006,129
KD’000
KD’000
KD’000
Table
4 on public
Table
4 on Entities
Table
4 onEntities
sovereigns
Claims on MDBs
Claims on MDBs
Claims on MDBs 6,064 25,598
Cash
Cash
Cash
50,000-121,279165,776
6,06425,598 70,034
6,064
6,064
6,064- --24,555
24,555
24,555
-6,06425,598
-95,742
-171,279
international
organisations
Claims
banks
Claimsononsovereigns
banks
Claims
banks 531,510165,776
Claims
onon
sovereigns
Claims
Claims
onon
sovereigns
38,099- 171,279
38,099289,854
39,513
39,513
157,235
374,275
404,284
114,430
404,284
114,430
289,854-289,854
531,510
531,510
157,235
157,235
374,275
374,275
171,279
171,279
165,776
- 165,776
-404,284
-114,430
public
sector
Entities
Claims
corporates
Claimsonon
corporates
Claims
corporates
Claims
onon
international
Claims
organisations
international
Claims
onon
organisations
international
organisations
6,6131,6964,917315,674
6,129 39,513
4,392
580,776
229,733
351,043
503,512
187,838
503,512
187,838
315,674
315,674
580,776
580,776
229,733
229,733
351,043
351,043
38,099
38,099
39,513
-1,73739,51338,099
-503,512
-187,838
Claims
MDBs
Regulatory
retail
exposure
Regulatory
retail
Regulatory
exposure
retailsector
exposure
Claims
on public
Claims
sector
onon
Entities
public
Claims
sector
onEntities
public
Entities
573,975
6,064 6,129
974,557
276,122
698,435
771,959
197,984
771,959
197,984
573,975-573,975
974,557
974,557
276,122
698,435
698,435
6,613
6,613
-6,613
6,129
-6,064 6,129276,122
-771,959
-197,984
Claims
banks
Past due
exposure
Past
due
Past due
exposure 10,433 6,064
Claims
on MDBs
Claims
ononexposure
MDBs
Claims
on MDBs
404,284
114,430
289,854
12,296
3,154
9,142
531,510
374,275
2,956 6,064157,235
7,477
12,296
12,296
3,154
3,154
9,142
9,142
10,433
10,433
2,956
2,956
7,477
7,477
6,064 - - - - Claims
corporates
Investments
inInvestments
real estate
inInvestments
real estate
in real23,397
estate533,412
Claims
on banks
Claims
ononbanks
Claims
on banks
503,512
187,838
315,674
25,637
25,637
580,776
229,733
351,043
23,397
25,637
25,637
25,637
23,397533,412
23,397
23,397
23,397- 1,902
405,199
405,199915
405,199
915
9151,902
533,412
1,902
Regulatory
retail
exposure
Investments
and
financing
toInvestments
customers
Investments
and
financing
to
and
customers
financing
to customers
Claims
on corporates
Claims
on corporates
Claims
on corporates
771,959
197,984
573,975
105,836
27,144 794,502
78,692
974,557
276,122
698,435
158,498931,421
44,907
113,591
105,836
105,836
27,144
27,144
78,692
78,692
158,498
158,498
44,907
113,591
44,907
113,591
794,502
794,502
290,990
290,990
290,990
931,421
350,645
931,421
350,645
350,645
Past
due
exposure
Sukuk exposures
Sukuk
exposures
Sukuk
exposures
Regulatory
retail
Regulatory
exposure
retail
Regulatory
exposure
retail exposure
27,037
10,433
19,045974,55719,045
19,045
- 771,959
19,045
19,045
974,55719,045
-2,956
974,557
- 7,477
Investments
in
real
estate
Other
exposures
Other
exposures
Other
exposures
Past due exposure
Past due exposure
Past due exposure 108,998 10,666
103,638
23,397
23,397
85,38210,666
23,616
108,998
108,998
85,382
85,382
23,616
15,691
234
10,666234
Investments
and
customers
real
estate inInvestments
realfinancing
estate intoreal
estate 23,397
158,498
44,907
113,591
2,194,745
2,650,294
963,37823,397
1,686,916
2,650,294
2,650,294
963,378
963,378
25,637
23,3971,686,916
-
12,296
-771,959
- 27,037
25,637
83,975
103,638
23,616
15,691
3,395
234
763,292
2,194,745
1,686,916
25,637
-105,836
3,154-27,037
27,037
771,959
25,637
19,663
103,638
83,975
15,691
3,395
27,1441,431,453
2,194,745
763,292
25,637
9,14227,037
83,975
19,663
3,395-
-
19,663
78,6921,431,453
763,292
1,431,453
Sukuk
exposures
Investments and
Investments
financing
to
and
Investments
customers
financing to
andcustomers
financing 386,268
to customers
27,037 337,252
27,037
19,045386,268
19,045
337,252 -227,770
337,252
231,416
231,416
231,416227,770
386,268
227,770
As atexposures
31 December
2015,
27.7%
of
Group’s
net
risk
exposure
was exposure
rated
by accredited
External
Credit
As atexposures
31
December
As atexposures
2015,
31the
December
27.7% of
2015,
thecredit
Group’s
27.7%
of
net
the
credit
Group’s
risk
net
credit
was
risk rated
exposure
by
accredited
was 103,638
rated
External
byAssessment
accredited
Credit
External
Assessment
Credit
Other
exposures
Sukuk
Sukuk
Sukuk
83,975
19,663-Assessment
108,998
27,037
27,037
19,045
19,045 85,382
19,04527,037
-23,616
Institutions (ECAIs),
(31 December
2014:
28.15%)(31
as December
detailed
below:
Institutions
(ECAIs),
Institutions
(31
December
(ECAIs),
2014:
28.15%)
2014:
as detailed
28.15%)
below:
as detailed below:
2,194,745
763,2921,431,453Other exposures
Other exposures
Other exposures
2,650,294108,998963,378
1,686,916
103,638
103,638
- 103,638
108,998
- 108,998
2014
2015
2014
2014
2015
2015
2,721,461 580,551
2,721,461
526,716 2,721,461
526,716
526,716
3,230,844
3,230,844
580,551 3,230,844
580,551
Net
credit
Unrated
Netof
credit
Unrated
NetRated
credit
Rated
credit
Unrated
Rated
Unrated
As at 31 December 2015, 27.7%
the Group’s
net credit Net
risk
exposure was
rated
by accredited
ExternalNet
Credit
Assessment
NetRated
credit
Rated
credit
Unrated
Rated
Unrated
exposure
exposure
exposure
exposure
exposure
exposure
Institutions (ECAIs), (31 December
2014: 28.15%)
as detailed
below:
exposure
exposure
exposure
exposure
exposure
exposure
exposure
exposure
exposure
exposure
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Table 8
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Table 8
Table 8
2014
2015
Cash
Cash
Cash
24,555
25,598
25,598
24,55524,555
24,55524,555
25,598 25,598
25,598
25,598
Net credit
Rated
Unrated
Net credit
Rated
Unrated
171,279
165,776
165,776
171,279
171,279
171,279
171,279
165,776
165,776
165,776
165,776
exposure
exposure
exposure
exposure
exposure
exposure
Claims
international
international
KD’000
KD’000
KD’000
38,099
KD’000
KD’000
KD’000
Table 8onorganisations
39,513organisations
39,513
38,099
38,099
38,099
38,099
39,513
39,513
39,513
39,513Cash
Claims on public
sector
Claims
on Entities
public
Claims
sector
onEntities
public sector
Entities
24,555
24,555
6,613
6,613
25,598
25,598
6,129
6,129
6,613
6,6136,613
6,129 6,129
6,129
6,129
sovereigns
Claims on MDBs
Claims on MDBs
Claims on MDBs 6,064
international
Claims on banks
Claims on banks
banks 531,510
public
sector
Claims
onEntities
corporates
580,776
Claims
on MDBs
Regulatory retail
exposure
Regulatory
retail
Regulatory
exposureretail 974,557
exposure
Claims
banks
Past due exposure
Past
dueonexposure
Past due exposure 10,433
Claims
on corporates
real estate
inInvestments
real estate in real23,397
estate 8
165,776
6,064 39,513
509,616
531,510
6,129 580,776
6,064 974,557
531,510
10,433 -
580,776
23,397 -8
Regulatory
exposure to
Investments and
financingretail
toInvestments
customers
Investments
and
financing
and
customers
financing
974,557 158,498 to customers
158,498
Past due
exposure
Sukuk exposures
Sukuk
exposures
Sukuk exposures 19,045
10,433
19,045
19,045
44
Investments
inOther
real estate
Other exposures
Other
exposures
exposures 108,998
Investments and financing to customers
2,650,294
Sukuk exposures
Other exposures
23,397 108,998
158,498
733,950
2,650,294
19,045
108,998
2,650,294
10
165,776
6,064
6,064
39,513
21,894
531,510
509,616
580,776
580,776
974,557
974,557
509,616
10,433
10,433
23,397
23,397
-8
158,498
158,498
-
19,045
19,045- 108,998
108,998
1,916,344
2,650,294
733,950-
6,064
-- 404,284
509,616
21,894
503,512
6,129
580,776
771,959
6,064
974,557
-
12,296
21,894
10,433
25,637
580,776
23,397
-
105,836
974,557
158,498
27,037
10,433
19,045
-
171,279
6,06438,099
381,366
404,284
21,894
6,613503,512
580,776
171,279-38,099
22,918
381,366
404,284
503,512
-
381,366
22,9186,613503,512
503,512
25,63723,397
25,637
105,836
-
503,512
25,637771,959105,836
771,959974,557
404,284
12,29610,433
771,959105,836
158,498
12,296
27,037
-
19,045
103,638
23,397
108,998
158,498
2,194,745
1,916,344
733,950
-
25,637103,638
108,998
105,836
617,781
2,194,745
1,916,344
27,037
733,950
1,916,344
2,194,745
10
10
-
10
108,998
103,638
771,959
381,366
12,296
-
-27,037
27,037
103,638
1,576,964
2,194,745
617,78127,037
-
617,781
771,95922,91812,296
12,29627,037
25,637103,638
105,836
1,576,964
617,781
-
22,918
503,512
771,959
12,296
25,637
105,836
-
BOUBYAN
BOUBYAN BANK
BANK K.S.C.P.
K.S.C.P. AND
AND SUBSIDIARIES
SUBSIDIARIES
RISK
MANAGEMENT
RISK MANAGEMENT
For
For the
the year
year ended
ended 31
31 December
December 2015
2015
6.
6.
6.2
6.2
RISK MANAGEMENT
(CONTINUED)
RISK
Risk
management
processes
(continued)
Risk management processes (continued)
6.2.9 Gross,
Gross, average
average and
and net
net credit
credit exposures
(continued)
6.2.9
The Group
Group uses
uses external
external ratings
ratings (where
(where available)
available) from
from Fitch,
Fitch, S&P
S&P and
and Moody’s
Moody’s to
to supplement
supplement internal
internal ratings
ratings during
during the
the
The
process of
of determining
determining credit
credit limits.
limits. Unrated
Unrated public
public issue
issue instruments
instruments are
are risk-weighted
risk-weighted at
at 100%
100% for
for capital
capital adequacy
adequacy
process
purposes.
purposes.
The geographical
geographical distribution
distribution of
of the
the gross
gross credit
credit exposure
exposure before
before taking
taking into
into consideration
consideration credit
credit enhancements
enhancements is
is as
as
The
detailed below:
below:
detailed
31 December
December 2015
2015
31
Table
Table 99
Cash
Cash
Claims
Claims on
on sovereigns
sovereigns
Claims on
on international
international organisations
Claims
organisations
Claims
Claims on
on public
public sector
sector Entities
Entities
Claims
Claims on
on MDBs
MDBs
Claims on
on banks
banks
Claims
Claims
Claims on
on corporates
corporates
Regulatory
Regulatory retail
retail exposure
exposure
Past
due
exposure
Past due exposure
Investments
Investments in
in real
real estate
estate
Investments
Investments and
and financing
financing to
to customers
customers
Sukuk
exposures
Sukuk exposures
Other
Other exposures
exposures
Middle
Middle
East
East
KD’000
KD’000
25,598
25,598
154,311
154,311
-6,129
6,129
6,064
6,064
453,261
453,261
928,036
928,036
974,557
974,557
9,444
9,444
19,491
19,491
386,268
386,268
16,116
16,116
90,945
90,945
3,070,220
3,070,220
North
North
America
America
KD’000
KD’000
-----2,549
2,549
------33
33
2,582
2,582
Europe
Europe
KD’000
KD’000
-5,159
5,159
---73,400
73,400
3,385
3,385
--3,906
3,906
-2,929
2,929
-88,779
88,779
Asia &
&
Asia
Others
Others
KD’000
KD’000
-6,306
6,306
39,513
39,513
--4,202
4,202
--1,222
1,222
---18,020
18,020
69,263
69,263
Total
Total
KD’000
KD’000
25,598
25,598
165,776
165,776
39,513
39,513
6,129
6,129
6,064
6,064
533,412
533,412
931,421
931,421
974,557
974,557
10,666
10,666
23,397
23,397
386,268
386,268
19,045
19,045
108,998
108,998
3,230,844
3,230,844
Middle
Middle
East
East
KD’000
KD’000
24,555
24,555
163,112
163,112
-6,613
6,613
337,228
337,228
791,608
791,608
771,959
771,959
13,617
13,617
19,864
19,864
335,721
335,721
24,163
24,163
85,084
85,084
2,573,524
2,573,524
North
North
America
America
KD’000
KD’000
----3,164
3,164
------32
32
3,196
3,196
Europe
Europe
KD’000
KD’000
-5,216
5,216
--57,662
57,662
2,894
2,894
--5,773
5,773
1,531
1,531
2,873
2,873
-75,949
75,949
Asia
Asia &
&
Others
Others
KD’000
KD’000
-2,951
2,951
38,099
38,099
-7,145
7,145
--2,074
2,074
---18,523
18,523
68,792
68,792
Total
Total
KD’000
KD’000
24,555
24,555
171,279
171,279
38,099
38,099
6,613
6,613
405,199
405,199
794,502
794,502
771,959
771,959
15,691
15,691
25,637
25,637
337,252
337,252
27,036
27,036
103,639
103,639
2,721,461
2,721,461
31
31 December
December 2014
2014
Table
Table 99
Cash
Cash
Claims on
on sovereigns
Claims
sovereigns
Claims
Claims on
on international
international organisations
organisations
Claims
Claims on
on public
public sector
sector Entities
Entities
Claims on
on banks
banks
Claims
Claims
Claims on
on corporates
corporates
Regulatory
Regulatory retail
retail exposure
exposure
Past due
due exposure
exposure
Past
Investments
Investments in
in real
real estate
estate
Investments
Investments and
and financing
financing to
to customers
customers
Sukuk exposures
exposures
Sukuk
Other
Other exposures
exposures
103,638
1,576,964
103,638
1,576,964
11
11
RISK MANAGEMENT
6.
RISK MANAGEMENT
6. (CONTINUED)
RISK MANAGEMENT
(CONTINUED)
(CONTINUED)
45
6.
RISK MANAGEMENT
RISK
For
theMANAGEMENT
6.
6. MANAGEMENT
RISK MANAGEMENT
(CONTINUED)
RISK
(CONTINUED)
6.2
Risk processes
management
processes (continued)
Risk6.2
management
(continued)
6.2.9
6.2.9
average
net credit
Gross,
averageGross,
and net
creditand
exposures
(continued)
The credit
Group’s
gross credit
exposure
by residual
contractual
maturitybelow:
is as detailed below:
The Group’s gross
exposure
by residual
contractual
maturity
is as detailed
31 December 2015
31 December 2015
Up to 3
months
Table 10
KD’000
Table 10
Cash
Cash
25,598
65,662
Claims
onEntities
Claims on public
sector
Claims on MDBs
Claims on MDBs
5,761
Claims on banks
Claims on banks
488,668
441,879
Regulatory
Regulatory retail
exposureretail exposure
9,760
Past due exposure
Past due exposure
10,666
Investments
and
financing to customers
Investments and
financing to
customers
276,576
Sukuk exposures
Sukuk exposures
18,093
Other exposures
Other exposures
7,749
1,387,949
Up3 to
– 63
months
months
KD’000
KD’000
25,59865,662
40,236
37,5373,5055,761488,668
31,356
441,879
141,169
9,760
1,296
10,666276,576
92,805
18,0937,7491,387,949
310,367
6
6Over
– 12 1
63––12
months
months
year
KD’000
KD’000
KD’000
-40,236
57,640
57,640
2,238
- - 1,976
3,5052,624
303
31,356
13,225
13,225
163
141,169
162,756
162,756
185,617
1,296
7,344
7,344
956,157
-23,397
92,805
16,648
16,648
239
952
6,424
6,42494,825
310,367
264,037
264,037
1,268,491
Over 1
year
Total
KD’000
KD’000
25,598
2,238
165,776
1,976
39,513
2,624
6,129
303
6,064
163
533,412
185,617
931,421
956,157
974,557
10,666
23,397
23,397
239
386,268
952
19,045
94,825
108,998
1,268,491
3,230,844
Total
KD’000
25,598
165,776
39,513
6,129
6,064
533,412
931,421
974,557
10,666
23,397
386,268
19,045
108,998
3,230,844
Over 1
year
Total
KD’000
KD’000
24,555
171,278
38,099
3,111
6,613
7,917
405,199
94,138
794,501
761,805
771,959
15,692
25,637
25,637
566
337,253
22,683
27,037
92,694
103,638
1,008,551
2,721,461
Total
KD’000
24,555
171,278
38,099
6,613
405,199
794,501
771,959
15,692
25,637
337,253
27,037
103,638
2,721,461
31 December 2014
31 December 2014
46
Up to 3
months
KD’000
Table 10
Table 10
Cash
Cash
24,555
98,094
Claims
onEntities
Claims on public
sector
Claims on banks
Claims on banks
390,304
385,600
Regulatory
Regulatory retail
exposureretail exposure
5,938
Past due exposure
Past due exposure
15,692
Investments
and
Investments and
financing to
customers
267,698
Sukuk exposures
Sukuk exposures
Other exposures
Other exposures
5,558
1,231,538
Up3 to
– 63
months
months
KD’000
KD’000
24,55598,094
48,394
38,0993,502390,304
5,048
385,600
211,846
5,938
624
15,692267,698
55,922
5,5581,231,538
325,336
6
63––12
months
KD’000
48,394
24,790
3,5025,048
1,930
211,846
102,917
624
3,592
55,922
13,067
4,3545,386325,336
156,036
6 – 121
Over
months
year
KD’000
24,7903,1111,930
7,917
102,917
94,138
3,592
761,805
25,63713,067
566
4,354
22,683
5,386
92,694
156,036
1,008,551
6.
6.
6.2.10 “Past-due” and impairment provisions
6.2.10Credit
“Past-due”
facilitiesand
areimpairment
classified as provisions
“past-due” when a payment has not been received on its contractual payment date, or if
Credit
facilities
are classified
as “past-due”
when a payment has not been received on its contractual payment date, or if
the facility
is in excess
of pre-approved
limits.
the facility is in excess of pre-approved limits.
A credit facility is considered as “past-due and impaired” if the profit or a principal instalment is past due for more than
A
facility
considered
as “past-due
and impaired”
the its
profit
or a principal
instalment
90credit
days and
if theiscarrying
amount
of the facility
is greaterifthan
estimated
recoverable
value. is past due for more than
90 days and if the carrying amount of the facility is greater than its estimated recoverable value.
“Past due” and “Past-due and impaired” facilities are managed and monitored as “irregular facilities” and are classified
“Past
and “Past-due
and impaired”
facilities
are to
managed
and
monitored as
“irregular facilities” and are classified
into
thedue”
following
four categories
which are
then used
guide the
provisioning
process:
into the following four categories which are then used to guide the provisioning process:
Category
Criteria
Category
Criteria
Watchlist
Irregular for a period up to 90 days (inclusive)
Watchlist
Irregular
period between
up to 90 days
(inclusive)
Substandard
Irregular for
for aa period
91 and
180 days (inclusive)
Substandard
Irregular
180
days
Doubtful
Irregular for
for aa period
period between
between 91
181and
days
and
365(inclusive)
days (inclusive)
Doubtful
Irregular
Bad
Irregular for
for aa period
period between
exceeding181
365days
daysand 365 days (inclusive)
Bad
Irregular for a period exceeding 365 days
The Group may also include a credit facility in one of the above categories based on management’s judgement of a
The
Group financial
may alsoand/or
include
a credit facility
in one of the above categories based on management’s judgement of a
customer’s
non-financial
circumstances.
customer’s financial and/or non-financial circumstances.
The Group’s impaired finance portfolio as at 31 December 2015 was KD 19,523 thousand against which a specific
The
Group’s
impaired
finance portfolio
at 31 (31
December
2015
wasKD
KD20,275
19,523thousand
thousand
which
a specific
provision
of KD
8,720 thousand
has beenasmade,
December
2014:
andagainst
KD 5,380
thousand),
as
provision
of KD 8,720 thousand has been made, (31 December 2014: KD 20,275 thousand and KD 5,380 thousand), as
detailed below:
detailed below:
2014
2015
2014
2015
Impaired
Related
Impaired
Related
Impaired
Related
Impaired
Related
finance
specific
finance
specific
finance
specific
finance
specific
facilities
provision
Net balance
facilities
provision
Net balance
facilities
provision
Net
balance
facilities
provision
Net
balance
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Table 11
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Table
Claims11
on corporates
16,654
3,756
12,898
14,814
7,123
7,691
Claims
on corporates
16,654
3,756
12,898
14,814
7,123
7,691
Regulatory
retail exposure
3,621
1,624
1,997
4,709
1,597
3,112
3,621
1,624
1,997
4,709
1,597
3,112
20,275
5,380
14,895
19,523
8,720
10,803
20,275
5,380
14,895
19,523
8,720
10,803
The geographical distribution of “past-due and impaired “financing and the related specific provision are as follows:
The geographical distribution of “past-due and impaired “financing and the related specific provision are as follows:
2014
2015
2014
2015
Middle
Middle
Middle
Middle
East
Asia
Total
East
Asia
Total
East
Asia
Total
East
Asia
Total
KD’000
KD’000
KD’000
Table 12
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Table
12and impaired financing
KD’000
KD’000
KD’000
Past due
17,093
3,182
20,275
16,225
3,298
19,523
Past
duespecific
and impaired
financing
17,093
3,182
20,275
16,225
3,298
19,523
Related
provision
4,126
1,254
5,380
6,408
2,312
8,720
Related specific provision
4,126
1,254
5,380
6,408
2,312
8,720
In accordance with CBK regulations, a minimum general provision of 1% for cash facilities and 0.5% for non-cash
In
accordance
with
regulations,
minimum(net
general
provision
of 1%
for cashoffacilities
and
0.5%arefornotnon-cash
facilities
is made
on CBK
all applicable
credita facilities
of certain
restricted
categories
collateral)
which
subject
facilities
made on all applicable credit facilities (net of certain restricted categories of collateral) which are not subject
to specificisprovisioning.
to specific provisioning.
The adequacy of provisions are regularly evaluated and monitored by the Provisions Committee.
The adequacy of provisions are regularly evaluated and monitored by the Provisions Committee.
The Bank’s total provision as at 31 December 2015 was KD 50,736 thousand inclusive of a general provision of KD
The Bank’s
total provision
as at 31
December
2015thousand
was KDand
50,736
thousand
inclusive
a general
provision of KD
42,016
thousands,
(31 December
2014:
KD 41,584
KD 36,204
thousand),
as of
detailed
below:
42,016 thousands, (31 December 2014: KD 41,584 thousand and KD 36,204 thousand), as detailed below:
2014
2015
2014
2015
KD’000
Table 13
KD’000
KD’000
Table
13 corporates
KD’000
Claim on
28,430
32,196
Claim
on corporates
28,430
32,196
Regulatory
retail exposure
7,774
9,820
7,774
9,820
36,204
42,016
36,204
42,016
The total general provision above includes KD 1,586 thousand relating to “non-cash” facilities in accordance with CBK
The total general
provision 2014:
aboveKD
includes
1,586 thousand relating to “non-cash” facilities in accordance with CBK
regulations,
(31 December
1,495KD
thousand).
regulations, (31 December 2014: KD 1,495 thousand).
13
13
RISK MANAGEMENT
RISK MANAGEMENT
For the
year ended2015
31 December 2015
For the year ended
31 December
47
BOUBYAN
BANK
K.S.C.P.
AND SUBSIDIARIES
BOUBYAN BANK
K.S.C.P.
AND
SUBSIDIARIES
RISK MANAGEMENT
6.
6.
6.6
Reputation and fiduciary risk
Reputation risk is defined as the current and prospective impact on earnings and capital arising from negative public
opinion which will affect the ability to establish new relationships or services or to continue servicing existing
relationships.
Management of reputation risk is an inherent feature of the Group’s corporate culture which is embedded as an integral
part of the internal control systems. Besides identification and management of risks, the internal control system also
incorporates as an ethos the maintenance of business practices of the highest quality towards its customers,
shareholders, regulators, general public and fiduciary and non-fiduciary clients.
Through its policies and practices Boubyan ensures proper screening of clients’ risk profiles and performance
expectations is conducted prior to making investment products or services available to them. Furthermore, once a
product or service is sold, appropriate risk and performance projections are clearly communicated, and funds placed
under management are treated with due care and professionalism.
During the year, Assets under Management at the Group decreased by 4.3% to reach KD 95,496 thousands on 31
December 2015, (31 December 2014: 26.5% to reach KD 99,804 thousands).
7.
COMPLIANCE WITH SHARI’A PRINCIPLES
Fatwa & Shari’a Supervisory Board of the Bank is responsible for monitoring the Bank’s compliance with its issued
fatwa and resolutions. The Shari’a Supervisory Board reviews and approves the contract and agreement forms after
obtaining the necessary information to provide its opinion. Random samples of operations related to the Bank’s
transactions are reviewed through Shari’a supervision according to the annual Shari’a audit plan for all the departments
and through the periodic reports provided by the Shari’a supervisory department about the audit processes, field visits,
workflow and the validity of implementing the fatwa and resolutions issue by the Shari’a Supervisory Board.
Accordingly, an annual report about the Bank’s compliance with Shari’a fatwa and resolutions are issued according to
those fatwa and resolutions and it is attached along with Bank’s annual report and submitted to shareholders in the
General Assembly. The external auditors have looked at the procedures adopted by the Shari’a Supervisory Board
review all the Shari’s committee minute of the meeting held during the year and regarding to this and based on CBK
circular number (2/RBA/100/2003) issue the report describing the procedures that taken in place during the year to
ensure that Bank compliance with Shari’s rules and principles in addition, they disclosed in the report that Bank had
comply with all Shari’a Supervisory Board rules and instructions.
6.2.10 “Past-due” and impairment provisions (continued)
The geographical distribution of the general provision on “cash” facilities is as follows:
2015
KD’000
40,396
34
40,430
Table 14
Middle east and north Africa
Europe
2014
KD’000
34,665
44
34,709
The analysis of specific and general provisions is further detailed in note 8 and 12 of the Group’s consolidated financial
statements.
6.3
“Market” risk
“Market” risk is defined as the potential loss in value of financial instruments caused by adverse movements in market
variables such as profit rates, foreign exchange rates and equity prices.
Market risk results from uncertainty in future earnings arising from changes in profit rates, exchange rates, market prices
and volatilities. Speculative Market Risk is not undertaken by the Bank but market risk arises from financing and
investment activities.
The strategy for controlling market risk includes:
 Stringent controls and limits.
 Strict segregation of “front”, “middle” and “back” office duties.
 Regular independent reporting of positions.
 Regular independent review of all controls and limits.
6.3.1 Market-risk management framework
The Market-Risk Management Framework governs the Bank’s activities related to market risk. Market risk arising from
banking book activities is the primary responsibility of the Bank’s Asset and Liability Management Executive
Committee and managed within a structure of approved financing and position limits.
6.4
Operational risk
Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems
failure, or from external events. When controls fail to perform, it can lead to legal or regulatory implications, or financial
or reputational loss
6.4.1 Operation- risk management framework
The Bank monitors its operational risks through an Operational-Risk Management Framework which defines roles and
responsibilities for managing and reporting operational risk. The key components of this framework are Risk Control
Self Assessments, comprehensive documented policies, procedures and internal controls.
Through the framework, line management is able to identify, assess and decide in what form and scale it can accept,
control and reduce operational risk, together with the form of risk-prevention measures which are necessary.
Furthermore, it embeds a culture of transparency of information, escalation of key issues, and accountability for issue
resolution. The Bank’s Risk Management collates and reviews actual loss data arising from the Bank’s day-to-day
operations to continuously refine its control arrangements.
The operational-risk framework is supplemented by regular reviews from the Bank internal audit function. The Bank
has a Business Continuity Plan together with a fully-equipped Disaster Recovery Centre which is tested periodically.
The Bank’s business processes are closely monitored to identify, assess, control and prevent potentially illicit use of
the Bank’s services for laundering money and/or financing terrorism. The Bank’s “anti-money laundering” and
“combating terrorism-financing” initiatives are regularly reviewed to ensure full compliance with legal and regulatory
requirements and international best practices.
48
6.5
Liquidity risk
Liquidity risk is defined as the inability to generate sufficient financial resources to meet all obligations and
commitments as they fall due, or having to access funds to meet payment obligations at an excessive cost. It is the
policy of the Bank to maintain adequate liquidity at all times.
The Bank applies a prudent mix of liquidity controls which provide security of access to funds without undue exposure
to increased costs of funds from the liquidation of assets, or aggressive bidding for deposits. Liquidity risk is monitored
and evaluated daily to ensure that, over the short term and by major currency, the profile of projected future cash
inflows is adequately matched to the maturity of liabilities.
14
According to the law no 46/2003 related to Zakat should be paid by listed companies, the Bank will pay KD 354
thousands for the year ended 31 December 2015, (31 December 2014: KD 289 thousands), and it is subject to auditing
procedures by external consultant and approval by Ministry of Finance.
The violations related to compliance of Sharia’s principles for the year ended 31 December 2015 is Nil, (31 December
2014: Nil).
The Shari’s Supervisor Board’s remuneration for the year ended 31 December 2015 is KD 54 thousands, (31 December
2014: KD 66 thousands).
8.
INVESTMENT ACCOUNTS
Investment accounts receive a proportion of profit based on an agreed profit-sharing ratio and bear a share of loss.
Investment accounts take the form of unrestricted Mudaraba or Wakala contracts and include savings accounts and fixed
term deposit accounts.
Saving Investment Accounts
These are open-term deposits and the client is entitled to withdraw the balances of these accounts or portions thereof at
any time. The profit sharing of saving investment accounts is calculated and distributed monthly and the rate of profits on
the accounts balances were ranging between 0.1% and 1% based on the product and currency.
Fixed-Term Deposit Investment Accounts
These are fixed-term deposits based on the deposit contract executed between the Bank and the depositor. These deposits
have a predetermined maturity date and renewed automatically for a similar period, unless the depositor notifies the Bank
in writing of his/her desire not to renew the deposit. The profit sharing of fixed-term deposit investment accounts is
calculated monthly and distributed on the month ended after the maturity date and the rate of profits on the accounts
balances were ranging between 1% and 1.5% based on the product and currency.
Investment accounts are invested in pools of assets and receive a proportion share of net income from these assets after
allocating it’s proportion share of expenses. These assets are complying with the Codes of the Islamic Sharia’a, as
approved by the Bank’s Sharia’a Supervisory Board. The Bank doesn’t maintain investment risk reserve or profit
equalization reserve.
A weighting factor of 50% is used for credit risk-weighted exposures financed from investment accounts.
15
49
RISK MANAGEMENT
RISK MANAGEMENT
RISK MANAGEMENT
9.1 Composition of Regulatory Capital
9. COMPOSITION
OF CAPITAL
For regulatory purposes,
the capital base is divided into:

Common
Equity Tier
1
9.1 Composition of Regulatory
Capital
 Tier 1purposes,
Capital the capital base is divided into:
For regulatory
Total Capital
 Common
Equity Tier 1

Tier
1
Capital
Common Equity Tier 1 Capital comprises share capital, share premium, retained earnings, eligible reserves and
 eligible
Total Capital
related
non-controlling interests. The book values of Goodwill and Intangibles are deducted along with other
10. RECONCILIATION REQUIREMENTS
The basis for the scope of consolidation for accounting and regulatory purposes is consistent for the Group. In order to
provide a full reconciliation of all regulatory capital elements to the balance sheet in the audited financial statements, a
three-step approach has been mandated under the Pillar 3 disclosures section of the CBK Basel III framework.
Tier
Capital consists
Common
Tierand
1 Capital
and Additional
Tier 1ofCapital
whichportions
includes
Total1Regulatory
Capitalofincludes
TierEquity
1 Capital
Tier 2 Capital
which consists
the allowed
of eligible
general
portions
of
non-controlling
interests.
provisions and certain additional eligible non-controlling interests.
Total
Regulatory
Capital includes
Tier 1 Capital
and Tier
Capital which consists of the allowed portions of general
The below
table summarizes
the composition
of capital
and2 ratios:
provisions and certain additional eligible non-controlling interests.
2014
2015
The
below
KD’000
Table
15 table summarizes the composition of capital and ratios:
KD’000
Common Equity Tier 1 Capital before regulatory adjustments
286,965
308,493
2014
2015
Less: 15
KD’000
Table
KD’000
Total regulatory
to before
Common
Equity Tier
1
28,731
27,978
Common
Equity adjustments
Tier 1 Capital
regulatory
adjustments
286,965
308,493
Deductions from Capital Base arising from Investments in FIs where ownership is >
Less:
10%
29,184
21,151
Total regulatory adjustments to Common Equity Tier 1
28,731
27,978
229,050
Common Equity
Tier 1 Base
Capital
(CET1)
259,364
Deductions
from Capital
arising
from Investments in FIs where ownership is >
10%
29,184
21,151
Additional Tier 1 Capital (AT1)
731
230
229,050
229,781
Common
Equity
1 Capital
(CET1)
259,364
Tier 1 Capital
(T1Tier
= CET1
+ AT1)
259,594
Additional
Tier(T2)
1 Capital (AT1)
731
230
Tier 2 Capital
15,148
18,332
229,781
Tier
Capital(TC
(T1 = T1
CET1
+ AT1)
259,594
244,929
Total1Capital
+ T2)
277,926
Tier 2 Capital (T2)
15,148
18,332
Total risk-weighted assets
1,356,592
1,631,425
244,929
Total Capital (TC = T1 + T2)
277,926
Capital ratios and buffers
1,356,592
1,631,425
Common Equity Tier 1 Capital (as percentage of risk-weighted assets)
16.88%
15.90%
Tier 1 Capital
16.94%
15.91%
Capital
ratios(as
andpercentage
buffers of risk-weighted assets)
Total Regulatory
Capital
(as percentage
of risk-weighted
assets)assets)
18.05%
17.04%
Common
Equity Tier
1 Capital
(as percentage
of risk-weighted
16.88%
15.90%
Tier 1 Capital (as percentage of risk-weighted assets)
16.94%
15.91%
National
minimaCapital (as percentage of risk-weighted assets)
Total
Regulatory
18.05%
17.04%
Common Equity Tier 1 minimum ratio including Capital Conservation Buffer
8.50%
9.00%
Tier 1 minimum
10.00%
10.50%
National
minimaratio
Total capital
minimum
excluding
and D-SIB
12.00%
12.50%
Common
Equity
Tier 1 ratio
minimum
ratio CCY
including
Capitalbuffers
Conservation Buffer
8.50%
9.00%
Tier 1 minimum ratio
10.00%
10.50%
A detailed breakdown of the Group’s regulatory capital position under the Common Disclosures
template as stipulated
Total
minimum
ratio
excluding
CCYIII
and
D-SIBAdequacy
buffers framework is presented in Table
12.00%
12.50%
under capital
the Pillar
3 section
of the
CBK Basel
Capital
24.
50
A detailed breakdown of the Group’s regulatory capital position under the Common Disclosures template as stipulated
under the Pillar 3 section of the CBK Basel III Capital Adequacy framework is presented in Table 24.
Balance sheet
as in published
financial
statements
31 December 2015
Table 16 - Step 1 and 2 of Reconciliation requirements
KD’000
Assets
Cash and cash equivalent
Due from banks
Islamic financing to customers
of which general provisions(netted above) capped for Tier 2 inclusion
Financial assets at fair value through profit or loss
Available for sale investments
Investment in associates
of which goodwill
of which investments in the capital of banking entities above the threshold deduction
that are outside the scope of regulatory consolidation
Investment properties
Other assets
Property and equipment
Total assets
Liabilities
Due to banks
Depositors’ accounts
Other liabilities
Total liabilities
Equity
Share capital
Share premium
Proposed bonus shares
Treasury shares
Statutory reserve
Voluntary reserve
Share based payment reserve
Fair value reserve
Foreign currency translation reserve
Retained earnings
Proposed cash dividends
Equity attributable to equity holders of the Bank
Non-controlling interests
of which limited recognition eligible as CET1 Capital
of which limited recognition eligible as AT1 Capital
of which limited recognition eligible as Tier 2 Capital
Total equity
16
16
465,259
218,076
2,171,794
27,410
27,410
18,288
15,388
126,307
79,713
18,288
15,388
126,307
79,713
Reference
A
B
C
21,151
23,397
14,169
18,782
3,132,885
21,151
23,397
14,169
18,782
3,132,885
382,749
2,398,935
30,402
2,812,086
382,749
2,398,935
30,402
2,812,086
206,325
62,896
10,316
(568)
9,998
9,570
1,171
4,159
(9,262)
13,320
10,307
318,232
206,325
62,896
10,316
(568)
9,998
9,570
1,171
4,159
(9,262)
13,320
10,307
318,232
D
E
F
G
H
I
J
K
L
M
N
230
44
320,799
230
44
320,799
O
P
3,132,885
17
KD’000
465,259
218,076
2,171,794
2,567
Total liabilities and equity
Under
regulatory
scope of
consolidation
2,567
3,132,885
regulatoryEquity
adjustments.
Common
Tier 1 Capital comprises share capital, share premium, retained earnings, eligible reserves and
related
interests.
The Tier
book 1values
of Goodwill
and Intangibles
are deducted
along with
other
Tier 1 eligible
Capital non-controlling
consists of Common
Equity
Capital
and Additional
Tier 1 Capital
which includes
eligible
regulatory
adjustments.
portions of non-controlling interests.
Table 16 provides the comparison (Step1) of the balance sheet published in the consolidated financial statement and the
balance sheet under the regulatory scope of consolidation. Lines have been expanded and referenced with letters (Step
2) to display the relevant items of the regulatory capital.
51
RISK MANAGEMENT
For
year ended 31 December
2015
9. the
COMPOSITION
OF CAPITAL
BOUBYAN BANK
BANK K.S.C.P.
K.S.C.P. AND
AND SUBSIDIARIES
SUBSIDIARIES
BOUBYAN
For the
the year
year ended
ended 31
31 December
December 2015
2015
For
RISK MANAGEMENT
RISK MANAGEMENT
MANAGEMENT
RISK
10.
10.
10. RECONCILIATION REQUIREMENTS (CONTUNUED)
Cash and cash equivalent
Due from banks
of which general provisions(netted above) capped for Tier 2 inclusion
Investment in associates
of which goodwill
of which investments in the capital of banking entities above the threshold deduction
that are outside the scope of regulatory consolidation
Other assets
Total assets
Liabilities
Due to banks
Other liabilities
KD’000
314,821
263,593
1,805,115
15,002
12,738
113,852
85,728
27,968
314,821
263,593
1,805,115
15,002
12,738
113,852
85,728
27,968
29,184
25,637
10,944
15,502
2,647,930
226,739
2,082,854
37,235
2,346,828
29,184
25,637
10,944
15,502
2,647,930
Reference
A
B
C
22
33
44
55
77
18
226,739
2,082,854
37,235
2,346,828
99
10
10
11
11
731
146
731
146
O
P
5,075
301,102
Goodwill
Goodwill
Otherintangibles
intangibles other
otherthan
thanmortgage-servicing
mortgage-servicingrights
rights (net
(net of
ofrelated
relatedtax
tax
Other
liability)
liability)
Investments in
inown
ownshares
shares
Investments
Deductionsfrom
fromCapital
CapitalBase
Basearising
arisingfrom
fromInvestments
Investmentsin
inFIs
FIswhere
where
Deductions
ownershipisis>> 10%
10%
ownership
Total regulatory
regulatoryadjustments
adjustmentsto
toCommon
CommonEquity
EquityTier
Tier11
Total
CommonEquity
EquityTier
Tier11 Capital
Capital (CET1)
(CET1)
Common
Component
Component
regulatory
regulatory
capital
capital
KD’000
KD’000
206,325
206,325
13,320
13,320
88,848
88,848
Source based
based
Source
on reference
reference
on
letters of
of the
the
letters
balance sheet
sheet
balance
fromstep2
step2
from
KD’000
KD’000
DD
M
M
E+H+I+J+K+L+F
E+H+I+J+K+L+F
-308,493
308,493
27,410
27,410
BB
-568
568
G
G
21,151
21,151
49,129
49,129
259,364
259,364
CC
AdditionalTier
Tier11capital
capital::instruments
instruments
Additional
D
E
F
G
H
I
J
K
L
M
N
2,647,930
Directlyissued
issuedqualifying
qualifyingcommon
commonshare
sharecapital
capitalplus
plus related
relatedstock
stocksurplus
surplus
Directly
Retainedearnings
earnings
Retained
Accumulatedother
othercomprehensive
comprehensive income
income(and
(andother
otherreserves)
reserves)
Accumulated
Commonshare
sharecapital
capitalissued
issuedby
bysubsidiaries
subsidiariesand
andheld
heldby
bythird
thirdparties
parties
Common
(minorityinterest)
interest)
(minority
CommonEquity
EquityTier
Tier11 Capital
Capital before
beforeregulatory
adjustments
Common
CommonEquity
EquityTier
Tier11Capital
Capital::regulatory
adjustments
Common
66
196,500
62,896
9,825
(763)
6,283
6,015
864
5,082
(6,468)
5,978
9,815
296,027
301,102
Total liabilities and equity
Table 17:
17: Step
Step 33 of
of Reconciliation
Reconciliation requirements
requirements
Table
CommonEquity
EquityTier
Tier11capital:
capital: instruments
instrumentsand
andreserves
reserves
Common
11
196,500
62,896
9,825
(763)
6,283
6,015
864
5,082
(6,468)
5,978
9,815
296,027
5,075
Total equity
KD’000
31 December
December 2015
2015
31
Relevant
Relevant
row
row
number in
in
number
common
common
disclosure
disclosure
template
template
88
Total liabilities
Equity
Share capital
Share premium
Proposed bonus shares
Treasury shares
Statutory reserve
Voluntary reserve
Share based payment reserve
Fair value reserve
Foreign currency translation reserve
Retained earnings
Proposed cash dividends
Equity attributable to equity holders of the Bank
of which limited recognition eligible as CET1 Capital
of which limited recognition eligible as AT1 Capital
of which limited recognition eligible as Tier 2 Capital
52
Under
regulatory
scope of
consolidation
13
13
AdditionalTier
Tier11instruments
instruments(and
(andCET1
CET1instruments
instrumentsnot
notincluded
includedin
inrow
row5)
5)
Additional
issuedby
bysubsidiaries
subsidiaries and
andheld
heldby
bythird
thirdparties
parties(amount
(amountallowed
allowedin
ingroup
group
issued
AT1)
AT1)
AdditionalTier
Tier11capital
capitalbefore
beforeregulatory
adjustments
Additional
14
14
15
15
AdditionalTier
Tier11Capital
Capital(AT1)
(AT1)
Additional
Tier11Capital
Capital(T1
(T1==CET1
CET1++ AT1)
AT1)
Tier
12
12
AdditionalTier
Tier11Capital
Capital::regulatory
adjustments
Additional
230
230
230
230
O
O
230
230
259,594
259,594
Tier22Capital
Capital::instruments
instrumentsand
andprovisions
provisions
Tier
17
17
18
18
Tier22instruments
instruments(and
(andCET1
CET1and
andAT1
AT1instruments
instruments not
notincluded
includedin
inrows
rows 55or
or
Tier
34)issued
issuedby
bysubsidiaries
subsidiaries and
andheld
heldby
bythird
thirdparties
parties(amount
(amount allowed
allowedin
ingroup
group
34)
Tier2)
2)
Tier
GeneralProvisions
Provisions included
includedin
inTier
Tier22Capital
Capital
General
Tier22Capital
Capitalbefore
beforeregulatory
adjustments
Tier
19
19
Totalcapital
capital(TC
(TC==T1
T1++T2)
T2)
Total
16
16
44
44
18,288
18,288
18,332
18,332
PP
AA
277,926
277,926
2,647,930
Assets
Balance sheet
as in published
financial
statements
19
19
53
31 December 2014
Table 16 - Step 1 and 2 of Reconciliation requirements
RECONCILIATIN RFQUIREMENTS
RFQUIREMENTS (CONTINUED)
(CONTINUED)
RECONCILIATIN
Table 17
17 provides
provides the
the relevant
relevant lines
lines under
under ‘Table
‘Table 24:
24: Composition
Composition of
of Regulatory
Regulatory Capital’
Capital’ with
with cross
cross references
references to
to the
the
Table
letters in
in Table
Table 16,
16, thereby
therebyreconciling
reconciling (Step
(Step 3)
3) the
the components
components of
of regulatory
regulatorycapital
capital to
to the
the published
published balance
balance sheet.
sheet.
letters
RISK MANAGEMENT
RISK MANAGEMENT
BOUBYAN
BANK
K.S.C.P.
For the
year ended 31
December
2015 AND SUBSIDIARIES
RISK MANAGEMENT
10.
RECONCILIATIN RFQUIREMENTS (CONTINUED)
10.
RECONCILIATIN RFQUIREMENTS (CONTINUED)
Table 17 provides the relevant lines under ‘Table 24: Composition of Regulatory Capital’ with cross references to the
31 December
letters 2014
in Table 16, thereby reconciling (Step 3) the components of regulatory capital to the published balance sheet.
31 December 2015
2
3
4
5
6
7
8
9
10
11
12
13
14
15
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
17
18
54
19
Common Equity Tier 1 Capital : regulatory adjustments
Common Equity Tier 1 Capital : regulatory adjustments
Goodwill
Goodwill
Other intangibles other than mortgage-servicing rights (net of related tax
Other intangibles other than mortgage-servicing rights (net of related tax
liability)
liability)
Investments in own shares
Investments
in own
Deductions
fromshares
Capital Base arising from Investments in FIs where
Deductions
fromisCapital
ownership
> 10% Base arising from Investments in FIs where
ownership is > 10%
Additional Tier 1 capital : instruments
Additional Tier 1 capital : instruments
Additional Tier 1 instruments (and CET1 instruments not included in row 5)
Additional
1 instruments
(and
instruments
not included
5)
issuedTier
by subsidiaries
and
heldCET1
by third
parties (amount
allowedininrow
group
issued
by subsidiaries and held by third parties (amount allowed in group
AT1)
AT1) Additional Tier 1 capital before regulatory adjustments
Additional Tier 1 capital before regulatory adjustments
Additional Tier 1 Capital : regulatory adjustments
Additional Tier 1 Capital : regulatory adjustments
Additional Tier 1 Capital (AT1)
Additional
1 Capital
Tier 1Tier
Capital
(T1 =(AT1)
CET1 + AT1)
Tier 1 Capital (T1 = CET1 + AT1)
Tier 2 Capital : instruments and provisions
17
18
2 Capital
instruments
provisions
Tier 2 instruments (andTier
CET1
and AT1: instruments
notand
included
in rows 5 or
issued by subsidiaries and held by third parties (amount allowed in group
Tier 234)
instruments
(and CET1 and AT1 instruments not included in rows 5 or
Tier 2)
34) issued by subsidiaries and held by third parties (amount allowed in group
General Provisions included in Tier 2 Capital
Tier 2)
TierProvisions
2 Capital before
regulatory
adjustments
General
included
in Tier 2 Capital
19
Tier 2 Capital before regulatory adjustments
Total capital (TC = T1 + T2)
16
16
Directly
issued
qualifying
common
share
capital
related
stock
surplus
Directly
issued
qualifying
common
share
capital
plusplus
related
stock
surplus
Retained
earnings
Retained
earnings
Accumulated
comprehensive
income
other
reserves)
Accumulated
otherother
comprehensive
income
(and(and
other
reserves)
Common
capital
issued
by subsidiaries
by third
parties
Common
shareshare
capital
issued
by subsidiaries
andand
heldheld
by third
parties
(minority interest)
(minority interest)
Total capital (TC = T1 + T2)
206,325
196,500
13,320
5,978
88,848
84,487
-308,493
286,965
27,410
27,968
-568
763
21,151
29,184
49,129
57,915
259,364
229,050
230
731
230
731
DD
MM
E+H+I+J+K+L+F
E+H+I+J+K+L+F
244,929
‘capital’
measure
by the with
‘exposure’
measure. The stipulated
capital measure
is made
Tier 1 Capital.
The
Group
is individed
compliance
the requirements
by CBK
forup
theofLeverage
ratioThe
set exposure
at a minimum of 3%.
measure is a sum of on-balance sheet assets, derivative exposures; securities finance transactions and off-balance
The
sheetLeverage
exposures. Ratio for the Group at consolidated level is:
The Group is in compliance with the requirements stipulated by CBK for the Leverage ratio set at a minimum of 3%.
2015
The Leverage Ratio for the Group at consolidated level is:
Table
18
Tier 1 Capital (KD’ 000s)
Total Exposures (KD’ 000s)
Table 18 Ratio (%)
Leverage
2015
Tier 1 Capital (KD’ 000s)
259,594
Totalbelow
Exposures
(KD’
000s) the details of the Total Exposures for Leverage Ratio:
3,286,647
The
Table
provides
Leverage Ratio (%)
7.90%
The below Table provides the details of the Total Exposures for Leverage Ratio:
259,594
3,286,6472014
7.90%
229,050
2,773,981
8.26%
2015
KD’000
2015 3,084,3262014
KD’000
KD’000
202,321
2,590,786
3,084,326
3,286,647
2014
229,050
2,773,981
8.26%
2014
KD’000
2,590,786
183,195
2,773,981
BB
Table 19
On-balance sheet exposures
Table
19
Off-balance
sheet items
Total Exposures
G
G
2,773,981 under the Pillar 3
Total Exposures
3,286,647
Table
25 provides details of the Leverage Ratio in the format stipulated
for public disclosure
framework
Table 25 provides details of the Leverage Ratio in the format stipulated for public disclosure under the Pillar 3
C
C
Off-balance sheet items
202,321
183,195
framework
11.1 Leverage Ratio Reconciliation
11.1 Leverage
Reconciliation
Table 20Ratio
provides
the reconciliation of the balance sheet assets from the published financial statement with total
Table 20 provides
thethe
reconciliation
balanceratio.
sheet assets from the published financial statement with total
exposure
amount in
calculationofofthe
leverage
exposure amount in the calculation of leverage ratio.
Summary
comparison
of accounting
vs leverage
ratio exposure
Summary comparison
of accounting
assetsassets
vs leverage
ratio exposure
measure measure
O
O
230
731
259,594
229,781
44
18,288
146
18,332
15,002
15,148
277,926
LEVERAGE
The
LeverageRATIO
ratio is a separate, additional requirement from the risk-based capital requirement. It is defined as the
In October 2014, CBK issued the regulations on the ‘Leverage ratio’ introduced by BCBS as part of the regulatory
‘capital’ measure divided by the ‘exposure’ measure. The capital measure is made up of Tier 1 Capital. The exposure
reforms package. This transparent and non-risk based metric supplements the Capital ratio to act as a backstop measure
measure
is a sum
of on-balance
sheet assets,
derivative exposures; securities finance transactions and off-balance
to limit excessive
build-up
of on and off-balance
sheet exposures.
sheet
exposures.
The Leverage ratio is a separate, additional requirement from the risk-based capital requirement. It is defined as the
P
PA
A
Table 20
Table
20
Item
Item
2015
2015 2014
2014
KD’000
KD’000
KD’000
KD’000
2,647,930
3,132,885
2,647,930
Total consolidated
assets
as per
financial
statements
3,132,885
Total
consolidated
assets
as published
per published
financial
statements
Adjustment for investments in banking, financial, insurance or commercial
Adjustment
for investments in banking, financial, insurance or commercial
entities that are consolidated for accounting purposes but outside the scope of
entities
that are
consolidated for accounting purposes but outside the scope of (48,559)
regulatory
consolidation
regulatory
consolidation
Adjustment for fiduciary
assets recognised on the balance sheet pursuant to the
Adjustment
for fiduciary
assets
onthe
theleverage
balance
sheet
pursuant to the
operative accounting
framework
but recognised
excluded from
ratio
exposure
measure accounting framework but excluded from the leverage ratio exposure
operative
Adjustments for derivative financial instruments
measure
Adjustment forfor
securities
financing
transactions
(ie repos and similar secured
Adjustments
derivative
financial
instruments
lending)
Adjustment
for securities financing transactions (ie repos and similar secured
Adjustment for off-balance sheet items (ie conversion to credit equivalent
lending)
amounts of off-balance sheet exposures)
202,321
Adjustment
for off-balance sheet items (ie conversion to credit equivalent
Other adjustments
amounts
off-balance
Leverage of
ratio
exposure sheet exposures)
3,286,647
Other adjustments
Leverage ratio exposure
(57,144)
(48,559)
-
(57,144)
- -
-
183,195
202,321
2,773,981
-
-
3,286,647
183,195
2,773,981
Common
Equity
1 capital:
instruments
and
reserves
Common
Equity
TierTier
1 capital:
instruments
and
reserves
1
Component
Component
regulatory
regulatory
capital
capital
KD’000
KD’000
Source
Sourcebased
based
on
onreference
reference
letters
lettersof
ofthe
the
balancesheet
sheet
balance
fromstep2
step2
from
KD’000
KD’000
11.
21
21
55
Relevant
Relevant
row row
number
in in
number
common
common
disclosureTable
disclosure
Table
17: Step
of Reconciliation
requirements
17: Step
3 of3Reconciliation
requirements
template
template
11. LEVERAGE RATIO
In October 2014, CBK issued the regulations on the ‘Leverage ratio’ introduced by BCBS as part of the regulatory
RISK reforms
MANAGEMENT
package. This transparent and non-risk based metric supplements the Capital ratio to act as a backstop measure
For theto
year
ended
31 December
2015of on and off-balance sheet exposures.
limit
excessive
build-up
RISK MANAGEMENT
RISK MANAGEMENT
12. LIQUIDITY COVERAGE RATIO DISCLOSURE
12.
12.1Introduction
In December 2014, the Central Bank of Kuwait (CBK) issued a directive (2/RB/346/2014) to Islamic banks operating
in Kuwait on the adoption of the Liquidity Coverage Ratio (LCR) as part of the Central Bank’s implementation of the
Basel III reforms.
The main objective of the Liquidity Coverage Ratio (LCR) is to ensure the short-term resilience of the liquidity risk
management of banks by ensuring that they have sufficient high quality liquid assets (HQLA) to survive a significant
stress scenario lasting for a period of 30 days.
12.2 Definition
The LCR is defined as a ratio of Islamic Sharia’a compliant HQLA to the total net cash outflows estimated for the next
30 ‘calendar’ days. HQLA are classified into two categories: “Level 1” and “Level 2” with a cap on “Level 2” assets to
the total HQLA. “Level 2 HQLA” are calculated after applying the hair cut provided by the Central Bank of Kuwait on
their market values. The net cash outflows are calculated by applying cash outflow and inflow run off factors assigned
by the Central Bank of Kuwait. These factors apply to the various categories of liabilities (outflows relating to retail
and wholesale deposits, contingent funding obligations and undrawn commitments) and assets (inflows from retail and
corporate financing receivables) maturing within 30 days.
The LCR is calculated by dividing the amount of unencumbered HQLA by the estimated net outflows over a stressed
30-day period.
12.3 Regulatory Scope of Reporting and Consolidation
The LCR is reported at local level, including head office and its branches in Kuwait.
The LCR is calculated on a total currency level. For follow up purposes only the LCR is prepared on a stand-alone basis
for significant currencies. Significant currencies are defined as those whose aggregate liabilities (on- and off- balance
sheet) constitute more than 5% of the bank’s total aggregate liabilities. Accordingly, the Bank reports the LCR for
Kuwaiti Dinar (KWD) and US Dollar (USD) denominated balances in addition to the total currency level.
12.4 Liquidity Policy and Contingency Funding Plan
The Bank’s liquidity management is guided by its Liquidity Policy which is reviewed annually and approved by the
Board of Directors. The Liquidity Policy document specifies the main goals, policies and procedures for managing
liquidity risk. The Liquidity Policy outlines procedures to identify, measure and monitor liquidity risk parameters in line
with regulatory and internal limits, under normal and stress scenarios.
The Liquidity Policy also encompasses the bank’s Contingency Funding Plan (CFP), which is approved by the Board of
Directors, charts the course to be followed under stressed conditions.
12.5 Funding Strategy and Liquidity Management
While the operational aspect of day-to-day cash flow and liquidity management rests with Treasury, other groups such
as Consumer Banking Group (CBG), Corporate Banking Group (COR), Risk Management Department (RMD), and
Financial Control Group (FCG) plays a key role in managing and monitoring the longer-term funding profile of the bank
under the oversight of the Asset Liability Management Committee (ALCO).
The Bank’s long-term strategy has been to maintain a strong and diversified liabilities profile. The bank has embraced a
robust funding profile through its wide domestic retail customer base and the diversified wholesale funding customers.
The bank’s major wholesale funding counterparties comprise mostly of Kuwaiti government and quasi-sovereign
agencies with which the Bank has established a strong and long-term relationship.
12.6 Results Analysis and Main Drivers
The Bank’s HQLA during the three months ending 31 December 2015, was averaging at KD 217 Million (post-haircut)
against an average liquidity requirement of KD 182 Million. Hence, the LCR averaged 119% during the last quarter of
2015
LIQUIDITY COVERAGE RATIO DISCLOSURE (CONTINUED)
12.7 Quantitative Information
Quantitative information on the Liquidity Coverage Ratio is provided in the table below. The values are calculated as the
simple average of daily observations over the period between 1 October 2015 and 31 December 2015 for the Bank at
Local level.
Table 21
SL.
Value before
applying flow
rates
Description
(average)**
KD 000s
Value after
applying
flow rates
(average)**
High-Quality Liquid Assets (HQLA)
1
217,275
Total HQLA (before adjustments)
Cash Outflows
2
Retail deposits and small business
3

Stable deposits
4

Less stable deposits
5
-
-
503,659
77,752
Deposit, investment accounts and unsecured wholesale funding excluding the deposits of small
business customers:
6

Operational deposits
7

Non-operational deposits (other unsecured commitments)
8
Secured Funding
9
Other cash outflows, including:
-
-
755,096
549,425
-
10

Resulting from Shari’ah compliant hedging contracts
-
11

Resulting from assets-backed sukuk and other structured funding instruments
-
-
12

Binding credit and liquidity facilities
-
-
1,172,441
58,622
13
Other contingent funding obligations
14
Other contractual cash outflows obligations
15
Total Cash Outflows
42,497
-
42,497
728,296
Cash Inflows
-
-
690,585
572,215
16
Secured lending transactions
17
Inflows from the performing exposures (as per the counterparties)
18
Other cash Inflows
19
Total Cash Inflows
20
Total HQLA (after adjustments)
21
Net Cash Outflows
182,074
22
LCR
119.3%
-
-
690,585
572,215
LCR
217,275
22
23
57
56
The HQLA is primarily comprised of Level 1 assets which represent cash and reserve balances with the CBK as well as
debt issuances by sovereign and Islamic development banks in domestic and foreign currencies. Level 2 assets
comprises of debt issuances by International Islamic Liquidity Management Corporation and other non-financial
institutions in domestic and foreign currencies. Level 1 assets comprise of 78% of the total HQLA.
RISK MANAGEMENT
RISK MANAGEMENT
RISK MANAGEMENT
13.
REMUNERATION DISCLOSURE
13.1 Qualitative Information
13.1.1 Governance bodies
The Boubyan Bank Group’s remuneration framework is under the supervision of the Board of Directors. As per the
Bank’s policies and charters, the Board is responsible to review and approve the remuneration policy and oversee the
implementation of the remuneration framework.
The Board Nomination and Remuneration Committee (BNRC) comprises three non-executive Board members. Its
main responsibility, in terms of remuneration mandates, is to support the board in setting the principles of the Group’s
remuneration policy and ensures effective implementation in accordance with the Bank’s remuneration policy and
Corporate Governance Code.
Boubyan Bank remuneration policy is developed and implemented at the Group level and covers Bank’s subsidiaries.
The remuneration policy defines three major categories for remuneration treatment, governance and disclosures.
Senior Management: includes all employees in the positions of Assistant General Manager and above and staff whose
hiring are subject to approval of regulators. The number of employees in this category as at 31 December 2015 was
33 employees, (31 December 2014: 29 employees).
Material Risk Takers: includes all employees whose activities and decisions have a material impact on the risk profile
of the Bank. The number of employees in this category as at 31 December 2015 was 23 employees, (31 December
2014: 23 employees).
Financial and Risk Control: includes all head of divisions and head of groups in Financial Control, Risk Management,
Compliance, Internal Audit and Anti-Money Laundering functions. The number of employees in this category as at
31 December 2015 was 13 employees, (31 December 2014: 12 employees).
13.1.2 Remuneration Structure and design
Boubyan Bank’s remuneration policy is in line with the strategic objectives of the Group. The policy is designed
mainly to attract, retain and motivate high-calibre, skilled and knowledgeable employees, thereby ensuring a sound
risk management and sustained profitability.
The Bank’s financial remuneration framework has been linked with long-term and short-term performance objectives.
The Board-approved Bank’s Strategy is transformed into Key Performance Indicators (KPIs) and remuneration is
determined based on the achievement of those KPIs towards the overall Group strategy [including financial and nonfinancial criteria and Key Risk Indicators (KRIs), as appropriate].
The employees of the Bank are entitled to two categories of remuneration, which are as follows:
Fixed remuneration: such remuneration are defined in the employment agreements, and may include fixed salaries
(i.e. basic salary , allowances and annual fixed pay as a percentage of basic salary) and other benefits (i.e. medical
insurance, air-tickets, and schooling support),
Variable remuneration: such remuneration are driven mainly by performance and guided by the “Employee Incentive
Plan”. This is in the form of cash bonus and/or Employee Stock Options (ESOP).
The remuneration policy is reviewed by the Board Nomination and Remuneration Committee annually and any
amendments should be approved by the Board of Directors.
13. REMUNERATION DISCLOSURE (CONTINUED)
13. REMUNERATION DISCLOSURE (CONTINUED)
13.1 Qualitative Information (continued)
13.1 Qualitative Information (continued)
13.1.3 An Overview on the Key Performance Indicators
13.1.3 The
An overall
Overview
on the
Performance
strategy
of Key
the Bank
is set andIndicators
approved by the Board and translated into KPIs. These are then documented
The
overall strategyto
ofensure
the Bank
set and approved
by the Board
and translated
into KPIs.
These
are thenManagement.
documented
and communicated
theisalignment
of management
activities
to the strategy
applied
by Senior
and communicated
to ensure
alignment
management
activities
These
KPIs are monitored
andthe
reported
to theofBoard
on a regular
basis.to the strategy applied by Senior Management.
These KPIs are monitored and reported to the Board on a regular basis.
Remuneration is determined based on the achievement of KPIs toward the overall Group strategy; this includes
Remuneration
is determined
basedand
onKey
the Risk
achievement
KPIs attoward
overall Group strategy; this includes
financial
and non-financial
criteria
Indicatorsof(KRIs)
Bank’sthe
level.
financial and non-financial criteria and Key Risk Indicators (KRIs) at Bank’s level.
The Bank’s Performance Management Policy sets the methodology of linking an individual’s annual performance with
The
Bank’soverall
Performance
Management Policy sets the methodology of linking an individual’s annual performance with
the Bank’s
performance.
the Bank’s overall performance.
The annual remuneration pool for this year was approved by the Board of Directors after review, discussion and
The
annual remuneration
pool Nomination
for this yearand
was
approved byCommittee.
the Board The
of Directors
after
and
recommendation
by the Board
Remuneration
percentage
of review,
approveddiscussion
remuneration
recommendation
by
the
Board
Nomination
and
Remuneration
Committee.
The
percentage
of
approved
remuneration
was determined based on the Bank-level KPIs.
was determined based on the Bank-level KPIs.
The performance appraisal form for each position identifies the quantitative weights of individual KPIs; the final
The
performance
appraisal
formwith
for aeach
position formula
identifies
the quantitative
weights
of individual KPIs; the final
scoring
of the appraisal
is linked
quantitative
to determine
the level
of remunerations.
scoring of the appraisal is linked with a quantitative formula to determine the level of remunerations.
Since the overall remuneration pool of the Group is linked to Group performance, the Group adjusts the remuneration
Since
the overall
remuneration
pool of theand
Group
is linked
to Group performance, the Group adjusts the remuneration
percentages
in case
of weak performance
business
recessions.
percentages in case of weak performance and business recessions.
13.1.4 Remuneration Adjustments
13.1.4 The
Remuneration
Adjustments
annual remuneration
amount (fixed and variable) is reviewed by the Board Nomination and Remuneration
The
annualand
remuneration
amount
(fixed
variable)
is Board
reviewed
by the Board Nomination and Remuneration
Committee
is then subject
to review
andand
approval
by the
of Directors’.
Committee and is then subject to review and approval by the Board of Directors’.
The Group remuneration deferment policy ensures an appropriate portion of the variable remuneration of senior
The
Group(including
remuneration
appropriate
portion
ofofthe
remuneration
of senior
employees
thosedeferment
deemed topolicy
have a ensures
materialan
impact
on the risk
profile
thevariable
organisation)
is deferred.
employees (including those deemed to have a material impact on the risk profile of the organisation) is deferred.
The deferment of variable remuneration applies to the equity shares as per the ESOP terms. This deferred variable
The
defermentisofsubject
variable
to the
sharesfraud,
as permisleading
the ESOP information
terms. This or
deferred
variable
remuneration
to remuneration
Clawback in applies
the event
of equity
established
exceeding
the
remuneration
is subject to Clawback in the event of established fraud, misleading information or exceeding the
approved risk limits.
approved risk limits.
13.1.5 Types of Remuneration Components
13.1.5 The
Types
of Remuneration
Componentscomponents (fixed and variable). The variable component is mainly linked with
Bank
has two main remuneration
The
Bank
has
two
main
remuneration
components
(fixed
and variable).
The variable component is mainly linked with
performance and is subject to the deferment
approach
as mentioned
above.
performance and is subject to the deferment approach as mentioned above.
The fixed component (salaries, benefits) is on cash basis, while the variable component is on cash or equity basis
The fixed component (salaries, benefits) is on cash basis, while the variable component is on cash or equity basis
(ESOP).
(ESOP).
The percentage between fixed and variable (cash and equity) is reviewed and approved by the Board on an annual
The percentage between fixed and variable (cash and equity) is reviewed and approved by the Board on an annual
basis.
basis.
In case weak performance and business recessions, the Group would try to minimise the percentage of variable
In
case weak especially
performance
andSenior
business
recessions,and
theMaterial
Group Risk-Takers.
would try to minimise the percentage of variable
remuneration,
for the
Management
remuneration, especially for the Senior Management and Material Risk-Takers.
The Risk Management, Compliance and internal audit functions are independent functions. The risk management and
compliance functions are reporting to and assessed by the Board Risk Committee. The internal audit function is
reporting to and assessed by the Board Audit Committee. The total remuneration for these positions are determined
and approved by the Board Risk Committee and Board Audit committee as a fully independent parties.
24
25
25
The overall variable remuneration pool is determined by taking into account of relevant risk metrics. The metrics used
to determine the pool are linked with key risk indicators and they are in line with the Group’s overall risk strategy.
The Group applied the key risk indicators (KRIs) this year without significant change from last year’s KRIs.
59
58
Boubyan Bank considers its Group risk profile when determining its annual remuneration pool; the risk profile
includes the key risks to which the Group is exposed such as strategic, credit, market, liquidity, and operational.
BOUBYAN BANK K.S.C.P.
BOUBYAN
AND SUBSIDIARIES
BANK K.S.C.P. AND SUBSIDIARIES
BOUBYAN
BANK K.S.C.P. AND SUBSIDIARIES
AND SUBSIDIARIES
RISK MANAGEMENT RISK MANAGEMENT
RISK MANAGEMENT
RISK MANAGEMENT
For the year ended 31 December
For 2015
the year ended 31 December 2015
13.
REMUNERATION DISCLOSURE (CONTINUED)
13.2 Quantitative Information (continued)
During the year, the Board Nomination and Remuneration Committee met 5 times, (31 December 2014: 4 times).
The total remuneration paid to the Committee members was Nil, (31 December 2014: Nil).
The quantitative disclosures detailed below cover only senior management and other material risk takers.
The number of employees having received a variable remuneration award during 2015 was 42 employees and they
represent 6.3% of the total number of employees received a variable remuneration, (31 December 2014: 42 employees
and they represent 6.8%).
The number of employees who received sign-on awards or guaranteed bonuses during 2015 was Nil, (31 December
2014: Nil).
The total amount of end-of-service benefit paid during 2015 was KD 159 thousand; this is related to 7 employees
(31 December 2014: KD 8 thousand related to 1 employee).
The total amount of outstanding deferred remuneration as at 31 December 2015 was KD 1,588, (31 December 2014:
KD 1,250).
Total amount of deferred remuneration paid during 2015 was KD 235 thousands, (31 December 2014: KD 445
thousands).
Total salaries & remuneration granted during reported period
Senior Management
Table 22
Fixed remuneration:
- Cash
- Others (Note 1)
Variable remuneration:
- Cash
- ESOP
2015
Unrestricted
KD’000
Deferred
KD’000
Unrestricted
KD’000
2014
Deferred
KD’000
3,049
-
581
3,097
-
361
729
-
730
684
-
673
Material Risk Taker*
Table 23
Fixed remuneration:
- Cash
- ESOP
Variable remuneration:
- Cash
- ESOP
Unrestricted
KD’000
2015
Deferred
KD’000
Unrestricted
KD’000
2014
Deferred
KD’000
1,959
-
337
2,008
-
208
508
-
505
496
-
486
Note 1: This consists of deferred end-of-service benefits in line with Boubyan Bank policy
Employees Category
60
Table 24
Senior Management
Material Risk Takers*
Financial and Risk Control
Number of
employees
33
23
13
2015
Remuneration
Fixed and
Variable
KD’000
5,089
3,309
1,062
* Material Risk Takers are identify as Senior Management
26
2014
Number of
employees
34
23
12
Remuneration
Fixed and
Variable
KD’000
4,815
3,193
880
Senior Management
Senior Management
Senior Management
Senior Management
Row
Table 25
Number
2014
2015
2015
2014
2015
2014 Deferred
2015
KD 000s
Unrestricted
Deferred
Unrestri
Unrestricted
DeferredUnrestricted
Table
22
Unrestricted
Unrestricted
Deferred
Unrestricted
Deferred
Unrestricted
Deferred
KD’000
KD’000
KD’0
AND
SUBSIDIARIES
KD’000
KD’000
KD’000
KD’000
instruments and reserves
Table 22
Table 22Equity Tier 1 Capital:
RISK MANAGEMENT Common
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Fixed
remuneration:
Fixed
remuneration:
1
Directly
issued
qualifying
common
share
capital
plus
related
stock
surplus
259,395
279,538
Fixed remuneration:
Fixed remuneration:
RISK
For
theMANAGEMENT
3,097
- 3,09
- Cash
- Cash
3,049
3,049
2 endedRetained
earnings
- Cash
-5,978
3,0973,049 (Note 1)- 3,049581 13,320
For the year
31 December
2015- Cash - Others (Note 1)
- Others
581 -3,097 361
- Others
(Note
1) remuneration:
361
Others
(Note 1)
581
3
Accumulated othercomprehensive
income (and
other
reserves)
21,592
15,635 - 581
14. OTHER
DISCLOSURES
Variable
remuneration:
Variable
Variable
Variable
remuneration:
Common share capital
issued
bysubsidiaries
and held remuneration:
by third -parties
interest)
684 68
4
Cash
Cash (minority729
729
14.
OTHER
DISCLOSURES
14.1 Regulatory Capital Composition:
Disclosure
Template- ESOP
- Cash
- 684
- CashCommon
729
- 729730
- ESOP
730 - 684 673
5
Common Equity Tier
1 capital
before regulatory adjustments
308,493 - 286,965
- ESOP
- 730
673
- ESOP
730
Common Disclosure
Template
Table 22
6
Row 7
Number
Row
Number
8
1
21
32 9
43 10
54
5 11
6
76 12
7
8 13
8
14
9
9
10
10 15
11
11 16
12 17
12
13 18
13
14 19
14 20
21
22
15
15
16 23
16 24
17
17 25
18
18 26
19
27
19
20
28
20
21
21
22
22
Common Equity Tier
1 Capital
: regulatory Material
adjustments
Material
Risk Taker*
Risk Taker*
Material
Goodwill (net of
relatedRisk
tax Taker*
liability) Material Risk Taker*
(27,968)
(27,410)
2014
2015
2015
Investments
in own shares (if not already netted off paid-in capital
on
reported
2014
2015
2014 Deferred
2015
Table
25
Unrestricted
Deferred
Unrestr
Unrestricted
Deferred
Unrestricted
KD
000s
Table
23
Unrestricted
balance
(763) KD’000
Unrestricted
Deferred
(568)
Deferred
Unrestricted
Table
25 sheet) Table 23 Table 23
KD’000
KD’000
KD’0
KD’000 Deferred
KD’000Unrestricted
KD’000
Table 23
000s KD’000
KD’000
KD’000 KDKD’000
Investments
in the Equity
capitalFixed
of
banking,
financial
and Fixed
insurance
entities that are
KD’000
KD’000
KD’000
Common
Tier
1 Capital:
instruments
and
reserves
remuneration:
remuneration:
Fixed
remuneration:
Fixed
remuneration:
outside
the
scope
of
regulatory
consolidation,
net of
eligible
short
positions
2,008
- 2,00
- Cash
-and
Cash
1,959
1,959259,395
Common
Equity
Tier
1share
Capital:
instruments
reserves
Directly
issued
qualifying
common
capital
plus
related
stock
surplus
279,538
- Cash
- 2,008- (29,184)
Cash - ESOP
1,959
- 1,959337(21,151)
(amount
above
10%- threshold)
208
- stock
ESOPsurplus 337 2,008
Directly
issued
qualifying
common
share
capital
plus
related
259,395
Retained
earnings
5,978
279,538
13,320
- Equity
ESOP Variable
- (49,129) - (57,915)
337
208
- ESOP
337
Variabletoremuneration:
Totalearnings
regulatory
adjustments
Common
Tier 1 remuneration:
Retained
5,978
13,320
Accumulated
otherVariable
comprehensive
income
(and other
reserves)
21,592
15,635
Variable
remuneration:
remuneration:
496
- 49
Cash
Cash
508
508
Common
Tier
1by
Capital
(CET1)
229,050
259,364
Common
shareEquity
capitalcomprehensive
issued
subsidiaries
and(and
held
by
third
parties (minority
interest)
- other
Cash
-- Accumulated
other
income
reserves)
15,635
- Cash
508
- 508505
- 496- 21,592
- ESOP
- ESOP
505 - 496 486
- by
ESOP
505 -286,965
486
Common
capital
issued
by subsidiaries
and
held
third
parties (minority
interest)
-1 capital
ESOP
505
Commonshare
Equity
Tier
beforeTier
regulatory
adjustments
Additional
1 Capital
: instruments
308,493
Common
Equity
Tier
1
capital
before
regulatory
adjustments
286,965
308,493
Additional
Tier
1
instruments
(and
CET1
instruments
not
included
in
row
4)
Common EquityNote
Tier1:1This
Capital
: regulatory
adjustments
consists
of deferred
Note
end-of-service
1: This consists
benefits
of deferred
in lineend-of-service
with Boubyanbenefits
Bank policy
in line with Boubyan Bank policy
1:end-of-service
This consists
of deferred
end-of-service
benefits
line with
Boubyan Bank
policy
issued
byNote
subsidiaries
and Capital
held
byNote
third
parties
(amount
allowed
in with
group
AT1)
1: ThisTier
consists
of deferred
benefits
in line
Boubyan
Bankin
policy
230
Common
Equity
regulatory
adjustments
Goodwill
(net of
related tax 1Employees
liability) :Category
(27,968)731
(27,410)
Employees Category
731
Additional
Tier
1
Capital
before
regulatory
adjustments
230
Employees
Category
Employees
Category
Goodwill (netinof
related
tax(ifliability)
(27,968)
Investments
own
shares
not already netted off paid-in capital on reported
(27,410)
balance sheet)
(763)
(568)
Investments
in ownAdditional
shares (if not
already
netted: regulatory
off paid-in capital
on reported 2015
Tier
1 Capital
adjustments
2014
2015
Investments
in
the
capital
of
banking,
financial
and
insurance
entities
that
are
balance
sheet)
(568)
2014
2015
2014
2015
Additional Tier 1 capital (AT1)
- (763)
Remuneration
Remuneration
Remuneration
outside
the scope
regulatory
consolidation,
ofinsurance
eligible short
positions
Investments
in theofcapital
of banking,
financialnet
and
entities
that Remuneration
are
Remuneration
Remuneration
Number
of
Fixed
and
Numb
Number
of
Fixed
and
Number
of
Fixed
and
229,781
Tier 1 Capital (T1 = CET1 + AT1)
259,594
(amount
above
10%
threshold)
(29,184)
Number
of emplo
(21,151)
of employees
Fixed
and Variable
Number
ofemployees
Fixed
and Variable
Number
and Variable
outside the
scope
of regulatory
consolidation,
net of eligible
short
Table
24
Table
24 ofpositions
employeesFixedNumber
employees
Table
24 Tier
employees
Variable
Variable
Table
24 2 Capital
Variable
(57,915)
(amount
above 10%
threshold)
(29,184) KD’000
Tier
: instruments
andemployees
provisions
Total regulatory
adjustments
to Common
Equity
1
(49,129)
(21,151)
KD’000
KD’000 employees
KD’000
KD’000
Senior
Senior
4,815
(57,915)
33
5,089
Total regulatory
adjustments
to Management
Common Equity Tier
1 Management
(49,129)
Common
Equity Tier
1 Capital
(CET1)
229,050 34 5,089
259,36433 KD’000
Senior Management
Senior Management
345,089 23 3,3094,815 34 3,193
33 Risk Takers*
5,089 33 3,309
Material
Risk
Takers*
Material
23
23
Common
Equity
Tier
1
Capital
(CET1)
229,050
259,364
Tier 2 instruments
(andRisk
CET1
and AT1
instruments
included
in rows 5 or
34) 23
Additional
Tier
1 Capital
: instruments
Material
Risk not
Takers*
Material
Takers*
233,309
3,193 23
23
3,309
Financial and Risk Control
Financial and Risk
13 Control
1,062
12 1,062
13
Financial
and
Controlininrow
issued by
subsidiaries
and
held
by
third
parties: instruments
(amount
allowed
group
2) 13
Financial
and(and
Risk
Control
44 121,062 146
13
1,062
Additional
Tier
1 Capital
Additional
Tier
1 instruments
CET1
instruments
notRisk
included
4) Tier
General
Provisions
included
in third
Tier
2parties
Capital
15,002
18,288
issued
by subsidiaries
held(and
by
(amount
in in
group
*and
Material
Risk
Takers
are identify
* Material
asallowed
Senior
Risk Management
Takers
are AT1)
identify
as Senior Management
Additional
Tier
1 instruments
CET1
instruments
not
included
row
4)
731
230
Material
Takers
are identify as Senior Management
* Material Riskregulatory
Takers are *identify
as Risk
Senior
Management
15,148
Tier
capital
adjustments
18,332
issued
by2subsidiaries
and held
by third
parties
(amount
allowed in group AT1)
731
Additional
Tier 1 before
Capital
before
regulatory
adjustments
230
Additional TierAdditional
1 Capital
before
regulatory
adjustments
Tier
2 Capital:
regulatory
adjustments
Tier
1 Capital
: regulatory
adjustments
Additional
Tier adjustments
1 Capital : regulatory adjustments 26
Additional
1 capital
(AT1)
NationalTier
specific
regulatory
26
Additional
Tier (T1
1 capital
(AT1)
regulatory
to Tier 2 Capital
TierTotal
1 Capital
=adjustments
CET1
+ AT1)
TierTier
1 Capital
(T1(T2)
= CET1 + AT1)
2 Capital
Tier 2 Capital : instruments and provisions
Total Capital (TC
+ T2) : instruments and provisions
Tier=2T1
Capital
Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34)
Capital
ratios (amount
and buffers
issued
by subsidiaries
heldand
by
third
allowed in
2)
Tier 2 instruments
(andand
CET1
AT1 parties
instruments
not included
ingroup
rows 5Tier
or 34)
General
in percentage
Tier
2 Capital
issued
byProvisions
subsidiaries
and1held
by third
parties
(amount allowed
in group Tier 2)
Common
Equityincluded
Tier
(as
of risk-weighted
assets)
General
included
in Tier
2 Capital
Tier
2 capital
before
regulatory
adjustments
Tier
1Provisions
(as percentage
of risk-weighted
assets)
TierTotal
2 capital
before
regulatoryofadjustments
capital
(as percentage
risk-weighted
Tier 2 Capital: regulatoryassets)
adjustments
minima
Tier 2 adjustments
Capital:National
regulatory
adjustments
National specific regulatory
Common
Equity
Tier
1
minimum
ratio
including
Capital Conservation Buffer
National
specificadjustments
regulatory adjustments
Total
regulatory
to Tier 2 Capital
Tier
1 minimum
ratio
Total
regulatory
adjustments
to
Tier
2
Capital
Tier 2 Capital (T2)
Total
capital
minimum ratio excluding CCY and D-SIB buffers
Tier
Capital
(T2)
Total2 Capital
(TC = T1 + T2)
Total
Capital (TC =assets
T1 + T2)
Total risk-weighted
Capital ratios and buffers
230
26--
880 12
731
26
-229,781-259,594-15,148
18,332 229,781
259,594
244,929
277,926
1,631,425 1,356,592
146
44
15,002
18,288
146
44
16.94%
15.91%
15,002
18,288
16.88%
18,332
15.90% 15,148
18,332
18.05%
17.04% 15,148
- 8.50%
- 9.00%
10.50% 15,148
-10.00%
18,332
12.00%
12.50% 15,148
18,332
244,929
277,926
244,929
277,926 1,356,592
1,631,425
1,631,425 1,356,592
RISK MANAGEMENT
61
For the2015
13. REMUNERATION DISCLOSURE
13. REMUNERATION
(CONTINUED)
DISCLOSURE (CONTINUED)
REMUNERATION
DISCLOSURE (CONTINUED)
13. REMUNERATION13.
DISCLOSURE
(CONTINUED)
13.2 Quantitative Information
13.2 (continued)
Quantitative Information (continued)
Information
(continued)
13.2 Quantitative
Information
(continued)
During
the13.2
year, Quantitative
the
Board Nomination
During
theand
year,
Remuneration
the Board Nomination
Committeeand
metRemuneration
5 times, (31 December
Committee2014:
met 54 times,
times).(31 De
the year,
Board Nomination
and met
Remuneration
Committee
5 times,
(31 December 2014:
During the year, the Board During
Nomination
and the
Remuneration
Committee
5 times, (31
Decembermet
2014:
4 times).
The total remuneration paid toThe
the total
Committee
remuneration
members
paidwas
to the
Nil,Committee
(31 December
members
2014: was
Nil).Nil, (31 December 2014: Nil).
total
remuneration
paid towas
theNil,
Committee
members
wasNil).
Nil, (31 December 2014: Nil).
The total remuneration paidThe
to the
Committee
members
(31 December
2014:
The quantitative disclosures detailed
The quantitative
below cover
disclosures
only senior
detailed
management
below cover
and other
only senior
material
management
risk takers.and other mater
quantitative
detailed
below coverand
only
senior
management
and other material risk takers
The quantitative disclosuresThe
detailed
below disclosures
cover only senior
management
other
material
risk takers.
The number of employees having
The number
received
of aemployees
variable remuneration
having received
award
a variable
during 2015
remuneration
was 42 employees
award during
and2015
they
The
of employees
received
a variable
remuneration
duringremuneration,
2015they
42(31
emp
The number
of employees
having
received
a of
variable
remuneration
2015 received
was (31
42award
employees
and
represent
6.3% of
thenumber
total
number
represent
employees
6.3%having
of thereceived
total number
aaward
variable
ofduring
employees
remuneration,
December
a variable
2014:
42was
employees
D
6.3%
the represent
total
number
of employees
received(31
a variable
remuneration,
(31 December 2014
represent 6.3%
of the
totalrepresent
number
employees
received
a variable
remuneration,
December
2014: 42 employees
and they
represent
6.8%). of
andofthey
6.8%).
and
they
represent
6.8%).
and they represent 6.8%).
The number of employees who
Thereceived
number sign-on
of employees
awardswho
or guaranteed
received sign-on
bonuses
awards
duringor2015
guaranteed
was Nil,
bonuses
(31 December
during 2
The
of sign-on
employees
whoorreceived
sign-on
awards
or guaranteed
2015 was Nil
The number
of employees
whonumber
received
guaranteed
bonuses
during
2015 was bonuses
Nil, (31 during
December
2014:
Nil).
2014:
Nil).awards
2014: Nil).
2014:AND
Nil). SUBSIDIARIES
The total amount of end-of-service
The total
benefit
amount
paidofduring
end-of-service
2015 wasbenefit
KD 159
paidthousand;
during 2015
this was
is related
KD 159
to 7thousand;
employees
th
The KD
total8benefit
amount
ofrelated
end-of-service
benefit
during
2015
wasisKD
159 to
thousand;
this is related
The total amount
of end-of-service
paid
during
was
KDpaid
159 related
thousand;
this
related
7 employees
(31 December
2014:
thousand
(31 December
to
2014:
12015
employee).
KD
8 thousand
to
1 employee).
RISK MANAGEMENT (31 December 2014: KD 8 (31
December
2014:
8 thousand related to 1 employee).
thousand
related
to 1KD
employee).
The total amount of outstanding
The deferred
total amount
remuneration
of outstanding
as at 31
deferred
December
remuneration
2015 wasasKD
at 31
1,588,
December
(31 December
2015 was
2014:
KD
The total
amount
of outstanding
remuneration
as atKD
31 1,588,
December
2015 was KD
The2015
total amount
of outstanding
deferred
as atdeferred
31 December
2015 was
(31 December
2014:1,588, (31 D
KD 1,250).
KDremuneration
1,250).
KD 1,250).
KD 1,250).
Total amount of deferred remuneration
Total amount
paid
of during
deferred2015
remuneration
was KD 235
paid thousands,
during 2015(31was
December
KD 2352014:
thousands,
KD 445
(3
14. OTHER DISCLOSURES
amountthousands).
of
deferred
2015 was
235 thousands,
Total amount
of deferred Total
remuneration
paid
during remuneration
2015 was KDpaid
235during
thousands,
(31 KD
December
2014: KD (31
445 December
thousands).
thousands). Template
thousands). Common Disclosure
Total salaries & remuneration
Total
granted
salaries
during
& reported
remuneration
periodgranted during reported period
Total
salaries
& remuneration
granted during reported period
Total salaries & remuneration
granted
during
reported period
880
RISK MANAGEMENT
14.
OTHER DISCLOSURES (CONTINUED)
14.2 Leverage Ratio: Common Disclosure Template
Table 26
Item
1
2
3
On-balance sheet items (excluding Sharia compliant hedging contracts, but including
collaterals)
(Asset amounts deducted in determining Basel III Tier 1 Capital)
Total on-balance sheet exposures (excluding Sharia compliant hedging contracts)
(sum of lines 1 and 2)
2015
KD 000's
2014
KD 000's
3,132,885
(48,559)
2,647,930
(57,144)
3,084,326
2,590,786
Exposures to Sharia compliant hedging contracts
4
Replacement cost associated with all Sharia compliant hedging contracts (i.e. net of
eligible cash variation margin)
-
-
5
Add-on amounts for potential future exposures ” PFE” associated with all Sharia
compliant hedging contracts
-
-
6
Gross-up for the collateral of Sharia compliant hedging contracts provided where
deducted from the balance sheet assets pursuant to the Bank’s accounting policy.
-
-
7
(Deductions of receivables assets for cash variation margin provided in with all Sharia
compliant hedging contracts )
-
(Bank’s exposures to exempted Central counter parties “CCP” )
-
-
9
Total exposures of Sharia compliant hedging contracts (sum of lines 4 to 8)
-
-
10
11
Other off-balance sheet exposures
Off-balance sheet exposure (before any adjustment for credit conversion factors)
(Adjustments for conversion to credit equivalent amounts)
1,200,570
(998,249)
1,085,500
(902,305)
259,594
3,286,647
229,050
2,773,981
7.90%
8.26%
8
12
Off-balance sheet items (sum of lines 10 and 11)
Capital and total exposures
13
Tier 1 Capital
15
Leverage ratio
Leverage ratio (Tier 1 Capital (13)/total exposures (14))
63
Report of Fatwa & Shari’a
Supervisory Board
Total exposures (sum of lines 3, 9,12)
183,195
62
14
202,321
-
Report of Fatwa & Shari’a Supervisory Board
Date: 23 Rabi’ Al-Awwal 1437 A.H.
Corresponding to: 04 January 2016
In the Name of Allah, the Most Gracious, the Most
Merciful
Report of the Fatwa and Shari’a Supervisory Board
From 01.01.2015 to 31.12.2015
To the Shareholders of Boubyan Bank
Praise be to Allah, the Almighty, and Peace and
Blessings be upon our Prophet Muhammad, his Folk, and
Companions All.
By virtue of the resolution of the General Assembly
to appoint the Fatwa and Shari’a Supervisory Board of
Boubyan Bank (the “Board”), and assigning us with these
duties, we hereby provide you with the following report:
We, at the Fatwa and Shari’a Supervisory Board of
Boubyan Bank, have reviewed the principles adopted
and the contracts pertinent to the transactions of the
Bank for the period from 1/1/2015 to 31/12/2015. We
have observed the due review and revision necessary
to express our opinion on the Bank’s compliance with
the rulings and principles of the Noble Islamic Shari’a
as well as its compliance with the Fatwa, resolutions,
principles and guidelines previously issued or set by the
Board. The management of the Bank is entrusted with
implementation of such rulings, principles and Fatwa
while the Board’s responsibility is limited to expressing
an independent opinion in light of the transactions
submitted and presented to it.
We have exercised proper observation and review that
covered review of contracts and procedures followed
in the Bank by testing each type of transactions, and
we have obtained all the information and explanations
necessary to express an opinion on the extent to which
the Bank’s activities are in compliance with the rulings
of the Noble Islamic Shari’a. In our opinion, Boubyan
Bank’s contracts, documents and operations during the
period from
1-1-2015 to 31-12-2015, presented
to us, have all been concluded as per the rulings and
principles of the Noble Islamic Shari’a.
5
We invoke the Almighty Allah to rightly guide the
Bank’s management to better serve our noble religion,
our dear country and to put everyone on the right path.
Verily, Allah is the Arbiter of All Success.
Peace be with you.
Peace and blessings be upon our Prophet, Muhammad,
his Folk and Companions All.
Independent Auditors’ Report
Sheikh Dr. Abdul Aziz K. Al-Qassar
68
Consolidated Statement of Other Comprehensive Income
69
Consolidated Statement of Financial Position
70
Consolidated Statement of Changes in Equity
71
Consolidated Statement of Cash Flows
72
73 - 102
65
Notes to the Consolidated Financial Statements
Sheikh Dr. Mohammed O. Al-Fazie
Consolidated Statement of Profit or Loss
64
Sheikh Dr. Ibrahim A. Al-Rashed
Sheikh Dr. Essam K. Al-Enezi
66 - 67
66
67
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Net the
profit
the 31
year
For
yearfor
ended
December 2015
Other comprehensive income
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Income
Murabaha and other Islamic financing income
Distribution to depositors and Murabaha costs
Net financing income
Net investment income
Net fees and commission income
Share of results of associates
Net foreign exchange gain
Other income
Notes
5
6
7
16
Operating income
Staff costs
General and administrative expenses
Depreciation
Operating expenses
Operating profit before provision for impairment
Provision for impairment
Operating profit before deductions
Contribution to Kuwait Foundation for the Advancement of Sciences (“KFAS”)
National Labour Support Tax (“NLST”)
Zakat
Board of directors’ remuneration
8
Net profit for the year
Attributable to:
Equity holders of the Bank
68
Basic and diluted earnings per share attributable to the equity holders of
the Bank (fils)
9
2015
KD’000
2014
KD’000
101,462
(22,120)
79,342
2,200
7,839
313
1,652
7
91,353
83,692
(17,484)
66,208
4,986
5,935
(247)
1,352
171
78,405
(22,933)
(13,624)
(2,636)
(39,193)
(20,833)
(12,411)
(2,178)
(35,422)
52,160
(15,058)
37,102
(327)
(926)
(354)
(310)
35,185
42,983
(12,952)
30,031
(261)
(736)
(289)
(240)
28,505
35,235
(50)
35,185
28,239
266
28,505
17.09
13.70
The notes from 1 to 32 form an integral part of these consolidated financial statements.
Other comprehensive income to be reclassified to consolidated
statement of profit or loss in subsequent periods:
Change in fair value of available for sale investments
Net gains on available for sale investments transferred to
consolidated statement of profit and loss
Other comprehensive income
Impairment losses on available for sale investments transferred to
Other
comprehensive
(loss)/income
be loss
reclassified to consolidated
consolidated
statement
of profittoand
statement of profit or loss in subsequent periods:
Foreign currency translation adjustments
Change in fair value of available for sale investments
Other comprehensive income/(loss) for the year
Net gains on available for sale investments transferred to
Total
comprehensive
for
theloss
year
consolidated
statementincome
of profit
and
Impairment losses on available for sale investments transferred to
Attributable
consolidated to:
statement of profit and loss
Foreign
currency
Equity holders oftranslation
the Bank adjustments
Other
comprehensive
(loss)/income for the year
Non-controlling
interests
Total comprehensive
comprehensiveincome
incomefor
forthe
theyear
year
Attributable to:
Equity holders of the Bank
Total comprehensive income for the year
2014
KD’000
2013
KD’000
28,505
12,720
2015
KD’000 947
2014
KD’000
(2,230)
35,185
(86)
28,505
(449)
1,364
1,278
(2,973)
3,503
32,008
(198)
2,115
(2,873)
947
(3,437)
9,283
(86)
2,248
(2,794)
31,742
(3,717)266
31,468
32,008
1,364
1,278
9,971
3,503(688)
32,008
9,283
31,518
(50)
31,468
31,742
266
32,008
The notes from 1 to 32 form an integral part of these
consolidated financial statements.
4
69
9,815
-
31,518
-
296,027
(50)
-
5,075
KD’000
-
(9,815)
-
31,468
-
301,102
KD’000
-
-
(10,307)
(10,316)
145
10,307
-
-
-
-
-
-
2,977
-
2,848
-
-
-
-
2,225
-
-
1,278
-
(5,825)
28,239
-
-
-
-
31,742
-
-
266
-
-
32,008
71
(9,815)
452
-
-
-
70
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
5,978
-
Total
equity
35,235
(7,270)
(9,815)
-
-
KD’000
(6,468)
-
Equity
attributable to
Nonequity holders controlling
of the Bank
interests
(2,794)
-
KD’000
5,082
-
Proposed
cash
dividends
(923)
-
KD’000
864
-
Retained
earnings
-
KD’000
6,015
-
Foreign
currency
translation
reserve
KD’000
3,555
-
KD’000
6,283
-
Fair
value
reserve
KD’000
3,715
-
KD’000
KD’000
(763)
-
Share based
payment
reserve
KD’000
Share
premium
-
KD’000
Share
capital
9,825
-
Voluntary
reserve
KD’000
62,896
-
Proposed
Treasury Statutory
bonus
shares
shares
reserve
196,500
-
(9,825)
-
-
452
-
(2,458)
-
-
(2,458)
307
-
-
-
-
-
-
-
-
269,487
320,799
-
-
5,543
2,567
-
-
-
-
-
263,944
318,232
-
-
10,307
(12,855)
-
-
3,204
13,320
50
9,825
Balance at 1 January 2015
Total comprehensive (loss) income
for the year
Transfer to reserves
Issue of bonus shares
Cash dividend paid
Capital redemption of noncontrolling interests
Share based payment (note 26)
-
(7,746)
(9,262)
50
-
2,857
4,159
-
860
1,171
(145)
-
10,316
3,167
9,570
-
-
3,306
9,998
-
(568)
-
-
(1,100)
-
195
12,855
10,316
-
-
Proposed bonus shares (note 22)
62,896
62,896
-
Proposed cash dividends (note 22)
183,645
206,325
-
Balance at 31 December 2015
Sales of treasury shares
-
Total comprehensive income for the
year
261
(734)
-
-
(734)
-
12,855
261
Issue of bonus shares
Transfer to reserves
-
-
-
-
257
-
-
-
-
301,102
4
-
-
5,075
-
-
-
296,027
-
9,815
-
(9,825)
9,815
5,978
(9,815)
-
-
-
-
(6,468)
-
-
-
-
Capital redemption of noncontrolling interests
Share based payment (note 26)
5,082
80
-
-
864
80
-
-
6,015
(257)
-
-
6,283
-
-
-
9,825
(763)
-
-
-
9,825
337
-
-
62,896
-
-
-
Proposed bonus shares (note 22)
196,500
Sales of treasury shares
Proposed cash dividends (note 22)
6
CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CASH FLOWS
2014
KD’000
Notes
8
35,185
2015
KD’000
15,058
28,505
2014
KD’000
12,952
8
2,636
35,185
(2,791)
(198)
15,058
630
2,636
(313)
(2,791)
(1,824)
(198)
998
630
180
(313)
452
(1,824)
50,013
998
180
45,517
452
(377,879)
50,013
(3,649)
156,010
45,517
306,907
(377,879)
2,257
(3,649)
1,824
156,010
181,000
306,907
2,257
(3,690)
1,824
544
181,000
(170,963)
158,991
(3,690)
559
544
(58)
(170,963)
2,194
158,991
(5,916)
559
(18,339)
(58)
2,194
(2,458)
(5,916)
50
(18,339)
(9,815)
10
10
(12,223)
(2,458)
150,438
50
314,821
(9,815)
465,259
(12,223)
150,438
314,821
465,259
2,178
28,505
(1,487)
10
12,952
547
2,178
247
(1,487)
(1,112)
10
(2,441)
547
(270)
247
261
(1,112)
39,390
(2,441)
(270)
35,278
261
(338,678)
39,390
572
(9,279)
35,278
425,456
(338,678)
8,001
572
1,112
(9,279)
161,852
425,456
8,001
(8,765)
1,112
1,451
161,852
(95,211)
48,488
(8,765)
359
1,451
(6,916)
(95,211)
13,845
48,488
(5,250)
359
(51,999)
(6,916)
13,845
(734)
(5,250)
80
(51,999)(654)
(734)
109,199
80
205,622
314,821(654)
109,199
205,622
314,821
BOUBYAN BANK K.S.C.P AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
INCORPORATION AND ACTIVITIES
Boubyan Bank K.S.C.P (“the Bank”) is a Kuwaiti public shareholding company incorporated on 21 September
2004, in accordance with the Commercial Companies Law in the State of Kuwait, by Amiri Decree No. 88 and in
accordance with the rules and regulations of the Central Bank of Kuwait (“CBK”) (Law No. 30 of 2003).
The Bank’s shares were listed on the Kuwait Stock Exchange on 15 May 2006.
The Bank was licensed by the CBK on 28 November 2004. The Bank is principally engaged in providing banking
services, in accordance with Codes of the Islamic Sharia’a, as approved by the Bank’s Sharia’a Supervisory
Board.
The Bank is a subsidiary of National Bank of Kuwait S.A.K.P (“the Parent Company”).
The total number of employees in the Group was 1201 employees as at 31 December 2015 (1081 employees as at
31 December 2014).
The address of the Bank’s registered office is P.O. Box 25507, Safat 13116, State of Kuwait.
The consolidated financial statements were authorised for issue by the Board of Directors on 5 January 2016 and
the shareholders have the power to amend these consolidated financial statement at the annual assembly meeting.
2.
BASIS OF PREPARATION
2.1
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRSs”) promulgated by the International Accounting Standards Board (“IASB”) and interpretations
issued by the International Financial Reporting Interpretations Committee of the IASB, as adopted for use by the
State of Kuwait for financial services institutions regulated by the Central Bank of Kuwait. These regulations
require adoption of all IFRSs except for the IAS 39 requirements for collective impairment provision, which has
been replaced by the Central Bank of Kuwait requirements for a minimum general provision as described in
accounting policy 3.9.
2.2
Basis of measurement
The consolidated financial statements have been prepared under the historical cost basis except for the
measurement at fair value of investment securities, available for sale investments, financial asset at fair value
through profit or loss, investment properties and derivatives.
2.3
Functional and presentation currency
These consolidated financial statements are presented in Kuwaiti Dinars, which is the Bank’s functional currency.
All financial information presented in Kuwaiti Dinars (“KD”) has been rounded to the nearest thousands, except
when otherwise indicated.
2.4
Changes in accounting policies and disclosures
The accounting policies used in the preparation of these consolidated financial statements are consistent with
those used in the previous year, except for the adoption of the following new or amended IFRS applicable to the
Group.
IFRS 3 Business Combinations (Effective for annual periods beginning on or after 1 July 2014)
The amendment is applied prospectively and clarifies that all contingent consideration arrangements classified as
liabilities (or assets) arising from a business combination should be subsequently measured at fair value at each
reporting date whether or not they fall within the scope of IAS 39.
IAS 24 Related Party Disclosures (Effective for annual periods beginning on or after 1 July 2014)
The amendment is applied retrospectively and clarifies that a management entity (an entity that provides key
management personnel services) is a related party subject to the related party disclosures. In addition, an entity
that uses a management entity is required to disclose the expenses incurred for management services.
IAS 40 Investment Property (Effective for annual periods beginning on or after 1 July 2014)
The description of ancillary services in IAS 40 differentiates between investment property and owner-occupied
property (i.e., property and equipment). The amendment is applied prospectively and clarifies that IFRS 3, and not
the description of ancillary services in IAS 40, is used to determine if the transaction is the purchase of an asset or
a business combination.
These amendments did not have any material impact on the accounting policies, financial position or performance
of the Group.
The notes from 1 to 32 form an integral part7 of these consolidated financial statements.
73
72
For
the year ended
31 December 2015
OPERATING
ACTIVITIES
Adjustments for:
Provision for impairment
OPERATING
Depreciation ACTIVITIES
Net
profit
for the year
Foreign
currency
translation adjustments
Adjustments
Net
(gain)/lossfor:
from available for sale investments
Provision
impairment
Net
lossesfor
from
financial assets at fair value through profit or loss
Depreciation
Foreign
Dividendcurrency
income translation adjustments
Net
(gain)/loss
from available
sale investments
Net unrealized loss/(gain)
fromfor
change
in fair value of investment properties
Net
losses
from
financial
assets
at
fairproperties
value through profit or loss
Net loss/(gain) on sale of investment
Share
results
of associates
Share of
based
payment
reserve
Dividend
income
Operating profit before changes in operating assets and liabilities
Net unrealized
loss/(gain)
fromand
change
in fair value of investment properties
Changes
in operating
assets
liabilities:
Net
Due loss/(gain)
from bankson sale of investment properties
Share
payment
reserve
Islamicbased
financing
to customers
Operating
profit
before
changes in operating assets and liabilities
Other assets
Changes
in
operating
assets
and liabilities:
Due to banks
Due
from
banks
Islamic
Other liabilities
Other
assets
Dividend income received
Due
to banks
Net cash
generated from operating activities
Depositors’
accounts
INVESTING
ACTIVITIES
Other
liabilities
Purchase of financial assets at fair value through profit or loss
Dividend
income
Proceeds from
salereceived
of financial assets at fair value through profit or loss
Net
cash
generated
operating
activities
Purchase of availablefrom
for sale
investments
INVESTING
ACTIVITIES
Proceeds from sale of available for sale investments
Purchase
financialfrom
assets
at fair value through profit or loss
Dividendsofreceived
associates
Proceeds
from
sale
of
financial
assets at fair value through profit or loss
Purchase of investment properties
Purchase of
available
sale investments
Proceeds
from
sale of for
investment
properties
Proceeds
from
sale ofand
available
for sale investments
Purchase of
property
equipment
Dividends
received
from associates
Net cash used
in investing
activities
Purchase
of
investment
properties
FINANCING ACTIVITES
Proceeds
from sale of
properties
Capital redemption
of investment
non-controlling
interest
Purchase
of
property
and
equipment
Proceeds from exercise of share options
Net
cash used
Dividends
paidin investing activities
FINANCING
Net cash used ACTIVITES
in financing activities
Capital
redemption
non-controlling
interest
Net
increase
in cashof
and
cash equivalents
Proceeds
exercise of share
Cash and from
cash equivalents
at the options
beginning of the year
Dividends
paid equivalents at the end of the year
Cash and cash
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Notes
2015
KD’000
8
2.
BASIS OF PREPARATION (CONTINUED)
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.5
New standards and interpretations not yet adopted
The following IFRS and Interpretations have been issued but are not yet effective and have not been early adopted
by the Group. The Group intends to adopt them when they become effective.
3.1
Basis of consolidation (continued)
3.1.2
Interest in the equity of subsidiaries not attributable to the Group is reported as non-controlling interest in the
consolidated statement of financial position. Non-controlling interest in the acquiree is measured at the
proportionate share in the recognized amount of the acquiree’s identifiable net assets. Losses are allocated to the
non-controlling interest even if they exceed the non-controlling interest’s share of equity in the subsidiary.
Transactions with non-controlling interests are treated as transactions with equity owners of the Group. Gains or
losses on disposals of non-controlling interests without loss of control are recorded in equity.
3.1.3
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control ceases. Where
necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line
with those used by the Bank.
3.1.4
Loss of control
On loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests
and the other components of equity related to the subsidiary. Any surplus or deficit arising on loss of control is
recognised in the consolidated statement of profit or loss. If the Group retains any interest in the previous subsidiary,
then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an
equity-accounted investee or as a financial asset depending on the level of influence retained.
3.1.5
Investments in associates (equity-accounted investees)
Associates are those entities in which the Group has significant influence, but not control, over the financial and
operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the
voting right.
IFRS 9 ‘Financial Instruments’:
The IASB issued IFRS 9 - Financial Instruments in its final form in July 2014 and is effective for annual periods
beginning on or after 1 January 2018 with a permission to early adopt. IFRS 9 sets out the requirements for
recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non- financial
assets. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement. The adoption of this
standard will have an effect on the classification and measurement of Group's financial assets but is not expected
to have a significant impact on the classification and measurement of financial liabilities. The Group is in the
process of quantifying the impact of this standard on the Group's consolidated financial statements, when adopted.
IFRS 15 Revenue from Contracts with Customers:
IFRS 15 was issued by IASB on 28 May 2014 is effective for annual periods beginning on or after 1 January
2017. IFRS 15 supersedes IAS 11 – Construction Contracts and IAS 18 – Revenue along with related IFRIC 13,
IFRIC 18 and SIC 31 from the effective date. This new standard would remove inconsistencies and weaknesses in
previous revenue recognition requirements, provide a more robust framework for addressing revenue issues and
improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital
markets. The Group is in the process of evaluating.
3.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in this consolidated
financial statements, and have been applied consistently by all of the Group’s entities.
3.1
Basis of consolidation
The consolidated financial statements comprise the Bank and its principal subsidiaries (collectively “the Group”) Boubyan Takaful Insurance Company K.S.C. and Boubyan Capital Investment Company K.S.C., which are
controlled by the Bank as set out in note 15.
3.1.1
Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date
on which control is transferred to the Group. The Group controls an investee if and only if the Group has:
 Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the
investee)
 Exposure, or rights, to variable returns from its involvement with the investee, and
 The ability to use its power over the investee to affect its returns
Investments in associates are accounted for using the equity method and are recognised initially at cost. The cost of
the investment includes transaction costs.
The Group recognises in the consolidated statement of profit or loss its share of the total recognised profit or loss of
the associate from the date that influence effectively commences until the date that it effectively ceases. Distributions
received from the associate reduce the carrying amount of the investments. Adjustments to the carrying amount may
also be necessary for changes in Group’s share in the associate arising from changes in the associate’s equity and
other comprehensive income. The Group’s share of those changes is recognised directly in equity or in other
comprehensive income as appropriate.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all
relevant facts and circumstances in assessing whether it has power over an investee, including:
 The contractual arrangement with the other vote holders of the investee
 Rights arising from other contractual arrangements
 The Group’s voting rights and potential voting rights
When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of the
investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further
losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the
investee.
The Group measures goodwill at the acquisition date as:

The fair value of the consideration transferred; plus
The recognised amount of any non-controlling interests in the acquiree; plus
If the business combination is achieved in stages, the fair value of the pre-existing equity interest in the
acquiree; less
The fair value of the identifiable assets acquired and liabilities assumed including contingent liabilities.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets and
liabilities of the associate at the date of acquisition is recognized as goodwill within the carrying amount of the
associates.
Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of
acquisition, after reassessment, is recognized immediately in the consolidated statement of profit or loss.
When the excess is negative, a bargain purchase gain is recognised immediately in the consolidated statement of
profit or loss.
3.1.6
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions,
are eliminated in preparing the consolidated financial statements.
9
74
Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in
connection with a business combination are expensed as incurred.
Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of
the Group’s interest in the associate. Unrealised losses are eliminated in the same way as unrealised gains, but
only to the extent that there is no evidence of impairment.
75



10
3.
3.
3.2
Foreign currency
The individual financial statements of each Group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency).
3.4
Financial instruments (continued)
3.4.1
Financial assets (continued)
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign
operations are expressed in KD using exchange rates prevailing on the reporting date. Income and expense items
are translated at the average exchange rates for the year. Exchange differences arising, if any, are classified as
other comprehensive income and transferred to the Group’s foreign currency translation reserve. Such translation
differences are recognised in the consolidated statement of profit or loss in the year in which the foreign operation
is disposed off.
3.3
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the
revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is
recognised.




Income from Murabaha, Wakala, and Leased assets is recognized on a pattern reflecting a constant
periodic return on the outstanding net investment.
Dividend income is recognized when the right to receive payment is established.
Fees and commission income is recognized at the time the related services are provided.
Rental income from investment properties is recognised on a straight line basis over the lease period.
3.4
Financial instruments
3.4.1
Financial assets
Trade and settlement date accounting
All regular way purchase and sale of financial assets are recognized using settlement date accounting. Changes in
the fair value between trade date and settlement date are recognized in the consolidated statement of profit or loss
for financial assets at fair value through profit or loss and are recognized in other comprehensive income for
available for sale investments. Regular way purchases or sales are purchases or sales of financial assets that
require delivery of assets within the time frame generally established by regulations or conventions in the market
place.
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire;
or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues
to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for
amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a
transferred financial asset, the Group continues to recognize the financial asset and also recognizes a liability for
the proceeds received.
76
Recognition and derecognition of financial assets
Financial assets are recognised when the Group becomes party to contractual provisions of the instrument and are
initially measured at fair value. Transaction costs are included only for those financial instruments that are not
measured at fair value through profit or loss.
11
Income and expenses are presented on a net basis only if it is so permitted by the accounting standards, or for
gains and losses arising from a group of similar transactions.
The Group classifies financial assets into the following categories: cash and cash equivalents, due from banks,
Islamic financing to customers, financial assets at fair value through profit or loss, available for sale investments
and other assets.
Cash and cash equivalents
Cash and cash equivalents consist of cash in hand, current account with other banks and placements with banks
maturing within seven days.
Due from banks and Islamic financing to customers
Due from banks and Islamic financing to customers are financial assets with fixed or determinable payments that
are not quoted in an active market.
Murabaha
Murabaha is an agreement relating to the sale of commodities at cost plus an agreed upon profit margin, whereby
the seller informs the buyer of the price at which the deal will be completed and also the amount of profit to be
recognized. Murabaha is a financial asset originated by the Group and is stated at amortized cost net of provision
for impairment.
Wakala
Wakala is an agreement involving Al-Muwakkil (the Principal) who wishes to appoint Al-Wakil (the Agent) to be
his agent with respect to the investment of Al-Muwakkil’s fund, in accordance with regulations of the Islamic
Sharia’a. Wakala is a financial asset originated by the Group and is stated at amortized cost net of provision for
impairment.
Leased assets - the Group as a lessor
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating lease. Leased assets are stated at
amortized cost net of provision for impairment.
Renegotiated finance facilities
In the event of a default, the Group seeks to restructure facilities rather than take possession of collateral. This
may involve extending the payment arrangements and the agreement of new facility conditions. When the terms
and conditions of these finance facilities are renegotiated, the terms and conditions of the new contractual
arrangement apply in determining whether these facilities remain past due. Management continually reviews
renegotiated facilities to ensure that all criteria are met and that future payments are likely to occur. The facility
continues to be subject to an individual or collective impairment assessment.
A financial asset is classified as at fair value through profit or loss if it is classified as held for trading or is
designated as such on initial recognition. Financial assets are designated as at fair value through profit or loss if
the Group manages such investments and makes purchase and sale decisions based on their fair value in
accordance with the Group’s strategy or such designation eliminates or significantly reduces a measurement or
recognition inconsistency that would otherwise arise.
Attributable transaction costs are recognised in consolidated statement of profit or loss as incurred. Financial
assets at fair value through profit or loss are measured at fair value and changes therein, which takes into account
any dividend income, are recognised in consolidated statement of profit or loss.
12
Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are
included in the consolidated statement of profit or loss for the year. Exchange differences arising on the translation
of non-monetary items carried at fair value are included in the consolidated statement of profit or loss for the year,
except for differences arising on the translation of non-monetary items in respect of which gains and losses are
recognised directly in other comprehensive income. For such non-monetary items, any exchange component of
that gain or loss is also recognised directly in other comprehensive income.
Offsetting
Financial assets and liabilities are offset and the net amount presented in the consolidated statement of financial
position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a
net basis or to realise the asset and settle the liability simultaneously.
77
Foreign currency transactions are recorded in the functional currency at the rate of exchange prevailing at the date
of the transaction.
3.
3.
3.4
Financial instruments (continued)
3.5
3.4.1
Financial assets (continued)
Fair values (continued)
If an asset or liability measured at fair value has a bid price and an ask price, then the Group measures assets at a
bid price and liabilities at an ask price.
Available for sale investment
Available for sale investments are non-derivative financial assets that are not classified in any of the above
categories of financial assets.
The Group determines whether transfers have occurred between levels in the hierarchy by reassessing
categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the
end of each reporting period.
Fair values of investment properties are determined by appraisers having an appropriate recognised professional
qualification and recent experience in the location and category of the property being valued and also considering
the ability to generate economic benefits by using the property in its highest and best use.
Available for sale investment are recognised initially at fair value plus any directly attributable transaction costs.
The Group enters into foreign exchange forward contracts. Forward foreign exchange contracts are contractual
agreements to buy or sell a specified financial instrument at a specific price and date in the future. Derivatives are
stated at fair value. The fair value of a derivative includes unrealised gain or loss from marking to market the
derivative using prevailing market rates or internal pricing models. Derivatives with positive market values
(unrealised gains) are included in other assets and derivatives with negative market values (unrealised losses) are
included in other liabilities in the consolidated statement of financial position.
Financial liabilities
All financial liabilities are recognised initially on the settlement date at fair value less any directly attributable
transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
Financial liabilities comprise due to banks, depositors’ accounts and other liabilities.
Due to banks and depositors’ accounts
Depositors' accounts are deposits received from customers under current account, saving investment accounts and
fixed term investments accounts. The depositors’ accounts of the Bank comprise the following:
The resultant gains and losses from derivatives are included in the consolidated statement of profit or loss.
3.7
i) Non-investment deposits in the form of current accounts. These deposits are not entitled to any profits nor do
they bear any risk of loss as the Bank guarantees to pay the related balances on demand. Accordingly, these
deposits are considered Qard Hassan from depositors to the Bank under Islamic Sharia'a principals. Investing
such Qard Hassan is made at the discretion of the Group, the results of which are attributable to the equity
shareholders of the Bank.
Fixed-Term Deposit Investment Accounts
These are fixed-term deposits based on the deposit contract executed between the Bank and the depositor. These
deposits mature monthly, quarterly, semi-annually, or annually.
Open –Term Deposit Investment Accounts
These are open-term deposits and are treated as annual deposits renewed automatically for a similar period, unless
the depositor notifies the Bank in writing of his/her desire not to renew the deposit.
In all cases, investment accounts receive a proportion of profit, bear a share of loss and are carried at cost plus
profit payable.
78
3.5
Fair values
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in the principal or, in its absence, in the most advantageous
market to which the Group has access at that date.
When available, the Group measures the fair value of an instrument using the quoted price in an active market for
that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient
frequency and volume to provide pricing information on an ongoing basis.
Investment properties are properties held either to earn rental income or for capital appreciation or for both, but
not for sale in the ordinary course of business, use in the production or supply of goods or services or for
administrative purposes. Investment property is measured at cost on initial recognition and subsequently at fair
value with any change therein recognised in consolidated statement of profit or loss. Cost includes expenditure
that is directly attributable to the acquisition of the investment property.
Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from
disposal and the carrying amount of the item) is recognised in consolidated statement of profit or loss.
i) Investment deposit accounts include savings accounts, fixed term deposit accounts, and open term deposit
accounts.
Saving Investment Accounts
These are open-term deposits and the client is entitled to withdraw the balances of these accounts or portions
thereof at any time.
Derivative
Derivative instruments are initially recognised in the consolidated statement of financial position at cost (including
transaction costs) and subsequently measured at their fair value.
When the use of a property changes such that it is reclassified as property and equipment, its fair value at the date
of reclassification becomes its cost for subsequent accounting.
3.8
Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment
losses. The initial cost of property and equipment comprises its purchase price and any directly attributable costs
of bringing the asset to its working condition and location for its intended use.
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with
the expenditure will flow to the Group. On-going repairs and maintenance is expensed as incurred.
Items of property and equipment are depreciated on a straight-line basis in consolidated statement of profit or loss
over the estimated useful lives of each component.
The estimated useful lives for the current and comparative years of significant items of property and equipment
are as follows:



Furniture and leasehold improvement
Office equipment
Building on leasehold land
5 years
3 - 10 years
20 years
Depreciation methods, useful lives and residual values are reviewed periodically and adjusted, if appropriate.
If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of
relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique
incorporates all of the factors that market participants would take into account in pricing a transaction.
13
79
3.4.2
3.6
Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment
losses (see note 3.9) and foreign currency differences on available for sale debt instruments, are recognised in
other comprehensive income and presented in the fair value reserve in equity. When an investment is derecognised
or is determined to be impaired, the gain or loss accumulated in equity is reclassified to consolidated statement of
profit or loss.
14
3.
3.9
Impairment
3.9.1
Financial assets
The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group
of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only
if there is objective evidence of impairment as a result of one or more events that has occurred after the initial
recognition of the asset (an incurred loss event) and that loss event has an impact on the estimated future cash
flows of the financial asset or the group of financial assets that can be reliably estimated. If such evidence exists,
any impairment loss is recognised in the consolidated statement of profit or loss.
Financial assets measured at amortised cost
The amount of impairment loss in respect of a financial asset measured at amortised cost is calculated as the
difference between its carrying amount and the present value of the estimated future cash flows discounted at the
asset’s original effective yield. Losses are recognised in the consolidated statement of profit or loss and reflected
in an allowance account against Islamic financing to customers. When an event occurring after the impairment
was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed
through the consolidated statement of profit or loss.
In addition, in accordance with Central Bank of Kuwait’s instructions, a minimum general provision of 1% for the
cash facilities and 0.5% for the non-cash facilities, net of certain categories of collateral, to which CBK
instructions are applicable and not subject to specific provisions is made. In March 2007, CBK issued a circular
amending the basis of calculating general provisions on facilities changing the rate from 2% to 1% for cash
facilities and from 1% to 0.5% for non-cash facilities. The required rates were to be applied effective from 1
January 2007 on the net increase in facilities, net of certain categories of collateral, during the reporting period.
The general provision in excess of the present 1% for cash facilities and 0.5% for non-cash facilities as of 31
December 2006 would be retained as a general provision until a further directive from the Central Bank of Kuwait
is issued.
Available for sale investment
Impairment losses on available for sale investment are recognised by reclassifying the losses accumulated in the
other comprehensive income to consolidated statement of profit or loss. The cumulative loss that is reclassified
from other comprehensive income to consolidated statement of profit or loss is the difference between the
acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment
loss recognised previously in consolidated statement of profit or loss. If, in a subsequent period, the fair value of
an impaired available for sale debt security increases and the increase can be related objectively to an event
occurring after the impairment loss was recognised, then the impairment loss is reversed, with the amount of the
reversal recognised in consolidated statement of profit or loss. However, any subsequent recovery in the fair value
of an impaired available for sale equity security is recognised in other comprehensive income.
3.9.2
Non-financial assets
At each reporting date, the Group reviews the carrying amounts of its non-financial assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent
basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or
otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent
allocation basis can be identified.
3.
3.10
Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the
obligation. Provisions are reviewed at each financial reporting date and adjusted to reflect the current best estimate
of the expenditure required to settle the obligation at the financial reporting date and are discounted to present
value where the effect is material.
3.11
Contingent liabilities and contingent assets
Contingent liabilities are not recognized in the consolidated financial statements. They are disclosed in the notes
of the consolidated financial statements, unless the possibility of an outflow of resources embodying economic
benefits is remote.
Contingent assets are not recognized in the consolidated financial statements but are disclosed when an inflow of
economic benefits is probable
3.12
Share based payment
The Bank operates an equity settled share based compensation plan. The fair value of the employee services
received in exchange for the grant of options or shares is recognized as an expense, together with a corresponding
increase in equity. The total amount to be expensed over the vesting period is determined by reference to the fair
value of the options or shares on the date of grant using the Black Scholes model. At each reporting date, the
Group revises its estimates of the number of options that are expected to become exercisable. It recognises the
impact of the revision of original estimates, if any, in the consolidated statement of profit or loss, with a
corresponding adjustment to equity.
3.13
Segment reporting
Operating segments are identified on the basis of internal reports that are regularly reviewed by the decision
makers in order to allocate resources to the segments and to assess their performance. Such operating segments
are classified as either business segments or geographical segments.
A business segment is a distinguishable component of the Group that is engaged in providing products or services,
which is subject to risks and returns that are different from those of other segments.
A geographic segment is a distinguishable component of the Group that is engaged in providing products or
services within a particular economic environment which is subject to risks and returns different from those of
segments operating in other economic environments.
3.14
No cash dividends are paid on these shares. The issue of bonus shares increases the number of treasury shares
proportionately and reduces the average cost per share without affecting the total cost of treasury shares.
3.15
Post-employment benefits
The Group is liable to make defined contributions to State plans and lump sum payments under defined benefit
plans to employees at cessation of employment, in accordance with the laws of the place they are employed. The
defined benefit plan is unfunded and is computed as the amount payable to employees as a result of involuntary
termination on the reporting date. This basis is considered to be a reliable approximation of the present value of
the final obligation.
3.16
Kuwait Foundation for the Advancement of Sciences (KFAS)
The Bank calculates the contribution to KFAS at 1% in accordance with the calculation based on the Foundation’s
Board of Directors resolution.
3.17
National Labour Support Tax (NLST)
The Bank calculates the NLST in accordance with Law No. 19 of 2000 and the Minister of Finance Resolutions
No. 24 of 2006 at 2.5% of taxable profit for the year. Cash dividends from listed companies which are subjected to
NLST are deducted from the profit for the year to determine the taxable profit.
80
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a discount rate that reflects current market
rates and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised immediately in consolidated statement of profit or loss.
For non-financial assets excluding goodwill, an assessment is made at each reporting date as to whether there is
any indication that previously recognised impairment losses may no longer exist or may have decreased. Where an
impairment loss is subsequently reversed, the carrying amount of the asset (cash-generating unit) is increased to
the revised estimate of its recoverable amount and is limited to the carrying amount that would have been
determined had no impairment loss been recognized for the asset (cash-generating unit) in prior years. A reversal
of impairment loss is recognized immediately in the consolidated statement of profit or loss.
15
Treasury shares
Treasury shares consist of the Bank’s own shares that have been issued, subsequently reacquired by the Bank and
not yet reissued or cancelled. The treasury shares are accounted for using the cost method. Under the cost method,
the weighted average cost of the shares reacquired is charged to a contra equity account. When the treasury shares
are reissued, gains are credited to a separate account in equity (treasury shares reserve) which is not distributable.
Any realised losses are charged to the same account to the extent of the credit balance on that account. Any excess
losses are charged to retained earnings then reserves. Gains realised subsequently on the sale of treasury shares
are first used to offset any previously recorded losses in the order of reserves, retained earnings and the gain on
sale of treasury shares account.
16
81
3.
4.
3.18
Zakat
Effective from 10 December 2007, the Bank has provided for Zakat in accordance with the requirements of Law No.
46 of 2006. The Zakat charge calculated in accordance with these requirements is charged to the consolidated
statement of profit and loss.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
(CONTINUED)
4.2
Key sources of estimation uncertainty (continued)
Fiduciary assets
The Group provides trust and other fiduciary services that result in the holding or investing of assets on behalf of its
customers. Assets held in trust or in a fiduciary capacity are not treated as assets of the Group and accordingly are not
included in the consolidated statement of financial position. These are disclosed separately in the consolidated
financial statements.
4.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
4.1
Critical judgments in applying the Group’s accounting policies
In the process of applying the Group’s accounting policies, management has made the following judgments, apart
from those involving estimations, which have the most significant effect in the amounts recognized in the
consolidated financial statements:
The determination of the cash flows and discount factors for unquoted equity investments requires significant
estimation.
5.
DISTRIBUTION TO DEPOSITORS AND MURABAHA COSTS
The Bank determines and distributes the depositors’ share of profit based on the Bank’s results at the end of
each month.
6.
NET INVESTMENT INCOME
Sukuk coupon income
Dividend income
Net rental income from investment properties
Net losses from financial assets at fair value through profit or loss
Net gains /(loss) from available for sale investments
Net (loss)/gain on sale of investment properties
Unrealized (loss)/gain from changes in fair value of investment properties
Classification of investments
Management decides on acquisition of an investment whether to classify it as held to maturity, available for sale
or financial asset at fair value through profit or loss.
In designating financial assets at fair value through profit or loss, the Group determines if it meets one of the
criteria for this designation set out in the significant accounting policies (see note 3.4.1).
Impairment of investments
The Group treats available for sale equity investments as impaired when there has been a significant or prolonged
decline in the fair value below its cost or where other objective evidence of impairment exists. The determination
of what is “significant” or “prolonged” requires considerable judgement. In addition, the Group evaluates other
factors, including normal volatility in share price for quoted equities and the future cash flows and the discount
factors for unquoted equities.
Fair value hierarchy
As disclosed in note 30.6, the Group is required to determine and disclose the level in the fair value hierarchy into
which the fair value measurements are categorized in their entirety, segregating fair value measurements in
accordance with the levels defined in IFRS. Differentiating between Level 2 and Level 3 fair value measurements,
i.e., assessing whether inputs are observable and whether the unobservable inputs are significant, may require
judgement and a careful analysis of the inputs used to measure fair value, including consideration of factors
specific to the asset or liability.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date,
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are discussed below.
Impairment losses on finance facilities
The Group reviews its irregular finance facilities on a quarterly basis to assess whether a provision for impairment
should be recorded in the consolidated statement of profit or loss. In particular, considerable judgement by
management is required in the estimation of the amount and timing of future cash flows when determining the
level of provisions required. Such estimates are necessarily based on assumptions about several factors involving
varying degrees of judgment and uncertainty, and actual results may differ resulting in future changes to such
provisions.
7.
NET FEES AND COMMISSION INCOME
Gross fees and commission income
Fees and commission expenses
8.
1,986
1,824
(630)
198
(180)
(998)
2,200
2015
KD’000
10,812
(2,973)
7,839
PROVISION FOR IMPAIRMENT
Provision for impairment of finance facilities
Impairment of investments
Impairment losses in associate
2014
KD’000
1,487
1,112
233
(547)
(10)
270
2,441
4,986
2014
KD’000
8,385
(2,450)
5,935
2015
KD’000
2014
KD’000
9,951
2,672
2,435
15,058
11,497
1,455
12,952
The analysis of provision for impairment of finance facilities based on specific and general provision is as
follows:
Provided during the year
Recovery of written off balances
Written off balances during the year
82
4.2
2015
KD’000
Specific
KD’000
General
KD’000
Total
KD’000
3,707
8,382
971
(7,680)
5,380
4,139
1,463
(2,262)
8,720
33,089
3,115
36,204
5,812
42,016
36,796
11,497
971
(7,680)
41,584
9,951
1,463
(2,262)
50,736
3.20
Financial guarantees
In the ordinary course of business, the Group gives financial guarantees, consisting of letters of credit, guarantees and
acceptances. Financial guarantees are initially recognized as a liability at fair value, adjusted for transaction costs that
are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the
best estimate of the expenditure required to settle the present obligation at the reporting date and the amount
recognized less cumulative amortization.
83
3.19
Valuation of unquoted equity investments
Valuation of unquoted equity investments is based on one of the following:
 Recent arm’s length market transactions;
 Current fair value of another instrument that has substantially the same characteristics; or
 Other valuation models.
18
BOUBYAN
BANK K.S.C.P AND SUBSIDIARIES
BOUBYAN BANK K.S.C.P
AND SUBSIDIARIES
BOUBYAN
BANK
K.S.C.P
AND SUBSIDIARIES
BOUBYAN
BANK K.S.C.P
AND
SUBSIDIARIES
BOUBYAN
BANK
K.S.C.P
AND
SUBSIDIARIES
NOTES TOFINANCIAL
THE CONSOLIDATED
FINANCIAL STATEMENTS
NOTES
TO
THE CONSOLIDATED
STATEMENTS
BOUBYAN
BANK
K.S.C.P
AND
SUBSIDIARIES
BOUBYAN
BANK
K.S.C.P
AND SUBSIDIARIES
TO
THE
CONSOLIDATED
FINANCIAL
NOTES TOFor
THE
FINANCIAL
STATEMENTS
NOTES
TONOTES
THE31
CONSOLIDATED
STATEMENTS
For
the
year FINANCIAL
ended
31 December
2015 STATEMENTS
the CONSOLIDATED
year
ended
December
2015
NOTES
TOFor
THE
CONSOLIDATED
FINANCIAL
NOTES
TO
THE
CONSOLIDATED
For
the31
year
ended
31
December STATEMENTS
2015 FINANCIAL STATEMENTS
For
the year
ended
December
2015
the31
year
ended
December
2015
8.
PROVISION FOR IMPAIRMENT (CONTINUED)
Further analysis of provision for impairment of finance facilities by category is as follows:
Islamic finance to
customers
KD’000
35,452
11,346
971
(7,680)
40,089
9,860
1,463
(2,262)
49,150
Non-cash
facilities
KD’000
Total
KD’000
1,344
151
1,495
91
1,586
36,796
11,497
971
(7,680)
41,584
9,951
1,463
(2,262)
50,736
At 31 December 2015, non-performing finance facilities amounted to KD 10,803 thousand, net of provision of
KD 8,720 thousand (31 December 2014: KD 14,895 thousand, net of provision of KD 5,380 thousand). The
analysis of specific and general provision stated above is based on Central Bank of Kuwait’s instructions.
9.
BASIC AND DILUTED EARNING PER SHARE
Basic earnings per share are calculated by dividing net profit for the year attributable to the equity holders of the
Bank by the weighted average number of shares outstanding during the year.
Diluted earnings per share is calculated by dividing the net profit for the year attributable to the equity holders of
the Bank by the weighted average number of shares outstanding during the year plus the weighted average number
of share that would be issued on the conversion of all the dilutive potential shares into shares. The diluted earnings
per share arising from the issue of employee share option does not result in any change from the reported basic
earnings per share.
2014
2015
Net profit for the year attributable to the equity holders of the Bank (KD’000)
Weighted average number of shares outstanding during the year (thousands of shares)
Basic and diluted earnings per share attributable to the equity holders of the Bank
(fils)
35,235
2,061,510
28,239
2,061,216
17.09
13.70
Earnings per share for the year ended 31 December 2014 was 14.39 fils per share before retroactive adjustment to
the number of shares following the bonus issue (see note 22).
10.
CASH AND CASH EQUIVALENTS
2015
KD’000
Cash on hand
Balances with banks – current accounts
Placement with banks maturing within seven days
11.
25,598
9,411
430,250
465,259
24,555
9,653
280,613
314,821
DUE FROM BANKS
The geographical distribution of balances due from banks is as follows:
2015
KD’000
2014
KD’000
192,276
25,800
218,076
206,816
56,777
263,593
85
Kuwait & Middle East
Europe
84
2014
KD’000
For the year 12.
ended 31ISLAMIC
December
2015
For the year
ended
31 December
2015FINANCING TO CUSTOMERS
12.
FINANCING
TOISLAMIC
CUSTOMERS
12.
ISLAMIC
FINANCING
TO
CUSTOMERS
12.
ISLAMIC
FINANCING
TOdistribution
CUSTOMERS
geographical
distribution
of Islamic
financing to customers is as follows:
12.
ISLAMIC
FINANCING
TOThe
CUSTOMERS
The
geographical
of
Islamic
financing
to customers
is as follows:
The
geographical
distribution
of
Islamic
toiscustomers
The geographical
distribution
of
Islamic
financing
to
customers
as follows:
The12.
geographical
distribution
of Islamic
financing
toisfinancing
customers
as follows:is as follows:
12.
ISLAMIC
FINANCING
TO
CUSTOMERS
ISLAMIC
FINANCING
TO
CUSTOMERS
The geographical distribution
of Islamic financing
to customers
as follows:
The geographical
distribution
of Islamicisfinancing
to customers
is as follows:
Kuwait &
Kuwait
&
&
Kuwait & Middle
KuwaitEast
& Kuwait
Middle
Europe
Asia
Total
Europe
AsiaEast
Total
East
Europe
Asia
Total
Middle
Europe
Asia
EastMiddle
Europe
Asia
Total
KuwaitEast
& Middle
Total
Kuwait
&
KD’000
KD’000
KD’000
KD’00
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Middle
East KD’000
EuropeMiddle
Asia
KD’000
KD’000
KD’000
Total KD’000
KD’000
KD’000
East
Europe
Asia
KD’000
KD’000
Total
2015
2015
2015
2015
Corporate bankingKD’000 1,215,001
KD’000 KD’000
KD’000 KD’000
2015
1,215,001
3,385
3,534
1,221,92
KD’000 KD’000
KD’000
Corporate
banking
3,385
3,534
1,221,920
Corporate banking
3,385
3,534
Corporate banking
Corporate
Consumer banking
1,215,001 1,215,001
3,385 1,215,001
3,534
1,221,920
3,385
3,5341,221,920
999,024
- 1,221,920 999,02
2015
2015
Consumer banking
banking
999,024
999,024
Consumer
banking
999,024
- 999,024
Consumer banking
banking
Consumer banking
999,024 2,214,025
999,024
999,024
- - 2,214,025
999,024
Corporate
1,215,001
3,385- 1,215,001
3,534
1,221,920
Corporate banking
3,385
3,534
1,221,920
3,385
3,534
2,220,94
3,385
3,534
2,220,944
3,385
3,534
Consumer banking
999,024
999,024
Consumer
banking
2,214,025
3,385- 2,214,025
3,534
2,220,944
Less: provision for
impairment
2,214,025
3,385
3,534
2,220,944
999,024
-(34) 2,220,944
999,024
(46,804)
(2,312)
(49,15
Less: provision
for impairment
(46,804)
(34) (2,312)
(49,150)
Less:
for impairment 2,214,025
(46,804)
(34)
(49,150)
Less: provision
forprovision
impairment
Less:
forprovision
impairment
(46,804) 2,167,221
(34)2,214,025
(2,312)
(49,150) (2,312)
(46,804)
(34)
(2,312)
(49,150)
3,385
3,534
2,220,944
3,385
3,534
2,167,221
3,351 2,220,944
1,222
2,171,79
3,351
1,222
2,171,794
3,351
1,222
2,171,794
Less: provision for impairment
(46,804) 2,167,221
(34)2,167,221
(2,312)
(49,150) (2,312)
Less: provision for impairment 2,167,221
3,351
1,222
2,171,794
3,351
1,222
2,171,794
(46,804)
(34)
(49,150)
2,167,221
3,351
1,222
2,171,794
3,351
1,222
2,171,794
Kuwait
&
Kuwait
& 2,167,221
&
Kuwait & Middle
KuwaitEast
& Kuwait
Middle
Europe
Asia
Total
Europe
AsiaEast
Total
East
Europe
Asia
Total
Middle
Europe
Asia
Total
EastMiddle
Europe
Asia
Total
KD’000
KD’000
KD’000
KD’00
KuwaitEast
& Middle
Kuwait
&
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
2014
Middle
East KD’000
EuropeMiddle
Asia KD’000
Total KD’000
East
Europe
Asia
Total
2014
2014
2014
2014
Corporate bankingKD’000 1,050,485
1,050,485
4,423
3,329
1,058,23
KD’000 KD’000
KD’000
KD’000 KD’000
KD’000
KD’000
Corporate
banking
4,423
3,329
1,058,237
Corporate banking
4,423
3,329
Corporate banking
1,050,485 1,050,485
4,423 1,050,485
3,329
1,058,237
Corporate
4,423
3,3291,058,237
Consumer banking
786,967
- 1,058,237 786,96
2014
2014
Consumer banking
banking
786,967
786,967
Consumer
banking
786,967
- 786,967
Consumer
banking
786,967 1,837,452
786,967
Consumer banking
786,967
- - 1,837,452
786,967
Corporate banking
1,050,485
4,423- 1,050,485
3,329
1,058,237
Corporate banking
4,423
3,329
1,058,237
4,423
3,329
1,845,20
4,423
3,329
1,845,204
4,423
3,329
Consumer banking
786,967
786,967
1,837,452
4,423- 1,837,452
3,329
1,845,204
1,837,452
4,423
3,329
1,845,204
Consumer
banking
786,967
-(44) 1,845,204
786,967
Less: provision for
impairment
(38,791)
(1,254)
(40,08
Less: provision
for impairment
(38,791)
(44) (1,254)
(40,089)
Less:
for impairment 1,837,452
(38,791)
(44)
(40,089)
Less: provision
forprovision
impairment
(38,791) 1,798,661
(44)1,837,452
(1,254)
(40,089) (1,254)
Less:
forprovision
impairment
(38,791)
(44)
(1,254)
(40,089)
4,423
3,329
1,845,204
4,423
3,329
1,798,661
4,379 1,845,204
2,075
1,805,11
4,379
2,075
1,805,115
4,379
2,075
1,805,115
Less: provision for impairment
(38,791) 1,798,661
(44)1,798,661
(1,254)
(40,089) (1,254)
4,379
2,075
1,805,115
4,379
2,075
1,805,115
Less: provision for impairment 1,798,661
(38,791)
(44)
(40,089)
1,798,661
4,379
1,805,115
1,798,661
2,075
1,805,115
for impairment
of Islamic
financing
to 2,075
customers4,379
are
as follows:
Provisions for impairment of Provisions
Islamic financing
to customers
are as
follows:
Provisions
forfinancing
impairment
of Islamic
financing
toare
customers
are as follows:
Provisions for
impairment
of
Islamic
to financing
customers
as follows:
Provisions
for
impairment
of
Islamic
toare
customers
as follows:
Provisions for impairment
of Islamic
to customers
are
as follows:
Provisions
forfinancing
impairment
of Islamic
financing
to customersGeneral
areSpecific
as follows:
General
Total
Specific
Total
General
Total
Specific2015 Specific2014Specific
General2015
Total2015
General2014
Total 2014
2014
2014
201
2015
2015
2015
2014
2014
2015
2015
General
Total
2014
2014
2014
2014
2014
2014
General
Total 2014
2015 Specific
2015Specific
2015
2015
2015
2015
KD’000
KD’000
KD’0
KD’000 KD’000
KD’000 2015
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
2014
2014
2014
KD’000
KD’000
KD’000
2015
2015
2015
KD’000
KD’000
KD’000
2014
2014
2014
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
2015
2015
2015
Balance at beginning
the3,707
year KD’000
3,707KD’000
31,745 KD’000
35,45
KD’000
KD’000
KD’000
5,380KD’000
34,709KD’000
40,089
KD’000
KD’000
Balance at beginning of the KD’000
year
31,745
35,452
5,380 ofKD’000
34,709
40,089
Balance
atofbeginning
of theduring
year
3,707
5,380
the year
3,707
31,745
35,452
Balance
beginning
the year
3,707
31,745
35,452
5,380
40,089
Provided
the year 34,709
8,382 31,745
2,964 35,452
11,34
5,380
34,709
40,089
4,139 34,709
5,721 40,089
9,860
Providedatof
during
the year
8,382
2,964
11,346
4,139
5,721
9,860
Provided
during
the
year
8,382
2,964
11,346
4,139
5,721
9,860
Providedatduring
the year
8,382 off balances
2,964
11,346
Provided
during
the year
8,382
2,964
11,346
4,139
5,721
9,860
Recovery
written
97
Balance
beginning
of
the
year
3,707
31,745
35,452
4,139
5,721
9,860 - 40,089
1,463
1,463
5,380
34,709
40,089
at
beginning
of theof
year
3,707
5,380
34,709
Recovery
ofBalance
written
off
balances
971
971 - 35,452
1,463
- 971 31,745
1,463
Recovery
of balances
written
off off
balances
971971
1,463
1,463
Recoveryduring
ofRecovery
written
off
balances
971 during
971
ofbalances
written during
off
971971
1,463
1,463
Written
balances
the
Provided
the year
8,382
2,964
11,346
1,463
1,463
4,139
5,721
9,860
Provided
during
the
year
8,382
2,964
11,346
4,139
5,721
9,860
Written
off
the
Written
during
the(2,262)
Written offofbalances
during
the off
Written
during
the1,463
year
(7,680)
- (7,680)
(7,68
Recovery
written
offbalances
balances
971
971
(2,262)
(2,262)
1,463
Recovery
ofbalances
written
off balances
971
971
1,463 1,463 year off
(7,680)
(2,262)
year
(7,680)
(2,262)
(2,262)
year off balances
(7,680)
(7,680)
year during
(7,680)
(7,680)
(2,262)
(2,262)
(2,262)
(2,262)
Written
the
Written
offyear
balances
during
5,380
34,709 (7,680)
40,08
Balance
atthe
end
of the year
8,720
40,430
49,150
5,38034,709
40,089
Balance
at end
of the
8,720
40,430
49,150
5,38034,709
40,089
Balance
end of(2,262)
the year (7,680)
8,720
40,430
49,150
year at end
(7,680)
5,380
34,709
40,089
(2,262)
5,38034,709
40,089
year
(7,680)
(7,680)
Balance
of theatyear
8,720
40,430
49,150
Balance
end
of theatyear
8,720
40,430
49,150
(2,262)
(2,262)
5,380
34,709
40,089
Balance at end of the year
40,430
49,150
5,380
34,709
40,089
Balance at end of 8,720
the year
8,720
40,430
49,150
Further analysis
specific
provision
based
class
of financial assets is given below:
Further analysis of specific provision
based onofclass
of financial
assets
is on
given
below:
Further
analysis
of specific
provision
based
on is
class
of below:
financial
assets
is given below:
Further analysis
of specific
provision
based
on class
of financial
assets
given
Further
analysis
of specific
provision
based
on class
of financial
assets
is given
below:
Corporate
banking
Consumer
Total
Corporate
banking
Consumer
banking
Total banking
Further analysis of specific
provision
based
on classprovision
of financial
assets
is
given
below:
Further
analysis
of specific
based
on
class
of
financial
assets
is given below:
Corporate
Consumer
banking
Total
Corporate banking
Consumerbanking
banking
Total
Corporate banking
Consumer
Total 20142014
20
2015 banking
2015
2015
2014
20142014
2015
2015
2015
2014
2014
2015
2015
2015
Corporate KD’000
banking
Consumer
banking
Total
2014
2014
2014
2014
2014
2014
Corporate
banking
Consumer
banking
Total 2014
2015
2015
2015
2015
2015
2015
KD’000
KD’000
KD
KD’000 KD’000
KD’000 KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
2014
2014
2014
KD’000
KD’000
KD’000
2015
2015
2015
KD’000
KD’000
KD’000
2014
2014
2014
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
2015
2015
2015
Balance
at beginning
of theKD’000
year
1,338 KD’0005,380
3
KD’000
KD’000
KD’000
3,756KD’000
1,624KD’000
KD’000
KD’000
KD’000
KD’000
Balance at beginning of the year
2,369
1,3382,369KD’000
3,707
3,756
1,624
5,380
Balance
of
theduring
year the
2,369
3,756
1,624
5,380801 3,7074,139
the year
2,369
1,338
3,707
Balance atof
beginning
ofbeginning
the year
2,369
3,707
3,756
1,624
5,380
Provided
year
8
3,756
1,624
5,380
3,093 1,338
1,046 8,382
Provided
during
the at
year
7,581
8017,581 1,338
3,093
1,046
4,139
Provided
during
the year
7,581
801 397 8,382
8,3821,463
3,093
1,046
4,139
Providedatduring
the year
7,581
801
8,382
Provided
during
the at
year
7,581
801
3,093
1,046
4,139
Recovery
written
off balances
Balance
beginning
of
the
year
2,369
1,338
3,707
3,093
1,046
4,139
1,066 1,624
3,756
1,624
5,380
Balance
beginning
of
theof
year
2,369
3,756
5,380
Recovery
of
written
off
balances
690
281 690 1,338
971281 3,707
1,066
397
1,463
Recovery
of
written
off
balances
690
281
971(2,262)
1,066
397
1,463
Recovery of
written
off
balances
690
281
971
Recovery
ofbalances
written off
balances
690
281
971(796) 8,382
Written
off
balances
(6,884) (2,262)
(7
1,066
397
1,463
Provided
during
theoff
year
7,581
801
8,382
1,066
397(792) 1,046
1,463
(1,470) (7,680)
3,093
1,046
4,139
Provided
during
the year
7,581
801
3,093
4,139
Written
(6,884)
(796)
(792)
(1,470)
Written
offof
balances
(6,884)
(796)
(792)
(2,262)
Written offofbalances
(6,884)
(796)
Written
(796)
(792)
(1,470)
(2,262)
(792)
(1,470)
(2,262)
Recovery
writtenoff
off
balances
690year (6,884)
281
9711,597 (7,680)
1,066
397
1,463
Recovery
written
off
balances
690
281
9718,720
3,756 (7,680)
1,624 (7,680)
5
1,066
397
1,463
Balance
at end of
the
7,123 (1,470)
3,756
1,624
5,380
Balance
at balances
end
of the
year
7,123
1,597
8,720
3,756
1,624
5,380
Balance
atyear
end of the7,123
year
7,123
1,597
8,720
Written
(6,884)
(796)
(7,680)
3,756
1,624
5,380
(792)
(1,470)
(2,262)
3,756
1,624
5,380
Written
off
balances
(6,884)
(796)
(7,680)
Balanceoff
at balances
end
of theatyear
1,597
8,720
Balance
end
of the
7,123
1,597
8,720
(792)
(1,470)
(2,262)
3,756
1,624
5,380
Balance at end
of the year
1,597by acceptable
8,720
1,624
5,380 to mitigate
Balance atIslamic
end of
the7,123
year necessary,
7,123
8,720
Whenever
Islamic
financing
to3,756
customers
is1,597
secured
by
acceptable
forms
Whenever
necessary,
financing
to customers
is secured
forms
of collateral
to mitigate
the of collateral
Whenever
necessary,
Islamic
financing
isforms
secured
byforms
acceptable
forms of
to mitigate the
Whenever necessary,
Islamic
to
customers
secured to
by
acceptable
of collateral
to collateral
mitigate
the
Whenever
necessary,
Islamic
financing
tois
customers
iscustomers
secured by
acceptable
of
to collateral
mitigate the
related
credit
risks.
related
credit
risks.financing
related
credit
risks.
related credit
risks. credit
related
risks.financing
Whenever
necessary,
Islamic
to customers
secured to
bycustomers
acceptableisforms
of collateral
to mitigate
thecollateral to mitigate the
Whenever
necessary,
Islamic is
financing
secured
by acceptable
forms of
Non performing
Islamic
financing
to customers
and
specific provisions are as follows:
performing
Islamic
financing
to customers
and related
specific
provisions
arerelated
as follows:
related creditNon
risks.
related
credit
risks.
Non
performing
Islamic
financing
customers
and related
provisions
are2015
as follows: 2014
Non performing
financing
to financing
customers
relatedto
specific
provisions
are
asspecific
follows:
Non Islamic
performing
Islamic
toand
customers
and
related
specific
provisions
are
as follows:
20
2015
2014
2014
2014
2015
Non performing Islamic Non
financing
to customers
relatedto
specific
provisions
are asspecific
follows:
2015
performing
Islamicand
financing
customers
and related
provisions
are
as
follows:2015
KD’
KD’000
KD’000
KD’000
KD’000
2014 KD’000
2015
2014
KD’000
KD’000
2015
KD’000
KD’000
20,
KD’000 KD’000
19,523
KD’000
KD’000
20,275
19,523
Islamic
financing
to customers
20,275
19,523
Islamic financing
to financing
customers
20,275
Islamic
tofor
customers
20,275
19,523
Specific
provision for impairment
(5,
19,523
(8,720)
Specific
provision
impairment
(5,380)
(8,720)
Specific
provision
impairment
(5,380)
(8,720)
Specificfinancing
provision
impairment
(5,380) 19,523
Specific
provision
for
impairment
(5,380)
(8,720)
Islamic
toforcustomers
20,275
(8,720)
19,523
Islamic
financing
toforcustomers
20,275
14,
10,803
14,895
10,803
14,895
Specific provision for impairment
(5,380) 10,803
14,895
(8,720)
14,895
Specific provision for impairment
(5,380)
10,803
10,803
(8,720)
At 31 December
management
fairagainst
value individually
of14,895
collaterals
held against
individually impa
At 31 December 2015 management
estimates2015
the fair
value of estimates
collateralsthe
held
impaired
10,803
14,895
10,803
At 31
December
2015
management
estimates
the of
fair
value
collaterals
held
against
impaired
At 31 December
management
estimates
the
fair
value
of
held
against
individually
impaired
At
312015
December
2015
management
estimates
the
fair
value
collaterals
held
individually
impaired
finance
facilities
tocollaterals
be
KD
7,171
thousand
(31against
December
2014:
KDindividually
23,800 thousand).
Islamic
finance
facilities
to
beIslamic
KD 7,171
thousand
(31
December
2014:
KDof23,800
thousand).
Islamic
finance
facilities
to (31
be
KD
7,171
thousand
December
2014:
KD 23,800
thousand).
Islamic
finance
facilities
to be
KD
7,171
thousand
December
2014:
KD(31
23,800
thousand).
Islamic
finance
facilities
to
be
KD 7,171
thousand
(31
December
2014:
KDof23,800
thousand).
At
31 December
2015
management
estimates
the
fair
value
of
collaterals
held
against
individually
impaired
At
31
December
2015
management
estimates
the
fair
value
collaterals
held
against
individually impaired
Islamic finance facilitiesIslamic
to be KD
7,171facilities
thousand
December
2014: KD(31
23,800
thousand).
finance
to (31
be KD
7,17120thousand
December
2014:
20 KD 23,800 thousand).
20
20
20
20
20
19
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Investment in unquoted securities
Investment in unquoted funds
2014
KD’000
2,995
9,743
12,738
2,560
12,828
15,388
AVAILABLE FOR SALE INVESTMENTS
2014
KD’000
2015
KD’000
Investment in Sukuk
Investment in unquoted funds
Investment in unquoted securities
Investment in quoted securities
15.
2015
KD’000
96,805
18,015
10,153
1,334
126,307
77,982
22,046
11,906
1,918
113,852
SUBSIDIARIES
Boubyan Takaful
Insurance Company
K.S.C. (Closed)
Boubyan Capital
Investment Company
K.S.C. (Closed)
16.
United Capital Bank
Ijarah Indonesia Finance
Company
Saudi Projects
Holding Group
2014
proportion of
ownership interest
and voting power
%
Kuwait
67.63
67.63
Bank of London and the
Middle East (“BLME”)
Bank Syariah Muamalat
Indonesia Tbk (“BSMI”)
Principal
activity
Takaful insurance
99.55
99.55
2015
proportion of
ownership interest
and voting power
%
2014
proportion of
ownership interest
and voting power
%
Republic of
Sudan
21.67
21.67
Islamic commercial
banking
Indonesia
33.33
33.33
Islamic financing services
Kuwait
25.00
25.00
Real Estate
United
Kingdom
25.62
25.62
Indonesia
22.00
22.00
INVESTMENTS IN ASSOCIATES
Name of associate
86
Country of
incorporation
2015
proportion of
ownership interest
and voting power
%
Kuwait
Country of
incorporation
Summarized financial information in respect of BLME is set out below:
Total assets
Total liabilities
Net assets
Group’s share of net assets
Total revenue
Net profit
Group’s share of results
2015
KD’000
2014
KD’000
634,139
(518,104)
116,035
29,728
585,845
(473,602)
112,243
28,757
2015
KD’000
2014
KD’000
19,528
322
(440)
21,918
2,447
627
2015
KD’000
2014
KD’000
1,206,572
(1,122,595)
83,977
18,475
4,032
1,444,575
(1,351,408)
93,167
20,497
4,955
2015
KD’000
2014
KD’000
46,640
2,397
410
42,776
(6,563)
(1,445)
Summarized financial information in respect of BSMI is set out below:
Principal operating subsidiaries are as follows:
Name of subsidiary
INVESTMENTS IN ASSOCIATES (CONTINUED)
Islamic investments
Principal
activity
Islamic commercial
banking
Islamic commercial
banking
Total assets
Total liabilities
Net assets
Group’s share of contingent liabilities
Total revenue
Net profit
Summarized financial information in respect of the Group’s other associates that are individually immaterial, are
set out below:
2014
2015
KD’000
KD’000
Total assets
Total liabilities
Net assets
Group’s share of contingent liabilities
140,669
(104,166)
36,503
8,582
2,434
2015
KD’000
Total revenue
Net profit
10,355
1,412
343
22
123,610
(61,584)
62,026
14,036
15,823
2014
KD’000
10,045
2,737
571
14.
16.
87
13.
BOUBYAN
BOUBYAN
BOUBYAN
BANK
BANK
BANK
K.S.C.P.
K.S.C.P.
K.S.C.P.
AND
AND
AND
SUBSIDIARIES
SUBSIDIARIES
SUBSIDIARIES
For
For the
the
Foryear
year
the year
ended
ended
ended
31
31 December
December
31 December
2015
20152015
23.
2015
20152015
KD’000
KD’000
KD’000
Balance
Balance
Balance
at
at the
theatbeginning
beginning
the beginning
of
of the
the
ofyear
year
the year
Additions
Additions
Additions
during
during
during
the
the year
year
the year
Disposals
Disposals
Disposals
during
during
during
the
the year
year
the year
Net
Net unrealized
unrealized
Net unrealized
(loss)/gain
(loss)/gain
(loss)/gain
from
fromfrom
change
change
change
in
in fair
fair
invalue
value
fair value
of
of investment
investment
of investment
properties
properties
properties
Foreign
Foreign
Foreign
currency
currency
currency
translation
translation
translation
adjustments
adjustments
adjustments
Balance
Balance
Balance
at
at the
theatending
ending
the ending
of
of the
the
ofyear
year
the year
2014
20142014
KD’000
KD’000
KD’000
18.
18. 18. OTHER
OTHER
OTHER
ASSETS
ASSETS
ASSETS
Accrued
Accrued
Accrued
income
income
income
Prepayments
Prepayments
Prepayments
Others
Others
Others
19.
19. 19. OTHER
OTHER
OTHER
LIABILITIES
LIABILITIES
LIABILITIES
Creditors
Creditors
Creditors
and
and accruals
accruals
and accruals
Accrued
Accrued
Accrued
staff
staffstaff
benefits
benefits
benefits
Clearing
Clearing
Clearing
accounts
accounts
accounts
General
General
General
provision
provision
provision
on
on non-cash
non-cash
on non-cash
facilities
facilities
facilities
Others
Others
Others
2015
20152015
KD’000
KD’000
KD’000
2014
20142014
KD’000
KD’000
KD’000
1,017
1,017
1,017
5,406
5,406
5,406
7,746
7,746
7,746
14,169
14,169
14,169
943
943 943
4,443
4,443
4,443
5,558
5,558
5,558
10,944
10,944
10,944
2015
20152015
KD’000
KD’000
KD’000
2014
20142014
KD’000
KD’000
KD’000
13,740
13,740
13,740
8,902
8,902
8,902
2,731
2,731
2,731
1,586
1,586
1,586
3,443
3,443
3,443
30,402
30,402
30,402
20.
20. 20. SHARE
SHARE
SHARE
CAPITAL
CAPITAL
CAPITAL
2015
20152015
Shares
Shares
Shares KD’000
KD’000
KD’000
8,518
8,518
8,518
7,804
7,804
7,804
6,040
6,040
6,040
1,495
1,495
1,495
4,204
4,204
4,204
28,061
28,061
28,061
2014
20142014
Shares
Shares
Shares KD’000
KD’000
KD’000
Shares
Shares
Shares
authorised,
authorised,
authorised,
issued
issued
issued
and
and paid
paid
and paid
up
up of
ofup
100
100
of fils
100
fils fils
each
eacheach
comprised
comprised
comprised
of
of 1,965,001,500
1,965,001,500
of 1,965,001,500
shares
shares
shares
(2014:
(2014:
(2014:
1,661,802,886
1,661,802,886
shares)
shares)
fully
fullyfully
paid
paidpaid
in
in cash
cash
and
and and
1,661,802,886
shares)
in cash
98,250,070
98,250,070
shares
shares
(2014:
(2014:
303,198,614
303,198,614
shares)
shares)
98,250,070
shares
(2014:
303,198,614
shares)
issued
issued
issued
as
as bonus
bonus
as bonus
shares
shares
shares
1,965,001,500
1,965,001,500 196,500
196,500
196,500
2,063,251,570
2,063,251,570
2,063,251,570 206,325
206,325
206,3251,965,001,500
88
21.
21. 21. SHARE
SHARE
SHARE
PREMIUM
PREMIUM
PREMIUM
The
The The
share
shareshare
premium
premium
premium
is
is not
not
is distributable
distributable
not distributable
except
except
except
under
under
under
specific
specific
specific
circumstances
circumstances
circumstances
as
as provided
provided
as provided
by
by the
the
by Companies
Companies
the Companies
Law
LawLaw
No.
No. 25
25
No.of
of25
2012,
2012,
of 2012,
as
as amended
amended
as amended
and
and its
its
andexecutive
executive
its executive
regulations
regulations
regulations
22.
22. 22. PROPOSED
PROPOSED
PROPOSED
DIVIDEND
DIVIDEND
DIVIDEND
The
The The
board
board
board
of
of directors
directors
of directors
recommended
recommended
recommended
distribution
distribution
distribution
of
of cash
cash
of cash
dividends
dividends
dividends
of
of 55 of
fils
fils5 per
per
fils share
share
per share
(2014:
(2014:
(2014:
55 fils)
fils)
5 fils)
and
and bonus
and
bonus
bonus
shares
shares
shares
of
of 5%
5%
of (2014:
5%
(2014:
(2014:
5%).
5%).5%).
The
The increase
The
increase
increase
in
in capital
capital
in capital
was
was recorded
was
recorded
recorded
in
in the
the
incommercial
commercial
the commercial
register
register
register
on
on 10
10
onMarch
March
10 March
2015)
2015)
2015)
on
on on
outstanding
outstanding
outstanding
shares
shares
shares
as
as at
atas31
31atDecember
December
31 December
2015.
2015.
2015.
The
The The
proposed
proposed
proposed
dividends,
dividends,
dividends,
if
if approved
approved
if approved
by
by the
the
by shareholders’
shareholders’
the shareholders’
general
general
general
assembly
assembly
assembly
shall
shallshall
be
be payable
payable
be payable
to
to the
the
to shareholders
shareholders
the shareholders
registered
registered
registered
in
in the
the
in bank’s
bank’s
the bank’s
records
records
records
as
as of
ofasthe
the
of date
date
the date
of
of the
the
of regulatory
regulatory
the regulatory
approval
approval
approval
for
for distribution
distribution
for distribution
of
of dividends.
dividends.
of dividends.
23
23 23
Number of treasury shares
Treasury shares as a percentage of total issued shares - %
Cost of treasury shares – KD thousand
Market value of treasury shares – KD thousand
Weighted average of market value per share (fils)
30,245
30,245
25,637
25,637
25,637 30,245
6,916
6,916
6,916
1,394
1,394
1,394
(13,575)
(13,575)
(2,447)
(2,447)
(2,447) (13,575)
2,441
2,441
2,441
(998)
(998)(998)
(390)
(390)(390)
(189)
(189)(189)
25,637
25,637
23,397
23,397
23,397 25,637
The
The fair
The
fair values
values
fair values
were
werewere
determined
determined
determined
based
based
based
on
on market
market
on market
approach.
approach.
approach.
There
There
There
has
has been
been
has been
no
no change
change
no change
to
to the
the
tovaluation
valuation
the valuation
techniques
techniques
techniques
during
during
during
the
the year.
year.
the year.
All
All of
of
Allthe
the
ofGroup’s
Group’s
the Group’s
investment
investment
investment
properties
properties
properties
are
are included
included
are included
in
in Level
Level
in Level
22 of
of 2fair
fair
of value
value
fair value
hierarchy
hierarchy
hierarchy
as
as at
atas
31
31at 31
December
December
December
2015.
2015.
2015.
TREASURY SHARES
The Bank held the following treasury shares as at 31 December:
2015
2014
1,790,413
0.0868%
568
790
0.427
1,930,589
0.0983%
763
792
0.512
An amount equivalent to the cost of purchase of the treasury shares have been earmarked as non-distributable from
voluntary reserve throughout the holding period of treasury shares.
24.
STATUTORY RESERVE
In accordance with the Companies Law No. 25 of 2012, as amended and the Bank’s Memorandum of
Incorporation and Articles of Association, 10% of profit for the year attributable to the shareholders of the Bank
before KFAS, NLST, Zakat and Board of directors’ remuneration is transferred to statutory reserve. The Bank
may resolve to discontinue such annual transfers when the reserve equals 50% of the capital. This reserve is not
available for distribution except in cases stipulated by law and the Bank’s Articles of Association.
25.
VOLUNTARY RESERVE
As required by the Bank’s Articles of Association, 10% of profit for the year attributable to the shareholders of the
Bank before Board of directors’ remuneration is transferred to the voluntary reserve. Such annual transfers may be
discontinued by a resolution of the shareholders’ General Assembly upon a recommendation by the Board of
Directors.
Voluntary reserve is available to be distributed to shareholders at the discretion of the general assembly in ways
that may be deemed beneficial to the Bank, except for the amount equivalent to the cost of purchase of the
treasury shares (Note 23).
26.
SHARED BASED PAYMENT RESERVE
The Bank operates an equity settled share based compensation plan and granted share options to its senior
executives. These options will vest if the employees remain in service for a period of three years from the grant
date and the employees can exercise the options within one year from the vesting date. If the exercise price is not
paid within one year from date of vesting, the options vested will be cancelled. The exercise price of the granted
options is equal to 100 fils per share.
The fair value of options granted during the year as determined using the Black-Scholes valuation model was 316
fils (2014: 476 fils). The significant inputs into the model were a share price of 410 fils (2014: 570 fils) at the
grant date, an exercise price of 100 fils as shown above, a standard deviation of expected share price returns of
21% (2014: 19%), option life disclosed above and annual risk free rate of 2%. The volatility measured at the
standard deviation of expected share price returns is based on statistical analysis of daily share prices over the last
three years. The weighted average remaining life of the share options was 501 days (2014: 481 days) and the
weighted average fair value of share options granted was 402 fils (2014: 500 fils).
The following table shows the movement in number of share options during the year:
2015
Number of
share options
Outstanding at 1 January
Granted during the year
Cancelled during the year
Exercised during the year
Outstanding at 31 December
2,410,645
1,821,007
(340,107)
(491,980)
3,399,565
2014
Number of
share options
2,369,156
1,259,683
(418,814)
(799,380)
2,410,645
The expense accrued on account of share based compensation plans for the year amounts to KD 461 thousand
(31 December 2014: KD 406 thousand) and is included under staff costs in the consolidated statement of profit or
loss. During the year certain employees have exercised their stock options of 492 thousand shares (2014: 799
thousands shares) and these shares have been issued from treasury shares held by the Bank.
24
INVESTMENT
PROPERTIES
17.
17. 17. INVESTMENT
INVESTMENT
PROPERTIES
PROPERTIES
The
movement
ininvestment
the investment
properties
as follows:
The
The movement
movement
in
in the
the
investment
properties
properties
is
is as
asis
follows:
follows:
89
NOTES
NOTES
NOTES
TO
TO THE
THE
TO THE
CONSOLIDATED
CONSOLIDATED
CONSOLIDATED
FINANCIAL
FINANCIAL
FINANCIAL
STATEMENTS
STATEMENTS
STATEMENTS
BOUBYAN
BANK K.S.C.P
AND SUBSIDIARIES
BOUBYAN
BANK
K.S.C.P
AND SUBSIDIARIES
BOUBYAN
BANK
K.S.C.P
AND SUBSIDIARIES
TO
THETO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTES
THE CONSOLIDATED
FINANCIAL
STATEMENTS
NOTES NOTES
TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
27.
RELATED
PARTY
TRANSACTIONS
27.
RELATED
PARTY
TRANSACTIONS
RELATED
PARTY
TRANSACTIONS
Relatedcomprise
parties
the
majorthe
shareholders,
of board
directors,
entities controlled
by
them by
or
under
their
Relatedcomprise
parties
comprise
major
shareholders,
of directors,
entities
controlled
them or
under their
Related parties
the
major
shareholders,
board
of board
directors,
entities
controlled
by them
or under
their
joint associates,
control,
key management
personnel
and
their
close
family
and theCompany
Parent
joint associates,
control,
associates,
key
management
personnel
and
their
closemembers
family
and theCompany
Parent Company
joint control,
key management
personnel
and their
close
family
members
and
the members
Parent
their
board
members,
key management
personnel,
branches,
associates
and subsidiaries.
Balances
with
including
their
board
members,
key management
personnel,
branches,
associates
and subsidiaries.
Balances
with
includingincluding
their board
members,
key
management
personnel,
branches,
associates
and subsidiaries.
Balances
with
relatedarise
parties
from
commercial
transactions
in thecourse
normal
business
on an
arm’s
length
andbasis and
related
parties
arise
from
commercial
in the
normalofcourse
business
onbasis
an
arm’s
length
related parties
fromarise
commercial
transactions
in thetransactions
normal
ofcourse
business
on an of
arm’s
length
andbasis
are included
within
thewithin
following
financial
information
captions:captions:
arethe
included
the following
financial
information
are included
within
following
financial
information
captions:
Number
board of board
Number
Number of
board of
member
or
executive
Number
relatedof related
member
or executive
Number
member or
executive
Number
of
relatedof
officers officers officers
parties parties parties
2014
2014
2014
2015
2015
2015
2014
2015
2014 2015
2014
2014 2015
2015
2015 2014
2015 2014
KD’000 KD’000
KD’000
KD’000
KD’000 KD’000
Islamic financing
to customers
financing
to customers
Islamic financing
toIslamic
customers
8
Depositors’
accounts accounts
Depositors’
Depositors’
accounts
16
ofLetters
guarantee
and
lettersand
of letters
credit of credit
of guarantee
Letters ofLetters
guarantee
and letters
of credit
1
RevenuesRevenuesRevenues
Expenses ExpensesExpenses
8 10
16 15
1 1
8 10 3
16 15 8
1 1 -
10 13
15 8
1 -
Parent Company
Parent Company
Parent Company
fromDue
banks
from banks
Due fromDue
banks
Due to banks
Due to banks
Due to banks
RevenuesRevenuesRevenues
Expenses ExpensesExpenses
4,650 4,650
3,918
1 4,6503,918
31
3,918
32,932 32,932
53,059
8 32,932
8
53,059
53,059
- 43
18
- 43 18 43 18
96103 96103
103
96
(6)(17) (6)(17)
(17)
(6)
8,366 8,366
72,021
8,366
72,021 72,021
42,554 42,554
124,310
42,554
124,310 124,310
234271 234271
271
234
(290) (290)
(246)
(290)(246)
(246)
Theholds
Group
holds
collaterals
against finance
Islamic
finance
toparties
relatedto
inparties
the
form
ofand
shares
real and real
The
Group
holds collaterals
againstfacilities
Islamic facilities
finance
related
in the
form
shares
The Group
collaterals
against
Islamic
to
relatedfacilities
inparties
the form
of shares
realofand
estate.
An
estimate
of value
the fair
value
collaterals
held Islamic
against
Islamic
finance
toparties
relatedto parties
estate.
An fair
estimate
of
fairof value
collaterals
heldfinance
against facilities
Islamic facilities
finance
facilities
related parties
estate. An
estimate
of the
of the
collaterals
heldof against
to related
to KD
5,713
thousand
as at 31 December
2015
(312015
December
2014:
4,770KD
thousand).
amounted
to KD
as2015
at 31(31
December
(31KD
December
2014:
4,770 thousand).
amountedamounted
to KD 5,713
thousand
as5,713
at 31thousand
December
December
2014:
4,770KD
thousand).
Compensation
of key management
personnel:
of key
management
personnel:
Compensation
ofCompensation
key management
personnel:
ofDetails
compensation
for key management
comprise
the following:
of compensation
for comprise
key management
comprise
the following:
Details ofDetails
compensation
for
key management
the following:
2015 2014
2014
2015 2014
2015
KD’000 KD’000
KD’000
KD’000
KD’000 KD’000
Short-term
benefits benefits
Short-term
Short-term
benefits
Post-employment
Post-employment
Post-employment
benefits benefits benefits
Share
based
compensation
Share
based compensation
Share based
compensation
1,790
373
398
2,561
1,790 1,780
1,790 1,780
373 283
373 283
398 279
398 279
2,561 2,342
2,561 2,342
1,780
283
279
2,342
Senior executive
officers
also
participate
in the share
Group’s
share
based
payment
programme
(see
26).note 26).
Senior executive
officers
participate
in the
Group’s
share
based payment
programme
Senior executive
officers
also
participate
in also
the Group’s
based
payment
programme
(see note
26). note(see
28.
28.
CONTINGENCIES
AND COMMITMENTS
28.
CONTINGENCIES
AND COMMITMENTS
CONTINGENCIES
AND COMMITMENTS
At the financial
reporting
date
there
were
outstanding
contingencies
and commitments
in
the ordinary
At the financial
reporting
date
there
were
outstanding
and
commitments
entered
in the ordinary
At the financial
reporting
date there
were
outstanding
contingencies
andcontingencies
commitments
entered
inentered
the ordinary
ofcourse
business
inofrespect
the following:
of business
inofrespect
of the following:
course ofcourse
business
in
respect
the following:
2015 2014
2014
2015 2014
2015
KD’000KD’000 KD’000
KD’000
KD’000 KD’000
Guarantees
Guarantees
Guarantees
Acceptances
and
ofletters
credit of credit
Acceptances
and
Acceptances
and letters
of letters
credit
Other commitments
Other commitments
Other commitments
184,644172,768 172,768
172,768
184,644 184,644
49,756 43,120 43,120
49,756 49,75643,120
914
3,812 914
3,812 3,812 914
238,212216,802 216,802
216,802
238,212 238,212
90
Operating
lease commitments:
Operating
lease commitments:
Operating
lease commitments:
Future minimum
lease payments:
Future
minimum
lease payments:
Future minimum
lease
payments:
2015 2014
2014
2015 2014
2015
KD’000KD’000 KD’000
KD’000
KD’000 KD’000
Within
year one year
Within
Within one
year one
yearmore
but not
than
fivethan
yearsfive years
one
year
but
more
After oneAfter
year one
butAfter
not
thanmore
fivenot
years
Total operating
lease expenditure
contracted
for
at thefor
reporting
date
Total
operating
lease
expenditure
contracted
at the reporting
date
Total operating
lease
expenditure
contracted
for at the
reporting
date
2,400
5,259
7,659
2,400 1,993
2,400 1,993
5,259 7,761
5,259 7,761
7,659 9,754
7,659 9,754
1,993
7,761
9,754
29.
SEGMENT REPORTING
Operating segments are identified on the basis of internal reports that are regularly reviewed by the decision
makers in order to allocate resources to the segments and to assess their performance. The operating segments
are divided as either business segments or geographical segments.
Business Segments
For management purposes, the Bank is organized into the following four major business segments:
Consumer banking: Provides a diversified range of products and services to individuals and institutional
customers. The range includes consumer finance, credit cards, deposits and other branch related services.
Corporate banking: Provides Murabaha, Ijarah, trade service and other related services to business and
corporate customers.
Investment banking: Principally handling direct investments, investment in associates, local and international
real estate investment and asset management.
Treasury: Principally handling local and international Murabaha and other Islamic financing, primarily with
banks, as well as the management of the Bank’s funding operations.
Group centre: Includes other group activities and residual in respect of transfer pricing and inter segment
allocation.
2015
Net financing income/(loss)
Operating income/(loss)
Depreciation
Net profit/ (loss) for the year
Total assets
Total liabilities
2014
Net financing income/(loss)
Operating income/(loss)
Depreciation
Net profit/(loss) for the year
Total assets
Total liabilities
Consumer Corporate Investment
banking
banking
banking
KD’000
KD’000
KD’000
47,293
27,758
(1,837)
313
49,339
34,490
2,392
(1,571)
(50)
(79)
27,232
27,357
(5,803)
1,004,871
1,381,277
175,623
1,034,387
258,201
20,009
Consumer
banking
KD’000
36,952
38,440
(1,248)
20,548
791,539
782,442
Corporate
banking
KD’000
24,572
29,476
(57)
18,447
1,176,156
190,718
25
25
Investment
banking
Treasury
KD’000
KD’000
(1,895)
4,980
(247)
5,899
6,332
(54)
(9)
118
5,983
192,601
520,509
19,115 1,344,421
Group
centre
Total
KD’000
KD’000
1,503
79,342
313
(1,145)
91,353
(926)
(2,636)
(19,477)
35,185
(26,263) 3,132,885
1,878 2,812,086
Group
centre
KD’000
1,599
(1,742)
(810)
(16,591)
(32,875)
10,132
Total
KD’000
66,208
(247)
78,405
(2,178)
28,505
2,647,930
2,346,828
Geographical segment
In presenting information on the basis of geographical areas, revenue is based on the geographical location of
customers and assets are based on the geographical location of assets.
2015
Assets
Non-current assets
(excluding financial instruments)
Liabilities and equity
Segment income/(expenses)
2014
Assets
Non-current assets
(excluding financial instruments)
Liabilities and equity
Segment income/(expenses)
Middle East &
North Africa
KD’000
North
America
KD’000
Europe
KD’000
Asia
KD’000
2,897,131
3,102
142,559
90,093
3,132,885
667
56,348
3,132,885
91,353
52,442
3,131,880
91,678
40
Middle East &
North
North Africa
America
KD’000
KD’000
3,906
1,005
(1,032)
Europe
KD’000
Asia
KD’000
Total
KD’000
Total
KD’000
2,425,562
3,195
131,830
87,343
2,647,930
46,309
2,644,560
78,736
285
5,774
3,370
917
(1,533)
52,083
2,647,930
78,405
26
25
Treasury
KD’000
4,625
6,277
(10)
5,876
597,377
1,497,611
27.
91
For ended
the year
31ended
December
2015
For
the
year
2015
For the year
31ended
December
201531 December
30.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
30.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
30.1
Introduction and overview
Risk is inherent in the Group’s activities but is managed in a structured, systematic manner through a Group risk
policy that embeds comprehensive risk management into organisational structure, risk measurement and
monitoring processes. The overall risk management direction and oversight is provided by the Board of
Directors and Board Risk Committee with the support of the Management Executive Committee and the
Group’s Risk Management functions.
30.2
Credit risk (Continued)
As part of its overall risk management, the Group uses financial instruments to manage exposures resulting from
changes in foreign exchange and equity risks. Collateral is used to reduce the Group’s credit risk.
The Group’s comprehensive risk management framework has specific guidelines that focus on maintaining a
diversified portfolio to avoid excessive concentration of risks.
Credit risk
Credit risk is the risk that counterparty will cause a financial loss to the Group by failing to discharge an
obligation. Credit risk arises in the Group’s normal course of business.
All policies relating to credit are reviewed and approved by the Board of Directors.
Credit limits are established for all customers after a careful assessment of their creditworthiness. Standing
procedures, outlined in the Group’s Credit Policy Manual, require that all credit proposals be subjected to
detailed screening by the respective credit risk functions. Whenever necessary, Islamic facilities are secured by
acceptable forms of collateral to mitigate the related credit risks.
In accordance with the instructions of the Central Bank of Kuwait, setting out the rules and regulations
regarding the classification of credit facilities, the Group has formed an internal committee comprising
competent professional staff and having as its purpose the study and evaluation of the existing credit facilities of
each customer of the Group. This committee, which meets regularly throughout the year, is required to identify
any abnormal situations and difficulties associated with a customer’s position which might cause the debt to be
classified as irregular, and to determine an appropriate provisioning level.
The Group further limits risk through diversification of its assets by industry sector. In addition, all credit
facilities are continually monitored based on a periodical review of the credit performance and account rating.
92
Maximum exposure to credit risk (Net exposure after covered collateral)
An analysis of Islamic financing to customers and contingent liabilities before and after taking account of collateral
held or other credit enhancements is as follows:
2014
2015
Gross
Net
Gross
Net
exposure
exposure
exposure
exposure
KD’000
KD’000
KD’000
KD’000
Contingent liabilities
2,171,794
238,212
1,375,208
204,459
1,805,115
216,802
1,157,148
182,624
Collateral and other credit enhancements
The amount, type and valuation of collateral are based on guidelines specified in the risk management
framework. The main types of collateral accepted includes real estate, shares, cash collateral and bank
guarantees. The revaluation and custody of collaterals are performed independent of the business units. The
Group may also obtain guarantees from parent companies for financing provided to their subsidiaries.
27.
RELATED
PARTY
PARTY
TRANSACTIONS
NOTES RELATED
TO
NOTES
THE
CONSOLIDATED
TO
THETRANSACTIONS
CONSOLIDATED
STATEMENTS
STATEMENTS
The27.
Group’s
financial
assets
andFINANCIAL
off-balanceFINANCIAL
sheet
items, before
taking into account any collateral held or credit
Related
parties
Related
comprise
the
comprise
major
shareholders,
the
major shareholders,
board of directors,
board of
entities
directors,
controlled
entitiesbycontrolled
them or under
by them
their
or under their
For the year
For
ended
the
31
year
December
ended
31
2015
December
2015
enhancements
can
beparties
analysed
by the
following
geographic
regions:
joint control,joint
associates,
control,key
associates,
management
key management
personnel and
personnel
their close
andfamily
their close
members
family
andmembers
the Parent
andCompany
the Parent Company
including
including
board members,
their
board
key
members,
management
key management
personnel, branches,
personnel,
associates
branches,
and
associates
subsidiaries.
and subsidiaries.
Balances with
Balances with
27.
RELATED
27. their
RELATED
PARTY
TRANSACTIONS
PARTY
TRANSACTIONS
Middle East & North
related
related
arise
parties
from
commercial
arise
fromshareholders,
transactions
commercial
in
transactions
the normal
incourse
the normal
of
business
course
on
of an
business
arm’s
length
on anby
arm’s
basis
and
length
basistheir
and
Relatedparties
parties
Related
comprise
parties
the
comprise
major
the major
shareholders,
board
of directors,
board
of
entities
directors,
controlled
entities
by
controlled
them
them
their
or under
North
Africa
America
Europe
Asia or under
Total
are
within
included
the following
within
the
financial
following
information
financialand
captions:
information
captions:
jointincluded
control,are
joint
associates,
control,
key
associates,
management
key management
personnel
personnel
their
close
and
family
their
close
members
family
and
members
the
Parent
and
Company
the
Parent
Company
KD’000
KD’000
KD’000
KD’000
KD’000
including
their
including
board members,
their board
key
members,
management
key
management
personnel,
branches,
personnel,
branches,
and
associates
subsidiaries.
and subsidiaries.
Balances with
Balances with
Number
of board
Number
of associates
board
2015
related
parties
related
arise
parties
from commercial
arise
from transactions
commercial
in
transactions
the
normal
incourse
the
normal
of business
course
on
of an
business
arm’s
length
on an arm’s
basis and
length basis and
member
or executive
member
or executive
Number
of related
Number
of related
Cash and
cash
equivalents
(excluding
are included are
within
included
the following
within the
financial
following
information
financial
captions:
information
captions:
officers
officers
cash on hand)
389,441
2,543 parties47,494parties 183
439,661
2014
2014 25,800
2014
20142014
2015 of board
2015- of board
2015
2015 2015
2015
Number
Number
Due from banks
192,276
218,076 2014
KD’000
KD’000
member
or executive
member -or executive
Number of related
Number
related
2,167,458
3,351 of
985 KD’000
2,171,794 KD’000
officers
officers
parties
Available
for
sale
42,897
8,089
96,805
Islamic
financing
Islamic
to investments
customers
financing to (Sukuk)
customers
10
10
1 parties
1
4,650
4,650
8
83
3 45,819
3,918
3,918
2014
2014
2014
2014
2014
2014
2015
2015
2015
2015
2015
Other assets
(excludingaccounts
accrued income
Depositors’
accounts
Depositors’
15
15
8
8
32,932
32,932
16
16
8
8 2015
53,059
53,059
KD’000
and prepayments)
Letters
of guarantee
Letters and
of guarantee
letters of and
credit
letters of credit 7,746
7,746
11118
18
1
-- -KD’000
43-- KD’000
43 KD’000
Revenues
Revenues
103
103
96
96
2,799,818
2,934,082
Islamic financing
Islamic
to customers
1082,543
10
1 3 46,987
1
4,650
4,650
8
3 84,734
3,918
3,918
Expenses
Expenses accounts
(17)
(17)
(6)
(6)
Contingentaccounts
liabilities
226,094
281
8,025
234,400
Depositors’
Depositors’
15
15
8 8 53,059
8
32,932
32,932
16
168
53,059
Commitments
3,812
Letters
of guarantee
Letters and
of guarantee
letters of and
credit
letters of credit 3,812
11118
18
1
-- 43-43
Parent
Company
Parent
Company
Revenues
Revenues
103
103
96
96
Total credit
risk exposure
3,029,724
2,543
85,015
55,012
3,172,294
Due
from banks
Due
from banks
8,366
8,366
72,021
72,021
Expenses
Expenses
(17)
(17)
(6)
(6)
Due to banks Due to banks
42,554
42,554
124,310
124,310
Middle East &
North
Revenues
Revenues
271
271
234
234
Parent Company
Parent Company
North Africa
America
Europe
Asia
Total
Expenses
Expenses
(290)
(290)
(246)
(246)
Due from banks
Due from banks
8,366
8,366
72,021
72,021
KD’000
KD’000
KD’000
KD’000
KD’000
42,554
42,554
124,310
124,310
The
The
Group
collaterals
holdsagainst
collaterals
Islamic
against
finance
Islamic
facilities
finance
to related
facilitiesparties
to related
in theparties
form of
in 234
the
shares
form
andofreal
shares and real
2014Group holds
Revenues
Revenues
271
271
234
estate.
An cash
estimate
estate.
An
of estimate
the (excluding
fair value
of theoffair
collaterals
value ofheld
collaterals
against held
Islamic
against
finance
Islamic
facilities
finance
to
facilities
related parties
to
related parties
Cash and
equivalents
Expenses
Expenses
(290)
(290)
(246)
(246)
amounted
to amounted
KD 5,713to
thousand
KD 5,713
as thousand
at 31 December
as265,623
at 312015
December
(31 December
2015 (312014:
December
KD
4,770
2014:
thousand).
KD
4,770 thousand).
cash on hand)
3,164
18,321
3,158
290,266
DueGroup
from banks
224,431
39,162
- form
263,593
The
holds
The Group
collaterals
holdsagainst
collaterals
Islamic
against
finance
Islamic
facilities
finance
to related
facilities
parties
to related
in theparties
form of
in the
shares
and
ofreal
shares and real
Compensation
Compensation
of key
management
of key
personnel:
personnel:
estate.
estimate
estate.
of
estimate
the fair
value
ofmanagement
the
offair
collaterals
value
ofheld
collaterals
against held
Islamic
finance
Islamic
facilities
finance
to
facilities
related1,805,115
parties
to related parties
IslamicAn
financing
toAn
customers
1,797,440
- against
4,423
3,252
amounted
to
amounted
KD
to
thousand
KD 5,713
as thousand
at 31 December
as at
312015
December
(31 December
2015
2014:
December
KD 4,770
2014:
thousand).
KD
4,770 thousand).
Available
for
sale5,713
investments
28,842
- (31
41,050
77,982
Details
of compensation
Details
of compensation
for key(Sukuk)
management
for key management
comprise
thecomprise
following:
the
following: 8,090
Other
assets
(excluding
accrued
income
2014
2014
2015
2015
Compensation
Compensation
of key management
of key management
personnel: personnel:
and prepayments)
5,558
- KD’000
5,558 KD’000
KD’000
KD’000
2,321,894thecomprise
3,164
47,460
2,442,514
Details of compensation
for key management
for key management
comprise
following:
the following:69,996
Short-term
Short-term
1,780
1,780
1,790
1,790
Contingentbenefits
liabilities benefits
208,377
371 2015
7,140 2015
215,888
2014
2014
Post-employment
Post-employment
benefits
benefits
283
373 KD’000
373283
Commitments
914
- KD’000
914 KD’000
KD’000
Share
Share
based compensation
279
398
398279
Totalbased
creditcompensation
risk exposure
2,531,185
3,164
70,367
54,600
2,659,316
2,342
2,342
2,561
2,561
Short-term benefits
Short-term benefits
1,780
1,780
1,790
1,790
Post-employment
Post-employment
benefits
benefits
283
373
373283
Seniorbased
executive
Senior
officers
executive
also officers
participate
alsoinparticipate
the Group’s
in share
the Group’s
based payment
share based
programme
payment (see
programme
note 26).(see398
note
Share
compensation
Share
based
compensation
27926).
279
398
2,342
2,342
2,561
2,561
28.
CONTINGENCIES
28.
CONTINGENCIES
AND COMMITMENTS
AND COMMITMENTS
At
the executive
financial
At
the
reporting
financial
date
reporting
there were
date
outstanding
there
wereincontingencies
outstanding
and commitments
and commitments
entered
in 26).
the
entered
ordinary
in 26).
the ordinary
Senior
Senior
officers
executive
also
officers
participate
also
inparticipate
the
Group’s
share
the Group’s
based contingencies
payment
share
based
programme
payment
(see
programme
note
(see
note
course of business
courseinofrespect
business
of in
therespect
following:
of the following:
2014
2014
2015
2015
28.
CONTINGENCIES
28.
CONTINGENCIES
AND COMMITMENTS
AND COMMITMENTS
KD’000
KD’000
KD’000
KD’000
At the financial
At the
reporting
financial
date
reporting
there were
dateoutstanding
there were contingencies
outstanding contingencies
and commitments
and commitments
entered in the
entered
ordinary
in the ordinary
course of business
courseinofrespect
business
of in
therespect
following:
of the following:
Guarantees Guarantees
172,768
172,768
184,644
184,644
2014
2014
2015
2015
AcceptancesAcceptances
and letters ofand
credit
letters of credit
43,120
43,120
49,756
49,756
KD’000
KD’000
KD’000
KD’000
Other commitments
Other commitments
914
3,812
3,812914
216,802
216,802
238,212
238,212
172,768
172,768
184,644
184,644
AcceptancesAcceptances
and letters ofand
credit
letters of credit
43,120
43,120
49,756
49,756
Operating
lease
Operating
lease commitments:
Other commitments
Othercommitments:
commitments
914
3,812
3,812914
Transactions and outstanding risk exposures are quantified and compared against authorised limits, whereas
non- quantifiable risks are monitored against policy guidelines and key risk and control indicators. Any
discrepancies, excesses or deviations are escalated to management for appropriate action.
riskFor
is the
managed
by diversification
the portfolio. The 20 largest facilities outstanding as a percentage of gross
For the year
ended
31
year
December
ended
312015
Decemberof
2015
BOUBYAN
BOUBYAN
BANK
AND
K.S.C.P
SUBSIDIARIES
AND
SUBSIDIARIES
facilities
as atK.S.C.P
31 BANK
December
2015
are
19.6%
(2014: 22.1%).
93
In accordance with the Central Bank of Kuwait’s directives, the Group has implemented a comprehensive
system for the measurement and management of risk. This methodology helps in reflecting both the expected
loss likely to arise in normal circumstances and unexpected losses, which are an estimate of the ultimate actual
loss based on statistical models. Information compiled from all internal business groups are closely examined
and analysed to identify, manage and control risks.
30.2.1
Risk Concentration of the maximum exposure to credit risk
Concentrations of credit risk arise from exposure to customers having similar characteristics in terms of the
geographic location in which they operate or the industry sector in which they are engaged, such that their
ability to discharge contractual obligations may be similarly affected by changes in political, economic or other
conditions.
BOUBYAN
BOUBYAN
BANK K.S.C.P
BANK
AND
K.S.C.P
SUBSIDIARIES
AND SUBSIDIARIES
Credit
riskCONSOLIDATED
can
due toFINANCIAL
a significant
concentration
of Group’s assets to any single counterparty. This
NOTES TO
NOTES
THE
TO also
THEarise
CONSOLIDATED
FINANCIAL
STATEMENTS
STATEMENTS
The Group is exposed to credit risk, market risk, liquidity risk and operational risk.
30.2
30.2.2
94
27. 31 December
RELATED
PARTY
TRANSACTIONS
27.
RELATED
TRANSACTIONS
Related For
parties
comprise
the
Related
shareholders,
parties
comprise
board
ofkey
the
directors,
major
shareholders,
entities
controlled
board
by
oftheir
them
directors,
or under
entities
their
controlledand
by the
them
or under
their
joint
control,
associates,
management
personnel
and
close
family
members
Parent
Company
For the year ended
2015
the
year ended
31major
December
For
2015
thePARTY
year
ended
31
December
2015
Related
partiesassociates,
comprise
the major
Related
shareholders,
parties
comprise
board
oftheir
the
directors,
major
shareholders,
entities
controlled
board
by
ofthe
them
directors,
or under
entities
their
controlled
by the
them
or
under
their
joint control,
key
management
joint
control,
personnel
associates,
and
key
management
close
family
personnel
members
and
their
Parent
close
Company
family
members
and
Parent
Company
including
their
board
members,
key management
personnel,
branches,
associates
and subsidiaries.
Balances
with
27.
RELATED
PARTY
TRANSACTIONS
27.
RELATED
PARTY
TRANSACTIONS
27.
RELATED
PARTY
TRANSACTIONS
30.
30.
FINANCIAL
INSTRUMENTS
AND
RISK
MANAGEMENT
(CONTINUED)
joint
control,
key
management
joint
control,
personnel
associates,
and
their
key
management
close
family
members
and
the
their
Parent
close
Company
family
members
andarm’s
the
Parent
Company
including
their
board
members,
key
including
management
their
board
personnel,
members,
branches,
keyboard
management
associates
and
personnel,
subsidiaries.
branches,
Balances
associates
with
and
subsidiaries.
Balances
with
related
parties
arise
from
commercial
transactions
the
normal
course
of
an
length
basis
and or under their
27.
RELATED
PARTY
TRANSACTIONS
27.
RELATED
PARTY
TRANSACTIONS
27.
RELATED
PARTY
TRANSACTIONS
Related parties
comprise
the associates,
major
Related
shareholders,
parties
comprise
board
ofthe
directors,
major
Related
shareholders,
entities
parties
controlled
comprise
by
of
thepersonnel
them
directors,
major
orinshareholders,
under
entities
their
controlled
board
of
bybusiness
directors,
them
oronunder
entities
their
controlled
by them
including
their
board
members,
key
including
management
their
board
personnel,
members,
branches,
key
management
associates
and
personnel,
subsidiaries.
branches,
Balances
associates
with
and
subsidiaries.
Balances
with
related
parties
arise
from
commercial
related
transactions
parties
arise
in the
the
from
normal
commercial
course
transactions
ofby
business
on
inshareholders,
the
an
arm’s
normal
length
course
basis
of
business
and
an arm’s
length
basis
and
are
included
within
following
financial
information
captions:
Related
partiesassociates,
comprise
the major
Related
shareholders,
parties
comprise
board
ofkey
the
directors,
major
Related
shareholders,
entities
parties
controlled
comprise
board
of
the
them
directors,
major
or
under
entities
their
controlled
board
of
by
directors,
them
oronunder
entities
their
controlled
by the
them
or under
their
30.2
Credit risk (Continued)
joint control,
key
management
joint
control,
personnel
associates,
and
their
management
close
joint
control,
family
personnel
members
associates,
and
and
key
their
the
management
Parent
close
family
Company
personnel
members
and
and
their
the
close
Parent
family
Company
members
and
Parent
Company
30.2
Credit
risk
(Continued)
related
parties
arise
from
commercial
related
transactions
parties
arise
in the
the
from
normal
commercial
course
transactions
of key
business
on
inmanagement
the
an
arm’s
normal
length
course
basis
of their
business
and
onfamily
an arm’s
length
basisthe
and
are included
the
following
are
financial
included
information
within
captions:
following
financial
information
captions:
joint control,
keywithin
management
joint
control,
personnel
associates,
and
key
their
management
close
joint
control,
family
personnel
members
associates,
and
and
their
the
management
Parent
close
family
Company
personnel
members
and
and
the
close
Parent
Company
members
and
Parent
Company
including
theirassociates,
board
members,
key
including
management
their
board
personnel,
members,
branches,
including
key
management
associates
their
board
and
personnel,
subsidiaries.
members,
branches,
key
Balances
associates
with
personnel,
and
subsidiaries.
branches,
Balances
associates
with
and
subsidiaries.
Balances
with
Number
of
board
30.2.2 Risk Concentration of the maximum exposure to credit risk (Continued)
30.2.3
Credit
quality
per
class
ofarise
financial
assets
(Continued)
are included
within
the
following
are
financial
information
within
the
captions:
following
financial
information
captions:
including
their arise
board
members,
key
including
management
their
board
personnel,
members,
branches,
including
key
management
associates
their
board
and
personnel,
subsidiaries.
members,
branches,
key
Balances
management
associates
with
personnel,
and
subsidiaries.
branches,
Balances
associates
with
and
subsidiaries.
Balances
with
related parties
from
commercial
related
transactions
parties
arise
inincluded
from
the
normal
commercial
related
course
transactions
parties
of
business
in
on
from
the
an
normal
arm’s
commercial
length
course
transactions
basis
of
business
and
in
on
the
an
normal
arm’s
course
length
basis
of
business
and
on
an
arm’s
length
basis
and
Numberofofpast
board
Number
board
member
orof
executive
Number of related
The Group’s financial assets before taking into account any collateral held or credit enhancements, can be
Ageing
analysis
due
or in
impaired
financial
assets:
related
parties
arise the
from
commercial
related
transactions
parties
arise
inthe
from
thecaptions:
normal
commercial
related
course
transactions
parties
ofboard
business
arise
on
from
the
an
normal
arm’s
commercial
length
course
transactions
basis
of
business
and inon
the
an
normal
arm’s
course
length
basis
of business
and on an arm’s length basis and
are included
within
following
are
financial
included
information
within
following
are
financial
included
information
within
the
following
captions:
financial
information
captions:
Number
of
Number
of
board
member
or
executive
Number
member
of
related
or
executive
Number
of
related
officers
parties
analysed by the following industry sectors:
are included within the followingare
financial
included
information
within thecaptions:
following
arefinancial
included
information
within the
following
captions:
financial
information
captions:
member
or executive
Number
member
of related
or executive
Number
of related
officers
officers
parties
2014
2014
2014
2015
2015
Number of board
Number
of parties
board
Number
of 2015
board
Corporate
banking
Consumer
banking
Total
2014
2015
officers
parties
officers
parties
2014
2014
2014
2014
2014
2014
2015
2015
2015
2015
2015
KD’000
Number
board 2015
board
Number
of
board
member
orof
executive
Number
member
ofNumber
related
orof
executive
Number
member
of
related
or
executive
Number
of related
Past
due
and
Past due
and
Past
due
and
Past due
and KD’000
Past
due and
Past due and
KD’000
2014
2014Number
2014
2014
2014
2014 impaired
KD’000
2015Number
2015
2015
2015impaired
2015
KD’000
KD’000
KD’000
not
impaired
impaired
not
not
member
or executive
member
of
related
or 2015
executive
member
ofimpaired
related
or
executive
Number
of impaired
relatedKD’000
officers
parties
officers
parties
officers
parties
Islamic financing to customersKD’000
10 officers
4,650
8
3 KD’0001 parties
3,918
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000 2014
officers 2014
parties2015
officers 2015
parties
2014
2014
2014
2014
2014
2014
2014 KD’000
2015
2015
2015
2015
2015
2015
2015
Islamic
financing
to 8customers 10
10
4,650
1
4,650
3
81
3,918
3
3,918
Depositors’
accounts
15
8
32,932
16
8
53,059
2015
Trading
145,864
160,991
2014
2014
2014
2014
2014
2014
2014
2014
2014
2015
2015
2015
2015
2015
2015
2015
2015
2015
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Islamic
financing
to customers
Islamic
financing
to16
customers
10
10
4,650
1
4,650
8and
3 2,688
8
3,918
33,918
Depositors’
accounts
Depositors’
accounts
1540,254
15
32,932
832,932
Letters
letters of
credit
8
16
53,059
8
53,059
1
18 2,688
1
43
Upof
toguarantee
30
days
10,936
51,190
Manufacturing
73,327
83,672
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Depositors’
accounts
Depositors’
accounts
15
8of guarantee
and letters
of credit
Letters
guarantee
letters3 of
16
8- 3,918
53,059
8- 3,918
1credit
13,953
18
18
1and financing
18-43
43 1 32,932
Revenues
103
96
6,072
10,025
- 4,650
Islamic financingLetters
to customers
Islamic
financing
to customers
Islamic
to
customers
10
10 16
4,650
10
4,650
31 –of60
days
8
81
3 15
8 1 32,932
353,059
3,918
Banking and other financial institutions
542,842
669,345
Letters
of guarantee
and letters
of credit
Letters
of90
guarantee
letters
of110,597
credit
-53,059
11,783
18
- 3,918
18
1and financing
1-- 32,932
43
-- 32,932
43
Revenues
Revenues
103
103
96
96
Expenses
(17)
(6)
Islamic
financing
to
customers
Islamic
financing
to
customers
Islamic
to
customers
12,380
- 32,932
10
1
10
4,650
1
10
4,650
1
4,650
8
3
8
3,918
3
8
3
3,918
Depositors’
accounts
Depositors’
accounts
Depositors’
accounts
15
8
15
8
15
8
16
8
16
8
16
53,059
8
53,059
61
–
days
Construction
33,503
37,306
Revenues
Revenues
103
103
Expenses
Expenses
(17)
(17)433,609 32,932
(6)16
(6) 8Depositors’
accounts
Depositors’
accounts
Depositors’
accounts
15
15
Letters of guarantee
and letters of credit
and
of
Letters
and
of 15
credit
16
816
818
53,059
8- 18 96
53,059
3,111 32,932
1credit of guarantee
143498 32,932
- 96
1 43
18
1
18- letters53,059
1 891 –letters
180 days
Real Estate
503,037
648,343
Expenses
Expenses
(17) 1 43
(17)43
Parent
Company
Letters
of guarantee
Letters
of guarantee
and
letters
ofLetters
of guarantee
and
credit
1credit
143
18
- (6) 1 - 18 (6) 18
1
1- letters of11,628
Revenues
Revenues
Revenues
103
103
103
96
96
96
1,598
13,226
More
than
180
days
Retail
764,658
967,672
Parent CompanyRevenues
Parent
Company
Due
from
banks Revenues
8,366 96
72,021
Revenues
103
103
103
96
96
Expenses
Expenses
Expenses
(17) 16,672
(17)
(17)
(6)
(6)
(6)
56,923
14,814
4,709
73,595
19,523
Government
182,914
165,776
Parent
Company
Parent
Company
Due from
banks Expenses
from
banks Expenses
8,366 (6)
8,366 (6)
72,021
72,021
Due to
banks
42,554
124,310
Expenses
(17)
(17)
(17)
(6)
Others
196,369
200,977
Due from
banks Parent Company
Due
from
banks Parent Company
8,366
8,366
72,021
72,021
to banks
to banks
42,554
42,554
124,310
124,310
Revenues
271
234
Parent Company
Corporate
banking
Consumer
banking
Total
2,442,514
2,934,082
to banks
to banks Parent
42,554
42,554
124,310
124,310
Revenues
Revenues
271
271
234
234
Expenses
(246)
Parent
Company
Parent
Company
Company
Due from
banks Due
Due from
banks Due
Due from
banks
72,021
72,021
72,021
Past due and
Past
due and 8,366
Past due and
Past
due and 8,366
Past
due and (290)
Past
due and 8,366
BOUBYAN BOUBYAN
BANK K.S.C.P
BANK
AND
K.S.C.P
SUBSIDIARIES
AND SUBSIDIARIES
Revenues
Revenues
271
271
234
234
Expenses
Expenses
(290)
(290)
(246)
(246)
Due
from
banks
Due
from
banks
Due
from
banks
8,366
8,366
8,366
72,021
72,021
72,021
to
banks
to
banks
to
banks
42,554
42,554
42,554
124,310
124,310
124,310
not
impaired
impaired
not
impaired
impaired
not
impaired
impaired
30.2.3
Credit
quality
per
class
of
financial
assets
BOUBYAN BOUBYAN
BANK K.S.C.P
BANK
AND
K.S.C.P
SUBSIDIARIES
AND SUBSIDIARIES
Expenses
(290)
(290)
(246)
(246)
The Group holds
collaterals
against Islamic
finance
to related parties
in the form
of
shares and124,310
real
Due
to banks Expenses
Due
to banks
Due
to banks KD’000
42,554
42,554
42,554
124,310
124,310
Revenues
Revenues
Revenues
271
271
271
234 facilities
234
234
NOTES TO In
THE
NOTES
CONSOLIDATED
TOits
THE
CONSOLIDATED
FINANCIAL
FINANCIAL
STATEMENTS
KD’000
KD’000
KD’000
KD’000
KD’000
managing
portfolio,
the
Group utilises
ratings andSTATEMENTS
other measures and techniques which seek to take
The Group holdsRevenues
collaterals against
The2014
Islamic
Group
holds
finance
collaterals
facilities
against
to related
finance
in thefacilities
form(290)
of to
shares
related
andparties
real
in the
form
of
real
estate.
An estimate
of the fair
valueIslamic
ofparties
collaterals
held
against
Islamic
finance
facilities
to shares
relatedand
parties
Revenues
Revenues
271
271
271
234
234
234
Expenses
Expenses
Expenses
(290)
(290)
(246)
(246)
(246)
NOTES
TOended
THE
NOTES
CONSOLIDATED
TO
THE2015
CONSOLIDATED
FINANCIAL
FINANCIAL
STATEMENTS
STATEMENTS
For
the
year
For
the
31
year
December
ended
31
December
2015
account
of
relevant
aspects
of
perceived
risk.
Credit
exposures
classified
as
‘High’
quality
are
those
where
the
BOUBYAN BOUBYAN
BANK K.S.C.P
BANK
AND
K.S.C.P
SUBSIDIARIES
AND SUBSIDIARIES
The
Group
holdsExpenses
collaterals
against
The
Islamic
Group
holds
finance
collaterals
facilities
against
to related
finance
in the
form(31
of
to
shares
related
and
parties
real
in 4,770
the
of
shares
real
estate.
An estimate
of the fair
value
estate.
ofAncollaterals
held
of thousand
theagainst
fair
value
Islamic
ofparties
collaterals
finance
facilities
held
against
toDecember
related
Islamic
parties
finance
facilities
to15,015
relatedand
parties
amounted
toestimate
KD
5,713
as
atIslamic
31
December
2015
2014:
KD
thousand).
Expenses
Expenses
(290)
(290)
(246)
(246)
(246) - (290)
5,883
-facilities
9,132
- form
Up to 30
days
For the year ended
For the
31 year
December
ended
2015
31 December
ultimate
risk
of financial
loss from2015
the obligor’s failure to discharge its obligation is assessed to be low. These
estate.
Antoestimate
of
the fair
value
estate.
ofAn
collaterals
held
of
the
against
fair
value
Islamic
of
collaterals
finance
facilities
held
against
toDecember
related
Islamic
parties
finance
facilities
to inrelated
parties
amounted
KD
5,713
thousand
amounted
ascollaterals
atfacilities
31
December
toestimate
KD
5,713
2015
thousand
(31
December
as
atfacilities
31
2014:
December
4,770
2015
thousand).
(31
2014:
4,770
thousand).
The Group holds
collaterals
against
The
Islamic
Group
holds
finance
against
toThe
related
Group
Islamic
parties
holds
finance
in
collaterals
the
form
against
ofKD
toshares
related
Islamic
real
finance
in
the
facilities
form
oftoKD
shares
related
parties
real
the form
of shares and
NOTES RELATED
TO include
THE
NOTES
CONSOLIDATED
TO THE
CONSOLIDATED
FINANCIAL
FINANCIAL
STATEMENTS
STATEMENTS
31 – 60 days
779
- andparties
3,587
- and
4,366
- real
27.
27.
PARTY
RELATED
TRANSACTIONS
PARTY
TRANSACTIONS
facilities
to AND
corporate
entities
with
financial condition,
risk indicators and capacity to repay which are
amounted
to KD
5,713
thousand
amounted
ascollaterals
atof
31the
December
to
KD
5,713
2015
thousand
(31
December
asthe
at
31
2014:
December
KD
4,770
2015
thousand).
(31
December
2014:
KD
4,770
thousand).
Compensation
ofvalue
key
management
personnel:
BOUBYAN
BOUBYAN
BANK
K.S.C.P
BANK
K.S.C.P
SUBSIDIARIES
AND
SUBSIDIARIES
The
Group
holds
collaterals
against
The
Islamic
Group
holds
finance
facilities
against
to
The
related
Group
Islamic
parties
holds
finance
in
collaterals
facilities
form
against
of
to
shares
related
Islamic
and
parties
real
finance
in
the
facilities
form
of
shares
related
and
parties
real
in
the
form
of
real
estate.
An
estimate
of
the
fair
estate.
value
of
An
collaterals
estimate
held
against
fair
estate.
Islamic
An
of
collaterals
estimate
finance
facilities
of
held
the
against
fair
to
value
related
Islamic
of
parties
collaterals
finance
facilities
held
against
to
Islamic
parties
finance
facilities
to shares
relatedand
Related
Related
comprise
parties
major
comprise
shareholders,
the
major
board
shareholders,
ofclassified
directors,
board
of directors,
controlled
entities
by
controlled
them orallunder
by them
their
or under their
61
–
90
days
1,709
1,798
3,507
- parties
27.
RELATED
27.
RELATED
TRANSACTIONS
PARTY
TRANSACTIONS
For the year
ended
Forparties
the
31PARTY
year
December
ended
2015
31the
December
2015
considered
to
be good
to
excellent.
Credit
exposures
asentities
‘Standard’
quality
comprise
other
facilities
Compensation
keyatmanagement
personnel:
ofvalue
key
management
personnel:
estate.
Antoestimate
of thousand
the fairofestate.
value
of
AnDecember
collaterals
of
held
the
against
fair
estate.
Islamic
of2014:
collaterals
estimate
finance
facilities
of
held
the
against
fair
toDecember
value
related
ofparties
collaterals
finance
facilities
held (31
against
to related
Islamic
parties
finance
facilities
to related parties
amounted
KD
5,713
amounted
as
31
toestimate
KDCompensation
5,713
2015
thousand
(31
December
amounted
as
at An
31
to
December
KDKD
5,713
4,770
2015
thousand
thousand).
(31
as Islamic
at- 31
2014:
December
KD 4,770
2015
thousand).
December
2014:
KD 4,770
thousand).
parties
Related
comprise
parties
the
major
comprise
shareholders,
the
major
board
shareholders,
of
directors,
board
entities
of
directors,
controlled
entities
by
controlled
them
or
under
by
them
their
or
under
their
joint
control,
associates,
joint
control,
key
associates,
management
key
personnel
management
and
personnel
their
close
and
family
their
members
close
family
and
members
the
Parent
and
Company
the
Parent
Company
NOTES Related
TO whose
THE
NOTES
CONSOLIDATED
TO
THE
CONSOLIDATED
FINANCIAL
FINANCIAL
STATEMENTS
STATEMENTS
91
–
180
days
2,393
2,393
payment performance is fully compliant with contractual conditions and which are not impaired. The
Details
of
compensation
key
management
the2014:
following:
Compensation
ofamounted
keyatmanagement
personnel:
of as
key
personnel:
amounted
to KD
5,713 thousand
as
31 December
to KDCompensation
5,713
2015
thousand
(31
December
amounted
at management
31for
2014:
to
December
KDKD
5,713
4,770
2015
thousand
thousand).
(31comprise
December
as at 31
December
KD 4,770
2015 (31
thousand).
December 2014: KD 4,770 thousand).
jointended
control,
associates,
joint
control,
key
associates,
management
key on
personnel
management
andpersonnel
their
close
and
family
their
members
close
family
andthan
members
the that
Parent
and
Company
Parent
Company
including
their
including
board
members,
their
board
key members,
management
key
personnel,
management
branches,
personnel,
associates
branches,
associates
subsidiaries.
and
Balances
subsidiaries.
with
Balances
with
27.
RELATED
27.
RELATED
TRANSACTIONS
PARTY
TRANSACTIONS
More
180 days
16,654 the following: 1,228 2015
- 2014
17,882
For the year
For
the
31PARTY
year
December
ended
2015
31
December
2015
Details
of compensation
for key management
Details
of than
compensation
comprise
thefor
following:
keyofmanagement
comprise
ultimate
risk
of
possible
financial
loss
‘Standard’
quality
is assessed
to
beand
higher
for
thethe
exposures
Compensation
of
key
management
Compensation
personnel:
of
key
management
Compensation
personnel:
key
management
personnel:
including
their
including
board
members,
their
board
key
members,
management
key
personnel,
management
branches,
personnel,
associates
branches,
and
associates
subsidiaries.
and
Balances
subsidiaries.
with
Balances
with
related
parties
related
arise
from
parties
commercial
arise
from
transactions
commercial
in
transactions
the
normal
course
in
the
normal
of
business
course
on
of
an
business
arm’s
length
on
an
basis
arm’s
and
length
basis
and
Related
parties
Related
comprise
parties
the
major
comprise
shareholders,
the
major
board
shareholders,
of
directors,
board
entities
of
directors,
controlled
entities
by
controlled
them
or
under
by
them
their
or
under
their
8,371
16,654
14,517
3,621
22,888
20,275
Details
of
compensation
for
key
management
Details
of
compensation
comprise
the
for
following:
key
management
comprise
the
following:
2014
2014
2015
2015
classified within the ‘High’ quality range.
KD’000
KD’000
Compensation of key management
Compensation
personnel: of key management
Compensation
personnel:of key management personnel:
related
parties
related
arise
from
parties
commercial
arise
from
transactions
commercial
intransactions
the
normal
course
in the
normal
of
business
course
on
ofan
business
arm’s
length
on an
basis
arm’s
length Company
basis and
are
within
are
included
the
following
within
financial
the
following
information
financial
captions:
information
captions:
jointincluded
control,
associates,
joint
control,
key
associates,
management
key
personnel
management
and
personnel
their close
and
family
their
members
close
family
and
members
the Parent
and
Company
theand
Parent
27.
RELATED
27.
PARTY
RELATED
TRANSACTIONS
PARTY
TRANSACTIONS
2014
2014
2015 compriseKD’000
2015
KD’000
KD’000
Details of compensation for key management
comprise theforfollowing:
keyDetails
management
of compensation
comprise the
for following:
key management
the following: KD’000
are
included
within
are
included
the
following
within
financial
the
following
financial
captions:
information
captions:
including
their
including
board
members,
their
board
key
members,
management
key
personnel,
management
branches,
personnel,
associates
branches,
andentities
associates
subsidiaries.
andlines,
Balances
subsidiaries.
with
Balances
with of compensation for key management
Related
Related
comprise
parties
the
major
comprise
shareholders,
theinformation
major
board
shareholders,
directors,
board
entities
ofboard
directors,
by
controlled
them
or
under
by
them
their
underDetails
their
KD’000
KD’000
The parties
table
below
shows
the
credit
quality
by
class
of
asset
for
statement
ofcontrolled
financial
position
based
onor
the
KD’000
At the
31forDecember
2015
management
estimates
theKD’000
fair
value
of collaterals
held against
individually
past
due or 2014
Short-term
benefits
1,780
1,790
comprise
following:
keyDetails
management
of compensation
comprise the
for
following:
key management
comprise
the
following:
2014
2014
2015
2015
2015
Number
ofof
board
Number
of
related
partiescredit
related
ariserating
from
parties
commercial
arise
fromtransactions
commercial
intransactions
the
normal
course
in the
normal
of
business
course
on
ofan
business
arm’s
length
on an
basis
arm’s
and
length Company
basis and
jointGroup’s
control,
associates,
joint
control,
key
associates,
management
key
personnel
management
and
personnel
their
close
and
family
their
members
close
family
and
members
the
Parent
and
Company
the
Parent
impaired
Islamic
finance facilities KD’000
to2015
KD 7,171 thousand
(31 December
2014: KDKD’000
24,665
system.
Short-term benefits
Short-term
benefits
1,780
1,780
1,790
1,790
Post-employment
benefits
283
373thousand).
2014
2014
2014
2015
2015
Number
board
Number
of
board of related
member
orof
executive
member
orNumber
executive
Number of related
KD’000
KD’000
KD’000
KD’000
are included
within
are
included
the
following
within
financial
the
following
information
financial
captions:
information
captions:
including
their
including
board
members,
their
board
key
members,
management
key
personnel,
management
branches,
personnel,
associates
branches,
and
associates
subsidiaries.
andBalances
subsidiaries.
withBalances with
Short-term
benefitsbenefits
Short-term
1,780
1,780
1,790
1,790
Post-employment
Post-employment
benefits
283
283
373
373
Share
basedbenefits
compensation
279
398
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
member
or executive
member
orNumber
executive
of
related
Number
of related
officers
officers
parties
parties
Neither
past
due
nor
BOUBYAN
BOUBYAN
BANK
K.S.C.P
BANK
K.S.C.P
SUBSIDIARIES
AND
SUBSIDIARIES
related
partiesrelated
arise from
parties
commercial
ariseAND
from
transactions
commercial
inofficers
transactions
the
course
inofficers
theofnormal
of
business
course
onofan
business
arm’s
length
on anbasis
arm’s
and
length basis
and
Post-employment
benefits 30.3
Post-employment
benefits benefits
283
283
373
373
Share based compensation
Share
based compensation
279
279
398
398
Market
risk
2,342
2,561
parties
parties
2014
2014
2014
2014
2014
2014
Short-term
benefits
Short-term
benefits
Short-term
1,780
1,780
1,780
2015
2015
2015
2015
2015
2015
1,790
1,790
1,790
Number
ofnormal
board
Number
board
impaired
Past due or
BOUBYAN
BOUBYAN
BANK
BANK
AND
SUBSIDIARIES
AND
SUBSIDIARIES
are
included within
included
the K.S.C.P
following
the K.S.C.P
following
information
financial
captions:
information
captions:
Share
based compensation
Share
basedrisk
compensation
279
279
398
398 in market
Market
is the risk that
thebenefits
fair value
of financial instruments
will fluctuate
prices.
2,342
2,342
2,561
2,561
Short-term
benefits
Short-term
benefits
Short-term
benefits
1,780
1,780
1,780
1,790
1,790
1,790
2014
2014
2014
2014 KD’000
2014
2014
2015or
2015orNumber
2015
2015
2015
2015
Post-employment
benefits
Post-employment
benefits
Post-employment
283
283
283
373
373 due to changes
373
KD’000
member
executive
member
executive
of related
Number
of
related
KD’000
KD’000
NOTES
TO are
THE
NOTES
CONSOLIDATED
TOwithin
THE financial
CONSOLIDATED
FINANCIAL
FINANCIAL
STATEMENTS
STATEMENTS
High
Standard
impaired
Total
2,342
2,342
2,561
2,561
Market
risksPost-employment
arise
from
open
positions
currency
equity
products,
all
of which are
exposed
to general
Senior
executive
officers
also
participate
in in
the
Group’sand
share
based
payment
programme
(see
note 26).
Post-employment
benefits
Post-employment
benefits
benefits
283
283
283
373
373
373
Share
based
compensation
279
279
279
KD’000
KD’000
398
398
398and
KD’000
KD’000
officers
officers
parties
parties
NOTES
TOended
THE
NOTES
CONSOLIDATED
TOended
THE2015
CONSOLIDATED
FINANCIAL
FINANCIAL
STATEMENTS
STATEMENTS
Number
of
board
Number
of
board
For
the
year
For
the
31
year
December
31
December
2015
KD’000
KD’000
KD’000
Islamic
financing
Islamic
to customers
financing
to AND
customers
10KD’000
1 2015
1 2014
4,650
4,650 based compensation
8 SUBSIDIARIES
8
310
3 2015
3,918
3,918
BOUBYAN
BOUBYAN
BANK
K.S.C.P
BANK
K.S.C.P
SUBSIDIARIES
AND
Senior
executive
officers
also
participate
Senior
executive
in
the
Group’s
officers
share
also
based
participate
payment
in
the
programme
Group’s
share
(see
note
based
26).
payment
programme
(see
note
26).
specific
market
movements
and
changes
in
the
level
of
volatility
of
prices
such
as
foreign
exchange
rates
and
Share
Share
based
compensation
Share
based
compensation
279
279
279
398
398
398
2,342
2,342
2,342
2014
2014
2014
2014
2014
2,561
2,561
2,561
2015
2015
2015
2015
member
or
executive
member
or
Number
executive
of
related
Number
of
related
For the
year
ended
For
the
31
year
December
ended
2015
31
December
2015
Islamic
financing
Islamic
to
customers
financing
to
customers
Depositors’
accounts
Depositors’
accounts
2015
10
1
4,650
4,650
1516
15
8
8 KD’000
32,932
32,932
8
8
3
3
3,9181
3,918 KD’000
16
810
8 53,059
53,059
Senior executive officers28.
also participate
Senior
executive
in the
Group’s
officers
share
also
based
participate
payment
in2,561
the
programme
Group’s share
(see
note
based
26).
payment
programme (see
note 26).
CONTINGENCIES
AND
COMMITMENTS
equity
prices.
2,342
2,342
2,342
2,561
2,561
KD’000
KD’000
officers
officers
parties
parties
NOTES
TO
THE
NOTES
CONSOLIDATED
TO
THE
CONSOLIDATED
FINANCIAL
FINANCIAL
STATEMENTS
STATEMENTS
27.
RELATED
27.
PARTY
RELATED
TRANSACTIONS
PARTY
TRANSACTIONS
Depositors’
accounts
Depositors’
accounts
Letters
of guarantee
Letters
and
of K.S.C.P
letters
guarantee
of(excluding
credit
and K.S.C.P
letters
of credit
15
832,932
32,932
116
1
1843
18 28.
Cash
and
cash
equivalents
cash
on hand)
16
8-15
8- 53,059
53,059
1 SUBSIDIARIES
1
438-439,661
439,661
BOUBYAN
BOUBYAN
BANK
BANK
AND
SUBSIDIARIES
AND
CONTINGENCIES
AND
28.
CONTINGENCIES
AND
COMMITMENTS
At
the financial
reporting
there
were
outstanding
contingencies
commitments
entered
in the ordinary
Senior
executive
officers also participate
Senior
executive
inCOMMITMENTS
the Group’s
officers
share
alsobased
participate
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payment
executive
indate
the
programme
Group’s
officers
share
(see
also
note
participate
based
26).
payment
in theprogramme
Group’sand
share
(see
based
note 26).
payment
programme
(see note 26).
2014
2014entities
2014 controlled
2014
2014
2014
2015
2015
2015
2015- 2015
2015
Related
parties
Related
comprise
parties
the
major
comprise
shareholders,
the 1
shareholders,
of
board
by1--controlled
them
or
under
by them
their
or103
under
their CONTINGENCIES
27.
RELATED
27.
PARTY
RELATED
PARTY
For the
year
ended
For
the
31
year
December
ended
2015
31
December
2015
The
Group
isreporting
not
exposed
to
material
risk
in termscontingencies
of the re-pricing
of
its liabilitiesentered
since, in
with
Letters
of
guarantee
Letters
and
of
letters
guarantee
ofTRANSACTIONS
credit
and
letters
ofTRANSACTIONS
credit
Revenues
Revenues
1 218,076
1 of directors,
18
18
103
1
43
43
96
96
Islamic
financing
Islamic
to
customers
financing
to
customers
Due
from
banks
10
14,650
4,650
218,076
8major board
8 directors,
3-10
3 entities
3,918
3,918
28.
AND
28.
COMMITMENTS
CONTINGENCIES
AND
COMMITMENTS
Atofficers
the financial
reporting
date
there
At
the
were
financial
outstanding
contingencies
date
there
and
were
commitments
outstanding
entered
in the and
ordinary
commitments
in accordance
the ordinary
course
of
business
in
respect
of
the
following:
Senior
executive
also
participate
Senior
executive
in
the
Group’s
officers
share
also
based
participate
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payment
executive
in
the
programme
Group’s
officers
share
(see
also
note
participate
based
26).
payment
in
the
programme
Group’s
share
(see
based
note
26).
payment
programme
(see note 26).
KD’000
KD’000
KD’000
KD’000
NOTES
TO
THE
NOTES
CONSOLIDATED
TO
THE
CONSOLIDATED
FINANCIAL
FINANCIAL
STATEMENTS
STATEMENTS
Related
parties
Related
comprise
parties
the
major
comprise
shareholders,
the
major
board
shareholders,
of
directors,
board
entities
of
directors,
controlled
entities
by
controlled
them
or
under
by
them
their
or
under
their
joint
control,
associates,
joint
control,
key
associates,
management
key
personnel
management
and
personnel
their
close
and
family
their
members
close
family
and
members
the
Parent
and
Company
the
Parent
Company
Islamic
Sharia’a,
the
Group
does
not
provide
a
guaranteed
contractual
rate
of
return
to
its
depositors.
Revenues
Revenuesto customers
103
103
Expenses
Expenses
(17)
(17)
96
96
(6)8
(6)
Depositors’
Depositors’
accounts
15
8
32,932
32,932
16
16
815123,651
8 53,059
53,059
Islamicaccounts
financing
At
the
financial
reporting
date
there
At
the
were
financial
outstanding
reporting
contingencies
date
there
and
were
commitments
outstanding
contingencies
entered
in
the
and
ordinary
commitments
entered
in
the
ordinary
2,004,175
93,118
2,220,944
course
of
business
in
respect
of
the
course
following:
of
business
in
respect
of
the
following:
2014
2015
28.
CONTINGENCIES
28. COMMITMENTS
CONTINGENCIES AND
28. COMMITMENTS
CONTINGENCIES AND COMMITMENTS
joint
control,
associates,
joint
control,
key
associates,
management
key 1personnel
management
and
personnel
their
closeand
their
members
close
family
and
the Parent
and
Company
thewith
Parent
including
their
including
board
their
board
keyofmembers,
management
keypersonnel,
management
branches,
personnel,
associates
branches,
and
associates
subsidiaries.
Balances
subsidiaries.
Balances
with courseAND
For the
year
ended
For
the
31
year
December
ended
2015
31
December
2015
27.
RELATED
27.
PARTY
RELATED
TRANSACTIONS
PARTY
TRANSACTIONS
Expenses
Expenses
(17)
(17)
(6)1-members
(6)
Letters
of
guarantee
Letters
and
of
letters
guarantee
ofmembers,
and
letters
credit
11
1family
18
18Company
43
43
of28.
business
inthe
respect
of the
course
following:
of business
in
of the
following:
Available
fortosale
investments
(Sukuk)
- and
2014
96,805
2015
2015
Islamic
financing
Islamic
customers
financing
tocredit
customers
10
14,650
4,650
8
896,805 3-10
3- 3,918
3,918
KD’000
28.
CONTINGENCIES
AND
COMMITMENTS
CONTINGENCIES
AND
28.
COMMITMENTS
CONTINGENCIES
AND
COMMITMENTS
At
the
financial
reporting
date
there
At
were
financial
outstanding
reporting
contingencies
date
At
there
therespect
and
were
financial
commitments
outstanding
reporting
contingencies
entered
date
there
in the
were
and
ordinary
commitments
outstanding 2014
contingencies
entered in the
and
ordinary
commitmentsKD’000
entered in the ordinary
including
their
including
board
members,
their
board
key
members,
management
key
personnel,
management
branches,
personnel,
associates
branches,
and
associates
subsidiaries.
and
Balances
subsidiaries.
with
Balances
with
related
parties
related
arise
from
parties
commercial
arise
from
transactions
commercial
in
transactions
the
normal
course
in
the
normal
of
business
course
on
of
an
business
arm’s
length
on
an
basis
arm’s
and
length
basis
and
Related
parties
Related
comprise
parties
the
major
comprise
shareholders,
the
major
board
shareholders,
of
directors,
board
entities
of
directors,
controlled
entities
by
controlled
them
or
under
by
them
their
or
under
their
Parent
Company
Parent
Company
Revenues
Revenues
10396
968
2014
2014
currency
risk
2015
2015
Other
assets
(excluding
accrued income and 16
Depositors’
accounts
Depositors’
accounts
KD’000
KD’000
1516
8
32,932
32,932
815
8 53,059
53,059
At103
thebasis
financial
reporting
date
At following:
the
were
financial
outstanding
reporting
contingencies
date
At
there
and
were
financial
commitments
outstanding
reporting
contingencies
entered
date
in following:
the
were
and
ordinary
commitments
outstandingKD’000
contingencies
entered in the
and
ordinary
commitmentsKD’000
entered in the ordinary
course
of
business
in respect
of there
the
course
of
business
inForeign
respect
of course
thethe
following:
of
business
in respect
of there
the
related
parties
related
arise
from
parties
commercial
arise
from
transactions
commercial
in
transactions
the
normal
course
in
the
normal
of
business
course
on
of
an
business
arm’s
length
on
an
basis
arm’s
and
length
and
are
included
within
are
included
the
following
within
financial
the
following
information
financial
captions:
information
captions:
joint
control,
associates,
joint
key
associates,
management
key 1personnel
management
and
their closeand
their-members
close- 72,021
family
and
and
Company
the Parent
27. prepayment)
RELATED
27.
PARTY
RELATED
PARTY
Due
from
banks
Due
from
bankscontrol,
Parent
Company
Parent
Company
8,366
8,366
72,021
Expenses
Expenses
(17)
(17)
(6)-members
(6)
Foreign
currency
risk
is the risk
that
the of
value
of KD’000
a 2014
financial instrument
will fluctuate
due to changes
in foreign 2014
KD’000
KD’000
KD’000
Letters
of
guarantee
Letters
and
of
letters
guarantee
ofTRANSACTIONS
credit
and
letters
ofTRANSACTIONS
credit
1 1personnel
- 1family
18
18Company
-the Parent
43
43
Guarantees
172,768
7,746
7,746
184,644
course
of
business
in
respect
of
the
course
following:
of
business
in
respect
of
course
the
following:
of
business
in
respect
the
following:
2014
2015
2015
2015
are
included
within
are
included
the
following
within
financial
the
following
financial
captions:
information
including
their
including
board
members,
their
board
key
members,
management
key
personnel,
management
branches,
personnel,
associates
branches,
and
associates
subsidiaries.
and
Balances
subsidiaries.
with
Balances
with Guarantees
Related
parties
Related
comprise
parties
the
major
comprise
shareholders,
theinformation
major
board
shareholders,
directors,
boardcaptions:
entities
ofboard
directors,
controlled
entities
by controlled
them
or
under
by them
their
or
under their
Due
from
banks
Due
from
banks
to banks
to
banks
8,366
8,366
42,554
42,554
72,021
72,021
124,310
124,310
currency exchange
Revenues
Revenues
Guarantees
172,768
172,768
Number
ofofboard
Number
of
184,644
184,644
103
103
96
96
Acceptances
and lettersrates.
of credit
43,120
49,756
2014
2014
2014
2015
2015
2015
2,766,463
123,651
93,118
2,983,232
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
related
parties
related
arisecontrol,
from
parties
commercial
arise
fromtransactions
commercial
intransactions
the
normal
course
in the
normal
of
business
course
on
ofan
business
arm’s
length
on271
an
basis
arm’s
length
basis and Guarantees
joint Due
control,
associates,
joint
key
associates,
management
key
personnel
management
and
personnel
their
close
and
family
their
members
close
family
and
members
the
Parent
and
Company
theand
Parent
Due
to banks
to banks
Revenues
Revenues
42,554
42,554
271
124,310
124,310
234
234
Parent
Company
Parent
Company
172,768
172,768
184,644
184,644
Acceptances and letters of credit Guarantees
Acceptances
43,120
43,120
Number
of
board
Number
of
board
Expenses
Expenses
member
or
executive
member
or
Number
executive
of
related
Number
of related
49,756
49,756
(17)
(17)Company
(6)
(6)
Other commitments
914
3,812
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Foreign exchange
are controlled through limits
pre-established
by the Board49,756
of Directors on
currency
are
included
within
are
included
the
following
within
financial
the
following
information
financial
information
captions:
their
including
board
members,
their
board
key
members,
management
key
personnel,
management
branches,
personnel,
associates
branches,
and
associates
subsidiaries.
and
Balances
subsidiaries.
Balances
with Acceptances
Revenues
Revenues
Expenses
Expenses
271
271
(290)
(290)
234
234 withGuarantees
(246)
(246)
Due
from including
banks
Due
from
banks
8,366
8,366
72,021
72,021
and Guarantees
letters of credit Acceptances
and
lettersrisks
of credit
43,120
43,120
49,756
Other commitments
Other commitments
914
914
member
orcaptions:
executive
member
orNumber
executive
of related
Number
of related
officers
officers
parties
parties
3,812
3,812
216,802
238,212
Guarantees
184,644
184,644
past
nor
position
exposures.
Assets are typically
funded in 172,768
the
same currency
as
that of the172,768
business
being184,644
transacted
to 172,768
related
parties
related
arise from
parties
commercial
arise fromtransactions
commercial
inofficers
transactions
the Neither
normal
course
in
thedue
normal
of2015
business
course
onof
an
business
arm’s
length
on
anbasis
arm’s
and
length
basis
and Other commitments
Expenses
Expenses
(290)
(290)
(246)
(246)
Due to banks
Due
to banks
42,554
42,554
124,310
124,310
Other
commitments
914
914
3,812
3,812
Parent
Company
Parent
Company
officers
parties
parties
2014
2014
2014
2014
2014
2014
2015
2015
2015
2015
2015
216,802
216,802
238,212
238,212
Number of board
Number
of board
Guarantees
Guarantees
172,768
172,768
172,768
184,644
184,644
184,644
Acceptances and letters of credit Guarantees
Acceptances and letters
of
credit
Acceptances
and
letters
of
credit
43,120
43,120
49,756
49,756
49,756
impaired
Past
due
or
eliminate exchange exposures. Appropriate segregation
of duties216,802
exists between 238,212
the treasury front
and back 43,120
are
included
within
are
included
the
following
within
financial
the
following
information
financial
information
captions:
The
Group
holds
The
Group
holds
against
collaterals
Islamic
against
finance
Islamic
facilities
finance
tocaptions:
related
facilities
parties
toNumber
related
in2015
the
parties
form
ofin
shares
the
form
and
of
real
shares
andAcceptances
real
Revenues
Revenues
271
271 KD’000
234
234
Due from
banks
Due collaterals
from
banks
216,802
238,212
2014
2014
2014
2014
2014
2014 and letters of credit Acceptances
8,366
8,366
2015
2015
2015
2015
2015
72,021
72,021
KD’000
KD’000
KD’000
member
or
executive
member
or
executive
of
related
Number
of
related
andOperating
letters of credit
and letters 49,756
of3,812
credit
43,120
43,120
43,120
49,756
49,756
Other
commitments
Other commitments
Other
commitments
914
914
914
3,812
3,812
leaseAcceptances
commitments:
High
Standard
impaired
Total
office
functions,
while
compliance
with
position
limits
is
independently
monitored
on
an
ongoing
basis
by
an
The
Group
holds
The
collaterals
Group
holds
against
collaterals
against
finance
facilities
finance
toofrelated
facilities
parties
toofrelated
in
the
parties
form
of
inshares
the
form
and
of
real
shares
and
real KD’000
estate.
An estimate
estate.
of
Anthe
estimate
fair
value
of Islamic
the
of fair
collaterals
valueIslamic
of
held
collaterals
against
Islamic
held
against
finance
Islamic
facilities
finance
to
related
facilities
parties
to
related
parties
Expenses
Expenses
(290)
(290)
(246)
(246)
Due
to
banks
Due
to
banks
42,554
42,554
124,310
124,310
KD’000
KD’000
KD’000
officers
officers
parties
parties
Number
board
Number
board
Other
commitments
Other
commitments
Other
commitments
914
914
914
3,812
3,812
3,812
Operating
lease
commitments:
Operating
lease
commitments:
Future
minimum
lease
payments:
216,802
216,802
216,802
238,212
238,212
238,212
KD’000
KD’000
KD’000
KD’000
financing
toKD
customers
financing
toDecember
customers
10
1234
1234
4,650
4,650
independent
middle office function.
estate.
AnIslamic
estate.
of
AnIslamic
the
fair
value
the
of
fair
collaterals
value
of
held
collaterals
against
Islamic
held
against
Islamic
facilities
finance
to
related
facilities
parties
to
related
parties
8December
8finance
310
3 3,918
3,918
amounted
toestimate
KD
amounted
5,713
thousand
toestimate
5,713
asofatthousand
31
as at 2015
31
December
(31
2015
(31
2014:
December
KD
4,770
2014:
thousand).
KD
4,770
thousand).
Revenues
Revenues
271
2014
2014
2014
2014
2014
lease commitments:
lease commitments:
member
member
executive
of
related
Number
related
2015or executive
2015orNumber
2015
2015of
2015
2015 271 2014 Operating
Future minimum
lease payments:Operating
Future minimum
lease payments:
216,802
216,802
216,802
238,212
238,212
238,212
2014
2015
2014
Islamic
financing
Islamic
to
customers
financing
to
customers
Depositors’
accounts
Depositors’
accounts
10
10
1
1
4,650
4,650
15
15
8
8
32,932
32,932
8
8
3
3
3,918
3,918
amounted
to
KD
amounted
5,713
thousand
to
KD
5,713
as
at
thousand
31
December
as
at
2015
31
December
(31
December
2015
(31
2014:
December
KD
4,770
2014:
thousand).
KD
4,770
thousand).
16
16
8
8
53,059
53,059
The Group holds
The collaterals
Group holds
against
collaterals
Islamicagainst
finance
Islamic
facilities
finance
to related
facilities
parties
to related
in the
parties
form of(246)
inshares
the
form
and (290)
of
real
shares
and (290)
real KD’000 Future minimum lease payments:Future minimum lease payments:
Expenses
Expenses
(246)
officers
officers
parties
parties
2014
2014
KD’000
2015
2015
KD’000
KD’000
KD’000
KD’000
lease
Cash
and
cash
equivalents
(excluding
cash
on hand)
290,266
accounts
Depositors’
accounts
Letters
of key
guarantee
Letters
and
of
letters
guarantee
of
and
letters
of
credit
Compensation
Compensation
of
management
of
key
personnel:
personnel:
15
8- related
8- related
32,932
32,932
116
1 finance
18Operating
18 commitments: Operating lease commitments:Operating lease commitments:
16
8-15
8- 53,059
53,059
1 290,266
1finance
43
43
estate.
AnDepositors’
estimate
estate.
of
An
the
estimate
fair
value
ofmanagement
the
ofcredit
fair
collaterals
value
of
held
collaterals
against
Islamic
held
against
Islamic
facilities
to
facilities
parties
to
2014
2014
2015
2015
2014
2014
2014
2014
2014lease commitments:
2015
2015
2015
2015
20152014
2015parties
KD’000
KD’000
KD’000
KD’000
Operating
Operating
lease
commitments:
Operating
lease
commitments:
Future
minimum
lease
payments:
Future
minimum
lease
payments:
Future
minimum
lease
payments:
Letters
of
guarantee
Letters
and
of
letters
guarantee
of
and
letters
of
credit
Compensation
Compensation
of
key
management
of
key
management
personnel:
personnel:
Revenues
Revenues
from
banks
263,593
263,593
11
1form
1843
18
103
103
1
- shares
43
96
96real
Islamic
financing
Islamic
toKD
customers
financing
customers
amounted
toholds
KD
amounted
5,713
thousand
toholds
5,713
as at
thousand
31tocredit
December
as at
2015
31
December
(31
2015
(31
2014:
2014:
thousand).
KD
4,770
thousand).
10
1in
1- shares
4,650
4,650
8December
8December
3- form
3,918
3,918
The Due
Group
The
collaterals
Group
against
collaterals
Islamic
against
finance
Islamic
facilities
finance
to related
facilities
parties
to KD
related
in 4,770
the3-10
parties
of
the
and
of
real
and
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Within
one
year
1,993
2,400
Future
minimum
lease
payments:
Future
minimum
lease
payments:
Future
minimum
lease
payments:
2014
2014
2014
2015
2015
2015
Details
of
compensation
Details
of
compensation
for
key
management
for
key
comprise
management
the
following:
comprise
the
following:
Islamic
financing
to
customers
103
103
Expenses
Expenses
(17)
(17)
96
96
138,771
43,163
1,845,204
(6)
(6)
Depositors’
Depositors’
accounts
8 related
8 related
32,932
32,932
16 1,663,270
16finance
815 finance
8 53,059
53,059
estate. AnRevenues
estimate
estate. accounts
of
AnRevenues
the
estimate
fair value
of the
of fair
collaterals
value of
held
collaterals
against
Islamic
held15
against
Islamic
facilities
to
facilities
parties
to
parties
Within one year
Withinone
oneyear
yearbut not more than fiveKD’000
1,993
1,993
2,400
2,400
After
years
7,761
5,259
2014
2014
2014
2015
2015
2015
KD’000
KD’000
KD’000
KD’000
KD’000
2014
2014
Details
of
compensation
Details
of
compensation
for
key
management
for
key
comprise
management
the
following:
comprise
the
following:
2015
2015
Available
for
sale
investments
(Sukuk)
Expenses
Expenses
(17)
(17)
(6)
(6)
Compensation
Compensation
of
key
management
of
key
management
personnel:
personnel:
77,982
77,982
Letters
of
guarantee
Letters
and
of
letters
guarantee
of
credit
and
letters
of
credit
Islamic
financing
Islamic
to
customers
financing
to
customers
1
1
18
18
10
10
1
1
4,650
4,650
1
1
43
43
8
8
3
3
3,918
3,918
amounted to KD
amounted
5,713 thousand
to KD 5,713
as atthousand
31 December
as at 2015
31 December
(31 December
2015 (31
2014:
December
KD 4,770
2014:
thousand).
KD 4,770 thousand).
Within
oneyear
yearbut not more thanTotal
Within
oneyear
year
1,993
1,993
2,400
2,400
After one
After
five years
one
but not
more thancontracted
fiveKD’000
years for at theKD’000
7,761
7,761
5,259 date KD’000
5,259
operating
lease
expenditure
reporting
9,754
7,659
KD’000
KD’000
KD’000
2014
2014
2015
2015
KD’000
KD’000
KD’000
KD’000
Parent
Company
Parent
Company
OtherDepositors’
assets (excluding
accruedaccounts
income and
Revenues
Revenues
accounts
Depositors’
10396
103 After one year but not more than After
1516
8
32,932
32,932
968
16
815
8 53,059
53,059
five years
one year
but
more
than
five years
7,761
7,761
5,259
5,259
Total operating lease
expenditure
Total
contracted
operating
for atlease
thenot
reporting
expenditure
date
contracted
for at the reporting
9,754
9,754
7,659
7,659
Within one
year
Within
one year
Within
one year
1,993 date
1,993
1,993
2,400
2,400
2,400
KD’000
KD’000
Details
ofParent
compensation
Details
ofmanagement
compensation
for from
key
management
for
key
management
following:
comprise
the following:
prepayment))
Due
from
banks
Due
banks
Company
Parent
Company
8,366
72,021
72,021
Letters
of
guarantee
Letters
and
of
letters
guarantee
of credit
andcomprise
letters
of the
credit
Expenses
Expenses
(17)
(17)
11
1
1843
18
(6)-5,558 8,366
(6)
5,558
1
43
-KD’000
-KD’000
Compensation
Compensation
of
key
of
key
management
personnel:
personnel:
Total
operating
lease
expenditure
Total
contracted
operating
forthan
atlease
the
reporting
expenditure
date
contracted
for
atfive
the reporting
date
9,754
9,754
7,659
7,659
Within
one
year
Within
one
year
Within
one
year
1,993
1,993
1,993
2,400
2,400
2,400
After
one
year
but
not
more
than
After
five
years
one
year
but
not
more
After
five
one
years
year
but
not
more
than
years
7,761
7,761
7,761
5,259
5,259
5,259
Short-term
benefits
Short-term
benefits
1,780
1,780
2014
2014
1,790
1,790
2015
2015
Due
from
banks
Due
from
banks
to
banks
to
banks
8,366
8,366
42,554
42,554
72,021
72,021
124,310
124,310
Revenues
Revenues
10396
103
96
2,300,669
138,771
43,163
2,482,603
After
one
year lease
but not
more thanTotal
After
five operating
years
one year
but
more than
After
fiveoperating
one
years
year
but
not
more
five years
7,761
7,761
7,761
5,259
5,259
5,259
Total
expenditure
contracted
for at
lease
thenot
expenditure
reporting
date
Total
contracted
forlease
at the
expenditure
reporting
date
contracted
9,754
for at the reporting
9,754
9,754
7,659than
7,659 date
7,659
Short-term
benefits
Short-term
benefits
1,780
1,780
Post-employment
Post-employment
benefits
benefits
283 42,554
283operating
1,790
1,790
373
373
to
banks
to
banks
KD’000
KD’000
Revenues
Revenues
KD’000
42,554
271
271
124,310
124,310
234
234
Details ofDue
compensation
Details
ofDue
compensation
for
key
management
for keycomprise
management
the following:
comprise the following: KD’000
Parent
Company
Parent
Company
Expenses
Expenses
(17)
(17)
(6)
(6)
25
Total
operating
lease
expenditure
Total
contracted
operating
for
at
lease
the
expenditure
reporting
date
Total
contracted
operating
for
lease
at
the
expenditure
reporting
date
contracted
9,754
for
at
the
reporting
date
9,754
9,754
7,659
7,659
7,659
Post-employment
Post-employment
benefits
283
283
Share based
compensation
Share
based
compensation
279
279
373
398
398
Revenues
Revenues
Expenses
Expenses
271
271
(290)
(290)
234
234
(246)
(246)
2014
2014
Due
from
banks
Due
frombenefits
banks
2015373
2015
8,366
8,366
72,021
72,021
25
25
Share
based
compensation
Share
based
compensation
279 42,554
279 42,554
398
398
2,342
2,342
Expenses
Expenses
Short-term
benefits
Short-term
benefits
1,780
1,780
2,561
2,561
1,790
1,790
(290)
(290)
(246)
(246)
Due
to
banks
Due
to banks
Parent
Company
Parent
Company
KD’000
KD’000
KD’000
KD’000
124,310
124,310
25
25
The from
Group
holds
The collaterals
Group
holds
against
collaterals
Islamicagainst
finance
Islamic
facilities
finance
to related
facilities
parties
to related
in2,561
the parties
form72,021
ofin
shares
the
form
and8,366
of
real
shares
real
2,342
2,342
2,561
Post-employment
Post-employment
benefits
benefits
283
283 and8,366
373
373
Revenues
Revenues
Due
banks
Due
from
banks
271
271
234
234
72,021
25
25
25
The
Group
holds
The
collaterals
Group
holds
against
collaterals
Islamic
against
finance
Islamic
facilities
finance
to
related
facilities
parties
to
related
in
the
parties
form
of
in
shares
the
form
and
of
real
shares
and
real
estate.
An
estimate
estate.
of
An
the
estimate
fair
value
of
the
of
fair
collaterals
value
of
held
collaterals
against
Islamic
held
against
finance
Islamic
facilities
finance
to
related
facilities
parties
to
related
parties
Share
based
compensation
Share
based
compensation
279
279
398
398
Senior
executive
Senior
officers
executive
also
participate
officers
also
in
the
participate
Group’s
in
share
the
Group’s
based
payment
share
based
programme
payment
(see
programme
note
26).
(see
note
26).
Expenses
Expenses
Due
to
banks Due
to banks
Short-term
benefits
Short-term
benefits
1,780 42,554
1,780 42,554
(290)
(290)
1,790
1,790
(246)
(246)
124,310
124,310
25
25
25
estate.
An
estate.
of
An
the
fair
ofatthousand
the
of December
fair
collaterals
value
of
held
collaterals
against
Islamic
held (31
against
finance
Islamic
facilities
finance
to234
related
facilities
parties
to234
related
amounted
toestimate
KD
amounted
5,713
thousand
toestimate
KD
5,713
as
31
as
2015
31
December
(31
December
2015
2014:
December
KD
4,770
2014:
thousand).
KD
4,770
thousand).
Senior executive
Senior
officers
executive
also
participate
officers
also
invalue
the
participate
Group’s
inshare
theatGroup’s
based
payment
share
based
programme
payment
(see
programme
note
26).
(see
note
2,342
2,342
2,561
2,561
Revenues
Revenues
Post-employment
Post-employment
benefits
benefits
283 26).
283 parties
271
271
373
373
95
BOUBYAN BANK K.S.C.P AND
BOUBYAN
SUBSIDIARIES
BANK K.S.C.P AND SUBSIDIARIES
NOTES
TO THE
CONSOLIDATED
BOUBYAN
SUBSIDIARIES
BANK
K.S.C.P AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED
NOTES
FINANCIAL
TOended
THE31
CONSOLIDATED
STATEMENTS
For
the year
December
2015AND
BOUBYAN
BANK
K.S.C.P.
SUBSIDIARIES
BOUBYAN BANK
BOUBYAN
AND
SUBSIDIARIES
BANK
BOUBYAN
AND
SUBSIDIARIES
BANK
AND SUBSIDIARIES
NOTES
TOended
THE
CONSOLIDATED
NOTES
FINANCIAL
TOended
THE
CONSOLIDATED
STATEMENTS
FINANCIAL
STATEMENTS
For the K.S.C.P
year
31
December
2015
For theK.S.C.P
year
31
December
2015 K.S.C.P
BOUBYAN BANK
K.S.C.P
BOUBYAN
AND
SUBSIDIARIES
BANK
K.S.C.P
BOUBYAN
AND
SUBSIDIARIES
BANK
K.S.C.P
AND SUBSIDIARIES
For the
year ended
31 December
2015
For CONSOLIDATED
the year
ended
31PARTY
December
2015
NOTES
TO
THE
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTES TO THE
CONSOLIDATED
NOTES
FINANCIAL
TO THE
STATEMENTS
NOTES
TO
FINANCIAL
THE
CONSOLIDATED
STATEMENTS
FINANCIAL
STATEMENTS
27.
RELATED
TRANSACTIONS
NOTES
TOended
THE
CONSOLIDATED
NOTES
FINANCIAL
TOended
THE
CONSOLIDATED
STATEMENTS
NOTES
TO
FINANCIAL
THE
CONSOLIDATED
STATEMENTS
STATEMENTS
27. 31
RELATED
PARTY
TRANSACTIONS
27. 31
RELATED
TRANSACTIONS
Related
parties
comprise
the
major
shareholders,
board of directors,
entities controlled by them or under their
For
the year
December
For
2015
the
year
2015
thePARTY
year
ended
31
December
2015 FINANCIAL
ForDecember
the
yearFor
ended
31
December
2015
BANK
K.S.C.P.
AND SUBSIDIARIES
BOUBYANBOUBYAN
BANK K.S.C.P
AND
SUBSIDIARIES
BOUBYAN
BANK
K.S.C.P
AND
SUBSIDIARIES
NOTES TONOTES
THE CONSOLIDATED
FINANCIALFINANCIAL
STATEMENTS
THE AND
CONSOLIDATED
STATEMENTS
BOUBYAN BANK TO
K.S.C.P
SUBSIDIARIES
NOTES
TOended
THE
CONSOLIDATED
FINANCIAL
STATEMENTS
For
the year
31
December
2015
For
the
year
ended
31
December
2015
N BANK
K.S.C.P
AND
SUBSIDIARIES
NOTES
TOended
THE31
CONSOLIDATED
For the year
December 2015 FINANCIAL STATEMENTS
30.
30.4
Liquidity risk
Liquidity
risk is the risk that the Group will be unable to meet its financial liabilities when they fall due. To limit
SUBSIDIARIES
this risk, management has arranged diversified funding sources, manages assets with liquidity in mind and
NOTES TO THE CONSOLIDATED
FINANCIAL
monitors
liquidity on aSTATEMENTS
daily basis.
SUBSIDIARIES
BOUBYAN
BANK
K.S.C.P
AND
SUBSIDIARIES
The
Group
has
established
an Asset and Liabilities Management Committee to manage the assets and liabilities
of the FINANCIAL
Group comprehensively
and strategically. The committee meets regularly to determine and review
NOTES
TOended
THE31
CONSOLIDATED
STATEMENTS
For the year
December
2015
27.
RELATED
PARTY
TRANSACTIONS
SUBSIDIARIES
policies
forshareholders,
managing liquidity
as well as
to set risk
limits. by them or under their
Related
comprise2015
the major
board risk,
of directors,
entities
controlled
For the year
endedparties
31 December
NOTES RELATED
TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
joint
control,
associates,
key
personnel
and
closeprofile
familyofmembers
the liabilities
Parent Company
27.
PARTY
TRANSACTIONS
The management
table
below summarises
thetheir
maturity
Group’sand
assets,
and equity based on contractual
including
their
board
members,
key management
personnel,
branches, entities
associates
and
subsidiaries.
Balances
with
Related
comprise
the major
shareholders,
board
directors,
controlled
by themThis
or
under
their
27.
RELATED
TRANSACTIONS
For the year
endedparties
31PARTY
December
2015
cash
flows,
maturity dates
or onofmanagement’s
estimate
of liquidation.
does not
necessarily take account of
related
parties
arise
from key
commercial
transactions
in the
course
of business
on an
arm’s
length
basistheir
and
joint
control,
management
personnel
andnormal
close
family
members
and
the
Parent
Company
Related
partiesassociates,
comprise
the effective
major
shareholders,
board
oftheir
directors,
entities
controlled
by
them
or under
the
maturities.
are
within
following
financial
information
captions:
including
their
boardthe
members,
key
management
personnel,
branches,
associates
and subsidiaries.
Balances
with
jointincluded
control,
associates,
key management
personnel
and
their
close family
members
and the Parent
Company
27.
RELATED
PARTY
TRANSACTIONS
Up
toand
three
3them
to 6length
6 to their
12
Over
related
from
commercial
transactionspersonnel,
in the normal
courseentities
of business
onsubsidiaries.
anby
arm’s
basis
and
including
their arise
board
members,
key management
branches,
associates
Balances
with
Relatedparties
parties
comprise
the major
shareholders,
board
directors,
controlled
or
under
Number
ofofboard
months
months
Months
1 year
Total
are
within
following
financial
information
captions:
BOUBYAN
BANK
K.S.C.P
AND
SUBSIDIARIES
related
parties
arise the
from
commercial
transactions
in
the
normal
course
of
business
on
an
arm’s
length
basis
and
jointincluded
control,
associates,
key
management
personnel
and
their
close
family
members
and
the
Parent
Company
member or executive
Number of related
KD’000
KD’000
KD’000
KD’000
KD’000
are
included
within
the
following
financial
information
captions:
board members, key
management
personnel,
branches, associates
officers
partiesand subsidiaries. Balances with
NOTES including
TO THEtheir
CONSOLIDATED
FINANCIAL
STATEMENTS
Number
of board
related parties arise from 2015
commercial transactions
in the
normal
course
of2015
business
on an arm’s
length basis
2014
2014
2014and
member
orof
executive
Number
of related
2015
2015
Number
board
Assets financial information captions:
are included within the following
officers
parties
KD’000
member
or executive
Number
of related KD’000Cash and cash equivalents
465,259
465,259
2014
2014
2015
2015
2015
officers
parties 2014
Number
of board
27.
RELATED PARTY TRANSACTIONS
Due from banks
80,736
69,078
68,262
218,076
10
1
4,650
8
3
3,918
KD’000
KD’000
2014
2014
2014
2015
2015
2015
member
or executive
related by them or under their
Related parties comprise the major shareholders,
board
of directors, Number
entities of
controlled
15
8
32,932 1,080,749 2,171,794
222,738
164,901
16
8 703,406
53,059
KD’000
officers
joint control, associates, key management personnel
and their close familyparties
members and KD’000
the Parent Company
Letters of
guarantee
letters
of credit
Islamic
financing
to and
customers
1 or loss 318
Financial
assets at fair value81 through profit
10
14,650
43
3,918
15,388
15,388
2014
2014
2014
including their board members, key management 2015
personnel, branches,
associates
subsidiaries.
with
2015 and
2015 Balances
Revenues
Depositors’
accounts
103
15
8
32,932
96
16
8 91,336
53,059
Islamic
financing
to customers
34,971
126,307
10
1
4,650
8
3
3,918
related parties arise from commercial transactions in the normal course of business on an arm’s
length basis
and
KD’000
KD’000
Letters
of guarantee
of credit in associates 16
Expenses
(17)
1
18
(6)
1
43
Depositors’
accountsand letters
Investments
832,932
853,059
79,713
79,713
are included within the following financial information
captions:15
Revenues
103
96
Letters of
guarantee
letters
of creditproperties
1
18
1
43
Investment
Islamic
financing
to and
customers
10
14,650
23,397
23,397
8
33,918
Parent Company
Expenses
(17)
(6)
Number
Revenues
103
96
Depositors’
accounts
Other assets
8
32,932
16 of board15
8
53,059
7,746
6,423
14,169
Due
from
banks
8,366
72,021
member1or executive1 Number-of related
Expenses
(17)
(6)
Letters
of guarantee
and letters
of credit
18
43
Property
and equipment
18,782
18,782
Due to banks
Parent
Company
42,554
124,310
officers
parties
Revenues
103 1,253,000 3,132,885
96
1,348,483
291,816
239,586
Total assets
Revenues
Due
from
banks
271
8,366
234
72,021
2014
2014
2014
2015
2015
2015
Parent
Company
Expenses
(17)
(6)
Liabilities and Equity
Expenses
to banks
(290)
42,554
(246) KD’000
124,310
Due
from
banks
8,366
KD’000
72,021
Due
to
banks
382,749
382,749
Revenues
271
234
Due
to banks
42,554
124,310
Parent
Company
Depositors’
accounts
Islamic
financing
to
customers
1,371,830
504,917
506,468
15,720
2,398,935
10
1
4,650
8
3
3,918
The
Group
holds
collaterals
against
Islamic
finance
facilities
to
related
parties
in
the
form
of
shares
and
real
Expenses
(290)
(246)
Revenues
271
234
Due
from banks
8,366
72,021
Depositors’
accounts of the
Other
15 Islamic finance
8
32,932
6,179
13,741
10,482
30,402
16 held against
8
53,059
estate.
An estimate
fairliabilities
value of collaterals
facilities
to
related
parties
Expenses
(290)
(246)
Due
to banks
42,554
124,310
Letters
of guarantee
and letters
of credit
1
18
Equity
1
43
320,799
320,799
amounted
to
KD
5,713
thousand
as
at
31
December
2015
(31
December
2014:
KD
4,770
thousand).
The
Group
holds
collaterals
against
Islamic
finance
facilities
to
related
parties
in
the
form
of
shares
and
real
Revenues
271
234
Revenues
103
96
Total
liabilities
equity facilities
1,760,758
520,209
347,001 3,132,885
estate.
An estimate
of the
fair
valueIslamic
of and
collaterals
held against
Islamic
finance
facilities
to
relatedand
parties
The
Group
holds collaterals
against
finance
to related
parties
in the
form504,917
of
shares
real
Expenses
(290)
(246)
Expenses
(17)
(6)
Compensation
key
personnel:
amounted
KDof5,713
thousand
as at
31
December
2014:
KD 4,770
thousand).
estate.
Antoestimate
ofmanagement
the fair value
of December
collaterals2015
held (31
against
Islamic
finance
facilities
to related
parties
28.
28.
28.
28.
Total
KD’000
314,821
263,593
1,805,115
12,738
113,852
85,728
25,637
10,944
15,502
2,647,930
226,739
2,092,028
28,061
301,102
2,647,930
28.
UpKD
tointhree
3 of
to 6shares and
6 to 12
Over
amounted
KD 5,713
thousand
as atIslamic
31 December
(31 December
4,770
thousand).
The
Grouptoholds
collaterals
against
finance 2015
facilities
to related 2014:
parties
the form
real
Parent
Company
Details
of compensation
for key
compriseheld
the following:
Compensation
of key
monthsfacilities
months
1 year
estate.
An
estimate
ofmanagement
the
fair management
valuepersonnel:
of collaterals
against Islamic finance
to relatedmonths
parties
Due
from banks
8,366 KD’000
72,021 KD’000
2014
Compensation
key management
personnel:
KD’000
amounted
to KDof5,713
thousand as at
31 December 2015 (31 December 2014:KD’000
KD 4,7702015
thousand).
Due
to banks
42,554
124,310 KD’000
Details
of compensation for
key management comprise the following:
KD’000
2014
Revenues
2014271
2015 234
for
key management
comprise the following:
Compensation
of key management
personnel:
Assets
Expenses benefits
(290)
(246)
Short-term
1,780
1,790
2014
2015
Cash and cash equivalents
314,821KD’000
- KD’000
Post-employment
benefitsfor
283
373
KD’000
KD’000
key
management
comprise
the
following:
Due from banks
186,718
52,085
24,790
The Group
holds
collaterals against Islamic finance facilities to related parties in the form
of shares and
real
Share
basedbenefits
compensation
279
Short-term
1,780
398
1,790
2014
639,047 2015
257,104
101,445
807,519
estate.
An
estimate
of
the
fair
value
of
collaterals
held
against
Islamic
finance
facilities
to
related
parties
Post-employment
283
373 - KD’000
2,342
2,561
Short-term
benefitsbenefitsFinancial assets at fair value through profit or loss
1,780
1,790
-KD’000
12,738
amounted
to compensation
KD 5,713
thousand as at 31 December 2015 (31 December 2014: KD 4,770
thousand).
Share
based
279
398
Post-employment
benefits
283
373
40,016
4,354
69,482
2,342
2,561
Seniorbased
executive
officers Investments
also participate
in the Group’s share based payment programme (see
note 26).
Share
compensation
279
398
Short-term
benefits
1,780
1,790
in associates
85,728
Compensation
of
key
management
personnel:
2,342
2,561
Post-employment benefitsInvestment properties
283
373 25,637
CONTINGENCIES
AND
COMMITMENTS
Seniorbased
executive
officers also participate in the Group’s share based payment programme (see398
note 26).
Share
compensation
279
Other
assets
5,558
5,386
Details
of
compensation
for
key
management
comprise
the
following:
At
the executive
financial reporting
dateparticipate
there wereinoutstanding
and commitments
in 26).
the ordinary
Senior
officers Property
also
the Group’scontingencies
share based payment
programmeentered
(see
note
2,342
2,561
equipment
- 2015
15,502
2014 course
of business in respect
of theand
following:
CONTINGENCIES
AND COMMITMENTS
Total
assets
1,186,160KD’000
309,189
135,975
1,016,606
2014
At
the executive
financial reporting
date
there wereinoutstanding
and commitments
entered
in 26).
theKD’000
ordinary
CONTINGENCIES
AND
COMMITMENTS
Senior
officers
also
participate
share based payment
programme2015
(see note
Liabilities
and
Equity
course
business
in respect
of there
the following:
KD’000
At the of
financial
reporting
date
were
outstanding contingencies and commitments
entered in theKD’000
ordinary
Short-term
benefitsin respect
1,780
1,790
Due
banks
201,221 2015
5,006
20,512
2014
course
of business
oftothe
following:
CONTINGENCIES
AND
COMMITMENTS
Post-employment
benefits
283
373
accounts
1,247,238KD’000
493,890
341,715
9,185
Guarantees
172,768
184,644
2014
2015
At
the financial reportingDepositors’
date there were
outstanding contingencies and commitments
entered
in theKD’000
ordinary
Share
based compensation
279
398 - KD’000
Acceptances
and letters
ofOther
credit
43,120
16,915KD’000
11,018
128
49,756
course
of business
in respect
of liabilities
the following:
2,342
2,561 - 172,768
Other commitments
914
Guarantees
Equity
3,812
-184,644
301,102
2014
2015
Acceptances
credit
43,120
49,756
216,802
238,212
Guarantees and letters ofTotal
172,768
liabilities and equity
184,644
1,465,374KD’000
498,896 KD’000
373,245
310,415
Senior
executive
participate in the Group’s share based payment programme49,756
(see note 26). 43,120
Other commitments
914
3,812
Acceptances
and officers
letters ofalso
credit
216,802
238,212
Other
commitments
914
3,812
Guarantees
172,768
184,644
Operating
lease commitments:
CONTINGENCIES AND COMMITMENTS
216,802
238,212
Acceptances
and lease
letterspayments:
of credit
43,120
Future minimum
49,756
At the financial reporting date there were outstanding contingencies and commitments entered in the ordinary
2014
Other
commitments
914
2015
3,812
Operating
lease commitments:
course of business in respect of the following:
Future minimum
lease payments:
KD’000
216,802
KD’000
238,212
Operating
lease commitments:
2014
2015
2014
2015
Future minimum lease payments:
KD’000
KD’000
Within one year
1,993
KD’000
2,400
KD’000
97
96
For
the year
ended
31PARTY
December
2015
O THE 27.
CONSOLIDATED
FINANCIAL
STATEMENTS
RELATED
TRANSACTIONS
30.
FINANCIAL
INSTRUMENTS
AND RISK MANAGEMENT (CONTINUED)
BOUBYAN
BANK
K.S.C.P
AND
SUBSIDIARIES
Related
parties
comprise
the major shareholders, board of directors, entities controlled by them or under their
27.December
RELATED
PARTY
TRANSACTIONS
r ended 31
2015
BOUBYAN
BANK
K.S.C.P
AND
SUBSIDIARIES
NOTES RELATED
TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
27.
PARTY
TRANSACTIONS
joint
control,
associates,
management
personnel
andoftheir
close family
Parent
Company
Related
parties
comprise
the
major
shareholders,
board
directors,
entitiesmembers
controlledand
by the
them
or under
their
30.3
Market
riskkey
(Continued)
Related
parties
comprise
the
major
shareholders,
board
of
directors,
entities
controlled
by
them
or
under
their
including
their
board
members,
key
management
personnel,
branches,
associates
and
subsidiaries.
Balances
with
TO
THE
CONSOLIDATED
FINANCIAL
STATEMENTS
joint
control,
associates,
key
management
personnel
and
their
close
family
members
and
the
Parent
Company
For
the year
ended
31
December
2015
ELATEDNOTES
PARTY
TRANSACTIONS
The table below analyses the effect on profit and equity of an assumed 5% strengthening
in value of the
jointended
control,
associates,
key
management
personnel
andnormal
their
close
family
members
and
the Parent
Company
related
parties
arise
from
commercial
transactions
in the
course
of
business
onsubsidiaries.
an
arm’s
basiswith
and
including
their
board
members,
key the
management
personnel,
branches,
associates
Balances
For the
year
31 currency
December
2015
lated parties
comprise
the
major
shareholders,
board
of
directors,
entities
controlled
by
them
oratand
under
their
rate
against
Kuwaiti
Dinar
from
levels
applicable
the
year
end, length
with
all
other
variables held
including
their
boardthe
members,
key
management
personnel,
branches,
and
Balances
are
included
within
following
financial
information
related
parties
arise
from
commercial
transactions
in thecaptions:
normal
course
of
business
onsubsidiaries.
an arm’s length
basiswith
and
27.associates,
RELATED
PARTY
nt control,
key
management
theirin
close
family
members
andassociates
thenet
Parent
Company
constant.TRANSACTIONS
Apersonnel
negative and
amount
the table
reflects
a potential
reduction
in profit or equity, whereas a positive
parties
arise
from
commercial
transactions
in
thecaptions:
normal
of business
on anwith
arm’s
length
basistheir
and
are
included
within
the
following
financial
information
Related
parties
comprise
the personnel,
major
shareholders,
board
of directors,
entities
controlled
by
them
or under
cluding their
members,
key
management
branches,
associates
andcourse
subsidiaries.
Balances
27. boardrelated
RELATED
PARTY
TRANSACTIONS
Number
of board
amount
reflects
a netfinancial
potential
increase.
included
within
the following
captions:
joint
control,
associates,
key
management
personnel
and
their
close
family
members
and
the
Parent
Company
Related
parties
comprise
the major
board
of
directors,
entities
controlled
by
them
or
under
their
ated parties arise are
from
commercial
transactions
in theshareholders,
normalinformation
course
of
business
on
an
arm’s
length
basis
and
member
orof
executive
Number of related
Number
board
theirassociates,
board members,
key captions:
management
personnel,
branches,
associates
and subsidiaries. Balances with
joint
control,
key management
personnel
and
their
close Number
family
members
e included within including
the following
financial
information
Number
of
board
officers
parties
member
or
executive
of relatedand the Parent Company
related
parties
arise
from
commercial
transactions
in
the
normal
course
of
business
onsubsidiaries.
an arm’s length
basiswith
and
including their board members, key management
personnel,
branches,
associates
and
member
or executive
of related
2014 Number
2014
2014
officers
parties
2015
2015
2015 Balances
Number
of boardinformation
are included
within
following
financial
related
parties
arise the
from
commercial
transactions2015
inofficers
thecaptions:
normal
course
of
business
on
an
arm’s
length
basis
2014
2015 2015
parties 2014 KD’000
2014and
2015
KD’000
member or executive
Number of 2014
related
are included within the following financial information
captions:
Effect
on
profit
Effect
on
profit
Effect
on
equity
2014
2014
2014Effect on equity
2015
2015
2015
KD’000
Number parties
of board
KD’000
officers
10
1
4,650
8or executive
3ofKD’000
3,918 KD’000
KD’000
KD’000
member
related
Number
of board
2014
2014 Number
2014 KD’000KD’000
2015
2015
2015
Depositors’
accounts
Islamic
financing
to customers
15
8
32,932
10
1
4,650
16
8
53,059
8
3
3,918
officers
parties
member
or
executive
Number
of
related
KD’000
KD’000
Islamic
financing
to and
customers
Letters of
guarantee
letters of credit
10
14,650
US Dollar
+5 2015
96
Depositors’
accounts
1
18
8
33,918
131
1
43
15
8
32,932
16
8
53,059
2014
2015
2015
officers 2014
parties 2014
Depositors’
accounts
Revenues
Letters
of guarantee
andPound
letters of credit
15
8-4,650 53,059
32,932
103
16
81 14
18
96 KD’000
Sterling
+5
(1)
1 3
43
amic financing to customers
10
8
3,918
2014
2014 KD’000
2014
2015
20152015
credit
1 85
18
Expenses
1 8
43
(17)
(6)
96
Euro and letters of16
+5
- 103
positors’ accountsRevenues
15
32,932
53,059
KD’000
KD’000
Revenues
103
96
Expenses
(17)
(6)
Islamic
financing
to customers
10 8
343 1,7291 18 3,918
Indonesian
Rupiah 1
+5
-4,650
1,994
tters of guarantee and
letters
of credit
1
Expenses
(17)
Parent Company
(6)
Depositors’
accounts
1558
8 103 53,059
32,932
16
896 2581
venues
Islamic
financing
to customers
Sudanese
Pound
+5
33
251
10
4,650
8
3
3,918
Due
from
banks
Parent
Company
Letters
of
guarantee
andYen
letters of credit
18
18
1
43
Depositors’
accounts
penses
15
8-- (17)72,021
32,932
16
8-(6)
53,059
Japanese
+5
-8,366
Parent
Company
Due
to
banks
from
banks
42,554
8,366
124,310
72,021
Revenues
103
96
Letters
of
guarantee
17
18
1
43
Othersand letters of credit
+5
24
Due
from
banks
Revenues
8,366
to banks
72,021
271
42,554
234
124,310
Expenses
(17)
(6)
rent Company Revenues
103
96
Due
to banks
Expenses
Revenues
124,310
(290)
271
(246)
234
e from banks
Expenses
(17)but opposite,
72,021 Dinar8,366
(6) had 42,554
A 5 percent decrease of the above currencies against the Kuwaiti
would
have
equal,
Revenues
271
Expenses
234
(290)
(246)
Parent
Company
e to banks
42,554
124,310
effect
of
the
amounts
shown
above,
on
the
basis
that
all
other
variables
remain
constant.
The
Group
holds collaterals against Islamic finance facilities to related parties
of(246)
shares and8,366
real
Expenses
(290)
Due
from
banks
venues
Parent
Company
271 72,021
234 in the form
estate.
Anbanks
estimate
of the fair
valueIslamic
of collaterals
held against
Islamic
finance
facilities
to shares
relatedand
parties
The from
Group
holds collaterals
against
finance facilities
to related
parties
in the
form
of
real
to
banks
42,554
124,310
Due
penses
8,366
(290)
72,021
(246)
Equity
price
The
Group
holds
collaterals
against
finance 2015
facilities
to related
parties
in 4,770
the
form
of
shares
real
amounted
KD
5,713
thousand
as atIslamic
31
December
2014:
KD
thousand).
estate.
Antoestimate
of
therisk
fair
value
of December
collaterals
held (31
against
Islamic
finance
facilities
to234
relatedand
parties
Revenues
271
Due to
banks
42,554
124,310
Equity
price
risk
the change
in(31
fairDecember
values of2014:
equity
investments.
The
Group
manages this risk
estate.
Anagainst
of thousand
the
fairarises
value
of December
collaterals
held
against
facilities
to
related
parties
amounted
toestimate
KD
5,713
as
at from
31
KD
4,770
thousand).
Expenses
(290)
(246)
e Group holds collaterals
Islamic
finance
facilities
to related2015
parties
in the Islamic
form of finance
shares
and
real
Revenues
271
234
through
of
investments
in2015
terms
ofDecember
geographical
and
industry concentration.
Compensation
of5,713
key
management
personnel:
amounted
to KD
thousand as
at
31
December
(31
KD 4,770
thousand).
ate. An estimateExpenses
of the fair
value
ofdiversification
collaterals
held
against
Islamic
finance
facilities2014:
to distribution
related
parties
(290)
(246)
Compensation
key
management
personnel:
The
Group holds
collaterals
against
Islamic
finance
facilities
to4,770
related
parties
the form
shares
andasreal
mounted to KD 5,713
thousand
asofatsuch
31 December
2015
(31 December
2014:
KD
thousand).
For
investments
classified
as available
for
sale,
a five
percentinincrease
in of
stock
prices
at 31 December
Details
of compensation
for key
management
comprisefacilities
the following:
Compensation
of collaterals
key
management
personnel:
estate.
An
estimate
of
the
fair
value
of
collaterals
held
against
Islamic
finance
facilities
to
related
parties
The
Group
holds
against
Islamic
finance
to
related
parties
in
the
form
of
shares
and
real691 thousand).
2015
would
have
increased
equity
by
KD
574
thousand
(31
December
2014:
an
increase
of
KD
2014
2015
Details
of compensation
for key
comprise
the (31
following:
amounted
toestimate
KD
thousand
asclassified
at 31
2015
December
2014:
thousand).
ompensation of key
management
personnel:
estate.
An
the
fair management
value
of December
collaterals
held
against
Islamic
finance
facilities
to on
related
parties
For 5,713
suchofinvestments
as at fair
value
through
profit
or KD
loss,4,770
the
impact
profit
or loss would have
Details
of compensation
for key management
comprise
the
following:
2014
2015
KD’000
KD’000
amounted
to KD
5,713
thousand
as
at
31
December
2015
(31
December
2014:
KD
4,770
thousand).
been an increase of KD 128 thousand (31 December 2014: an increase of
KD
150
thousand).
An equal change
2014
2015
KD’000
KD’000
Compensation
of key management
personnel:
tails of compensation
for key management
comprise the
following:
in the opposite direction would have had equal, but opposite
effect
to
the
amounts
shown
above,
on the basis
KD’000
KD’000
Short-term
benefits
1,780
1,790
2014
2015
Compensation of key management personnel:
that
all
other
variables
remain
constant.
Post-employment
283
Short-term
benefitsbenefitsfor key management comprise the following:
1,780
373
KD’000 1,790
KD’000
Short-term
benefits
1,780
1,790
Share
compensation
279
Post-employment
benefitsfor key management comprise the following:
283
2014
398
373
2015
Detailsbased
of compensation
benefits
283
373
279
398
2,342
KD’000
2,561
KD’000
2014
2015
ort-term benefits Post-employment
1,780
1,790
279
398
2,342
2,561
KD’000
st-employment benefits
283
KD’000
373
2,342
2,561
Short-term
benefits
1,780
1,790
Senior executive
officers also participate in the Group’s share based payment
(see
note 26).
are based compensation
398 programme 279
Post-employment
benefitsalso participate in the Group’s share based payment
283
373
Senior executive
officers
(see
note 26).
Short-term
benefits
1,780
1,790
2,342
2,561 programme
28.
CONTINGENCIES
AND
COMMITMENTS
Share
compensation
279
Seniorbased
executive
officers
also
participate in the Group’s share based payment programme (see398
note 26).
Post-employment
benefits
283
373
At
thealso
financial
reporting
thereshare
werebased
outstanding
contingencies
and note
commitments
entered
28. officers
CONTINGENCIES
AND
COMMITMENTS
2,342
2,561
Share
based
compensation
279
398in the ordinary
nior executive
participate
in
thedate
Group’s
payment
programme (see
26).
28.
CONTINGENCIES
ANDdate
COMMITMENTS
course
business
in respect
of there
the following:
At
the of
financial
reporting
were outstanding contingencies and commitments entered
2,342
2,561in the ordinary
At
the of
financial
reporting
date
there
wereinoutstanding
and commitments
entered
in 26).
the ordinary
2014
course
business
in respect
ofparticipate
the following:
Senior
executive
officers
also
share based payment
programme2015
(see note
ONTINGENCIES
AND
COMMITMENTS
course
of
business
in
respect
of
the
following:
2015
KD’000
KD’000
the financial reporting
date
there
were
outstanding
contingencies
and
commitments
entered
in
the
ordinary
Senior executive officers also participate in the Group’s share based payment programme (see note 26). 2014
2014
2015
KD’000
KD’000
28.
AND COMMITMENTS
urse of business
inCONTINGENCIES
respect of the following:
KD’000
Guarantees
172,768
184,644
At
the financial reporting
there were outstanding contingencies2015
and commitments
entered in theKD’000
ordinary
2014
28.
CONTINGENCIES
ANDdate
COMMITMENTS
Acceptances
andreporting
letters
of date
credit
43,120
Guarantees
49,756
course
business
in respect
of there
the following:
184,644
At
the of
financial
were outstanding contingencies
and commitments
entered in the172,768
ordinary
KD’000
KD’000
Guarantees
172,768
184,644
Other commitments
914
Acceptances
and letters
of credit
43,120
2014
3,812
49,756
2015
course
of business
in respect
of the following:
Acceptances
43,120
49,756
Other commitments
914
3,812
216,802
KD’000
238,212
KD’000
2014
2015
uarantees
172,768
184,644
Other
914
3,812
216,802
238,212
KD’000
cceptances and letters
ofcommitments
credit
43,120
KD’000
49,756
216,802
238,212
172,768
184,644
Operating lease commitments:
her commitmentsGuarantees
914
3,812
Acceptances
and commitments:
letterspayments:
of credit
43,120
49,756
Future minimum
lease
Guarantees
172,768
Operating
lease
184,644
216,802
238,212
Other
914
3,812
2014
Operating
lease
2015
Futurecommitments
minimum
lease
Acceptances
and commitments:
letterspayments:
of credit
43,120
49,756
216,802
238,212
Futurecommitments
minimum lease payments:
2014
Other
914
2015
KD’000
3,812
KD’000
perating lease commitments:
2014
2015
KD’000
216,802
KD’000
238,212
ture minimum lease payments:
KD’000
KD’000
Within onelease
yearcommitments:
1,993
2,400
Operating
2014
2015
After one
notpayments:
more than five years
7,761
Within
oneyear
yearbut
1,993
5,259
Future
minimum
lease
2,400
Operating
lease
commitments:
KD’000
KD’000
Within
oneyear
year
1,993
2,400
Afteroperating
one
but
not
more thancontracted
five years for at the reporting date
7,761
2014
5,259
2015
Total
lease
expenditure
9,754
7,659
Future
minimum
lease
payments:
Afteroperating
one year lease
but not
more thancontracted
five years for at the reporting date 2,400
7,761
5,259
expenditure
9,754
KD’000
7,659
KD’000
2014
2015
Within one year Total
1,993
operating
lease
expenditure contracted for at the reporting date 5,259
9,754
7,659
KD’000
After one year but Total
not more
than five
years
7,761
KD’000
one year
1,993
2,400
otal operating lease Within
expenditure
contracted for at the reporting date
9,754
7,659
25
After
7,761
5,259
Withinone
oneyear
yearbut not more than five years
1,993
2,400
Total
expenditure
the reporting date
9,754
7,659
Afteroperating
one year lease
but not
more thancontracted
five years for at 25
7,761
5,259
OUBYAN BANK
BOUBYAN
K.S.C.PBANK
BOUBYAN
AND SUBSIDIARIES
K.S.C.P
BANK
AND
K.S.C.P
SUBSIDIARIES
AND SUBSIDIARIES
OTES TO THE
NOTES
CONSOLIDATED
TO THE
NOTES
CONSOLIDATED
TO
FINANCIAL
THE CONSOLIDATED
STATEMENTS
FINANCIALFINANCIAL
STATEMENTS
STATEMENTS
the year ended
For
31the
December
year ended
For
2015
the
31 BANK
year
December
ended
2015
31 December
BOUBYAN
K.S.C.P.
AND 2015
SUBSIDIARIES
NOTES
CONSOLIDATED
RELATED
27. PARTY
RELATED
TRANSACTIONS
27.TO THE
PARTY
RELATED
TRANSACTIONS
PARTY TRANSACTIONS
Related parties comprise
Related
parties
theended
major
Related
comprise
shareholders,
parties
the major
comprise
board
shareholders,
of
thedirectors,
major board
shareholders,
entities
of directors,
controlled
boardentities
of
by directors,
them
controlled
or under
entities
bytheir
them
controlled
or under
by them
their or under their
For
the year
31
December
2015
joint control, associates,
joint control,
key management
associates,
joint control,
key
personnel
associates,
management
andkey
their
personnel
management
close family
and personnel
their
members
closeand
and
family
their
themembers
Parent
close family
Company
and members
the Parentand
Company
the Parent Company
including their board
including
members,
theirincluding
key
board
management
members,
their board
key
personnel,
members,
management
branches,
key
personnel,
management
associates
branches,
and
personnel,
subsidiaries.
associates
branches,
Balances
and associates
subsidiaries.
with andBalances
subsidiaries.
with Balances with
30.
FINANCIAL
INSTRUMENTS
AND
RISK
MANAGEMENT
(CONTINUED)
related parties arise
related
fromparties
commercial
related
arise from
transactions
parties
commercial
ariseinfrom
thetransactions
normal
commercial
course
intransactions
the
of normal
businesscourse
inon
theannormal
of
arm’s
business
length
course
onbasis
of
anbusiness
arm’s
and length
on anbasis
arm’s
and
length basis and
30.4
Liquidity
risk
are included within
arethe
included
following
within
arefinancial
included
the (Continued)
following
information
within financial
the following
captions:
information
financial
captions:
information captions:
The liquidity profile of financial liabilities of the Group summarised below reflects the projected cash flows
Number
of board
Number
of board
including future profit
payments
overNumber
the lifeofofboard
these
financial
liabilities based on contractual repayment
member or executive
memberNumber
or executive
member
of related
orNumber
executive
of related
Number of related
arrangements.
officers
officers
parties officers parties
Up to three
3 to 6
6 to 12 partiesOver 1
2014 2015 20152014
2014 2015
2014 2014 2014
2014
2015
2015
2015
201520152014 2014
2015
months
months
months
year
Total
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
2015 Islamic
Islamic financing to
Islamic
customers
financing
to customers
10
10
1 4,650
4,650
4,650
8
8
3 10 8 1
3
3,918
3 3,918 1
3,918
Financial
Liabilities
Depositors’
accounts
Depositors’
accounts16
15 16
8 32,932
32,932
32,932
8 1516 8
53,059
815
8 53,059 8
53,059
Letters
and letters
of
guarantee
ofLetters
creditand
ofletters
guarantee
of credit
and
credit
Due
to
banks
1
1 1- 143
-18 43 18
18
383,356
1 letters of383,356
1
43
Revenues
Revenues
Revenues
10315,770
103
103
96
96
96
Depositors’
accounts
1,375,582
506,007
510,276
2,407,635
Expenses
Expenses
Expenses
(17)15,770
(17)(6)
(17)
(6)
(6)
1,758,938
506,007
510,276
2,790,991
3 to 6
months
KD’000
6 to 12
Over
72,021
72,021
months 8,366
1 year
42,554
124,310
124,310
KD’000
KD’000
271 234
234
(290)(246)
(246)
8,366
72,021
Total
42,554
124,310
KD’000
271
234
(290)
(246)
8,366
42,554
271
(290)
Financial Liabilities
201,264
5,031
20,832
227,127
Due holds
to The
banks
The Group holdsThe
collaterals
Group
against
collaterals
Group
Islamicholds
finance
against
collaterals
facilities
Islamicagainst
finance
to related
Islamic
facilities
parties
finance
to
in related
the
facilities
form
parties
oftoshares
related
in theand
form
parties
realofinshares
the- form
and of
real
shares and real
Depositors’
accounts
1,258,969
498,050
200
2,100,126
estate. An estimate
estate.
of the
An
fair
estimate
estate.
value
of
An
ofthe
collaterals
estimate
fair value
ofheld
the
of against
collaterals
fair
value
Islamic
of
held
collaterals
finance
against
facilities
Islamic
held against
finance
to342,907
related
Islamic
facilities
parties
finance
to related
facilities
parties
to related parties
amounted to KD amounted
5,713 thousand
to KD
amounted
as
5,713
at 31thousand
to
December
KD 5,713
as2015
atthousand
31(31
December
December
as at 2015
31 2014:
December
(31503,081
KD
December
4,770
2015 thousand).
(31
2014:
December
KD 4,770
2014:
thousand).
KD 200
4,770 thousand).
1,460,233
363,739
2,327,253
30.5
Operational
risk
Compensation ofCompensation
key management
Compensation
of key
personnel:
management
of key personnel:
management personnel:
Operational risk is the risk of loss arising from inadequate or failed internal processes, systems failure, human
error,
from of
external
events.
When
controls
fail
perform,the
it can
lead to legal or regulatory implications, or
Details for
of
compensation
keyor
Details
management
compensation
for key
comprise
management
the
for
following:
keycomprise
management
the to
following:
comprise
following:
financial /reputational loss.
2014
2014
2014
2015
2015
2015
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
The Group has established policies and procedures, which are applied to identify, assess, monitor, control and
mitigate operational risk in addition to other types of risks relating to the banking and financial activities of the
Short-term benefits
Short-term
benefits
Short-term
benefits
1,780
1,780
1,780
1,790
1,790
1,790
Group
as part of overall
risk management activities.
Post-employmentPost-employment
benefits
Post-employment
benefits
benefits
283
283
283
373
373
373
The operational
riskcompensation
of the Group is managed in line with the Central
Bank of Kuwait’s
concerning
Share based
compensation
Share based
279
279
279
398
398instructions398
the general guidelines for internal controls and best practice for managing
and supervising
2,342
2,342risks in 2,342
2,561
2,561 operational
2,561
banks.
Senior executive officers
Senior executive
also participate
Senior
officers
executive
inalso
the participate
Group’s
officersshare
also
in the
participate
based
Group’s
payment
in
share
theprogramme
Group’s
based payment
share
(see based
note
programme
26).
payment
(see
programme
note 26). (see note 26).
30.6
Fair value of financial instruments
values
are
obtained
from
market prices, discounted cash flow models and other models as
CONTINGENCIES
28.
CONTINGENCIES
AND
28.Fair
COMMITMENTS
CONTINGENCIES
AND
COMMITMENTS
ANDquoted
COMMITMENTS
appropriate.
The
carrying
values
ofoutstanding
financial
instruments
are contingencies
approximate
to
their
fair values
at 31 December
At the financial reporting
At the financial
date there
Atreporting
thewere
financial
outstanding
date reporting
there
were
contingencies
date
there were
and
contingencies
commitments
outstanding
and
entered
commitments
in the
and
ordinary
entered
commitments
in the entered
ordinary
in the ordinary
due
to course
the following:
relatively
short-term
maturity
the instruments.
course of businesscourse
in respect
of
business
of
the
in respect
of business
of the
in following:
respect
of theoffollowing:
2014
2014
2015
2015
Fair value of the Group’s financial assets that are measured2015
at fair value on2014
a recurring basis.
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Some of the Group’s financial assets are measured at fair value at the end of each reporting period. The
following tables give information about how the fair values of these financial assets are determined (in
Guarantees
172,768
172,768
172,768
184,644
184,644
184,644
particular, the valuation techniques(s) and inputs used).
Acceptances and Acceptances
letters of credit
and
Acceptances
letters of credit
43,120
43,120
43,120
49,756
49,756
49,756
Other commitments
Other commitments
Otherofcommitments
914
914valuation 914
3,812
Fair values
remaining financial assets and liabilities carried at
amortised cost 3,812
are estimated 3,812
using
216,802
216,802
238,212
238,212
techniques incorporating a range of input assumptions that are238,212
appropriate in 216,802
the
circumstances.
Carrying value
of financial assets and liabilities that are carried at amortised cost are not materially different from their fair
values
as commitments:
most of these
assets and liabilities are of short term maturities or are re-priced immediately based on
Operating lease commitments:
Operating
lease
Operating
lease commitments:
Future minimum Future
lease payments:
minimum
leaseminimum
payments:
lease
payments:
marketFuture
movement
in profit
rates.
2014
2014
2014
2015
2015
2015
Sensitivity analysis on fair value estimations, by varying input
assumptionsKD’000
by a reasonable
margin, did not
KD’000
KD’000
KD’000
KD’000
KD’000
indicate any material impacts on consolidated statement of financial position or consolidated statement of profit
loss.
Within one year Withinorone
year
Within one year
1,993
1,993
1,993
2,400
2,400
2,400
98
After one year butAfter
not more
one year
thanAfter
but
fivenot
one
years
more
yearthan
but not
fivemore
yearsthan five years
5,259
Total operating lease
Totalexpenditure
operatingTotal
lease
contracted
operating
expenditure
forlease
at the
contracted
expenditure
reporting
fordate
contracted
at the reporting
for atdate
the reporting
7,659 date
25
25
25
7,761
5,259
9,754
7,659
7,761
5,259
9,754
7,659
7,761
9,754
30.6
Fair value of financial instruments (Continued)
Fair value as at
Financial assets
2015
Fair value
Hierarchy
2015
2014
Sector
Financial assets at fair value through profit or loss Unquoted securities
2,560
2,995
Level 3
Real Estate
Financial assets at fair value through profit or loss Unquoted funds
12,828
9,743
Level 2
Financial Institutions
Available for sale investments - Sukuk
32,183
64,622
19,802
58,180
Level 1
Level 1
Government
7,609
6,244
4,162
9,064
6,468
6,514
Level 2
Level 2
Level 2
Real Estate
Services
Available for sale investments - Unquoted funds
Level 3
2,018
1,712
Level 3
Real Estate
3,487
1,836
Level 3
Services
6,401
6,605
RELATED PARTY TRANSACTIONS
Related parties comprise
the
major
shareholders,
board
of
directors,
entities
controlled
by
them
or
under
their
Available for sale investments - Quoted securities
Level 1
Real Estate
1,348
886
joint control, associates, key management personnel and their close family members and the Parent Company
Level 1
570
448
including their board members, key management personnel, branches, associates and subsidiaries. Balances with
Fair value hierarchy
related parties arise from commercial transactions in the normal course of business on an arm’s length basis and
The table below analyses financial instruments carried at fair value by valuation method. The different levels
are included within the following financial information captions:
have been defined as follows:
of board
 Level 1: quoted pricesNumber
(unadjusted)
in active markets for identical assets or liabilities;
or executive
Number
of related
 Level 2: inputs othermember
than quoted
prices included
within
level 1 that are observable, either directly (i.e. as
officers
parties
prices) or indirectly (i.e. derived from prices);
2014
2014
2014
2015
2015
2015
 Level 3: inputs that are not based on observable market data (unobservable inputs).
KD’000
KD’000
Level 1
Level 2
Level 3
Total
10
1
4,650
8
3
3,918
2015
KD’000
KD’000
KD’000
KD’000
15
8
32,932
16
8
53,059
assets
at fair value through
12,828
15,388
Letters of guaranteeFinancial
and letters
of credit
1
182,560
1 profit or loss
43
Revenues
103
98,139
18,015
10,153
126,307
96
Expenses
(17)
(6)
98,139
30,843
12,713
141,695
Available
for sale investments - Unquoted securities
2015
27.
Level 2
Level 3
KD’000
KD’000
8,366
72,021
42,554
124,310
9,743
2712,995
234
79,900
22,046
11,906
(290)
(246)
79,900
31,789
14,901
The Group holds collaterals against Islamic finance facilities to related parties in the form of shares and real
estate. An estimate of the fair value of collaterals held against Islamic finance facilities to related parties
amounted to KD 5,713 thousand as at 31 December 2015 (31 December 2014: KD 4,770 thousand).
Parent Company
Due from banks 2014
Due to banks
Revenues
Expenses
Level 1
KD’000
Total
KD’000
12,738
113,852
126,590
Compensation of key management personnel:
Details of compensation for key management comprise the following:
Short-term benefits
Post-employment benefits
2015
KD’000
2014
KD’000
1,790
373
398
2,561
Senior executive officers also participate in the Group’s share based payment programme (see note 26).
1,780
283
279
2,342
Up to three
months
KD’000
30.
99
Parent CompanyParent Company
Parent Company
Due from banks Due from banksDue from banks
Due to banks
Revenues
Revenues
Revenues
2014
Expenses
Expenses
Expenses
BOUBYAN
BANK
K.S.C.P.
AND
SUBSIDIARIES
YAN BOUBYAN
BANK K.S.C.P
BOUBYAN
BANK
AND
K.S.C.P
BOUBYAN
SUBSIDIARIES
BANK
AND
K.S.C.P
BANK
SUBSIDIARIES
AND
K.S.C.P
SUBSIDIARIES
AND
SUBSIDIARIES
TO
THE
FINANCIAL
STATEMENTS
TO NOTES
THE CONSOLIDATED
TONOTES
THENOTES
CONSOLIDATED
TO
NOTES
THE
FINANCIAL
CONSOLIDATED
TO CONSOLIDATED
THE
FINANCIAL
STATEMENTS
CONSOLIDATED
FINANCIAL
STATEMENTS
FINANCIAL
STATEMENTS
STATEMENTS
valueIslamic
through
profit
orto financing
Islamic financing
Islamic
to customers
financing
to customers
financing
Islamic
customers
10 8
8 to customers
3108
loss-accounts
Depositors’
1516
16
815
16
Lettersand
of
letters
guarantee
Letters
of securities
credit
and
of guarantee
letters
Letters
ofof
and
credit
guarantee
letters
ofand
credit
letters
credit - 11
1 1 of(435)
1 2,995
Unquoted
Revenues
Revenues
Revenues Revenues
Available for sale
Expenses
Expenses
Expenses Expenses
investments-
Unquoted
securities
Parent Company
Parent Company
Parent
Company
Parent Company11,906
Due from banks
Due from banks
Due from banks
Due from banks 14,901
Due to banks Due to banks Due to banksDue to banks
Revenues
Revenues
Revenues Revenues
Expenses
Expenses
Expenses Expenses
397
1
8
--
10
1 3
38 3,9181 103 4,650
3,918
15
8 8
16
8 53,0598 158 32,932
53,059
-- 1843
143-- 110396
96
(17)
(6)
(6)
(1,098)
(38)
(1,098)
336
72,021
336
124,310
234
(246)
4,650
1
3,918
32,932
8
53,059
18
43
-103
96
(17)
(6)
4,650
4,650
3,918
32,932
32,932
53,059
2,560
18
18
43
103
103
96
(17)
(17)
(6)
(1,495)
107
8,366
8,366
72,021
(1,495) 72,021
107
42,554
42,554
124,310
124,310
271
271
234
234
(290)
(290)
(246)
(246)
10,153
8,366
72,021
12,713 8,366
42,554
42,554
124,310
271
271
234
(290)
(290)
(246)
Exchange
At 31
The Group holds
The collaterals
Group holds
Theagainst
Group
collaterals
Islamic
The
holdsGroup
against
collaterals
finance
holds
Islamic
facilities
against
collaterals
finance
to
Islamic
related
facilities
against
finance
parties
Islamic
to related
facilities
in finance
the parties
form
to facilities
related
ofinshares
theparties
to
form
and
related
of
in
real
the
shares
parties
form
and
in
ofreal
the
shares
formand
of real
shares and real
Change in
Sale/
At 1
rate
December
estate. An estimate
estate. of
Anthe
estimate
estate.
fair value
An
of estimate
the
estate.
of fair
collaterals
An
value
of estimate
theof
held
fair
collaterals
of
value
against
the of
fair
Islamic
held
collaterals
value
against
finance
of held
collaterals
Islamic
facilities
against
finance
held
Islamic
to related
against
facilities
finance
parties
Islamic
to facilities
related
finance
parties
to facilities
related parties
to related parties
January
2014
fair
value
Impairment
redemption
movements
2014
amounted to KD
amounted
5,713 thousand
to amounted
KD 5,713
as at
to
thousand
amounted
31
KDDecember
5,713
astothousand
atKD
31
2015
5,713
December
(31
asthousand
December
at 31
2015
December
as
(31
2014:
atDecember
312015
KD
December
4,770
(31
2014:
December
thousand).
2015
KDAdditions
(31
4,770
2014:
December
thousand).
KD
4,770
2014:thousand).
KD
4,770 thousand).
KD 000’s KD 000’s
KD 000’s
KD 000’s KD 000’s KD 000’s
KD 000’s
Compensation
Compensation
of key management
Compensation
of key management
personnel:
Compensation
of key management
personnel:
of key management
personnel: personnel:
Financial
assets
at fair
through
profit
orcomprise
loss
Details ofvalue
compensation
for
Details
key
management
of compensation
Details
for key
of
management
compensation
for key
the management
following:
comprise
for keythe
management
comprise
following:
thecomprise
following:
the following:
3,932
89
- 2015
- 2015
Unquoted securities
2014(1,026)2015
2014 - 201520142,995 2014
KD’000 KD’000
KD’000 KD’000
KD’000
KD’000
KD’000
KD’000
Available for sale
investmentsShort-term benefits
Short-term benefits
Short-term benefits
Short-term benefits
Unquoted
securities
Post-employment
Post-employment
benefits
Post-employment
benefits
Post-employment
benefits 11,159
benefits
15,091
Share basedShare
compensation
based compensation
1,780
1,780 1,790
1,780
1,780
1,790
1,790
1,790
995
(662)
929
(634)
119
11,906
283
283
373
373
373283
373 283
1,084
(662)
(1,660)
279
279
279
279
398 929
398
398119
39814,901
2,342
2,342 2,561
2,342
2,342
2,561
2,561
2,561
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value
hierarchy
together
with
aGroup’s
quantitative
analysis
asthe
at 31
December
2015
arepayment
as shown
below:
Senior executive
Senior
officers
executive
also
Senior
participate
officers
executive
Senior
also
in
officers
the
participate
executive
alsoin
officers
share
participate
the sensitivity
Group’s
based
alsoin
payment
participate
share
the
Group’s
based
programme
in
payment
share
Group’s
based
(see
programme
note
share
payment
26).
based
(see
programme
note
26).
programme
(see
note 26).
(see note 26).
CONTINGENCIES
28.
CONTINGENCIES
28. ANDCONTINGENCIES
COMMITMENTS
28. AND
CONTINGENCIES
COMMITMENTS
AND COMMITMENTS
AND COMMITMENTS
Significant
Range
At the financial
At reporting
the financial
At
datethe
reporting
there
financial
were
Atdate
the
outstanding
reporting
there
financial
were
date
reporting
contingencies
outstanding
there were
date contingencies
outstanding
there
and commitments
were outstanding
contingencies
and commitments
entered
contingencies
and
in the
commitments
entered
ordinary
andincommitments
the
entered
ordinary
in the
entered
ordinary
in the ordinary
Valuation
unobservable
(weighted
course of business
course
in of
respect
business
course
of the
inofrespect
following:
business
course
of in
of
therespect
business
following:
ofinthe
respect
following:
of the following:
technique
inputs
average)
Sensitivity
of2015
the
input to
fair
value 2014
2014
2014
2014
2015
2015
2015
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
Financial assets at fair
Market
Discount for
5%-10%
An increase (decrease) in the Discount KD’000
rate
value through profit or loss
approach
lack of liquidity
by 1% would result in an increase
Guarantees
Guarantees
172,768 184,644
172,768
184,644
184,644
184,644
– unquoted
securities
(decrease)
in 172,768
fair value
by KD 172,768
25
Acceptances and
Acceptances
letters of Acceptances
credit
and letters of
Acceptances
and
credit
letters ofand
credit
letters of credit
43,120
43,120 49,756
43,120
43,120
49,756
49,756
49,756
thousand.
Other commitments
Other commitments
Other commitments
Other commitments
914
914
3,812
3,812
3,812914 3,812 914
Available for sale
Market
Discount for
5%-10% 238,212
An
increase238,212
(decrease)
the
Discount rate
216,802
216,802 in
216,802
216,802
238,212
238,212
investments – unquoted
approach
lack of liquidity
by 1% would result in an increase
securities
(decrease) in fair value by KD 102
Operating lease
Operating
commitments:
lease
Operating
commitments:
lease
Operating
commitments:
lease commitments:
thousand.
Future minimum
Future
lease
minimum
payments:
Future
lease
minimum
payments:
Futurelease
minimum
payments:
lease payments:
2014
2014 20152014
2014
2015
2015
2015
The discount for lack of marketability represents the amounts that the Group has determined that market participants
KD’000 KD’000
KD’000 KD’000
KD’000
KD’000
KD’000
KD’000
would take into account when pricing the investments.
100
Within one year
Within one
year
Within
one
year
Within one
year investments, the impairment charge
1,993
1,993
2,400
2,400
2,400
In the
case of
available
for sale
in the profit
or loss would
depend 2,400
on 1,993
whether the1,993
After one yearAfter
but not
one
more
year
After
than
but
one
not
fivemore
year
years
After
but
than
not
five
year
more
years
but
than
notfive
more
years
than
years
7,761
7,761
7,761
7,761
5,259only impact
5,259
5,259
decline
is significant
orone
prolonged.
An
increase
in five
the fair
value would
equity (through
other5,259
comprehensive
Total operating
Total
leaseoperating
expenditure
Total
lease
operating
contracted
expenditure
Total
lease
operating
forhave
contracted
expenditure
at the
reporting
for
expenditure
contracted
at date
the reporting
for
contracted
at the
date
reporting
for at the
date
reporting date
9,754
9,754 7,659
9,754
9,754
7,659
7,659
7,659
income)
and,
would
not
anlease
effect
on
profit
or
loss.
25
25
25
25
30.
30.6
Fair value of financial instruments (Continued)
Fair values of remaining financial assets and liabilities carried at amortised cost are estimated using valuation
techniques incorporating a range of input assumptions that are appropriate in the circumstances. Carrying value
of financial assets and liabilities that are carried at amortised cost are not materially different from their fair
values as most of these assets and liabilities are of short term maturities or are repriced immediately based on
market movement in profit rates.
Sensitivity analysis on fair value estimations, by varying input assumptions by a reasonable margin, did not
indicate any material impacts on consolidated statement of financial position or consolidated statement of profit
or loss.
30.7
Capital management
The primary objectives of the Group’s capital management are to ensure that the Group complies with
externally imposed capital requirements and that the Group maintains strong and healthy capital ratios in order
to support its business and to maximize shareholders’ value.
The Group actively manages its capital base in order to cover risks inherent in the business. The adequacy of the
Group’s capital is monitored using, among other measures, the rules and ratios established by the Basel
Committee on Banking Supervision (BIS rules/ratios) and adopted by the Central Bank of Kuwait in
supervising the Group.
The Group’s regulatory capital and capital adequacy ratios for the years ended 31 December 2015 and 31
December 2014 are calculated in accordance with Central Bank of Kuwait circular number 2/RB,
RBA/336/2014 dated 24 June 2014 related to Basel III regulations which are shown below:
Risk weighted assets
Capital required
Capital available
Tier 1 capital
Tier 2 capital
Total capital
Tier 1 capital adequacy ratio
Total capital adequacy ratio
2015
2014
KD’000
KD’000
1,631,425
203,928
1,356,592
162,791
259,594
18,332
277,926
15.91%
229,781
15,148
17.04%
244,929
16.94%
18.05%
The Group’s financial leverage ratio for the year ended 31 December 2015 is calculated in accordance with
Central Bank of Kuwait circular number 2/RBA/ 343/2014 dated 21 October 2014 and is shown below:
2014
2015
KD’000
Tier 1 capital
259,594
Total exposures
3,286,647
7.90%
Financial leverage ratio
KD’000
229,781
2,773,982
8.28%
The disclosures relating to the capital adequacy regulations issued by Central Bank of Kuwait as stipulated in
Central Bank of Kuwait’s circular number 2/RB, RBA/336/2014 dated 24 June 2014 and disclosures related to
financial leverage ratio as stipulated in Central Bank of Kuwait’s circular number 2/RBA/ 343/2014 dated 21
October 2014 for the year ended 31 December 2015 are included under the ‘Risk Management’ section of the
annual report.
36
30. PARTY
AND RISK MANAGEMENT (CONTINUED)
RELATED
27.
PARTY
RELATED
27. TRANSACTIONS
RELATED
27.FINANCIAL
TRANSACTIONS
RELATED
PARTYINSTRUMENTS
TRANSACTIONS
PARTY TRANSACTIONS
Related parties
Related
comprise
parties
the
Related
comprise
majorparties
shareholders,
Related
thecomprise
major
parties
shareholders,
board
thecomprise
major
of directors,
shareholders,
the
board
major
entities
of directors,
shareholders,
board
controlled
of
entities
directors,
board
by controlled
them
ofentities
or
directors,
under
bycontrolled
them
their
entities
or under
by
controlled
them
their
or by
under
them
their
or under their
30.6
Fair
value
of
financial
instruments
(Continued)
joint control, joint
associates,
control,
key
joint
associates,
management
control,
joint
key
associates,
personnel
management
control,
key
associates,
and
management
personnel
their key
close
and
management
family
personnel
their members
close
and
personnel
family
their
andclose
members
the
andParent
family
theirand
close
Company
members
thefamily
Parent
and
members
Company
the Parent
and Company
the Parent Company
The
following
table
shows
amembers,
reconciliation
ofpersonnel,
the and
opening
and closing
amount
ofsubsidiaries.
level 3 and
financial
assets.with
including theirincluding
board members,
their
including
board
keymembers,
management
their
including
board
key
members,
their
personnel,
management
boardkey
branches,
management
personnel,
key
associates
branches,
management
associates
subsidiaries.
branches,
personnel,
and
associates
Balances
branches,
subsidiaries.
and
with
associates
Balances
with
subsidiaries.
Balances
Balances with
related partiesrelated
arise from
parties
commercial
related
arise parties
fromtransactions
related
commercial
ariseparties
fromintransactions
commercial
arise
the normal
from commercial
in
transactions
course
the normal
of business
transactions
incourse
the normal
onofanbusiness
inarm’s
course
the normal
length
on
of an
business
course
basis
arm’sand
length
on
of business
an arm’s
basis on
and
length
an arm’s
basislength
and basis and
are included within
are included
the following
are
within
included
the
financial
following
are
within
included
information
the
financial
following
within
captions:
information
thefinancial
following
captions:
information
financial information
captions: captions:
Exchange
At 31
Number of board
Number of board
Number of board
Number of board
Sale/
At 1 January Change in
rate
December
member or executive
member orNumber
executive
member
ofor
related
executive
member
Number or
of executive
related
Number of related
Number of related
2015
fair valueofficers
Impairment
Additions
redemption
movements
2015
officers
officers parties
parties
officers
parties
parties
KD
000's
KD
000's 2014
KD 000's2015
KD 000's2014
2014
2014
2014000's
20142015
2014
2014
2014
2014
2014
2015KD 000's
2015 KD 000's
2015
2015 KD
2015
20152014
2015
2015
2015
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000
KD’000 KD’000
Financial assets at fair
101
For
the
year
31 December
2015 2015
ear ended
For the
31year
December
ended
For the
31
2015
year
December
For
ended
theended
31
year
2015
December
ended
312015
December
31.
DERIVATIVES
In the ordinary course of business, the Bank enters into various types of transactions that involve Sharia’a
approved derivative financial instruments to mitigate foreign currency risk. A derivative financial instrument is a
financial contract between two parties where payments are dependent upon movements in price of one or more
underlying financial instruments, reference rate or index.
The notional amount, disclosed gross, is the amount of a derivative’s underlying asset and is the basis upon
which changes in the value of derivatives are measured.
The notional amounts indicate the volume of transactions outstanding at the year-end and are neither indicative
of the market risk nor credit risk.
The positive fair value of forward foreign exchange contracts outstanding as of 31 December 2015 is KD 1
thousand (2014: KD 3 thousand) and their notional amounts outstanding as of 31 December 2015 are KD 1,345
thousand (2014: KD 43 thousand)
The Group’s derivative trading activities mainly related to deals with customers, which are normally matched by
entering into reciprocal spot deals with counterparties.
103
FIDUCIARY ASSETS
The aggregate value of assets held in a trust or fiduciary capacity by the Group amounted to KD 95,496
thousand (31 December 2014: KD 99,804 thousand) and the related income from these assets amounted to KD
355 thousand (31 December 2014: KD 307 thousand).
102
32.

ANNUAL REPORT

Transcription

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