CBB published a circular introducing, with immediate effect, certain regulatory measures and relaxations, for a period of six months from the date of the circular, to contain the financial repercussions of COVID-19 outbreak. Until further notice, CBB has decided to postpone all the announced regulatory policy initiatives, except the E-KYC rules in the Financial Crime Module. Furthermore, CBB has decided to extend the deadline, to June 30, 2021, for compliance with the revised Operational Risk Modules (Volumes 1 and 2) that were issued on December 31, 2019.
The regulatory measures and relaxations introduced by CBB for a period of six months include the following:
- Retail banks, finance companies, and micro-finance companies must offer any impacted borrower six-month deferral of installments at no fees, no interest on interest, and no increase in rate, unless the borrower agrees for a shorter period.
- For Stage 1 expected credit loss (ECL), the number of days past due, excluding the deferrals mentioned above, must be increased up to 74 days, with effect from February 01, 2020.
- Cooling off period for reclassifying restructured credit facilities from Stage 3 to Stage 2 is reduced from 12 months to 3 months.
- Liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) limits for all locally incorporated banks have been reduced from 100% to 80%.
- Risk-weight for capital adequacy purposes for Bahrain-based small and medium enterprises has been reduced from 75% to 25%.
- Retail banks and financing companies must relax their loan-to-value (LTV) ratio for new residential mortgages for Bahrainis.
- Cash reserve ratio for retail banks is reduced from 5% to 3%.
The above regulatory measures and relaxations are subject to review by CBB at the end of six month period. CBB has also released implementation guidelines regarding the six months deferral.
- Regulatory Measures and Relaxations
- Deferral of Implementation of Policy Initiatives
- Implementation Guidelines, March 23, 2020
- Implementation Guidelines, March 24, 2020
Keywords: Middle East and Africa, Bahrain, Banking, COVID-19, LCR, NSFR, Operational Risk, ECL, Residential Mortgage, IFRS 9, Credit Risk, Regulatory Capital, CBB
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