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
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
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