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    CBB Amends Capital Adequacy Rules, Proposes Cybersecurity Controls

    November 08, 2022

    The Central Bank of Bahrain (CBB) amended the Capital Adequacy Module (Module CA) of the CBB Rulebook Volume 1 for conventional banks and Volume 2 for Islamic banks. The regulator also proposed standards on financial cybersecurity controls, which will be incorporated within all volumes of the CBB Rulebook, with the comment period ending on November 22, 2022.

    Amendments to Capital Adequacy Module. CBB has amended paragraphs CA-3.2.19B and CA-4.2.19B in the Capital Adequacy Module (Module CA) of CBB Rulebook Volumes 1 and 2 respectively, to facilitate the implementation of social housing schemes and encourage participation from retail banks. The regulatory text now reads as follows:

    • CA-3.2.19B of CBB Rulebook Volume 1: The risk-weight for residential mortgage exposure granted under the social housing schemes of the Kingdom of Bahrain was reduced to 25%, subject to meeting conditions (a) and (b) in CA-3.2.19A. The reduced risk-weight is subject to ensuring compliance with the requirements for timely recognition of expected credit loss (ECL) as per the credit risk management module (Module CM).
    • CA-4.2.19B of CBB Rulebook Volume 2: The risk-weight for residential mortgage exposure granted under the social housing schemes of the Kingdom of Bahrain was reduced to 25% subject to meeting conditions (a) and (b) in CA-4.2.19A. The reduced risk-weight is subject to ensuring compliance with the requirements for timely recognition of ECL as per the credit risk management module (Module CM). 

    The draft standards on financial cybersecurity controls were developed by the Ministry of Interior’s National Cybersecurity Controls (NCSC) to guide the financial entities toward robust cybersecurity control mechanism. The draft standards address the best practices to be implemented in seven domains:

    • Cybersecurity Governance ensures that the entity is fully aware of cybersecurity goals and that all actions taken are in the correct direction toward the achievement of cybersecurity goals. It covers roles and responsibilities, cybersecurity risk management, strategies, policies and procedures, asset management, change management, cybersecurity continuity management, cybersecurity awareness and training.
    • Cybersecurity of Financial Technology intends to provide the required cybersecurity measures to be considered when acquisition, developing and managing financial systems.
    • Cyber Defense provides effective cybersecurity defense processes to ensure their effectiveness in protecting networks, systems, applications, and information technology services of the entity.
    • Cybersecurity Assessment aims to guide the financial entities in performing vulnerability assessment and penetration testing.
    • Cybersecurity of Third-Party aims to protect entity from third-party misconduct, lists cybersecurity controls starting from selecting a third-party until the termination of the third-party contract.
    • Cybersecurity Incident Management provides controls to minimize the impact of current and future incidents.
    • Cybersecurity Audit aims to maximize the effectiveness of cybersecurity requirements of the financial entity by conducting audits to ensure compliance with established policies, operational procedures, and relevant standard, legal, and technical requirements.

     

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    Keywords: Middle East and Africa, Bahrain, Banking, Regtech, Fintech, Cyber Risk, Third Party Risk, CBB Rulebook, Regulatory Capital, Islamic Banking, Basel, Credit Risk, ECL, IFRS 9, CBB

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