11.1 Application to a Financial Group
Where a Bank to which this Chapter applies is part of a Financial Group, this Chapter applies on a consolidated basis in relation to all the entities within the Financial Group.
11.2 Internal Capital Adequacy Assessment Process (ICAAP)
(1) A Bank must implement and maintain an ICAAP which details the processes and procedures by which the Bank will assess and maintain adequate Capital Resources in relation to the risks faced by it.
(2) The Bank must conduct an ICAAP assessment at least annually giving due regard to the guidance in Chapter 11 of the BPG.
(3) The ICAAP assessment conducted by the Bank pursuant to (2) must be approved by its Governing Body and then submitted to the AFSA within four months from the end of the Bank’s financial year.
(4) In addition to (2), the Bank must conduct an ICAAP assessment:
(a) whenever there is material change to the business, strategy, nature or scale of the activities of the Bank which may have a significant impact on its risk profile or adequacy of its regulatory capital; or
(b) as and when required by the AFSA.
(5) The ICAAP assessment conducted by the Bank pursuant to (4) must be approved by its Governing Body and then submitted to the AFSA within two months from the date of such material change or requirement.
(6) A Bank must ensure that an ICAAP assessment is documented in writing and includes details of:
(a) the calculations and models used in the determination of the level of Capital Requirements which it considers will be adequate to cover all the risks identified by its ICAAP assessment;
(b) the Bank’s strategies and plans to ensure availability of the level of capital determined by the ICAAP;
(c) specifications of any models used in the ICAAP, including the underlying assumptions, parameters, and results of back-testing; and
(d) any other relevant information, giving due and appropriate regard to the guidance in Chapter 11 of the BPG.
(7) A Bank must retain the records of an ICAAP assessment for at least six years.
11.3 Imposition of an Individual Capital Requirement
(1) The AFSA may, subject to (3) and (4), at any time by written notice to a Bank:
(a) impose an Individual Capital Requirement; or
(b) vary or withdraw an Individual Capital Requirement.
(2) The AFSA may impose or vary an Individual Capital Requirement by written notice, on its own initiative, where the AFSA forms the view that the Bank’s Capital Requirement is insufficient to address adequately all its risks.
(3) The AFSA will, in addition to prescribing an Individual Capital Requirement, also specify in the notice the types and amounts of Capital Resources required to meet the Individual Capital Requirement.
(4) Any decisions made under this Rule 11.3 will be subject to the decision-making procedures set out in Schedule 1 of the AIFC Financial Services Framework Regulations (FSFR).
(5) If the AFSA decides to exercise its power under (2) after a Licence has been granted, the Bank may refer the matter to the AIFC Court for review.
(6) A Bank must have and maintain, at all times, regulatory capital as defined in by the rules in Chapter 4 of BBR as well as capital meeting the types and amounts specified in the notice issued to it under this rule to meet its Individual Capital Requirement.
CHAPTER 12 Public Disclosures Requirements
Introduction
Guidance
(1) This Chapter implements the Pillar III of the Basel III framework. Pillar III is aimed at facilitating market discipline which is considered as one of the effective mechanisms to achieve safety and soundness of banks. The rules in this Chapter set out the regulatory requirements for Banks to make periodic disclosures of relevant and material information about their business activities and data on risk exposures assumed by them.
(2) The detailed public disclosure requirements specifying the data items to be disclosed and related guidance are provided in Chapter 12 of the Banking Prudential Guideline (BPG) issued by the AFSA. It is suggested that this Chapter of the BBR, be read in conjunction with Chapter 12 of the BPG issued by the AFSA, to facilitate understanding of the regulatory requirements and compliance with them.
12.1 Application to a Financial Group
(1) A Bank, which is a member of a Financial Group, according to Chapter 10 of BBR, must ensure that the detailed disclosures specified in Chapter 12 of the BPG are made on a consolidated basis, at the level of the Financial Group.
(2) A Bank which is a Subsidiary of a regulated bank or financial institution or another Bank, which is already subject to equivalent public disclosure requirements, does not need to comply with the requirements in this Chapter to the extent that it meets those equivalent public disclosure requirements.
12.2 Disclosure policy
(1) A Bank must implement and maintain a written disclosure policy that:
(a) sets out the Bank’s approach for determining which of the disclosures set out in Chapter 12 of the BPG it needs to make;
(b) details the processes and procedures and its internal controls in relation to such disclosure details the medium for disclosure that most appropriately meets the purposes of this chapter; and
(c) is approved by the Governing Body of the Bank.
(2) A Bank must ensure that appropriate verification, whether internal or external, is performed in relation to any disclosure, and take all reasonable steps to ensure its accuracy and timeliness.
(3) To the extent that any required disclosure is substantially similar to a disclosure required of the Bank under the International Financial Reporting Standards, a disclosure under such standards must be taken to meet the requirement for disclosure under this Chapter.
12.3 Disclosure frequency, locations and omissions
Frequency
(1) The disclosures set out in this Chapter must be made by the Bank at least once a year, other than disclosures of CET1 Capital, T1 Capital and T2 Capital, deductions from Capital Resources, Liquidity Coverage Ratio and Leverage Ratios which must be made on a quarterly basis.
(2) Reporting deadlines must be in accordance with quarterly and annual reporting obligations under Chapter 3 of BBR.
Locations
(3) A Bank must, subject to (2), make these disclosures either in its annual report or periodic financial statements.
(4) A Bank may disclose the items marked as quantitative in Chapter 12 of the BPG in a medium or location other than its annual report or periodic financial statements, provided that:
(a) it has prior approval of the AFSA to do so;
(b) the annual report or periodic financial statements contain clear references to the location of such disclosures; and
(c) such disclosures are readily accessible by the market.
Omissions
(5) A Bank may omit certain disclosures if the omitted item is:
(a) not material, in accordance with the concept of materiality under the International Financial Reporting Standards,
(b) proprietary in nature, and the disclosure of the relevant information to the public would undermine the Bank’s competitive position or render the Bank’s investments in products and systems less valuable, or
(c) confidential in nature, and the disclosure of the relevant information would violate or jeopardise confidentiality agreements with Clients or Counterparties.
(6) Where in reliance upon (5)(b) or (c) above, a Bank omits an item that is marked as a quantitative disclosure in Chapter 12 of the BPG, it must disclose general qualitative information about the subject matter of that particular requirement, together with the reasons for the omission.
