BANK OF SHARJAH Basel III - Pillar III Disclosures
For the year ended 31 December 2022
Bank of Sharjah P.J.S.C.
Pillar III Disclosure for the year ended December 2022
Table of Contents
1. | Introduction | 4 | |
2. | Purpose and basis of preparation | 4 | |
3. | Overview of Pillar III | 5 | |
3.1 | Verification | 5 | |
3.2 | Implementation of Basel III standards and guidelines | 5 | |
4. | Key Metrics for the group (KM1) | 6 | |
5. | Overview of risk management and Risk Weighted Assets (OVA) | 7 | |
5.1 | Overview of Risk Weighted Assets (RWAs) (OV1) | 7 | |
5.2 | Differences between accounting and regulatory scopes of consolidation and mapping of | ||
financial statement categories with regulatory risk categories (LI1) | 8 | ||
5.3 | Main sources of differences between regulatory exposure amounts and carrying values in | ||
financial statements (LI2) | 11 | ||
5.4 | Explanations of differences between accounting and regulatory exposure amounts (LIA) | 12 | |
6. | Composition of Capital | 12 | |
6.1 | Capital Management | 12 | |
6.2 | Regulatory Capital | 13 | |
6.3 | Composition of Regulatory Capital (CC1) | 14 | |
6.4 | Reconciliation of regulatory capital to balance sheet (CC2) | 17 | |
7. | Leverage Ratio | 18 | |
7.1 | Summary comparison of accounting assets versus leverage ratio exposure (LR1) | 18 | |
7.2 | Leverage ratio common disclosure template (LR2) | 19 | |
8. | Credit Risk | 20 | |
8.1 | General qualitative information about credit risk (CRA) | 20 | |
8.2 | Relationships between the credit risk management, risk control, compliance and internal audit | ||
functions | 21 | ||
8.3 | Scope and main content of the reporting on credit risk exposure and on the credit risk | ||
management function to the executive management and to the board of directors | 21 | ||
8.4 | Credit quality of assets (CR1) | 22 | |
8.5 | Changes in Stock of Defaulted Loans (CR2) | 22 | |
8.6 | Credit Risk Mitigation Techniques (CR3) | 23 | |
8.7 | Additional Disclosure related to the Credit Quality of Assets (CRB) | 23 | |
8.8 | Past due exposure but not impaired | 23 | |
8.9 | Renegotiated Financial Assets | 23 | |
8.10 Gross Credit Exposure - Currency Classification | 24 |
BOS Classification: Internal
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Bank of Sharjah P.J.S.C.
Pillar III Disclosure for the year ended December 2022
8.11 | Gross Credit Exposure by Maturity | 25 |
8.12 | Gross Credit Exposure by Geography | 27 |
8.13 | Gross Credit Exposure by Economic Activity | 29 |
8.14 | Impaired by Geography | 31 |
8.15 | Impaired by Economic Activity | 31 |
8.16 | Credit Risk Exposure and Credit Risk Mitigation (CRM) Effects (CR4) | 32 |
8.17 | Exposure by Asset classes and Risk Weights (CR5) | 34 |
8.18 | Qualitative disclosure requirements related to credit risk mitigation techniques (CRC) | 36 |
8.19 | Qualitative disclosures on bank's use of external credit ratings under the standardized approach | |
for credit risk (CRD) | 37 | |
9 Counterparty credit risk (CCR) | 38 | |
9.1 | Analysis of Counterparty Credit Risk by approach (CCR1) | 38 |
9.2 | Credit valuation adjustment (CVA) capital charge (CCR2) | 39 |
9.3 | Standardized approach - CCR exposure by regulatory portfolio and risk weights (CCR3) | 40 |
9.4 | Composition of collateral for Counterparty Credit Risk exposure (CCR5) | 42 |
10 Market Risk | 43 | |
10.1 | Market Risk - trading book | 43 |
10.2 | Market Risk - non-trading or banking book | 43 |
10.3 | Market Risk under the Standardized approach (MR1) | 47 |
10.4 | Market Risk | 47 |
11. Interest rate risk in the banking book (IRRBB) | 48 | |
11.1 | IRRBB risk management objectives and policies | 48 |
11.2 | Sensitivity of economic value of equity and NII - IRRBB1 | 49 |
12 Operational Risk | 49 | |
13 Liquidity risk management | 49 | |
13.1 | Exposure to liquidity risk | 51 |
13.2 | Eligible Liquid Asset Ratio (ELAR) | 51 |
13.3 | Advances to Stable Resources Ratio (ASRR) | 52 |
14 Remuneration Policy | 53 | |
14.1 | Remuneration Policy (REMA) | 53 |
14.2 | Remuneration awarded during the financial year (REM1) | 53 |
14.3 | Special payments (REM2) | 54 |
BOS Classification: Internal
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Bank of Sharjah P.J.S.C.
Pillar III Disclosure for the year ended December 2022
1. Introduction
Bank of Sharjah P.J.S.C. (the "Bank"), is a public joint stock company incorporated by an Amiri Decree issued on 22 December 1973 by His Highness the Ruler of Sharjah and was registered in February 1993 under the Commercial Companies Law Number 8 of 1984 (as amended). The Bank commenced its operations under a banking license issued by the United Arab Emirates Central Bank dated 26 January 1974. The Bank is engaged in commercial and investment banking activities.
The Bank's registered office is located at Al Khan Road, P.O. Box 1394, Sharjah, United Arab Emirates. The Bank operates through eight branches in the United Arab Emirates located in the Emirates of Sharjah, Dubai, Abu Dhabi, and City of Al Ain.
2. Purpose and Basis of preparation
The CBUAE supervises Bank of Sharjah ("BOS" or the "bank") and its subsidiaries (together referred to as the "Group") on a consolidated basis, and therefore receives information on the capital adequacy of, and sets capital requirements for, the Group as a whole. The capital requirements are computed at a Group level using the Basel III framework of the Basel Committee on Banking Supervision ("Basel Committee"), after applying the amendments advised by the CBUAE, within national discretion. The Basel III framework is structured around three 'pillars': minimum capital requirements (Pillar I); supervisory review process (Pillar II); and market discipline (Pillar III).
The disclosures have been prepared in line with the disclosures template introduced by the CBUAE guidelines on disclosure requirements published in November 2020, November 2021 and December 2022 respectively.
The annual Pillar III report of the Group for the year ended 31 December 2022 comprises detailed information on the underlying drivers of risk-weighted assets (RWA), capital of the Bank, its wholly owned subsidiaries (together referred to as "The Group"). The report should be read in conjunction with the Group's Consolidated Financial Statements for the year ended 31 December 2022.
The complete listing of all direct subsidiaries of Bank of Sharjah PJSC as at 31 December 2022 is as follows:
Country | ||||||
Proportion of | Year of | Year of | of | |||
Name of Subsidiary | ownership interest | incorporation | acquisition | incorporation | Principal activities | |
2022 | 2021 | |||||
Emirates Lebanon Bank SAL | 100% | 100% | 1965 | 2008 | Lebanon | Financial institution |
El Capital FZC | 100% | 100% | 2007 | 2017 | U.A.E. | Investment in a financial institution |
BOS Real Estate FZC | 100% | 100% | 2007 | 2007 | U.A.E. | Real estate development activities |
BOS Capital FZC | 100% | 100% | 2007 | 2007 | U.A.E. | Investment |
Polyco General Trading LLC | 100% | 100% | 2008 | 2008 | U.A.E. | General trading |
Borealis Gulf FZC | 100% | 100% | 2010 | 2010 | U.A.E. | Investment & Real estate development |
activities | ||||||
BOS Funding Limited | 100% | 100% | 2015 | 2015 | Cayman Islands | Financing activities |
Muwaileh Capital FZC | 90% | 90% | 2010 | 2017 | U.A.E. | Developing of real estate & related activities |
BOS Repos Limited | 100% | 100% | 2018 | 2018 | Cayman Islands | Financing activities |
BOS Derivatives Limited | 100% | 100% | 2018 | 2018 | Cayman Islands | Financing activities |
GTW Holding LTD | 100% | - | 2022 | - | U.A.E. (ADGM) | Facilitate the sale of real estate assets |
GDLR Holding LTD | 100% | - | 2022 | - | U.A.E. (ADGM) | Facilitate the sale of real estate assets |
BOS Classification: Internal
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Bank of Sharjah P.J.S.C.
Pillar III Disclosure for the year ended December 2022
3. Overview of Pillar III
Pillar III complements the minimum capital requirements and the supervisory review process. Its aim is to encourage market discipline by developing disclosure requirements which allow market participants to assess certain specified information on the scope of application of Basel III, capital, particular risk exposures and risk assessment processes, and hence the capital adequacy of the institution. Disclosures consist of both quantitative and qualitative information and are provided on the consolidated level.
The CBUAE issued Basel III capital regulations, which came into effect from 1 February 2017 introducing minimum capital requirements at three levels, namely Common Equity Tier 1 ('CET1'), Additional Tier 1 ('AT1') and Total Capital.
The minimum capital adequacy requirements as set out by the Central Bank of UAE are as follows:
- Minimum common equity tier 1 (CET 1) ratio of 7% of risk weighted assets (RWAs).
- Minimum tier 1 ratio of 8.5% of RWAs.
- Total capital adequacy ratio of 10.5% of RWAs.
In addition to CET 1 ratio of 7% of RWAs, a capital conservation buffer (CCB) of 2.5% of RWAs shall be maintained in the form of CET 1. Further, counter cyclical buffer (CCyB) requirement shall be met by using CET 1. The level of CCyB to be notified by 'the Central Bank'. There is no CCyB requirement during the current year. The Group has not complied with all the externally imposed capital requirements and has prepared the capital adequacy ratios excluding the hyperinflation impact and currency translation resulting from the Lebanese operations.
Following are the changes in the revised standards which have been adopted either prior to or during 2022:
- The Tier Capital Supply Standard
- Tier Capital Instruments Standard
- Pillar 2 Standard: Internal Capital Adequacy Assessment Process (ICAAP)
- Credit Risk, Market Risk and Operational Risk
- Equity Investment in Funds, Securitisation, Counterparty Credit Risk, Leverage Ratio
- Credit Value Adjustment (CVA) for Pillar I and III
CBUAE requires the Pillar 2 - Supervisory Review Process to focus on each bank's Internal Capital Adequacy Assessment Process (ICAAP) in addition to Pillar 1 Capital calculations. The ICAAP should include a risk based forward looking view of, but not limited to, Credit, Market and Operational Risk Capital.
3.1 Verification
The Pillar 3 Disclosures for the year 2022 have been reviewed by the Group's internal and statutory auditors.
3.2 Implementation of Basel III standards and guidelines
The Group is compliant with Standardised Approach for Credit, Market and the Basic Indicator Approach for Operational Risk (Pillar 1) as applicable in 2022.
BOS Classification: Internal
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Disclaimer
Bank of Sharjah PJSC published this content on 16 May 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 May 2023 13:48:01 UTC.
