Disclosures Under

Basel III Framework

Qualitative & Quantitative Disclosures

Basel III Pillar 3 Disclosures
December 31, 2022

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 Basel III Pillar 3 Disclosures 31 December 2022

Tables and templates

OVA – Bank risk management approach

Overview of risk
management and RWA KM1 – Key metrics (at consolidated group level)
OV1 – Overview of RWA
LI1 – Differences between accounting and regulatory scopes of consolidation and mapping of financial statement categories
Linkages between financial with regulatory risk categories
statements and regulatory
LI2 – Main sources of differences between regulatory exposure amounts and carrying values in financial statements
exposures
LIA – Explanations of differences between accounting and regulatory exposures amounts
CC1 – Composition of regulatory capital
Composition of capital and
TLAC CC2 – Reconciliation of regulatory capital to balance sheet
CCA – Main features of regulatory capital instruments and of other TLAC- eligible instruments

Macroprudential supervisory CCyB1 – Geographical distribution of credit exposures used in the countercyclical buffer
measures
Leverage ratio LR1 – Summary comparison of accounting assets vs leverage ratio exposure measure
LR2 – Leverage ratio common disclosure template
LIQA – Liquidity risk management
Liquidity LIQ1 – Liquidity Coverage Ratio (LCR)
LIQ 2 – Net Stable Funding Ratio (NSFR)
CRA – General qualitative information about credit risk

CR1 – Credit quality of assets

CR2 – Changes in stock of defaulted loans and debt securities

CRB – Additional disclosure related to the credit quality of assets

CRC – Qualitative disclosure requirements related to credit risk mitigation techniques
Geographic Breakdown
Industry Sector Breakdown
Credit risk Residual Contractual Maturity Breakdown
Impaired Loans, Past Due Loans And Allowances
Impaired Loans, Past Due Loans And Allowances
Reconciliation of Changes in the Allowances for Loan Impairment
CR3 – Credit risk mitigation techniques – overview
CRD – Qualitative disclosures on banks’ use of external credit ratings under the standardised approach for credit risk
CR4 – Standardised approach – credit risk exposure and Credit Risk Mitigation (CRM) effects
CR5 – Standardised approach – exposures by asset classes and risk weights
CCRA – Qualitative disclosure related to counterparty credit risk
CCR1 – Analysis of counterparty credit risk (CCR) exposure by approach
CCR2 – Credit valuation adjustment (CVA) capital charge
Counterparty credit risk
CCR3 – Standardised approach of CCR exposures by regulatory portfolio and risk weights
CCR5 – Composition of collateral for CCR exposure
CCR8 – Exposures to central counterparties
SECA – Qualitative disclosure requirements related to securitisation exposures
Securitisation SEC1 – Securitisation exposures in the banking book
SEC4 – Securitisation exposures in the banking book and associated capital requirements – bank acting as investor
MRA – General qualitative disclosure requirements related to market risk
Market risk
MR1 – Market risk under standardised approach

Interest rate risk in the IRRBBA – IRRBB risk management objective and policies
banking book IRRBB1 – Quantitative information on IRRBB
REMA – Remuneration policy
REM1 – Remuneration awarded during the financial year
Remuneration
REM2 – Special payments
REM3 – Deferred remuneration

Operational Risk Operational Risk Qualitative disclosure

General General Qualitative Disclosure Requirements

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 Table OVA: Bank’s Risk Management approach

a) Business model determination and risk profile

Riyad Bank is a full service Bank, undertaking Retail, Commercial and Wholesale banking activities. The Bank
provides sophisticated corporate and retail products, doing so through both conventional and Shari’a-
compliant programs.

Riyad Bank has a large retail franchise covering a multitude of segments across the market. The Bank is a
market leader in project and syndicated finance business, and its main emphasis in corporate arena is on the
mid cap corporates as well as emerging enterprises (EEU). The Bank’s Treasury & Investment Division is an
active participant in Saudi riyal and various other foreign currency denominated money markets in the
Kingdom.

The Bank is selectively increasing its branch and ATM networks but has a major focus on digital/ non-
physical channels. Capital market and investment services are provided through the wholly-owned
subsidiary i.e. Riyad Capital.

The Bank also has a branch in London, a representative office in Singapore and an agency in Houston, USA.

The Bank is undergoing a transformation journey into becoming the most innovative and trusted financial
solution partner in the Saudi market. Bank is resolutely focused on delivering an excellent customer
experience and an excellent employee experience. An excellent customer experience means that Bank shall
pursue a programme of initiatives to deliver what “Brilliant Banking”; the Bank shall focus on new and growth
markets (such as emerging sectors, SMEs and private sector), and bank shall continue to deliver a best-in-
class digital offering with constant innovation. An excellent employee experience requires continually
developing bank's talent to respond to an ever more competitive market, clear well-laid out career paths,
and high-caliber leaders who inspire the bank staff people to out-run the competition, delight bank
customers, and excel in their jobs and careers.

The Bank adopted an integrated enterprise-wide approach with regard to risk management where all risk
types and cross-risk type issues are identified/understood, measured and monitored at all levels to provide
one integrated view on the Bank’s business risk profile.

b) The risk governance structure

The Board of Directors are responsible to ensure that the Bank is organized effectively and efficiently, and is
conducting its business in accordance with all appropriate regulatory and good corporate governance and
practices. The bank has relevant corporate governance and risk related Board committees that include the
Executive Committee, Audit Committee, Risk Management Committee, ALCO, Nomination and
Compensation Committee and the Strategic Planning Group.

The Board carries out the core responsibilities of setting the Bank’s risk appetite, approving the Bank-wide
risk frameworks and relevant policies, monitoring compliance with Board approved risk limits and progress
on implementation of strategic risk related projects as well as compliance with all regulatory matters. These
high level frameworks and policies provide the fundamental corporate governance principles and guidance
for risk taking, managing and monitoring activities throughout the Bank and its subsidiaries.

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Risk Management is an independent function from the business, headed by CRO and comprises of
Enterprise Risk Management Division and Corporate Credit Division. Risk Management responsibilities in
the Bank cover all facets of Credit, Market and Operational Risks as well as Liquidity and Interest rate risk in
Banking book. The Enterprise Risk Management Division also has the responsibility of coordinating and
managing the risk appetite and Internal Capital Adequacy Assessment Plan (ICAAP), on the basis of a
comprehensive risk-profile of the Bank.

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c) Channels to communicate, decline and enforce the risk culture
The Bank’s fundamental risk management goal is to build a culture of risk understanding so that better
decisions can be made at every level. Risk culture is an integral part of the Bank’s overall corporate culture.
The conservative risk profile is embedded in the risk culture by means of communication and training, and is
monitored through periodic performance assessment.

The Chief Risk Officer (CRO) is responsible for the actual risk profile and risk processes in the Bank for all risk
types (credit, market, operational, liquidity, interest rate risk, etc.) across all products and business
segments. The Risk Management function headed by the CRO is independent from the Bank’s business
activities.

The Bank, through Compliance Department, reporting to the CEO , ensures that decisions which legally
commit the Bank are in compliance with internally approved policies and procedures, the regulations of the
countries in which the Bank operates, including its branches/overseas units and its fully-owned subsidiaries.

d) The scope and main features of risk measurement systems.

1. Credit Risk Measurement Systems

The fundamental pillars of the Bank’s credit risk management systems are its credit rating systems for
assessing the credit quality of its customers on a regular basis. These advanced systems are deployed in
quantifying credit risk and is leveraged in setting various lending policies incorporating robust credit
underwriting standards.

The scope and features of the risk management system deployed in credit risk management are as follows:

i. Credit Limit Management and Application Workflow System:

System for wholesale business is divided into two main components as follows:

· Credit Workflows Manager- facilitates automation of credit management processes by ensuring the
timely and accurate capture of data and documents, validating consistent business rules and standards, for
a wide range of users across the bank

· Credit Limit Manager- manages multiple levels of credit limits at any point-in-time in a counterparty
structure and across any combination of user-specified criteria such as industry, group, country, rating,
category, product type and risk type etc. It also controls the credit exposures during lifecycle of facility
utilization as excess, past-due and suspension.

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Credit Limit Management System features:

· The system is able to produce all the required information to enable the management to assess quickly
and accurately the level of credit risk as well as ensure adherence to the risk tolerance levels, throughout
credit lifecycle.

System is capable to apply risk policies and business rules in the processes to validate and control credit
decisions and exposures to generate warnings in case of violations.

The system is able to provide information on the composition of the portfolio, concentrations of credit risk,
quality of the overall credit portfolio as well as various categories of the portfolio and information on
rescheduled/restructured and ‘’watch-list’’ accounts;

· The system is able to demonstrate control over the amounts of credit exposures undertaken with
break-down by loans categories, geography, types of exposures, products and level of credit grades, etc.;

· The system is able to provide details on the overall quality of the credit portfolio. This may include, inter
alia, details of problem loans including those on the watch-list, categories of their classification, potential
loss to the bank on each significant problem loan, the level of existing and additional provisions required
etc.;

ii. Obligor’s Risk Rating System

This system provides a comprehensive Obligor risk information by combining financial spreading, Credit
Analysis & Robust Data Storage using one flexible, secured Enterprise Platform.

System features:

· Highly flexible and Integrated Credit Limit Management and workflow system;

· Risk Analyst’s open architecture design enables integration with proprietary and third-party
applications and ratings models; promotes accuracy integrity and consistency;

· Streamline credit decision process and reduce turnaround time for management

· System has unique architecture and modular components, enabling Riyad Bank to meet credit risk
assessment goals;

iii. Treasury Risk System for Counterparty Credit Risk Measurement

Riyad Bank Treasury System for Counterparty Credit Risk measurements is compliant with Basel III
Standardised Approach for Counterparty Credit Risk (SACCR) as adopted by SAMA.

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Treasury System features:

· Solution complies with Basel III SA CCR computation for EAD (Exposure at Default) OTC Derivatives as
per SAMA/BASEL requirements;

· Solution measures Exposure at Default (EAD) through replacement cost and potential future exposure
while adjusting variation margins posted as collateral.

· Solution is a real-time solution that assist Riyad Bank to achieve a consistent and compliant risk policy
for derivative counterparty exposures. This is accomplished by allowing a bank to apply the same risk
methodology across capital reporting and internal risk limits management

· Solution provide capabilities on checking available limits based on Risk Based and Notional. Further,
system also provides Pre-Deal calculation facilities in a fully integrated and automated environment.

IFRS9 solution for calculation of Expected Credit Loss (ECL):

Bank has implemented Finevare solution for calculating IFRS9 Expected Credit Loss Model (ECL)
provisioning.
Finevare solution complies and conform with the IFRS 9 standard for impairment calculations, simulations,
risk parameters, interest revenue correction and Effective Interest rate. Business reports are also
generated from Finevare in an automated environment.

3. Retail Risk Measurement Systems

For retail asset business, the Bank uses Origination Manager Decision Module for automating the
applications of credit risk acceptance criteria, business acceptance rules, and scorecard decisions. This
system is integrated with customer relationship management systems to allow a seamless origination and
management of retail asset activity.
Moreover, the accounts are managed within the core banking systems given transaction and exposure
management. The accounts rehabilitation process is performed at the collection management system
which has seamless identification and status of the accounts under process.

4. Market Risk Measurement Systems

Riyad Bank uses an integrated market risk system that brings together bank-wide market, ALM and
Liquidity risk management into one platform for daily monitoring and reporting. Kamakura Risk Manager
(KRM) enables Riyad Bank to measure market valuations, Value at Risk, Net interest Income at Risk,
Economic Value of Equity at Risk and IRRBB. Risk is monitored on Banking and Trading Books under normal
and stressed scenarios. The VaR model is subject to daily back-testing and any exceptions to the one-day
99% VaR are analyzed and documented.

The system is regularly validated and upgraded to cater for changes in regulatory requirements and Riyad
Bank’s risk profile.

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5. Operational Risk Measurement Systems

SAS - Governance Risk and Compliance Manger (GCM) is a single web based platform for Operational
Risk which captures both quantitative and qualitative data for risk identification, assessment &
measurement, mitigation, monitoring and for both internal and external reporting’s by using the following
modules:

Risk Control & Self-Assessment – a key tool which facilitates hosting of risks faced by the organization and
enables their assessment, measurement and monitoring.

Key risk indicators – an important tool within risk management used to enhance the monitoring and
mitigation of risks and facilitate risk reporting.

Incident management module – a robust and complete process life cycle of operational losses (potential,
actual and near-miss with the recovery effects) to produce both internal and regulatory reporting’s.

Issues and action plans –– module that supports creation and tracking of issues and their corresponding
action plans.

Risk Management – used as a risk register repository for the bank, which is linked to other modules to
provide a 360 - degree view of the banks risk profile.
Insurance policies – a tool to manage banks insurance policies, their performance, documentation and
renewal.

Control Testing – module that facilitates the periodic control self-assessment process to enable a
reasonable assurance on the effectiveness and adequacy of control environment.

Compliance Department also uses the ‘Policy Module’ in the SAS (GCM) system which is: an important tool
used for logging regulatory circulations, policies, guidelines and their implementation plan as well as
ownership for better tracking and monitoring of the bank’s compliance.

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e) Process of risk information reporting provided to the Board and Senior management
Riyad Bank has the following measures in place to monitor the Capital Adequacy Ratio and Risk related
information of the Bank on a continuing basis.

i. Risk Appetite Statement Dashboard and Enterprise Risk management Report, which includes Capital
Adequacy Ratios, is prepared and submitted to the Board of Directors on a quarterly basis. This report also
contains the Minimum CAR threshold set by SAMA every year and internally sets target for the Bank for the
year. The risk appetite statement describes both the nature of, and tolerance for, the material risks that are
inherent to bank’s business. Actual performance against the risk appetite statement thresholds is
presented periodically to Board Risk Management Committee (BRMC), which besides providing a snapshot
view, also acts as a monitoring tool to holistically review the bank’s actual risk profile against RAS.
Explanation is provided where the ratio is below target level.

ii. Weekly movement report- a snapshot of weekly movement in loan portfolio along with overview of
major transactions and past dues (below and above 90 days) categorized through facilities and segments.
This report is submitted to Senior Management on a weekly basis

iii. Asset Quality report - this comprehensive report is produced on a monthly basis and covers details
about portfolio growth, NPLs and Loan loss reserves, portfolio quality, provision coverage and
concentrations in the portfolio. It also includes Portfolio risk profile and risk migration as well as exposures in
different economic sectors.

iv. ALCO Report is circulated on a monthly basis to the ALCO Members and Invitees which comprises of
senior management of the Bank. This is an exhaustive report covering amongst other topics but not limited
to Funding Liquidity Ratio, Risk Indicators Dashboard, Interest income at risk, Stress tests, Concentration
risk, FX trading positions and VAR analysis etc.

v. Provisioning Report at transactional and client level is produced on a monthly basis from Finevare
solution and provided to Senior Management. The report covers exhaustive information on client’s
provisioning, staging information, rating, past due for management’s analysis.
A range of other standard are also generated from Finevare to meet vast requirements related to IFRS 9
standard reporting as well as specific regulatory or internal reporting requirements.

vi. Quarterly Provision Study closely monitors and identifies provisioning requirements and problem loan
migration. This is approved by the Audit Committee

vii. Bank is reporting on a monthly basis for Retail Portfolio to the Retail Risk Management Committee as
well as Asset Quality Reports which also includes retail risk information is reported to the Board

viii. Risk & Compliance Committee (RMCC) acts as the senior risk and regulatory compliance committee of
the Bank. RMCC has responsibility for overseeing the control environment through monthly reports, the
level of risks taken, compliance with Board and management policies, limits, as well as compliance with all
regulatory requirements. The scope of responsibilities of RMCC extends to all risk types except for Credit
Risk. RMCC receives key metrics related to People Risk with its monthly report for a comprehensive
oversight on the enterprise level risks.
The bank has also instituted an Operational Resilience Committee (ORC) which serves as a
designated committee for overseeing operational resilience related matters which includes,
but not limited to, Operational Risk, Technology Risk, Cyber & Information Security, Business
Continuity, etc.
ix. Operational Risk Management Dept. submits periodic reports to the management and board level
committees to provide an oversight of the major operational risks within the bank. The main objective of
the report is to assist senior executives and Board to take informed timely decisions to keep operational risk
within the bank's operational risk appetite

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 x. Interim condensed financial statements are prepared on a quarterly basis. The external auditors of the
Bank provide a Review Report on the quarterly financial statements. Annual consolidated financial
statements are prepared based on which the External Auditors issue audit opinion

xi. A comprehensive Internal Capital Adequacy Assessment Plan (ICAAP) is prepared once every year with
rigorous involvement of risk owners and other internal stakeholders to assess Bank’s capital adequacy
position on forward looking basis. The Plan is reviewed by the senior management and approved by the
Board of Directors and subsequently submitted to SAMA. It forms the basis of an active one-to-one
dialogue with SAMA under Supervisory Review Process.

xii. The objective of Internal Liquidity Adequacy Assessment Process (ILAAP) is to comprehensively
identify and quantify all sources of Bank’s liquidity risk, document how the Bank intends to mitigate those
risks, and assess how much current and future liquidity is required. An important aim of developing the
ILAAP is to ensure compliance with the overall liquidity adequacy rules set by SAMA. Through ILAAP, the
Bank aims to highlight how it embeds liquidity as a fundamental aspect of its strategic business planning and
regularly assesses liquidity requirements & availability given its balance sheet structure under normal &
stress conditions. The Bank also details its liquidity risk appetite & limits and justifies how it is in line with the
size and complexity of the Bank’s business.

xiii. Bank also undertakes risk assessment and capital requirements under defined stress scenarios for its
material risks. This semi-annual stress exercise is conducted in line with SAMA Rules on Stress Testing. The
results of regular and reverse stress testing are reviewed by the management and shared with Board of
Directors and subsequently submitted to SAMA. The stress testing results are used as an input into the
Bank’s business and contingency funding plans and also forms part of the regulatory dialogue and
engagement under Supervisory Review Process.

xiv. On a quarterly basis the Bank submits CAR to SAMA after due review and approval by senior
management. During the review process the increase/decrease over the previous quarter is analyzed.

xv. Eligible capital is a key component of the CAR calculations. The Bank closely monitors the dividend
payout ratio to consider the impact of dividend payments on its CAR each time it considers dividend
distribution. The impact on CAR, (both before and after distribution of dividends) is an integral part of the file
request sent to SAMA for approval of dividends.

xvi. Key investment decisions taken by Investment Committee consider potential impact on CAR.
xvii. Third party independent review of the bank’s internal Obligor Risk Rating (ORR) models’ validation is
placed for Credit Risk Policy Committee (CRPC) perusal on annual basis. Furthermore, ORR models’
performance and monitoring report is shared with the Senior Management on quarterly basis

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f) Qualitative information on stress testing
An assessment of risk and capital requirements under defined stress scenarios is conducted to cover Pillar 1
risks (credit, market and operational risk) and material Pillar 2 risks

For each risk type the key model variable(s)/factor(s) are identified that directly influence size of the risk
being measured before applying stress them.

Coverage of the Portfolio:

Adequate coverage of the stress test is achieved through designing scenarios for balance sheet exposures

i. On the assets side, stress testing covers:

- Loan Book: Corporate, commercial, SME, retail / consumer loans (wherever Bank’s significant
exposure exists)

- The traded market portfolios: These portfolios include interest rate, equity, foreign exchange,
commodity and credit market instruments bearing the ability to mark them to market on a regular basis.

ii. On the liabilities side, funding and liquidity is tested at various levels of shocks.

Methodologies Used in Risk Management:

The Bank has adopted following stress testing methodologies for the purpose its risk management across
the organization:

i. Bank uses Advanced approach for stress testing of Corporate asset class both for pillar 1 “Credit” and
pillar 2 “Credit Concentration” along with Market Risk in pillar 1.

ii. For Pillar 1 risks (excluding above) required capital under stressed conditions is based on models used
for Standardized Approach with appropriate set of assumptions specific to the given risk type.

iii. For Pillar 2 risks the required capital under stressed conditions is based on internal models
(quantitative or judgmental) that are used for capital estimation under normal conditions with appropriate
set of assumptions specific to the given risk type.
iv. For each risk type the key model variable(s)/factor(s) are identified that directly influence size of the
risk being measured before stressing them.

v. From a process perspective, after consultation, future plausible stressed events are agreed and
scenarios are drawn with likely implications for the Saudi Arabia’s economic indicators, like oil prices, non-oil
GDP growth, interest rate, inflation, etc. As a next step, Bank specific impact on the financial performance
under each risk area is assessed under certain assumptions. The results are then aggregated to assess
Bank's Capital Adequacy Ratio (CAR) under the stressed conditions. Stress results are presented to Senior
Management (Asset and Liability Committee - ALCO) for capital adequacy assessment and planning
purposes and is also shared with the Board of Directors and its Risk Committee.

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g) The strategies and processes to manage, hedge and mitigate risks
Suitable policies and procedures have been adopted by Riyad Bank in order to ensure an appropriate level of
risk management is directed at the relevant element of the business.
The Bank's risk management strategy is to support the Bank's corporate and strategic objectives by
effectively and efficiently assisting business and support units.

The Bank has effective risk mitigation techniques in place to manage and mitigate risk as follows:

i. Bank has comprehensive Credit Risk Management (CRM) Framework in place approved by the Board of
Directors to cover all Bank-wide credit functions and activities. The CRM framework along with strong
credit risk governance structure are designed to provide comprehensive controls and continuing
management of the credit risk.

ii. The bank has an overarching board approved enterprise risk management framework (ERMF) to
outline the high level risk management goals, risk governance and strategy for risk management in Riyad
bank including fully owned subsidiaries, offshore agencies, branches and representative offices, where
applicable. ERMF applies to all levels and assists in achieving the strategic objectives by bringing a
systematic approach to identifying, analyzing, mitigating and reporting of risks.

A strong risk Strategy and risk appetite approved by the Board is in place and monitored and reported
through risk appetite dashboard which provide integrated approach to spot and trigger immediate remedial
actions with clearly defined roles and responsibilities keeping in view the best international market practices

iii. Bank has Business and Risk Acceptance (BACs and RACs) criteria to manage the risk on its loan book
and provide effective screening and measurement tool of credit risk to assist with the building of high
quality credit portfolio at the outset.
iv. The Board of Directors has approved credit policy guidelines for the Bank. All exposures must confirm
to these macro credit-limits, product types and tenors. Cross border counterparty credit lines are subject
to the availability of respective country-limits, where applicable.

v. Bank’s maximum exposure to a single borrower is in line with the maximum legal limits set by SAMA
supported by policies, processes and auto solution to monitor the total indebtedness of group
counterparties. Further the bank has also complied with the minimum requirements on setting large
exposure rules with respect to bank’s exposure to single counterparties, group of connected counterparties
and related counterparties to meet the new regulatory requirements for large and connected exposures
reporting. The rules have now been fully operationalized in the bank’s lending system and complies with
SAMA’s requirements.

vi. Bank has deployed an advanced internal loan grading system as well as early warning signal system
that covers areas such as loan usage, documentation, company information, third party information as well
as external information. The Bank is also more vigilant in terms of the application of credit mitigants. At a
bank-wide level, credit exposures are managed to promote alignment to Bank's risk appetite statement, to
maintain the target business mix and to ensure that there is no undue concentration of risk. Concentration
risk is also well managed through well-defined policy and employment of robust methodology.

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 vii. Bank has adopted the new IFRS9 impairment methodology under which the impairment model under
IFRS-9 reflects expected credit losses, as opposed to incurred credit losses under IAS 39. Under the
impairment approach in IFRS-9, it is no longer necessary for a credit event to have occurred before credit
losses are recognized. Instead, an entity always accounts for expected credit losses and changes in those
expected credit losses. The amount of expected credit losses is updated at each reporting date to reflect
changes in credit risk since initial recognition. Impairment approach of IFRS-9 applies to financial assets
measured at Amortized cost and Fair Value through Other Comprehensive Income. For the risk
management and reporting purposes, Bank has deployed new ECL calculation solution (Finevare) that
calculates provisioning based on IFRS9 guidelines and supports an integrated modular approach in an
automated environment for business and regulatory reporting. Bank has also put in place the required
policies, process and procedure documents as well as respective models are in place to enable the
computation of ECL for financial instruments that are subject to ECL calculation.

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 viii. Enhancement of management information system is carried out to provide timely, integrated and
informative reports that properly identify, measure, monitor, individual and related exposures as well as
credit risk concentrations. Revision of under writing procedures to be more formalized and specific to take
quick and necessary corrective actions, with policy exception, being immediately tracked and reported to
management and Board of Directors.

ix. Bank has further refined it's internal rating system together with the introduction of risk migration
matrix to assist with more accurate calculation of PD’s associated with loan portfolio and enhancing risk
premium/ review pricing policies.

x. For retail asset portfolios, second line oversight is provided by an independent Retail Risk Management
Department which is involved in the process of setting risk acceptance criteria for product programs,
providing risk assurance on origination, exposure management, and collections activity, as well as with
analytics on the health of the retail portfolio with recommendations for remediation.

Post Crisis Mitigants

i. The Bank has enhanced collateral coverage in designated business activities, together with the
reduction of risk limits at an individual and portfolio levels. Further, the bank can tighten credit underwriting
requirements to reduce credit risk as well as restructuring, unwinding or hedging certain positions.

ii. Amend pricing policies (e.g. as interest spread or margin income) to reflect previously unidentified
risks; the Bank has also deployed RAROC which is a valuable tool, both for senior management to compare
different businesses on a like-for-like basis, and for business managers to compare different products/
customers/ transactions on a like-for-like basis.

iii. Re profiling of the loans which are likely to default due to sudden change in macroeconomic
environment as these may require some time to adjust to the changes.

iv. The Bank has enhanced remedial and restructuring capabilities so as to identify and cure the problem
accounts at the right time in order identify potential NPLs at an earlier stage.

the Bnak reassess market sector exposure and realign Bank’s strategy to one where risk adjusted return on
capital is maximized and carry out more frequent interim revision of riskier/concentrated sections and
collateral limits.

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 Template KM1: Key metrics
SAR Million
a b c d e

Available capital (amounts) Dec-22 Sep 22 Jun 22 Mar 22 Dec 21

1 Common Equity Tier 1 (CET1) 49,465 46,657 46,716 48,117 47,306

1a Fully loaded ECL accounting model 49,465 46,657 46,716 48,117 47,306

2 Tier 1 56,036 49,476 49,530 50,930 47,306

2a Fully loaded ECL accounting model Tier 1 56,036 49,476 49,530 50,930 47,306

3 Total capital 65,353 58,776 58,851 60,202 56,695

3a Fully loaded ECL accounting model total capital 65,353 58,776 58,851 60,202 56,695

Risk-weighted assets (amounts)

4 Total risk-weighted assets (RWA) 310,425 308,390 301,635 313,214 298,475

Risk-based capital ratios as a percentage of RWA

5 Common Equity Tier 1 ratio (%) 15.9% 15.1% 15.5% 15.4% 15.8%

5a Fully loaded ECL accounting model Common Equity Tier 1 (%) 15.9% 15.1% 15.5% 15.4% 15.8%

6 Tier 1 ratio (%) 18.1% 16.0% 16.4% 16.3% 15.8%

6a Fully loaded ECL accounting model Tier 1 ratio (%) 18.1% 16.0% 16.4% 16.3% 15.8%

7 Total capital ratio (%) 21.1% 19.1% 19.5% 19.2% 19.0%

7a Fully loaded ECL accounting model total capital ratio (%) 21.1% 19.1% 19.5% 19.2% 19.0%

Additional CET1 buffer requirements as a percentage of RWA

8 Capital conservation buffer requirement (2.5% from 2019) (%) 2.500% 2.500% 2.500% 2.500% 2.500%

9 Countercyclical buffer requirement (%) 0.0370% 0.0242% 0.0265% 0.0340% 0.0352%

10 Bank G-SIB and/or D-SIB additional requirements (%) 0.50% 0.50% 0.50% 0.50% 0.50%

11 Total of bank CET1 specific buffer requirements (%) (row 8 + row 9 + row 10) 3.037% 3.024% 3.027% 3.034% 3.035%

12 CET1 available after meeting the bank’s minimum capital requirements (%) 12.9% 12.1% 12.5% 12.3% 12.8%

Basel III leverage ratio

13 Total Basel III leverage ratio exposure measure 436,752 423,661 441,444 425,069 401,897

14 Basel III leverage ratio (%) (row 2 / row 13) 12.8% 11.7% 11.2% 12.0% 11.8%

14a Fully loaded ECL accounting model Basel III leverage ratio (%)(row 2a / row13) 12.8% 11.7% 11.2% 12.0% 11.8%

Liquidity Coverage Ratio*

15 Total HQLA 55,946 71,611 53,645 51,441 52,913

16 Total net cash outflow 30,741 43,407 31,141 32,850 31,553

17 LCR ratio (%) 182% 165% 172% 157% 168%

Net Stable Funding Ratio

18 Total available stable funding 239,070 233,468 236,317 237,788 220,366

19 Total required stable funding 202,420 198,777 201,993 202,665 189,747

20 NSFR ratio 118% 117% 117% 117% 116%

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OV1: Overview of RWA - 31 December 2022
SAR 000
a b c
Minimum
RWA capital
requirements

Dec-22 Sep-22 Dec-22

1 Credit risk (excluding counterparty credit risk) (CCR) Includes item 23 280,192,986 277,051,098 22,415,439

2 Of which standardised approach (SA) 280,192,986 277,051,098 22,415,439

3 Of which internal rating-based (IRB) approach

4 Counterparty credit risk 3,654,755 4,104,223 292,380

5 Of which standardised approach for counterparty credit risk (SA-CCR) 3,654,755 4,104,223 292,380

6 Of which internal model method (IMM)

7 Equity positions in banking book under market-based approach

8 Equity investments in funds – look-through approach

9 Equity investments in funds – mandate-based approach

10 Equity investments in funds – fall-back approach

11 Settlement risk

12 Securitisation exposures in banking book

13 Of which IRB ratings-based approach (RBA)

14 Of which IRB Supervisory Formula Approach (SFA)

15 Of which SA/simplified supervisory formula approach (SSFA)

16 Market risk 5,175,649 6,564,170 414,052

17 Of which standardised approach (SA) 5,175,649 6,564,170 414,052

18 Of which internal model approaches (IMM)

19 Operational risk 21,401,471 20,670,939 1,712,118

20 Of which Basic Indicator Approach

21 Of which Standardised Approach 21,401,471 20,670,939 1,712,118

22 Of which Advanced Measurement Approach

23 Amounts below the thresholds for deduction (subject to 250% risk weight)

24 Floor adjustment

25 Total (1+4+7+8+9+10+11+12+16+19+23+24) 310,424,861 308,390,430 24,833,989

16
LI1: Differences between accounting and regulatory scopes of consolidation and mapping of financial statement categories with
regulatory risk categories - 31 December 2022

SAR 000
a b c d e f g
Carrying values of items:

Carrying values as Carrying values

Subject to
reported in under scope of Subject to the Subject to the Not subject to capital
Subject to credit counterparty
published financial regulatory securitisation market risk requirements or subject
risk framework credit risk
statements consolidation framework framework to deduction from capital
framework

Assets

Cash and balances with SAMA 33,366,652 33,366,652 33,366,660

Due from banks and other financial institutions 20,613,232 20,613,232 20,613,815

Positive fair vale of derivatives 3,790,841 3,790,841 3,790,841

Investments, net 52,196,120 52,196,120 50,528,091 - 1,363,419

Loans and advances, net 242,364,947 242,364,947 244,586,644

Investment in associates 371,215 371,215 371,215

Other real estate 465,249 465,249 465,249

Property and equipment, net 3,308,655 3,308,655 3,308,655

Other assets 3,175,946 3,175,946 3,435,987

Total assets 359,652,857 359,652,857 356,676,315 3,790,841 - 1,363,419 -

Liabilities

Due to banks and other financial institutions 38,760,068 38,760,068

Negative fair value of derivatives 2,854,285 2,854,285

Customer deposits 240,007,085 240,007,085

Debt securities in issue 8,758,419 8,758,419

Other liabilities* 13,099,651 13,099,651

Total liabilities 303,479,508 - - - - - 303,479,508

*This includes loss allowance for credit related commitments and contingencies

17
Template LI2: Main sources of differences between regulatory exposure amounts and carrying values in financial statements - 31 December 2022
SAR 000
a b c d e
Total Items subject to:
(&/or Notional Counterparty
Credit risk Securitisation Market risk
Amounts) credit risk
framework framework framework
framework

Asset carrying value amount under scope of regulatory consolidation (as per
1 template LI1) 359,652,857 356,676,315 - 3,790,841 1,363,419

Liabilities carrying value amount under regulatory scope of consolidation (as per
2 template LI1) - - - - -

3 Total net amount under regulatory scope of consolidation 359,652,857 356,676,315 - 3,790,841 1,363,419

4 Off-balance sheet amounts* 215,004,119 67,300,011

5 Differences in valuations

Differences due to different netting rules, other than those already included in row
6 2

7 Differences due to consideration of provisions -

8 Differences due to prudential filters

9 Market risk on Foreign exchange 1,074,825

# Derivatives (also subject to Credit valuation adjustment ) 148,383,318 (316,120) 158,855

# Exposure amounts considered for regulatory purposes 723,040,294 423,976,326 - 3,474,721 2,597,099
*Includes commitments that are unconditionally cancellable at any time by the Bank or automatic cancellation due to deterioration in a borrower’screditworthiness

18
Table LIA: Explanations of differences between accounting and
regulatory exposure amounts

Riyad Bank does not have any difference between ‘Carrying values as reported in published financial
statements’ and ‘Carrying values under scope of regulatory consolidation’

On-Balance Sheet
In case of On-Balance Sheet items, currently there are no differences between carrying values and amounts
considered for regulatory purposes except certain provisions.

Off-Balance Sheet & Derivatives

In case of Off-Balance sheet and Derivatives Notional values are populated as total carrying/accounting
value whereas credit equivalent amounts (i.e. after applying conversion factors including Add-on
adjustments in case of Derivative portfolio) are populated under respective regulatory framework.

Valuation methodologies

Please refer to note no. 2 of Annual Published Financial Statements

19
 CAPITAL STRUCTURE - 31 December 2022
CC2 – Reconciliation of regulatory capital to balance sheet
Balance sheet - Step 1 (Table 2(b))
All figures are in SAR '000
Balance sheet in Under regulatory
Published financial scope of
statements consolidation
(C) (E)
Assets
Cash and balances at central banks 33,366,652 33,366,652
Due from banks and other financial institutions 20,613,232 20,613,232
Investments, net 52,196,120 52,196,120
Loans and advances, net 242,364,947 242,364,947
Debt securities 0 0
Trading assets 0 0
Investment in associates 371,215 371,215
Derivatives 3,790,841 3,790,841
Goodwill 0 0
Other intangible assets 0 0
Property and equipment, net 3,308,655 3,308,655
Other assets 3,641,195 3,641,195

Total assets 359,652,857 359,652,857

Liabilities
Due to Banks and other financial institutions 38,760,068 38,760,068
Items in the course of collection due to other banks 0 0
Customer deposits 240,007,085 240,007,085
Trading liabilities 0 0
Debt securities in issue 8,758,419 8,758,419
Derivatives 2,854,285 2,854,285
Retirement benefit liabilities 0 0
Taxation liabilities 0 0
Accruals and deferred income 0 0
Borrowings 0 0
Other liabilities 13,099,651 13,099,651
Subtotal 303,479,508 303,479,508

Paid up share capital 30,000,000 30,000,000

Statutory reserves 10,942,054 10,942,054
Other reserves (790,260) (790,260)
Retained earnings 7,500,430 7,500,430
Minority Interest 0 0
Proposed dividends 1,950,000 1,950,000
Tier 1 Sukuk 6,571,125 6,571,125
Total liabilities and equity 359,652,857 359,652,857

20
 CAPITAL STRUCTURE- 31 December 2022
Balance sheet - Step 2 (Table 2(c))

All figures are in SAR '000

Balance sheet in
Published financial Adjustment of banking Under regulatory
statements associates / other entities scope of consolidation Reference
(C) (D) (E)
Assets
Cash and balances at central banks 33,366,652 0 33,366,652
eligible provisions 8 0 8 A
Due from banks and other financial institutions 20,613,232 0 20,613,232
eligible provisions 582 0 582 A
Investments, net 52,196,120 0 52,196,120
eligible provisions 5,429 0 5,429 A
Loans and advances, net 242,364,947 0 242,364,947
eligible provisions 2,221,697 0 2,221,697 A
Debt securities 0 0 0
Equity shares 0 0 0
Investment in associates 371,215 0 371,215
Derivatives 3,790,841 0 3,790,841
Goodwill 0 0 0
Other intangible assets 0 0 0
Property and equipment, net 3,308,655 0 3,308,655
Other assets 3,641,195 0 3,641,195
Total assets 359,652,857 0 359,652,857

Liabilities
Due to Banks and other financial institutions 38,760,068 0 38,760,068
Items in the course of collection due to other banks 0 0 0
Customer deposits 240,007,085 0 240,007,085
Trading liabilities 0 0 0
Debt securities in issue 8,758,419 0 8,758,419
of which Tier 2 capital instruments 8,758,419 0 8,758,419 B
Derivatives 2,854,285 0 2,854,285
Retirement benefit liabilities 0 0 0
Taxation liabilities 0 0 0
Accruals and deferred income 0 0 0
Borrowings 0 0 0
Other liabilities 13,099,651 0 13,099,651
eligible provisions 38,779 0 38,779 A
Subtotal 303,479,508 0 303,479,508

Paid up share capital 30,000,000 0 30,000,000

of which amount eligible for CET1 30,000,000 0 30,000,000 C
of which amount eligible for AT1 0 0 0
Statutory reserves 10,942,054 0 10,942,054 E
of which representing stock Surplus 0 0
Other reserves (790,260) 0 (790,260) F
Retained earnings 7,500,430 0 7,500,430 G
Minority Interest 0 0 0
Proposed dividends 1,950,000 0 1,950,000
Tier 1 Sukuk 6,571,125 0 6,571,125
Total liabilities and equity 359,652,857 0 359,652,857

21
 CAPITAL STRUCTURE Dec 2022
CC1: Composition of regulatory capital
Common template (Post 2018) - Step 3 (Table 2(d)) i
All figures are in SAR'000
Source based on reference
1
Components of numbers / letters of the
regulatory capital balance sheet under the
reported by the bank regulatory scope of
consolidation from step 2
(2)
Common Equity Tier 1 capital: Instruments and reserves
1
Directly issued qualifying common share capital (and equivalent for non-joint stock companies) plus related stock surplus 30,000,000
C
2 Retained earnings 7,500,430 G
3 Accumulated other comprehensive income (and other reserves) 12,101,794 E+F
4 Directly issued capital subject to phase out from CET1 (only applicable to non-joint stock companies)
5 Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET1)
6 Common Equity Tier 1 capital before regulatory adjustments 49,602,224
Common Equity Tier 1 capital: Regulatory adjustments
7 Prudential valuation adjustments
8 Goodwill (net of related tax liability)
9 Other intangibles other than mortgage-servicing rights (net of related tax liability) (9,213)
10 Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax
liability)
11 Cash-flow hedge reserve (127,977)
12 Shortfall of provisions to expected losses
13 Securitisation gain on sale (as set out in paragraph 562 of Basel II framework)
14 Gains and losses due to changes in own credit risk on fair valued liabilities
15 Defined-benefit pension fund net assets
16 Investments in own shares (if not already netted off paid-in capital on reported balance sheet)
17 Reciprocal cross-holdings in common equity
18 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory
consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued share capital
(amount above 10% thresh
19
Significant investments in the common stock of banking, financial and insurance entities that are outside the scope of
regulatory consolidation, net of eligible short positions (amount above 10% threshold)

20 Mortgage servicing rights (amount above 10% threshold)

21
Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability)
22 Amount exceeding the 15% threshold
23 of which: significant investments in the common stock of financials
24 of which: mortgage servicing rights
25 of which: deferred tax assets arising from temporary differences
26 National specific regulatory adjustments
27 Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to cover
deductions
28 Total regulatory adjustments to Common equity Tier 1 (137,191)
29 Common Equity Tier 1 capital (CET1) 49,465,033
Additional Tier 1 capital: instruments
30 Directly issued qualifying Additional Tier 1 instruments plus related stock surplus 6,571,125
31 of which: classified as equity under applicable accounting standards
32 of which: classified as liabilities under applicable accounting standards
33 Directly issued capital instruments subject to phase out from Additional Tier 1
34 Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsidiaries and held by third parties
(amount allowed in group AT1)
35 of which: instruments issued by subsidiaries subject to phase out
36 Additional Tier 1 capital before regulatory adjustments 6,571,125
Additional Tier 1 capital: regulatory adjustments
37 Investments in own Additional Tier 1 instruments
38 Reciprocal cross-holdings in Additional Tier 1 instruments
39 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory
consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued common share
capital of the entity (am
40 Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory
consolidation (net of eligible short positions)
41 National specific regulatory adjustments
42 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions
43 Total regulatory adjustments to Additional Tier 1 capital
44 Additional Tier 1 capital (AT1)
6571125
45 Tier 1 capital (T1 = CET1 + AT1) 56,036,158

22
 CAPITAL STRUCTURE Dec 2022
CC1: Composition of regulatory capital
Common template (Post 2018) - Step 3 (Table 2(d)) ii
All figures are in SAR'000
Source based on reference
numbers / letters of the
1
Components of balance sheet under the
regulatory capital regulatory scope of
reported by the bank consolidation from step 2

Tier 2 capital: instruments and provisions

46 Directly issued qualifying Tier 2 instruments plus related stock surplus 8,758,419 B
47 Directly issued capital instruments subject to phase out from Tier 2

48 Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third parties
(amount allowed in group Tier 2)
49 of which: instruments issued by subsidiaries subject to phase out

50 Provisions 558,044 A
51 Tier 2 capital before regulatory adjustments 9,316,463
Tier 2 capital: regulatory adjustments
52 Investments in own Tier 2 instruments

53 Reciprocal cross-holdings in Tier 2 instruments and other TLAC liabilities

54 Investments in the capital and other TLAC liabilities of banking, financial and insurance entities that are outside the scope of
regulatory consolidation, where the bank does not own more than 10% of the issued common share capital of the entity (amount
above 10% threshold)
54
a Investments in the other TLAC liabilities of banking, financial and insurance entities that are outside the scope of regulatory
consolidation and where the bank does not own more than 10% of the issued common share capital of the entity: amount previously
designated for the 5% threshold but that no longer meets the conditions (for G-SIBs only)

55 Significant investments in the capital and other TLAC liabilities of banking, financial and insurance entities that are outside the scope
of regulatory consolidation (net of eligible short positions)
56 National specific regulatory adjustments

57 Total regulatory adjustments to Tier 2 capital

58 Tier 2 capital (T2) 9,316,463

59 Total capital (TC = T1 + T2) 65,352,621
60 Total risk weighted assets 310,424,861

Capital ratios
61 Common Equity Tier 1 (as a percentage of risk weighted assets)
15.9%
62 Tier 1 (as a percentage of risk weighted assets)
18.1%
63 Total capital (as a percentage of risk weighted assets)
21.1%
64 Institution specific buffer requirement (minimum CET1 requirement plus capital conservation buffer plus countercyclical buffer
requirements plus G-SIB/D-SIB buffer requirement expressed as a percentage of risk weighted assets)
7.5%
65 of which: capital conservation buffer requirement
2.5%
66 of which: bank specific countercyclical buffer requirement
0.037%
67 of which: G-SIB / D-SIB buffer requirement
0.5%
68 Common Equity Tier 1 available to meet buffers (as a percentage of risk weighted assets)

National minima (if different from Basel 3)

69 National Common Equity Tier 1 minimum ratio (if different from Basel 3 minimum)
n/a
70 National Tier 1 minimum ratio (if different from Basel 3 minimum)
n/a
71 National total capital minimum ratio (if different from Basel 3 minimum)
n/a
Amounts below the thresholds for deduction (before risk weighting)

72 Non-significant investments in the capital and other TLAC liabilities of other financial entities

73 Significant investments in the common stock of financials

371,215
74 Mortgage servicing rights (net of related tax liability)

75 Deferred tax assets arising from temporary differences (net of related tax liability)

Applicable caps on the inclusion of provisions in Tier 2

76 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardised approach (prior to application of cap)
558,044
77 Cap on inclusion of provisions in Tier 2 under standardised approach 3,548,097
78 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap)

79 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach

Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2018 and 1 Jan 2022)
80 Current cap on CET1 instruments subject to phase out arrangements

81 Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities)

82 Current cap on AT1 instruments subject to phase out arrangements

83 Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities)

84 Current cap on T2 instruments subject to phase out arrangements

85 Amount excluded from T2 due to cap (excess over cap after redemptions and maturities)

23
 CAPITAL STRUCTURE
Main features template of regulatory capital instruments - (Table 2(e))
1 Issuer Riyad Sukuk Limited
Unique identifier (eg CUSPIN, ISIN or Bloomberg identifier for private
2 placement) ISIN: XS2120069047

English law (except certain provisions, including those

relating to the status and subordination of the Certificates,
the Master Purchase Agreement and Sale/Transfer
3 Governing law(s) of the instrument Agreement which shall be governed by Saudi Arabian law)
Regulatory treatment
4 Transitional Basel III rules Tier 2
5 Post-transitional Basel III rules Eligible
6 Eligible at solo/group/group&solo Solo
7 Instrument type Subordinated Trust Certificates
Amount recognised in regulatory capital (Currency in mil, as of most recent
8 reporting date) USD 1,500 million
9 Par value of instrument USD 1,500 million
10 Accounting classification Liability at amortised cost
11 Original date of issuance 25/Feb/20
12 Perpetual or dated Dated
13 Original maturity date 25/Feb/30
At the 5th anniversary of the Issue Date, and each Periodic
Distribution Date thereafter, subject to, amongst other
conditions, prior written approval from the Financial
14 Issuer call subject to prior supervisory approval Regulator, if then required

The Trust Certificates may be redeemed prior to the

scheduled dissolution date due to: (i) a Capital
Disqualification Event, (ii) tax reasons, or (iii) at the option of
the Issuer on the Periodic Distribution Date that falls on the
5th anniversary of the Issue Date, and each Periodic
Distribution Date thereafter, in each case, subject to the
conditions to redemption and repurchase, and as further set
15 Option call date, contingent call dates and redemption amount out in the terms and conditions of the Trust Certificates
16 Subsequent call dates if applicable As above
Coupons / dividends
17 Fixed or Floating dividend/coupon Fixed

3.174% per annum fixed rate payable semi-annually in arrear

on each Periodic Distribution Date from and including the
Issue Date to but excluding the First Call Date. The Profit
18 Coupon rate and any related index Rate shall thereafter reset on the First Call Date
19 Existence of a dividend stopper No
20 Fully discretionary, partially discretionary or mandatory Mandatory
21 Existence of step up or other incentive to redeem Yes
22 Non cumulative or cumulative Non cumulative
23 Convertible or non-convertible Non convertible
24 If convertible, conversion trigger (s) Not applicable
25 If convertible, fully or partially Not applicable
26 If convertible, conversion rate Not applicable
27 If convertible, mandatory or optional conversion Not applicable
28 If convertible, specify instrument type convertible into Not applicable
29 If convertible, specify issuer of instrument it converts into Not applicable
30 Write-down feature Yes
Terms of issuance provide the legal basis for the regulator
31 If write-down, write-down trigger (s) to trigger write down
32 If write-down, full or partial Can be full or partial
33 If write-down, permanent or temporary Permanent
34 If temporary writedown, description of the write-up mechanism NA
Position in subordination hierarchy in liquidation (specify instrument type Subordinated. Senior obligations are immediately senior to
35 immediately senior to instrument) this instrument
36 Non-compliant transitioned features NA
37 If yes, specify non-compliant features NA
37 If yes, specify non-compliant features

24
 CAPITAL STRUCTURE
Main features template of regulatory capital instruments - (Table 2(e))
1 Issuer Riyad Bank
Unique identifier (eg CUSPIN, ISIN or Bloomberg identifier for private
2 placement) RIBL: AB
The instrument is governed by the laws of the Kingdom of
3 Governing law(s) of the instrument Saudi Arabia
Regulatory treatment
4 Transitional Basel III rules Tier 2
5 Post-transitional Basel III rules Eligible
6 Eligible at solo/group/group&solo Solo
7 Instrument type Sub-ordinated sukuk
Amount recognised in regulatory capital (Currency in mil, as of most recent
8 reporting date) SAR 3,000 million
9 Par value of instrument SAR 3,000 million
10 Accounting classification Liability at amortised cost
11 Original date of issuance 9/Feb/21
12 Perpetual or dated Dated
13 Original maturity date 9/Feb/31

Issuer call at the [5th] anniversary of the Issue Date, subject

14 Issuer call subject to prior supervisory approval to prior written approval from the regulator, if then required.
The Sukuk may be redeemed prior to the scheduled
dissolution date due to: (i) regulatory capital reasons, (ii) tax
reasons, or (iii) at the option of the Issuer on the Periodic
Distribution Date that falls on the [5th] anniversary of the
Issue Date, in each case, as set out in the terms and
15 Option call date, contingent call dates and redemption amount conditions of the Sukuk
16 Subsequent call dates if applicable As above
Coupons / dividends
17 Fixed or Floating dividend/coupon Floating
18 Coupon rate and any related index 6-month SAIBOR plus 150 basis point
19 Existence of a dividend stopper No
20 Fully discretionary, partially discretionary or mandatory Mandatory
21 Existence of step up or other incentive to redeem No
22 Non cumulative or cumulative Non cumulative
23 Convertible or non-convertible Non convertible
24 If convertible, conversion trigger (s) Not applicable
25 If convertible, fully or partially Not applicable
26 If convertible, conversion rate Not applicable
27 If convertible, mandatory or optional conversion Not applicable
28 If convertible, specify instrument type convertible into Not applicable
29 If convertible, specify issuer of instrument it converts into Not applicable
30 Write-down feature Yes
Terms of issuance provide the legal basis for the regulator
31 If write-down, write-down trigger (s) to trigger write down
32 If write-down, full or partial Can be full or partial
33 If write-down, permanent or temporary Permanent
34 If temporary writedown, description of the write-up mechanism NA
Position in subordination hierarchy in liquidation (specify instrument type Sub-ordinated. Senior Bond holders are immediately senior
35 immediately senior to instrument) to this instrument
36 Non-compliant transitioned features NA
37 If yes, specify non-compliant features NA

25
 CAPITAL STRUCTURE
Main features template of regulatory capital instruments - (Table 2(e))
1 Issuer Riyad Tier 1 Sukuk Limited
Unique identifier (eg CUSPIN, ISIN or Bloomberg identifier for private
2 placement) RIBL 4 PERP

English law (except certain provisions, including those

relating to the status and subordination of the Certificates,
the Master Purchase Agreement and Sale/Transfer
3 Governing law(s) of the instrument Agreement which shall be governed by Saudi Arabian law)
Regulatory treatment
4 Transitional Basel III rules Tier 1
5 Post-transitional Basel III rules Eligible
6 Eligible at solo/group/group&solo Solo
7 Instrument type USD denominated Additional Tier 1 capital sukuk.
Amount recognised in regulatory capital (Currency in mil, as of most recent
8 reporting date) USD 750 million
9 Par value of instrument USD 750 million
10 Accounting classification Capital Instrument Tier 1
11 Original date of issuance 16/Feb/22
12 Perpetual or dated Perpetual
Perpetual Tier 1 Capital (subject to any early redemption as
13 Original maturity date described below)
(6-month par call) at the 5th anniversary of the Issue Date,
and each Periodic Distribution Date thereafter, subject to,
amongst other conditions, prior written approval from the
14 Issuer call subject to prior supervisory approval Financial Regulator, if then required

The Capital Certificates are perpetual securities in respect

of which there is no fixed redemption date may be redeemed
prior to the scheduled dissolution date due to: (i) a Capital
Disqualification Event, (ii) tax reasons, or (iii) at the option of
the Issuer on the Periodic Distribution Date that falls on the
5th anniversary of the Issue Date, and each Periodic
Distribution Date thereafter, in each case, subject to the
conditions to redemption and repurchase, and as further set
15 Option call date, contingent call dates and redemption amount out in the terms and conditions of the Capital Certificates
16 Subsequent call dates if applicable As above
Coupons / dividends
17 Fixed or Floating dividend/coupon Fixed
4.000 per cent for the period from and including the Issue
Date to but excluding the First Reset Date. Resets on the
First Reset Date and every five years thereafter on the basis
18 Coupon rate and any related index of the Relevant Five Year Reset Rate
19 Existence of a dividend stopper No
20 Fully discretionary, partially discretionary or mandatory Mandatory
21 Existence of step up or other incentive to redeem Yes
22 Non cumulative or cumulative Non cumulative
23 Convertible or non-convertible Non convertible
24 If convertible, conversion trigger (s) Not applicable
25 If convertible, fully or partially Not applicable
26 If convertible, conversion rate Not applicable
27 If convertible, mandatory or optional conversion Not applicable
28 If convertible, specify instrument type convertible into Not applicable
29 If convertible, specify issuer of instrument it converts into Not applicable
30 Write-down feature Yes
Terms of issuance provide the legal basis for the regulator to
31 If write-down, write-down trigger (s) trigger write down
32 If write-down, full or partial Can be full or partial
33 If write-down, permanent or temporary Permanent
34 If temporary writedown, description of the write-up mechanism NA
Subordination
(i) constitute Additional Tier 1 Capital of the Bank,
(ii) constitute direct, unsecured, unconditional and
subordinated obligations of the Bank,
(iii) rank subordinate and junior to all Senior Obligations but
not further or otherwise,
Position in subordination hierarchy in liquidation (specify instrument type (iv) rank pari passu with all other Pari Passu Obligations and
35 immediately senior to instrument) rank in priority only to all Junior Obligations.
36 Non-compliant transitioned features NA
37 If yes, specify non-compliant features NA
37 If yes, specify non-compliant features

26
 CAPITAL STRUCTURE
Main features template of regulatory capital instruments - (Table 2(e))
1 Issuer Riyad Bank
Unique identifier (eg CUSPIN, ISIN or Bloomberg identifier for private
2 placement) RIBL 4 PERP
The instrument is governed by the laws of the Kingdom of
3 Governing law(s) of the instrument Saudi Arabia
Regulatory treatment
4 Transitional Basel III rules Tier 1
5 Post-transitional Basel III rules Eligible
6 Eligible at solo/group/group&solo Solo
7 Instrument type SAR denominated Additional Tier 1 capital sukuk.
Amount recognised in regulatory capital (Currency in mil, as of most recent
8 reporting date) SAR 3,750 million
9 Par value of instrument SAR 3,750 million
10 Accounting classification Capital Instrument Tier 1
11 Original date of issuance 5/Oct/22
12 Perpetual or dated Perpetual
Perpetual Tier 1 Capital (subject to any early redemption as
13 Original maturity date described below)
at the 5th anniversary of the Issue Date, and each Periodic
Distribution Date thereafter, subject to, amongst other
conditions, prior written approval from the Financial
14 Issuer call subject to prior supervisory approval Regulator, if then required

The Capital Certificates are perpetual securities in respect

of which there is no fixed redemption date may be redeemed
prior to the scheduled dissolution date due to: (i) a Capital
Disqualification Event, (ii) tax reasons, or (iii) at the option of
the Issuer on the Periodic Distribution Date that falls on the
5th anniversary of the Issue Date, and each Periodic
Distribution Date thereafter, in each case, subject to the
conditions to redemption and repurchase, and as further set
15 Option call date, contingent call dates and redemption amount out in the terms and conditions of the Capital Certificates
16 Subsequent call dates if applicable As above
Coupons / dividends
17 Fixed or Floating dividend/coupon Fixed
5.25 per cent. per annum payable quarterly in arrear on each
Periodic Distribution Date from and including the issue date
to but excluding 5/10/2027G (the First Reset Date). The
return rate shall thereafter reset on the First Reset Date and
every five years thereafter, as detailed in the offering circular
18 Coupon rate and any related index in relation to the Sukuk.
19 Existence of a dividend stopper No
20 Fully discretionary, partially discretionary or mandatory Mandatory
21 Existence of step up or other incentive to redeem Yes
22 Non cumulative or cumulative Non cumulative
23 Convertible or non-convertible Non convertible
24 If convertible, conversion trigger (s) Not applicable
25 If convertible, fully or partially Not applicable
26 If convertible, conversion rate Not applicable
27 If convertible, mandatory or optional conversion Not applicable
28 If convertible, specify instrument type convertible into Not applicable
29 If convertible, specify issuer of instrument it converts into Not applicable
30 Write-down feature Yes
Terms of issuance provide the legal basis for the regulator to
31 If write-down, write-down trigger (s) trigger write down
32 If write-down, full or partial Can be full or partial
33 If write-down, permanent or temporary Permanent
34 If temporary writedown, description of the write-up mechanism NA
Subordination
(i) constitute Additional Tier 1 Capital of the Bank,
(ii) constitute direct, unsecured, unconditional and
subordinated obligations of the Bank,
(iii) rank subordinate and junior to all Senior Obligations but
not further or otherwise,
Position in subordination hierarchy in liquidation (specify instrument type (iv) rank pari passu with all other Pari Passu Obligations and
35 immediately senior to instrument) rank in priority only to all Junior Obligations.
36 Non-compliant transitioned features NA
37 If yes, specify non-compliant features NA

27
CCyB1 – Geographical distribution of credit exposures used in the
countercyclical capital buffer - 31 December 2022

a b e

Bank-specific
Countercyclical capital
Geographical breakdown countercyclical
buffer rate
capital buffer rate

KSA 0.0% 0.0000%

GCC and ME 2.5% 0.0190%
North America 0.0% to 2.5% 0.0013%
Latin America 0.0% to 2.5% 0.0001%
Europe 0.0% to 2.5% 0.0084%
South East Asia 0.0% to 2.5% 0.0015%
Others 0.0% to 2.5% 0.0066%
Total 0.0370%

28
Leverage ratio common disclosure
31 December 2022

LR1: Summary Comparison of accounting assets versus leverage ratio exposure measure (Table 1)
Dec 31, 2022
Row # Item In SR 000's
1 Total Assets as per published financial statements 359,652,857
Adjustment for investments in banking, financial insurance or commercial entities that are consolidated for accounting purposes
2
but outside the scope of regulatory consolidation 0
Adjustment for fiduciary assets recognised on the balance sheet pursuant to the operative accounting framework but excluded
3
from the leverage ratio exposure measure 0
4 Adjustment for derivative financial instruments 1,709,457
5 Adjustment for securities financing transactions (i.e. repos and similar secured lending) 0
6 Adjustment for off-balance sheet items (i.e. conversion to credit equivalent amounts of Off-balance sheet exposures) 77,415,583
7 Other adjustments -2,025,577
8 Leverage ratio exposure (A) 436,752,320

LR2: Leverage Ratio Common Disclosure Template (Table 2)

Dec 31,2022 Sep 30, 2022
Row # Item In SR 000's In SR 000's
On-balance sheet exposures
1 On-balance sheet items (excluding derivatives and SFTs, but including collateral) 355,862,016 344,181,078
2 (Relevant Asset amounts deducted in determining Basel III Tier 1 capital)
3 Total on-balance sheet exposures (excluding derivatives and SFTs) (sum of lines 1 and 2) (a) 355,862,016 344,181,078
Derivative exposures
4 Replacement cost associated with all derivatives transactions (i.e. net of eligible cash variation margin) 1,765,264 1,977,621
5 Add-on amounts for Potential Financial Exposure (PFE) associated with all derivatives transactions 1,709,457 1,790,944
Gross-up for derivatives collateral provided where deducted from the balance sheet assets pursuant to the operative
6
accounting framework
7 (Deductions of receivables assets for cash variation margin provided in derivatives transactions)
8 (Exempted CCP leg of client-cleared trade exposures)
9 Adjusted effective notional amount of written credit derivatives
10 (Adjusted effective notional offsets and add-on deductions for written credit derivatives)
11 Total derivative exposures (sum of lines 4 to 10) (b) 3,474,721 3,768,565
Securities financing transaction exposures
12 Gross SFT assets (with no recognition of netting), after adjusting for sales accounting transactions
13 (Netted amounts of cash payables and cash receivables of gross SFT assets)
14 Credit Conversion Factor (CCR) exposure for Security Financing Transaction (SFT) assets
15 Agent transaction exposures
16 Total securities financing transaction exposures (sum of lines 12 to 15)
Other off-balance sheet exposures
17 Off-balance sheet exposure at gross notional amount ** 215,004,119 210,636,878
18 (Adjustments for conversion to credit equivalent amounts) (137,588,535) (134,925,618)
19 Off-balance sheet items (sum of lines 17 and 18) (c) 77,415,583 75,711,260
Capital and total exposures
20 Tier 1 capital (B ) 56,036,158 49,476,646
21 Total exposures (sum of lines 3, 11, 16 and 19) (A) = (a+b+c) 436,752,320 423,660,903
Leverage ratio
22 Basel III leverage ratio*** ( C ) = (B ) / ( A ) 12.8% 11.7%
**Includes commitments that are unconditionally cancellable at any time by the Bank or automatic cancellation due to deterioration in a borrower’s creditworthiness

Reconciliation (Table 5)
Dec 31,2022
Row # Item In SR 000's
1 Total Assets on Financial Statements 359,652,857
2 Total On balance sheet assets Row # 1 on Table 2 355,862,016
3 Difference between 1 and 2 above 3,790,841

Explanation
Positive fair value of Derivatives 3,790,841
Other adjustment represents provision
3,790,841

29
LIQA – Liquidity risk management
Governance of liquidity risk management

Riyad Bank has a robust risk management and governance framework that covers all material risks. Liquidity risk is deemed to be a
material risk for the Bank and is part of the overall risk management framework. The risk management framework comprises of
Board and Senior Management committees, a Board-approved Risk Appetite Statement, Liquidity Risk Policy, Internal Liquidity
Adequacy Assessment Plan, limit management, monitoring and control framework, and an overarching Enterprise Risk Policy.

The Bank adopts a set of liquidity management strategies that limits the liquidity risk to acceptable levels. The compliance of such
internal limits is independently monitored and regularly reported to management and to the Asset and Liability Committee (ALCO).
According to the degree of imminence of liquidity/funding risk, risk stages are outlined in the CFP. These stages are Precaution,
Caution and Crisis. For each of these stages, a specific contingency plan has been laid out.

The policy stipulates activation of the Contingency Funding Plan (CFP) in the event of a major liquidity problem. The CFP delineates
responsibilities of selected senior executives and sets out a plan of action to be followed in any emerging or sudden liquidity crisis. In
order to manage the liquidity contingency process, senior executives designated in this plan draw support from other key
management process already established within Riyad Bank. ALCO, on an ongoing basis provides a forum to exchange information,
both internal and external, which can affect Riyad Bank’s liquidity.

Funding Strategy

The formulation of funding strategy for the Bank is integrated with the annual strategic planning process. Annually, the Bank
develops a detailed budget for immediate next year and three years rolling forecast. For each asset type, forecast volumes are
developed. Based on the forecast volumes and forecast mix, the funding strategy of the Bank is developed.

The funding strategy of the Bank focuses on increasing the customer base of non-interest-bearing stable deposits, diversification of
funding sources as well enlarging the product mix and customer base of interest-bearing deposits. It also ensures that there is
minimum reliance on the whole sale funding (inter-bank) markets and that the Bank maintains a conservative and healthy repo able
investment portfolio.

Liquidity risk mitigation techniques

Riyad Bank operates within an approved Liquidity risk appetite which is defined as the level and nature of risk that the Bank is willing
to take (or mitigate) in order to safeguard the interests of the depositors whilst achieving business objectives. In addition, the risk
appetite statement takes into consideration constraints imposed by other stakeholders such as regulators and counterparties.

Funding and Liquidity Risk is deemed to be a material risk for the Bank; the risk appetite for funding and liquidity is conservative and
deemed to be low. The liquidity risk appetite statement is approved by the Board. Risk appetite is defined on an annual basis or on an
ad hoc basis if there is a significant change in the external environment or business strategy.

In addition, the Bank’s liquidity risk management techniques include:

a. Pro-actively monitor and manage regulatory liquidity ratios such as LCR, NSFR and SAMA Liquidity Ratio
b. Gap Reports to monitor the mismatch risk
c. Concentration Risk limits

30
Stress Testing

Riyad Bank measures its liquidity requirements by undertaking scenario analysis under the normal scenario and three stress
scenarios as follows:
• Normal/Going-concern scenario – this refers to the normal behavior of cash flows in the ordinary course of business and would form
the day-to-day focus of the Bank’s liquidity management.
• Bank-specific (“Name”) crisis scenario – This covers the behavior of cash flows where there is some actual or perceived problem
specific to Riyad Bank.
• Market crisis scenario – This covers the behavior of cash flows where there is some actual or perceived problem with the genera
banking industry.
• Combined Scenario – This covers severe Bank-specific liquidity shock coupled with a severe market wide liquidity impact. Under
combined stress scenario, Bank’s liquidity position is considered to be under most pressure compared to other two scenarios.

31
In addition, Riyad Bank has adopted more stringent standards or parameters to reflect its liquidity risk profile and its own
assessment of the compliance with the SAMA’s Liquidity Coverage Ratio (LCR) standards. The LCR incorporates many of the shocks
experienced during the Global Financial Crisis (GFC) into one acute systemic stress for which sufficient liquidity is needed to survive
up to 30 calendar days. Riyad Bank adopts a number of liquidity management strategies to control its liquidity risk and ensures that
its liquidity requirements can be met even during a crisis situation.

Contingency Funding Planning

Riyad Bank has its own Contingency Funding Plan (CFP). The objective of the Bank’s CFP is to ensure the Bank meets its payment
obligations as they fall due under a liquidity crisis scenario. It contains (i) an assessment of the sources of funding under different
liquidity conditions, (ii) liquidity status indicators and metrics and (iii) contingency procedures. Contingency liquidity risk is the risk of
not having sufficient funds to meet sudden and unexpected short-term obligations. The CFP references business area action plans
and a communications plan. Action plans have been developed for a range of circumstances that might arise in wholesale funding
markets. The communications plan aims to reassure principal stakeholders via a rapid communications response to a developing
situation. CFP is reviewed annually or if there is a significant change in the external environment or the balance sheet or funding
profile of the Bank.

OTHER QUALITATIVE INFORMATION

1. Main drivers of LCR & NSFR:

As at 31st of Dec 2022, against the regulatory requirement of 100% of LCR, the Bank is at a comfortable level of quarterly average of
182%. The main drivers of LCR of the Bank are sufficient high-quality liquid assets (HQLAs) to meet liquidity needs of the Bank at all
times and funding from stable customer deposits.

NSFR can be described as the Bank Funding requirement to support the asset maturity profile focusing on 1Y horizon and above
considering the credit quality, counterparty and residual maturity of the assets.

As at 31st of Dec 2022, against the regulatory requirement of 100% the bank’s NSFR is 118.1%

2. Intra period changes as well as changes overtime:

LCR: The average LCR is 182% in Q4 2022 compared to 165% in Q3 2022. The ratio has improved mainly due to an increase in one-
month inflow during Q4.

NSFR: The ratio in Q4 2022 is 118.1% compared to 117.5% in Q3 2022 mainly due to an increase of capital and deposits balances
during Q4.

3. Composition of High Quality Liquid Assets (HQLA)

HQLA comprises of high-quality unencumbered assets that can be readily converted into cash at little or no loss of value or used as
collateral to obtain funds in a range of stress scenarios. HQLAs comprises of Level 1 and Level 2 assets. Level 2 assets is further
divided into Level 2A and Level 2B assets, keeping in view their price volatility.

Level-I assets are those assets which are highly liquid. As at 31st of Dec 2022, the Level-I assets of the Bank included cash, due from
SAMA and high-quality qualifying government securities.

Level-2A & 2B assets are those assets that are less liquid. The Bank’s level 2A assets include sovereign central bank, PSE assets
qualifying for 20% risk weighting and qualifying corporate bonds rated AA- or higher. SAMA does not allow the inclusion of level 2B
assets.

4. Concentration of Funding Sources

This metric includes those sources of funding; whose withdrawal could trigger liquidity risks. It aims to address the funding
concentration of a bank by monitoring its funding requirement from each significant counterparty and each significant
product/instrument.
The Bank regularly reviews and measures concentration of funding for each counterparty as well as from all products and
instruments to ensure that it is within Bank’s liquidity risk appetite.

32
 LIQ1: Liquidity Coverage Ratio (LCR) Dec 2022
[LCR Common Disclosure Prudential Return Template]
SAR 000

TOTAL UNWEIGHTED VALUE TOTAL WEIGHTED VALUE

(average) (average)

HIGH-QUALITY LIQUID ASSETS

1 Total high quality liquid assists (HQLA) 55,945,827

CASH OUTFLOWS
2 Retail deposits and deposits from small businesses customers of which: 89,029,088 8,902,909

3 Stable deposits - -

4 Less stable deposits 89,029,088 8,902,909

5 Unsecured wholesale funding of which: 101,879,415 45,755,264

6 Operational deposits (all counterparties)

7 Non operational deposits (all counterparties) 101,879,415 45,755,264

8 Unsecured debt - -

9 Secured wholesale funding 1,232,114 1,232,114

10 Additional requirement of which: 24,332,136 2,441,999

11 Outflows related to derivative exposure and other collateral requirements 9,761 9,761

12 Outflows related to loss of funding on debt products - -

13 Credit and liquidity facilities 24,322,374 2,432,237

14 Other contractual funding obligations - -

15 Other contingent funding obligations 249,615,672 5,352,577

16 TOTAL CASH OUTFLOWS 63,684,863

CASH INFLOWS
17 Secured lending (eg reverse repos) - -

18 Inflows from fully preforming exposures 42,547,309 32,942,350

19 Other cash inflows 1,508 1,508

20 TOTAL CASH INFLOW 42,548,817 32,943,859

TOTAL ADJUSTED
VALUE
21 TOTAL HQLA 55,945,827

22 TOTAL NET CASH OUTFLOW 30,741,005

23 LIQUIDITY COVERAGE RATIO 182%

33
 LIQ2 – Net Stable Funding Ratio (NSFR) DEC 2022
SAR 000
Unweighted value by residual maturity
(In Currency Amount) Weighted value
No maturity* < 6 months 6 months to < 1yr ≥ 1yr

ASF Item
1 Capital 65,489,812 - - - 65,489,812
2 Regulatory capital 65,489,812 65,489,812
3 Other capital instruments
4 Retail deposits and deposits from small business customers: 88,677,052 6,572,304 1,395,406 769,248 87,749,533
5 Stable deposits
6 Less stable deposits 88,677,052 6,572,304 1,395,406 769,248 87,749,533
7 Wholesale funding 55,225,404 91,414,118 16,927,597 17,232,907 85,830,885
8 Operational deposits
9 Other wholesale funding 55,225,404 91,414,118 16,927,597 17,232,907 85,830,885
10 Liabilities with matching interdependent assets
11 Other liabilities: 15,949,009 - - - -
12 NSFR derivative liabilities -
All other liabilities and equity not included in the above categories
13 14,332,304 -

14 Total ASF 239,070,231

RSF Item
15 Total NSFR high-quality liquid assets (HQLA) 1,837,782
Deposits held at other financial institutions for operational purposes
16

17 Performing loans and securities: - 107,628,070 29,684,013 142,074,009 182,327,253

Performing loans to financial institutions secured by Level 1 HQLA
18 - - - -
Performing loans to financial institutions secured by non-Level 1
19 21,103,690 255,737 1,963,974 5,257,396.14
HQLA and unsecured performing loans to financial institutions
Performing loans to non- financial corporate clients, loans to retail
20 and small business customers, and loans to sovereigns, central 81,568,847 26,966,736 129,398,351 164,256,390
banks and PSEs, of which:
With a risk weight of less than or equal to 35% under the
21
Basel II Standardised Approach for credit risk
22 Performing residential mortgages, of which:
With a risk weight of less than or equal to 35% under the
23
Basel II Standardised Approach for credit risk
Securities that are not in default and do not qualify as HQLA,
24 - 4,955,533 2,461,540 10,711,684 12,813,468
including exchange-traded equities
25 Assets with matching interdependent liabilities
26 Other assets: 16,391,190 735,916 - - 17,016,718
27 Physical traded commodities, including gold
Assets posted as initial margin for derivative contracts and
28 735,916 625,528
contributions to default funds of CCPs
29 NSFR derivative assets -
NSFR derivative liabilities before deduction of variation margin
30 -
posted
31 All other assets not included in the above categories 16,391,190 - - - 16,391,190
32 Off-balance sheet items 24,763,828 1,238,191
33 Total RSF 202,419,945
34 Net Stable Funding Ratio (%) 118%

34
Table CRA: General qualitative information about credit risk
a) Business Model & Credit Risk Profile

For the purposes of aligning business model to Bank’s credit risk profile, Riyad Bank has a policy defining the
Target Sectors and Non-Target Sectors for different segments within corporate portfolio. In addition, bank
has defined criteria in the form of BAC’s i.e. Business Acceptance Criteria for any customer to enter into
relationship with the Bank.

Further Bank defines Risk Acceptance Criteria (RAC’s) for different segments; and products depending on
Obligor Rating, segments, type of products mitigants etc. Bank also align the pricing of the facilities to the
Risk profile of the Obligor. All these parameters assist Bank to balance business profiling to Credit Risk.

b) Criteria and approach used for defining credit risk management policy and for setting credit risk
limits

The Credit Risk Manual is an integral part of the Credit Risk Management (CRM) framework. It provides
details of Riyad Bank’s strategy towards the granting of credit and the management of associated credit
risk. It deals with the details of the principles, standards, risk manuals and processes related to lending. The
audience of the Credit Policy are the Relationship Managers and the credit sanctioning authorities such as
the Credit Review and Approval Department and the Credit Committees jointly with the personnel engaged
in the evaluation, measurement, management and monitoring of risk.

Shown below are the components of the Credit Risk Manual and how it fits/integrates with the CRM
framework of the bank.
Credit Risk Policy Components

Governance &
Strategy Credit Risk
Credit Strategy
Appetite

Credit Risk Credit Risk

Identification
CRM Framework

Identification

Credit Risk Capital and

Measurement RWA Rating models Provisioning
Computation

Credit Risk
Credit Risk Mitigation Mitigation

Concentration
Reporting Risk Stress Testing
Portfolio Management Management

Figure 1: Integration of the Credit Risk Manual with CRM Framework

With respect to the business of the Bank, this Credit Risk Manual:

- Provides guidelines that deal with the identification, measurement, mitigation and management of Credit
Risk

- Addresses regulatory requirements that are not directly linked to loan decision and monitoring, such as
the Basel capital computation rules and the Basel credit risk mitigation rules that are adopted by the Bank.

35
- Lays down guidelines for the relationship manager and the credit sanctioning units. The scope of the
manual covers all the credit risk management activities pertaining to the management of corporate credit
portfolios (i.e. all non-retail portfolios), their management and reporting.

Riyad Bank establishes limits for each aspect of risk (single borrower limit, industry sector analysis, collateral
limits, country limits, product line limits etc.)

Documents described in previous section encompass criteria/guidelines provide risk/reward relationship

for the Bank, whereas Obligor credit risk ratings are tied to maximum allowed exposure, product, pricing and
collateral. Indeed, supplemental control/limits are in place for large exposure and related counterparties.

c) Structure and organization of the credit risk management and control function
The Credit Risk Management Structure within the Bank is shown in the diagram below:

36
d) Relationships between the credit risk management, risk control, compliance and internal audit
functions

At Riyad Bank, a number of control functions are responsible for oversight monitoring design and
implementation of internal controls.

1. Risk Management function

Riyad Bank’s credit risk management aims at preserving the high credit quality of the Bank’s portfolios and
thereby protecting the Bank’s short-and long-term viability. The Bank’s credit risk management builds on
the principles of (1) appropriate risk diversification within the scope of the mission; (2) thorough risk
assessment at the credit appraisal stage; (3) risk-based pricing and application of risk mitigation techniques;
(4) continuous risk monitoring at the individual/ counterparty level as well as at portfolio level; (5) avoidance
of undesirable risks to the extent possible. Key risk indicators monitored are, among others, the
development in risk class distribution in the lending and treasury portfolios as well as large exposures to
individual counterparties, sectors and countries

2. Compliance function

The compliance function, including regulatory compliance, is separately performed by the Bank's
Compliance Department with reporting lines to the Bank’s CEO. Bank has implemented an Integrated
Internal Control and Reporting Governance policy which clearly sets out the roles and responsibilities of the
executive management and various committees.

3. Internal Audit function

Internal Audit is an independent function providing assurance over effectiveness of controls over banks
activities and reports to Board Audit Committee. Internal Audit annually assess various aspects of credit
risk on sample basis within Riyad bank’s corporate and retail portfolios.

37
e) 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
Riyad Bank and its fully owned subsidiaries requires management reporting from the various risk
management functional divisions/departments (Credit Division, Risk Management Division) Finance,
Treasury etc. on a daily, monthly, quarterly and annual basis, as and when applicable.

Information compiled from all the business areas is to be examined and processed in order to analyze,
control and identify early warning signs, emerging risks in line with their respective assigned roles and
responsibilities. This information is to be presented and explained to the Board and its committees (in line
with their respective charters), as well as, to the Executive Management and Management Committees
including business division Heads on a periodical basis.

Specific risk related reports are to be prepared and distributed at all relevant levels in the Bank in order to
ensure that all risk oversight functions and business divisions have access to extensive, relevant, complete
and up-to-date information to support their risk management activities.

The following under-mentioned are the reports that is shared from credit risk with the senior management
of the bank:

1. Asset Quality Report

This comprehensive report is produced and shared on a monthly basis and covers details regarding portfolio
growth, NPLs (Non-Performing Loans) and Loan loss reserves, portfolio quality, provision coverage and
concentrations in the portfolio. It also includes Portfolio risk profile and risk migration as well as exposures in
different economic sectors

2. Risk Appetite Statement/ Dashboard:

Risk Appetite is the quantum of risk that Riyad Bank Board is willing to accept in pursuit of its financial and
strategic objectives, recognizing a range of possible outcomes detailed in the Group's overall business plan
and budget. Riyad Bank’s) Risk Appetite combines a top-down view of its capacity to accept risk with a
bottom-up view of the business risk profile requested and recommended by each Business Division.

3. Weekly movement Report

It’s a snapshot of weekly movement in loan portfolio along with overview of major transactions and past
dues (below and above 90 days) categorized through facilities and segments. This report is submitted to
Senior Management on a weekly basis.

38
4. Economic sector ceiling

A yearly studies study/report conducted to analyze the portfolio of the bank to aggregate and monitor all
risk exposures and mainly to obtain a yearly approval from Riyad Bank Board for the ceilings that limits the
bank exposure towards the specific economic sectors in order to control the sectorial concentration risk.

Yearly ceilings are recommended considering the bank strategies as well as customers’ needs per sector.
The main predictions and plans for each coming year is based on the yearly budget of the Saudi
Government, additionally bank consider the utilization against each sector, risk and reward (yields and the
probability of default) within each sector. Recommendations (increase, maintain or decrease) is provided in
order to achieve better balanced distribution of exposures among different and various economic sectors.

The economic sector ceiling is continuously and frequently monitored on a monthly basis and reported to
the Board and Senior Management. Any exceptions to the rule are highlighted and reported immediately
along with remedial actions taken.

39
CR1: Credit quality of assets - 31 December 2022
SAR 000
a b c d

Gross carrying values of Allowances/ Net values

impairments** (a+b-c)
Defaulted exposures Non-defaulted exposures*

1 Loans 4,880,688 242,239,057 4,754,798 242,364,947

2 Debt Securities 688,977 49,041,443 315,469 49,414,951

3 Off-balance sheet exposures 806,126 214,197,992 206,944 214,797,174

4 Total 6,375,791 505,478,492 5,277,211 506,577,072

*Includes commitments that are unconditionally cancellable at any time by the Bank or automatic cancellation due to deterioration in a borrower’screditworthiness
** The impairment allowance on debt instruments also includes allowance on the investments at FVOCI

40
CR2: Changes in stock of defaulted loans and debt securities - 31 December 2022
SAR 000
a

1 Defaulted loans and debt securities at end of the previous reporting period 5,239,205

2 Loans and debt securities that have defaulted since the last reporting period

3 Returned to non-defaulted status

4 Amounts written off (970,321)

5 Other changes* 1,285,997

Defaulted loans and debt securities at end of the reporting period

6 (1+2-3-4±5) 5,554,881
* Other changes include addition, deletion and re-measurement.

41
Table CRB: Additional disclosure related to the credit quality of assets

a) Scope and definitions of “past due” and “impaired” exposures

Default due to Non Payment
Basel II specifies that a default occurs when the client is past due for more than 90 days and more than 5%
credit obligation is overdue to the banking group. The outstanding obligation includes principal, Interest,
commission and penal fees, as applicable.

Default prior to reaching 90 Days Past Due Status

Default is said to have occurred when the Bank considers that an obligor is unlikely to repay its credit
obligations, even if on the default date the Obligor is not yet more than 90 days past due. The default on
one facility would classify the Obligor as default and all other facilities to the Obligor would be considered to
be in default.

Bank conducts assessment at each period end date to determine if there is any objective evidence that a
financial asset or group of financial assets may be impaired. Objective evidence of impairment may include
indications that the borrower is experiencing significant financial difficulty, default or delinquency in special
commission or principal payments, the probability that it will enter bankruptcy or other financial
reorganization.

Riyad Bank considers Exposures past-due more than 90-days but not considered impaired for accounting
purposes are considered as Defaulted and therefore are treated accordingly.

An exposure to a counterparty is deemed restructured when the counterparty is experiencing difficulty in

meeting its financial commitments and concessions are granted due to the counterparty’s financial
difficulty on any exposure whether on or off balance sheet item.

A forborne exposure are identified as such until the following exit criteria are fulfilled:
• When repayments as per revised terms have been made in a timely manner over a continuous repayment
period of not less than one year.
• The counterparty has solved its financial difficulties.

The definition of forbearance covers exposure of performing and non-performing status before the
granting of forbearance measurers.

b) The extent of past-due exposures (more than 90 days) that are not considered to be impaired and the
reasons for this.

These instances are normally substantiated by in-depth financial analysis and the management’s strong
conviction based on client’s prior credit experience and future indications that the borrower will honor his
obligations towards the Bank such as his ability to remedy temporary hiccup, collection of high quality
receivables, strong collateral that is placed for liquidation etc.

c) Description of methods used for determining impairments.

An assessment is made at each reporting date to determine whether there is objective evidence that a
financial asset or group of financial assets carried at amortized cost may be impaired. If such evidence
exists, the estimated recoverable amount of that asset is determined and any impairment loss, based on
the net present value of future anticipated cash flows, is recognised for changes in its carrying amounts.

42
Objective evidence that financial assets are impaired can include default or delinquency by a borrower,
restructuring of a loan or advance by the group on the terms that the Bank would not otherwise consider,
indications that a borrower or issuer will enter bankruptcy, the disappearance of active market for a security
or other observable data relating to a group of assets such as adverse changes in the payment status of
borrowers or issuers.

It may also include instances where Bank considers that the obligor is unlikely to pay its credit obligations to
the Bank, in full, without recourse by the Bank to actions such as realizing the security, if held.

d) The bank’s own definition of a restructured exposure.

Restructuring occurs when there is a change or modification of the terms and conditions of the original
exposure contract. Restructuring may only occur in the form of either:

• Renegotiation/Refinancing/Rescheduling or
• Forbearance

The determination of whether restructuring results in forbearance or renegotiation is based on whether the
modified terms of the original exposure contract is concessionary, as a result of the financial difficulty of the
borrower.

Any modification in the Assets which are classified as Amortized Cost may lead to two scenarios – De-
recognition of Assets and continuance as Recognized Asset (No De-recognition).

The Bank does not prefer multiple times restructuring of contract with the counterparty, however, in
exceptional circumstances, if the Bank needs to do so, Obligor’s financial health will be evaluated and
accordingly the asset will be transferred to Stage 2 (Significant Increase in Credit Risk) or Stage 3 (De-
recognition/ Re-recognition) based on above mentioned criteria. Latest restructured Present Value of cash-
flow will be assessed against the previous restructured Present Value of cash-flow for the purposes of
determining, the amount of impairment.

In case the Modification of Asset does not result into De-recognition, the Bank will recalculate the gross
carrying amount of the asset by discounting the modified contractual cash-flows using EIR prior to the
modification. Any difference between the recalculated amount and the existing gross carrying amount will
be recognised in Profit or Loss for Asset Modification.

The asset will be provided appropriate treatment according to the identified staging after Asset
Modification i.e. 12 Month ECL for Stage 1, Lifetime ECL for Stage 2 and Default for Stage 3.

Quantitative disclosures
For disclosure requirements from ‘e’ to ‘h’, please refer to Quantitative tables:

43
CRB related Quantitative
disclosures

44
 CREDIT RISK: GENERAL DISCLOSURES 31 December 2022
Geographic Breakdown SAR '000'
Other GCC &
Portfolios Saudi Arabia Europe North America Latin America South East Asia Other Countries Total
Middle East
Sovereigns and central banks: 59,662,072 589,026 2,838 1,779,801 - - 84,790 62,118,527

− SAMA and Saudi 59,662,072 - - 872,505 - - - 60,534,577

Government
− Others - 589,026 2,838 907,296 - - 84,790 1,583,950

Multilateral Development - - - - - - - -
Banks (MDBs)
Public Sector Entities (PSEs) - - - - - - - -

Banks and securities firms 20,494,853 4,061,188 6,738,227 9,297,009 - 2,305,718 3,492,624 46,389,620

Corporates 179,097,772 1,760,092 9,128,860 12,088,574 970,154 1,348,969 2,253,170 206,647,590

Retail non−mortgages 29,123,655 - - - - - - 29,123,655

Small Business Facilities 3,255,860 - - - - - - 3,255,860

Enterprises (SBFEs)
Mortgages 57,043,207 - - - - - - 57,043,207

− Residential 57,043,207 - - - - - - 57,043,207

Securitized assets - - - - - - - -

Equity 1,120,204 197,546 300 470,915 - - - 1,788,965

Others 16,367,779 - 1,028,378 11,333 - - 2,445 17,409,936

Total 366,165,402 6,607,851 16,898,603 23,647,634 970,154 3,654,687 5,833,029 423,777,359

45
 TABLE (STA): CREDIT RISK: GENERAL DISCLOSURES - 31 December 2022
Industry Sector Breakdown SAR '000'
Government and quasi Banks and other Electricity, Water, Gas Building and Transportation and Consumer loans and
Agriculture and Fishing Manufacturing Mining and Quarrying Commerce Services Others Total
Government Financial institutions and Health Services Construction Communications Credit cards

Sovereigns and central 62,118,527 - - - - - - - - - - - 62,118,527

banks:

− SAMA and Saudi 60,534,577 - - - - - - - - - - - 60,534,577

Government

− Others 1,583,950 - - - - - - - - - - - 1,583,950

Multilateral Development - - - - - - - - - - - - -
Banks (MDBs)

Public Sector Entities (PSEs) - - - - - - - - - - - - -

Banks and securities firms - 46,389,620 - - - - - - - - - - 46,389,620

Corporates - 5,322,970 4,147,841 35,081,767 13,359,502 20,614,983 35,964,791 54,315,095 9,926,447 21,676,438 - 6,237,757 206,647,590

Retail non mortgages - - - - - - - - - - 29,123,655 - 29,123,655

Small Business Facilities - - 13,522 429,631 3,725 48,877 521,758 1,368,160 53,544 737,533 - 79,111 3,255,860
Enterprises (SBFEs)

Mortgages - - - - - - - - - - 57,043,207 - 57,043,207

− Residential - - - - - - - - - - 57,043,207 - 57,043,207

Securitized assets - - - - - - - - - - - - -

Equity - - - 153,071 - - - - - 1,635,893 - - 1,788,965

Others - - 1,068 483,661 4,589 7,395 607,052 4,355,143 6,917 378,128 - 11,565,983 17,409,936

Total 62,118,527 51,712,589 4,162,431 36,148,131 13,367,816 20,671,255 37,093,601 60,038,398 9,986,907 24,427,993 86,220,406 17,882,851 423,777,359

46
 CREDIT RISK: GENERAL DISCLOSURES - 31 December 2022
Residual Contractual Maturity Breakdown SAR '000'
Less than 8 days 8−29 days 30−89 days 90−179 days 180−359 days 1−3 years 3−5 years Over 5 years Total

Sovereigns and central banks: 29,693,344 72,261 200,670 17,357 2,806,846 1,453,744 2,839,619 25,034,686 62,118,527

− SAMA and Saudi Government 29,693,344 72,261 200,670 17,357 2,430,536 1,237,735 2,388,411 24,494,262 60,534,577

− Others - - - - 376,310 216,009 451,208 540,423 1,583,950

Multilateral Development Banks - - - - - - - - -

(MDBs)
Public Sector Entities (PSEs) - - - - - - - - -

Banks and securities firms 19,321,003 2,180,791 6,504,093 6,298,833 1,645,632 4,312,769 2,621,273 3,505,226 46,389,620

Corporates 18,541,504 16,185,067 34,733,297 29,837,873 30,024,621 26,026,886 17,355,893 33,942,448 206,647,590

Retail non−mortgages 284,097 11,238 191,612 230,081 644,376 9,426,739 17,351,360 984,153 29,123,655

Small Business Facilities Enterprises 173,269 129,097 377,564 454,643 515,713 825,981 709,547 70,046 3,255,860
(SBFEs)
Mortgages 708 394 1,537 8,842 15,240 266,463 716,701 56,033,323 57,043,207

− Residential 708 394 1,537 8,842 15,240 266,463 716,701 56,033,323 57,043,207

Securitized assets - - - - - - - - -

Equity 1,788,965 - - - - - - - 1,788,965

Others 5,890,625 241,186 584,678 916,471 980,513 634,805 196,915 7,964,743 17,409,936

Total 75,693,515 18,820,033 42,593,452 37,764,099 36,632,941 42,947,387 41,791,308 127,534,624 423,777,359

47
 CREDIT RISK: GENERAL DISCLOSURES - 31 December 2022
Impaired Loans, Past Due Loans and Allowances SAR '000'
Ageing of loans and advances
(Excluding non-performing loans)
Nonperforming
Charges Charge−offs Balance at the end of
Industry Sector loans and during the during the the period
advances 31−90 91−180 181−360 Over 360 period period

Government and quasi 772 - 772

government

Banks and other financial - (13,219) - 15,177

institutions

Agriculture and fishing - 145 - 3,557

Manufacturing 288,122 120,096 5,754 241 9,338 (47,097) (12,890) 828,558

Mining and quarrying 294 (6,805) - 4,348

Electricity, water, gas and 17,027 14,877 (469) - 18,221

health services

Building and construction 759,012 46,345 796 13,650 - 378,016 (449,370) 1,460,447

Commerce 1,247,666 131,535 17,835 3,752 - 305,034 (75,769) 976,812

Transportation and 4,357 80 - - (1,967) - 7,572

communication

Services 616,527 27,550 8,474 1,922 - 347,828 (28,023) 392,306

Consumer loans and credit 1,310,629 1,224,494 617,397 (422,075) 1,046,090

cards

Others 328 - 680 - 938

Portfolio provision - -

Total 4,243,962 1,564,897 32,939 19,565 9,338 1,580,315 (988,127) 4,754,798

Definitions: * 'Defaulted' are Loans that are Past Due over 90 days, but not yet Impaired

48
 CREDIT RISK: GENERAL DISCLOSURES - 31 December 2022
SAR '000'
Ageing of loans and advances
(Excluding non-performing loans) Specific
Geographic Area Impaired Loans
Allowances
31−90 91−180 181−360 Over 360

Saudi Arabia
4,243,962 1,564,897 32,939 19,565 9,338 4,750,540
Other GCC & Middle East
- - - - -
Europe
- - - - - 4,059
North America
- - - - - 199
South East Asia
- - - - - -
Others countries
- - - - - -
Total
4,243,962 1,564,897 32,939 19,565 9,338 4,754,798

49
 CREDIT RISK: GENERAL DISCLOSURES - 31 December 2022
Reconciliation Of Changes In The Allowances For Loan Impairment SAR '000'
Specific
Particulars
Allowances
Balance, beginning of the year 4,514,157

Charge-offs taken against the allowances during the period (988,127)

Amounts set aside (or reversed) during the period 1,580,315

Other adjustments: -

- exchange rate differences -

- business combinations -

- acquisitions and disposals of subsidiaries -

- etc. (351,547)

Transfers between allowances -

Balance, end of the year 4,754,798

Note: Charge-offs and recoveries have been recorded directly to the income statement.
' other adjustments' represents write-offs that have been charged to P&L in previous years

50
Table CRC: Qualitative disclosure requirements related to credit risk
mitigation techniques
a) Core features of policies and processes for, and an indication of the extent to which the bank makes
use of, on- and off-balance sheet netting.

Netting can reduce capital adequacy requirements by offsetting deposits held by the bank against financing
arrangements. However netting arrangements are not used by Riyad Bank unless the deposits need to be in
the form of collateral with a specific charge or lien on the deposit for any credit risk mitigation benefits to be
derived by Riyad Bank.

b) Core features of policies and processes for collateral evaluation and management
Collateral residual risk is monitored to manage valuation, maturity, enforceability, liquidity and marketability
of collaterals.

Acceptable collaterals are detailed as per Bank’s policy. Different classes of collaterals are subject to
independent policy guidelines and periodic valuation. Real Estate, Shares, Mutual Funds and Non- rated
Corporate Guarantees are not considered as eligible credit risk mitigants by local Regulator and are
excluded while calculating regulatory capital of the Bank.

- Collateral Valuation

Valuation is based on the current market value of the collateral. Documentation and Security Department
maintains and update the list of approved external valuers and surveyors on a frequent basis. They are
professionally qualified, reputable, experienced and competent valuers. Where required, or when in doubt,
Documentation and Security Department always ask collateral specialists to perform a check valuation.
External experts are pre-approved by the Credit Risk Management/Vendor management Department.
Collateral inspection reports are kept with Documentation Security Dept. in the documents File.

- On-going Collateral Monitoring and Management

Management monitors the market value of the collateral and requests additional collateral in accordance
with the underlying agreement when deemed necessary.

The administration and safe-keeping of the loan facilities documentation and collateral documentation
instruments is the responsibility of a specialized Credit Documentation & Security unit within the Credit
Control Department. The existence of appropriate signed collateral documentation prior to entering a
credit facility into the Bank’s limits systems is the responsibility of the Credit Documentation and Security
Department.

In addition to credit facility limit expiry dates, the expiry dates of any time-sensitive collateral/cover are
also captured. The notice period required for timely renewal of such cover or the presentation of claims
under the same is flagged for proper and timely notification. Credit Documentation & Security Department
maintains a collateral expiry agenda and notify Relationship Management in advance of upcoming collateral
events.

Timely re-appraisal of collateral values is notified by Documentation and Security Department. Such re-
appraisal frequencies are in accordance with the standard re-appraisal rules of the Bank.

Documentation and files of each credit facility are checked at least once a year at the review dates to
ensure that all authorizations, maturity dates, appraisals etc. are current and as they should be.

51
c) Credit risk concentrations

Riyad Bank strives to avoid excess credit risk concentrations in any single party, counterparty and industry
sector.

- Management of Credit Concentration Risk

Concentration risk refers to the risk arising from an uneven distribution of counterparties in credit or any
other business relationship or from concentration in business sectors or geographical regions. Accordingly,
concentration risk in the credit portfolios comes into being through a skewed distribution of loans to
individual borrowers (name concentration) or in industry / service sector (sector concentration).

- Types of Concentration Risk

Historical experience has shown that concentration of Credit Risk in asset portfolios has been one of the
key drivers of stress in the Banking sector. This is true for both individual institutions as well as the Banking
system at large. The importance of Concentration Risk in the Bank’s portfolio requires a separate
assessment to gauge the gap between Pillar 1 capital requirement and the actual underlying risk.

Concentration Risk refers to the risk arising from an uneven distribution of counterparties in credit or any
other business relationship or from concentration in business sectors or geographical regions. Accordingly,
Concentration Risk in the credit portfolios comes into existence through a skewed distribution of financing
to:

- Geographical regions (regional concentration);

- Collateral types (collateral concentration);

- Individual borrowers (name concentration) including assessment of connected party exposures;

- Industry / sector (sector concentration)

These aforesaid areas of concentration have also been highlighted by SAMA's guideline document on the
Internal Capital Adequacy Assessment Plan (ICAAP).

- Coverage
The Bank ensures that the concentration risk assessment covers all of the portfolios, not limited to but
including the following asset classes

- Sovereign
- Banks and FIs
- Corporate

The following are the guidelines for managing and accessing concentration risk:

- Exposures to counterparty include its on- and off-balance sheet exposures and indirect exposures.

- Exposures arising from securities, foreign exchange, derivatives or other off-balance sheet exposures are
captured where appropriate;
- The criteria used for identifying a group of related persons has been identified;

- Large exposures are identified and reported separately as part of management reporting

- The circumstances in which the exposure limits can be exceeded and authority to approve such breaches
(e.g. the Board of directors) are clearly documented

- The individual and aggregate exposure limits for various types of counterparty (e.g. governments, banks,
corporate and individual borrowers) are made as part of normal management reporting.

Economic sector ceiling is set and regularly monitored to ensure that balance distributed loan portfolio is
built, and any potential industry / economic sector concentration is avoided.

52
CR3: Credit risk mitigation techniques – overview - 31 December 2022
SAR 000

a b c d e f g

Exposures secured by
Exposures Exposures secured Exposures secured by Exposures secured by
Exposures secured by financial guarantees, Exposures secured by
unsecured: carrying by collateral, of which: credit derivatives, of
financial guarantees of which: secured credit derivatives
amount collateral secured amount which: secured amount
amount

Loans 240,993,784 1,371,163 422,808 1,816,585 601,781 - -

Debt securities 49,414,951 - - 846,333 846,333 - -

Total 290,408,735 1,371,163 422,808 2,662,918 1,448,114 - -

Of which defaulted 2,366,834 - - - - -

53
Table CRD: Qualitative disclosures on banks’ use of external credit
ratings under the standardised approach for credit risk

a) "Names of the external credit assessment institutions (ECAIs) and export credit agencies (ECAs)

The Bank uses Moody’s, Standard & Poor’s and Fitch as External Credit Assessment Institutions (ECAIs) in
accordance with SAMA guidelines for determining the risk weights of Sovereigns, Public Sector Entities
(PSE), Multilateral Development Banks (MDBs), Banks and Securities Firms and Corporate exposures. There
are no changes over the reporting period.

b) The asset classes for which each ECAI or ECA is used;

Eligible ECAIs are used for Sovereigns, Central Banks, Banks, Securities Firms and Corporate exposures,
when available. In accordance with the guidelines issued by the local Regulator, if a given exposure is rated
by two External Credit Assessment Institutions, then the lower rating is applied; in case any exposure is
rated by three External Credit Assessment Institutions, the two lowest ratings are referred to and the
higher of these two ratings is applied.

c) A description of the process used to transfer the issuer to issue credit ratings onto comparable assets
in the banking

Under the Standardized Approach, the Bank applies the issue specific risk weights where the bank’s claim is
not an investment in a specific assessed issue. The Bank use issue-specific assessment for cases where
specific debt ranks pari-passu or senior to the claim. The Bank fully complies with paragraph 99-101 of
BASEL II International Convergence of Capital Measurement and Capital Standards dated June 2006. And in
cases, where borrower has an issuer assessment, this assessment typically applies to senior unsecured
claims on that issuer. Consequently, only senior claims on that issuer will benefit from a high quality issuer
assessment. Other unassessed claims of a highly assessed issuer are treated as unrated.

d) The alignment of the alphanumerical scale of each agency used with risk buckets.

ECAIs use alphanumerical scales to represent risk levels. Riyad Bank uses Saudi Central Bank’s prescribed
External Credit Assessment Institutions’ mapping tables issued by the local Regulator for Sovereign and
Central Banks, Banks and Securities Firms, as well as for Corporate exposures

The tool that bank has deployed to assess is referred to as ‘’Master Rating Scale’’( MRS). The MRS serves as
a consistent benchmark and label to group obligors with similar risk profiles into particular rating grades,
which in turn are associated with unique Probability of Defaults (PD). MRS facilitates a single view to risk
management for future reporting and portfolio management including limit setting, credit pricing and also
for capital computation. The MRS with a twenty three point scale has been formulated and benchmarked
against Moody’s MRS scale.

54
CR4: Standardised approach – credit risk exposure and Credit Risk Mitigation (CRM) effects - 31 December 2022

SAR 000
a b c d e f
Exposures before CCF and CRM Exposures post-CCF and CRM RWA and RWA density
On-balance sheet Off-balance sheet On-balance sheet Off-balance sheet
RWA RWA density
Asset classes amount amount* amount amount

1 Sovereigns and their central banks 61,870,283 30,262 61,870,283 3,069 1,397,195 0.02
Non-central government public sector
2 entities - - - - - -

3 Multilateral development banks - - - - - -

4 Banks 28,798,666 10,532,061 28,798,666 5,991,020 11,306,966 0.33

5 Securities firms 9,954,238 2,734,451 9,908,313 690,041 4,894,288 0.46

6 Corporates 149,989,963 184,794,983 149,649,945 57,053,236 194,657,759 0.94

7 Regulatory retail portfolios 31,444,764 13,013,831 31,440,857 1,049,922 24,285,358 0.75

8 Secured by residential property 57,043,207 2,490,614 57,043,207 - 28,521,604 0.50

9 Secured by commercial real estate - - - - - -

10 Equity 1,788,965 - 1,788,965 - 2,367,281 1.32

11 Past-due loans 2,366,834 797,308 2,366,834 260,008 2,701,501 1.03

12 Higher-risk categories - - - - - -

13 Other assets 13,919,496 610,608 13,886,539 75,894 10,061,034 0.72

14 Total 357,176,416 215,004,119 356,753,608 65,123,191 280,192,986 0.66

55
CR5: Standardised approach – exposures by asset classes and risk weights - 31 December 2022
SAR 000

Total credit exposures

0% 10% 20% 35% 50% 75% 85% 100% 150% Others amount (post CCF and
Asset classes/ Risk weight* post-CRM)

1 Sovereigns and their central banks 58,090,825 - 3,609,802 - 2,838 - - 673,816 - - 62,377,280

2 Non-central government public sector entities (PSEs) - - - - - - - - - - -

3 Multilateral development banks (MDBs) - - - - - - - - - - -

4 Banks - - 20,842,471 - 13,618,687 - - 327,330 1,199 - 34,789,686

5 Securities firms - - 1,614,157 - 8,825,480 - - 158,716 - - 10,598,354

6 Corporates - - 870,021 - 13,864,161 - 31,739,244 158,353,811 1,479,671 - 206,306,907

7 Regulatory retail portfolios - - 3,610 - - 32,379,515 - - - - 32,383,125

8 Secured by residential property - - - - 57,043,207 - - - - - 57,043,207

9 Secured by commercial real estate - - - - - - - - - - -

10 Equity - - - - - - - 1,403,420 - 385,545 1,788,965

11 Past-due loans - - - - - - - 2,477,523 149,319 - 2,626,842

12 Higher-risk categories - - - - - - - - - - -

13 Other assets 3,894,726 - 8,341 - - - - 10,059,366 - - 13,962,433

14 Total 61,985,551 - 26,948,401 - 93,354,373 32,379,515 31,739,244 173,453,982 1,630,188 385,545 421,876,799

56
Table CCRA: Qualitative disclosure related to counterparty credit risk
a) Risk management objectives and policies related to counterparty credit risk, including:

Counterparty Limits
Riyad Bank has developed and implemented a credit risk management process to ensure prudent and timely risk
identification, quantification, monitoring and reporting of exposures. All counterparties are assessed in conjunction
with the Banks’s counterparty risk appetite benchmarks and internal risk matrix.

The Bank use appropriate reporting matrix and limits systems, have well developed and comprehensive stress testing,
and maintain systems that facilitate measurement and aggregation of Counterparty Credit Risk (CCR) throughout the
organization.

Meaningful limits on CCR exposures are an important part of the risk management framework. The bank have an
appropriate independent exposure monitoring system that tracks exposures against established limits. Adequate risk
controls are in place to mitigate limit exceptions.

Pre-settlement risk is the credit risk associated with dealing room products before Settlement. It is generally based on
the "replacement value" (Mark-to-Market) plus "potential future" volatility concept.

Since 1st January, 2017 the bank has adopted a SA-CCR methodology introduced by Basel which calculates the EAD
according to the new Standardized Approach for CCR. The implemented risk system complies with SA-CCR exposure
computation methodology based on the framework issued by SAMA and BIS. The Bank has approved policies and
processes related to counterparty limits and exposure calculations.

Senior management and the board of directors are responsible for setting risk tolerances for CCR; measuring,
monitoring, and controlling CCR risk exposures; and developing and implementing effective policies and procedures.
Senior management receives comprehensive CCR exposure reports on a frequent basis.

The bank is subject to daily variation margining on its un-cleared derivatives exposures. Bank has established Margin
Policies and Practices which to help mitigate CCR exposure; the policies addresses establishment of processes and
periodical review minimum transfer amounts, eligible margining collateral, eligible currencies, minimum haircuts,
recognizing any volatility and liquidity concerns with underlying collateral. Policies also cover when CCR should lead to
the decision to require posted margin to be segregated. Additionally, bank have policies and procedures for monitoring
margin agreements involving third-party custodians that identify the location of the account where collateral is posted
and methods for gathering adequate documentation from the custodian to confirm collateral disposition

Credit valuation adjustment

The credit valuation adjustment is the capital charge for potential mark to market losses due to the credit quality
deterioration of a counterparty. The standardized approach uses the external credit rating of each counterparty and
includes the effective maturity and exposure at default.

Bank is applying non-IMM bank methodology to measure CVA capital charge since it uses SA-CCR (Standardised
counterparty credit risk) for measuring EAD of OTC Derivatives transactions. CVA charge for the Bank is not material.

57
b) The method used to assign the operating limits defined in terms of internal capital for counterparty credit
exposures and for CCP exposures
All exposures are subject to continuous monitoring of events/signals that could potentially lead to or indicate a
material change in risk.

Monitoring of compliance with limits for counterparty credit exposure is carried out by Risk Management on a daily
basis against applicable limits. Limit breaches are reported to senior management as well as to the Board of Directors if
the maximum exposure limit is exceeded.

Bank has developed and designed risk matrix for Financial Institutions (BACs and RACs) that sets target sectors,
minimum pricing guidelines, risk profile of the counterparty, nature of the product, Products Weighting, Tenor of
transaction and country of issue etc.

Establishment of Central Counter Party (CCP) is still work in progress at SAMA; however, SAMA has assessed and
published the list of the Foreign Qualifying CCPs (for G4 currencies i.e. US$, Euro, GBP, JPY) through which business
can be conducted. There is currently no qualified National CCP. However, in order to conduct business with CCP (G4
currencies) bank has engaged clearing broker who acted as bank's Clearing Broker and collateral is placed in an asset
segregated account with them. The trade will be cleared through them. Bank has established credit limit for this broker
services which is approved by the senior management committee.

c) Policies relating to guarantees and other risk mitigants and assessments concerning counterparty risk, including
exposures towards CCPs;
The bank has approved Collateral Management (CSA) policy which defines eligible collateral & currency, thresholds
related to minimum transfer amounts and rounding conventions.

All exposures with CCPs are subject to daily initial and variation margins and are closely monitored against mark to
market valuations of underlying transactions.

Riyad Bank reviews central counterparties where exposures exist. Such reviews include a due diligence evaluation of
the central counterparty’s risk management framework. For example, Bank reviews each central counterparty’s
membership requirements, guarantee fund contributions, margin practices, default-sharing protocols, and limits of
liability. Additionally, the Bank considers the counterparty’s procedures for handling the default of a clearing member,
obligations at post-default auctions, and post-default assignment of positions

d) Policies with respect to wrong-way risk (WWR) exposures;

WWR occurs when the exposure to a particular counterparty is positively correlated with the probability of default of
the counterparty itself. This is also governed by Financial Institution Matrix that has an inverse relationship. When the
counterparty rating has improved and credit risk is low it enjoys high operating limits to prevent wrong way risk. Riyad
Bank regularly assesses the potential exposure that the bank may have to wrong way risk which are likely to lead to this
risk.

e) The impact in terms of the amount of collateral that the bank would be required to provide given a credit rating
downgrade.
The Bank standard documentation in place that allows the Bank in case of credit rating downgrade, to embed impacts
of such downgrade in the covenant for monitoring purposes and also at the same time allows Riyad Bank to call
off/terminate such facility and request for additional collateral to mitigate such risk.

58
CCR1: Analysis of counterparty credit risk (CCR)[1] exposure by approach - 31 December 2022
SAR 000
a b c d e f
Alpha used for
Replacement Potential future computing EAD post-
EEPE RWA
cost exposure regulatory CRM
EAD

1 SA-CCR (for derivatives) 1,260,903 1,221,040 1.4 3,474,721 1,697,209

2 Internal Model Method (for derivatives and SFTs)

3 Simple Approach for credit risk mitigation (for SFTs)

4 Comprehensive Approach for credit risk mitigation (for SFTs)

5 VaR for SFTs

6 Total 1,697,209

59
CCR2: Credit valuation adjustment (CVA) capital charge - 31 December 2022
SAR 000

a b
EAD post-CRM RWA

Total portfolios subject to the Advanced CVA capital charge

1 (i) VaR component (including the 3×multiplier)

2 (ii) Stressed VaR component (including the 3×multiplier)

3 All portfolios subject to the Standardised CVA capital charge 2,446,342 1,957,546

4 Total subject to the CVA capital charge 2,446,342 1,957,546

60
CCR3: Standardised approach – CCR exposures by regulatory portfolio and risk weights - 31 December 2022
SAR 000
a1 a2 b c d e1 e2 f g h i
Total credit
0% 2% 10% 20% 50% 75% 85% 100% 150% Others
Regulatory portfolio*/ Risk weight** exposures

Sovereigns and their central banks - - - 245,175 - - - - - - 245,175

Non-central government public sector entities
(PSEs) - - - - - - - - - - -

Multilateral development banks (MDBs) - - - - - - - - - - -

Banks - - - 165,305 610,203 - - 2,933 - - 778,441

Securities firms - - - 7,464 215,675 - - 4,679 - - 227,817

Corporates - - - - 41,528 - 10,957 1,142,425 - - 1,194,909

Regulatory retail portfolios - - - - - - - - - - -

Other assets - 1,028,378 - - - - - - - 1,028,378

Total - 1,028,378 - 417,944 867,405 - 10,957 1,150,037 - - 3,474,721

61
B.26 - CCR5: Composition of collateral for CCR exposure 31 December 2022

a b c d e f
Collateral used in derivative transactions Collateral used in SFTs

Fair value of collateral Fair value of Fair value of

Fair value of posted collateral
received collateral posted
received collateral
Segregated Unsegregated Segregated Unsegregated

Cash – domestic currency - - - - - -

Cash – other currencies - 307,837 608,490 275,175 37,018 -

Domestic sovereign debt - - - - - -

Other sovereign debt - - - - - -

Government agency debt - - - - - -

Corporate bonds - - - - - -

Equity securities - - - - - -

Other collateral - - - - - -

Total - 307,837 608,490 275,175 37,018 -

62
B.29 - Template CCR8: Exposures to central counterparties

a b
EAD (post-CRM) RWA
1 Exposures to QCCPs (total) 419,889 20,568
Exposures for trades at QCCPs (excluding initial margin and default
2 fund contributions); of which 1,028,378 20,568
3 (i) OTC derivatives 1,028,378 20,568
4 (ii) Exchange-traded derivatives - -
5 (iii) Securities financing transactions - -

6 (iv) Netting sets where cross-product netting has been approved - -

7 Segregated initial margin -
8 Non-segregated initial margin (608,490) -
9 Pre-funded default fund contributions - -
10 Unfunded default fund contributions - -
11 Exposures to non-QCCPs (total) - -
Exposures for trades at non-QCCPs (excluding initial margin and
12 default fund contributions); of which - -
13 (i) OTC derivatives - -
14 (ii) Exchange-traded derivatives - -
15 (iii) Securities financing transactions - -

16 (iv) Netting sets where cross-product netting has been approved - -

17 Segregated initial margin -
18 Non-segregated initial margin - -
19 Pre-funded default fund contributions - -
20 Unfunded default fund contributions - -

63
 Basel III Pillar 3 Disclosures - Dec 2021

Table SECA: Qualitative disclosure requirements related to securitisation

exposures
Bank’s objectives in relation to securitization and re-securitization activity

Currently, the Bank is neither the originator, sponsor nor investor for any Securitization exposure.

Details of SPEs/Affiliated entities where Bank is acting as sponsor

Not applicable as bank don’t have any exposure

Summary of the bank’s accounting policies for securitization activities.

Not applicable as bank don’t have any exposure
Names of external credit assessment institution (ECAIs) used for securitizations
Not applicable as bank don’t have any exposure

Basel internal assessment approach (IAA)

Not applicable to Riyad Bank

64
SEC1: Securitisation exposures in the banking book - 31 December 2022
SAR 000
a b c e f g i j k
Bank acts as originator Bank acts as sponsor Banks acts as investor
Traditional Synthetic Sub-total Traditional Synthetic Sub-total Traditional Synthetic Sub-total
Retail (total)
1 – of which - - - - - - - - -

2 residential mortgage - - - - - - - - -

3 credit card - - - - - - - - -

4 other retail exposures - - - - - - - - -

5 re-securitisation - - - - - - - - -
Wholesale (total)
6 – of which - - - - - - - - -

7 loans to corporates - - - - - - - - -

8 commercial mortgage - - - - - - - - -

9 lease and receivables - - - - - - - - -

10 other wholesale - - - - - - - - -

11 re-securitisation - - - - - - - - -

65
SEC4: Securitisation exposures in the banking book and associated capital requirements – bank acting as investor - 31 December 2022

SAR 000
a b c d e f g h i

Exposure values
Exposure values (by RW bands) (by regulatory approach)

>20% to 50% >50% to 100% >100% to IRB RBA

≤20% RW 1250% RW IRB SFA SA/SSFA 1250%
RW RW <1250% RW (including IAA)

1 Total exposures - - - - - - - - -

2 Traditional securitisation - - - - - - - - -

3 Of which securitisation - - - - - - - - -

4 Of which retail underlying - - - - - - - - -

5 Of which wholesale - - - - - - - - -

6 Of which re-securitisation - - - - - - - - -

7 Of which senior - - - - - - - - -

8 Of which non-senior - - - - - - - - -

9 Synthetic securitisation - - - - - - - - -

10 Of which securitisation - - - - - - - - -

11 Of which retail underlying - - - - - - - - -

12 Of which wholesale - - - - - - - - -

13 Of which re-securitisation - - - - - - - - -

14 Of which senior - - - - - - - - -

15 Of which non-senior - - - - - - - - -

SAR 000
j k l m n o p q

RWA
(by regulatory approach) Capital charge after cap

IRB RBA IRB RBA

IRB SFA SA/SSFA 1250% IRB SFA SA/SSFA 1250%
(including IAA) (including IAA)

1 Total exposures - - - - - - - -

2 Traditional securitisation - - - - - - - -

3 Of which securitisation - - - - - - - -

4 Of which retail underlying - - - - - - - -

5 Of which wholesale - - - - - - - -

6 Of which re-securitisation - - - - - - - -

7 Of which senior - - - - - - - -

8 Of which non-senior - - - - - - - -

9 Synthetic securitisation - - - - - - - -

10 Of which securitisation - - - - - - - -

11 Of which retail underlying - - - - - - - -

12 Of which wholesale - - - - - - - -

13 Of which re-securitisation - - - - - - - -

14 Of which senior - - - - - - - -

15 Of which non-senior - - - - - - - -

66
Table MRA: Qualitative disclosure requirements related to market risk
Risk management Objectives and Policies

Riyad Bank's market risk objectives are governed by Market Risk Management Framework, which provides the Bank's market risk
appetite and a robust market risk management. The framework is approved by the Board and sets out the objectives and
requirements of policies and procedures for Market Risk Management. Market Risk Guidelines provides roles & responsibilities of the
Bank's Senior Management and Market & Liquidity Risk Management Department for effective management of market risks in the
Bank's trading activates as per the appetite set by the Board.

a) Strategies and processes of the bank

The Bank's risk management strategy is to support the Bank's corporate and strategic objectives within the Risk Appetite set by the
Board through effective controls and monitoring.

The Bank's trading activities are guided by Asset and Liability Committee (ALCO) within the strategic objective of market risk
averseness

The Bank maintains minimal trading positions through FX trading. Derivative trading positions are taken for the Bank’s customer
needs but are closed back to back to offset market risks arising from it. All trading positions are subject to Value-at-Risk and Stop-
Loss limits which is monitored and reported on a daily basis. All proprietary investments are classified in Banking Book to avoid the
increased market risk.
The Bank has and independent Market & Liquidity Risk Management Department (MLRM) within its Enterprise Risk Management
Division which is responsible for identification, measurement, monitoring and reporting of market risk. The function closely monitors
and reports inherent market risks related to the trading activities of the bank.

The bank allows limited products for hedging purposes to avoid complexity. The classification of each hedge deal is approved by
MLRM and the hedge effectiveness of all hedging and hedged instruments is monitored and reported on a regular basis.

b) Structure and organization of the market risk management function

Asset and Liability Committee (ALCO)

Riyad Bank ALCO oversees the effective management of the assets and liabilities of the bank in order to maximize shareholder value,
support business growth and optimize capital and its utilization. In doing so, it protects the institution from any adverse
consequences arising from changes in financial and non-financial risk. It ensures growth of the bank in line with the business strategy
and Board approved risk appetite.
Investment Committee

Riyad Bank maintains a substantial domestic and international investment portfolio to provide an alternative income source for the
Bank via investment in countercyclical investments which are expected to perform well during periods when more normal sources of
Bank income may not perform as well. The Investment Committee is responsible for establishing investment guidelines and
mandates (limits and parameters) for the investment managers who manage the portfolio, and for monitoring and reviewing the risks
and performance of this investment portfolio.

67
 Market and Liquidity Risk Management Department comprises of -

i. Asset Liability Management Section

ALM section supports the Bank’s capital markets businesses and Asset and Liability Committee (ALCO). The section conducts
regular analysis of the Bank's interest rate and liquidity risks using simulation models. These measures include Net Interest Income at
Risk, Economic Value of Equity at Risk and Liquidity ratios which are reported to ALCO and the Board of Directors.

ii. Market Risk Management Section

Market Risk section covers the monitoring of market risk on the trading book, banking book, and the international investments
portfolio. The section also conducts a daily analysis of the risks on banking and trading book under stress scenarios along with a daily
back testing to record any breaches. The section is also responsible for the capital charge calculation and reporting the same under
normal and stressed conditions.

iii. Treasury Middle Office (TMO) Section

TMO independently monitors the risks and profitability of Treasury. It ensures the segregation and integrity of key reporting
processes especially the market rate revaluation process, and ensures that Treasury complies with the approved limits structure. It
also assists Treasury with business and systems developments.

c) Risk Reporting

Risks and control effectiveness are reported to management to ensure that managers within the business lines, and at senior levels,
for a more informed decision making process. As the first line of defense, it is the responsibility of line managers, and senior
managers, to be able to manage risks in accordance with Board approved risk appetite.

Risk reports are provided to managers and senior management on regular basis (e.g. monthly, weekly etc.) to ensure that
management has the opportunity to assure themselves that risk positions are within limits and in line with the Bank’s current
strategy. Typically, these would be provided to senior management on a monthly or weekly basis for the purposes of holding the
various Risk Committee meetings and reviews. Line managers, supervisors and staff directly responsible for managing risk on a day
to day basis, would obviously receive full positions reports on a much more frequent basis.

The general policy within Riyad Bank is for risk issues to be raised with the line manager first, then to escalate it to the senior manager
responsible for that area. Risk matters are also escalated to the relevant risk committee, either immediately if critical, or as part of
the normal reporting process, if less urgent. If insufficient action is taken as a result of this reporting and escalation process, staff
and risk managers have the authority to take matters further, such as to the Chief Risk Officer, to the Chief Executive Officer, to
Internal Audit Department, or in very extreme cases, to the Board of Directors office or to external auditors.

Independent risk reporting is also a key component of the risk reporting controls. Separation between the group creating the risk
(the risk taking business unit) and the unit reporting the risk level (the risk monitoring unit) is very common throughout the Bank.
Internal Audit periodically assess this fundamental segregation of duties within the Bank. Risk Management Division also takes this
into account when assessing the risk within business units. Much of the Bank’s risk reporting is prepared and delivered by various
units within the Risk Management Division as an independent check.

For Enterprise-wide risk reporting purposes, a tabular risk weight was developed to provide comprehensive description of the risk
coverage in the Bank. It is based on all risk types relevant to the Bank and how each respective risk weight is governed, evaluated,
managed, monitored and reported within the Bank as well as the frequency of such reporting.

The Bank deploys adequate risk management systems for the effective measurement, monitoring and reporting. For market risk,
Kamakura Risk Manager (KRM) is used by the Bank which is widely acknowledged and used for Value at Risk and other risk measures
such as Net Interest income at Risk and Economic Value of Equity at Risk. The systems are regularly assessed and upgraded for
improvement in risk measurement and adherence to regulatory changes.

68
MR1: Market risk under standardised approach - 31 December 2022

SAR 000
a
RWA
Outright products 5,175,649
1 Interest rate risk (general and specific) 1,429,800
2 Equity risk (general and specific) 2,671,024
3 Foreign exchange risk 1,074,825
4 Commodity risk
Options -
5 Simplified approach
6 Delta-plus method
7 Scenario approach
8 Securitisation
9 Total 5,175,649

69
 Table IRRBBA – IRRBB risk management objectives and policies
Qualitative disclosure

Interest Risk in the Banking Book (IRRBB) is the risk to Riyad Bank’s earnings and capital that arises out of customers’ demands for
a interest rate related products with various repricing profiles. As Riyad Bank engages in such activities as lending, balance sheet
funding and capital management, it may be exposed to the inherent Interest Rate, Foreign Exchange and Liquidity risks.

Riyad Bank manages Interest Rate Risk in the Banking Book (IRRBB) within its established Net Interest Income at Risk (NII@R) and
Economic Value of Equity at Risk (EVE) limit that are measured and monitored by Risk Management Division and reported to the Asset
and Liability Committee and to the Board.
b
The strategies used to mitigate the stressed IRRBB are through the Funds Transfer Pricing (FTP) mechanism, the management of
interest rate risk is taken out of the hands of the business units and entrusted to the Treasury /Balance Sheet Management units. The
Treasury /Balance Sheet Management performs analysis of the risks inherent in the balance sheet based on the calculations provided
by the Market and Liqudity Risk Management (M&LRM), and determines appropriate hedging strategies in consultation with the ALCO
and then executes those strategies.

The periodicity of calculation of bank's IRRBB measures is monthly. The bank uses interest income at risk and economic value of equity
c
at risk to gauge and a description of the specific measures that the bank uses to gauge its sensitivity to IRRBB.

While the Basel committee recommends a 200 bps parallel shifts for stress testing purpose, the bank uses seven interest rate shock
scenarios to gauge the change in its economic value and earnings; +/- 100 bps and +/- 200 bps; +/- 400 bps ramp (12 months period to
d
achieve an increase of 400 bps for all terms) and one rotation (6 months period to achieve an increase of short term rates by 50bps up to 6
months term).

Re-pricing and yield curve risks were determined to be the predominant risk categories affecting the Bank. The risk exposure to the
embedded options like early redemptions and delays, is not material
e and hence has not been considered over the past years. Based on the behavioral trends it has been concluded that options risk
(excluding prepayments) is not currently significant for the Bank and hence
can be excluded from the capital allocation process for interest rate risk at present.

Strategies to mitigate IRRBB include the use of cash and derivative instruments. In the case of significant and fast parallel shifts in
rates in either direction, the alternative products available to the Bank are:
1. Buy/Sell long/short term government securities or bonds
2. Liquidate some Investments
3. Buy/Sell futures
4. Buy/Sell forwards
f
5. Write payer/receiver swaps
6. Pay/Receive fixed rate deposits
7. Issue fixed/floating bonds/loans/CDs
8. Buy/sell caps/floors
In each case the strategy undertaken by the ALCO is to appropriately adjust the Bank’s exposure in terms of duration, timing and
interest rates whilst minimizing the accounting issues and remaining within all regulatory limits and ratios.

For generating cash flows, the end rates (including commercial margins and other spreads) have been used. For discounting however,
SAIBOR and LIBOR rates have been used. The average repricing maturity for NMD's have been estimated based on a historical ten
g
year redemption data analysis of deposits. The impact of prepayments in retail fixed loans has been incorporated in the calculations.
The historical prepayments are analyzed to estimate the annual CPR rates.

QuantQuantitative disclosures
1 Average maturity assigned to NMDs: 4 years.
2 Longest repricing maturity assigned to NMDs: within 7-8 years.

70
 SAR Millions
Template IRRBB1 – Quantitative information on IRRBB - 31 December 2022
In reporting currency EVE NII

Period Dec-22 Dec-21 Dec-22 Dec-21

Parallel up 5,661 4,770 636 701

Parallel down 5,796 4,121 843 964

Steepener 2,358 3,620

Flattener 933 2,385

Short rate up 1,894 141

Short rate down 1,791 538

Maximum 5,796 4,770 843 964

Period T T-1

Tier 1 Capital (See note

below) 56,036 47,306

71
Operational risk

Operational Risk Management: Strategy & Objectives:

Operational risk is a risk of Bank not achieving its strategic objectives as a consequence of inadequate or failed internal
processes, people and systems, or from external events

Operational Risk Management Department (ORMD) provides professional risk management services to all business
and support areas of the bank to optimally manage their operational risks. ORMD objective, as a 2nd Line of Defense
function, is to facilitate business and support functions in controlling and managing their operational risks through
identification, measurement/ assessment, monitoring, mitigating and reporting the risks. ORMD role, as 2nd Line of Defense
function, is to adopt a pro-active approach in supporting the 1st Line of Defense functions for identification of risks
thus reasonably minimizing the risks within the Bank’s risk appetite. It is supported by robust operational risk
management framework, policies and procedures.

Structure and Organization of Operational Risk Management:

Operational Risk Management Department is headed by the Senior Vice President of Operational Risk who reports to the
EVP – Enterprise Risk Management Division. Head of Operational Risk is responsible for the development and
implementation of Bank’s Operational Risk Management Policy across the Bank.

Operational Risk Management Department activities are supported by five functional areas within the department to
facilitate the sustainability and integrity of the Bank’s operations and to protect its reputation by controlling, mitigating or
transferring the impact of operational risk by performing various risk controlling activities within their scope of work.

i. Operational Loss Analysis Section

The primary objective of the Operational Loss Analysis section is to minimize operational risk through the timely recording,
tracking, analysis, and reporting using SAS GCM system operational loss module to the relevant departments, personnel,
committees and SAMA. In addition, it helps to determine chain of events (root cause, event and effect) and suggests ways to
reduce the probability and impact of losses in order to bring risk to the acceptable level set-up by the Board. The Section is
also involved in ICAAP and stress testing exercise mandated by SAMA.

ii. Incident Management & Resolutions Section

It is one of the key functions within the operational risk management department, which performs risk- based examination of
the bank’s branch network in accordance with approved methodology to minimize the operational risk exposures.
Investigate on operational losses incidents to identify the root – cause for the breach and control failures bases on technical
report and publish investigation reports to the stakeholders for implementing appropriate remediation. Additionally, as a
member of the process and charter review committee (PCRC), provide feedback and suggestions concerning the issuance of
bank-approved process, procedures and charter.

iii. Risk Analysis Section

Risk Analysis Sections is responsible to systematically manage and minimize the operational risks faced by the Bank. The
section monitors the risks through various operational risk tools including Key Risk Indicators (KRI’s), KRI’s Data Quality
review, Risk Assessments of New / Changes to existing Product & Services, and review of bank-wide Change requests (CR’s),
and Policies & Procedures to ensure appropriate coverage of Operational risk.

72
 iv. The Insurance Section

The insurance section manages the Bank’s insurance program and risk transfer of operational losses experienced by the
Bank through a cost-effective insurance program that provides adequate protection against insurable risks.

The primary objective is to ensure that appropriate level of cover is maintained for insurable risks across the bank’s business
areas, and for the design, placement and administration of the bank’s insurance plan.

The Insurance Section performs claims management activity that monitors the progress of all reported claims under
different types of insurance until final settlement of the claim as per agreed-upon terms & conditions

v. Risk Monitoring and Reporting

This section plays a major role in monitoring key activities, limits and metrics including KRIs for significant products of bank
and most critical branches network. Major Responsibilities include:
- Monitoring of activities transactions, and processes.
- Enhance coverage over monitoring with special focus on financial limits through digital channels.
- Aid in monitoring key elements or indicators which will be based on ongoing risk assessments relating to a new products,
services and key changes to the process.
- Supporting ORMD in developing customized management reports.
- Provide periodic reporting

vi. Internal Control Section

Internal Control Section is one of the control functions instituted within the Bank to ensure adherence with the requirements
of SAMA’s Guidelines on Internal Control. The bank has established an effective mechanism for identification,
measurement, monitoring and reporting of key risks and their mitigating controls. Guidance for testing of the controls
associated with the key risks is approved by the Executive Management and is implemented through quarterly control
testing process. The executive management has also implemented the 3 Lines of Defense model within the bank which
defines the roles and responsibilities and relationship between business and risk oversight/monitoring functions.

IC Section is assigned with the responsibility of facilitating the periodic control testing through bank-wide divisional
controllers. The results of the key controls testing and findings from other control functions are shared with Divisional Heads
to enable them ensure that exceptions are adequately followed-up for timely remediation.

iv. Technology Risk Department

Technology Risk Department as a section ensures the governance of technology activaties and the oversight of technology
risk across the bank in coordination with technology functions.

Scope and Nature of Operational Risk Reporting

Operational Risk Management Department ensures that a regular risk reporting is carried out for senior executives and
the board. In this regard an integrated risk report is presented on a monthly basis to the Operational Resilience
Committee (ORC) and Semi-Annual Report updates to the Risk Committee as well as Audit Committee of the Board.

There are other risk assessments, examination and investigation reports which are prepared by ORMD and are presented
to concerned stakeholders.

Operational Risk Weighted Assets for Capital Allocation

Bank has adopted Standardized Approach methodology in determining its regulatory Operational risk capital charge and the
risk weighted assets as per Basel and SAMA guidelines of operational risk management.

73
REMA – Remuneration policy (Compensation & Incentives Policy)

Introduction

Riyad Bank’s compensation and incentives policy is the foundation upon which its base pay, incentive pay, allowances and
benefits programs are built. They are underpinned by the performance management process.

Both external and internal equity are important in developing, administering and maintaining the salary management
program. Market competitive pay is important in attracting, retaining and engaging the highest quality and caliber of
employees.
RB has a salary management program that supports its strategic business objectives, that is externally competitive and
internally equitable, and is designed to provide compensation opportunities based on performance.

RB is committed to varying compensation – base pay and incentive rewards – based on company, business and individual
performance. The appropriate mix of base pay and incentives depends on a job’s duties, competitive practices versus the
KSA banking sector market and grade level.
RB views performance as a combination of results and behavioural competence. While the emphasis is on achieving and
exceeding goals, superior performance will also include behaviours and activities consistent with RB’s purpose, values and
adherence to prudent risk management policies.
RB communicates openly the basic principles of the salary management and performance evaluation programs so that
they are clearly understood, supported and perceived as fair by employees.

Policy Summary

To establish and apply compensation policies and processes which support delivery of business
Purpose strategy, reinforce the desired organisational culture, reflect prudent risk management practices and
comply with SAMA regulations.

· Rewards performance – both the measurable and behavioural.

· Competitive within the Bank's chosen markets.

·Uses a total reward model (i.e. basic salary, allowances, benefits and variable pay).
Core Principles
· Fair and equitable in its treatment of employees.

· Simple to understand and easy to administer.

· Effectively managed (Risk Management and Governance).

· Effective communicated to employees.

· A well-designed and evenly applied performance management process.

· Effective governance (policies, monitoring and oversight).

Enablers
· Good decision-making in design, implementation and review.

· Efficient supporting systems and processes.

· Comprehensive, accurate and timely management information.

74
 Core Principle What it means What it looks like
1. Reward arrangements which offer • Salary increases and bonus payments should reflect
high rewards for high performance and market, business & individual performance, including
lower to no rewards for average or poor
adherence to risk management policies and processes.
performance. • Where individual performance is below expectations, no
salary increase or annual bonus award is made.
2. Linking reward to agreed measures • Everyone has the opportunity to earn a bonus, if justified by
of business and individual performance. business performance.
• The maximum bonus opportunity should is significantly
3. Differentiation based on more than the on-target opportunity.
performance • For bonus purposes, the chosen business performance
measure is a percentage of the Bank’s overall profitability
Rewards Performance • Personal performance is measured against individual KPIs &
4. A meaningful proportion of reward competencies.
‘at risk’ • Personal KPIs always includes an assessment of the
employee’s compliance with risk management policies,
procedures and controls.
• Salary increases & bonus awards are markedly different for
different levels of performance
• Employees who do not meet their goals or do not follow
risk management policies will not receive an annual bonus
award.

1. Ensuring that rewards are • Positioning salaries overall at market median against
implemented at a level that enables explicitly defined & agreed external salary markets, provided
each part of the Bank to attract and that this is justified by business performance.
retain employees of the required • Managing fixed cost elements of reward (e.g. allowances &
caliber. other benefits) so that they conform to market practice
Competitiveness 2. Systematic benchmarking of total (measured against defined & agreed external markets).
reward against the right market • Targeting special programmes towards key at-risk
comparators (Reward policy is not populations.
driven by market trends and
movements alone, but is informed by
them).

75
Core Principle What it means What it looks like
1. Ensuring the right balance of reward,• The mix of reward emphasises those elements which can
with an emphasis on: motivate performance rather than those where cost is fixed
• variable versus fixed pay and does not produce additional organisational benefit.
• motivation versus activity • Reward recommendations are not shaped in isolation but
are always determined based on a clear understanding of the
2. Managing total remuneration, intended total reward package.
including: • Reward decisions take account of the balance between
• salary external competitiveness and affordability.
• incentives (short-term and deferred) • Taken together, these mean:
• allowances - Controlling, not unjustifiably enhancing, allowances,
• benefits benefits and other fixed costs.
- Not providing guaranteed bonus awards.
- Focusing attention on building motivational and
Total Reward 3. Applying recognition policies that performance related reward arrangements.
motivate. • Introducing recognition programmes (financial or non-
financial), where motivational benefits clearly outweigh
4. Balancing short-term gains and long- costs.
term risks. • For specific roles/grades, using a combination of short-
term and deferred bonuses to create an equilibrium between
the requirement for the delivery of financial results in the
short-term with balanced risk-taking over the long-term.
• The payment of deferred bonuses takes into account: ROE,
net income, credit portfolio, cost/income ratio and
performance versus peer banks.

Ensuring fairness of treatment (not • Clearly defined and well-applied reward and performance
outcomes) within and between management processes and decision-making criteria.
Fair & Equitable business functions and employee • Compliance with relevant regulatory frameworks.
groups. • Rigorous monitoring.

76
 Core Principle What it means What it looks like
1. Clarity of focus. • All reward proposals clearly state what they are designed to
achieve.
• Reward communications are clear, user friendly and
2. Ease of understanding by feedback is obtained to test that these objectives are being
employees. met.
• Employees at each level in a business or functional area
3. Ease of administration and should enjoy the same reward arrangements unless there is
operation. a clear business, market and performance reasons for
Simplicity separate treatment.
• Employees at each level have their reward package clearly
explained to them so that they are able to accurately value it
correctly.
• Informal ‘return on investment’ (ROI) calculations and
discussions should be done periodically to ensure that
programmes are not costing more in terms of cash and
administrative effort than the benefit they are providing.

1. Rewards for employees in control • Business Heads in functions being monitored and
functions to be determined controlled by Audit, Compliance, Risk Management and
independently of the functions they Credit Risk do not have any input to reward decisions of
control. employees in the control functions.
• Any changes to reward policies is signed off by the Risk
Risk Management 2. Risk Management review of Management function before submission to the Nomination
compensation and incentives policies & Compensation Committee (NCC).
to ensure employees are not rewarded
for taking excessive risk or creating
undue concentration of risk.

1. Board of Directors is responsible for • The Board of Directors has ultimate responsibility for
reward across the Bank. approving the compensation & incentives policy, and
ensuring the effective implementation of the policy.
2. The Nominations & Compensation • The Board is advised by the Nominations & Compensation
Committee (NCC) advises the Board of Committee on all matters relating to the compensation &
Directors. incentives policy
• The Committee takes reports and recommendations from
the Executive Management of the Bank, supported by
3. The Nominations & Compensation Human Resources and Risk Management.
Governance Committee (NCC) is responsible for • The Nominations & Compensation Committee reviews and
ensuring that compensation decisions recommends to the Board of Directors all compensation
take account of risk. matters relating to Executive Management.
• Decisions affecting compensation reflect all aspects of risk,
including hard-to-measure risks such as reputational risk.
• The Committee ensures that compensation decisions do
not threaten capital ratios or liquidity.

77
REM1: Remuneration awarded during the financial year - 31 December 2022
a b
Other
Senior material risk-
Remuneration amount management takers
1 Fixed remuneration Number of employees 12 362
2 Total fixed remuneration (3 + 5 + 7) 28,322 151,204
3 Of which: cash-based 28,322 151,204
4 Of which: deferred
5 Of which: shares or other share-linked instruments
6 Of which: deferred
7 Of which: other forms
8 Of which: deferred
9 Variable remuneration Number of employees 12 362
10 Total variable remuneration (11 + 13 + 15) 30,565 59,874
11 Of which: cash-based 30,565 59,874
12 Of which: deferred 11,271 9,327
13 Of which: shares or other share-linked instruments
14 Of which: deferred
15 Of which: other forms
16 Of which: deferred
17 Total remuneration (2 + 10) 58,887 211,078

78
REM2: Special payments - 31 December 2022

Guaranteed bonuses Sign-on awards Severance payments

Number of Number of Number of Number of
Special payments employees Total amount employees Total amount employees employees Total amount

Senior management

Other material risk-takers

79
REM3: Deferred remuneration - 31 December 2022
a b c d e

Of which: Total amount

of outstanding deferred Total amount of Total amount of
and retained amendment amendment Total amount of
Total amount of remuneration exposed during the year during the year deferred
outstanding to ex post explicit due to ex post due to ex post remuneration paid
Deferred and retained deferred and/or implicit explicit implicit out in the financial
remuneration remuneration adjustment adjustments adjustments year

Senior management 27,720

Cash
Shares
Cash-linked instruments
Other
Other material risk-takers 48,515
Cash
Shares
Cash-linked instruments
Other
Total 76,235 - - - -

80
General Qualitative Disclosure Requirements

Disclosure Policy for Basel III Pillar 3

To comply with the requirements of ‘General Guidance Notes: Part A’ issued via SAMA’s circular
361000126572 dated July 9, 2015, Para 10 Riyad bank has established a Disclosure Policy for Basel III Pillar 3
information.

The Disclosure Policy amongst other things covers scope, implementation date, purpose, applicability and
the roles and responsibilities and Internal Controls over preparation of Pillar 3 Disclosures.

81
 APPENDIX

The below list of tables and templates are Not Available

Overview of risk
management and RWA KM2 – Key metrics – TLAC requirements (at resolution group level)
Linkages between financial PV1 – Prudent valuation adjustments (PVA)
statements and regulatory
exposures
TLAC1 –TLAC composition for G-SIBs (at resolution group level)
Composition of capital and TLAC2 – Material subgroup entity – creditor ranking at legal entity level
TLAC
TLAC3 – Resolution entity – creditor ranking at legal entity level
Macroprudential supervisory GSIB1 – Disclosure of G-SIB indicators
measures
CRE – Qualitative disclosures related to IRB models
CR6 – IRB – credit risk exposures by portfolio and probability of default (PD) range

CR7 – IRB – effect on RWA of credit derivatives used as CRM techniques

Credit risk
CR8 – RWA flow statements of credit risk exposures under IRB

CR9 – IRB – backtesting of PD per portfolio

CR10 – IRB (specialised lending and equities under the simple risk weight method)

CCR4 – IRB – CCR exposures by portfolio and PD scale

Counterparty credit risk CCR6 – Credit derivatives exposures

CCR7 – RWA flow statements of CCR exposures under the Internal Model Method (IMM)
SEC2 – Securitisation exposures in the trading book
Securitisation SEC3 – Securitisation exposures in the banking book and associated regulatory capital
requirements – bank acting as originator or as sponsor
MRB – Qualitative disclosures for banks using the IMA

MRC – The structure of desks for banks using the IMA

MR2 – RWA flow statements of market risk exposures under IMA (Phase I only)
Market risk MR2 – Market risk IMA per risk type (Phase II only)
MR3 – IMA values for trading portfolios (Phase I only)
MR3 – RWA flow statements of market risk exposures under IMA (Phase II only)
MR4 – Comparison of VaR estimates with gains/losses (Phase I only)

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