Salam 2020

Nurturing
Relationships
by Enriching
Experiences
2020
ANNUAL REPORT
His Royal Majesty His Royal Highness
King Hamad bin Isa Al Khalifa Prince Salman bin Hamad Al Khalifa
The King of the Kingdom of Bahrain The Crown Prince, Deputy Supreme Commander
and Prime Minister
Contents
Strategic Report
Corporate Vision and Financial Operational Board of
Overview Mission Highlights Highlights Directors
04 05 06 07 08
Fatwa Shari’a Executive Board of Message from Management
Supervisory Management Directors’ the Group Review of
Board Team Report to the Chief Executive Operations and
Shareholders Officer Activities
13 14 24 26 28
2 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Corporate Governance
Corporate Organizational Remuneration Risk Corporate Fatwa & Shari’a
Governance Structure Policy Management & Social Supervisory Board
Report Compliance Responsibility Report to the
Shareholders
34 47 48 54 56 58
Financial Statements
Independent Consolidated Consolidated Consolidated Consolidated Notes to the Basel lll – Pillar lll
Auditors’ Statement of Income Statement of Statement of consolidated Disclosures
Report Financial Statement Changes in Cash Flows financial
Position Equity statements
61 65 66 67 68 69 127
Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 3

Corporate Overview
Al Salam Bank-Bahrain B.S.C (ASBB) was established on 19 January 2006 in the

Kingdom of Bahrain with paid-up capital of BD 120 million (US$ 318 million) and was
the largest Initial Public Offering (IPO) in the Kingdom’s history with subscriptions
reaching over BD 2.7 billion (US$ 7 billion). The Bank commenced commercial
operations on 17 April 2006. ASBB was listed in Bahrain Bourse on 27 April 2006
and subsequently on Dubai Financial Market (DFM) on 26 March 2008.
Following a resolution of ASBB’s Extraordinary General Assembly meeting held on 4 May 2009, ASBB completed its merger with
the Bahraini Saudi Bank (BSB) on 22 December 2011. On 2 February 2014, Al Salam Bank-Bahrain and BMI Bank B.S.C (c) confirmed
the conclusion of a business combinations between the two institutions after obtaining the approval of their shareholders at their
respective extraordinary general assembly meetings by way of exchanging 11 ASBB shares for each BMI Bank share wherein ASBB
acquired 58,533,357 BMI Bank shares of BD 1 each and issued 643,866,927 ASBB shares of 100 fils each. As of 30 March 2014,
both Banks updated their respective CRs to give effect to the share swap and consequently BMI Bank became a wholly owned
subsidiary of ASBB.
ASBB, the pioneering Shari’a compliant Bank in the Kingdom, offers its customers a comprehensive range of innovative and unique
financial products and services through its extended strong network of branches and ATMs utilizing the state-of-art technologies
to meet various banking requirements. In addition to its Retail Banking services, the Bank also offers Corporate Banking, Private
Banking, Asset Managment, International Transaction Banking as well as Treasury Services. The Bank’s high-caliber management
team comprises of a highly qualified and internationally experienced professionals with proven expertise in key areas of banking,
finance and related fields.
The Bank received coveted accolades such as the “Best Islamic Retail Bank in Bahrain for the year 2020” awarded by Global Banking
and Finance Review, the “Best Islamic Financial Institution in Bahrain for the year 2020 and 2019” by prestigious US-based finance
magazine Global Finance, “Best Islamic Retail Bank in Bahrain for the year 2019 and 2018”, the “Best Shari’a Compliant Product
in Bahrain for 2019”, the “Most Innovative Shari’a Compliant Products in Bahrain for 2018” awarded by Global Business Outlook,
Enterprise Excellence award in the field of training and national manpower development at the 34th annual ceremony organized by
the Ministry of Labor and Social Development. Al Salam Bank- Bahrain has been awarded with the “Critics’ Choice award – The Best
Islamic Retail Bank in Bahrain for 2017” by Cambridge IFA – a UK-based Islamic finance intelligence specialized in providing strategic
advice in the field of financial services and conduct professional academic researches for financial institutions.
Key factors that contribute to the Bank’s distinct market differentiation include:
• Strong paid-up capital base;
• Pre-eminent founding shareholders;
• High-caliber management team;
• State-of-the-art IT infrastructure;
• Innovative, tailor-made Shari’a compliant product solutions;
• Universal business model covering deposits, financing and investment products and services.

Vision
To become a regional force in the Islamic
financial services industry by providing
differentiated Shari’a compliant products
to focused segments.
Mission
• Become a “one-stop shop” for Islamic
financial services.
• Create a strong onshore presence
in select countries.
• Develop a premier brand image as an
Islamic financial shaper.
• Achieve high returns for stakeholders
commensurate with the risks
undertaken.

6
BD 281 (USD 746) BD 57 (USD 152)
2020
2020
(Million)
(Million)
BD 320 (USD 849) BD 54 (USD 142)
2019
2019
Total Equity
BD 305 (USD 809) BD 57 (USD 151)
2018
2018
BD 304 (USD 806) BD 63 (USD 167)
2017
2017
BD 57m
Net Operating Income
BD 281m
BD 325 (USD 862) BD 57 (USD169)
2016
2016
Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

4 Fils BD 9 (USD 24)
(Fils)
2020
2020
Financial Highlights
(Million)
2019
2019
Net Profit
4 Fils
2018
2018
BD 9m
Earning Per Share

2017
2017
2016
2016
52% BD 2,261 (USD 5,998)
2020
2020
(Million)
(Percent)
56% BD 2,043 (USD 5,419)
2019
2019
52%
49% BD 1,710 (USD 4,537)
Total Assets
2018
2018
39% BD 1,589 (USD 4,215)
2017
2017
41% Cost to Income Ratio BD 1,681 (USD 4,460)
2016
2016
BD 2,261m
Operational Highlights
Solid strides have been made during 2020 to increase market

share across all fronts, leading to growth in customer deposits
and financing facilities, an increase of 19% in each of these
balance sheet items.
 The successful introduction of a new retail mobile  Retail Banking has been recognized as a catalyst for the
banking application that housed the Bank’s COVID-19 Ministry of Housing and Eskan Bank finance scheme
Response Center where customers were able to avail “Mazaya social housing”, capturing 24% of the Mazaya
COVID-19 specific initiatives such as applying for an scheme share since inception, while the total market
interest-free financing facility, requesting to defer share in 2020 H1 reached 47%.
installments, in addition to receiving exclusive discounts
on medical consultations.  Relationships with Private Banking clients were key
in sustaining record growth in liabilities, reaching BD
 Launched the new family account via Al Salam Bank’s 663 million during the year, while also generating 15%
mobile application that allows customers to extend increase in assets, reaching BD 295 million (2019:
supplementary accounts and debit cards to the whole BD 257 million).
household.
 Corporate Banking registered a significant 15% increase
 Expanded the digital channels by launching WhatsApp in assets of BD 74 million to BD 604 million (2019:
Banking to empower customers to make inquiries in BD 527 million).
real time, in addition to launching the Virtual Branch
to deliver high quality services through modernized  16,000 of employee training hours were achieved, an
platforms to enhance customer experience virtually, increase of 187% against the yearly target, equating to
and the new flagship mobile application that combines an average of 45 training hours per employee.
digital on-boarding with a full suite of personalized
banking features.

Board of Directors
Mr. Khaleefa Butti Bin Omair Bin Yousif Al Muhairi H. E. Shaikh Khalid bin Mustahail Al Mashani
Chairman Chairman
Non-executive Non-executive
Director since: 22 March 2018 Director since: 5 May 2014
Term started: 22 March 2018 Term started: 22 March 2018
Experience: more than 17 years Experience: more than 25 years
Mr. Khaleefa Butti Bin Omair, is the founder and Chairman H.E. Shaikh Khalid bin Mustahail Al Mashani offers the Bank
of KBBO Group, a leading investment group with a diverse over 25 years of in depth experience. He is the Chairman of
portfolio of interests operating in the UAE and spanning across the Board of Directors of Bank Muscat S.A.O.G., Director of Al
the MENA, European, and US regions. The Group’s investment Omaniya Financial Services Company, and Chairman of Dhofar
portfolio and operational verticals include leading companies in International Development & Investment Holding Company
the field of healthcare, education, retail, financial services and S.A.O.G.
technology, amongst others.
H.E. Shaikh Khalid has a BSc. in Economics, and a Master’s
Mr. Al Muhairi, is a recognized UAE business leader with over Degree in International Boundary Studies from the School of
17 years of experience in entrepreneurship and financial Oriental and African Studies (SOAS), from the University of
investments. He began his career at the Abu Dhabi National London.
Oil Company (ADNOC), where he gained extensive experience
*Appointed as Chairman of the Board of Directors on 12 April
in the field of finance. In 2006, as a co-founder of Brokerage
2020.
House Securities LLC, he was appointed Chairman and CEO.
He later went on to found One Financial Markets, an FCA-
regulated brokerage firm in the United Kingdom that offers
global presence with local expertise through its wholly owned
and affiliate offices throughout the Middle East, Europe,
South America and Central and South-East Asia. Additional
responsibilities include serving as the Chairman of Travelex
Group Limited, Infinite Investment and First Energy Bank.
He is also the Executive Vice Chairman of Centurion Investment.
Spending his early school years in the UK, he went on to
complete his studies in the US, earning a degree in Finance
from Suffolk University, Boston.
*Mr. Khaleefa Butti Al Muhairi resigned on 12 April 2020.

Mr. Matar Mohamed Al Blooshi Mr. Salman Saleh Al Mahmeed
Vice Chairman Board Member
Non-executive Independent
Director since: 22 March 2018 Director since: 15 February 2010
Mr. Matar Mohamed Al Blooshi has over 24 years of experience Mr. Salman Saleh Al Mahmeed is a prominent business figure
in the financial and fund management industries. Beginning with experience exceeding 34 years. He is the Chairman
his career in 1992 with the Central Bank of the United Arab of Board’s Audit Committee at Al Salam Bank - Bahrain,
Emirates as a Dealer in the Treasury department, he joined Abu the Chief Executive Officer of Bahrain Airport Services,
Dhabi Investment Company as a Portfolio Manager in 1995. the Deputy Chairman of Dar Albilad, the Managing Director,
In 1998, he joined First Gulf Bank as the Head of Treasury & Chairman of Coca Cola Bottling Company Bahrain and
Investment, moving to National Bank of Abu Dhabi in 2001 as Owner’s Representative of Global Hotels, Global Express and
Head of Foreign Exchange and Commodities. In February 2005, the Movenpick Hotel in Bahrain. Previously, he was a Board
Mr. Matar Al Blooshi became the Head of Domestic Capital Member and member of the Investment, Executive and
Market Group and the General Manager of Abu Dhabi Financial Strategic Options Committee for the Bahraini Saudi Bank, and
Services (a subsidiary of National Bank of Abu Dhabi) and was the Investment Director of Magna Holdings.
given the title of Senior Manager, Asset Management Group in
Mr. Salman Al Mahmeed holds an MBA in Business
October 2006. Mr. Matar Al Blooshi is Chief Investment Officer
Administration, a Masters in Hotel Management and a BSc in
at Das Holding LLC, a Member of the Board of Directors of Al
Management.
Salam Bank-Bahrain, First Energy Bank in Bahrain, Etisalat
Misr and Chairman of Maalem Holdings in Bahrain.
Mr. Matar Al Blooshi holds a BA in Banking & Financial
Management from University of Arkansas, US..
*Appointed as Vice Chairman on 12 April 2020.

Board of Directors (Continued)
Mr. Hussein Mohammed Al Meeza Mr. Salim Abdullah Al Awadi

Board Member Board Member
Independent Independent
Director since: 20 March 2012 Director since: 22 March 2018
Mr. Hussein Mohammed Al Meeza is a respected and award- Mr. Salim Abdullah Al Awadi is the Deputy CEO of Al Omaniya
winning Banker with over 44 years of experience spanning the Financial Services S.A.O.G., Oman. He is also a Director of Dhofar
Islamic banking, finance and insurance sectors. His outstanding Cattle Feed Company S.A.O.G., Oman, Chairman of Dhofar
career success was crowned in December 2006 when the Poultry S.A.O.G., Oman and Director of Dhofar International
International Conference of Islamic Bankers chose him as the 2006
Development & Investment Holding S.A.O.G., Oman.
Best Islamic Banking Personality. His professional career began
in 1975 at the Dubai Islamic Bank (DIB), where he spent 27 years Mr. Salim Al Awadi holds a Bachelor Degree in Business
developing the Bank’s services. Mr. Al Meeza played a key role in the Administration, a Post Graduate Diploma in Accounting from
establishment of the Al Salam Banks in Sudan, Bahrain and Algeria. Strathclyde University, UK and an MBA from Lincoln University,
He was the Chairman of Al Salam Bank-Seychelles, Chairman of Top UK.
Enterprises L.L.C., Chairman of Lycée Fracais Jean Mermoz L.L.C.,
and Vice Chairman and Chairman of the Executive Committee of Al
Salam Bank- Algeria.
He was a founding member of Emaar properties, Amlak finance,
Emaar Industries & Investments, Emaar Financial services,
Dubai Islamic Insurance & Reinsurance Company (AMAN).
Mr. Al Meeza occupied the positions of the CEO and Managing
Director of Dubai Islamic Insurance and Reinsurance Company
(AMAN), Vice Chairman and Chairman of the Executive Committee
of Al Salam Bank-Sudan, Chairman of LMC Bahrain, Chairman of
the Executive Committee of Islamic Trading company in Bahrain,
Board member and Chairman of the Executive Committee in
Amlak Finance – Dubai and Chairman of Emaar Financial
Services Dubai, Vice Chairman of Emirates Cooperative
Society – Dubai. Board member of the General Council
of Islamic Banks and Financial Institutions, Chairman
of the founding committee of Islamic Insurance and
Re-Insurance Companies. He was also a Board Member of Emirates
Society for Insurance.
Mr. Al Meeza is a graduate of the Beirut Arab University and holds an
MBA degree from La Jolla University, USA.
*Mr. Hussein Mohammed Al Meeza resigned on 17 June 2020.

Mr. Khalid Salem Al Halyan Mr. Zayed Ali Al-Amin
Director since: 24 February 2015 Director since: 22 March 2018
Mr. Khalid Salem Al Halyan is a business professional with Mr. Zayed Al-Amin is a Bahraini Businessman with over 22
over 38 years of senior level experience spanning a number years of experience in the finance and investment sectors.
of industries. Mr. Khalid Al Halyan is currently the Group Chief Currently serving as Executive Director of Investments at Ali
Audit Executive at Dubai Aviation City Corporation (DACC). His Rashid Al-Amin Group, he is also a board member of various
career has seen him hold senior positions at the UAE Central organizations including Chairman of First Energy Bank, Board
Bank, the Department of Economic Development (DED), Dubai, Member of Al Salam Bank Bahrain, Board Member of Esterad
and in the aviation industry where he played a key role in the Investment Co. and Board Member of Gulf African Bank, and
establishment of the new Dubai Airport Free Zone (DAFZA) a former board member of MIDAD Gulf Energy, RAMAKAZA
and head up the Finance Department, before moving on Logistics Qatar and Food Storage Co. Ltd. KSA, Prior to his
to establish the Group Internal Audit and Risk Assessment current responsibilities at Al-Amin Group, he worked for
(GIARA) function at DACC. Mr. Khalid Al Halyan has also National Bank of Bahrain and Towry Law International.
supported the establishment of DED, Emaar Properties, the
Mr. Zayed Al-Amin holds a Post Graduate Degree in Finance
UAE Internal Audit Association, the UAE Golf Association and
and Investment from the London School of Business & Finance.
restructured projects for DUBAL, Dubai World Trade Centre,
He has also attended many executive courses in management,
Dubai Civil Aviation, UAE Central Bank Banking Supervision,
finance and investment.
and realized the construction of a new facility for the Al Noor
Special Needs Centre in Dubai. He currently serves as Vice
President of the UAE Internal Audit Association (affiliated to
the Institute of Internal Auditors (IIA), USA), is Chairman of Al
Noor Special Needs Centre in Dubai, Chairman of Emaar South,
Dubai, Board Member of Emaar Development Company, Board
Member of Amlak Finance PGSC, and he has recently become
a member at the Board of Trustees of American University in
the Emirates.
Mr. Khalid Al Halyan holds an MBA degree from Bradford
University in the UK, and a BBA from the UAE University, Al Ain.

Board of Directors (Continued)
Mr. Alhur Mohammed Al Suwaidi Mr. Khalid Shehab Eddin Madi

Director since: 22 March 2018 Director since: 22 March 2018
Experience: 17 years Experience: more than 26 years
Mr. Alhur Mohammed Al Suwaidi is a well-rounded investment Mr. Khalid Madi brings over 26 years of extensive experience
strategist with over 17 years of experience in investments, in all aspects of private, commercial and investment banking.
portfolio management at both listed and private equities. He He currently serves as a Director in Al Salam Bank-Bahrain
currently serves as a Director in Al Salam Bank-Bahrain and a and a Managing Director of Advanced Living Solutions, which
Portfolio manager in the Abu Dhabi Investment Authority (ADIA), was established in 2013. His professional career began with
UAE. Beginning his career in 2004, Mr. Alhur Al Suwaidi held Merrill Lynch as a Senior Financial Consultant, where he spent
senior positions at ADIA as a Fund manager and Investment 8 years. In 2002, Mr. Khalid Madi founded Infinity Investment
manager. He also served in a number of Advisory Boards of Solutions, a successful financial advisory practice in the
General Partners and International Private Equity Firms that United Arab Emirates where he served as a Managing Partner.
includes Leonard Green and Partners, The Blackstone Group, In 2005, he was one of the founding Board members and
Carlyle Group, Apollo Global Management, Ares Management the CEO of Al Mal Capital, which was set up with three core
and Silver Lake Partners. business lines including brokerage services in Saudi Arabia,
asset management in Bahrain, and proprietary trading globally
Mr. Alhur Al Suwaidi holds a Bachelor degree in Business
with a focus on Asia.
Administration from Chapman University, California, USA.
Mr. Khalid Madi holds a Bachelor degree in Marketing & Finance
from Questrom School of Business, Boston University.

Fatwa & Shari’a Supervisory Board
Sheikh Adnan Abdullah Al Qattan Dr. Nizam Mohammed Yaquby

Chairman Member
Shaikh Adnan Al Qattan holds Master’s degree in the Quran and Sheikh Dr. Nizam Mohammed Yaquby is an internationally
Hadith from the University of Um Al-Qura, Makka, Kingdom of acclaimed Shari’a scholar in the Islamic banking industry. He
Saudi Arabia; and Bachelor’s degree in Islamic Shari’a from the has a background in both Traditional Islamic sciences with
Islamic University, Madeena, Saudi Arabia. Shaikh Al Qattan is senior scholars from different parts of the Muslim World.
also a Judge in the Shari’a Supreme Court, Ministry of Justice He holds a PhD in Islamic studies also a degree from McGill
– Kingdom of Bahrain. Shaikh Al Qattan is a Member of Shari’a University in Canada. Sheikh Nizam has taught Islamic Subjects
Supervisory Boards for several Islamic banks and he is also in Bahrain and lectured all over the world. He is a member
Chairman of Al Sanabil Orphans Protection Society, Chairman of many International Boards: the Shari’a Council of AAOIFI,
of the Board of Trustees of the Royal Charity Establishment Dow Jones Islamic Index, Central Bank of Bahrain Shari’a
under the Royal Court – Kingdom of Bahrain, and President Committee and IIFM Shari’a Council. He is also a member of
of the Kingdom of Bahrain Hajj Mission. In addition, he is a several local and International Shari’a Boards. Sheikh Nizam
Friday sermon orator at Al Fateh Grand Mosque. Shaikh Al has edited several Arabic manuscripts and has more the 500
Qattan contributed to drafting the Personal Status Law for audio-visual lectures and lessons in both Arabic and English.
the Ministry of Justice and is a regular participant in Islamic
committees, courses, seminars and conferences.
Dr. Osama Mohammed Bahar
Member
Dr. Fareed Yaqoub Al Meftah
Sheikh Dr. Osama Mohammed Bahar is a recognized Shari’a
Member
scholar in Islamic banking and financing. He has extensive
Dr. Fareed Almeftah is the Undersecretary of the Ministry of experience in the structuring of financial and Islamic products
Justice & Islamic Affairs – Bahrain, member of the Supreme and Islamic contracts, in addition to his contributions to a
Council of Islamic Affairs and a former judge of the high Shari’a number of research papers on Islamic finance and banking.
Court. Dr. Fareed is the Chairman of the Shari’a Supervisory Sheikh Osama Bahar holds a Bachelor’s degree from Prince
Board of Khaleeji Commercial Bank (KHCB) and a former Abdul Qader University for Islamic Studies in Algeria and he
Lecturer at the University of Bahrain and wrote a lot of has a Master’s degree in the Islamic economy from ‘Al Awzai
research papers. Dr. Fareed holds PhD in Islamic Philosophy University’ in Lebanon and PhD in Islamic Financial Engineering
from University of Edinburgh – United Kingdom. from Islamic University of Europe. He is also a member of many
Shari’a Supervisory Boards.

Executive Management
Mr. Rafik Nayed Mr. Anwar Mohammed Murad

Group Chief Executive Officer Deputy Chief Executive Officer
Mr. Rafik Nayed is a seasoned banker with over 28 years of Mr. Anwar Murad is a proficient Banker with over 27 years of
experience. He joined Al Salam Bank-Bahrain from Deutsche experience in the areas of Private Banking, Treasury, Market
Bank where he was the Vice Chairman of the MENA region, Risk Management and Retail Banking. Prior to his current
Chief Country Officer for the UAE and Senior Executive Officer appointment with the Bank, Mr. Murad served as the Executive
of Deutsche Bank AG Dubai (DIFC). Before joining Deutsche Vice President - Head of Private Banking at Al Salam Bank-
Bank, Mr. Nayed was the Chief Executive Officer of the Libyan Bahrain since May 2006. Previous to joining Al Salam Bank-
Investment Authority and prior to that worked for many years Bahrain, he was the Head of Private Banking at BMI Bank,
in the oil and gas and financial services industries in a variety Bahrain and Regional Market Risk Manager for the MENA
of international senior positions. region at ABN AMRO Bank where he also headed the Bank’s
Treasury Operations in Bahrain and he held various senior
positions at CitiBank – Bahrain. Mr. Murad has extensive
knowledge and experience in Global Consumer Banking,
Treasury and Investment products including Money Market,
Foreign Exchange, Debt Derivatives, and Structured Products.

Mr. Eihab Abdellatif Ahmed Mr. Yousif Ahmed Ebrahim
Chief Legal Officer, Corporate Secretary and Advisor to Chief Financial Officer
the Chairman
Experience: more than 27 years
Experience: more than 25 years
Mr. Eihab Ahmed has a wide range of professional experience Mr. Yousif Ebrahim is a proficient banker with over 27 years
that spans over 25 years covering all major legal disciplines of experience in the areas of finance and audit. He is primarily
including but not limited to Investment Banking, Corporate responsible for directing and overseeing the financial and
Banking and Criminal, Labour, Public and Private International fiscal management of the Bank and its subsidiaries that
Laws. Prior to joining Al Salam Bank, he was the General Counsel includes contributing to the Bank’s strategy planning, leading
- Corporate Secretary & Money Laundering Reporting Officer and directing the budget process, maintaining appropriate
(MLRO) Legal & Compliance of First Energy Bank - Bahrain. accounting framework and establishing effective system
He was the focal point of communication between the Board of cost management and internal control. Prior to joining Al
of Directors and Senior Management as well as between the Salam Bank, he served as the Chief Financial Officer at First
Bank and its Shareholders, providing advisory and guidance Energy Bank for more than 9 years. He also worked at Gulf
on Corporate Governance principles and practices. Mr. Ahmed International Bank as a Vice President of Internal Audit and
had worked at the International Investment Bank - Bahrain he was also in the Audit & Business Assurance services at
(IIB) as Head of Legal and Compliance, MLRO and for Khaleej PricewaterhouseCoopers. Mr. Ebrahim is a Certified Public
Finance & Investment as the Head of Legal, MLRO and Accountant (USA) and a member of the American Institute of
Corporate Secretary. He also worked for a number of reputed Certified Public Accountant.
firms in the Kingdom of Bahrain. Before coming to Bahrain 15
years ago, he served the Ministry of Justice, Sudan as a Legal
Counsel.
Mr. Ahmed holds L.L.B degree from the Faculty of Law -
University of Khartoum, Sudan. In January 2017, he obtained
his International Diploma in Governance, Risk and Compliance
from the ICTA and University of Manchester, UK. He also
holds the Sudanese Bar certificate from Sudan and he is a
registered member of the Sudanese Advocates Association
as a Proper Advocate before various Courts of Law. Mr. Ahmed
is a Certified Compliance Officer (CCO) from the American
Academy of Financial Management - Dubai, UAE. In 2014,
Mr. Eihab was awarded the GCC MLRO of the year.

Executive Management (Continued)
Mr. Abdulkarim Turki Mr. Ahmed Abdulla Saif

Chief Operating Officer Head of Strategy and Planning
Mr. Abdulkarim Turki is a well-rounded banker with more than Mr. Ahmed Saif brings over 14 years of experience in the
40 years of experience spanning Treasury, Operations, Audit, banking sector. Prior to joining Al Salam Bank-Bahrain in 2008
Internal Controls, Remedial and Risk Management. Mr. Turki as an Associate in the Investment Team, Mr. Saif worked
worked in the incorporation and structuring of the Bank’s with DBS Singapore as an Investment Analyst. In 2012, he
Operation and he was appointed as a key member in the was appointed as the Head of the Investment Middle Office
Selection and Implementation Committee of the Bank’s core Department, and in 2016 took the reigns as the Head of
banking system responsible for the integration and business Strategic Acquisition and Investment Management. Mr. Saif
transfer of BMI Bank to Al Salam Bank-Bahrain in addition to sits on the Board of a number of the Bank’s affiliate and
being a member in the Bank’s major management committees. subsidiary companies, including Al Salam Bank-Seychelles,
Prior to joining the Bank in 2006, Mr. Turki was Vice President - NS Real Estate Holding, and SAMA Investment Company.
Head of Treasury Support at Citibank Bahrain where he headed He holds an MSc in Finance and Financial Law with Honors
various departments and business units and was a key player from SOAS University of London, UK, and a BSc with Honors
in the launch of Citi Islamic Investment Banking. Mr. Turki holds in Commerce, majoring in Finance & Economics, from DePaul
an MBA in Investment & Finance from the University of Hull, University, USA.
UK.

Mr. Hussain Abdulhaq Mr. Ahmed Jasim Murad
Head of Treasury and Capital Markets Head of Corporate Banking
Mr. Hussain Abdulhaq is an experienced Treasurer in the Mr. Ahmed Murad brings over 24 years of experience in the
area of Islamic Banking and Financial Markets. His 20 years banking sector covering areas that include Retail, Commercial
banking career as a treasury specialist has been very focused and Corporate Banking. Prior to joining Al Salam Bank-Bahrain,
in Islamic liquidity management, Islamic capital markets, he served as Head of Corporate Banking and also a member
the development of Islamic compliant investment products of the Credit Committee at National Bank of Bahrain BSC.
and hedging instruments as well as Financial Institutions Mr. Murad holds a Bachelor degree in Business Marketing
relationships. Mr. Abdulhaq joined Al Salam Bank-Bahrain in from St. Edward’s University – Austin, Texas, USA, Associate
2007 as a senior member in the treasury team, and has led Diploma in Commercial Studies from University of Bahrain, and
the treasury integration process of Al Salam Bank and Bahrain Executive Diploma from University of Virginia, USA. Moreover,
Saudi Bank in 2010 and the same for BMI Bank in 2014. Prior he attended number of banking training courses inside the
to joining Al Salam Bank, he was in charge of dealing room Kingdom of Bahrain and abroad.
activities for Kuwait Finance House Bahrain for a period of
5 years. Mr. Abdulhaq holds an MBA degree in Banking &
Islamic Finance with honors from University of Bahrain and is a
Chartered Financial Analyst (CFA).

Mr. Ali Habib Qassim Mr. Mohammed Yaqoob Buhijji

Head of Private Banking Head of Retail Banking
Mr. Ali Habib Qassim is a banking expert with more than Mr. Mohammed Buhijji brings to the Bank more than 19 years
21 years of experience covering Corporate, Investment of consultancy and banking experience. He joined Al Salam
and Private Banking; developing new products, locally and Bank-Bahrain in 2006 when he set up the Internal Audit
throughout GCC and capitalizing on his investment experience. division and various departmental policies and procedures
Previous to his appointment with the Bank’s Private Banking during the Bank’s establishment. In 2009, he moved to
division in 2011, he marketed the Bank’s Corporate Banking the Bank’s Retail Banking division where he supported the
products and services in local markets after which he development of products, services, the core banking system
handled financial institutions and government relationships. and Retail Banking policies. He also played an essential role in
He holds a Master Degree in Science from Emerson College, the integration and conversion phases of the Bank’s acquisition
Boston. USA. of the Bahraini Saudi Bank and BMI Bank; serving as a member
in the Integration Steering Committee and various other
management committees including IT Steering Committee
and Information Security Steering Committee. Prior to joining
Al Salam Bank-Bahrain, he worked with Ernst & Young in the
Business Risk Services division, where he was responsible for
managing the audit and consultancy services for major financial
institutions and governmental bodies. He holds an MBA degree
from the University of Strathclyde Business School, Glasgow
and a Bachelor’s degree in accounting. He has also completed
Executive Management Programs in Harvard Business School
in USA and Ivey Business School in Canada.

Mr. Sadiq Al Shaikh Mr. Krishnan Hariharan
Head of International Transaction Banking Chief Risk Officer
Mr. Sadiq Al Shaikh is a professional banker with over 23 Mr. Krishnan Hariharan is a versatile Banker with over 36
years of experience in both Wholesale and Retail Banks in the years of experience in conventional and Islamic banks
Kingdom of Bahrain. Mr. Al Shaikh managed global markets in the region and India. Prior to joining Al Salam Bank –
with a focus on the GCC, MENA region, East Africa, South Asia Bahrain in 2019 he worked with Ithmaar Bank, Bahrain as
and CIS region, where he develops Financial Institutions Group Chief Risk Officer. Before joining Ithmaar Bank, he was part
(FIG) products and structured finance. These include bilateral of the founding team of Alizz Islamic Bank, Sultanate of
and syndication, correspondent and transaction banking, Oman. He holds twin Bachelor degrees one in Commerce
global trade finance instruments, export credit insurance and the other in Economics from Universities in India, he
covers and credit review of credit limits for countries and also holds a Master degree in Financial Management from
banks. Prior to joining Al Salam Bank-Bahrain in 2014, he was Jamanalal Bajaj Institute of Management Studies, Mumbai
the Head of FIG & International banking at BMI Bank for 10 – India.
years, and held various senior positions for 7 years at the Arab
Investment Company in Operations, Risk Management and the
International Banking Division, covering Financial Institutions
and Corporate products in overseas markets. Mr. Al Shaikh
holds a Bachelor degree in Business Management majoring in
finance and marketing from Bangalore University.

Mr. Essa Abdulla Bohijji Ms. Muna Al Balooshi

Chief Auditor Head of Human Resources and Administration
Mr. Essa Bohijji has more than 20 years of consulting and Ms. Muna Al Balooshi is a practiced HR professional with over
industry experience covering financial services, commercial 21 years of industry experience and vast knowledge of HR
entities, governmental bodies, and internal audit. Prior to joining policies and Labor Law regulations. Prior to her appointment
Al Salam Bank-Bahrain, Mr. Bohijji was the Chief Auditor and with Al Salam Bank-Bahrain in 2006, Ms. Al Balooshi was the
Board Secretary of an Islamic Investment Bank in Bahrain Head of Human Resources at the Court of HRH the Crown
and held senior positions at Ernst & Young where he worked Prince, prior to this served as HR Associate with KPMG Bahrain.
in the Audit and Assurance Services Group and Business She has played a major role in the Bank’s two acquisitions of
Advisory Services responsible for the Internal Audit and Risk the Bahraini Saudi Bank and BMI Bank where she managed the
Management assignments. Mr. Bohijji has previously served merger of the Bank’s Human Resources. She holds an MBA from
as a Board and Audit Committee member of Al Salam Bank- De Paul University, Chicago, and is a CIPD Associate.
Algeria, a non-executive Audit Committee member in Manara
Developments B.S.C. (c), as a Board member of BMI Bank, as a
Board and Audit Committee member of Bahraini Saudi Bank,
and an interim Board member in BMIO Bank in Seychelles. Mr.
Bohijji is a Certified Public Accountant (CPA), licensed from
the state of New Hampshire and is a member of the American
Institute of Certified Public Accountants. He also holds a B.Sc.
in Accounting from the University of Bahrain.

Mr. Qassim Taqawi Dr. Mohammed Burhan Arbouna
General Counsel Head of Shari’a Compliance
Mr. Qassim Taqawi is a skilled legal counsel with over 18 Dr. Mohammed Burhan Arbouna is a well versed Islamic
years of experience covering Investment Banking, Islamic banking and finance expert with over 23 years of Islamic
Banking, Retail Banking, Finance, Company Law, Labor Law, banking experience. Prior to joining Al Salam Bank-Bahrain,
Real Estate and Construction. Mr. Taqawi has handled legal Dr. Arbouna was the Shari’a Head and Shari’a Board member
matters covering the GCC, USA, Europe and MENA region. of Seera Investment Bank B.S.C Bahrain, Head of the Shari’a
Prior to his appointment with Al Salam Bank-Bahrain, Mr. department at Kuwait Finance House Bahrain, and has worked
Taqawi held a number of senior executive positions with as a Shari’a researcher and consultant for the Accounting
various Banking and Financial Institutions throughout the and Auditing Organization for Islamic Financial Institutions
region. In addition to his current executive responsibilities (AAOIFI) in Bahrain. He is a respected lecturer on Islamic
as General Counsel, Mr. Taqawi is a member of the banking and finance, and provides consultancy on orientation
Bank’s Investment Committee and Remedial Committee. and professional programs for a number of professional and
Mr. Taqawi holds a Bachelor degree (LLB) in Law, and is a educational institutions. Dr. Arbouna was also a member of the
registered lawyer with the Ministry of Justice & Islamic Affairs Islamic Money Market Framework (IMMF) steering committee,
in the Kingdom of Bahrain. a committee initiated by the Central Bank of Bahrain for the
management of liquidity amongst Islamic banks. He holds
a PhD in comparative law with a specialization in Islamic
banking and finance and a Masters in Comparative Laws with
specialization in Law of Evidence from the International Islamic
University Malaysia, a BA degree in Shari’a, and Higher Diploma
in Education from the Islamic University, Medina.

Mr. Ali Al Khaja Mr. Ahmed Abdulrahim Al Mahmood Mahmood Qannati

Head of Compliance and MLRO Head of Internal Shari’a Audit Head of Marketing & Communications
Experience: more than 12 years Experience: more than 14 years Experience: more than 19 years
Mr. Ali Al Khaja brings more than 12 years Mr. Ahmed Al Mahmood has over 14 With over 19 years of extensive experience
of Compliance experience to the Bank. years of professional experience in the in Marketing, Communications and
Prior to joining Al Salam Bank-Bahrain, field of Shari’a supervision and auditing in Branding on both local and regional levels,
he worked with Kuwait Finance House Islamic financial institution. Prior to joining Mahmood Qannati is a veteran of the
Bahrain, where he was responsible for Al Salam Bank-Bahrain, he established communications industry; having worked
various regulatory aspects including the Shari’a department in BMI Bank and across various sectors including banking,
ensuring that transactions, investments GBCORP in addition to joining the Shari’a telecommunications, automotive and
and general dealings with the public were department of Abu Dhabi Islamic Bank aviation.
in compliance with the Central Bank of (ADIB). He also played an essential role During his time in the United Arab Emirates,
Bahrain (CBB) regulations and applicable in the integration and conversion phases Mr. Qannati worked in prominent and
laws. Previous to this he was employed of the Bank’s acquisition of BMI Bank; established institutions, leading Standard
by the CBB, where he held responsibility serving as a member in the Conversion Chartered Bank as the Regional Head of
for the oversight of various local Islamic Committee. Marketing & Branding for the entire Middle
Banks in the Kingdom of Bahrain. Mr. East, Africa and Pakistan region, as well as
Al Khaja holds a Bachelor degree in He holds an MBA degree in Islamic Finance serving as the Middle East Chief Marketing
Banking and Finance from the University from University of Bolton - UK, and he is Officer at Cigna Insurance.
of Bahrain and an International Diploma currently preparing a PhD at the same
university. In addition to BA in Islamic He has also held several senior positions
in Compliance from the International
Studies from University of Bahrain. He on a local level, gaining experience in
Compliance Association (ICA).
holds various professional qualifications marketing and communications at HSBC
that includes Certified Shari’a Advisor and Bank, Bahrain International Airport and
Auditor (CSAA) from AAOIFI along with Batelco. Most recently, Mr. Qannati served
Advanced Diploma in Islamic commercial as the Chief Corporate Communications
Jurisprudence (ADICJ) from BIBF. He and Marketing Officer at Bahrain Islamic
also provided several training workshops Bank (BisB), after which he joined Al
on the principles of Islamic banking and Salam Bank as Head of Marketing and
Communications.
wrote a lot of researches and published
articles on Islamic banking & products. Mr. Qannati holds a Master degree in
Marketing Information Systems from the
University of Sunderland and a Bachelor
degree in Marketing from the University of
Bahrain.
Board of Directors’ Report
to the Shareholders
The Directors of Al Salam Bank- 2020 has proven to be one of the most challenging year for
economies across the globe. From a fiscal to a health and
Bahrain B.S.C. (“the Bank”) are safety perspective, the global pandemic has ushered in a
host of new challenges for business sectors around the world.
pleased to submit our annual Various national lockdowns have exerted negative pressure on
global economies, straining budget deficits and future outlooks.
report to the shareholders, In addition to COVID-19, the Bahraini economy faced the
additional pressure of global oil price volatility, further widening
accompanied by the consolidated the national budget deficit.
financial statements of the Bank In light of the global outbreak, preventative measures were
taken by the Central Bank of Bahrain (CBB), including a range of
and its subsidiaries (“the Group”) directives aimed at protecting the health and safety of citizens,
residents, and financial sector workers. The CBB also introduced
for the year ended 31 December, a range of policies and measures to maintain the stability of
Bahrain’s financial sector. These included fiscal, monetary, and
2020. macro-financial measures to mitigate the financial implications
of COVID-19 for financial institutions and businesses, as well as
their customers.
Despite this challenging and uncertain landscape, the Group
Net Operating Income posted a YoY increase in net operating income of 7.3% – up from
BD 53.5 million in 2019 to BD 57.4 million in 2020. Total operating
expenses also saw a slight YoY increase, from BD 29.8 million to
2020 BD 57.4 million BD 30 million, in line with operational activities. However, due
to deteriorating macro-economic factors, the Group adopted
2019 BD 53.5 million a prudent and conservative approach to provisioning levels,
increasing provisions from BD 2.6 million in 2019 to BD 18.28
million in 2020, resulting in a BD 12.01 million decrease in net
7.3% profit for the year – down from 21.13 million in 2019 to BD 9.12
million in 2020.

The Bank retained a strong Capital Adequacy
Ratio (CAR) of 26.5% in 2020, comparatively
higher than the 12.5% mandated by the CBB.
Furthermore, the Group achieved a reduction in its non- strongly positioned to navigate the uncertain waters of the post-
performing financing ratio from 5.6% in 2019 to 5.1% in 2020. pandemic landscape that lie ahead.
Moreover, it recorded growth across the business with record
Finally, on behalf of all the Board members, I would like to take
levels of customer deposits reaching BD 1.32 billion, up from BD
this opportunity to express our appreciation for the visionary
1.11 billion in 2019 – a YOY increase of 19%. Financings rose by
leadership of His Majesty King Hamad bin Isa Al Khalifa and His
19.6% over 2020, reaching BD 1.28 billion – up from BD 1.07 billion
Royal Highness Prince Salman bin Hamad Al Khalifa, the Crown
the previous year. The Group’s total assets also increased from
Prince and Prime Minister. Their guidance and wise council
BD 2.0 billion in 2019 to BD 2.3 billion as of 31 December 2020.
during these unprecedented times and the responsiveness of
Cost-to-income ratio also improved during the year from 55.6%
the Kingdom’s various Government institutions have bolstered
in 2019 to 52.3% in 2020. Finally, the Bank retained a strong
the nation’s stability and confidence in overcoming profound
Capital Adequacy Ratio (CAR) of 26.5% in 2020, comparatively
challenges. We would also like to express our gratitude to the
higher than the 12.5% mandated by the CBB.
Ministry of Finance, the Ministry of Industry, Commerce and
This impressive resilience – and even growth – in the face of Tourism; the CBB, the Bahrain Bourse, Dubai Financial Market,
near unprecedented global disruption is owing to forward- as well as the Group’s correspondent banks, customers,
looking, decisive yet agile thinking from the Bank’s leadership shareholders and employees for their continued support and co-
and is testament to the Bank’s ability to flexibly adapt to change. operation.
At the very earliest stages of the pandemic, Management
We look forward to sharing a positive, productive and successful
developed and was quick to implement a clear, short-term
2021 with you.
strategy with a simple objective: to build resilience and ultimately
exit this period of uncertainty in a stronger position than when
we entered it. Subsequently, business has continued as usual
with the expected results achieved via a shift to remote working
H.E. Shaikh Khalid Bin Mustahil Al Mashani
and adherence to all government health and safety protocols
and guidelines. Prudent and tactical expansion of market Chairman
share, growth and enhancement of earnings quality, further 10 February 2021
development of operational efficiency, fast-tracking of our Manama, Kingdom of Bahrain
digitalisation initiatives, and strict adherence to our corporate
and social responsibility measures formed the foundation of
this strategy. By identifying and adopting these key pillars for
the Bank’s short-term strategy, Management has succeeded in
making impressive progress in the Bank’s overall growth strategy
to grow our core banking activities, having successfully captured
market share throughout 2020. Moreover, the Bank is now

Message from the
Group Chief Executive Officer
2020 was an extremely challenging year for the banking

industry across the world as it came to grips with the adverse
effects of the global COVID-19 pandemic. Against the backdrop
of social and economic disruptions which undoubtedly affected
the performance of the sector, Al Salam Bank remained resilient,
maintained a robust balance sheet, prudently increased
provisions and generated a net profit of BD 9.12 million (2019:
BD 21.13 million), all while implementing strict health and safety
Operating Income measures to ensure uninterrupted service to our customers.
In the wake of the pandemic, Al Salam Bank made it a priority
to develop a short-term strategy with defined objectives that
2020 BD 96.58 million would help mitigate potential risks and steer the Bank through
this period of uncertainty. We had a clear vision in mind:
2019 BD 91.71 million to come out of this pandemic stronger than when we first
entered. Focusing on our critical success factors, we outlined
5.31%
five key strategic pillars to ensure continuity in the realm of
an unpredictable landscape; (1) to expand market share; (2)
to increase and enhance the quality of our earnings; (3) to
strengthen our operational resilience and efficiency; (4) to roll-
out new technologies and fast-track digitization to boost our
competitiveness and; (5) to proactively accelerate corporate
social responsibility initiatives, including the Bank’s commitment
to safeguarding the health and safety of its employees and that
of the wider communities.
Customer Deposits
Al Salam Bank has successfully delivered positive results
BD 1.32 billion across the five strategic pillars, evidenced by significant organic
growth in all of its core activities.
Financing Facilities Solid strides were made during 2020 to increase market share
across all fronts, leading to a 19% growth in both customer
BD 1.28 billion deposits (BD 1.32 billion) and financing facilities (BD 1.28 billion)
respectively. The Bank’s asset base closed in excess of BD 2.26
billion in 2020, the highest since its inception, reflecting a solid
Growth of annual growth of 11%. The quality of the financing portfolio has
19%
also improved, aided by the booking of high-quality financing
facilities early in 2020 with NPF declining by 55 bps from
5.60% in 2019 to 5.05% in 2020. Driven by improved digital
channels and intensive customer acquisition efforts, the Bank’s
customer base continues to trend upwards and witness further
diversification.
The Bank remains a market leader in the financing
business and local syndications, it is well placed to
compete and gain market share in other lucrative
segments, including personal financing, credit cards,
and international trade finance.
The Bank’s Retail Banking division witnessed positive The impetus gained during a tumultuous 2020, as a result of
performance with a 34% year-on-year growth as a result of the Bank’s agility and strategic focus, will carry us positively into
new digitized products, the launch of the Bank’s first virtual 2021 and beyond. The groundwork has already been laid and
branch, a new and improved mobile banking application and a a solid foundation is in place to build on the successes already
simplified digital onboarding for new and existing customers. achieved. 2021 will witness the roll out of a new holistic 3-year
Corporate Banking had a stellar year following the addition of strategy focused on core banking, digital, IT, brand and marketing
new, high-quality assets. Private Banking’s business surged initiatives.
by 15%. International Transaction Banking continued with its
On behalf of Al Salam Bank, I would like to convey my gratitude
regional expansion, attracting increased trade finance business
to the leadership of the Kingdom of Bahrain, led by His Majesty
and financial institutional counterparty transactions. The Bank’s
King Hamad bin Isa Al Khalifa, and His Royal Highness the Crown
interests in Kenya, Seychelles and Algeria continue to serve it
Prince, Deputy Supreme Commander and Prime Minister, Prince
well.
Salman bin Hamad Al Khalifa, for their unwavering support.
As Work from Home (WFH) became a necessity on a country-
My sincere appreciation also extends to the Central Bank
wide level, all Bank employees adapted seamlessly to the
of Bahrain, the Ministry of Industry, Commerce and Tourism,
new norm, demonstrating commitment to safeguarding the
Bahrain Bourse, Dubai Financial market (DFM), and the Securities
health and safety of their families, colleagues, their customers
& Commodities Authority in the UAE, for their continued
and the wider community. In March 2020, 38% of the Bank’s
guidance. I would also like to thank the Board of Directors for
employees adopted WFH, reaching a 70% peak in April and
their wise counsel during this difficult year, as well as our valued
May, and averaging 50% thereafter. Following the shift to
shareholders and loyal customers who continue to bestow their
virtual communications channels, Al Salam Bank continued to
trust in us. And to all the management and employees who
invest in building the skills and capabilities of its human capital
have worked tirelessly to weather the storm and to ensure that
through online training and development programs. The Bank
Al Salam Bank retains its prominent position in the markets it
recorded 16,000 hours of employee training - 187% of its annual
serves, my heartfelt appreciation.
target - which constitutes a remarkable achievement given the
circumstances.
Looking ahead to 2021, Al Salam Bank remains confident of
its resilience in mitigating risks and adapting to shifting market
dynamics. Further growth is anticipated in our balance sheet,
Rafik Nayed
driven by the prudent booking of grade-A credit, and in turn,
increased market share. While the Bank remains a market leader Group Chief Executive Officer
in the financing business and local syndications, it is well placed 10 February 2021
to compete and gain market share in other lucrative segments,
including retail banking, asset management and international
trade finance. Along with accelerated digital rollouts, brand
re-positioning will now be fast-tracked as a key enabler for
business growth as competition intensifies, banking becomes
commoditized, and customer expectations rise. Our efforts will
continue to complete orderly exits of non-core banking and real
estate assets in 2021.

Management Review of
Operations and Activities
OPERATING ENVIRONMENT FINANCIAL PERFORMANCE
Countries in the Middle East and Central Asia region responded Set against a backdrop of restrained global growth and geopolitical
to the COVID-19 pandemic with swift and stringent measures uncertainties, the Group posted a net income of BD 9.1 million
to mitigate its spread and impact, which came at an economic in 2020 compared to BD 21.1 million at 31 December 2019,
cost. Countries are now cautiously reopening their economies, representing a decrease of 57%. The Bank’s prudent provisioning
but they continue to face a public health emergency and a approach in response to the implications of COVID-19 resulted
challenging economic environment. Real GDP for the region in additional provisions and impairments thereby decreasing the
is projected to fall by 4.1% in 2020 after growing by 1.3% in net profit for the year ended 31 December 2020.
2019. With global recovery subdued, downside risks continue
Total operating income stood at BD 96.6 million for the year
to dominate the outlook as the pandemic continues to test
ended December 2020 – a 5% increase from BD 91.7 million
countries. Ensuring adequate resources for health systems
recorded for the year ended December 2019. The Group’s cost-
and correctly targeting support programs remain immediate
to-income ratio also improved from 55.6% in 2019 to 52.3% in
priorities. In the near future, governments and policymakers need
2020.
to continue to act decisively to secure jobs, provide liquidity to
businesses and households, protect the poor, and put in place Total assets recorded strong growth in 2020, increasing by 11%
a carefully designed economic road map to recovery. Further to BD 2,261 million from BD 2,043 million in December 2019. The
actions will be necessary to address pressing vulnerabilities in growth was accompanied with a robust improvement in asset
countries with limited fiscal room to ensure a smooth recovery quality during 2020 with the Bank’s nonperforming facilities ratio
while maintaining macroeconomic sustainability. Consumer decreasing to 5.05% in 2020 compared to 5.6% in 2019, driven
demand was negatively affected on the back of weak tourism by effective recovery initiatives and quality asset bookings.
and remittance inflows, which are key income sources for the Customer deposits reached BD 1.32 billion, up from BD 1.11 billion
region. International flights all but stopped in many countries. in 2019 - a YOY increase of 19%. Financings rose by 19.6% for
Oil exporters felt the economic effect of lockdown and the the year, reaching BD 1.28 billion compared to BD 1.07 billion in
resulting sharp decline in oil prices. After dropping to 20-year 2019.
lows between March and April, the Organization of the Petroleum
Total shareholders’ equity decreased by 12% from BD 319.4
Exporting Countries and other major oil producers (OPEC+)
million in 2019 to BD 280.8 million at the end of December
agreement in April and extension in June (which entailed oil
2020, primarily due to modification losses stemming from the
production curtailment) succeeded in stabilizing oil prices, which
profit-free moratorium provided to financing customers in light
recovered more than 50 percent of the losses suffered since the
of COVID-19, as mandated by the Central Bank of Bahrain, and a
end of 2019 but still currently trade at 40 percent below pre-
one-off transaction involving a non-controlling interest.
COVID-19 levels.
BUSINESS ENVIRONMENT CAPITAL ADEQUACY
Bahrain’s economy is closely linked to the fluctuation in global The Group continued to enjoy strong financial solvency and
crude oil prices as are the economies of the rest of the region. liquidity in 2020 and, in accordance with the Basel III capital
However, its impact is much narrower compared to other Gulf adequacy guidelines, achieved a Capital Adequacy Ratio of
countries due to the relatively diverse nature of the Bahraini 26.46% against a mandatory Central Bank of Bahrain minimum
economy. The economy grew slightly by 1.8% in 2019 despite requirement of 12.5%.
a sizeable contraction in the oil industry. Due to the COVID-19
pandemic, it plummeted to -4.9% in 2020 but GDP growth ASSET QUALITY
is expected to recover to +2.3% in 2021 and +2.8% in 2022,
subject to the post-pandemic global economic recovery. The The Bank maintained its conservative approach to asset
Government of the Kingdom of Bahrain took significant steps selection for financing and investments and as at 31 December
to contain the effects of the virus. The CBB issued a number 2020, 98% of the financing portfolio was classified under the
of directives to preserve the health and safety of citizens, ‘good & satisfactory’ category (2019: 97%). Total provisions
residents, and workers, including those in the financial sector. for the financing portfolio was BD 43.8 million (2019: BD 30.6
A number of key policy responses (including fiscal, monetary, million), which is primarily due to the effect of COVID-19. The
and macro-financial) were issued to mitigate the effects of the Asset Remedial and Collection unit continued to closely monitor
financial implications on financial services’ customers affected past due facilities.
by COVID-19, as well as on financial institutions and merchants.
These moves assisted in protecting the stability of the financial
sector in the Kingdom of Bahrain. These were aimed to ease
liquidity in the economy as well as to assist banks in complying
with regulatory requirements. Standard & Poor’s awarded a
B+ credit rating for Bahrain in November 2019, with a positive
outlook. The robust and increasingly diverse nature of Bahrain’s
economy provided the Bank with a sound platform for expansion
across several lines of business within the GCC and further.
BANKING ACTIVITIES Enhanced pari-passu partnership with Eskan Bank facilitated
financing land purchase and constructions. Home finance deals
STRATEGY
were struck with a range of real estate developers, providing
Set in 2018, the Bank’s 3-year strategy focused on growing core customers with highly competitive property financing scheme
banking activities and conducting firm-wide enhancements to terms. The non-performing financing portfolio was reduced,
increase efficiencies and improve competitiveness. The strategy enhancing profitability and the bottom line. Growth of the Retail
consisted of significant optimization of the Bank’s business Banking liability portfolio was a major contributor towards the
model, enhancements to the risk framework, improvements Bank’s balance sheet growth. Several campaigns were rolled out
in corporate governance and a substantial investment in during the year, including a Wakala campaign, the Family account
technologies and infrastructure to accommodate future growth. campaign mentioned above, which was positively received with
new accounts during the first year. Additionally, the Bank’s
During the first two years of strategy execution, the Bank made
flagship Danat savings scheme was refreshed to include a villa,
significant strides in implementing various initiatives including,
luxury car and monthly salary of BD 5,000 for a one-year annual
but not limited to, streamlining various internal processes,
grand prize.
introducing several digitization projects, expanding current
offerings to cater for new customer segments, and upgrading
the core IT infrastructure. Collectively, the efficiencies derived PRIVATE BANKING
from these initiatives, alongside the recently launched offerings,
The Private Banking division performed well in 2020 in all areas
have enabled the Bank to acquire market share, grow total
of its business. Al Salam Bank placed the strategic framework
assets, improve competitiveness, and enhance overall efficiency.
to navigate unprecedented market conditions with agility, and
With the impact of COVID-19, the original 3-year strategy was flexibility, offering clients tailor made solutions.
put on hold and was replaced with five key pillars encompassing
Relationships with clients were key in sustaining record growth
the Bank’s short-term vision during the period. The major growth
in liabilities, reaching BD 663 million during the year, while also
targets set as part of the strategy formulation exercise in 2018
generating 15% increase in assets, reaching BD 295 million
were achieved during the 3-year period. 2020 marked the last
(2019: BD 257 million). Transactions amounting to BD 96.135
year of the strategy implementation, with a new 3-year strategy
million were closed successfully, fees and commissions of BD 1.2
to be formulated and presented in 2021.
million were booked, even in the face of a highly priced market,
Key is the focus shift to core banking and increasing market aligning to the Bank’s strategy of increasing fee-based income.
shares. Digitization is no longer optional. It is key for survival. The
Focused marketing efforts saw the on-boarding of 180 new
focus going forward is seamless, digital, and relevant banking.
clients for the division, with 24% of these from non-resident
The Bank is well positioned for further growth and to capture
clients, another geographical target area of expansion of the
more market share.
customer base.
In line with the CBB directives for deferment of financing
RETAIL BANKING
installments from March to September 2020, Private Banking
The Bank continued to enjoy major growth in its Retail Banking worked closely with its clients to offer tailor-made solutions
business, with Retail Banking Assets increasing by 34%, whilst aligned with their cash flows during the COVID pandemic.
Liabilities increased by 43% YoY growth. This has been achieved,
The exclusive, dedicated middle office team and operations team
in part, through the addition of almost six thousand new retail
catering to the requirements of Private Banking’s clients have
accounts. Retail Banking has been a major contributor to the
ensured faster turnaround time, maintaining the highest level of
Bank’s bottom line.
confidentiality and exclusivity to its clients.
Retail Banking has also been recognized as a catalyst for the
The division signed up with Mubasher to become the Bank’s
Ministry of Housing and Eskan Bank finance scheme “Mazaya
exclusive partner for offering digital wealth management services
social housing”, capturing 24% of the Mazaya scheme share
as well as an accessible trading platform, set to launch in 2021.
since inception, while the total market share in 2020 H1 reached
The innovative platform will give customers access to Shari’a
47%.
compliant portfolios modeled by an internationally renowned
In 2020, new Al Raya Mall in Riffa and Hidd branches were opened. asset manager.
The division significantly expanded its product range, with the
Despite obstacles presented by COVID-19, Private Banking
launch of the new family account via Al Salam Bank’s mobile
persevered through challenging market conditions, raising close
application that allows customers to extend supplementary
to US$ 20 million in investments in 2020, preparing the division
accounts and debit cards to the whole household. The division
to meet any trial that may lie ahead in 2021.
also expanded its digital channels by launching WhatsApp
Banking to empower customers to make inquiries in real time,
in addition to launching the Virtual Branch to deliver high quality
services through modernized platforms to enhance customer
experience virtually, and the new flagship mobile application
that combines digital onboarding with a full suite of personalized
banking features.
Operations and Activities (Continued)
CORPORATE BANKING In line with the mandate set by the Bank’s Executive Management,
the Department successfully structured Shari’a-compliant
Given the challenges experienced locally, regionally and
hedging products, including FX Wa’ad and Cross Currency
internationally as a result of the pandemic, Corporate Banking
Swaps. It also supported the Group (Seychelles and Kenya) with
performed well in 2020, registering a significant 15% increase in
relevant products in their respective Treasury units.
assets of BD 74 million to BD 604 million (2019: BD 527 million).
Although 2020 was more eventful than expected, the Treasury
During the year, swift and adequate measures were taken to
& Capital Markets team achieved further diversification of
ensure the lending portfolio was regularized as per CBB directions,
liquidity sources. It also used a variety of different tools such
ensuring the exposures were well-balanced between the
as Islamic repos and term finance from various local and
government and non-government book, thereby considerably
international sources. As the Bank moves through the third
minimizing the portfolio risk and maintaining a healthy return on
year of its renewed strategy, the focus will remain on further
assets overall.
enhancing the geographic diversification of liquidity sources, on
The team worked assiduously to enhance relationships with the implementation of innovative fixed income structures and
its customers to understand the challenges faced by their leveraged products with international banks.
industries during the pandemic and addressing them in the best
The Treasury will continue to play its central role in helping
possible manner.
business units within the Group to optimally deploy their liquidity
Escrow services remained a strong feature in 2020. In addition while at the same time assuring adherence to regulatory liquidity
to building the corporate customer base and maintaining the ratios.
quality of the assets portfolio, the SME sector was boosted by
transferring around several hundred names from the corporate
INTERNATIONAL TRANSACTION BANKING
book to the newly established MSME division under Retail
Banking. The year 2020 was a challenging year, dominated by the global
COVID-19 pandemic which caused a slowdown of economic
activity globally. The pandemic had its impact on international
TREASURY & CAPITAL MARKETS
trade and overall credit activities. During the year, the International
As an enabler of liquidity, Treasury & Capital Markets played Transaction Banking (ITB) adopted a cautious approach
an instrumental role in supporting the Bank’s growth strategy while taking up new transactions, and redirected its focus
in 2020. Al Salam Bank-Bahrain achieved 11% growth in assets towards serving its client base through cash management and
and a 19.6% increase in the financing book. Treasury made a structured collateralized trade activities. The unit leveraged on
vital contribution through a variety of funding sources and tools its established and well diversified geography, and as a result, ITB
to support the Bank in its focus on large syndication activities. succeeded in remaining a significant source of foreign currency
Despite the high volatility in the market due to the COVID-19 funding across different currencies for the Bank. The business
impact, Treasury applied extraordinary control measures to concluded several structured trade funding transactions with
ensure the sustainability of liquidity and furnish the business regional and international banks, at satisfactory commercial
flow as regularly as possible. pricing. In addition, the department received additional funding
from new geographies that contributed to the overall funding
Furthermore, Treasury & Capital Markets continued to grow and
profile during 2020. The ITB department continued to work
diversify its fixed income portfolio and experienced an increase
closely with the Group Compliance department to on-board
of 11% in the Sukuk portfolio, coupled with an improvement in
additional new counterparties in the existing locations and added
yields through careful use of leverage, which supported the
new clients from new locations across the region with focus
Bank’s overall profitability and liquidity profile. The Bank also
on Asia and Africa in line with the business strategy adopted
continued to support Bahrain’s sovereign requirements through
in 2018. During the year, the Division was a solid revenue
the distribution of local and international CBB sukuk issuances
contributor in terms of profit and fee income. It successfully
to local and regional client bases. Treasury & Capital Markets
grew the Bank’s international network, while supporting local
successfully placed several tranches of Investment Gateway
commercial business in terms of cash management and other
Bahrain (IGB) Sukuk, a corporate issuance out of Bahrain where
correspondent banking requirements
a distribution mandate was given to the Department.
The division has created a solid foundation for growth in 2021
In addition to overseeing the Bank’s Asset and Liability
and beyond, through the expansion and development of the
management functions, the Treasury & Capital Markets
trade finance business with diversification within Asia and
department saw an expansion of its institutional relationships
Africa. ITB worked to strengthen relationships with institutions
with a variety of financial institutions, locally, regionally and
in trade finance in 2020, including with the IDB entities and ITFC,
internationally. The expansion of the financial institution network
the Arab-Africa foreign Trade Bridges Program, and the Arab
is partly due to the successful engagement of new counterparties
Trade Finance Program (ATFP) in the area of risk participation
across the GCC and North Africa and the development of a wide-
opportunities and raising special funding.
reaching network of interbank relationships.

In 2020, ITB grew its business portfolio and registered a OPERATIONS
healthy ancillary overall business in excess of USD 2.2 billion,
Amid the spread of the COVID-19 pandemic, operations played
mainly in foreign exchange volumes for trades and other cash
an active role in promoting change during the challenging year
payments. The Unit’s deposit base increased to BD 168 million
of 2020. The department led in creating a remote working space
in 2020, split between various funding items. The business has
following the emergency measures adopted worldwide, which
leveraged on its strong partnerships with regional players such
caused a major shift in the way the Bank operates, communicates
as Standard Chartered Bank and RAKBANK and finalized several
and reacts to new directions received from the regulators and
self-liquidating trade structures which contributed to the bank
the Bank’s management.
in terms of fees and funding. During the year, the department
also continued to make excellent progress in diversifying and Business lines and development projects, such as the newly
increasing its funding base. The unit has a solid pipeline for 2021 introduced Bahrain’s e-cheque system, the Bank’s New
with a good number of international clients underway to be Mobile Application, Bahrain’s Wage Protection Systems and
added to Al Salam Bank’s growing portfolio. more, progressed as usual, with support of changes in the
internal business processes and technologies. Human capital
The Department’s vision during 2021 and beyond is to support
was managed from a distance. Key success factors included
the regional and international business and to further establish
increasing communication levels, adopting flexible operating
the department as a significant source of liabilities and regional
hours, accepting new ideas and absorbing changes with an open
trade flow from a wide market coverage, as well as to remain
mind by reflecting and finding solutions quickly and implementing
a significant source of healthy fee-based activities from its
them effectively.
international trade transactions. This will be achieved through
its customer and trader acquisition, deposits and international A pivotal role was the management of the customer’s facilities
diversification through new geographies. This prudent strategy deferment task in response to the Central Bank of Bahrain’s
for the Bank will continue to operate through a period of directives and the Bank’s initiatives to support impacted
geopolitical uncertainty in the region. customers’ categories, this being in line with Al Salam
Bank’s corporate citizenship strategy. Participation with the
stakeholders achieved a seamless process that guaranteed
INNOVATION
meeting regulatory requirements throughout the year without
Innovation continues to be a pillar component of the Bank’s interruption to customer service.
strategy. While 2019 was focused on building the infrastructure
Efficiencies reflected additional processing enhancements
and assembling resources, in 2020 the quest to become a
adopted in 2020, accomplishing shorter lead time in booking the
digitally native bank took precedence. This encompassed
Bank’s transactions, maintaining the output quality, regulatory
overhauling internal procedures and policy to imbed digital
guidelines, compliance, and the Bank’s Standard Operating
behavior; reorganizing the workforce with digital thinkers;
Standards. This achievement was despite the remote working
introducing new digital services such as client on-boarding,
conditions and was reached through increasing the collective
retail customer application and data analytics; and a major focus
team effort and spirit which ensured successful operational
on laying the infrastructure to collect and analyze customer
continuity.
information and bank data.
With COVID imposing / boosting the need for digital measures,
INFORMATION TECHNOLOGY
the Innovation Unit supported the Bank’s use of cloud-based
collaboration tools to ensure communication and productivity The development of a solid foundation for information technology
throughout the lock-down period. services in prior years focused on upgraded delivery services and
products to the Bank’s customer base. Additionally, in 2020, the
The successful introduction of a new retail mobile banking
prevalence of the COVID called for swift responses to assist in
application became the central launch pad of many new
the shift to a ‘Work from Home’ strategy. Information Technology
products and services. The Retail Banking mobile application
department created reliable and efficient remote solutions to
also housed the Bank’s COVID-19 Response Center where
enable employees to perform their duties at home as well as in
customers were able to avail COVID-19 specific initiatives such
the office.
as applying for an profit-free financing facility, requesting to
defer installments, in addition to receiving exclusive discounts on Continuing the digital transformation from previous year, the
medical consultations. launch of the new Retail Banking mobile banking platform,
implementation of new technologies and channels such as
Current initiatives focus on data to further boost the transition
customer digital on-boarding added to the ease of transactions
to becoming a digitally native bank, focused on enhancing the
for the Bank’s client base.
breadth and quality of products and services to retail customers,
SMEs, the Al Ruwad banking business center and private banking Information Technology department successfully rose to the
segment. Elements of these include realigning and integrating the challenge of multiple requests for facilities deferments by a large
Bank’s digital external and internal channels (sales, marketing, number of customers adversely affected by the pandemic. This
and risk) with a bank-wide digital workflow engine; a Corporate was met by the delivery of practical and timely technical solutions
Banking Cash Management Portal; a Digital Wealth Management in order for Al Salam Bank to address and accommodate these
Experience; data-warehousing and bank-wide analytics. customers’ needs.

Operations and Activities (Continued)
CORPORATE GOVERNANCE & RISK MANAGEMENT HUMAN RESOURCES
In 2020, the Bank’s underwriting process continued to be In 2020, Human Resources introduced the SABA Performance
effective, arresting the growth of the non-performing portfolio. Management System. Operating through the SABA Cloud mobile
This was supported by enhancements in the manner in which application, elements embraced included Task Management
financing decisions are made from a qualitative perspective. The and Team Collaboration, while one to one meetings were also
risk appetite across the Bank is well-defined in light of prevailing introduced for frequent reviews and constructive assessment at
economic conditions and other external factors, and by a greater all levels. Virtual classes provided valuable learning materials and
focus on stress assessments taking into account the economic instant feedback.
impact of COVID-19.
Current HR records were automated and upgraded, linked with IT
External risks were evaluated throughout 2020, in line with Group to monitor all changes to employee-related data. New employee
policy, including a review of IT infrastructure, external economic information templates were shared with Compliance on a regular
factors, FX fluctuations, geopolitical issues and the prevailing basis.
pandemic situation.
The HR Communication Hub was established with a new email
The Bank pursued its risk management policy of maintaining and and web portal to distribute news and events to all employees,
bolstering its strong balance sheet through the reduction of non- rendering weekly update communications on a range of issues,
performing assets and increased focus on liquidity management, including health and safety procedures during the pandemic, as
information security and market risks. well as training and career development information.
The Group’s Corporate Governance and Risk Management Early moves to arrange for Working from Home (WFH) were
function continues to focus on enhancing the management of in place by March, and continued throughout the year, with
risks more effectively, transparency in risk reporting, improving management and staff coordinating working schedules,
follow-up on potential non-performing assets, and close successfully minimizing disruption to services and operations,
monitoring of credit risk, market risk, information security risk both at the branches and the Head Office.
and operational risk.
Personnel development
To counter the challenge of COVID-19, 2020 marked a complete
KNOW YOUR CUSTOMER
paradigm shift toward Virtual Training sessions. 16,000 hours
The application of Know Your Customer (KYC) policies and of employee training hours were achieved, an increase of 187%
procedures is a fundamental part of the Bank’s ability to protect against the yearly target, equating to an average of 45 training
itself and all other stakeholders from money laundering. The hours per employee.
Group adheres to the CBB’s Financial Crimes Module, which
Timely emphasis on Leadership and Positive Thinking during
mirrors the AML directives developed by the Financial Action
Crisis reflected the Bank-wide positive attitude toward
Task Force (FATF).
overcoming barriers and obstacles thrown up by the coronavirus.
Additional measures were taken in 2020 to educate employees
As in previous years, Career Development Training continued by
on the Bank’s new customer onboarding risk assessment
BIBF, as did Cross Functional Training by Al Salam Bank team
processes and due diligence requirements for digital onboarding.
members, accompanied by virtual monitoring.
Anti-money-laundering training sessions took place throughout
the year and looking ahead, the Bank will continue to review its In the fourth quarter, the Bank held its annual town hall meeting on
policies and processes to ensure that the Bank is always fully a virtual basis for the first time. The Group Chief Executive Officer
compliant and up to standards with the current digitization. fielded a comprehensive range of questions from the Bank’s
personnel which were mainly focused on the major challenges
faced in 2020 by the Bank in specific and the financial sector
in general. During the town hall, employee performance awards
were presented to 65 superstars.
In recognition of the extraordinary efforts of all of the Bank’s
front-line employees, and Retail Banking employees in particular,
for being available to continue unbroken, seamless service to the
client base during the epidemic, the Group CEO and Executive
Team visited all branches toward the end of the year to thank
each of them in person and to deliver certificates as well as
financial rewards to these heroes.

Well-being Brand, Marketing, and Corporate Communications
The health and well-being of our personnel and customers In 2020, the department witnessed a few key milestones
are paramount. Virtual awareness sessions and guidance on including laying the foundation for a fully integrated structured
COVID-19 were conducted constantly throughout the year. brand, marketing and corporate communications function. The
Random tests were coordinated with the Ministry of Health - division re-established the roadmap to fully align its objectives
National Team of Bahrain, as were the use of COVID-19 Rapid with newly appointed and existing agencies and partners. In
Test devices and discounted test rates. addition, a thorough policy and procedures document was
ratified by the Board and was put into action immediately.
Enhancements were made to the Bank’s Medical Insurance
This paves the way for new branding, marketing and corporate
Scheme policy, covering current limit increases without any
communications strategies. The year outlined the adoption
additional costs.
of progressive digital marketing initiatives. On ESG issues, the
Community Sponsorship and Donation Committee continued to review and
manage the Bank’s community donations and sponsorships as
A perennial important focus for the Bank is preparing young
part of its community outreach programs.
Bahrainis and graduates for the world of work. This is achieved
in part through the Bank’s internship programs. In 2020, more Al Salam Bank was recognized for the second successive year
than 40 interns were onboarded, including 12 virtual summer as the Best Islamic Retail Bank in Bahrain by Global Banking &
internships. Intensive career development training is extended to Finance Review.
the participants across a focused range of areas in order to build
exposure to the real-time business environment and situations.
Several of the Banks’ employees remain as volunteers to attend
the ‘Injaz’ programs as part of the ongoing commitment to
foster the spirit of entrepreneurship within the younger Bahraini
generation, laying the foundation for the Kingdom’s future
business leaders.

Corporate Governance Report
Corporate Governance Practice
The Bank aspires to the highest standards of ethical conduct: doing what it says; reporting results with accuracy, transparency, and
maintaining full compliance with the laws and regulations that govern the Bank’s business. Since the introduction of the Corporate
Governance Code in the Kingdom of Bahrain, the Bank has continuously implemented measures to enhance its compliance with the
code.
Shareholders
Major Shareholders as of 31 December 2020
S. No. Investor Name Country No. of Shares %
1 Bank Muscat (S.O.A.G) Sultanate of Oman 339,598,596 14.74
2 First Energy Bank B.S.C Closed Kingdom of Bahrain 144,651,042 6.28
3 Overseas Investment S.P.C. Kingdom of Bahrain 138,611,666 6.01
4 Al-Rushd Investments Limited United Arab Emirates 113,022,000 4.90
5 Tasameem Real estate United Arab Emirates 110,077,631 4.78
6 United International Representation of Companies United Arab Emirates 83,388,708 3.62
7 Al Salam Bank - Bahrain B.S.C Kingdom of Bahrain 81,304,080 3.53
8 Wadeema Mohammed Butti Alqubaisi United Arab Emirates 78,280,115 3.40
9 Royal Court Affairs, Sultanate of Oman Sultanate of Oman 76,236,415 3.31
10 Sayed Husain Ali Alawi AlQatari United Arab Emirates 58,337,361 2.53
11 Alfateh Investment Kingdom of Bahrain 43,796,024 1.90
12 Bond Investments L.L.C United Arab Emirates 41,226,120 1.79
13 Al Suban Company Kingdom of Bahrain 28,255,500 1.23
14 Global Express Co. W.L.L. Kingdom of Bahrain 26,910,000 1.17
15 Emirates Investment Bank United Arab Emirates 25,524,396 1.11
Shareholding – 31 December 2020

Category No. of Shares No. of Shareholders % of Outstanding Shares
Less than 1% 915,278,199 22,738 39.72%
1% to less than 5% 766,358,350 12 33.25%
5% to less than 10% 283,262,708 2 12.29%
10% to less than 20% 339,598,596 1 14.74%
20% up to less than 50% - - -
50% and above - - -
Total 2,304,497,853 22,753 100.00

The outstanding ordinary share ownership of the Bank is distributed as follows:
Nationality No. of Shares Ownership Percentage

Bahraini
Government - -
Institutions 520,857,412 22.60%
Individuals 200,008,065 8.68%
GCC
Institutions 815,698,788 35.40%
Individuals 488,877,079 21.21%
Other
Institutions 189,706,603 8.23%
Individuals 89,349,906 3.88%
Total 2,304,497,853 100.00
BOARD OF DIRECTORS
The Board of Directors provides central leadership to the Bank, establishes the Bank’s objectives and develops the strategies
that directs the ongoing activities of the Bank to achieve these objectives. Directors determine the future of the Bank through the
protection of its assets and reputation. Directors apply skill and care in exercising their duties to the Bank and are subject to fiduciary
duties. Directors are accountable to the shareholders of the Bank for the Bank’s performance and can be removed from office by
them.
The primary responsibility of the Board is to provide effective governance over the Bank’s affairs for the benefit of its shareholders,
and to balance the interests of its diverse stakeholders including its customers, correspondents, employees, suppliers and the local
community. In all actions taken by the Board, the directors are expected to exercise their business judgment in what they reasonably
believe to be in the best interests of the Bank and its stakeholders. In discharging that obligation, directors may rely on the honesty
and professional integrity of the Bank’s senior management and, its external advisors and auditors.
Board Composition
The Board consists of members who possess both the required skills and expertise to govern the Bank in a manner that would achieve
the objectives of all stakeholders. Furthermore, in compliance with relevant regulations, the Board Committees consist of Directors
with adequate professional background and experience. The Board periodically reviews its composition, the contribution of Directors
and the performance of its various Committees. The appointment of Directors is subject to prior screening by the Nomination and
Corporate Governance Committee and the Board of Directors, as well as the approval of both the Shareholders and the Central Bank
of Bahrain. The classification of “executive”, “non-executive” and “independent” directors is as per the definitions stipulated in the
Central Bank of Bahrain Rulebook.
Each Director is elected for a three-year term, after which he must present himself to the Annual General Meeting of shareholders for
re-appointment. Board Meeting attendance is as per the regulations stipulated in the Central Bank of Bahrain Rulebook.
Mandate of the Board of Directors and their Roles and Responsibilities

The principal role of the Board is to oversee the implementation of the Bank’s strategic initiatives in accordance with relevant
statutory and regulatory structures. The Board is also responsible for the consolidated financial statements of the Group. The Board
ensures the adequacy of financial and operational systems and internal controls, as well as the implementation of corporate ethics
and the code of conduct. The Board has delegated the responsibility of the day-to-day management of the Bank to the Group Chief
Executive Officer (“Group CEO”).

Corporate Governance Report ((continued))
The Board reserves a formal schedule of matters for its decision to ensure that the direction and control of the Bank rests with the
Board. This includes:
 Reviewing the strategic plan of the Bank;
 Performance reviews of the Senior Management (all approved persons);
 Performance assessment of the Board, Board Sub-Committees and the Shari’a Supervisory Board;
 Approving material acquisition and disposal of assets;
 Approving capital expenditure;
 Approving authority levels;
 Appointing auditors and, reviewing the financial statements and financing activities;
 Reviewing the Corporate Governance Report
 Approving the annual operating plan and budget;
 Ensuring regulatory compliance through its various committees;
 Reviewing the adequacy and integrity of the internal controls; and
 Approving all policies pertaining to the Bank’s operations and functioning.
Board Elections System

Article 25 of the Bank’s Articles of Association provides the following:
1. The company shall be administered by a Board of Directors consisting of not less than five (5) members elected by the shareholders
by means of cumulative voting by secret ballot and in accordance with the provisions of the Commercial Companies Law, after
obtaining the approval of the Central Bank of Bahrain for their appointment. Members of the Board of Directors shall be appointed
or elected to serve for a term not exceeding three (3) years renewable. A cumulative vote shall mean that each shareholder shall
have a number of votes equal to the number of shares he owns in the Company and shall have the right to vote for one candidate
or to distribute them among his chosen candidates.
2. Each shareholder owning 10% or more of the capital may appoint whoever represents him on the Board to the same percentage
of the number of the Board members. His right to votes shall be forfeited for the percentage he has appointed representatives. If
a percentage is left that does not qualify him to appoint another member, he may use such percentage to vote.
3. The Board of Directors shall elect, by secret ballot, a Chairman and one Vice Chairman or more, three years renewable. The Vice
Chairman shall act for the Chairman during his absence or if there is any barrier preventing him. The Ministry of the Industry,
Commerce and Tourism and the Central Bank of Bahrain shall be provided with a copy of the resolution electing the Chairman and
the Deputy Chairman.
4. The Board of Directors shall consist of independent and non-executive members in accordance with the Central Bank of Bahrain’s
rules and regulations.
5. No person may be appointed or elected as a member of the Board of Directors until he has declared his acceptance to such
nomination in writing, provided that the declaration includes the disclosures of any work performed that may directly or indirectly
constitute competition for the company, names of the companies and entities in which he works in or in which he is a member of
their board of directors.
Article 27 of the Bank’s Articles of Association covers the “Termination of Membership in the Board of Directors” which states the
following:
A Director shall lose his office on the Board in the event that he:
1. Fails to attend four consecutive meetings of the Board in one year without an acceptable excuse, and the Board of Directors
decides to terminate his membership;
2. Resigns his office by virtue of a written request;
3. Forfeits any of the provisions set forth in Article 26 of the Articles of Association;
4. Is elected or appointed contrary to the provisions of the Law; and
5. Has abused his membership by performing acts that may constitute a competition with the Company or caused actual harm to
the Company;
6. If he has been convicted before any court for theft, embezzlement, fraud, forgery or issuing dishonored cheques or any crime as
provided in the law;
7. If he declares bankruptcy;

8. If any of the shareholders have terminated his appointment to any of their representatives on the Board of Directors or if the
shareholders of the General Assembly vote for his removal in accordance with Article 42; or
9. If the Central Bank of Bahrain considers him not eligible for the position.
Independence of Directors
An independent Director is a Director whom the Board has specifically determined has no material relationship, which could affect
his independence of judgment, taking into account all known facts. The Directors have disclosed their independence by signing the
Directors Annual Declaration whereby they have declared that during the year ending 31st December 2020, they have met all the
conditions required by the various regulatory authorities to be considered independent.
As of 31-12-2020, the members of the Board were:

Non-executive Members
H.E. Shaikh Khalid bin Mustahil Al Mashani Chairman

Mr. Matar Mohamed Al Blooshi Vice Chairman
Mr. Zayed Ali Al-Amin Board Member
Independent Members
Mr. Salim Abdullah Al Awadi Board Member

Mr. Alhur Mohammed Al Suwaidi Board Member
Mr. Khalid Salem Al Halyan Board Member
Mr. Salman Saleh Al Mahmeed Board Member
Mr. Khalid Shehab Eddin Madi Board Member
All current Directors were elected for a three-year term on 22 March 2018.
Mr. Khaleefa Butti Omair Al Muhairi (former Chairman) resigned on 9 April 2020.
Mr. Hussain Mohammed Al Meeza (former Board Member) resigned on 18 June 2020.
The Board Charter

The Board has adopted a Charter which provides the authority and practices for governance of the Bank. The Charter was approved
by the Board with the beginning of its term in 2018 and includes general information on the composition of the Board of Directors’,
classification of Directors’, Board related Committees, Board of Directors’ roles and responsibilities, Board of Directors’ code of
conduct, Board remuneration and evaluation process, insider dealing, conflict of interest and other Board related information.
Conflict of Interest
The Bank has a documented procedure for dealing with situations involving “conflict of interest” of Directors. In the event of the
Board or its Committees considering any issues involving “conflict of interest” of Directors, the decisions are taken by the full Board/
Committees. The concerned Director abstains from the discussion/ voting process. These events are recorded in Board/ Committees
proceedings. The Directors are required to inform the entire Board of (potential) conflicts of interest in their activities with, and
commitments to, other organizations as they arise and abstain from voting on the matter. This disclosure includes all material facts
in the case of a contract or transaction involving the Director. A report detailing the absentation from voting relating to conflict of
interest is made available to shareholders upon their request.
Induction and Orientation for New Directors

When new Directors are appointed, they shall be provided with an appointment letter and the Directors’ Handbook containing
information relevant to the performance of their duties as members of the Board. The Handbook includes the Corporate Governance
Guidelines, Charters of the Board and Committees, key policies, etc. The Board reserves a formal schedule of matters for its decision
to ensure that the direction and control of the Bank rests with the Board.

Code of Conduct
The Board has an approved Code of Conduct for Directors, as follows:
 To act with honesty, integrity and in good faith, with due diligence and care, in the best interest of the Bank and its stakeholders;
 To act only within the scope of their responsibilities;
 To have a proper understanding of the affairs of the Bank and to devote sufficient time to their responsibilities;
 To keep confidential Board discussions and deliberations;
 Not to make improper use of information gained through the position as a director;
 Not to take undue advantage of the position of director;
 To ensure his/her personal financial affairs will never cause reputational loss to the Bank;
 To maintain sufficient/detailed knowledge of the Bank’s business and performance to make informed decisions;
 To be independent in judgment and actions and to take all reasonable steps to be satisfied as to the soundness of all decisions
of the Board;
 To consider themselves as a representative of all Shareholders and act accordingly;
 Not to agree to the Bank incurring an obligation unless he/she believes at the time, on reasonable grounds, that the Bank will be
able to discharge the obligations when it is required to do so;
 Not to agree to the business of the Bank being carried out or cause or allow the business to be carried out, in a manner likely to
create a substantial risk of serious loss to the Bank’s creditors;
 To treat fairly and with respect all of the Bank’s employees and customers with whom they interact;
 Not to enter into competition with the Bank;
 Not to demand or accept substantial gifts from the Bank for himself/herself or his/her associates;
 Not to take advantage of business opportunities to which the Bank is entitled for himself/herself or his/her associates;
 Report to the Board any potential conflicts of interests; and
 Absent themselves from any discussions or decision-making that involves a subject in which they are incapable of providing
objective advice or which involves a subject or proposed conflict of interest.
Evaluation of Board Performance

The Board has adopted a ‘Performance Assessment Framework’ designed to provide Directors with an opportunity to assess their
performance on an annual basis. The self-assessment consists of three categories, such as:
 Assessment of the Board as a unit;
 Assessment of the Committee as a unit; and
 Self-assessment of individual Directors.
The results of the annual performance assessment shall be communicated to the Shareholders at the Annual General Meeting.
Remuneration of Directors
Remuneration of the Directors as provided by Article 34 of the Articles of Association states the following:
“The General Assembly shall specify the remuneration of the members of the Board of Directors. However, such remunerations must
not exceed in total 10% of the net profits after deducting statutory reserve and the distribution of dividends of not less than 5% of
the paid capital among the shareholders. The General Assembly may decide to pay annual bonuses to the Chairman and members
of the Board of Directors in the years when the Company does not make profits or in the years when it does not distribute profits to
the shareholders, subject to the approval of the regulatory authorities.
The Board, based upon the recommendation of the Remuneration Committee and subject to the laws and regulations, determines
the form and amount of Director compensation subject to final approval of the shareholders at the Annual General Meeting. The
Remuneration Committee shall conduct an annual review of Directors’ compensation.
As per the Directors Remuneration Policy approved by the Shareholders, the structure and level for the compensation for the Board
of Directors consist of the following:
1. Annual remuneration subject to the annual financial performance of the Bank and as per the statutory limitation of the law.
2. The total amount payable to each Board member with respect to Board and Committee meetings attended during the year.
The remuneration of the Board of Directors will be approved by the shareholders at the Annual General Meeting.

In addition to the above, Directors who are employees of the Bank shall not receive any compensation for their services as Directors
and Directors who are not employees of the Bank may not enter into any consulting arrangements with the Bank without the
prior approval of the Board. Directors who serve on the Audit and Risk Committee shall not directly or indirectly provide or receive
compensation for providing accounting, consulting, legal, investment banking or financial advisory services to the Bank.
Board Meetings and Attendances

The Board of Directors meets at the summons of the Chairman or his Deputy (in the event of his absence or disability) or if requested
to do so as per the Bank’s Board Charter. According to the Bahrain Commercial Companies Law and the Bank’s Articles of Association,
the Board meets at least four times a year. A meeting of the Board of Directors shall be valid if attended by half of the members in
person. During 2020, the Directors that were present at the Annual General Meeting are detailed in the minutes of the 2020 Annual
General Meeting. The details of the Board meetings held during 2020 are as follows:
Board Meetings in 2020 - Minimum Four Meetings per Annum
Members 20 Feb 31 Mar 12 Apr 4 Jun 30 Jun 3 Sep 22 Oct 3 Dec

Mr. Khaleefa Butti Al Muhairi × √ × × × × × ×
H.E. Shaikh Khalid bin Mustahil Al Mashani √ √ √ √ √ √ √ √
Mr. Alhur Mohammed Al Suwaidi √ √ √ √ √ √ √ √
Mr. Husein Mohamed Al Meeza √ √ √ √ × × × ×
Mr. Khaled Shehabeddin Madi √ √ √ √ √ √ √ √
Mr. Khalid Salim Al Halyan √ √ √ × √ √ √ √
Mr. Matar Mohamed Al Blooshi √ √ √ √ √ √ √ √
Mr. Salim Abdullah Al Awadi √ √ √ √ √ √ √ √
Mr. Salman Saleh Al Mahmeed √ √ √ √ √ √ √ √
Mr. Zayed Ali Al Amin √ √ √ √ √ √ √ √
*Mr. Khaleefa butti Omair Al Muhairi (former Chairman) resigned on 9 April 2020.
*Mr. Hussain Mohammed Al Meeza (former Board Member) resigned on 18 June 2020.
Directors’ Interests
Directors’ shares ownership in two-year comparison as of 31 December:
No of Shares
Members
2020 2019
H.E. Shaikh Khalid bin Mustahil Al Mashani 0 0
Mr. Matar Mohamed Al Blooshi 0 0
Mr. Salim Abdullah Al Awadi 0 0
Mr. Alhur Mohammed Al Suwaidi 0 0
Mr. Khalid Salem Al Halyan 10,764 10,350
Mr. Zayed Ali Al-Amin 520,000 3,500,000
Mr. Salman Saleh Al Mahmeed 0 0
Mr. Khalid Shehab Madi 0 0
Approval Process for Related Parties’ Transactions

The Bank has a due process for dealing with transactions involving related parties. Any such transaction will require the unanimous
approval of the Board of Directors. The nature and extent of transactions with related parties are disclosed in the consolidated
financial statements under note 29 - related party transaction.

Material Transactions that require Board Approval
Depending on the internal risk rating transactions above BD 5 million and up to BD 15 million requires the approval of the Executive
Committee of the Board of Directors, any transaction above BD 15 million requires the approval of the Board of Directors of the
Bank. In addition, when acquiring 20% of a company Board approval is required regardless of the amount.
Material Contracts and Financing Involving Directors and Senior Management During 2020
The Bank’s dealings with its directors/ associated entities are conducted on an arms-length basis and at prevailing commercial
terms in respect of its exposure to and deposits received from them. All financing facilities to senior management members
are governed by the policies applicable to staff, which are reviewed and approved by the Board Remuneration & Nomination
Committee. Material contracts and financing facilities involving directors and senior management during 2020 are as follows:
 BD 1.6 million outstanding against Ali Rashid Al Amin Co., which is related to a Director.
 BD 3.95 million outstanding against Maalem Holding B.S.C which is related to a Director.
 Financing Facilities provided to certain Directors of the Board with a total amount of BD 530 thousand.
 Financing Facilities provided to senior management with a total amount of BD 1,136 million.
All related party transactions are disclosed in note 29 of the consolidated financial statements for the year ending 31st December
2020.
Directorships held by Directors on Other Boards

The High-Level Controls Module of the Central Bank of Bahrain Rulebook provides that no Director should hold more than three
directorships in Bahrain public companies. All members of the Board of Directors met this requirement and are approved by the
Central Bank of Bahrain.
Board Committees
Consistent with the industry’s best practice, the Board has established four Committees with defined roles and responsibilities. The
Standing Committees of the Board are Executive Committee, Audit and Risk Committee, Remuneration Committee and, Nomination
and Corporate Governance Committee.
Certain information relating to the work of certain Board Committees during the year 2020, summary of the dates of Committee
meetings held, Directors’ attendance and a summary of the main responsibilities of each Committee is enclosed in this report.
Executive Committee
The Committee operates under the delegated authority of the Board and provides direction to the executive management
on business matters, as delegated by the Board, to address matters arising between the Board meetings. The Committee is
responsible for reviewing business matters concerning credit and market risks, strategy review and providing recommendation to
the Board.
Committee Meetings in 2020 - Minimum four meetings per annum.
Four Committee meetings were held during 2020 as follows:
Members 5 Feb 23 Jun 26 Aug 25 Nov

Mr. Khaleefa Butti Al Muhairi (former Chairman) √ * * *
Mr. Alhur Mohammed Al Suwaidi √ √ √ √
Mr. Salim Abdullah Al Awadi √ √ √ √
Mr. Zayed Ali Al Amin √ √ √ √
Mr. Matar Mohamed Al Blooshi (Chairman) * √ √ √
*Mr. Khaleefa butti Omair Al Muhairi (former Chairman) resigned on 9 April 2020.
*Mr. Matar Mohamed Al Blooshi was appointed as Committee Chairman on 10 May 2020.

Audit and Risk Committee
The Committee’s responsibility is to assist the Board in discharging its oversight duties relating to matters such as risk and compliance,
including the integrity of the Bank’s financial statements, financial reporting process and systems, internal controls and financial
controls. The Committee also acts as a liaison between the external auditor, internal auditor and the Board. The Committee is also
charged with the responsibility of handling whistleblowing complaints and monitoring related party transactions.
Committee Meetings in 2020 - Minimum four meetings per annum.

Four Committee meetings were held during 2020 as follows:
Members 30 Jan 22 Jun 27 Aug 26 Nov

Mr. Salman Saleh Al Mahmeed (Chairman) √ √ √ √
H.E. Shaikh Khalid bin Mustahil Al Mashani √ √ √ √
Mr. Khaled Shehabeddin Madi √ √ √ √
Mr. Khalid Salim Al Halyan √ √ √ √
Remuneration Committee
The Committee’s role is to provide a formal and transparent procedure for developing a compensation policy for the Board, Group
Chief Executive Officer and Senior Management (approved persons and material risk takers); ensures that compensation offered
is competitive, in line with the market/peer group and consistent with the responsibilities assigned to employee. In addition, the
Committee recommends to the Board special compensation plans, including annual performance bonus and short/long term
incentives to attract, motivate and retain key employees.
Committee Meetings in 2020 - Minimum two meetings per annum.
Three meetings were convened during 2020:
Members 30 Jan 22 Jun 26 Nov

H.E. Shaikh Khalid bin Mustahail Al Mashani (Chairman) √ √ √
Mr. Khalid Salim Al Halyan √ √ √
Mr. Khaled Shehabeddin Madi √ √ √
Nomination and Corporate Governance Committee

The Committee’s role is to evaluate and nominate candidates to the Board, as well as facilitate the assessment of the performance of
the Board, Committees and individual Directors. In addition, the Committee is responsible to ensure that Directors receive adequate
training during the year so as to be able to perform their duties on the Board and the Committees they serve on. The Committee is
also charged with the responsibility of ensuring that the Corporate Governance Framework of the Bank is adequate and in compliance
with the prevailing regulations. The Committee liaises with the Bank’s Corporate Governance Officer to manage the governance
related activities.
Committee Meetings in 2020 - Minimum two meetings per annum.

Two meetings were convened during 2020:
Members 23 June 25 November

Mr. Salim Abdullah Al Awadi (Chairman) √ √
Mr. Matar Mohamed Al Blooshi √ √
Mr. Alhur Mohammed Al Suwaidi √ √

FATWA & SHARI’A SUPERVISORY BOARD
The Bank is guided by a Shari’a Supervisory Board consisting of five distinguished scholars. The Shari’a Supervisory Board reviews
the Bank’s activities to ensure that all products and investment transactions comply fully with the rules and principles of Islamic
Shari’a. Further, the Shari’a Supervisory Board shall review and vet the screening criteria for charitable donations/sponsorships as
well as the sponsorship contracts.
The Shari’a Supervisory Board shall also ensure that an internal Shari’a audit function is in place and is adequately performing their
duties as stipulated in the Shari’a Governance Module and AAOIFI Standards.
In addition, one designated member from the Shari’a Supervisory Board shall form part of the Nomination and Corporate Governance
Committee to ensure that the corporate governance related matters are in compliance with the Islamic Shari’a rules and guidelines.
The Board meets at least 4 times a year. Its members are remunerated by annual retainer fee and sitting fees per meeting attended,
with travel expenses reimbursed as appropriate. Its members are not paid any performance-related remuneration.
Performance assessment of the Shari’a Supervisory Board is done on a self-assessment basis and submitted to the Board for their
review and action.
ANNUAL GENERAL MEETING

The Board of Directors report to the Shareholders on the performance of the Bank through the Annual General Meeting. The meeting
shall be convened upon an invitation from the Chairman of Board and be convened during the three months following the end of the
Bank’s financial year.
All the Directors, especially the Chairs of the Board and Committees, at least one member of the Shari’a Supervisory Board and
the external auditors shall be present at this meeting to answer questions from the Shareholder regarding matters within their
responsibilities:
At a minimum, the Board shall report on the following to the Shareholders, for their approval, at the Annual General Meeting:
 Audited financial statements of the Bank;
 Related party transactions executed;
 Corporate governance report;
 Corporate social responsibility report;
 Performance assessment of the Board, Committees and individual Directors; and
 Remuneration for the Directors and the Shari’a Supervisory Board members.
EXECUTIVE MANAGEMENT
The Board delegates the authority of managing the Bank to the Group Chief Executive Officer (“Group CEO”). The Group CEO and
Executive Management are responsible for implementation of decisions and strategies approved by the Board of Directors and the
Shari’a Supervisory Board.
Senior Managers’ Interests
The number of shares held by the senior managers, in two-year comparison, as on 31 December 2020 is as follows:
Shares
Members
2020 2019
Dr. Mohammed Burhan Arbouna 360 347
Mr. Essa Abdulla Bohijji 128,085 123,159
Mr. Karim Turki 179 173
Total 128,624 123,679

Management Committees
The Group Chief Executive Officer (“Group CEO”) is supported by a number of management committees each having a specific
mandate to give focus to areas of business, risk and strategy. The various committees and their roles and responsibilities are:
Committee Roles and Responsibilities

Management Executive Committee Overseeing the other Management committees and assisting the Group CEO
in various issues or topics as and when required.
Credit/Risk Committee Recommending the risk policy and framework to the Board. Its primary role
is the selection and implementation of risk management systems, portfolio
monitoring, stress testing, risk reporting to Board, Board Committees,
Regulators and Executive Management. In addition to these responsibilities,
individual credit transaction approval and monitoring is an integral part of the
responsibilities.
Asset Liability Committee This Committee’s primary responsibility is to review the trading and liquidity
policy for the overall management of the balance sheet and its associated
risks.
Investment Committee The role of the Committee is to review and approve all transactions related
to corporate and real estate investments and monitoring their performance
on an ongoing basis. In addition, the Committee is responsible to oversee
the performance of the fund managers and recommend exit strategies to
maximize return to its investors.
Technology Steering Committee The Committee oversees the information technology function of the Bank.
It recommends the annual IT budget and plans, drawn up in accordance with
the approved strategy of the Bank, to the Group CEO for submission to the
Board of Directors for their approval. It supervises the implementation of the
approved IT annual plan within set deadlines and budgetary allocations.
Remedial Committee The role of the committee is to assess and follow up on all non-performing
assets of the Bank with the objective of maximizing recoveries for the Bank.
Human Resources Committee The role of the committee is to enable the Bank’s employees to meet
their professional and personal goals aligned with the growth of the Bank
by focusing on skill enhancement, career development, rewards with
performance, and work life balance.
Information Security Committee The role of the committee is advisory in nature. It assists the relevant
stakeholders to develop, review and execute a comprehensive Information
Security Management System (ISMS) for the Bank. The role of the Committee
is to strengthen the Information Security Department’s capabilities as well.
Social Responsibility Committee This Committee oversees the Corporate Social Responsibility affairs of
the Bank, managing donations and sponsorship requests, evaluating the
proposals and allocating funds to causes that the Bank is committed to
support, in line with the annual corporate social responsibility plan and the
Corporate Social Responsibility Policy. Any exceptions to the approved plan
are reviewed and recommended to the Board for approval. The Committee
is also involved in the preparation of the Corporate Social Responsibility
Report, which forms part of the Annual Report, detailing the donations and
sponsorships made during the year.
The social causes that are supported by the Bank are:
 Medical assistance;
 Care for the less fortunate; and
 Cultural initiatives focused on preserving and promoting Bahraini
traditions into the future.

Executive Management Compensation
The performance bonus of the Group Chief Executive Officer is recommended by the Remuneration and Nomination Committee
and approved by the Board. The performance bonus of senior management is recommended by the Group Chief Executive Officer
for review and endorsement by the Remuneration Committee subject to Board approval. The Performance Audit for the Compliance,
Audit and Risk functions are assessed and approved by both the Audit and Risk Committee and the Remuneration Committee.
COMPLIANCE
The Bank has in place comprehensive policies and procedures to ensure full compliance with the relevant rules and regulations of
the respective regulators.
Due diligence is performed to ensure that the financial activities of the Bank’s customers are performed in accordance with the
guidelines issued by the regulatory authorities.
The Bank continuously endeavors to enhance its Compliance and Anti Money Laundering systems. The Bank .as part of its
enhancement efforts, has recently started implementing the national E-KYC initiative which was launched nationwide as part of the
Kingdom of Bahrain’s digitization initiatives related to the Banking Sector.
The Bank adheres to the Financial Crimes Module of Central Bank of Bahrain’s Rulebook. The module contains Bahrain’s current
anti-money laundering legislation, developed under the directives of the Financial Action Task Force, which is the international
organization responsible for developing global anti-money laundering policies. The Bank complied with Foreign Account Tax
Compliance Act (FATCA) and Common Reporting Standards (CRS) requirements as mandated by the Central Bank of Bahrain (CBB).
REMUNERATION AND APPOINTMENT OF THE EXTERNAL AUDITORS

During the Annual General Meeting held on 19 March 2020, the shareholders approved the re-appointment of KPMG as external
auditors for the year ending 31 December 2020 and authorized the Board of Directors to determine their remuneration.
INTERNAL CONTROL
Internal control is an active process that is continually operating at all levels within the Bank. The Bank has established an appropriate
culture to facilitate an effective internal control process. Every employee of the Bank participates in the internal control process and
contributes effectively by identifying risks at an earlier stage and implementing mitigating controls at optimum cost. Residual risk is
properly communicated to the senior management and corrective actions are taken.
KEY PERSONS POLICY

The Bank has established a Key Persons’ Policy to ensure that Key Persons are aware of the legal and administrative requirements
regarding holding and trading of the Bank’s shares, with the primary objective of preventing abuse of inside information. Key Persons
include the Directors, Executive Management, designated employees and any person or firm connected to the identified Key Persons.
The ownership of the Key Persons’ Policy is entrusted to the Board’s Audit Committee. The latest Key Persons’ Policy is posted on
the Bank’s website and is updated every board term.
EMPLOYEE RELATIONS
Al Salam Bank-Bahrain is committed to promoting a diverse and inclusive environment and encourages understanding of the
individuality and creativity that each employee uniquely brings to the Bank. Employees are hired and placed on the basis of ability
and merit. Evaluation of employees is maintained on a fair and consistent basis.
In line with the Bank’s policy of being on equal opportunity firm and as part of Central Bank of Bahrain’s Rulebook and Corporate
Governance requirements, the Bank shall not employ relatives of employees up to the 4th degree. Existing employees must alert the
Human Resources of any relatives or relationship of other employees or candidates being interviewed. Failure to do so will subject
the employee to disciplinary action pursuant to the Law No. 36 of 2012 Promulgation of the Labour Law in the Private Sector and
the Bank’s Disciplinary Guidelines.

COMMUNICATION POLICY
The Bank recognizes that active communication with different stakeholders and the general public is an integral part of good business
and administration. In order to reach its overall communication goals, the Bank follows a set of guiding principles such as efficiency,
transparency, clarity and cultural awareness.
The Bank uses modern communication technologies in a timely manner to convey messages to its target groups. The Bank shall
reply without unnecessary delay, to information requests by the media and the public. The Bank strives in its communication to be
as transparent and open as possible while taking into account Bank confidentiality. This contributes to maintaining a high level of
accountability. The Bank also proactively develops contacts with its target groups and identifies topics of possible mutual interest. The
Bank reinforces clarity by adhering to a well-defined visual identity in its external communications. The Bank’s formal communication
material is provided in both Arabic and English languages.
The annual reports and quarterly financial statements and Corporate Governance reports are published on the Bank’s website.
Shareholders have easy access to various types of forms including proxies used for the Annual General Meeting. In addition, forms
are also available online to file complaints or make inquiries which are duly dealt with. The Bank regularly communicates with its staff
through internal communications to provide updates of the Bank’s various activities.
WHISTLE BLOWING POLICY

This Policy details the procedures for a whistleblower to escalate a complaint to the designated authority and procedures that are to
be followed by the Audit and Risk Committee to ensure that a valid whistleblowing complaint is investigated properly and action taken
appropriately, while protecting the whistleblower from any adverse reaction due to their complaint.
DELEGATION OF AUTHORITY LIMITS

Approving limits for the Board, Board Committees and other designated individuals are incorporated into the Delegation of Authority
Limits. The authorities are established for both financial and operational activities.
DISCLOSURES
The Bank has a Disclosures Policy in place detailing the Bank’s internal as well as external communications and disclosures. The
Board oversees the process of disclosure and communication with the internal and external stakeholders.

HC comply or Explain:
Sr Rule Recommendation
1 HC-1.4.6 – The chairman of the Board should be an The Board structure is approved by CBB. Since this is a guidance,
independent director, so that there will be an appropriate the Bank needs to disclose this fact in the annual report only.
balance of power and greater capacity of the Board for
independent decision making.
2 HC-5.3.2 (Remuneration Committee) - The committee Chairman is Non-Executive Director. This is approved by CBB
should include only independent directors or, however, needs to be added in the Annual Report.
alternatively, only non-executive directors of whom a
majority are independent directors and the chairman is an
independent director. This is consistent with international
best practice and it recognizes that the remuneration
committee must exercise judgment free from personal
career conflicts of interest.
3 HC 7.2.2 - The Bahraini Islamic bank licensee should Due to COVID-19, only members who were able to attend has
require all directors to attend and be available to answer attended. The same will be disclosed in the Annual report.
questions from shareholders at any shareholder meeting
and, in particular, ensure that the chairs of the audit,
remuneration and nominating committees are ready to
answer appropriate questions regarding matters within
their committee’s responsibility (it being understood that
confidential and proprietary business information may
be kept confidential).
4 HC 8.2.1 - In each Islamic bank licensee: (a) The Board The Bank complies, however, a reference to HC and PD was
must adopt written corporate governance guidelines added by November 2020 to ensure full compliance.
covering the matters stated in this Module and Module
PD and other corporate governance matters deemed
appropriate by the Board. Such guidelines must include
or refer to the principles and rules of Module HC; (b) The
Islamic bank licensee must publish the guidelines on
its website; (c) At each annual shareholders’ meeting
the Board must report on the Islamic bank licensee’s
compliance with its guidelines and Module HC, and explain
the extent if any to which it has varied them or believes
that any variance or noncompliance was justified; and (d)
At each annual shareholders’ meeting the Board must
also report on further items listed in Module PD. Such
information should be maintained on the Islamic bank
licensee’s website or held at the Islamic bank licensee’s
premises on behalf of the shareholders.
5 HC B.2.2 - Bahraini Islamic bank licensees must satisfy Although similar arrangements were available in ASBS, the Bank
the CBB that financial services activities conducted in formalized an annual Governance review to ensure the same.
subsidiaries and other group members are subject to the
same or equivalent arrangements for ensuring effective
corporate governance over their activities.

ORGANIZATIONAL STRUCTURE
BOARD OF DIRECTORS
Shari’a
Shareholder Relations
Corporate Secretary /
Board
Advisor to Chairman
Audit & Risk Nomination & Remuneration Executive
Committee Governance Committee Committee
Committee
Shari’a Shari’a
Compliance Internal Audit
Chief Legal
GROUP CHIEF Officer,
Head of Corporate
Chief Risk Chief EXECUTIVE Secretary &
Compliance OFFICER
Officer Auditor & MLRO Advisor to
Legal, PBO & PBMO Chairman
Credit Risk
Private Banking Shareholder Private Banking
Operational Operations Relations Middle Office
Risk
Market Risk General Board Secretary

Counsel Office
IT Security
DEPUTY
CEO
Chief International Asset Chief HR & Treasury

Marketing Strategy & Private Financial & Capital
& Comm. Planning Operating Transaction Banking Management Admin
Officer Banking Officer Markets
Bahrain PB Administration
Special
PMO Operations Situation Asset
Management
Innovation IT Retail Banking Finance

Private Banking
Structuring
Internal Corporate Investment
Control Banking Real Estate Administration
Asset
Management
Remedial &
Collections
CAD

Remuneration Policy
CORE REMUNERATION POLICY
The fundamental principles underlying our remuneration policy which has been approved by the Board of Directors and the shareholders of
the Bank are:
• The composition of salary, benefits and incentives is designed to align employee and shareholder interests;
• Remuneration determination takes into account both financial and non-financial factors over both the short and longer-term;
• Emphasis is on performance evaluations that reflect individual performance, including adherence to the Bank’s risk and compliance policies
in determining the total remuneration for a position;
• The Bank has set a fixed remuneration of the employees at such a level to reward the employees for an agreed level of performance and
the variable pay or bonus will be awarded purely at the discretion of the Board’s Remuneration Committee in recognition of the employees
exceptional effort in any given performance period;
• The Bank shall have a well-defined variable pay scheme in place, to support the Remuneration Committee, should they decide to pay
variable pay or bonus in any performance period;
• Variable pay will be determined based on achievement of targets at the Bank level, unit level and individual level;
• Variable pay scheme is designed in a manner that supports sound risk and compliance management. In order to achieve that goal:
°° Performance metrics for applicable business units are risk-adjusted where appropriate;
°° Individual award determinations include consideration of adherence to compliance-related goals.
• The remuneration package of employees in Control and Support functions are designed in such a way that they can function independent
of the business units they support. Independence from the business for these employees is assured through:
°° Setting total remuneration to ensure that variable pay is not significant enough to encourage inappropriate behaviours while remaining
competitive with the market;
°° Remuneration decisions are based on their respective functions and not the business units they support;
°° Performance measures and targets are aligned to the Bank and individual objectives that are specific to the function;
°° Respective function’s performance as opposed to other business unit’s performance is a key component for calculating individual
incentive payments.
• Both qualitative and quantitative measures will be used to evaluate an individual’s performance across the Bank.
• The Bank reviews the salaries and benefits periodically, with an objective of being competitive in the market places, based on salary
surveys and market information gathered through secondary sources.
• The Bank does not provide for any form of severance pay, other than as required by the Labour Law for the Private Sector (Law No.36 of
2012 of the Kingdom of Bahrain), to its employees.

REGULATORY ALIGNMENT
The Bank reviewed and revised the remuneration policy and especially its variable pay policy to meet the requirements of the CBB Guidelines
on remuneration with the help of external consultants. Key regulatory areas and the Bank’s response are summarized below:
REGULATORY AREA BANK’S PRACTICE
The composition of Remuneration Committee, is as required by the CBB remuneration guidelines and is
chaired by an Independent Director. The Remuneration Committee charter has been revised in line with the
requirements of the CBB guidelines and the Committee will be responsible for the design, implementation and
Governance supervision of the remuneration policy. The aggregate fees / compensation paid to Remuneration Committee
members for 2020 amounted to BD 22,500 (2019: BD 30,000). The Committee utilized the services of an
external consultant to redesign and implement the revised remuneration policy aligned to the CBB guidelines
on remuneration.
The Bank has set the Fixed Remuneration of the employees at such a level to reward the employees for
an agreed level of performance and the variable pay or bonus is being paid purely at the discretion of the
Remuneration Committee in recognition of the employees exceptional efforts in any given performance period.
Should the Remuneration Committee decide to award Variable Pay, it will be determined based on risk adjusted
Risk Focused targets set at the Business unit level aggregated to the Bank level. The variable pay for the Group CEO, senior
Remuneration Policy management in Business units and the Material Risk takers would be higher as compared to the fixed pay
subject to achieving the risk adjusted targets both at the business unit and the Bank level. For employees in
Control and Support functions, the pay mix is structured as more fixed and lesser variable. Further the variable
pay, for employees in Control and Support Functions, is based on their units target and individual performance
and not linked to Bank’s performance.
The bonus or variable pay computation process is designed in such a way to ensure that it does not impact
the Capital and Liquidity as there are validation checks prior to approval of the Remuneration Committee. The
Capital and Liquidity
validation checks are the bonus pool as compared to the realized profit, impact on capital adequacy computed
as per Basel III guidelines and as compared to the total fixed pay.
The Bonus for the Group CEO, his deputies and Material Risk Takers and Approved Persons as per CBB and
those whose total remuneration exceeds the regulatory threshold has a deferral element and share - linked
payment. Phantom or Shadow shares are offered to such employees. The deferral arrangements are as follows:
Group CEO, his deputies and top 5 Executive Management members (in terms of total remuneration) in Business
units:
• 40% of the variable pay will be paid in cash at the end of the performance period; and
• The balance 60% will be deferred over a period of 3 years with 10% being cash deferral and 50% being
Deferral and Share phantom or shadow shares and the entire deferred variable pay will vest equally over a 3-year period.
Linked Instruments For all other employees in Business units and Approved Persons in Control and Support Functions and whose
total remuneration exceeds the regulatory threshold:
• 50% of the variable pay will be paid in cash at the end of the performance period; and
• 10% in the form of phantom or shadow shares at the end of the performance period and the phantom or
shadow shares subject to a minimum share retention period of 6 months from the award date.
• The balance 40% will be deferred over a period of 3 years and paid in the form of phantom or shadow shares
and vests equally over the 3 year period and the phantom or shadow shares subject to a minimum share
retention period of 6 months from the award date.
The Bank has introduced claw - back and malus clauses whereby the Remuneration Committee has the right
Claw Back and Malus to invoke these clauses under certain pre-defined circumstances where in the Bank can claw-back the vested
as well as the unvested bonus paid or payable to an employee.

Remuneration Policy (continued))
REMUNERATION COMPONENTS
It is the Bank’s intent to have a transparent, structured and comprehensive remuneration policy that covers all types of compensation and
benefits provided to employees.
The remuneration policy provides a standardized framework for remuneration covering employees at all levels of the Bank.
Remuneration offered by the Bank shall reflect the Bank’s objective of attracting and retaining the desired level of talent from the banking
sector.
Remuneration will be at a level, which will be commensurate with other Banks of similar activity in Bahrain, and will allow for changes
in the cost of living index. The compensation package shall comprise of basic salary and benefits and discretionary variable pay.
The following table summarizes the total remuneration:
Element of Pay Salary and Benefits
Rationale To attract and retain the desired level of talent.
Reviewed annually.
Benchmarked to the local market and the compensation package offered to employee is based on the job
Summary content and complexity.
The Bank offers a composite fixed pay i.e. it is not split as Basic and Allowances but is paid as one lump sum.
The benefits are aligned to the local market practice.

Element of Pay Variable Pay / Bonus
To incentivize the achievement of annual targets set at the Bank level and at the Business unit levels and
thereby also make sure that senior management get substantial portion as variable pay which is linked to
Rationale performance.
The Variable pay is deferred to ensure that the management’s interests are aligned to the shareholder value
and to align time horizon of risk.
The Bonus pool is determined based on the bottom up approach i.e. by setting base multiples of monthly
salary per level and aggregating the multiples per unit and then on to the Bank level.
The basis of payment of bonus would be as follows:
GCEO and Senior Management Base multiple * Bank score * Individual score
Business units Base multiple * Bank score * Unit score * Individual score
Control & Support units Base multiple * Unit score * Individual score
Computation of Variable Pay - Business Units

Beginning of the financial year:
Targets are set for the Business units and are aggregated to the Bank level target. In setting targets certain
Bank wide risk parameters which include capital, liquidity, profit and qualitative measure such as reputation
risk and the Bank and unit specific KPIs shall be considered. For achieving this target, total Bonus pool is
set based on monthly multiples of salary across the Bank. The Key feature is that bonus is self-funding and
the different levels of targets are not just % increase in profits but profits adjusted for additional bonus. This
Bonus Pool is subject to additional checks for its impact on the capital adequacy, as a proportion of net profit
and realized profit and as a proportion of the total fixed pay in any given financial year.
At the end of the financial year:
The actual results are evaluated against targets, considering the risk parameters matrix and adjustments if
any to the unit score or the Banks score as appropriate are made and the bonus pool is revised accordingly.
Summary The actual bonus pool is approved by the Remuneration Committee and the individual Bonus payments are
as per the scoring matrix.
Computation of Variable Pay – Control and Support Units
The Unit targets as set out and agreed with the Remuneration Committee in the beginning of each evaluation
period will be the base for Variable pay to be paid. Except in the case of Bank making a loss, the variable
pay for the employees in the Control and Support unit, would be payable based on the Unit targets and the
individual performance.
Base Multiples are set for each employee level in each Control and Support unit. The achievement of unit
target is assigned a weight of 1 and scored based on the level of actual results achieved.
The individual performance score is based on the individual rating and the score is set to vary between 0 up
to a maximum of 1.
The Summary of the Variable pay process is:
Links reward to Bank, business unit and individual performance.
Target setting process considers risk parameters which are both quantitative and qualitative such as
reputation.
Aligned to time horizon of risk the bonus has a deferral element and a share linkage to align the employee’s
interest with that of the shareholders.
Bonus can be lesser or nil if the Bank or business units do not achieve the risk adjusted targets or make
losses. Post risk assessment is carried out to ensure that in case of material losses or realization of less than
expected income which can be attributed to employee’s actions the claw back or malus as appropriate is
invoked.

Remuneration Policy (continued))
DETAILS OF REMUNERATION
(A) Board of Directors
Amounts in BD 2020 2019
Attendance fee and travel expenses 344,111 337,094

Remuneration paid 615,000 787,000
ASBB subsidiaries’ Board remuneration, attendance fees and expenses 18,850 20,476
(B) Employees
Amounts in BD thousands
Variable Upfront Variable Deferred
31 December 2020 No. of Staff Fixed* Cash Non-cash Cash Non-cash Total
Approved person business line 9 1,990 343 - 83 403 2,819
Approved person control & support 19 1,236 154 - 12 53 1,455
Other material risk takers 39 1,390 279 - 2 9 1,680
Other employees - Bahrain operations 296 6,647 1,159 - - - 7,806
Other employees overseas 28 186 - - - - 186
391 11,449 1,935 - 97 465 13,946
31 December 2019
Approved person business line 9 2,007 553 - 134 649 3,343
Approved person control & support 19 1,424 284 - 20 85 1,813
Other material risk takers 37 1,334 356 - 3 12 1,705
Other employees - Bahrain operations 288 6,512 1,844 - - - 8,356
Other employees overseas 28 196 - - - - 196
381 11,473 3,037 - 157 746 15,413
Fixed remuneration includes all compensation and benefits that are due to employees based on contractual arrangements (GOSI,
indemnity, tickets & medical)
Severance payments during the year amounted to zero.

DEFERRED PERFORMANCE BONUS AWARDS
Cash No. of Shares Others Total
31 December 2020 BD ‘000 Shares Value BD ‘000 BD ‘000
Opening balance 321 13,353,495 2,020 - 2,341
Awarded during the year 97 3,686,254 466 - 563
Bonus shares adjustment - 534,140 - - -
Exercised / sold / paid during the year (63) (4,124,968) (605) - (668)
Remeasurement of phantom shares - - 8 - 8
Closing balance 355 13,448,921 1,889 - 2,244
31 December 2019
Opening balance 345 12,235,923 1,738 - 2,083
Awarded during the year 157 5,080,059 746 - 903
Bonus shares adjustment - 428,257 - - -
Exercised / sold / paid during the year (144) (3,089,122) (278) - (422)
Remeasurement of shares - - 18 - 18
Risk Adjustment (37) (1,301,622) (204) - (241)
Closing balance 321 13,353,495 2,020 - 2,341

Risk Management & Compliance
At Al Salam Bank-Bahrain (“ASBB”, “Bank”, “Group”), our success is largely dependent on how efficiently we identify, measure, control
and manage risks. Hence, we view risk management as a core competency from a strategic point of view. Provisions of the Basel
Accord are the catalysts to the successful implementation of the pillars of risk management in line with industry best practice.
The fundamental principle underlying our risk management framework is ensuring that accepted risks are within the Board approved
risk appetite and the returns are commensurate with the risks taken. The objective is creating shareholder value through protecting
the Group against unforeseen losses, ensuring maximization of earnings potential and opportunities vis-à-vis the Group’s risk appetite
and ensuring earnings stability.
With this in mind, the Bank has focused its efforts on establishing effective and practical risk management and compliance frameworks
taking into consideration local and international best practices, the requirements of the Central Bank of Bahrain and the Basel Accord.
Risk Management Framework
The risk management framework defines the risk culture of Al Salam Bank–Bahrain and sets the tone throughout the Group to
practice the right risk behavior consistently to ensure that there is always a balance between business profits and risk appetite.
The risk management framework achieves this through the definition of the Group’s key risk management principles covering credit,
market, operational, information security, strategic and reputation risks.
Moreover, the framework further addresses the roles and responsibilities of the Board, risk management group and senior management
towards risk management. The individual components of the framework captures the risk assessment methodology adopted, risk
limits, the risk management information systems and reports, as well as the Group’s approach to capital management.
The effectiveness of the risk management framework is independently assessed and reviewed through internal audits, external audits
and Central Bank of Bahrain supervision. In addition, business and support groups carry out periodic risk control self-assessments.
As a result, the risk management framework creates an alignment between business and risk management objectives.
Capital Management
The cornerstone of risk management framework is the optimization of risk-reward relationship against the capital available through a
focused and well monitored capital management process involving risk management, finance and business groups.
Corporate Governance
The risk management framework is supported by an efficient Corporate Governance Framework discussed on pages 36 to 49.
Risk Ownership
The implementation of the Group-wide risk management framework is the responsibility of the Risk Management Department under
the supervision of the Group Chief Executive Officer and Board Audit and Risk Committee. Ownership of the various risks across the
Group lies with the business and support heads, being the first line of defense, and it is their responsibility to ensure that these risks
are managed in accordance with the risk management framework.
Risk Management assists business and support heads in identifying concerns and risks, identifying risk owners, evaluating risks
as to likelihood and consequences, assessing options for mitigating the risks, prioritizing risk management efforts, developing risk
management plans, authorizing implementation of risk management plans and tracking risk management efforts.
Compliance & Anti-Money Laundering Department
The Bank has established an independent and dedicated department to coordinate the implementation of compliance and Anti-
Money Laundering and Anti-Terrorist Financing program. The program covers policies and procedures for managing compliance with
regulations, anti-money laundering, disclosure standards on material and sensitive information and insider trading. In line with its
commitment to combat money laundering and terrorist financing, Al Salam Bank-Bahrain through its Anti-Money Laundering policies
ensures that adequate preventive and detective internal controls and systems operate effectively. The policies govern the guidelines
and procedures for client acceptance, maintenance and monitoring in line with the Central Bank of Bahrain and International standards
such as FATF recommendations and Basel Committee papers.
All inward and outward electronic transfers are screened against identified sanction lists issued by certain regulatory bodies including
the UN Security Council Sanctions Committees and US Department of the Treasury - OFAC, in addition to those designated by the
Central Bank of Bahrain.
The compliance program also ensures that all applicable Central Bank of Bahrain regulations are complied with and/ or non-compliance
is detected and addressed in a timely manner. The program includes compliance with regulations set by Ministry of Industry &
Commerce and Bahrain Bourse.
The Bank has formulated appropriate policies and implemented the requirements of Foreign Account Tax Compliance Act (FATCA) and
Common Reporting Standards (CRS) as required by the regulators. The due diligence and reporting requirements have been complied with.

Risk Management & Corporate Governance Frameworks
Board Committees
Risk Management & Compliance Functions
Management Committees
Supervisory Board
Fatwa and Shari’a
Board & Senior Comprehensive Compliance &
Senior
Management Oversight Internal Control Framework Anti-Money Laundering
Risk Assessment Methodology
Risk Policies, Capital

Risk Management Systems
Procedures & Limits Management
Internal Audit, External Audit, Central Bank of Bahrain

Corporate Social Responsibility
The Bank is committed to fulfilling its obligations as a good

corporate citizen in the communities in which it operates.
We endeavor to support the Bahrain Government in its efforts
to enhance the quality of life of the people of the Kingdom of
Bahrain.
Al Salam Bank-Bahrain underscore this commitment to our
community by supporting initiatives that add value to the
Island’s housing, education and health infrastructure, as well as
encouraging future economic growth and prosperity through
supporting entrepreneurship and the development of our youth.
During the year, charitable donations were made to medical
facilities and other charities that care for the less fortunate and
supported cultural initiatives in order to preserve the traditions
of the Kingdom for generations.

Fatwa & Shari’a Supervisory Board
Report to the Shareholders
In the name of Allah, the Beneficent and the Merciful
Praise be to Allah; Prayers and peace be upon the most ennoble messenger,
our Prophet Muhammad and his companion
The Report of Shari’a Supervisory Board of Al Salam Bank-Bahrain B.S.C, (“the Board”) submitted to the General Assembly on the
Bank’s activities during the financial year ending 31 December 2020.
First: Memorandum and Articles of Association

Al Salam Bank, B.S.C. operates as an Islamic Bank authorized by the Central Bank of Bahrain. We therefore confirm that the
Memorandum and Articles of Association of the Bank are in conformity with the rules and principles of Shari’a.
Second: Activities of the Bank and Board’s Guidance

The Board has supervised the activities and transactions of the Bank during the reporting year and instructed and guided various
departments to comply with the rules and principles of Shari’a and fatwas of the Board while undertaking such activities and
transactions. During the year, the SSB has held five meetings online due to Covid-19 with the senior staff of the Bank.
Third: Contracts and Transactions

The Board studied the operational structures that have been presented to it during the year, approved their contracts and documents,
and responded to the questions and inquiries that were raised in respect thereof and issued decisions and fatwas in this regard. These
fatwas and decisions have been circulated to the concerned departments of the Bank for execution and implementation. It has also
reviewed and studied drafts of the contacts and agreements that were presented to it in respect to sukuks (investment certificates),
syndicated financing transactions and investment funds and approved them after its comments were considered.
Fourth: Access to Records

The Management of the Bank has positively cooperated with the Board and, based on its request, allowed it to access the records,
information and data of the Bank that are necessary for it to perform the Sharia audit and supervision.
Fifth: Shari’a Audit

The Board has reviewed Internal Shari’a Audit reports and pointed out its observations on the reports. The Board further reviewed the
external Shari’a Audit report and noted the management responses on most of the points mentioned in the report. As for the points
that need rectification as appearing in the two reports, the Board directed the Bank’s Management to rectify and address those
points as soon as possible.
Sixth: Training
The Board has taken note of the efforts of the Bank’s Management in training its employees and recommended that the Management
continues to conduct regular training programmes for its employees in order to raise the level of performance and Shari’a compliance.
Seventh: Balance Sheet

The Board has reviewed the balance sheet, profit and loss accounts, accounting policies for the preparation of the financial statement
and the basis of distributing dividends to the shareholders and depositors.
The Board believes that the financial numbers presented in the balance sheet, to the extent of correct presentation and information
provided by the Bank’s Management and the Bank’s compliance with some observations, did not result from non-compliance of the
underlying transactions with the rules and principles of Shari’a. The Board, therefore, approved the balance sheet.

Eighth: Zakat
Since the Articles of Association of the Bank do not oblige the Bank to pay zakat on the invested Shareholder’s equity, the Board
has reviewed the calculation of the Zakat payable by the shareholders in order to be communicated to the shareholders. The Zakat
calculation was prepared in line with Shari’a Standards on Zakat issued by Accounting and Auditing Organization for Islamic Financial
Institutions (“AAOIFI”). Resultantly, the Board approved the calculation of Zakat and instructed the Bank to notify Shareholders of the
Zakat for this year, either through a disclosure in the balance sheet or any other means.
Ninth: Charity Fund

The Board has ensured that all non-Sharia compliant income and dividends are channelled to the Bank’s Charity Fund, which are
noted to be resulted from either the previous transactions due to merger and conversion of conventional banks into Al Salam Bank
or any other reason.
Decision of the Board

The Board emphasizes that compliance to the rules and principles of the Shari’a in respect of all the businesses and transactions of
the Bank is the responsibility of the Bank’s Management. The Board confirms that the transactions executed by the Bank during the
year, to the extent of the information and data made available to it by the Bank’s Management, do not conflict, in general, with the
rules and principles of Shari’a.
Allah is the guider to the right path.
The Board wishes for the Bank a continuous success and rectitude in doing things that pleases Allah.
Fatwa and Shari’a Supervisory Board
Shaikh Adnan Abdulla AlQattan Dr. Fareed Yaqoob Almeftah

Chairman Vice Chairman
Dr. Nedham Mohamed Yaqoobi Dr. Osama Mohamed Bahar

Member Member

Contents
Financial Statements
Independent Consolidated Consolidated Consolidated
Auditors’ Statement of Income Statement of
Report Financial Position Statement Changes in Equity
61 65 66 67
Consolidated Notes to the Basel lll – Pillar lll
Statement of consolidated Disclosures
Cash Flows financial statements
68 69 127

Independent Auditors’ Report to the Shareholders
Al Salam Bank-Bahrain B.S.C., Manama, Kingdom of Bahrain
Report on the audit of the consolidated financial statements
Opinion
We have audited the accompanying consolidated financial statements of Al Salam Bank-Bahrain B.S.C. (the “Bank”), and its subsidiaries
(together the “Group”) which comprise the consolidated statement of financial position as at 31 December 2020, the consolidated
statements of income, changes in equity, cash flows, for the year then ended, and notes, comprising significant accounting policies
and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial
position of the Group as at 31 December 2020, and consolidated results of its operations, changes in owners’ equity, its cash flows,
for the year then ended in accordance with the Financial Accounting Standards (“FAS”) issued by the Accounting and Auditing
Organisation for Islamic Financial Institutions (“AAOIFI”) as modified by the Central Bank of Bahrain (the “CBB”).
In our opinion, the Group has also complied with the Islamic Shariah Principles and Rules as determined by the Group’s Shariah
Supervisory Board during the year ended 31 December 2020.
Basis for opinion

We conducted our audit in accordance with Auditing Standards for Islamic Financial Institutions (“ASIFIs”) issued by AAOIFI. Our
responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the consolidated financial
statements section of our report. We are independent of the Group in accordance with AAOIFI’s Code of Ethics for Accountants and
Auditors of Islamic Financial Institutions, together with the ethical requirements that are relevant to our audit of the consolidated
financial statements in the Kingdom of Bahrain, and we have fulfilled our other ethical responsibilities in accordance with these
requirements and the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Impairment allowance on financing and finance lease assets

(Refer to accounting policy in Note 2.5 (d), use of estimates and judgments in Note 2.4 and management of credit risk in Note 32.2).
Description How the matter was addressed in our audit

We focused on this area because: Our procedures, amongst others, included:
• of the significance of financing and • Evaluating the appropriateness of the accounting policies adopted based on the
finance lease assets representing requirements of applicable accounting standards, our business understanding and
57% of total assets; industry practice.
• impairment of financing assets • Confirming our understanding of management’s processes, systems and controls
and assets acquired for leasing implemented, including controls over ECL model development.
involves: Control testing
 complex estimates and We performed process walkthroughs to identify the key systems, applications and controls
judgement over both timing used in the ECL processes. We tested the relevant General IT and application controls
and recognition of impairment over key systems used in the ECL process incorporating consideration of the economic
including susceptibility to disruption caused by COVID-19. Key aspects of our control testing involved the following:
management bias;
• Performing detailed credit risk assessment for a sample of performing and non-
 use of statistical models and performing financing contracts to test controls over credit rating and its monitoring
methodologies for determination process;
of expected credit losses. The
• Testing the design and operating effectiveness of the key controls over the completeness
Group exercises significant
and accuracy of the key inputs and assumptions elements into the ECL models;
judgments and makes a number
of assumptions in developing • Testing controls over the transfer of data between underlying source systems and the
its expected credit loss (‘ECL) ECL models that the Group operates;
models which is determined as • Testing controls over the modelling process, including governance over model monitoring,
a function of the assessment validation and approval;
of the probability of default • Testing key controls relating to selection and implementation of material economic
(“PD”), loss given default (“LGD”), variables; and
and exposure at default (“EAD”)
• Testing controls over the governance and assessment of model outputs and authorisation
associated with the underlying
and review of post model adjustments and management overlays including selection of
financial assets; and
economic scenarios and the probability weights applied to them.

Independent Auditors’ Report to the Shareholders (continued)

 complex disclosure requirements Tests of details
regarding credit quality of the Key aspects of our testing involved:
portfolio including explanation
• Sample testing over key inputs and assumptions impacting ECL calculations including
of key judgments and material
economic forecasts and weights to confirm the accuracy of information used;
inputs used in determination of
expected credit losses; • Re-performing key aspects of the Group’s significant increase in credit risk (“SICR”)
determinations and selecting samples of financial instruments to determine whether a
• The need to measure ECLs on
SICR was appropriately identified;
an unbiased forward-looking
basis incorporating a range of • Re-performing key elements of the Group’s model calculations and assessing
economic conditions. Significant performance results for accuracy; and
management judgment is applied • Selecting a sample of post model adjustments and management overlays in order to
in determining the economic assess the reasonableness of the adjustments by challenging key assumptions, testing
scenarios used and the probability the underlying calculation and tracing a sample back to source data.
weightings applied to them; and Use of specialists
• Adjustments to the ECL model For the relevant portfolios examined, we have involved KPMG specialists to assist us in
results are made by management assessing IT system controls and challenging key management assumptions used in
to address known impairment determining expected credit losses. Key aspects of their involvement include:
model limitations or emerging
• We involved our information technology specialists to test controls over the IT systems,
trends or risks. The assumptions
recording of data in source systems and transfer of data between source systems and
regarding the economic outlook
the impairment models;
are more uncertain due to
COVID-19 which, combined • We involved our credit risk specialists in:
with government response (e.g.  evaluating the appropriateness of the Groups’ ECL methodologies (including the
deferral programs and government staging criteria used);
stimulus package), increases the  re-performing the calculation of certain components of the ECL model (including the
level of judgement required by the staging criteria);
Group in calculating the ECL.
 evaluating the appropriateness of the Group’s methodology for determining the
economic scenarios used and the probability weighing applied to them; and
 evaluating the overall reasonableness of the management economic forecast by
comparing it to external market data and our understanding of the underlying sector
and macroeconomic trends including the impact of COVID-19.
Disclosures
• We assessed the adequacy of the Group’s disclosure in relation to use of significant
estimates and judgement and credit quality of financing and finance lease assets by
reference to the requirements of relevant accounting standards.
Valuation of unquoted equity investments

Refer to accounting policy in Note 2.5 (k), use of estimates and judgments in Note 2.4 and Note 42.

Non-trading investments include Our procedures, amongst others, included:
investment in unquoted equity • Comparing the key underlying financial data inputs to external sources, investee
securities that are carried at their fair company financial and management information, as applicable;
values.
• Assessing the qualification and experience of the independent valuers by reading the
We considered this as a key audit area terms of their engagement letter to determine whether there were any matters that
we focused on because the valuation might have affected their objectivity or limited their scope of work; and
of unquoted equity securities (level
• With the involvement of our own valuation specialists, we performed the following
3 financial instruments) held at fair
testing:
value requires the application of
valuation techniques which often  evaluating the appropriateness of the valuation methodology used by the Group
involve the exercise of significant and its appointed experts, where applicable and compared with observed industry
judgment by the Group and the use practice; and
of significant unobservable inputs.  evaluating the reasonableness of key input and assumptions used by using our
knowledge of the industries in which the investees operate and industry norms; and
• Evaluating the adequacy of the Group’s disclosures related to valuation of unquoted
equity instruments by reference to the relevant accounting standards.

Valuation of investment properties

Refer to accounting policy in Note 2.5 (m), use of estimates and judgments in Note 2.4 and Note 12
Description How the scope of our audit addressed the matter

We considered this as a key audit Our procedures, amongst others, included:
area we focused on because of: • With the involvement of our real estate valuation specialists, who by reference to their
• the uncertainty prevalent in the knowledge of the industry and available historical data:
property market; and  evaluated the appropriateness of the valuation methodology used by the independent
• application of valuation techniques property valuer appointed by the Group; and
which often involve the exercise  challenged the inputs and assumptions used in the valuation;
of judgment and the use of
• Assessing the qualification and experience of the independent property valuers by
assumptions and estimates.
reading the terms of their engagement letter to determine whether there were any
matters that might have affected their objectivity or limited their scope of work; and
• evaluating the adequacy of the Group’s disclosures related to valuation of investment
properties by reference to the relevant accounting standards.
Other information
The Board of Directors is responsible for the other information. The other information comprises the annual report but does not
include the consolidated financial statements and our auditors’ report thereon. Prior to the date of this auditors’ report, we obtained
the board of directors’ report and the remaining sections of the annual report are expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any
form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and,
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the
other information that we have obtained prior to the date of this auditors’ report, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors for the financial statements

The Board of Directors is responsible for the Group’s undertaking to operate in accordance with Islamic Sharia Rules and Principles
as determined by the Group’s Shariah Supervisory Board.
The Board of Directors is also responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with FAS as modified by CBB, and for such internal control as the board of directors determines is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the board of directors is responsible for assessing the Group’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the board of directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance but is not a guarantee that an audit conducted in accordance with ASIFIs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with ASIFIs, we exercise professional judgment and maintain professional skepticism throughout
the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by the board of directors.
• Conclude on the appropriateness of the board of directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or
conditions may cause the Bank to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group
to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance
of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the board of directors with a statement that we have complied with relevant ethical requirements regarding
independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the board of directors, we determine those matters that were of most significance in the audit
of the consolidated financial statements of the current period. and are therefore the key audit matters. We describe these matters in
our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on other regulatory requirements

As required by the Commercial Companies Law and Volume 2 of the Rulebook issued by the Central Bank of Bahrain, we report that:
a) the Bank has maintained proper accounting records and the consolidated financial statements are in agreement therewith;
b) the financial information contained in the Board of Director’s report is consistent with the consolidated financial statements;
c) we are not aware of any violations during the year of the Commercial Companies Law, the CBB and Financial Institutions Law
No. 64 of 2006 (as amended), the CBB Rule Book (Volume 2, applicable provisions of Volume 6 and CBB directives), the CBB
Capital Markets Regulations and associated resolutions, the Bahrain Bourse rules and procedures or the terms of the Bank’s
memorandum and articles of association that would have had a material adverse effect on the business of the Bank or on its
financial position; and
d) satisfactory explanations and information have been provided to us by management in response to all our requests.
The engagement partner on the audit resulting in this independent auditors’ report is Mahesh Balasubramanian.
KPMG Fakhroo
Partner Registration No. 137
10 February 2021

Consolidated Statement of Financial Position
31 December 2020
2020 2019
Note BD '000 BD '000
(Restated)
ASSETS
Cash and balances with banks and Central Bank 4 288,266 219,456
Sovereign Sukuk 5 393,108 345,305
Placements with financial institutions 6 37,965 114,803
Corporate Sukuk 7 16,395 22,162
Financing assets 8 814,449 685,756
Finance lease assets 9 469,363 389,742
Non-trading investments 11 98,034 108,991
Investment properties 12 67,586 72,774
Development properties 13 2,943 2,943
Investment in associates 14 12,036 10,640
Other assets 15 35,237 44,260
Goodwill 16 25,971 25,971
TOTAL ASSETS 2,261,353 2,042,803
LIABILITIES, EQUITY OF INVESTMENT ACCOUNTHOLDERS,

OWNERS' EQUITY AND NON-CONTROLLING INTEREST
LIABILITIES
Placements from financial institutions 6 116,883 211,459
Customers' current accounts 363,970 289,456
Murabaha term financing 17 221,671 145,590
Other liabilities 18 52,282 41,481
TOTAL LIABILITIES 754,806 687,986
EQUITY OF INVESTMENT ACCOUNTHOLDERS

Wakala from financial institutions 19 264,784 210,887
Wakala and Mudaraba from customers 19 960,596 823,856
TOTAL EQUITY OF INVESTMENT ACCOUNTHOLDERS 1,225,380 1,034,743
OWNERS' EQUITY
Share capital 20 230,450 221,586
Treasury stock 20 (7,530) (6,758)
Reserves 57,846 104,547
Total owners' equity 280,766 319,375
Non-controlling interest 401 699
TOTAL EQUITY 281,167 320,074
TOTAL LIABILITIES, EQUITY OF INVESTMENT ACCOUNTHOLDERS,
OWNERS' EQUITY AND NON-CONTROLLING INTEREST 2,261,353 2,042,803
H.E. Shaikh Khalid bin Mustahil Al Mashani Matar Mohamed Al Blooshi

Rafik Nayed
The attached notes 1 to 45 form part of these consolidated financial statements.

Consolidated Income Statement
Year ended 31 December 2020
2020 2019
Note BD '000 BD '000
(Restated)
OPERATING INCOME
Finance income 23 74,863 59,712
Income from Sukuk 19,481 17,066
(Loss) / Income from non-trading investments 24 (8,964) 2,633
Loss from properties 25 (1,825) (1,442)
Fees and commission, net 26 7,406 7,639
Share of profit from associates 14 1,953 1,209
Other income 27 3,665 4,889
Total operating income 96,579 91,706
Finance expense on placements from financial institutions (4,265) (4,171)
Finance expense on Murabaha term financing (5,559) (5,583)
Return on equity of investment accountholders before
Group's share as a Mudarib and Wakala (60,186) (50,271)
Group's share as a Mudarib 925 1,002
Group's Wakala fee 29,926 20,844
Share of profit of investment accountholders 19 (29,335) (28,425)
Net operating income 57,420 53,527
OPERATING EXPENSES
Staff cost 28.1 14,759 15,394
Premises cost 2,293 2,269
Depreciation 1,882 1,599
Other operating expenses 28.2 11,091 10,525
Total operating expenses 30,025 29,787
PROFIT BEFORE IMPAIRMENT ALLOWANCES 27,395 23,740

Impairment charge for financing, net 10 (17,136) (2,531)
Impairment charge for investment and others 10.1 (1,141) (79)
NET PROFIT FOR THE YEAR 9,118 21,130
ATTRIBUTABLE TO:
- Shareholders of the Bank 9,142 21,093
- Non-controlling interest (24) 37
9,118 21,130
Basic and diluted earnings per share (fils) 22 4.3 9.7
H.E. Shaikh Khalid bin Mustahil Al Mashani Matar Mohamed Al Blooshi

Rafik Nayed

Amounts in BD '000s
Attributable to shareholders of the Bank
Reserves
Real
Accumulated Estate Foreign
Loss / Investment Fair Exchange Total Non-
Share Treasury Share Statutory Retained Fair Value Value Translation Total Owners' Controlling Total
Capital Stock Premium Reserve Earnings Reserve Reserve Reserve Reserves Equity Interest Equity
Balance as of 1 January 2020 221,586 (6,758) 12,209 21,107 42,608 8,257 23,589 (3,223) 104,547 319,375 699 320,074
Net profit for the year - - - - 9,142 - - - 9,142 9,142 (24) 9,118
Net changes in fair value - - - - - - (241) - (241) (241) - (241)
Movement in fair value of Sukuks - - - - - 1,587 - - 1,587 1,587 - 1,587
Foreign currency re-translation - - - - - - - (561) (561) (561) - (561)
Total recognised income and expense - - - - 9,142 1,587 (241) (561) 9,927 9,927 (24) 9,903
Bonus shares issued 8,864 - - - (8,864) - - - (8,864) - - -
Cash dividend for the year 2019 - - - - (8,551) - - - (8,551) (8,551) - (8,551)
Modification loss (note 2.2) - - - - (24,768) - - - (24,768) (24,768) - (24,768)
Subsidy from government (note 2.2) - - - - 2,143 - - - 2,143 2,143 - 2,143
Purchase of treasury stock - (772) - - - - - - - (772) - (772)
Movements in non-controlling interest - - - - - - - - - - (274) (274)
Transactions with
non-controlling interest (note 20.2) - - - - (16,588) - - - (16,588) (16,588) - (16,588)
Consolidated Statement of Changes In Equity
Transfer to statutory reserve - - - 671 (671) - - - - - - -

Balance at 31 December 2020 230,450 (7,530) 12,209 21,778 (5,549) 9,844 23,348 (3,784) 57,846 280,766 401 281,167
Balance as of 1 January 2019 214,093 (3,855) 12,209 18,998 42,101 199 23,589 (3,195) 93,901 304,139 683 304,822
Impact of adopting FAS 33 - - - - (3,631) - - - (3,631) (3,631) - (3,631)
Balance as at 1 January 2019 (restated) 214,093 (3,855) 12,209 18,998 38,470 199 23,589 (3,195) 90,270 300,508 683 301,191
Net profit for the year - - - - 21,093 - - - 21,093 21,093 37 21,130
Movement in fair value of Sukuks - - - - - 8,268 - - 8,268 8,268 - 8,268
Foreign currency re-translation - - - - - (210) - (28) (238) (238) - (238)
Total recognised income and expense - - - - 21,093 8,058 - (28) 29,123 29,123 37 29,160
Bonus shares issued 7,493 - - - (7,493) - - - (7,493) - - -
Cash dividend for the year 2018 - - - - (7,353) - - - (7,353) (7,353) - (7,353)
Purchase of treasury stock - (2,903) - - - - - - - (2,903) - (2,903)
Movements in non-controlling interest - - - - - - - - - - (21) (21)
Transfer to statutory reserve - - - 2,109 (2,109) - - - - - - -
Balance at 31 December 2019 221,586 (6,758) 12,209 21,107 42,608 8,257 23,589 (3,223) 104,547 319,375 699 320,074

Consolidated Statement of Cash Flows
2020 2019
BD '000 BD '000
(Restated)
OPERATING ACTIVITIES
Net profit for the year 9,118 21,130
Adjustments:
Depreciation 1,882 1,599
Amortisation of premium on Sukuk - net - 286
Loss from non-trading investments and properties 10,616 (1,191)
Net impairment charge 18,277 2,610
Impact of modification loss and government subsidies, net (23,170) -
Share of profit from associates (1,953) (1,209)
Operating income before changes in operating assets and liabilities 14,770 23,225
Changes in operating assets and liabilities:

Mandatory reserve with Central Bank 10,093 (5,938)
Balances with other banks ** (9,955) -
Financing assets and finance lease assets (224,612) (250,630)
Other assets (6,835) 778
Placements from financial institutions (94,576) 177,637
Other liabilities 14,912 (2,362)
Equity of investment accountholders 190,637 118,684
Net cash (used in) / from operating activities (31,052) 99,008
INVESTING ACTIVITIES
Sovereign Sukuk (46,440) 12,942
Corporate Sukuk 5,743 (12,631)
Non-trading investments and properties 4,147 (371)
Investment in associates - 6,303
Purchase of premises and equipment (2,304) (1,649)
Net cash (used in) / from investing activities (38,854) 4,594
FINANCING ACTIVITIES
Murabaha term financing 76,081 (9,953)
Dividends paid (12,993) (7,777)
Purchase of treasury stock (772) (2,903)
Net movements in non-controlling interest (274) (21)
Net cash from / (used in) financing activities 62,042 (20,654)
NET CHANGE IN CASH AND CASH EQUIVALENTS (7,864) 82,948
Cash and cash equivalents at 1 January 299,509 216,561

CASH AND CASH EQUIVALENTS AT 31 DECEMBER 291,645 299,509
Cash and cash equivalents comprise of:*

Cash and other balances with Central Bank 82,286 83,500
Balances with other banks ** 171,253 101,107
Placements with financial institutions with
original maturities of less than 90 days 38,106 114,902
291,645 299,509
* Cash and cash equivalents as at 31 December 2020 is gross of the expected credit loss of BD 217 thousands (2019: BD 192 thousands)
** Balances with other banks is net of restricted cash of BD 9,955 thousands which is not available for day to day operations.
.The attached notes 1 to 45 form part of these consolidated financial statements

Notes to the Consolidated Financial Statements
31 December 2020
1 REPORTING ENTITY
Al Salam Bank-Bahrain B.S.C. (“the Bank”) was incorporated in the Kingdom of Bahrain under the Bahrain Commercial Companies
Law No. 21/2001 and registered with Ministry of Industry, Commerce and Tourism (“MOICT”) under Commercial Registration number
59308 on 19 January 2006. The Bank is regulated and supervised by the Central Bank of Bahrain (“the CBB”) and has an Islamic
retail banking license and operates under Islamic principles in accordance with all relevant regulatory guidelines for Islamic banks
issued by the CBB. The Bank’s registered office is P.O. Box 18282, Bahrain World Trade Center, East Tower, King Faisal Highway,
Manama 316, Kingdom of Bahrain. The Bank’s ordinary shares are listed in Bahrain Bourse and Dubai Financial Market.
The principal subsidiaries are as follows:
% holding
Name of entity Country of incorporation Principal activities 2020 2019
ASB Seychelles Seychelles Provide Banking services 70% 70%
ASB Biodiesel Hong Kong Production of Biodiesel 36% 36%
The Bank and its principal banking subsidiary operates through ten branches in the Kingdom of Bahrain and one branch in Seychelles
respectively and offer a full range of Shari’a-compliant banking services and products. The activities of the Bank includes managing
profit sharing investment accounts, offering Islamic financing contracts, dealing in Shari’a-compliant financial contracts as principal
/ agent, managing Shari’a-compliant financial contracts and other activities permitted for under the CBB’s Regulated Islamic Banking
Services as defined in the licensing framework. The economic interest in ASB Biodiesel is higher than the % holding due to existence
of other class of equity and financing provided by the Bank.
These consolidated financial statements have been authorised for issue in accordance with a resolution of the Board of Directors
dated 10 February 2021.
2 ACCOUNTING POLICIES
2.1 BASIS OF PREPARATION AND PRESENTATION

The consolidated financial statements of the Group are prepared on a historical cost basis, except for investment in sovereign and
corporate sukuk, non-trading investments, investments properties and certain hedging instruments, which are carried at fair value.
These consolidated financial statements are presented in Bahraini Dinars, being the functional and presentation currency of the
Bank, rounded to the nearest thousand [BD ‘000], except where otherwise indicated.
The consolidated financial statements of the Group has been prepared in accordance with applicable rules and regulations issued
by the Central Bank of Bahrain (“CBB”) including the CBB issued circulars on regulatory concessionary measures in response to
COVID-19. These rules and regulations require the adoption of all Financial Accounting Standards issued by the Accounting and
Auditing Organisation of Islamic Financial Institutions (AAOIFI) (FAS), except for:
(a) recognition of modification losses on financial assets arising from payment holidays provided to customers impacted by
COVID-19 without charging additional profits, in equity instead of the profit or loss as required by FAS issued by AAOIFI. Any other
modification gain or loss on financial assets are recognised in accordance with the requirements of applicable FAS. Refer to note
2.2 for further details; and
(b) recognition of financial assistance received from the government and / or regulators as part of its COVID-19 support measures
that meets the government grant requirement, in equity, instead of the profit or loss as required by the statement on “Accounting
implications of the impact of COVID-19 pandemic” issued by AAOIFI, to the extent of any modification loss recorded in equity as
a result of (a) above, and the excess amount to be recognized in the profit or loss. Any other financial assistance is recognised in
accordance with the requirements of FAS. Refer to note 2.2 for further details.
The above framework for basis of preparation of the consolidated financial statement is hereinafter referred to as ‘Financial Accounting
Standards as modified by CBB’.
In line with the requirements of AAOIFI and the CBB rule book, for matters not covered under AAOIFI standards the group takes
guidance from the relevant International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards
Board (“IASB”).
The accounting policies used in the preparation of annual audited consolidated financial statements of the Group for the year ended
31 December 2020 were in accordance with FAS as issued by AAOIFI. However, except for the above-mentioned modifications to
accounting policies that have been applied retrospectively and impact of adoption of new standards (note 2.6), all other accounting
policies remain the same and have been consistently applied in this consolidated financial statement. The retrospective application
of the change in accounting policies on adoption of FAS as modified by CBB did not result in any change to the financial information
reported for the comparative year.

Notes to the Consolidated Financial Statements (continued)
31 December 2020
2 ACCOUNTING POLICIES (continued)
2.2 COVID-19 IMPACT

On 11 March 2020, the Coronavirus (COVID 19) outbreak was declared a pandemic by the World Health Organization (WHO) and
has rapidly evolved globally. This has resulted in a global economic slowdown with uncertainties in the economic environment. This
includes disruption to capital markets, deteriorating credit markets and liquidity concerns.The estimation uncertainty is associated
with the extent and duration of the expected economic downturn and forecasts for key economic factors including GDP, employment,
oil prices etc.
Authorities have taken various measures to contain the spread including implementation of travel restrictions and quarantine
measures. The Government of Kingdom of Bahrain has announced various economic stimulus programmes (“Packages”) to support
businesses in these challenging times. The Group and its clients are expected to get some benefits from these Packages that will
help them sustain the impact of the crisis.
The management and the Board of Directors (BOD) has been closely monitoring the potential impact of the COVID 19 developments
on the Group’s operations and financial position; including possible loss of revenue, impact on asset valuations, impairment, review of
onerous contracts and debt covenants, outsourcing arrangements etc. The Group has also put in place contingency measures, which
include, but are not limited to enhancing and testing of business continuity plans including its liquidity requirements.
In preparing the consolidated financial statement, judgements made by management in applying the Group’s accounting policies
and sources of estimation are subject to uncertainty regarding the potential impacts of the current economic volatility and these are
considered to represent management’s best assessment based on available or observable information.
As of 31 December 2020, the Bank is compliant with the required regulatory capital adequacy ratio, net stable funding ratio and
liquidity coverage ratios.
IMPACT OF COVID-19 CONCESSIONARY MEASURES
1) Modification of financial assets

During the current year, based on a regulatory directive issued by the CBB as concessionary measures to mitigate the impact of
COVID-19 (refer note 2.1), the one-off modification losses amounting to BD 24,768 thousands arising from the 6-month payment
holiday provided to financing customers without charging additional profit has been recognized directly in equity. The modification
loss has been calculated as the difference between the net present value of the modified cash flows calculated using the original
effective profit rate and the current carrying value of the financial assets on the date of modification. The Group provided payment
holiday on financing exposures amounting to BD 896,279 thousands as part of its support to impacted customers.
2) Government assistance and subsidies

Governments and central banks across the world have responded with monetary and fiscal interventions to stabilize economic
conditions. The Government of Kingdom of Bahrain has announced various economic stimulus programmes (“Packages”) to support
businesses in these challenging times.
As per the regulatory directive, financial assistance amounting to BD 2,143 thousands representing specified reimbursement of a
portion of staff costs and waiver of fees, levies, utility charges and cost of Repo funding received from the government and regulator,
in response to its COVID-19 support measures, has been recognized directly in equity.
Fair valuation
The COVID-19 pandemic has resulted in a global economic slowdown with uncertainties in the economic environment. The global
capital and commodity markets have also experienced great volatility and a significant drop in prices. The Group’s fair valuation
exercise primarily relies on quoted prices from active markets for each financial instrument (i.e. Level 1 input) or using observable or
derived prices for similar instruments from active markets (i.e. Level 2 input) and has reflected the volatility evidenced during the year
and as at the end of the reporting date in its measurement of its financial assets and liabilities carried at fair value. Where fair value
measurements was based in full or in part on unobservable inputs (i.e. Level 3), management has used its knowledge of the specific
asset/ investee, its ability to respond to or recover from the crisis, its industry and country of operations to determine the necessary
adjustments to its fair value determination process. In particular for assets, where underlying is long term real estate infrastructure
projects, management has considered long term measures and likely recoveries. This may not significantly impact the underlying
drivers of fair valuation of such assets.
Carrying value of the non-trading investment portfolio and investment properties, has reported a fair value loss of 8.1% and 2.4%
respectively as at 31 December 2020 due to the ongoing volatility in the global and regional markets.

31 December 2020
2.3 BASIS OF CONSOLIDATION
(i) Business combinations

Business combinations are accounted for using the acquisition method when the acquired set of activities meets the definition of
a business. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date
fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether
to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net
assets
In a business combination achieved in stages, the group remeasures its previously held equity interest in the acquiree at its acquisition
date fair value and recognises the resulting gain or loss, if any, in the consolidated income statement or total comprehensive income
as appropriate.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.
In a business combination in which the Bank and the acquiree exchange only equity interests, the acquisition-date fair value of the
acquiree’s equity interests is used to determine the amount of goodwill.
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any
goodwill that arises is tested annually for impairment (see 2.5 (q)). Any gain on a bargain purchase is recognised in profit or loss
immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are
generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that
meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within
equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the
fair value of the contingent consideration are recognised in profit or loss.
Investments acquired that do not meet the definition of business combination are recorded as assets acquisitions e.g. financial
assets or investment in properties as appropriate. When such investments are acquired, the Group allocates the cost of acquisition
between the individual identifiable assets and liabilities based on their relative fair values at the date of acquisition. Cost of such
assets is the sum of all consideration given and any non-controlling interest recognised. If the non-controlling interest has a present
ownership interest and is entitled to a proportionate share of net assets upon liquidation, the Group recognises the non-controlling
interest at its proportionate share of net assets.
(ii) Subsidiaries
The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries as at 31 December 2020.
The financial statements of the subsidiaries are prepared for the same reporting year except for one subsidiary. All subsidiaries are
using consistent accounting policies of the Bank.
Subsidiaries are those enterprises (including special purpose entities) controlled by the Bank. Control exists when the Group has the
power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities.
Subsidiaries are consolidated from the date on which control is transferred to the Group and de-consolidated from the date that
control ceases. Control is presumed to exist when the Bank owns majority of the voting rights in the investee.
Special purpose entities (SPEs) are entities that are created to accomplish a narrow and well-defined objective such as the
securitisation of particular assets, or the execution of a specific financing or investment transaction and usually voting rights are not
relevant for the operating of such entities. An investor that has decision-making power over an investee and exposure to variability of
returns determines whether it acts as a principal or as an agent to determine whether there is a linkage between power and returns.
When the decision maker is an agent, the link between power and returns is absent and the decision maker’s delegated power does
not lead to a control conclusion. Where the Group’s voluntary actions, such as finance amounts in excess of existing liquidity facilities
or extending terms beyond those established originally, change the relationship between the Group and an SPE, the Group performs
a reassessment of control over the SPE.
The financial statements of SPE are not included in these consolidated financial statements except when the Group controls the
entity. Information about the Group’s fiduciary assets under management is set out in note 37.

31 December 2020
2.3 BASIS OF CONSOLIDATION (continued)
(iii) Non-controlling interests

Non-controlling interests (NCI) are measured at their proportionate share of the acquiree’s identifiable net assets at the date of
acquisition. Profits or losses attributable to non-controlling interests are reported in the consolidated income statement as income
attributable to non-controlling interests. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-
controlling interests even if doing so causes the non-controlling interests to have a deficit balance.
The Group treats transactions with non-controlling interests as transactions with equity owners of the Group.
(iv) Loss of control

When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value,
with the change in carrying amount recognised in the consolidated income statement. The fair value is the initial carrying amount
for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition,
any amounts previously recognised in equity in respect of that entity are accounted for as if the Group had directly disposed of the
related assets or liabilities. This may mean that amounts previously recognised in other equity are reclassified to the consolidated
income statement.
(v) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions are eliminated in preparing the
consolidated financial statements. Intra-group gains on transactions between the Group and its equity accounted associates are
eliminated to the extent of the Group’s interest in the investees. Unrealised losses are also eliminated in the same way as unrealised
gains, but only to the extent that there is no evidence of impairment. Accounting policies of the subsidiaries and associates have been
changed where necessary to ensure consistency with the policies adopted by the Group.
(vi) Foreign currency
(a) Functional and presentation currency

Items included in the consolidated financial statements are measured using the currency of the primary economic environment in
which the entity operates (the functional currency). The consolidated financial statements are presented in Bahraini Dinars, which is
the Bank’s functional and presentation currency.
(b) Foreign currencies

Foreign currency transactions are recorded at rates of exchange prevailing at the dates of the transactions. Monetary assets and
liabilities in foreign currencies at the consolidated statement of financial position date are retranslated at market rates of exchange
prevailing at that date. Gains and losses arising on translation are recognised in the consolidated income statement. Non-monetary
assets that are measured in terms of historical cost in foreign currencies are recorded at rates of exchange prevailing at the value
dates of the transactions. Translation gains or losses on non-monetary items classified as “fair value through equity” are included
in consolidated statement of changes in equity until the related assets are sold or derecognised at which time they are recognised
in the consolidated income statement. Translation gains on non-monetary assets classified as “fair value through profit or loss” are
directly recognised in the consolidated income statement as part of fair value changes.
(c) Translation of foreign operations

Assets and liabilities of foreign subsidiaries and associates whose functional currency is not Bahraini Dinars are translated into Bahraini
Dinars at the rates of exchange prevailing at the reporting date. Income and expense items are translated at average exchange rates
prevailing for the reporting year. Any exchange differences arising on translation are included in foreign exchange translation reserve
forming part of equity except to the extent that the translation difference is allocated to the non-controlling interest. On disposal
of foreign operations, exchange differences relating thereto and previously recognised in foreign exchange translation reserve are
recognised in the consolidated statement of changes in equity.
2.4 SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

The preparation of the consolidated financial statements requires management to make judgments and estimates that affect the
reported amount of financial assets and liabilities and disclosure of contingent liabilities. These judgments and estimates also affect
the revenues and expenses and the resultant allowance for losses as well as fair value changes reported in equity.

31 December 2020
2.4 SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES (continued)
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimating uncertainty at the date of the consolidated
statement of financial position, that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below:
Impairment assessment of financial contracts subject to credit risk

In determining expected credit losses (‘ECL’) on financial contracts subject to credit risk, significant estimates are made in determination
of inputs into the ECL measurement model, including key assumptions used in estimating recoverable cash flows and incorporation
of forward-looking information. Refer to notes 2.5 (d) and 32.2 for further details.
Impairment of goodwill
Impairment exists when carrying value of an asset or cash generating unit (CGU) exceeds its recoverable amount, which is the higher
of its fair value less costs of disposal and its value in use.
The recoverable amount of the cash-generating unit’s goodwill is based on value-in-use calculations using cash flow projections
from financial budgets approved by the Board of Directors, extrapolated for three years projection using nominal projected growth
rate. The determination of projected growth rate and discount rate involves judgment whereas, preparation of cash flow projections
requires various management assumptions.
The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between
loss estimates based on the actual loss experience. Refer note 16 for further details.
Impairment of fair value through equity investments

The Group determines that investments carried at fair value through equity are impaired when there has been a significant or
prolonged decline in the fair value below their cost. This determination of what is significant or prolonged requires judgment. In the
case of quoted equity securities in active markets, the Group generally considers a decline in value below cost of 30%, or a decline
that persists for more than 9 months as an indicator of impairment. In the case where markets for the investment are assessed to
be inactive, the Group determines impairment based on its assessment of fair value and the investee companies’ financial health,
industry and sector performance.
Fair value of unquoted equity

The Group determines fair value of equity investments that are not quoted in active markets by using valuation techniques such
as discounted cash flows and recent transaction prices. Fair value estimates are made at a specific point in time, based on market
conditions and information about the investee companies. These estimates are subjective in nature and involve uncertainties and
matters of significant judgement and therefore, cannot be determined with precision. There is no certainty about future events
(such as continued operating profits and financial strengths). It is reasonably possible, based on existing knowledge, that outcomes
within the next financial year that are different from assumptions could require a material adjustment to the carrying amount of the
investments. In case where discounted cash flow models have been used to estimate fair values, the future cash flows have been
estimated by the management based on information from and discussions with representatives of investee companies, and based
on the latest available audited and un-audited financial statements. The basis of valuation have been reviewed by the Management
in terms of the appropriateness of the methodology, soundness of assumptions and correctness of calculations and have been
approved by the Board of Directors for inclusion in the consolidated financial statements.
Valuation of investments in private equity and joint ventures in real estate measured at fair value through profit and loss involve
judgment and is normally based on one of the following:
• valuation by independent external valuers for underlying properties / projects;
• recent arm’s length market transactions;
• current fair value of another contract that is substantially similar;
• present value of expected cash flows at current rates applicable for items with similar terms and risk characteristics; or
• application of other valuation models.
Estimating fair value of investment property and net realisable value of development property
Investment property are carried at their fair values. Development property is stated at lower of cost and net realisable value. Net
realisable value is the estimated selling price in the ordinary course of business less estimated selling expenses.

31 December 2020
The Group appoints experienced external valuers to determine the market value of the investment and development properties at the
balance sheet date. For large development projects, a residual value approach is adopted which forecasts future cost to completion
and use of the expected development. The management has forecasted the cost of completion of development property and has
engaged independent valuers to estimate the residual value of the development property based on estimated / forecasted market
selling prices for similar properties. Net realisable value estimates are made at a specific point in time, based on market conditions and
information about the expected use of development property.
The 31 December 2020 valuation contains a ‘material valuation uncertainty’ clause due to the market disruption caused by the
COVID-19 pandemic, which resulted in a reduction in transactional evidence and market yields. This clause does not invalidate the
valuation but implies that there is substantially more uncertainty than under normal market conditions. Accordingly, the valuer cannot
attach as much weight as usual to previous market evidence for comparison purposes, and there is an increased risk that the price
realised in an actual transaction would differ from the value conclusion. As a result of this increased uncertainty, the assumptions
may be revised significantly in 2021.
The Group calibrates the valuation techniques yearly and tests these for validity using either prices from observable current market
transactions in the same contract or other available observable market data.
Judgments
Going concern
The management has made an assessment of the Group’s ability to continue on a going concern and is satisfied that the Group
has the resources to continue in business for the foreseeable future. Furthermore, the management is not aware of any material
uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the consolidated
financial statements continue to be prepared on the going concern basis.
Control over special purpose entities

The Group sponsors the formation of special purpose entities (SPE’s) primarily for the purpose of allowing clients to hold investments.
The Group provides corporate administration, investment management and advisory services to these SPE’s, which involve the Group
making decisions on behalf of such entities. The Group administers and manages these entities on behalf of its clients, who are by
and large third parties and are the economic beneficiaries of the underlying investments. The Group does not consolidate SPE’s that
it does not have the power to control directly or indirectly, to govern the financial and operating policies of an enterprise so as to
obtain benefits from its activities. In determining whether the Group has the power to control an SPE, judgements are made about
the objectives of the SPE’s activities, its exposure to the risks and rewards, as well as about the Group intention and ability to make
operational decisions for the SPE and whether the Group derives benefits from such decisions.
Investment classification
In the process of applying the Group’s accounting policies, management decides on acquisition of an investment whether it should
be classified as investments carried at fair value through income statement or investments carried at fair value through equity or
investments carried at amortised cost. The classification of each investment reflects the management’s intention in relation to each
investment and is subject to different accounting treatments based on such classification.
Significant judgement is involved in assessment of the business model within which the investments are managed and assessment
of whether the contractual terms of the investment represents either a debt-type instrument or other investment instrument having
reasonably determinable effective yield. The impact on investment classification on adoption of FAS 33 has been disclosed in note
2.6.
Impairment on equity-type investments classified as fair value through equity

In the case of equity-type investments classified as fair value through equity and measured at fair value, a significant or prolonged
decline in the fair value of an investment below its cost is considered in determining whether the investments are impaired. If any
such evidence exists for equity-type investments classified as fair value through equity, the cumulative loss previously recognised
in the consolidated statement of changes in equity is removed from equity and recognised in the consolidated statement of income.
Impairment losses recognised in the consolidated statement of income on equity-type investments are subsequently reversed
through equity.

31 December 2020
In the current uncertain and extra-ordinary market conditions, for the purpose of determination of what constitutes significant or
prolonged decline in fair value of investments, the management takes into account the following additional factors:
• Their intention relating to the respective holding years of such investments i.e. for trading purposes, or with intention for strategic
investment , or for long-term dividends and capital gains etc.;
• As to whether the decline in value of investment is in line with the overall trend of decline in the relevant or local market corresponding
to the uncertain economic condition as a result of COVID-19;
• Forecasts of expected recovery of market values within the expected holding years; and/ or
• Forecasts of the expected recovery of the core business of the investee entity within the expected holding years and consequential
cash flows to the institution.
Expected Credit Loss (ECL)

Establishing the criteria for determining whether credit risk on a financial asset has increased significantly since initial recognition,
determining the methodology for incorporating forward-looking information into the measurement of ECL and selection and approval
of models used to measure ECL are significant areas that require use of management judgements (refer note 32.2).
2.5 SIGNIFICANT ACCOUNTING POLICIES
a) Financial instruments
Financial assets consist of balances with banks and the Central Bank, Sovereign Sukuk, Corporate Sukuk, placements with financial
institutions, Murabaha financing (net of deferred profits), Mudaraba financing, Musharaka financing, receivable under finance lease
assets contracts, asset under conversion, non-trading investments in equity securities, derivatives used for risk management and
other receivables.
Financial liabilities contracts consist of placement from financial institutions, placements from customers, customers’ current
accounts, murabaha term financing and other payables.
Except for non-trading investments and derivatives used for risk management instruments, all financial assets and financial liabilities
are carried at amortised cost.
A financial asset or financial liability is measured initially at fair value plus, for an item not at FVTPL, transaction costs that are directly
attributable to its acquisition or issue. The fair value of a financial instrument at initial recognition is generally its transaction price.
Amortized cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition,
minus the capital repayments, plus or minus the cumulative amortization using the effective profit method of any difference between
the initial amount recognised and the maturity amount, minus any reduction (directly or through the use of an allowance account) for
impairment or uncollectability. The calculation of the effective profit rate includes all fees paid or received that are an integral part of
the effective profit rate.
b) Trade and settlement date accounting

The Group recognises financing, investments, deposits and equity of investment accountholders on the date on which they are
originated. Purchases and sale of all other financial assets and liabilities are recognised on the trade date, i.e. the date that the Group
contracts to purchase or sell the asset or liability.
c) Derecognition
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Group
has transferred substantially all risk and rewards of ownership.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying
amount of the asset and the maximum amount of consideration that the Group could be required to pay.
Financial liabilities are derecognised when the obligation specified in the contract is legally discharged, cancelled, or expired.

31 December 2020
2.5 SIGNIFICANT ACCOUNTING POLICIES (continued)
d) Impairment assessment
Impairment of financial assets and commitments

The Group applies three-stage approach to measure ECL on financial assets carried at amortised cost. Assets migrate through the
following three stages based on the change in credit quality since initial recognition.
Stage 1: Twelve months ECL

For exposures where there has not been a Significant Increase in Credit Risk (“SICR”), since initial recognition, a portion of the lifetime
ECL associated with the probability of default events occurring within next twelve months is recognised.
Twelve-month ECL (Stage 1) is the portion of ECL that results from probable default events on a financial contract within twelve
months after the reporting date.
Stage 2: Lifetime ECL – not credit impaired

For credit exposures where there has been a SICR since initial recognition but that are not credit impaired, a lifetime ECL is recognised.
Lifetime ECL (Stage 2) is a probability-weighted estimate of credit losses and is determined based on the difference between the
present value of all cash shortfalls. The cash shortfall is the difference between all contractual cash flows that are due to the Group
and the present value of the recoverable amount, for financial assets that are not credit-impaired at the reporting date.
Stage 3: Lifetime ECL – credit impaired

Financial contracts are assessed as credit impaired when one or more events that have a detrimental impact on the estimated future
cash flows of that asset have occurred.
For Stage 3 financial contracts, the provisions for credit-impairment are determined based on the difference between the net carrying
amount and the recoverable amount of the financial contract.
Credit-impaired financial assets and assets acquired for leasing
At each reporting date, the Group assesses whether financial assets carried at amortised cost and finance lease assets are credit
impaired. A financial asset and finance lease assets is ‘credit-impaired’ when one or more events that have a detrimental impact on
the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset and finance lease asset is credit-impaired includes the following observable data:
• significant financial difficulty of the customer or issuer;
• a breach of contract such as a default or being more than 90 days past due;
• the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;
• it is probable that the customer will enter bankruptcy or other financial re-organization; or
• the disappearance of an active market for a security because of financial difficulties.
Write-offs
Financial assets are written-off (either partially or in full) when there is no realistic prospect of recovery. This is generally the case
when the Group determines that the customer does not have assets or sources of income that could generate sufficient cash flows
to repay the amounts subject to the write-off. However, financial assets that are written-off could still be subject to enforcement
activities in order to comply with the Group’s procedures for recovery of amounts due.
Presentation of allowance for credit losses in the consolidated statement of financial position
Allowance for credit losses are presented in the consolidated statement of financial position as follows:
• financial assets measured at amortised cost, as a deduction from the gross carrying amount of the assets;
• financing commitments and financial guarantee contracts: generally as a provision under other liabilities; and
• where a financial contract includes both a drawn and undrawn component, and the Group has identified the ECL on the financing
commitments / off-balance sheet component separately from those on the drawn component, the Group presents allowance
for credit losses for drawn components. The amount is presented as a deduction from the gross carrying amount of the drawn
component. Allowance for credit losses for the undrawn component is presented as a provision in other liabilities.

31 December 2020
e) Cash and cash equivalents

For the purpose of the consolidated cash flows statement, “cash and cash equivalents” consist of cash on hand, balances with
the Central Bank of Bahrain excluding mandatory reserve deposits, balances with banks and other financial institutions (excluding
restricted balances) and placements with financial institutions with original maturities of 90 days or less when acquired.
f) Financing assets
Financing assets comprise of Sharia’a complaint financing contracts with fixed or determinable payments. These include financing
provided through Murabaha, Musharaka, Mudaraba contracts and credit card based receivables. Financing assets are recognised on
the date they are originated and are carried at their amortised cost less allowance for expected credit losses, if any.
Modification of financing assets

If the terms of the financing asset are modified then the Group evaluates whether the cashflows of the modified asset are substantially
different. If the cashflows are substantially different, then the contractual rights to cashflows from the original financing asset are
deemed to have expired. In this case, the original financing asset is derecognised and a new financing asset is recognised at fair value
plus any eligible transaction cost.
If the modification of a financing asset measured at amortized cost does not result in the derecognition of the financing asset then
the Group first recalculates the gross carrying amount of the financing asset using the original effective interest rate of the asset and
recognises the resulting adjustment as a modification gain or loss in profit or loss.
The above policy is applied for all reporting periods except for contracts that were subject CBB directives on COVID-19 related
concessionary measures (refer note 2.2)
All Sharia compliant contracts are interpreted for accounting purposes in its entirety and all linked -contracts or promissory note
arrangements are considered together with the main financing contract to reflect the single economic outcome and purpose of the
contracts.
f-i) Murabaha financing

Murabaha is a contract whereby one party (“Seller”) sells an asset to the other party (“Purchaser”) at cost plus profit and on a deferred
payment basis, after the Seller has purchased the asset based on the Purchaser’s promise to purchase the same on such Murabaha
basis. The sale price comprises the cost of the asset and an agreed profit margin. The sale price (cost plus the profit amount) is paid
by the Purchaser to the Seller on installment basis over the agreed finance tenure. Under the Murabaha contract, the Group may act
either as a Seller or a Purchaser, as the case may be.
The Group considers the promise to purchase made by the Purchaser in a Murabaha transaction in favor of the Seller to be binding.
f-ii) Mudaraba financing

Mudaraba is a contract between two parties whereby one party is a fund provider (Rab Al Mal) who would provide certain amount
of funds (Mudaraba Capital), to the other party (Mudarib). Mudarib would then invest the Mudaraba Capital in a specific enterprise or
activity deploying its experience and expertise for a specific pre-agreed share in the resultant profit. The Rab Al Mal is not involved in
the management of the Mudaraba activity. The Mudarib would bear the loss in case of its default, negligence or violation of any of the
terms and conditions of the Mudaraba contract; otherwise the loss would be borne by the Rab Al Mal. Under the Mudaraba contract,
the Group may act either as Mudarib or as Rab Al Mal, as the case may be.
f-iii) Musharaka
Musharaka is used to provide venture or project finance. The Group and customer contribute towards the capital of the Musharaka.
Profits are shared according to a pre-agreed profit distribution ratio but losses are borne by the partners according to the capital
contributions of each partner. Capital contributions may be in cash or in kind, as valued at the time of entering into the Musharaka.

31 December 2020
g) Finance lease assets

Finance lease assets (also called Ijarah Mutahia Bitamleek contracts) is an agreement with the customers whereby the Group
(“Lessor”) leases an asset to the customer (“Lessee”) after purchasing / acquiring a specified asset, either from a third party seller or
from the customer, according to the customer’s request and promise to lease against certain rental payments for a specific lease
term / years, payable on fixed and / or variable rental basis.
The finance lease agreement specifies the leased asset, duration of the lease term, as well as, the basis for rental calculation, the
timing of rental payment and responsibilities of both parties during the lease term. The Lessee provides the Lessor with an undertaking
to renew the lease years and pay the relevant rental payment amounts as per the agreed schedule throughout the lease term.
The Lessor retains the ownership of the assets throughout the lease term. At the end of the lease term, upon fulfillment of all the
obligations by the Lessee under the finance lease agreement, the Lessor will sell the leased asset to the Lessee for a nominal value
based on sale undertaking given by the Lessor. Leased assets are usually in the type of residential properties, commercial real estate
or aircrafts.
Depreciation is provided on a systematic basis on all Finance lease assets other than land (which is deemed to have an indefinite
useful life), at rates calculated to write off the cost of each asset over the shorter of either the lease term or economic life of the asset.
The Group measures at each reporting date whether there is objective evidence that finance lease assets are impaired. Impairment
loss is recognised when the carrying amount of assets exceeds its recoverable amount. The estimates of future cashflows, when
dependent on a single customer, takes into consideration the credit evaluation of the customer in addition to other factors. Impairment
losses, if any, are recognised in the income statement.
Modification of finance lease assets

If the terms of the finance lease assets are modified then the Group evaluates whether the cashflows of the modified asset are
substantially different. If the cashflows are substantially different, then the contractual rights to cashflows from the original finance
lease assets are deemed to have expired. In this case, the original finance lease assets is derecognised and a new finance lease
assets is recognised at fair value plus any eligible transaction cost.
If the modification of a finance lease assets measured at amortized cost does not result in the derecognition of the finance lease
assets then the Group first recalculates the gross carrying amount of the finance lease assets using the original effective interest
rate of the asset and recognises the resulting adjustment as a modification gain or loss in profit or loss.
h) Placements with financial institutions

Placements with financial institutions comprise of short-term treasury contracts with financial instititions in the form of Commodity
Murabaha receivables and Wakala investments. These placements are stated at amortised cost net of deferred profits and allowance
for credit losses, if any.
i) Sovereign Sukuk and Corporate Sukuk

These investments are in the nature of debt-type instruments that provide fixed or determinable payments of profits and capital.
Sukuk that are assessed as debt-type securities are classified as investments carried at fair value through equity. Any change in
fair value of the Sukuks will be recognized as a movement in the statement of changes in equity under fair value reserve. On de-
recognition of Sukuks due to disposal, the balance in the fair value reserve will be recycled to the consolidated statement of income.
j) Assets and liabilities under conversion
Assets under conversion:
Loans and advances

At amortised cost less any amounts written off and allowance for credit losses, if any.
Non-trading investments
These are classified as fair value through equity investments and are fair valued based on criteria set out in note 2.5 (k).
Liabilities under conversion:

These are remeasured at amortised cost.

31 December 2020
k) Non-trading investments
Equity-type investments
Equity-type instruments are investments that do not exhibit features of debt-type instruments and include instruments that
evidence a residual interest in the assets of an entity after deducting all its liabilities. Investments in equity type instruments are
classified in the following categories: 1) at fair value through income statement (‘FVTPL’) or 2) at fair value through equity (‘FVTE’),
consistent with its investment strategy.
Subsequent to initial recognition, equity-type investments carried at FVTPL and FVTE are re-measured to fair value. Gains and losses
arising form a change in the fair value of instruments carried at FVTPL are recognised in the income statement in the year which
they arise. Gains and losses arising from a change in the fair value of investments carried at FVTE are recognised in the consolidated
statement of changes in equity and presented in a separate fair value reserve within equity. When the investments carried at FVTE
are sold, impaired, collected or otherwise disposed of, the cumulative gain or loss previously recognised in the statement of changes
in equity is transferred to the income statement.
l) Investments in associates and joint ventures

The Group’s investments in associates and joint ventures, that are acquired for strategic purposes, are accounted for under the
equity method of accounting. Other equity investments in associates and joint ventures (note 2.5 (k)) are accounted for as fair value
through profit or loss by availing the scope exemption under FAS 24, Investments in Associates. An associate is an entity over which
the Group has significant influence and which is neither a subsidiary nor a joint venture. An entity is considered as an associate if the
Group has more than 20% ownership of the entity or the Group has significant influence through any other manner. A joint venture is
an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than
rights to its assets and obligations for its liabilities.
Under the equity method, investment in associate is carried in the consolidated statement of financial position at cost plus post-
acquisition changes in the Group’s share of net assets of the associates. Losses in excess of the cost of the investment in associates
are recognised when the Group has incurred obligations on its behalf. Goodwill relating to an associate is included in the carrying
amount of the investment and is not amortised. The consolidated income statement reflects the Group’s share of results of operations
of the associates. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share
of any changes and discloses this, when applicable, in the consolidated statement of changes in equity.
The reporting dates of the Group’s associates are identical with the Group and the associates accounting policy conform to those
used by the Group for like transactions and events in similar transactions.
After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss
on its investment in associates. The Group determines at each reporting date whether there is any objective evidence that the
investment in associates are impaired. If this is the case, the Group calculates the amount of impairment as the difference between
the recoverable amount of the associate and its carrying value and recognises the amount in the consolidated income statement.
Profit and losses resulting from transactions between the Group and the associates are eliminated to the extent of the interest in
associates.
Foreign exchange translation gains / losses arising out of the translation of net assets of investment in associates are included in the
consolidated statement of changes in equity.
m) Investment properties
Properties held for rental, or for capital appreciation purposes, or both, are classified as investments in real estate. The investment
in real estate is initially recognised at cost and subsequently measured based on intention whether the investments in real estate
is held-for-use or held-for-sale. The Group has adopted the fair value model for its investments in real estate. Under the fair value
model, any unrealized gains are recognised directly in owners’ equity under the Real Estate Fair Value Reserve. Any unrealized losses
are adjusted in equity to the extent of the available credit balance. Where unrealized losses exceed the available balance in owners’
equity, these are recognised in the consolidated income statement. In case there are unrealized losses relating to investments in real
estate that have been recognised in the consolidated income statement in a previous financial year, the unrealized gains relating to
the current financial year is recognised to the extent of crediting back such previous losses in the consolidated income statement.
Investments in real estate held-for-sale is carried at lower of its carrying value and expected fair value less costs to sell. Investments
in real estate carried at fair value shall continue to be measured at fair value.

31 December 2020
n) Development properties
Properties acquired exclusively for development are classified as development properties and are measured at the lower of cost or
net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimates costs of
completion and the estimated costs necessary to make the sale.
o) Premises and equipment

Premises and equipment are stated at cost less accumulated depreciation and any impairment in value. Depreciation is changed
on a straight-line basis over the estimated useful lives of all premises and equipment, other than freehold land and capital work-in-
progress.
- Computer hardware 3 to 5 years

- Computer software 3 to 5 years
- Furniture and office equipment 3 to 5 years
- Motor vehicle 4 to 5 years
- Leasehold improvements Over the lease year
The assets residual values and useful lives are reviewed and adjusted, if appropriate, at each reporting date.
p) Subsidiaries acquired with a view to sell

A subsidiary acquired with a view to subsequent disposal within twelve months is classified as “held-for-sale” when the sale is highly
probable. Related assets and liabilities of the subsidiary are shown separately on the consolidated statement of financial position as
“assets held-for-sale” and “liabilities relating to assets classified as held-for-sale” respectively. Assets that are classified as held-for-
sale are measured at the lower of carrying amount and fair value less costs to sell. Any resulting impairment loss reduces the carrying
amount of the assets. Assets that are classified as held-for-sale are not depreciated.
q) Goodwill
In a business combination in which the Bank and the acquiree exchange only equity interests, the acquisition-date fair value of the
acquiree’s equity interests is used to determine the amount of goodwill. After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. Goodwill is tested for impairment at least annually. Any impairment is recognised immediately in the
consolidated income statement. Goodwill is allocated to each of the Group’s cash-generating units (CGU) that are expected to benefit
from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Impairment exists when carrying value of an asset or CGU exceeds its recoverable amount, which is the higher of its fair value less
costs of disposal and its value in use.
Impairment of goodwill is determined by assessing the recoverable amount of the CGU (or group of CGUs), to which the goodwill
relates. Where the recoverable amount of the CGU (or group of CGUs) is less than the carrying amount, an impairment loss is
recognised immediately in the consolidated income statement.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each
of the Group’s CGU, or groups of CGUs, that are expected to benefit from the synergies of the combination, irrespective of whether
other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill
is allocated:
• represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and
• is / are not larger than a segment based on either the Group’s primary or the Group’s geographic segment reporting format.
r) Offsetting
Financial assets and financial liabilities can only be offset with the net amount being reported in the consolidated statement of
financial position when there is a religious or legally enforceable right to set off the recognised amounts and the Group intends to
either settle on a net basis, or intends to realise the asset and settle the liability simultaneously.
s) Customers’ current accounts

Customers’ current accounts balances are in non-investment accounts and are recognised when received by the Bank. The
transaction are measured at the cash equivalent amount received by the Bank at the time of contracting. At the end of the accounting
year, the accounts are measured at their book value, which represents the settlement value to the customers.

31 December 2020
t) Equity of investment accountholders

Equity of investment accountholders (“IAH”) are funds held by the Group in one common pool of unrestricted investment account,
which is invested by the Group’s (‘Mudarib’) in its own discretion. These include funds raised under Mudaraba contracts and Wakala
contracts under multi-level investment arrangements. The funds received under the Wakala arrangement is invested in the Mudaraba
investment pool and is considered as investment made by an investment account holder. Under both the Mudaraba and a comingled
Wakala arrangement, the investment accountholder authorizes the Group to invest the accountholder’s funds in a manner which
the Group deems appropriate without laying down any restrictions as to the purpose the funds should be invested. The Group
charges management fee (Mudarib fees) to investment accountholders. The allocation of income is determined by the management
of the Group at a pre-agreed ratio with IAH. Administrative expenses incurred in connection with the management of the fund are
borne directly by the Group and are not charged to investment accounts. Only profits earned on pool of assets funded from IAH are
allocated between the owners’ equity and IAH. All equity of investment accountholders are carried at cost plus profit and related
reserves less amounts settled.
The basis applied by the Group in arriving at the equity of investment accountholder’s share of income is total investment income
less shareholders’ income. Incase of Wakala contracts, the Bank does not acts as both an investment agent and Mudarib of the same
fund at one time. Therefore, in case of comingling of Wakala investment funds with the Mudaraba pool, the investment agent will only
charge Wakala Fee and will not share profits from the Mudaraba investment pool in the capacity of Mudarib.
Under FAS 30, ECL is allocated to the assets invested using funds from unrestricted investment accounts.
u) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) arising from a past event and the costs to
settle the obligation are both probable and able to be reliably measured.
v) Employees’ end-of-service benefits

Short term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has
a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation
can be estimated reliably.
Post employment benefits
Pensions and other social benefits for Bahraini employees are covered by the Social Insurance Organisation scheme, which is a
“defined contribution scheme” in nature, and to which employees and employers contribute monthly on a fixed-percentage of
salaries basis. Contributions by the Bank are recognised as an expense in income statement when they are due.
Expatriate employees on fixed contracts are entitled to leaving indemnities payable under the Bahraini Labour Law, based on length
of service and final remuneration. Provision for this unfunded commitment has been made by calculating the notional liability had all
employees left at the reporting date.
w) Revenue recognition
Financing assets
As the income is quantifiable and contractually determined at the commencement of the contract, income is recognised on effective
yield basis over the contract term. Recognition of income is suspended when the Group believes that the recovery of these amounts
may be doubtful or when the payments of installments are overdue by 90 days, whichever is earlier.
Sukuk
Income on Sukuk is recognised on a time-proportionate basis based on underlying rate of return of the respective type of Sukuk.
Recognition of income is suspended when the Group believes that the recovery of these amounts may be doubtful or when the
payments are overdue by 90 days, whichever is earlier.
Dividend
Dividend income is recognised when the Group’s right to receive the dividend is established.

31 December 2020

Finance lease assets
Finance lease income is recognised on a time-proportionate basis over the lease term. Income related to non-performing finance
lease is suspended. Accrual of income is suspended when the Group believes that the recovery of these amounts may be doubtful
or normally when the rental payments are overdue by 90 days, whichever is earlier.
Fees and commission income
The Group earns fee and commission income from a diverse range of services it provides to its customers. Fee income can be divided
into the following main categories:
• Fee income on financing transactions: Fee earned on financing transactions including up-front fees and early settlement fees are
recognised when earned. To the extent the fees are deemed yield enhancement they are recognised over the year of the financing
contracts.
• Fee income from transaction services: Fee arising from corporate finance, corporate advisory, arranging the sale of assets and
wealth management are recognised when earned or on a time proportionate basis when the fee is linked to time.
• Other fee income: This is recognised when services are rendered.
x) Fair value of financial assets

For investments that are actively traded in organised financial markets, fair value is determined by reference to the prevailing market
bid price on the reporting date.
For investments where there is no quoted market price, a reasonable estimate of fair value is determined by reference to valuation by
independent external valuers or based on recent arm’s length market transactions. Alternatively, the estimate would also be based
on current market value of another contract, which is substantially the same, or is based on the assessment of future cash flows. The
cash equivalent values are determined by the Group by calculating the present value of future cash flows at current profit rates for
contracts with similar terms and risk characteristics.
For assets having fixed or determinable payments, fair value is based on available active broker quotes or the net present value of
estimated future cash flows determined by the Group using current market profit rates for contracts with similar terms and risk
characteristics.
y) Fiduciary assets
Assets held in a fiduciary capacity are not treated as assets of the Group and are accordingly not included in the consolidated
statement of financial position. These include assets under management and custodial assets.
z) Dividend on ordinary shares

Dividend payable on ordinary issued and fully paid shares of the Bank is recognised as a liability and deducted from equity when it is
approved by the Group’s shareholders.
aa) Financial guarantees

Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs
because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. A financial guarantee
contract is recognised from the date of its issue. The liability arising from a financial guarantee contract is recognised at the present
value of any expected payment, when a payment under the guarantee has become probable.
ab) Treasury stock

Own equity contracts that are re-acquired, are recognised at cost and deducted from equity. No gain or loss is recognised in profit
or loss on the purchase, sale, issue or cancellation of the Bank’s own equity contracts. Any difference between the carrying amount
and the consideration, if re-issued, is recognised in share premium in consolidated statement of changes in equity.
ac) Zakah
Zakah is calculated on the Zakah base of the Group in accordance with FAS 9 Zakah using the net assets method. Zakah is paid by
the Group based on the eligible reserve and retained earnings balances at the end of the year and the remaining Zakah is payable by
individual shareholders. The Bank calculates and notifies the shareholders of their pro-rata share of the Zakah payable annually. The
Group also pays Zakah on the balance of treasury shares held at the year-end based on the pro-rata share of Zakah. The calculations
of Zakah is approved by the Sharia’a Supervisory Board. Payment of Zakah on the unrestricted investment and other accounts is the
responsibility of the investment accountholders.

31 December 2020
ad) Repossessed assets

In certain circumstances, properties are repossessed following the foreclosure of financial facilities that are in default. Repossessed
properties that are held for immediate sale, are measured at the lower of the carrying value on closure and fair value less cost to sell.
Other repossessed properties are classified as investment property.
ae) Earnings prohibited by Shari’a

The Group is committed to contributing to charity any income generated from non-Shari’a sources. Accordingly, any earning
prohibited by Shari’a is credited to charity funds to be used for social welfare purposes.
2.6 STANDARDS ISSUED AND EFFECTIVE
Early adoption of new standards in current year
i. FAS 31 Investment Agency (Al-Wakala Bi Al-lstithmar)

The Group has early adopted FAS 31 as issued by AAOIFI on 1 January 2020, before its effective date of 1 January 2021.
AAOIFI has issued FAS 31 Investment Agency (Al-Wakala Bi Al-lstithmar) in 2019. The objective of this standard is to establish the
principles of accounting and financial reporting for the investment agency (Al- Wakala Bi Al- Istithmar) instruments and the related
assets and obligations from both the principal (investor) and the agent perspectives.
The Group uses wakala structure to raises funds from interbank market and from customers, and these were reported as liabilities
under placements from financial institutions and placements from non-financial institutions and customers, respectively as of 31
December 2019. All funds raised using wakala structure, together called “wakala pool” are comingled with the Bank’s jointly financed
pool of funds based on an underlying equivalent mudaraba arrangement. This comingled pool of funds is invested in a common pool
of assets of in the manner which the Group deems appropriate without laying down restrictions as to where, how and what purpose
the funds should be invested. After adopting FAS 31 on 1 January 2020, the Wakala pool is now classified as part of the Mudaraba
pool of funding under equity of investment accountholders and the profit paid on these contracts is reported as part of determination
of return on investment of equity of investment accountholders.
As per the transitional provisions of FAS 31, the entity may choose not to apply this standard on existing transactions executed before
1 January 2020 and have an original contractual maturity before 31 December 2020. However as the comingled pool arrangement
has been in existence for all years , the Bank decided to apply the standard retrospectively, thereby reclassifying all transactions
outstanding as of the year end and the corresponding previous year end. The adoption of this standard has resulted in change
in classification of all Wakala based funding contracts as part of equity of investment accountholders and additional associated
disclosures (refer note 19).
ii. FAS 33 Investment in sukuks, shares and similar instruments

The Group has early adopted FAS 33 as issued by AAOIFI on 1 January 2020, before its effective date of 1 January 2021 .
The objective of this standard is to set out the principles for the classification, recognition, measurement and presentation and
disclosure of investment in Sukuk, shares and other similar instruments made by Islamic financial institutions. This standard shall
apply to an institution’s investments whether in the form of debt or equity securities. This standard replaces FAS 25 Investment in
Sukuk, shares and similar instruments.
The standard classifies investments into equity type, debt-type and other investment instruments. Investment can be classified
and measured at amortized cost, fair value through equity or fair value through the income statement. Classification categories are
now driven by business model tests and reclassification will be permitted only on change of a business model and will be applied
prospectively.
Investments in equity instruments must be at fair value and those classified as fair value through equity will be subject to impairment
provisions as per FAS 30 “Impairment, Credit Losses and Onerous Commitments”. In limited circumstances, where the institution is
not able to determine a reliable measure of fair value of equity investments, cost may be deemed to be best approximation of fair
value.
The standard has been adopted effective 1 January 2020 and is applicable on a retrospective basis. However, the cumulative
effect, if any, attributable to owners’ equity, equity of investment account holders relating to previous years, shall be adjusted with
investments fair value pertaining to assets funded by the relevant class of stakeholders.

31 December 2020
2.6 STANDARDS ISSUED AND EFFECTIVE (continued)
The adoption of FAS 33 has resulted in changes in accounting policies for recognition, classification and measurement of investment
in sukuks, shares and other similar instruments, however, except for remeasurement of certain assets from amortised cost to its fair
value, the adoption of FAS 33 had no significant impact on any amounts previously reported in the consolidated financial statement
for the year ended 31 December 2019 and the annual audited consolidated financial statement of the Group for the year ended 31
December 2019. Set out below are the details of the specific FAS 33 accounting policies applied in the current year and impact of
change in reclassification.
1) Changes in accounting policies

Categorization and classification
FAS 33 contains classification and measurement approach for investments in sukuk, shares and similar instruments that reflects
the business model in which such investments are managed and the underlying cash flow characteristics. Under the standard, each
investment is to be categorized as investment in:
(a) equity-type instruments;
(b) debt-type instruments, including:
(i) monetary debt-type instruments; and
(ii) non-monetary debt-type instruments; and
(c) other investment instruments
Unless irrevocable initial recognition choices as per the standard are exercised, an institution shall classify investments as subsequently
measured at either of (i) amortised cost, (ii) fair value through equity or (iii) fair value through income statement, on the basis of both:
I. the Bank’s business model for managing the investments; and
II. the expected cash flow characteristics of the investment in line with the nature of the underlying Islamic finance contracts.
2) Reclassification of assets and liabilities

The adoption of FAS 33 has resulted in the following change in the classification of investments based on the reassessment of
business model classification of the assets:
Difference
Original carrying New carrying recognized in
Original New amount under amount under investment fair
classification classification FAS 25 FAS 33 value reserve
1 Jan 2020 under FAS 25 under FAS 33 BD '000 BD '000 BD '000
Sovereign Sukuk Amortised cost FVTE 335,382 339,737 4,355
Corporate Sukuk Amortised cost FVTE 21,703 21,984 281
Original carrying New carrying Difference

Original New amount under amount under recognized in
classification classification FAS 25 FAS 33 retained earnings
1 Jan 2019 under FAS 25 under FAS 33 BD '000 BD '000 BD '000
Sovereign Sukuk Amortised cost FVTE 348,273 344,425 (3,848)
Corporate Sukuk Amortised cost FVTE 9,173 9,390 217
2.7 NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
(i) FAS 32 Ijarah

AAOIFI has issued FAS 32 “Ijarah” in 2020. This standard supersedes the existing FAS 8 “Ijarah and Ijarah Muntahia Bittamleek”.
The objective of this standard is set out principles for the classification, recognition, measurement, presentation and disclosure
for Ijarah (asset Ijarah, including different forms of Ijarah Muntahia Bittamleek) transactions entered into by the Islamic Financial
Institutions as a lessor and lessee. This new standard aims to address the issues faced by the Islamic finance industry in relation to
accounting and financial reporting as well as to improve the existing treatments in line with the global practices. This standard shall be
effective for the financial years beginning on or after 1 January 2021 with early adoption permitted. The Group is currently evaluating
the impact of this standard.

31 December 2020
2.6 STANDARDS ISSUED AND EFFECTIVE (continued)
(ii) FAS 34 Financial reporting for Sukuk-holders

AAOIFI has issued FAS 34 Financial reporting for Sukuk-holders in 2019. The objective of this standard is to establish the principles
of accounting and financial reporting for assets and business underlying the Sukuk to ensure transparent and fair reporting for all
stakeholders particularly Sukuk-holders.
(iii) FAS 38 Wa’ad, Khiyar and Tahawwut

AAOIFI has issued FAS 38 Wa’ad, Khiyar and Tahawwut in 2020. The objective of this standard is to prescribe the accounting and
reporting principles for recognition, measurement and disclosures in relation to shariah compliant Wa’ad (promise), Khiyar (option)
and Tahawwut (hedging) arrangements for Islamic financial institutions. This standard is effective for the financial reporting periods
beginning on or after 1 January 2022.
This standard classifies Wa’ad and Khiyar arrangements into two categories as follows:
a) “ancillary Wa’ad or Khiyar” which is related to a structure of transaction carried out using other products i.e. Murabaha, Ijarah
Muntahia Bittamleek, etc.; and
b) “product Wa’ad and Khiyar” which is used as a stand-alone Shariah compliant arrangement.
Further, the standard prescribes accounting for constructive obligations and constructive rights arising from the stand-alone Wa’ad
and Khiyar products.
The Group is currently evaluating the impact of adopting this standard.
3 CLASSIFICATION OF ASSETS, LIABILITIES AND EQUITY OF INVESTMENT ACCOUNTHOLDERS
2020
At fair value through At fair value At amortised
profit or loss through equity cost / others Total
BD '000 BD '000 BD '000 BD '000
ASSETS
Cash and balances with banks and Central Bank - - 288,266 288,266
Sovereign Sukuk - 393,108 - 393,108
Placements with financial institutions - - 37,965 37,965
Corporate Sukuk - 16,395 - 16,395
Financing assets - - 814,449 814,449
Finance lease assets - - 469,363 469,363
Non-trading investments 97,684 350 - 98,034
Investment properties - 67,586 - 67,586
Development properties - - 2,943 2,943
Investment in associates - - 12,036 12,036
Other assets - 900 34,337 35,237
Goodwill - - 25,971 25,971
97,684 478,339 1,685,330 2,261,353
LIABILITIES AND EQUITY OF INVESTMENT

ACCOUNTHOLDERS
Placements from financial institutions - - 116,883 116,883
Customers' current accounts - - 363,970 363,970
Murabaha term financing - - 221,671 221,671
Other liabilities - - 52,282 52,282
Equity of investment accountholders - - 1,225,380 1,225,380
- - 1,980,186 1,980,186

31 December 2020
3 CLASSIFICATION OF ASSETS, LIABILITIES AND EQUITY OF INVESTMENT ACCOUNTHOLDERS (continued)
2019
At fair value through At fair value At amortised
profit or loss through equity cost / others Total
BD '000 BD '000 BD '000 BD '000
ASSETS
Cash and balances with banks and Central Bank - - 219,456 219,456
Sovereign Sukuk - 345,305 - 345,305
Placements with financial institutions - - 114,803 114,803
Corporate Sukuk - 22,162 - 22,162
Financing assets - - 685,756 685,756
Finance lease assets - - 389,742 389,742
Non-trading investments 107,438 1,553 - 108,991
Investment properties - 72,774 - 72,774
Development properties - - 2,943 2,943
Investment in associates - - 10,640 10,640
Other assets - 964 43,296 44,260
Goodwill - - 25,971 25,971
107,438 442,758 1,492,607 2,042,803
LIABILITIES AND EQUITY OF INVESTMENT

ACCOUNTHOLDERS
Placements from financial institutions - - 211,459 211,459
Customers' current accounts - - 289,456 289,456
Murabaha term financing - - 145,590 145,590
Other liabilities - - 41,481 41,481
Equity of investment accountholders - - 1,034,743 1,034,743
- - 1,722,729 1,722,729
4 CASH AND BALANCES WITH BANKS AND CENTRAL BANK
2020 2019
BD '000 BD '000
Mandatory reserve with Central Bank* 24,848 34,942
Balances with other banks** 181,132 101,014
288,266 219,456
* This balance is not available for use in the day-to-day operations of the Group.
** This balance is net of BD 76 thousands (2019: BD 93 thousands) amount of allowance for credit losses.
5 SOVEREIGN SUKUK
This includes BD 271,361 thousands (2019 BD 181,549 thousands) of sukuk which are pledged against Murabaha term financing of
BD 221,671 thousands (2019: BD 128,625 thousands).

31 December 2020
6 PLACEMENTS WITH FINANCIAL INSTITUTIONS AND PLACEMENTS FROM
FINANCIAL INSTITUTIONS
These represent short-term interbank placements to and from financial institution in the form of Murabaha and Wakala contracts.
2020 2019
BD '000 BD '000
Placements with financial institutions
Wakala asset 27,432 56,254
Commodity Murabaha asset 10,674 58,648
Allowance for credit losses (141) (99)
37,965 114,803
Placements from financial institutions
Commodity Murabaha liability 116,883 211,459
116,883 211,459
7 CORPORATE SUKUK
2020 2019
BD '000 BD '000
Investment grade (AAA - BBB+) 3,980 1,530
Non-investment grade (< BBB-) - 7,424
Un-rated Sukuk 12,446 13,214
Allowance for credit losses (31) (6)
16,395 22,162
Corporate sukuk portfolio include BD 3,977 thousands (2019: BD 8,509 thousands) of sukuk which are pledged against Murabaha
term financing of BD 221,671 thousands (2019: BD 128,625 thousands).
8 FINANCING ASSETS
2020
Stage 2: Stage 3:
Stage 1: Lifetime ECL not Lifetime ECL
12-month ECL credit-impaired credit-impaired Total
BD '000 BD '000 BD '000 BD '000
Murabaha financing 346,904 10,375 43,913 401,192
Mudaraba financing 375,803 29,782 4,852 410,437
Musharaka financing 32,262 65 278 32,605
Credit cards 2,749 157 566 3,472
Total financing assets 757,718 40,379 49,609 847,706
Allowance for credit losses (note 10) (10,184) (5,499) (17,574) (33,257)
747,534 34,880 32,035 814,449
2019
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Murabaha financing 241,026 20,128 31,965 293,119
Mudaraba financing 340,567 32,127 7,323 380,017
Musharaka financing 30,407 64 421 30,892
Credit cards 3,015 168 639 3,822
Total financing assets 615,015 52,487 40,348 707,850
Allowance for credit losses (note 10) (5,180) (7,118) (9,796) (22,094)
609,835 45,369 30,552 685,756

31 December 2020
9 FINANCE LEASE ASSETS

This represents net investment in assets leased (land and buildings) under a finance lease arrangement with customers of the Bank.
Lease documentations states that the lessor undertakes to transfer the leased assets to the lessee at the end of the lease term upon
the lessee fulfilling all the obligations under the lease agreement.
2020 2019
BD '000 BD '000
Finance lease assets 476,137 394,184
Allowance for impairment (6,774) (4,442)
469,363 389,742
Movements in finance lease assets are as follows:
2020 2019
BD '000 BD '000
At 1 January 389,742 256,892
Additions during the year - net 141,285 99,886
Finance lease assets depreciation (40,994) (33,169)
Allowance for impairment during the year, net (2,332) 2,039
Settlements/adjustments during the year (18,338) 64,094
At 31 December 469,363 389,742
The future minimum lease receivable (excluding future profits) in aggregate are as follows:
2020 2019
BD '000 BD '000
Due within one year 59,939 60,690
Due in one to five years 154,565 119,062
Due after five years 254,859 209,990
469,363 389,742
The accumulated depreciation on finance lease assets amounted to BD 54,988 thousands (2019: BD 95,982 thousands).
2020
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Finance lease assets 445,656 20,594 9,887 476,137
Allowance for impairment (note 10) (3,355) (350) (3,069) (6,774)
442,301 20,244 6,818 469,363
2019
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Finance lease assets 322,987 58,296 12,901 394,184
Allowance for impairment (note 10) (1,444) (169) (2,829) (4,442)
321,543 58,127 10,072 389,742

31 December 2020
10 MOVEMENT IN NET ALLOWANCE FOR CREDIT LOSSES / IMPAIRMENT
2020
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Balance at the beginning of the year 7,191 7,295 19,042 33,528
Changes due to receivables recognised
in opening balance that have:
- transferred to Stage 1: 12 month ECL 1,464 (1,128) (336) -
- transferred to Stage 2: Lifetime ECL not
credit-impaired (317) 810 (493) -
- transferred to Stage 3: Lifetime ECL
credit-impaired (49) (1,815) 1,864 -
Net remeasurement of loss allowance 6,257 935 10,439 17,631
Recoveries / write-backs - (62) (433) (495)
Allowance for credit losses 7,355 (1,260) 11,041 17,136
Exchange adjustments and other movements - - (125) (125)
Amounts charged off during the year - - (3,239) (3,239)
Balance at the end of the year 14,546 6,035 26,719 47,300
2020
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Cash and balances with banks and Central Bank 76 - - 76
Sovereign Sukuk 248 - - 248
Placements with financial institutions 141 - - 141
Corporate Sukuk 31 - - 31
Financing assets 10,184 5,499 17,574 33,257
Finance lease assets 3,355 350 3,069 6,774
Loans and advances to customers
- Assets under conversion (note 15) 17 145 3,602 3,764
Other receivables 45 - 2,181 2,226
Financing commitments and financial
guarantee contracts 449 41 293 783
14,546 6,035 26,719 47,300

31 December 2020
10 MOVEMENT IN NET ALLOWANCE FOR CREDIT LOSSES / IMPAIRMENT (continued)
2019
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Changes due to receivables recognised
in opening balance that have:
- transferred to Stage 1: 12 month ECL 1,042 (667) (375) -
- transferred to Stage 2: Lifetime ECL not
credit-impaired (754) 2,812 (2,058) -
- transferred to Stage 3: Lifetime ECL
credit-impaired (29) (580) 609 -
Recoveries / write-backs (472) (299) (2,593) (3,364)
Allowance for credit losses 1,598 1,910 (977) 2,531
Amounts charged off during the year - - (9,620) (9,620)
Elimination on consolidation - - 107 107
2019
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Cash and balances with banks and Central Bank 93 - - 93
Sovereign Sukuk 24 - - 24
Placements with financial institutions 99 - - 99
Corporate Sukuk 3 3 - 6
Financing assets 5,180 7,118 9,796 22,094
Finance lease assets 1,444 169 2,829 4,442
Loans and advances to customers
- Assets under conversion 80 - 4,008 4,088
- Other receivables 45 - 2,182 2,227
Financing commitments and financial guarantee
contracts 223 5 227 455
7,191 7,295 19,042 33,528
10.1 Movements in impairment allowances for equity investments and others
2020 2019
BD '000 BD '000
Balance at the beginning of the year 3,209 3,130
Impairment during the year 1,141 79
Balance at the end of the year 4,350 3,209

31 December 2020
11 NON-TRADING INVESTMENTS
2020 2019
BD '000 BD '000
At fair value through profit or loss:
Equity securities 90,209 97,380
Funds 7,475 10,058
At fair value through equity 350 1,553
Balance at the end of the year 98,034 108,991
The Group has 40% stake (2019: 40%) in Manara Developments Company B.S.C.(c) (“Manara”) & Bareeq Al Retaj Real Estate Services
WLL (“Bareeq”), a company incorporated in Bahrain and engaged in the business of property development. The investment is being
fair valued through profit or loss using the fair value scope exemption of FAS 24.As part of restructuring net assets of Manara will be
novated to Bareeq.
For investments in hospitality sector, sensitivity analysis has been performed on occupancy rate and discount factor by increasing or
decreasing it by 5% and 1% respectively. This will not have any major impact in the income statement. For other investments primarily
with underlying real estate assets, any increase or decrease in value of properties by 5% will impact the income statement in either
scenario by BD 4 million.
12 INVESTMENT PROPERTIES
2020 2019
BD '000 BD '000
Land 64,466 67,749
Buildings 3,120 5,025
67,586 72,774
The movements in fair value of investment properties classified in Level 3 of the fair value hierarchy are as follows:
Fair value measurement using

significant unobservable inputs
Level 3
2020 2019
BD '000 BD '000
At 1 January 72,774 74,261
Fair value changes through income statement (1,750) (1,239)
Fair value changes through equity (241) -
Additions during the year* 902 6,960
Disposals during the year (4,033) (7,034)
Others (66) (174)
At 31 December 67,586 72,774
* Additions of investment properties during the year resulted from the Bank obtaining possession of collateral held as securities
against financing.
For sensitivity analysis of the investment properties, an increase or decrease of 5% in value of properties per square feet will impact
income statement in either scenario by BD 750 thousands.
13 DEVELOPMENT PROPERTIES
Development properties represent properties acquired and held through investment vehicles exclusively for development and sale in
the United Kingdom. The carrying amount include land price and related construction costs.

31 December 2020
14 INVESTMENT IN ASSOCIATES
The Group has a 14.42% (2019: 14.42%) stake in Al Salam Bank Algeria (ASBA), an unlisted bank incorporated in Algeria. The Bank has
representation on the board of ASBA through which the Bank exercises significant influence on ASBA.
The Group has a 20.94% (2019: 20.94%) stake in Gulf African Bank (“GAB”), an Islamic commercial bank incorporated as the first
Islamic bank in Kenya on August 2006, licensed by the Central Bank of Kenya.
The Group’s interest in ASBA and GAB is accounted for using the equity method in the consolidated financial statements.
The following table illustrates summarised financial information of Group’s investments in ASBA:
2020 2019
BD '000 BD '000
Associates' statement of financial position:
Total assets 463,738 413,272
Total liabilities 409,843 353,299
Net assets 53,895 59,973
Total revenue 21,960 29,431
Total expenses 13,208 16,787
Group's share of associates' net profit 1,823 1,107
The following table illustrates summarised financial information of Group’s investments in GAB:
2020 2019
BD '000 BD '000
Associates' statement of financial position:
Total assets 129,946 130,607
Total liabilities 112,664 113,372
Net assets 17,282 17,235
Total revenue 9,867 10,038
Total expenses 8,586 9,417
Net profit for the year 1,281 621
Group's share of associates' net profit 130 102
15 OTHER ASSETS
2020 2019
BD '000 BD '000
Assets under conversion (a)
Loans and advances to customers 6,434 7,181
Non-trading investments - fair value through equity (b) 900 964
Non-trading investments - debt 8 21
7,342 8,166
Other receivables and advances 24,635 12,478
Prepayments 1,299 924
Premises and equipment 1,961 22,692
35,237 44,260
(a) These represent non-Shari’a compliant assets resulting from the acquisition of ASBS, BMI B.S.C. (c) and Bahraini Saudi Bank
B.S.C. (“ex-BSB”). Income derived from these assets are transferred to charity payable and as such are not recognised in the
consolidated financial statements. During the year under audit, Shari’a prohibited income amounting to BD 209 thousands have
been transferred to charity payable, under “Accounts payable and accruals” of note 18.
(b) The above fair value through equity investments are classified as Level 3 in the fair value hierarchy. Movements in fair value
through equity investments are as follows:

31 December 2020
15 OTHER ASSETS (continued)
Fair value measurement using

significant unobservable inputs
Level 3
2020 2019
BD '000 BD '000
At 1 January 964 1,041
Additions during the year 1 2
Write down during the year (65) (79)
At 31 December 900 964
Loans and advances to customer - Assets under conversion
2020
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Loans and advances to customers 1,806 485 7,907 10,198
Allowance for credit losses (17) (145) (3,602) (3,764)
1,789 340 4,305 6,434
2019
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Loans and advances to customers 1,701 384 9,184 11,269
Allowance for credit losses (80) - (4,008) (4,088)
1,621 384 5,176 7,181
16 GOODWILL
In 30 March 2014, the Bank acquired 100% of the paid-up capital of BMI. Goodwill of BD 25,971 thousands (2019: BD 25,971
thousands) arose from the business combination and is associated with the banking segment of the Group.
The recoverable amount of goodwill is based on value-in-use, calculated through cash flow projections from financial forecasts
approved by the Board of Directors and adjusted to the requirements of IFRS extrapolated for three years projection to arrive at the
terminal value. A steady growth rate of 1% and discount rate of 14% is applied to the estimated cash flows.
The banks assesses, on annual basis, whether there is an indication, based on either internal or external source of information, that
the goodwill may be impaired in accordance to IAS 36 (‘impairment of non-financial assets’). As of 31 December 2020, there are no
indication of impairment of the CGU associated with the goodwill.
A sensitivity analysis was conducted to assess the impact of recoverable amount as compared to the carrying value of the CGU.
Two variable factors are considered in the analysis, an increase of discount rate by 1% and a reduction of earnings by 0.5%, the
recoverable amount is greater than the carrying value of goodwill in the sensitivity analysis and did not result in any impairment.
17 MURABAHA TERM FINANCING

These represent short-term to long-term financings with various financials institutions that are collateralised by corporate and
sovereign sukuk of total carrying value BD 275,338 thousands (2019: BD 190,058 thousands).

31 December 2020
18 OTHER LIABILITIES
2020 2019
BD '000 BD '000
Accounts payable and accruals (a) 48,767 28,692
Dividend payable 1,139 5,581
Project payables 69 60
Liabilities under conversion - 5,229
End of service benefits and other employee related accruals 1,524 1,464
Allowance for credit losses relating to financing commitments and
financial guarantee contracts 783 455
52,282 41,481
(a) This includes payable towards settlement of borrowing of subsidiary (refer note 20.2).
19 EQUITY OF INVESTMENT ACCOUNTHOLDERS

Equity of investment accountholders comprise:
2020 2019
BD '000 BD '000
Wakala from financial institutions 264,784 210,887
Wakala from customers 714,465 721,380
979,249 932,267
Mudaraba from customers 246,131 102,476
1,225,380 1,034,743
The Group utilizes the funds from EIAH to finance assets.
Asset in which EIAH funds are invested:
2020 2019
BD '000 BD '000
Asset
Mandatory reserve with Central Bank 24,848 34,026
Placements with financial institutions 38,106 76,660
Financing assets 757,718 656,985
1,225,380 1,034,743
Equity of investment accountholders’ fund is commingled with Group’s and Wakala fund to form one general Mudaraba pool. This
pooled fund is used to fund and invest in banking assets generating income, however no priority is granted to any party for the
purpose of investments and distribution of profits.
The Group does not allocate non-performing assets to IAH pool. All the impairment allowances are allocated to owners’ equity.
Recoveries from non-performing financial assets are also not allocated to IAH accountholders. Only the profits earned on pool
of assets funded from IAH and owners’ equity are allocated between the owners’ equity and IAH. As per the policy of the Group,
minimum of 15% of return on assets earned is distributed to investment accountholders and 85% is retained by the Group as Mudarib
share. The Group did not charge any administration expenses to investment accounts.
The average profit rate attributed to the equity of investment accountholders based on the above ratio for the year was 2.75% (2019:
3.02%).

31 December 2020
20 SHARE CAPITAL
2020 2019
BD '000 BD '000
Authorised:
2,500,000,000 ordinary shares (2019: 2,500,000,000 shares) of BD 0.100 each 250,000 250,000
Issued and fully paid: (BD 0.100 per share)
Number of shares 2,304,497,853 (2019: 2,215,863,320) 230,450 221,586
Total number of treasury stock outstanding as of 31 December 2020 was 81,304,080 shares (2019: 72,694,133 shares).
Names and nationalities of the major shareholders and the number of equity shares held in which they have an interest of 5% or more
of outstanding share as of 31 December 2020 is as follows:
% of the
Investor Name Nationality No. of Shares outstanding shares
Bank Muscat (S.A.O.G.) Omani 339,598,596 14.74
First Energy Bank B.S.C Closed Bahraini 144,651,042 6.28
Overseas Investment S.P.C. Bahraini 138,611,666 6.01
A distribution schedule of equity shares, setting out the number of holders and the percentages as of 31 December 2020 is presented
below:
No. of the % of the

Categories No.of Shares shareholders outstanding shares
Less than 1% 915,278,199 22,738 39.72
1% up to less than 5% 766,358,350 12 33.25
5% up to less than 10% 283,262,708 2 12.29
10% up to less than 20% 339,598,596 1 14.74
Total 2,304,497,853 22,753 100
20.1 Proposed appropriation

The Board of Directors proposed dividend of 5 fils per share or 5% (2019: 8 fils or 8%) of the paid up capital to be paid by issue of
bonus shares (1 share for every 20 shares held). This amounts to BD 11,523 thousands (2019: 17,727 thousands).
20.2 Transactions with non-controlling interest

During the year, an indirect subsidiary of the Bank, ASB Biodiesel Hong Kong Limited (“ASBHK), with operations in Hongkong, went
through a debt restructuring where the external senior lenders converted their debt to a new class of equity in ASB Biodiesel 1 being
the sole shareholder of ASBHK. The Banks net equity investment in ASB Biodiesel 1 and financing due from ASBHK was already
fully impaired in prior years, however, the Bank retained control through its ownership of management shares in ASB Biodiesel 1 and
variability associated with its participation as a lender and equity holder. To manage the associated risks for the Bank, the Board of
Directors approved purchase of the new class of equity from the non-controlling shareholders for USD 45 million.
The consideration paid in excess of the share of net asset of the NCI has been reflected as a change in attribution of equity between
the parent and the NCI in the statement of changes in equity (against retained earnings) in line with the policy of treating transactions
with NCI as transaction between equity holders of the group. Any exit proceed from sale of the underlying plant and operations would
fully vest to the benefit of the Group. However, the current economic environment makes it difficult to attribute any significant value
for these operations.
21 STATUTORY RESERVE
As required by Bahrain Commercial Companies Law and the Bank’s articles of association, 10% of the net profit for the year has been
transferred to the statutory reserve. The Group may resolve to discontinue such annual transfers when the reserve totals 50% of
the paid up share capital of the Bank. The reserve is not distributable except in such circumstances as stipulated in the Commercial
Companies Law and approval of the CBB.

31 December 2020
22 BASIC AND DILUTED EARNINGS PER SHARE

Basic earnings per share (EPS) is calculated by dividing the net profit for the year attributable to shareholders of the Bank by the
weighted average number of ordinary shares outstanding during the year. There were no dilutive instruments issued by the Group.
2020 2019
Net profit attributable to Shareholders of the Bank (BD '000) 9,142 21,093
Weighted average number of shares (thousands) 2,149,540 2,164,037
Basic and diluted earnings per share (fils) 4.3 9.7
23 FINANCE INCOME
2020 2019
BD '000 BD '000
Murabaha financing 18,033 14,866
Mudaraba financing 27,960 21,342
Finance lease income, net 24,608 18,585
Musharaka 2,858 1,713
74,863 59,712
24 (LOSS) / INCOME FROM NON-TRADING INVESTMENTS
2020 2019
BD '000 BD '000
(Loss) / gain on sale of investments (252) 196
Fair value changes on investments (8,866) 2,145
Dividend income 154 292
(8,964) 2,633
25 LOSS FROM PROPERTIES
2020 2019
BD '000 BD '000
Loss on sale of investment properties (75) (302)
Fair value loss on investment properties (1,750) (1,140)
(1,825) (1,442)
26 FEES AND COMMISSION, NET
2020 2019
BD '000 BD '000
Transaction related fees and income 2,843 2,258
Arrangement fees 1,959 1,555
LC and LG commission 867 1,463
Credit and debit card income 733 974
Others 1,004 1,389
7,406 7,639

31 December 2020
27 OTHER INCOME
2020 2019
BD '000 BD '000
Recoveries from pre-acqusition provisions 1,392 2,491
Foreign exchange gains 377 299
Others 1,896 2,099
3,665 4,889
28.1 STAFF COST
2020 2019
BD '000 BD '000
Salaries and short term benefits 13,617 14,169
Employees' social insurance expenses 1,047 1,156
Other staff expenses 95 69
14,759 15,394
28.2 OTHER OPERATING EXPENSES
2020 2019
BD '000 BD '000
Business related expenses 3,208 3,163
Information Technology expenses 1,783 1,335
Professional expenses 1,634 1,591
Board of directors related expenes 1,058 1,019
Other expenses 3,408 3,417
11,091 10,525
29 RELATED PARTY TRANSACTIONS

Related parties comprise major shareholders, Directors of the Bank, senior management, close members of their families, entities
owned or controlled by them and companies affiliated by virtue of common ownership or directors with that of the Bank. The
transactions with these parties were approved by the Board of Directors.
The balances with related parties at 31 December 2020 and 31 December 2019 were as follows:
2020
Associates Directors
and joint Major and related Senior
ventures shareholders entities management Total
BD '000 BD '000 BD '000 BD '000 BD '000
Assets:
Cash and balances with banks
and Central Bank - 194 - - 194
Corporate Sukuk - - 3,977 - 3,977
Financing assets 18,330 6,460 6,797 1,107 32,694
Non trading investments 79,715 - 1,574 - 81,289
Investment in associates 12,036 - - - 12,036
Other assets 7,996 - - - 7,996
Liabilities and equity of investment

accountholders:
Placements from financial institutions - 23,455 - - 23,455
Customers' current accounts 2,588 2,984 3,175 496 9,243
Equity of investment accountholders 9,286 31,672 59,367 2,041 102,366
Other liabilities 13 - 30 5 48
Contingent liabilities and commitments 9,117 119 101 - 9,337

31 December 2020
29 RELATED PARTY TRANSACTIONS (continued)
2019
Associates, Directors
BD '000 BD '000 BD '000 BD '000 BD '000
Assets:
Corporate Sukuk - - 4,799 - 4,799
Financing assets 10,057 2 17,256 1,159 28,474
Non-trading investments 88,814 - 2,187 - 91,001
Investment in associates 10,640 - - - 10,640
Other assets 2,938 - - - 2,938
Liabilities and equity of investment

accountholders:
Placements from financial institutions - 92,894 - - 92,894
Customers' current accounts 1,517 14,712 1,602 317 18,148
Equity of investment accountholders 943 12,921 14,693 2,279 30,836
Other liabilities - - - 15 15
Contingent liabilities and commitments - 553 101 - 654
Income and expenses in respect of related parties included in the consolidated income statement are as follows:
2020
BD '000 BD '000 BD '000 BD '000 BD '000
Income:
Finance income 1,070 89 313 18 1,490
Income from sukuk - - 123 - 123
Loss from non-trading investments (8,989) - (612) - (9,601)
Share of profit from associates 1,953 - - - 1,953
Expenses:
Finance expense on placements from
financial institutions - 1,858 - - 1,858
Share of profit on equity of investment
accountholders 86 125 1,313 61 1,585
Other operating expenses - - 1,058 - 1,058

31 December 2020
29 RELATED PARTY TRANSACTIONS (continued)
2019
BD '000 BD '000 BD '000 BD '000 BD '000
Income:
Finance income 696 37 1,130 18 1,881
Income from sukuk - - 127 - 127
Income from non-trading investments 1,911 - (71) - 1,840
Share of profit from associates 1,209 - - - 1,209
Expenses:
Finance expense on placements
from financial institutions - 2,338 - - 2,338
Finance expense on placements
from customers 26 29 480 62 597
Share of profit on equity of
investment accountholders - 2 1 1 4
Other operating expenses - - 1,019 - 1,019
Board of Directors’ remuneration for the year 2020 amounted to BD 670 thousands (2019: BD 787 thousands).
Sharia Supervisory Boards’ remuneration for the year 2020 amounted to BD 28 thousands (2019: BD 72 thousands).
Key management personnel of the Bank comprise key members of management having authority and responsibility for planning,
directing and controlling the activities of the Bank. Compensation of key management personnel for the year 2020 includes salaries
and other short-term benefits of BD 2,769 thousands (2019: BD 2,851 thousands).
30 CONTINGENT LIABILITIES AND COMMITMENTS
2020 2019
BD '000 BD '000
Contingent liabilities on behalf of customers
Guarantees 34,575 20,860
Letters of credit 9,190 9,223
Acceptances 855 808
44,620 30,891
Irrevocable unutilised commitments

Unutilised financing commitments 55,051 55,230
Unutilised non-funded commitments 9,097 9,396
64,148 64,626
Letters of credit, guarantees (including standby letters of credit) commit the Group to make payments on behalf of customers
contingent upon their failure to perform under the terms of the contract.
Commitments generally have fixed expiration dates, or other termination clauses. Since commitments may expire without being
utilized, the total contract amounts do not necessarily represent future cash requirements.
Operating lease commitment - Group as lessee
The Group has entered into various operating lease agreements for its premises. Future minimal rentals payable under the non-
cancellable leases are as follows:
2020 2019
BD '000 BD '000
Within 1 year 1,343 1,238
After one year but not more than five years 1,668 746
3,011 1,984

31 December 2020
31 WA’AD BASED FX TRANSACTIONS FOR RISK MANAGEMENT

The Group entered into Wa’ad based FX transactions for general management of its balance sheet to manage its exposures to foreign
currency risk. The fair values of these instruments at 31 December 2020 and 31 December 2019 were as follows:
2020 2019
Notional Amount Fair Value Notional Amount Fair Value
BD ‘000 BD ‘000 BD ‘000 BD ‘000
FX Wa’ad instruments
USD long position 9,797 9,966 3,979 4,071
USD short position (27,191) (25,349) (4,966) (5,058)
EUR long position 27,191 25,349 - -
EUR short position (6,027) (6,195) - -
BHD long position - - 987 987
BHD short position (3,770) (3,771) - -
32 RISK MANAGEMENT
32.1 Introduction
Risk is inherent in the Group’s activities but it is managed through a process of ongoing identification, measurement and monitoring,
subject to risk appetite limits and other controls. This process of risk management is critical to the Group’s continuing profitability and
each individual within the Group is accountable for the risk exposures relating to his or her responsibilities. The Group is exposed to
credit risk, liquidity risk, operational risk, information security risk and market risk. It is also subject to early settlement risk.
The Group’s risk function is independent of lines of business and the Group Chief Risk Officer reports to the Audit and Risk Committee
with access to the Group Chief Executive Officer.
The independent risk control process does not include business risks such as changes in the environment, technology and industry
as they are monitored through the Group’s strategic planning process.
Board of Directors
The Board of Directors is responsible for setting the overall risk management framework and appetite encompassing the risk
strategies and policies.
Shari’a Supervisory Board

The Group’s Shari’a Supervisory Board is entrusted with the responsibility to ensure the Group’s adherence to Shari’a rules and
principles in its transactions and activities.
Risk Committee
Risk Committee exercises its authority to review and approve proposals within its delegated limits. The Committee recommends the
risk policies and framework to the Board. The Committee has a primary role in selection and implementation of risk management
systems, portfolio monitoring, stress testing, risk reporting to the Board, Board Committees, Regulators and Executive Management.
The Committee discharges its authority after adequate due diligence.
Asset and Liability Committee

The Asset and Liability Committee (ALCO) establishes policy and objectives for the asset and liability management of the Group’s
financial position in terms of ICAAP, Stress Testing, Step-in Risk, Structure, Distribution, Risk and Return and its impact on profitability.
It also monitors the cash flow, tenor and cost / yield profiles of assets and liabilities and evaluates the Group’s financial position both
from profit rate sensitivity and liquidity points of view, making corrective adjustments based upon perceived trends and market
conditions, monitoring liquidity, monitoring foreign exchange exposures and positions.
Operational Risk Committee

The Operational Risk Committee establishes the Bank’s Operational Risk Policies which must be consistent with the corporate values
and strategy of the Bank. The Committee shall be responsible for the design, implementation and supervision of the Operational Risk
framework of the Bank.
Information Security Committee

Information Security Committee is an advisory committee appointed by the Management Executive Committee of the Bank to
develop, review and execute a comprehensive Information Security Management System for the Bank. The Committee will regularly
review the information security risk exposure of the Bank.

31 December 2020
32 RISK MANAGEMENT (continued)
32.1 Introduction (continued)
Audit and Risk Committee

The Audit and Risk Committee is appointed by the Board of Directors who are non-executive directors of the Group. The Audit and
Risk Committee assists the Board in carrying out its responsibilities with respect to assessing the quality and integrity of financial
reporting, the audit thereof, the soundness of the internal controls of the Group, reviewing and monitoring the overall risk framework
and profile of the Group as well as its adherence to stipulated policies and limits, and the methods for monitoring compliance with
laws, regulations and supervisory and internal policies.
The Audit and Risk Committee reviews Group’s accounting and financial practices, risk management reports, integrity of the Group’s
financial and internal controls and consolidated financial statements. It also reviews the Group’s compliance with legal requirements,
recommends the appointment, compensation and oversight of the Group’s external and internal auditors. The Committee has the
responsibility to review and recommend to the Board for approval the overall risk process and policies within the Bank.
Internal Audit
Risk management processes throughout the Group are audited by the internal audit function that examines both the adequacy
of the procedures and the Group’s compliance with the procedures. Internal Audit discusses the results of all assessments with
management, and reports its findings and recommendations to the Audit and Risk Committee.
Risk measurement and reporting systems

The Group’s risk management policies aim to identify, measure, analyse and manage the risks faced by the Group, to set appropriate
risk limits and controls, and to continuously monitor risk levels and adherence to limits. The Group’s risk management department
is also responsible for identifying risk characteristics inherent in new and existing products, activities and setting exposure limits to
mitigate these risks.
Monitoring and controlling risks is primarily performed based on limits established by the Group. These limits reflect the business
strategy and market environment of the Group as well as the level of risk that the Group is willing to accept, with additional emphasis
on selected industries. In addition, the Group monitors and measures the overall risk bearing capacity in relation to the aggregate risk
exposure across respective risk types and activities.
Information compiled from all the businesses is examined and processed in order to analyse, control and identify early risks. This
information is presented and explained to the Board of Directors, the Audit and Risk Committee, Risk Management Committee
and ALCO, whenever required. The reports include aggregate credit quality and exposures, market risk exposures, operational risk
metrics, limit exceptions, liquidity ratios, stress testing, and risk profile changes. A detailed report is produced on a quarterly basis with
simplified reports produced on a monthly basis. Senior management assesses the appropriateness of the allowance for credit losses
on a quarterly basis. The Board of Directors receives a comprehensive risk report once a quarter which is designed to provide all the
necessary information to assess the risks of the Group.
For all levels throughout the Group, specifically tailored risk reports are prepared and distributed in order to ensure that all business
divisions have access to extensive, necessary and up-to-date information. Briefing is given to all relevant members of the Group on
the utilization of market limits, proprietary investments and liquidity, plus any other risk developments.
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographic
region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by
changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group’s performance to
developments affecting a particular industry or geographical location.
In order to avoid excessive concentrations of risk, the Group’s policies and procedures include specific guidelines to focus on
maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly.
32.2 Credit risk

Credit risk is the risk that one party to a financial contract will fail to discharge an obligation and cause the other party to incur a financial
loss. The Group attempts to control credit risk by monitoring credit exposures, setting limits for transactions with counterparties, and
continually assessing the creditworthiness of counterparties.
In addition to monitoring credit limits, the Group manages the credit exposures by entering into collateral arrangements with
counterparties in appropriate circumstances and by limiting the duration of the exposure.

31 December 2020
32.2 Credit risk (continued)
Maximum exposure to credit risk without taking account of any collateral and other credit enhancements
Credit risk grades
The Group allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk
of default and applying experienced credit judgment. Credit risk grades are defined using qualitative and quantitative factors that
are indicative of risk of default. These factors vary depending on the nature of the exposure and the type of customer. Credit risk
grades are defined and calibrated such that the risk of default occurring increases exponentially as the credit risk deteriorates. Each
exposure is allocated to a credit risk grade at initial recognition based on available information about the customer. Exposures are
subject to ongoing monitoring which may result in an exposure being moved to a different credit risk grade.
The table below shows the maximum exposure to credit risk for the components of the consolidated statement of financial position.
The maximum exposure is shown net of provision, before the effect of mitigation through the use of master netting and collateral
agreements.
Gross maximum Gross maximum

exposure exposure
2020 2019
BD '000 BD '000
ASSETS
Balances with other banks 181,132 101,014
Corporate Sukuk 16,395 22,162
Financing assets and finance lease assets 1,283,812 1,075,498
Non-trading investments-debt 8 21
Financing contracts under other assets 6,434 7,181
Total 1,525,746 1,320,679
Contingent liabilities and commitments 107,985 95,062

Total credit risk exposure 1,633,731 1,415,741
Where financial contracts are recorded at fair value the amounts shown above represent the current credit risk exposure but not the
maximum risk exposure that could arise in the future as a result of changes in values.
Type of credit risk
Various contracts entered into by the Group comprise Murabaha financing, Mudaraba financing, Musharaka, Credit card receivables,
Corporate Sukuk and finance lease contracts. Murabaha contracts cover financing of land, buildings, commodities, motor vehicles
and others non-financial assets. Mudaraba financing consist of financing transactions entered through other Islamic banks and
financial institutions. Mudaraba is a partnership agreement in which the Islamic bank acts as the provider of funds (the Rabalmal)
while the recipient of the funds (the Mudarib or the manager) provides the professional, managerial and technical know-how towards
carrying out the venture, trade or service with an aim of earning profit.
The Group follows an internal rating mechanism for grading relationships for financial assets. All financial assets are assigned a rating
in accordance with the defined criteria. The Group utilises a scale ranging from 1 to 10 for credit relationships, with 1 to 7 denoting
performing grades and 8 to 10 denoting non-performing grades. Ratings 1 to 4 represent good credit grade, 5 to 7 represents a
satisfactory credit grade and 8 to 10 represents default grade.
For externally rated exposures, credit risk ratings of an authorised Credit Rating Agency (S&P, Moody’s, Fitch & Capital Intelligence)
are converted into internal ratings which are calibrated with the risk appetite of the Bank. Conversion of an external credit risk rating
to an internal risk rating is done to ensure consistency across publicly rated and unrated entities.
The Group endeavors continuously to improve upon the internal credit risk rating methodologies and credit risk management policies
and practices to reflect the true underlying credit risk of the portfolio and the credit culture in the Group.

31 December 2020
The uncertainties due to COVID-19 and resultant economic volatility has impacted the Group’s financing operations and is expected
to affect most of the customers and sectors to some degree. Although it is difficult to assess at this stage the degree of impact faced
by each sector, the main industries impacted are hospitality, tourism, leisure, airlines/transportation and retailers. In addition, some
other industries are expected to be indirectly impacted such as contracting, real estate and wholesale trading. Also the volatility in oil
prices during the early part of 2020, will have a regional impact due to its contribution to regional economies.
Considering this evolving situation, the Group has taken preemptive measures to mitigate credit risk by adopting more cautious
approach for credit approvals thereby tightening the criteria for extending credit to impacted sectors. Payment holidays have been
extended to customers, including private and SME sector, in line with the instructions of CBB. These measures may lead to lower
disbursement of financing facilities, resulting in lower net financing income and decrease of other revenue.
The risk management department has also enhanced its monitoring of financing portfolio by reviewing the performance of exposures
to sectors expected to be directly or indirectly impacted by COVID-19 to identify potential SICR on a qualitative basis.
Measurement of ECL
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e.
the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects
to receive). ECLs are discounted at the effective profit rate of the financial asset.
The key parameters into the measurement of ECL are the following variables:
• Probability of Default (PD);
• Loss Given Default (LGD); and
• Exposure At Default (EAD).
These parameters are generally derived from internally developed models, historical and projected data. These are further adjusted
to reflect forward-looking scenarios as described below.
Definition of default
The Group considers a financial asset to be in default when the customer is unlikely to pay its credit obligations to the Group in full,
without recourse by the Group to actions such as liquidating collateral; or the customer is past due more than 90 days on any credit
obligation to the Group. In assessing whether a customer is in default, the Group considers both qualitative factors such as breaches
of covenants and quantitative factors such as overdue status and non-payment on another obligation of the same issuer to the Group.
Probability of default
PDs estimates are estimated at a certain date, which are calculated based on the Bank’s default experience, and assessed using
rating tools tailored to the segment of counterparties and exposures. These estimations are based on internally compiled data
comprising both quantitative and qualitative factors. In case of lack of default history, market data may also be used to derive the PD
for selected segment of counterparties. If a counterparty or exposure migrates between rating classes, then this will lead to a change
in the estimate of the associated PD.
Generating the term structure PD
Credit risk grades are a primary parameters into the determination of the term structure of PD for exposures. The Group collects
performance and default information about its credit risk exposures analysed by credit risk grading for corporate and days-past-due
for retail portfolio. The Group employs credit risk estimation models for analysing the data collected and generate estimates of PD of
exposures and how these are expected to change as a result of the passage of time.
Incorporation of forward - looking information
The Group uses industry recognized models to estimate impact of macro-economic factors on historical observed default rates. In
case the results of forecasted PDs are significantly different from the expected default rates that may be observed for the forecasted
economic conditions, conservative and discretionary overlays shall be used by the management after analyzing the portfolio and
impact. The key macro-economic indicators include gross domestic product (GDP) growth and oil prices.
Incorporating forward-looking information requires continuous assessment as to how changes in these macroeconomic factors
will affect the ECL applicable to the stage 1 and stage 2 exposures which are considered as performing (Stage 3 are the exposures
under default category). The methodologies and assumptions involved, including any forecasts of future economic conditions, are
reviewed yearly.

31 December 2020

Loss Given Default
LGD is the magnitude of the likely loss if there is a default. The Group estimates LGD parameters based on the history of recovery rates
of claims against defaulted counterparties, based on historical data using both internal and external factors. The LGD is estimated
using below factors:
Cure Rate: Defined as the ratio of accounts which have fallen to default and have managed to move backward to the performing
accounts.
Recovery Rate: Defined as the ratio of liquidation value to market value of the underlying collateral at the time of default would also
account for expected recovery rate from a general claim on the individual’s assets for the unsecured portion of the exposure.
In case of non-availability of recovery data, the Bank uses LGD estimate based on market practice.
Discounting Rate: Defined as the opportunity cost of the recovery value not being realized on the day of default adjusted for time
value. Where the Group does not have stable or adequate internal loss or recovery experience, an expert judgement measure using
market benchmarks as inputs is considered.
Exposure At Default
EAD represents the expected exposure in the event of a default. The Group derives the EAD from the current exposure to the
counterparty and potential changes to the current amount allowed under the contract including amortisation. The EAD of a financial
asset is its gross carrying amount. For lending commitments and financial guarantees, the EAD includes the amount drawn, as well as
potential future amounts that may be drawn under the contract, which are estimated based on historical observations and forward-
looking forecasts.
Significant Increase in Credit Risk
A SICR occurs when there has been a significant increase in the risk of a default occurring over the expected life of a financial
instrument. In the measurement of ECL, judgement is involved in setting the rules and trigger points to determine whether there has
been a SICR since initial recognition of a financing facility, which would result in the financial asset moving from ‘stage 1’ to ‘stage 2’.
When determining whether the risk of default on financial contracts has increased significantly since initial recognition, the Group
considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based on the Group’s historical experience and expert credit assessment
including forward-looking information.
The criteria for determining whether credit risk has increased significantly vary on a portfolio level and include quantitative and
qualitative factors, including days past due, restructured status and relative migration in risk rating. Credit risk grades are defined
and calibrated such that the risk of default occurring increases exponentially as the credit risk grade deteriorates so, for example,
the difference in risk of default between credit risk grades 1 and 2 is smaller than the difference between credit risk grades 4 and 5.
The Group continues to assess borrowers for other indicators of unlikeliness to pay, taking into consideration the underlying cause
of any financial difficulty and whether it is likely to be temporary as a result of Covid-19 or longer term.
During the year, in accordance with CBB instructions the Group has granted payment holidays to its eligible/impacted customers by
deferring up to ten months instalments. These deferrals are considered as market-wide short-term liquidity relief to address borrower
cash flow issues and not necessarily indicative of deterioration in credit risk. The Group believes that the extension of these payment
reliefs does not automatically trigger a SICR and a stage migration for the purposes of calculating ECL, as these are being made
available to assist borrowers affected by the Covid-19 outbreak to resume regular payments. At this stage sufficient information is
not available to enable the Group to individually differentiate between a borrowers’ short-term liquidity constraints and a change in its
lifetime credit risk. However, the Group has made risk based assessments on the affected portfolio to determine a range of possible
outcomes for its ECL determination process.
Management overlays are applied to the model outputs if consistent with the objective of identifying a significant increase in credit
risk.

31 December 2020

Renegotiated financial assets
The contractual terms of a financing may be modified for a number of reasons including changing market conditions, and other
factors not related to the current or potential credit deterioration of a customer. When the terms of a financial asset are modified and
the modification does not result in a derecognition, the determination of whether the asset’s credit risk has increased significantly
reflects a comparison of its remaining lifetime PD at the reporting date based on modified terms, with the remaining lifetime PD
estimated based on data at initial recognition and the original contractual terms.
The Group renegotiates financing to customers in financial difficulties to maximize collection opportunities and minimize the risk of
default. This may involve extending the payment arrangements and documenting the agreement of new conditions for providing
finance. Management continuously reviews renegotiated facilities to ensure that all criteria are met and that future payments are
likely to occur.
The accounts which are performing prior to restructuring but restructured due to financial difficulty are categorised under stage
2. The accounts that are non-performing or meet any criteria for classifying as non-performing (prior to restructuring), then such
restructured accounts are categorized under stage 3.
The Group believes that the extension of payment holidays due to COVID-19 related concerssionary measures of CBB does not
automatically trigger a SICR and a stage migration for the purposes of calculating ECL.
Backward transition
FAS 30 staging model is of symmetrical nature as exposures may migrate from lifetime ECL measurement (Stage 2 and Stage 3)
to 12 month ECL measurement (Stage 1). However, movement across stages are not immediate once SICR indicators are no longer
triggered. Once such indicators are no longer triggered, movement back to Stage 1 or Stage 2 has to be calibrated and cannot be
automatic or immediate. Certain criteria like cooling off year, SICR indicators and payment history are considered for migrating
customers to Stage 2 or Stage 1.
Credit Conversion Factor
The estimation of EAD takes into account any unexpected changes in the exposure after the assessment date, including expected
drawdowns on committed facilities through the application of a credit conversion factor (CCF). The EAD is estimated using the
outstanding exposure adjusted by CCF times undrawn portion of the facilities.
The outstanding exposure is calculated as principal plus profit less expected prepayments. The undrawn portion refers to the portion
of the unutilized credit limit. CCF applied to the facilities would be the higher of average behavioral utilization over the last five years
or the CCF considered for capital charge.
The Bank applies regulatory CCF as defined by the Central Bank of Bahrain.
Expected credit Losses
The economic uncertainties caused by COVID-19, and the volatility in oil prices impacting the Middle East economic forecasts have
required the Group to update the inputs and assumptions used for the determination of expected credit losses (“ECLs”) as at 31
December 2020. ECLs were estimated based on a range of forecast economic conditions as at that date and considering that the
situation is fast evolving, the Group has considered the impact of higher volatility in the forward-looking macro-economic factors,
when determining the severity and likelihood of economic scenarios for ECL determination.
The following table summarizes the key judgements and assumptions in relation to the model inputs and the interdependencies
between those inputs and highlights significant changes during the current year.
Key model inputs Change in estimates

Probability of default (PD’s) Point-in-time PD’s updated using latest available macro-economic forecasts by using historical
correlation to Oil prices.
Probability weighted outcomes Probability weights updated to increase weightage to downturn scenarios - Base 65, Stressed
25, Improved 10 (31 December 2019: 60:20:20)
Unfunded exposure Increment in CCFs by 25% as compared to December 2019 to reflect change in draw down
behavior of customers.
Loss Given Default Unsecured LGD increased to 65% from 60% Collateral haircuts increased by 10% for secured
exposures.

31 December 2020
The Group has also stressed financing exposures with regards to specific industries which are expected to be most impacted due to
Covid-19 and considered for ECL in its probability weighted scenarios. However, the staging of these exposures reported in the tables
below reflect their account position on the reporting date. The Group continues to individually assess significant corporate exposures
to adequately safeguard against any adverse movements due to Covid-19.
The Group has previously performed historical analysis and identified key economic variables impacting credit risk and ECL for each
portfolio and expert judgement has also been applied in this process. These economic variables and their associated impact on PD,
EAD and LGD vary by financial instrument.
Judgement is involved in determining which forward looking information variables are relevant for particular financing portfolios and
for determining the sensitivity of the parameters to movements in these forward-looking variables. As with any economic forecasts,
the projections and likelihoods of the occurrence are subject to a high degree of inherent uncertainty and therefore the actual
outcomes may be significantly different to those projected.
Any changes made to ECL to estimate the overall impact of Covid-19 is subject to very high levels of uncertainty as limited forward-
looking information is currently available on which to base those changes. The judgements and associated assumptions have been
made within the context of the impact of COVID-19 and reflect historical experience and other factors that are relevant, including
expectations of future events that are believed to be reasonable under the circumstances. In relation to COVID-19, judgements and
assumptions include the extent and duration of the pandemic, the impacts of actions of governments and other authorities, and the
responses of businesses and consumers in different sectors, along with the associated impact on the global economy. Accordingly,
the Group’s ECL estimates are inherently uncertain and, as a result, actual results may differ from these estimates.
a) The credit quality of balances with banks and placements with financial institutions subject to credit risk is as follows:
2020
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Good (R1-R4) 211,392 - - 211,392
Satisfactory (R5-R7) 7,922 - - 7,922
Allowance for credit losses (217) - - (217)
219,097 - - 219,097
2019
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Good (R1-R4) 216,009 - - 216,009
215,817 - - 215,817

31 December 2020
b) The following tables sets out information about the credit quality of financial assets. For financing commitments and financial
guarantee contracts, the amounts in the table represent the amounts committed or guaranteed.
i) Corporate Sukuk
2020
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Good (R1-R4) 16,426 - - 16,426
16,395 - - 16,395
2019
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Good (R1-R4) 14,603 3,410 - 18,013
Satisfactory (R5-R7) 4,155 - - 4,155
Allowance for credit losses (3) (3) - (6)
18,755 3,407 - 22,162
ii) Financing assets and receivable from finance lease assets
2020
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Good (R1-R4) 1,122,092 43,207 14,483 1,179,782
Satisfactory (R5-R7) 81,282 17,486 29,939 128,707
Default (D8-D10) - 280 15,074 15,354
Allowance for credit losses and impairment (13,539) (5,849) (20,643) (40,031)
1,189,835 55,124 38,853 1,283,812
2019
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Good (R1-R4) 888,814 83,893 1,931 974,638
Satisfactory (R5-R7) 49,188 26,890 32,036 108,114
Default (D8-D10) - - 19,282 19,282
Allowance for credit losses and impairment (6,624) (7,287) (12,625) (26,536)
931,378 103,496 40,624 1,075,498

31 December 2020
iii) Non trading investments - debt-type
2020
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Good (R1-R4) 8 - - 8
8 - - 8
2019
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Good (R1-R4) 21 - - 21
21 - - 21
iv) Financial contracts under other assets
2020
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Good (R1-R4) 1,132 - 30 1,162
Satisfactory (R5-R7) 674 485 - 1,159
Default (D8-D10) - - 7,877 7,877
Allowance for credit losses (17) (145) (3,602) (3,764)
1,789 340 4,305 6,434
2019
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Good (R1-R4) 1,254 32 110 1,396
Satisfactory (R5-R7) 447 352 38 837
Default (D8-D10) - - 9,036 9,036
Allowance for credit losses (80) - (4,008) (4,088)
1,621 384 5,176 7,181

31 December 2020
v) Financing commitments and financial guarantee contracts
2020
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Good (R1-R4) 89,774 1,985 - 91,759
Satisfactory (R5-R7) 11,201 3,437 - 14,638
Default (D8-D10) - - 2,371 2,371
Allowance for credit losses (449) (41) (293) (783)
100,526 5,381 2,078 107,985
2019
Stage 2: Stage 3:
BD '000 BD '000 BD '000 BD '000
Good (R1-R4) 81,398 3,439 - 84,837
Satisfactory (R5-R7) 6,438 1,450 305 8,193
Default (D8-D10) - - 2,487 2,487
Allowance for credit losses (228) (5) (222) (455)
87,608 4,884 2,570 95,062
The maximum credit risk, without taking into account the fair value of any collateral and Shari’a-compliant netting agreements, is
limited to the amounts on the consolidated statement of financial position plus commitments to customers disclosed in note 30
except capital commitments.
During the year BD 46,896 thousands (2019: BD 66,940 thousands) of financing facilities were renegotiated. Most of the renegotiated
facilities are performing and are secured.
Write-off policy
The Group writes off an asset/security balance (net of any related allowances for impairment losses) when it determines that the
asset/security are uncollectible. This determination is reached after considering information such as the occurrence of significant
changes in the counterparty’s financial position such that he can no longer pay the obligation, or that proceeds from collateral will not
be sufficient to pay back the entire exposure. During the year, the Group has written off financing facilities amounting to BD 3,239
thousands (2019: BD 9,620 thousands) which were fully impaired.
Collateral held and other credit enhancements

The Group accepts the following type of collateral, as defined in CBB rule book. The collateral can be in Bahraini Dinars or other
Foreign Currencies-in such cases, haircut as appropriate as per the credit risk policy shall be effected.
• Cash Margin
• Sukuk-Long Term – rated & unrated
• Equities listed and not listed in main index
• Units in collective investment schemes
• Other physical assets including real estate

31 December 2020
The Group holds collateral and other credit enhancements against certain of its credit exposures. The following table sets out the
principal types of collateral held against different types of financial assets.
2020 2019
Type of credit exposure Principal type ofcollateral held BD '000 BD '000
Financing assets to corporates Cash, Property, Machinery, Shares and Sukuk 858,600 464,824
Financing assets to retail customers Cash, Property, Shares and Sukuk 624,881 301,792
FTV ratio
Financing to value (FTV) is calculated as the ratio of the gross amount of the financing or the amount committed for financing
commitments to the value of the collateral. The valuation of the collateral excludes any adjustments for obtaining and selling the
collateral.
2020 2019
BD '000 BD '000
Less than 50% 743,349 262,466
51-70% 268,433 7,690
71-90% 256,249 320,172
91-100% 100,457 69,664
More than 100% 114,993 106,624
Key drivers of credit risk and credit losses

Credit risk arises from all transactions that give rise to actual, contingent or potential claims against any counterparty, obligor or client
(which is referred to collectively as “counterparties”). This is the most frequent and substantial risk faced by any financing Bank.
Credit risk may have the following consequences leading to credit losses:
• Delayed fulfilment of a payment obligation
• Partial loss of the credit exposure
• Complete loss of the credit exposure
The various types of credit risk are defined as follows:

• Default Risk
• Country Risk
• Settlement Risk
• Replacement cost-risk
• Concentration risk
• Residual risk (e.g. legal risk, documentation risk, or liquidity risk)
The Group has identified and documented key drivers of credit risk and credit losses for each portfolio of financial instruments and,
using an analysis of historical data, has estimated relationships between macro-economic variables and credit risk and credit losses.
The economic scenarios used included the key indicators for Bahrain such as the oil price, net lending , population, GDP growth and
government expenditure.
32.3 Legal risk and claims

Legal risk is the risk arising from the potential that unenforceable contracts, lawsuits or adverse judgments can disrupt or otherwise
negatively affect the operations of the Group. The Group has developed controls and procedures to identify legal risks and believes
that losses will be minimised.
As at 31 December 2020, legal suits amounting to BD 2,379 thousands (2019: BD 385 thousands) were pending against the Group.
Based on the opinion of the Group’s legal counsel, the total estimated liability arising from these cases is not considered to be material
to the Group’s consolidated financial position as the Group has also filed counter cases against these parties.

31 December 2020
32.4 Operational risk management

In response to COVID 19 outbreak, there were various changes in the working model, interaction with customers, customer acquisition
and executing contracts and carrying out transactions with and on behalf of the customers. The management of the Group has
enhanced its monitoring to identify potential risk events arising out of the current situation and the changes in the way business is
conducted. The operational risk department has also enhanced its monitoring processes to identify operational risks in the revised
working pattern.
The BCP was thoroughly tested during this year, as the Bank implemented measures like working from the BCP Site and from home.
These measures were implemented in time and performed satisfactorily. The work from home set-up was thoroughly reviewed prior
to its commissioning to ensure that the information security risks associated with it are thoroughly addressed and mitigated.
As of 31 December 2020, the Group did not have any significant issues relating to operational risks.
33 CONCENTRATIONS
developments affecting a particular industry or geographic location. The Group manages its exposure through diversification of
financing activities to avoid undue concentrations of risks with customers in specific locations or businesses.
The distribution of assets, liabilities and equity of investment accountholders by geographic region and industry sector was as
follows:
2020 2019
Liabilities Liabilities,
and equity of Contingent and equity of Contingent
investment liabilities investment liabilities
account and account and
Assets holders Commitments Assets holders Commitments
BD '000 BD '000 BD '000 BD '000 BD '000 BD '000
Geographic region
GCC 2,104,951 1,720,695 101,105 1,864,096 1,500,645 88,895
Arab World 30,578 82,175 6,920 19,781 82,865 5,857
Europe 31,482 105,984 - 69,832 72,015 25
Asia Pacific 12,194 44,059 743 24,638 45,544 740
North America 61,608 3,449 - 40,944 3,631 -
Others 20,540 23,824 - 23,512 18,029 -
2,261,353 1,980,186 108,768 2,042,803 1,722,729 95,517
2020 2019
Liabilities Liabilities,
and equity of Contingent and equity of Contingent
investment liabilities investment liabilities
account and account and
Assets holders Commitments Assets holders Commitments
BD '000 BD '000 BD '000 BD '000 BD '000 BD '000
Industry sector
Government and public sector 513,933 165,716 1,015 424,960 168,098 2,977
Banks and financial institutions 535,514 663,899 18,510 516,566 642,339 8,136
Real estate 360,618 157,207 20,257 345,064 97,693 7,535
Trading and manufacturing 268,417 282,882 53,487 299,079 257,794 66,834
Aviation - - - 1,203 - -
Individuals 506,080 570,893 7,501 383,164 441,606 5,376
Others 76,791 139,589 7,998 72,767 115,199 4,659
2,261,353 1,980,186 108,768 2,042,803 1,722,729 95,517

31 December 2020
34 MARKET RISK
Market risk arises from fluctuations in global yields on financial contracts and foreign exchange rates that could have an indirect
effect on the Group’s assets value and equity prices. The Board has set limits on the risk that may be accepted. This is monitored on
a regular basis by the Audit and Risk Committee as well as ALCO of the Group.
34.1 Equity price risk

Equity price risk arises from fluctuations in equity prices. The Board has set limits on the overall investment exposure of the Bank.
This is monitored on an ongoing basis by the Group’s Investment Committee and Risk Management.
The effect on income (as a result of changes in the fair values of non-trading investments held at fair value through profit or loss and
fair value through equity investments) solely due to reasonably possible changes in equity prices, is as follows:
2020
10% increase 10% decrease
Effect on Effect on Effect on Effect on
net profit equity net profit equity
BD '000 BD '000 BD '000 BD '000
Quoted: 416 - (416) -
Unquoted 9,352 125 (9,352) (125)
2019
10% increase 10% decrease
Effect on Effect on Effect on Effect on
net profit equity net profit equity
BD '000 BD '000 BD '000 BD '000
Quoted: 358 - (358) -
Unquoted 10,386 252 (10,386) (252)
34.2 Profit return risk

Profit rate risk arises from the possibility that changes in profit rates will affect the future profitability or the fair values of financial
assets. The Board has set limits on the risk that may be accepted. This is monitored on a regular basis by the Audit and Risk
Committee as well as ALCO of the Group.
The Group manages exposures to the effects of various risks associated with fluctuations in the prevailing levels of market profit
rates on its financial position and cash flows.
The effect on income solely due to reasonably possible immediate and sustained changes in profit return rates, affecting both
floating rate assets and liabilities and fixed rate assets and liabilities with maturities less than one year are as follows:
2020
Effect on Effect on
Change in rate net profit Change in rate net profit
% BD '000 % BD '000
Bahraini dinars 0.10 447 (0.10) (447)
US dollars 0.10 242 (0.10) 242
2019
Effect on Effect on
Change in rate net profit Change in rate net profit
% BD '000 % BD '000
Bahraini dinars 0.10 311 (0.10) (311)
US dollars 0.10 341 (0.10) (341)

31 December 2020
34 MARKET RISK (continued)
34.2 Profit return risk (continued)
Profit rate benchmark reform (PBOR)

LIBOR is a benchmark rate at which banks estimate they can finance money to other banks on an unsecured basis. LIBOR was
published for five different currencies and for seven different maturities. After 2021 it will not be mandatory for banks to publish LIBOR
as per the Financial Conduct Authority, regulator of LIBOR. Alternatively, a Secured overnight funding rate (SOFR) will be published
which will be a risk free rate and the profit rate for various currencies will be reviewed by the respective currencies regulators. The
Group has contracts which are at variable profit rates based on LIBOR. The Group is still in the process of assessing the impact of
transition to the risk free rate for its financing portfolio.
34.3 Currency risk

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Board
has set limits on positions by currency. Positions are monitored on a yearly basis by the Audit and Risk Committee as well as ALCO
to ensure positions are maintained within established limits.
Substantial portion of the Group’s assets and liabilities are denominated in Bahraini Dinars, US Dollars or Saudi Riyals. As the Bahraini
Dinar and Saudi Riyals are pegged to the US Dollars, positions in these currencies are not considered to represent significant currency
risk as of 31 December 2020 and 2019.
The Group’s net exposure for denominated in foreign currencies as at 31 December for its financial instruments are as follows:
Long Long
(short) (short)
2020 2019
BD '000 BD '000
Sterling Pounds 4,051 4,427
Kenyan Shilings 109 2,115
Euro (10,496) (2,499)
Others (3,445) 294
Standard scenarios that are considered include a 10% increase or decrease in exchange rates other than GCC pegged currencies. An
analysis of the Group’s sensitivity to an increase or decrease in foreign exchange rates (assuming all other variables primarily profit
rates, remain constant) is as follows:
Change in Effect on profit Change in Effect on profit

currency rate 2020 currencyrate 2019
% BD '000 % BD '000
Sterling Pounds 10 405 10 443
Kenyan Shilings 10 11 10 212
Euro 10 (1,050) 10 (250)
Others 10 (345) 10 29
Total (979) 434
35 LIQUIDITY RISK
Liquidity risk is the risk that the Group will be unable to meet its liabilities as they fall due. Liquidity risk can be caused by market
disruptions or credit downgrades which may impact certain sources of funding. To mitigate this risk, management has diversified
funding sources and assets are managed with liquidity in mind, maintaining an adequate balance of cash, cash equivalents and
readily convertible marketable securities. Liquidity position is monitored on an ongoing basis by the Risk and Audit Committee as well
as ALCO of the Group.
The Bank has computed the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) as per the requirements of the
CBB rulebook. The LCR at the Group level as at 31 December 2020 is 141.56% and the simple average of the daily consolidated LCRs
of the last three months is 126.41%. The NSFR as at 31 December 2020 is 99.96%.

31 December 2020
35 LIQUIDITY RISK (continued)
The effects of COVID-19 on the liquidity and funding risk profile of the banking system are evolving and are subject to ongoing
monitoring and evaluation. The CBB has announced various measures to combat the effects of COVID-19 and to ease the liquidity in
banking sector. Following are some of the significant measures provided for a year of six months with effect from March 2020 that
has an impact on the liquidity risk of the Group:
• Payment holiday for principal and profit for 6 months to eligible customers;
• Concessionary repo to eligible banks at zero percent, amount at the discretion of CBB;
• Reduction of cash reserve ratio from 5% to 3%;
• Reduction of LCR and NSFR ratio from 100% to 80%;
The maturity profile of sovereign and corporate sukuk, placements with or from financial institutions, financing assets, finance lease
assets and murabaha term financing has been presented using the contractual maturity year. For other balances, maturity profile is
based on expected cash flows / settlement profile of the respective assets and liabilities.
The management of the Group has enhanced its monitoring of the liquidity and funding requirements. ALCO meetings are convened
more frequently in order to carryout granular assessment of funding requirements with the objective to explore available sources of
funding and to drawdown the existing funding sources as and when necessary to maintain enough liquidity at a reasonable cost of
funding.
In response to COVID 19 outbreak, the Group invoked its Liquidity Contingency Plan and continues to monitor and respond to all
liquidity and funding requirements that are presented. The Group continues to calibrate stress testing scenarios to current market
conditions in order to assess the impact on the Group in current extreme stress years. As at the reporting date the liquidity and funding
position of the Group remains strong and is well placed to absorb and manage the impacts of this disruption. Further information
on the regulatory liquidity and capital ratios as at 31 December 2020 have been disclosed in Note 44 to the consolidated financial
statement.
2020
Up to 3 months 1 to 5 Over 5
3 months to 1 year years years Total
BD '000 BD '000 BD '000 BD '000 BD '000
ASSETS
Cash and balances with banks
and Central Bank 288,266 - - - 288,266
Sovereign Sukuk 18,035 39,157 268,005 67,911 393,108
Placements with financial institutions 32,670 5,295 - - 37,965
Corporate Sukuk 1,285 8,974 6,136 - 16,395
Finance lease assets 31,293 28,646 154,565 254,859 469,363
Non-trading investments - - - 98,034 98,034
Investment properties - - - 67,586 67,586
Development properties - - - 2,943 2,943
Investment in associates - - - 12,036 12,036
Other assets 12,032 397 1,166 21,642 35,237
Goodwill - - - 25,971 25,971
503,498 267,590 828,438 661,827 2,261,353
LIABILITIES AND EQUITY OF

INVESTMENT ACCOUNTHOLDERS
Placements from financial institutions 59,283 57,298 302 - 116,883
Customers' current accounts 363,970 - - - 363,970
Murabaha term financing 137,461 66,752 2,211 15,247 221,671
Other liabilities 41,404 68 4,673 6,137 52,282
Equity of investment accountholders 734,904 407,881 82,272 323 1,225,380
1,337,022 531,999 89,458 21,707 1,980,186

31 December 2020
2019
Up to 3 months 1 to 5 Over 5
3 months to 1 year years years Total
BD '000 BD '000 BD '000 BD '000 BD '000
ASSETS
Cash and balances with banks and
Central Bank 219,456 - - - 219,456
Sovereign Sukuk 5,162 20,574 165,233 154,336 345,305
Placements with financial institutions 113,534 1,269 - - 114,803
Corporate Sukuk 10,893 3,982 7,287 - 22,162
Non-trading investments - - 108,991 - 108,991
Investment properties - - 72,774 - 72,774
Development properties - - 2,943 - 2,943
Investment in associates - - 10,640 - 10,640
Other assets 13,500 2,480 1,562 26,718 44,260
Goodwill - - - 25,971 25,971
457,414 240,454 826,231 518,704 2,042,803
LIABILITIES AND EQUITY OF

INVESTMENT ACCOUNTHOLDERS
Placements from financial institutions 147,155 64,304 - - 211,459
Customers' current accounts 289,456 - - - 289,456
Murabaha term financing 52,615 43,886 33,842 15,247 145,590
Other liabilities 10,936 15,014 9,805 5,726 41,481
Equity of investment accountholders 534,201 414,460 86,082 - 1,034,743
1,034,363 537,664 129,729 20,973 1,722,729
The table below summarises the maturity profile of the Group’s financial liabilities at 31 December 2020 and 2019 based on
contractual undiscounted payment obligation:
2020
On Up to 3 months 1 to 5 Over 5
demand 3 months to 1 year years years Total
BD '000 BD '000 BD '000 BD '000 BD '000 BD '000
LIABILITIES, EQUITY OF INVESTMENT
ACCOUNTHOLDERS, COMMITMENTS
AND CONTINGENT LIABILITIES
Placements from financial institutions - 59,512 58,207 327 - 118,046
Customers' current accounts 363,970 - - - - 363,970
Equity of investment accountholders 246,131 489,823 416,664 88,801 428 1,241,847
Murabaha term financing - 139,085 68,223 3,733 15,761 226,802
Contingent liabilities and commitments - 26,959 45,616 18,003 21,201 111,779
Other financial liabilities 12,353 16,965 - - - 29,318
622,454 732,344 588,710 110,864 37,390 2,091,762

31 December 2020
2019
On Up to 3 months 1 to 5 Over 5
demand 3 months to 1 year years years Total
BD '000 BD '000 BD '000 BD '000 BD '000 BD '000
LIABILITIES, EQUITY OF INVESTMENT
ACCOUNTHOLDERS, COMMITMENTS
AND CONTINGENT LIABILITIES
Placements from financial institutions - 147,729 65,850 - - 213,579
Customers' current accounts 289,456 - - - - 289,456
Murabaha term financing - 53,020 44,983 36,409 16,103 150,515
Equity of investment accountholders 102,476 432,716 422,962 92,047 - 1,050,201
Contingent liabilities and commitments - 49,146 41,414 6,928 13 97,501
Other financial liabilities 16,982 - - - - 16,982
408,914 682,611 575,209 135,384 16,116 1,818,234
36 SEGMENT INFORMATION
Primary segment information

For management purposes, the Group is organised into four major business segments:
Banking Principally managing Shari'a compliant profit sharing investment accounts, and offering Shari'a compliant
financing contracts and other Shari'a-compliant products. This segment comprises corporate banking, retail
banking, private banking and wealth management.
Treasury Principally handling Shari'a compliant money market, trading and treasury services including short-term
commodity Murabaha.
Investments Principally the Group's proprietary portfolio and serving clients with a range of investment products, funds and
alternative investments.
Transactions between segments are conducted at estimated allocated internal rates. Transfer charges are based on a pool rate which
approximates the cost of funds.
Segment information is disclosed as follows:
2020
Banking Treasury Investments Unallocated Total
BD '000 BD '000 BD '000 BD '000 BD '000
Net income 50,557 12,439 (5,576) - 57,420
Segment result 7,369 9,477 (7,728) - 9,118
Segment assets 1,314,749 751,880 192,012 2,712 2,261,353
Segment liabilities, and equity 1,311,031 660,947 7,469 281,906 2,261,353
Goodwill resulting from BMI acquisition is allocated to banking segment.
2019
Banking Treasury Investments Unallocated Total
BD '000 BD '000 BD '000 BD '000 BD '000
Net income 37,522 13,435 2,570 - 53,527
Segment result 13,750 8,847 (1,467) - 21,130
Segment assets 1,111,107 727,260 201,962 2,474 2,042,803
Segment liabilities, and equity 1,098,663 622,810 1,256 320,074 2,042,803
Goodwill resulting from BMI acquisition is allocated to banking segment.

31 December 2020
36 SEGMENT INFORMATION (continued)
Secondary segment information

The Group primarily operates in the GCC and derives substantially all its operating income and incurs all operating expenses in the
GCC.
37 FIDUCIARY ASSETS
Funds under management at the year end amounted to BD 158,458 thousands (2019: BD 162,077 thousands). These assets are
held in a fiduciary capacity, measured at initial subscription amounts and are not included in the consolidated statement of financial
position. Further, the Group through its SPV’s, acts as an agent/custodian on behalf of certain clients to facilitate transations as per
terms and instructions from their customers.
38 SHARI’A SUPERVISORY BOARD

The Bank’s Shari’a Supervisory Board (“SSB”) consists of four Islamic scholars who review the Bank’s compliance with general Shari’a
rules and principles, specific fatwas and rulings issued by SSB and the guidelines of the Central Bank of Bahrain (“CBB”) in relation to
Shari’a governance and compliance. Their review includes examination and approval of products, documentation, procedure manuals
and policies, services and related charges and fees that are presented to it to ensure that the Bank’s adopted activities are conducted
in accordance with Shari’a rules and principles, and consequently issue annual report on Bank’s compliance following the review of
the financial statements.
39 EARNINGS AND EXPENSES PROHIBITED BY SHARI’A

During the year, the Group earned Shari’a prohibited income totalling BD 209 thousands (2019: BD 399 thousands). These include
income earned from the conventional financing and investments due to acquiring BMI and BSB, penalty charges from customers and
interest on balances held with correspondent banks. These funds were allocated to charitable contributions after deducting actual
recovery expenses of these funds.
40 SOCIAL RESPONSIBILITY
The Group discharges its social responsibility through charity fund expenditures and donations to individuals and organisations which
are used for charitable purposes. During the year, the Group paid an amount of BD 920 thousands (2019: 395 thousands) out of
which BD 745 thousands (2019: BD 204 thousands) was paid from Sharia prohibited income pool.
41 ZAKAH
Pursuant to a resolution of the shareholders in an Extra-ordinary General Meetings (EGM) held on 12 November 2009, it was resolved
to amend the articles of association of the Bank to inform the shareholders of their obligation to pay Zakah on income and net
worth. Consequently, Zakah is not recognised in the consolidated income statement as an expense. The total Zakah payable by the
shareholders for 2020 has been determined by the Shari’a supervisory board as 2.3 fils (2019: 2.3 fils) per share. Under FAS 9, Zakah
payble for the year ended 2020 was calculated at 2.32% of the Zakah base of BD 187,369 thousands (2019: BD 194,116 thousands)
which was determined on the Net Invested Funds method.
42 FAIR VALUE HIERARCHY

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly
or indirectly; or
Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market
data.

31 December 2020
42 FAIR VALUE HIERARCHY (continued)
Financial instruments measured at fair value

The following table shows an analysis of the non-trading investments and sukuk portfolio carried at fair value in the consolidated
statement of financial position:
Level 1 Level 2 Level 3 Total

31 December 2020 BD '000 BD '000 BD '000 BD '000
Sovereign Sukuk 67,704 325,404 - 393,108
Corporate Sukuk 1,866 3,978 10,551 16,395
Financial assets at fair value through profit or loss 4,162 3,313 90,209 97,684
Financial assets at fair value through equity - - 350 350
73,732 332,695 101,110 507,537

31 December 2019 (Restated) BD '000 BD '000 BD '000 BD '000
Sovereign Sukuk 200,951 144,354 - 345,305
Corporate Sukuk 10,842 - 11,320 22,162
Financial assets at fair value through profit or loss 3,578 6,480 97,380 107,438
Financial assets at fair value through equity - - 1,553 1,553
215,371 150,834 110,253 476,458

1 January 2019 (Restated) BD '000 BD '000 BD '000 BD '000
Sovereign Sukuk 355,026 - - 355,026
Corporate Sukuk 9,459 - - 9,459
364,485 - - 364,485
During the current year, due to changes in market conditions for certain investment securities, quoted prices in active markets and
adequate trading volumes were no longer available for these securities at or closer to the measurement date. However, there was
sufficient information available to measure the fair values of these securities based on observable market inputs. Therefore, these
securities, with a carrying amount of BD 176 million, were transferred from Level 1 to Level 2 of the fair value hierarchy.
The movements in fair value of non-trading investments classified in Level 3 of the fair value hierarchy are as follows:
31 December 31 December
2020 2019
BD '000 BD '000
At 1 January 98,933 98,650
Fair value changes (10,434) (2,008)
Repayments during the year (231) (294)
Additions during the year 2,291 2,585
At end of the year 90,559 98,933

31 December 2020
42 FAIR VALUE HIERARCHY (continued)
The movements in fair value of sukuk portfolio classified in Level 3 of the fair value hierarchy are as follows:
2020 2019
BD '000 BD '000
At 1 January 11,320 -
Additions during the year 13,411 11,320
Fair value changes (3,426) -
Disposals during the year (10,754) -
10,551 11,320
The estimated fair value of yielding financing assets and financing liabilities approximates their carrying value as their pricing is not
materially different to expected market return on such contracts.
The estimated fair values of other financial assets are not expected to be materially different from their carrying values as of 31
December 2020 and 31 December 2019 due to their short term nature.
43 DEPOSIT PROTECTION SCHEME

Certain customers’ deposits of the Bank are covered by deposit protection schemes established by the CBB. Customers’ deposits
held with the Bank in the Kingdom of Bahrain are covered by the Regulation Protecting Deposits and Equity of unrestricted investment
accounts issued by the CBB in accordance with Resolution No.(34) of 2010. This scheme covers eligible ‘natural persons’ (individuals)
up to a maximum of BD 20,000 as set out by CBB requirements. A yearly contribution as mandated by the CBB is paid by the Bank
under this scheme.
44 REGULATORY RATIOS
1) Liquidity Coverage Ratio (LCR)

LCR has been developed to promote short-term resilience of a bank’s liquidity risk profile. The LCR requirements aim to ensure that a
bank has an adequate stock of unencumbered high quality liquidity assets (HQLA) that consists of assets that can be converted into
cash immediately to meet its liquidity needs for a 30 calendar day stressed liquidity year. The stock of unencumbered HQLA should
enable the Bank to survive until day 30 of the stress scenario, by which time appropriate corrective actions would have been taken
by management to find the necessary solutions to the liquidity crisis.
LCR is computed as a ratio of Stock of HQLA over the Net cash outflows. The average Consolidated LCR for three months calculated
as per the requirements of the CBB rulebook, as of 31 December 2020 and 31 December 2019, is as follows:
Total weighted value BD ‘000

2020 2019
Stock of HQLA 195,494 267,049
Net cashflows 157,730 122,135
LCR % 126.41% 230.14%
Minimum required by CBB 80% 100%
2) Capital Adequacy Ratio

The primary objectives of the Group’s capital management policies are to ensure that the Group complies with externally imposed
capital requirements and that the Group maintains strong credit ratings and healthy capital ratios in order to support its business
and to maximise shareholders’ value. Capital adequacy for each of the group companies is also managed separately at individual
company level. The Group does not have any significant restrictions on its ability to access or use its assets and settle its liabilities
other than any restrictions that may result from the supervisory frameworks within which the banking subsidiaries operate.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders or issue
capital securities. No changes were made in the objectives, policies and processes from the previous years.

31 December 2020
44 REGULATORY RATIOS (continued)
The regulatory capital and risk-weighted assets have been calculated in accordance with Basel III as adopted by the CBB.
As at
BD ‘000 2020 2019
CET 1 Capital before regulatory adjustments 277,655 291,230
Less: regulatory adjustments 25,971 25,971
CET 1 Capital after regulatory adjustments 251,684 265,256
AT 1 Capital 26 17
T 2 Capital adjustments 35,745 15,533
Regulatory Capital 287,455 304,421
Risk weighted exposure:

Credit Risk Weighted Assets 988,982 1,329,714
Market Risk Weighted Assets 250 3,108
Operational Risk Weighted Assets 97,200 100,785
Total Regulatory Risk Weighted Assets 1,086,432 1,433,607
Total Adjusted Risk Weighted Exposures 1,086,432 1,433,607
Capital Adequacy Ratio 26.46% 21.23%
Tier 1 Capital Adequacy Ratio 23.17% 18.50%
Minimum required by CBB 12.50% 12.50%
As of 31 December 2020, aggregate of modification loss of BD 24,768 thousands has been added back to Tier 1 capital.
As per CBB instructions, the above concessional treatment would be followed for two years ending 31 December 2020 and 31
December 2021, thereafter this amount will be proportionately deducted from Tier 1 capital on an annual basis for three years ending
31 December 2022, 31 December 2023 and 31 December 2024.
3) Net Stable Funding Ratio (NSFR)

The objective of the NSFR is to promote the resilience of banks’ liquidity risk profiles and to incentivize a more resilient banking sector
over a longer time horizon.The NSFR limits overreliance on short-term wholesale funding, encourages better assessment of funding
risk across all on-balance sheet and off-balance sheet items, and promotes funding stability.
The Net Stable Ratio (“NSFR”) is calculated in accordance with the Liquidity Risk Management Module guidelines, issued by CBB and
its affective from 2019. The minimum NSFR ratio as per CBB is 100%. However, as per CBB circular OG/106/2020 dated 17 March
2020, OG/296/2020 dated 26 August 2020 and OG/431/2020 dated 29 December 2020, the limit has been reduced to 80% until
December 2021, to contain the financial repercussions of COVID-19.

31 December 2020
The NSFR (as a percentage) as at 31 December 2020 is calculated as follows:
Unweighted Values (before applying relevant factors)

More than Total
Nospecified Less than 6 months and less Over weighted
maturity 6 months than one year one year value
Item
Available Stable Funding (ASF):
Capital:
Regulatory Capital 255,056 - - 35,745 290,801
Retail deposits and deposits from
small business customers:
Less stable deposits - 442,336 125,503 66,951 578,006
Wholesale funding:
Other wholesale funding - 1,032,384 189,353 58,126 374,683
Other liabilities:
All other liabilities not included in
the above categories - 64,101 - - -
Total ASF 255,056 1,538,821 314,856 160,822 1,243,490
Required Stable Funding (RSF):

Total NSFR high-quality liquid
assets (HQLA) - - - - 17,604
Deposits held at other financial
Performing financing and sukuk/
securities:
Performing financing to financial
institutions secured by non-level 1 HQLA
and unsecured performing financing to
financial institutions - 245,585 416 4,911 41,956
Performing financing to non- financial
corporate clients, financing to retail and
small business customers, and financing
to sovereigns, central banks and PSEs,
of which: - 225,592 133,368 740,303 775,213
With a risk weight of less than or equal
to 35% as per the Capital Adequacy
Ratio guidelines - - - 167,627 108,958
Performing residential mortgages, of which: - - - 131,367 85,388
With a risk weight of less than or equal to
35% under the CBB Capital Adequacy
Ratio Guidelines - - - 131,367 85,388
Securities/ sukuk that are not in default
and do not qualify as HQLA, including
exchange-traded equities - 7,386 6,567 780 7,640
Other assets:
All other assets not included in
the above categories 292,513 3,980 - 24,007 308,941
OBS items - 145,464 - - 7,273
Total RSF 292,513 628,007 140,351 901,368 1,244,015
NSFR (%) - - - - 99.96%

31 December 2020
The NSFR (as a percentage) as at 31 December 2019 is calculated as follows:
Unweighted Values (before applying relevant factors)

More than Total
Nospecified Less than 6 months and less Over weighted
maturity 6 months than one year one year value
Item
Capital:
Regulatory Capital 291,239 - - 38,995 330,234
Retail deposits and deposits from small
business customers:
Less stable deposits - 383,983 107,506 59,104 501,444
Wholesale funding:
Other wholesale funding - 872,778 138,161 96,385 405,825
Other liabilities:
All other liabilities not included in
the above categories - 44,451 - - -
Total ASF 291,239 1,301,212 245,667 194,484 1,237,503

Performing financing to financial
institutions secured by non-level 1 HQLA
and unsecured performing financing to
financial institutions - 221,009 3,161 5,918 40,650
Performing financing to non- financial
corporate clients, financing to retail and
small business customers, and financing
to sovereigns, central banks and PSEs,
of which: - 177,553 134,751 714,111 732,316
35% as per the Capital Adequacy Ratio
guidelines - - - 154,150 100,197
Performing residential mortgages, of which: - - - 8,305 5,398
35% under the CBB Capital Adequacy
Ratio Guidelines - - - 8,305 5,398
Securities/ sukuk that are not in default
and do not qualify as HQLA, including
exchange-traded equities - 5,073 - 942 3,337
Other assets:
All other assets not included in the
above categories 284,141 9,282 - 80,342 369,124
OBS items - 100,483 - - 5,024
Total RSF 284,141 508,327 137,912 808,676 1,152,512
NSFR (%) - - - - 105.8%
45 COMPARATIVE FIGURES
Certain of the prior year figures have been regrouped to conform to the current year presentation and restated on adoption of FAS
31 and FAS 33 (refer note 2.6). Such grouping did not affect previously reported net profit, total assets, total liabilities and total equity
.of the Group

Unaudited Supplementary Disclosures
31 December 2020
In line with the Central Bank of Bahrain (“CBB”) directions per circular OG/259/2020 of 14 July 2020 that aims to
maintain transparency amidst the current financial implications of Coronavirus (COVID-19) outbreak, the Bank has
provided additional supplementary information on the impact of COVID 19 on its financial statements and the results of
its operations.
On 11 March 2020, the COVID-19 outbreak was declared as a pandemic by the World Health Organization (“WHO”) and
has rapidly evolved globally. This has resulted in an economic slowdown with uncertainties in the economic environment
across the globe. This includes disruption to capital markets, deteriorating credit markets and liquidity concerns.
Authorities all over the world have taken various steps to contain the spread of COVID-19 including implementation
of travel restrictions as well as lockdown and quarantine measures. The pandemic as well as the resulting measures
have had a significant knock-on impact on Al Salam Bank and its principal subsidiaries (collectively the “Group”) and its
associates. The Group is actively monitoring the COVID-19 situation and in response to this outbreak, has activated its
business continuity plan and various other risk management practices to manage the potential business disruption on
its operations and financial performance.
The CBB announced various measures to combat the effects of COVID-19 on the banking sector in the Kingdom of
Bahrain. These were aimed to ease liquidity in the economy as well as to assist banks in complying with regulatory
requirements. These measures included the following:
• Payment holiday of 6 months to eligible and approved customers.
• Concessionary repo to eligible banks at zero percent.
• Reduction of cash reserve ratio from 5% to 3%.
• Reduction of liquidity coverage ratio (“LCR”) and net stable funding ratio (“NSFR”) from 100% to 80%.
• Capital relief by allowing the aggregate of modification loss and incremental expected credit losses (“ECL”) from March
to December 2020 to be added back to Tier 1 capital for the two financial years ending 31 December 2020 and
31 December 2021 and deducted proportionately from Tier 1 capital on an annual basis for three years ending 31
December 2022, 31 December 2023 and 31 December 2024.
The aforesaid measures have resulted in the following effects on the Group:
• The CBB mandated 6-month payment holidays requires impacted banks to recognize a one off modification loss
directly in equity. The modification loss has been calculated as difference between the net present value of the
modified cash flows calculated using the original effective profit rate and the current carrying value of the financial
assets on the date of the modification.
• The mandated 6 month payments holiday included the requirement to suspend minimum payments, service fees and
outstanding credit card balances. In addition, COVID-19 also resulted in lower transaction volumes and related fees.
This resulted in a significant decline in the Group’s fee income.
• The Government of the Kingdom of Bahrain have announced various economic stimulus program (“packages”) to
support business in these challenging times. The Bank received regulatory directive financial assistance representing
specified reimbursement of a portion of staff costs, waiver of fees, levies and utility charges as well as zero cost
funding received from the Government and/or the regulators in response to its COVID-19 support measures. This has
been recognized directly in the Group’s equity as per the instructions of the CBB.
• The Group also maintained a lower cash reserve due to reduction in cash reserve ratio to 3%.
• Due to the stressed liquidity scenario in the market, the Bank also had to incur higher funding costs for sourcing new
deposits and foreign exchange.
• During the year ended 31 December 2020, growth rate of financing assets booked were 19% higher than previous
year. In addition, the stressed economic situation resulted in an incremental ECL provision on its exposures during the
year of 2020. Decreased consumer spending caused by the economic slowdown resulted in increase in balances on
demand held by the Group.
• The Group continues to meet the regulatory requirement of capital adequacy ratio (“CAR”), LCR and NSFR. The
consolidated CAR, LCR and NSFR as at 31 December 2020 stands at 26.46%, 141.56%, 99.96% respectively.

Unaudited Supplementary Disclosures (continued)
31 December 2020
The CBB subsequently announced second and third deferrals of instalments of financing effective September 2020 for
a period of four months, and January 2021 for a period of six months. These deferments allowed the Banks to charge
profit, and as such, did not result in any additional modification losses to the Group.
In addition to the above areas of impact, due to the overall economic situation certain strategic business and investment
initiatives have been postponed until there is further clarity on the recovery indicators and its impact on the business
environment. Overall, for the year, the Bank achieved a net profit of BD 9.12 million, which is lower than BD 21.13 million
of the previous year, registering a drop of 57%.
A summary of the financial impact of the above effects is as follows:
Net impact on the Group

Consolidated Consolidated
Income financial Consolidated
Amounts in BD ‘000 statement position Owners equity
Modification loss - - (24,768)
Modification loss amortization 24,768 24,768 -
Lower Credit card fee (282) - -
Government grants - - 2,143
Concessionary repo @ 0% - 121,613 -
Average reduction of cash reserve - 172,143 -
Stressed liquidity (371) - -
ECL attributable to COVID -19 (6,630) (6,630) -
Information reported in the table above only include areas or line items where impact was quantifiable and material.
Some of the amounts reported above include notional loss of income or an incremental cost measure and hence may
not necessarily reconcile with amounts reported in the consolidated financial statements for 31 December 2020.
The information provided in this supplementary disclosure should not be considered as an indication for the results of
the entire year or relied upon for any other purposes. Since the situation of COVID-19 is uncertain and is still evolving,
the above assessment is as at the date of preparation of this information and only considers significant areas of impact.
Circumstances may change which will result in this information being out of date. In addition, this information does not
represent a full comprehensive assessment of COVID-19 impact on the Group. This information has not been subject to
audit by external auditors.

Basel III -
Pillar III
Disclosures

Table of Contents
1. Introduction 127
2. Financial Performance and Position 127
3. Group & Capital Structure 129

3.1 Group Structure 129
3.2 Capital Structure 129
4. Capital Adequacy Ratios (CAR) 131

4.1 Capital Management 131
5. Profile of Risk-Weighted Assets and Capital Charge 131

5.1 Credit Risk 131
5.2 Market Risk 141
5.3 Operational Risk 141
5.4 Rate of Return Risk 142
5.5 Equity Position Risk 144
5.6 Displaced Commercial Risk 145
5.7 Liquidity Risk 145
5.8 Other Risk 145
6. Equity of Investment Accountholders 145
7. Other Disclosures 147

7.1 Currency Risk 147
7.2 Related Party Transactions 147
7.3 Restructured Facilities 148
7.4 Assets Sold Under Recourse Agreements 148
7.5 Legal Risk and Claims 148
7.6 Deposit Protection Scheme 148
7.7 Exposure to highly-leveraged and other high-risk counterparties 148
7.8 Exposures in excess of regulatory limits 148
7.9 CBB Penalties 148
Appendix I - Composition of Capital Disclosure 149
Appendix II - Net Stable Funding Ratio (NSFR) Disclosure 156
Appendix III - Leverage Ratio 157
Appendix IV - Liquidity Coverage Ratio (LCR) 158

Basel III - Pillar III - Disclosures
31 December 2020
1 INTRODUCTION
The Central Bank of Bahrain (“CBB”) requirements, which act as a common framework for the implementation of the Basel III accord
in the Kingdom of Bahrain came into effect on 1 January 2015.
The Basel III accord is built on three pillars:
• Pillar I deals with the basis for the computation of the regulatory capital adequacy ratio. It defines the calculation of Risk Weighted
Assets (RWAs) for credit risk, market risk and operational risk, as well as the derivation of the regulatory capital base. The capital
adequacy ratio is then calculated as the ratio of the Bank’s regulatory capital to its total RWAs.
• Pillar II involves the process of supervisory review of a financial institution’s risk management framework and its capital adequacy.
• Pillar III relates to market discipline and requires the Bank to publish detailed qualitative and quantitative information of its risk
management and capital adequacy policies and processes to complement the first two pillars and the associated supervisory
review process.
The disclosures in this document are in addition to the disclosures included in the consolidated financial statements which are
prepared in accordance with Financial Accounting Standards issued by Accounting and Auditing Organization for Islamic Financial
Institutions and in conformity with the Bahrain Commercial Companies Law and the Central Bank of Bahrain and Financial Institutions
Law, the CBB Rule Book (Volume 2) and relevant CBB directives.
2 FINANCIAL PERFORMANCE AND POSITION

The Bank was incorporated on 19 January 2006 in the Kingdom of Bahrain. The Bank operates under Islamic Shari’a principles in
accordance with the regulatory requirements for Islamic banks set by the CBB. The Bank’s ordinary shares are listed in the Bahrain
Bourse and Dubai Financial Market and operates under an Islamic retail banking license issued by CBB.
On 30 March 2014, the Bank acquired 100% stake in BMI Bank B.S.C.(c) (“BMI”), a closed shareholding company in the Kingdom of
Bahrain, through exchange of shares. During January 2015, the Shari’a Supervisory Board approved BMI Bank to be an Islamic bank
effective 1 January 2015. BMI Bank’s operations are in compliance with Shari’a principles effective 1 January 2015.
On 29 November 2016, the shareholders of BMI resolved to approve the transfer of the operations of BMI to the Bank. The transfer
of business was approved by the CBB on 17 April 2017 which was subsequently published in the official gazette dated 20 April 2017.
The Bank has transferred majority of the BMI’s rights and assumed all of it’s obligations at their respective carrying values.
During 2016, the Bank acquired 70% stake in Al Salam Bank Seychelles Limited (“ASBS”), (previously “BMIO”) an offshore bank in
Seychelles. ASBS operates under an offshore banking license issued by the Central Bank of Seychelles. BMIO used to operate under
an offshore banking license issued by the Central Bank of Seychelles. From 20 May 2016, ASBS was granted a Banking Business
License which permits onshore as well as offshore banking activities. All legal formalities in relation to the share allotment have been
completed and the process of converting ASBS into fully compliant Islamic operations is in progress. In accordance with CA-B.1.4
of the CBB Rulebook, for the purpose of disclosure of risk weighted exposures and for capital adequacy calculation, the Bank has
obtained an approval from the CBB to aggregate the risk weighted exposures of ASBS and hence, the risk weighted exposures of
ASBS do not form part of all disclosures in this Basel III - Pillar III Disclosure Document.
During 2018, the Group reassessed its involvement with an associate entity and its asset under management, ASB Biodiesel 1
(“Biodiesel”), a company incorporated in Cayman Islands with operations based on in Hongkong undertaking business of manufacturing
biodiesel. The Group also had a significant financing exposure to Biodiesel. Based on the Groups ongoing involvement and support
of the business and increase in variability of its exposure arising from the operations, it was assessed that the Group has obtained
control over relevant activities of the Company in its capacity as principal. Accordingly the Group consolidated ASB Biodiesel and its
subsidiaries (together “Biodiesel Group”) effective 30 September 2018, being the deemed date of acquisition.
The Bank and its principal banking subsidiary operates through 10 branches in the Kingdom of Bahrain and 1 branch in Seychelles
and offer a full range of Shari’a-compliant banking services and products. The activities of the Bank includes managing profit sharing
investment accounts, offering Islamic financing contracts, dealing in Shari’a-compliant financial contracts as principal / agent,
managing Shari’a-compliant financial contracts and other activities permitted for under the CBB’s Regulated Islamic Banking Services
as defined in the licensing framework. The Bank together with its subsidiaries are referred to as the “Group”.
The consolidated financial statements and capital adequacy regulatory disclosures of the Group have been prepared on a consistent
basis where applicable.

Basel III - Pillar III - Disclosures (continued)
31 December 2020
2 FINANCIAL PERFORMANCE AND POSITION (continued)
Table 2.1 Key Financial Indicators (PD 1.3.9 a,b,c)

(BD '000s)
Dec-2020 Dec-2019 Dec-2018 Dec-2017 Dec-2016 Dec-2015
Net operating income 57,420 53,527 56,719 62,190 63,000 58,898
Net profit 9,118 21,130 18,520 18,055 16,096 10,548
Total assets 2,261,353 2,042,803 1,710,310 1,589,228 1,681,293 1,656,643
Total equity 281,167 320,074 304,822 303,837 324,899 320,002
Key Ratios Dec-2020 Dec-2019 Dec-2018 Dec-2017 Dec-2016 Dec-2015
Earnings per share (fils) 4.3 9.7 8.7 8.5 7.6 5.8
Return on average assets (%) 0.4 1.1 1.1 1.1 1.0 0.6
Return on average equity (%) 3.0 6.8 6.1 5.7 5.0 3.3
Cost to Net operating income (%) 52.3 55.6 48.9 39.0 41.4 44.7
Dividend payout ratio (%) 126.4 83.9 81.0 83.0 66.5 86.2
Dividend yield ratio (%) 6.8 8.0 7.0 6.1 4.2 5.4
Net profit margin on Islamic assets (%) 3.4% 2.7% 2.9% 3.2% 2.7% 3.3%
Table 2.2 Financial Summary

(BD '000s)
Consolidated Financial Position Dec-2020 Dec-2019 Dec-2018 Dec-2017 Dec-2016 Dec-2015
Cash and balances with banks and Central Bank 288,266 219,456 82,587 66,351 131,990 152,572
Sovereign Sukuk 393,108 345,305 354,215 363,569 358,269 350,474
Placements with financial institutions 37,965 114,803 163,305 141,225 182,452 103,345
Corporate Sukuk 16,395 22,162 9,222 10,419 28,934 50,472
Financing assets 814,449 685,756 568,905 532,535 478,798 491,353
Finance lease assets 469,363 389,742 256,892 213,238 188,485 155,217
Non-trading investments 98,034 108,991 107,508 111,325 122,073 123,514
Investment properties 67,586 72,774 74,261 66,782 51,863 68,786
Development properties 2,943 2,943 6,290 6,448 17,781 49,021
Investment in associates 12,036 10,640 15,972 16,835 10,561 9,994
Other assets 35,237 44,260 45,182 34,530 64,276 75,924
Goodwill 25,971 25,971 25,971 25,971 25,971 25,971
Assets classified as held-for-sale - - - - 19,840 -
Placements from financial institutions 116,883 211,459 144,125 154,765 132,032 120,795
Placements from customers - - 705,924 602,784 723,439 842,570
Customer current accounts 363,970 289,456 251,842 283,886 279,609 224,366
Murabaha term financing 221,671 145,590 155,543 79,986 91,837 35,986
Other liabilities 52,282 41,481 48,293 45,089 49,260 50,573
Liabilities relating to assets classified
as held-for-sale - - - - 11,421 -
Equity of Investment Accountholders (EOIA) * 1,225,380 1,034,743 99,761 118,881 68,796 62,351
of which: Wakala from financial institutions 264,784 210,887 - - - -
of which: Wakala and Mudaraba from customers 960,596 823,856 - - - -
Capital Dec-2020 Dec-2019 Dec-2018 Dec-2017 Dec-2016 Dec-2015
Capital adequacy (%) 26.5 21.2 20.6 21.4 21.6 20.1
Equity/total assets (%) 12.4 15.7 17.8 19.1 19.3 19.3
Total customer deposits/equity (times) 4.7 x 3.5 x 3.5 x 3.3 x 3.3 x 3.5 x

31 December 2020
2 FINANCIAL PERFORMANCE AND POSITION (continued)
Table 2.2 Financial Summary (continued)

(BD '000s)
Liquidity and Other Ratios Dec-2020 Dec-2019 Dec-2018 Dec-2017 Dec-2016 Dec-2015
Islamic financing contracts/total assets (%) 56.8 52.6 48.3 46.9 39.7 39.0
Investments/total assets (%) 26.1 27.6 33.2 36.2 36.2 39.4
Liquid assets/total assets (%) 19.8 24.4 24.9 28.9 31.0 36.6
Liquid assets/Current and URIA deposits (%) 28.2 37.6 121.1 114.2 149.6 211.5
Customer Deposits/ Total assets (%) 58.6 54.5 61.8 63.3 63.8 68.2
Due from banks and financial institutions/ Total
Assets (%) 1.7 5.6 9.5 8.9 10.9 6.2
Interbank Assets/ Interbank Liabilities 32.5 54.3 113.3 91.3 138.2 85.6
Islamic financing contracts/customer deposits (%) 80.8 81.2 78.1 74.2 62.3 57.3
Number of employees 363 355 341 322 333 368
* Year ended 2019 has been restated on account of adoption of FAS31 standard
3 GROUP AND CAPITAL STRUCTURE
3.1 GROUP STRUCTURE

The consolidated financial statements for the period comprise of the financial statements of the Bank and its subsidiaries (together
referred to as “the Group”)
The principal subsidiaries and associates as at 31 December 2020 and their treatment for capital adequacy purposes are as follows:
Entity classification
as per CA Module Treatment by the Bank
Subsidiary
Aggregation of risk weighted assets
Al Salam Bank Seychelles Banking subsidiary
approved by the CBB on 28 June 2016
Kenaz Al Kadam Real Estate Investment W.L.L.
Kenaz Al Hamala Real Estate Investment W.L.L.
Commercial entity Risk weighting of investment exposure
Wahat Al Muharraq Real Estate Investment W.L.L.
ASB Biodiesel 1
Associates
Al Salam Bank Algeria
Financial entity Risk weighting of investment exposure
Gulf African Bank
Manara Developments Company W.L.L.
NS Real Estate Company W.L.L.
Darari Investment Company W.L.L. Commercial entity Risk weighting of investment exposure
Burj Al Safwa Property Investment Company W.L.L.
ASB Global REIT Fund
3.2 CAPITAL STRUCTURE

The Group’s regulatory total capital of BD 287,455 thousands comprises of CET 1, AT1 and Tier 2 capital which is detailed in the
following table: (PD 1.3.11)
The issued and paid up share capital of the Group was BD 230,450 thousands at 31 December 2020, comprising of 2,304,500
thousand shares of BD 0.100 each. (PD 1.3.11)
The management believes that the current capital structure addresses the current and future activities of the Group.

31 December 2020
3 GROUP AND CAPITAL STRUCTURE (continued)
3.2 CAPITAL STRUCTURE (continued)
Table 3.1 Breakdown of the Bank’s Capital Base (PD 1.3.12, 13, 14, 15, 16)
(BD '000s)
CET1 AT1 T2
Issued and fully paid up ordinary shares 230,450
Treasury shares (7,530)
Legal/statutory reserves 21,778
Share premium 12,209
Retained earnings (3,496)
Current interim cumulative net income / losses 6,633
Unrealized gains and losses on available for sale financial instruments 9,844
Gains and loss resulting from converting foreign currency subsidiaries to
the parent currency (3,784)
Unrealized gains and losses arising from fair valuing equities 11,430
Total Minority Interest in banking subsidiaries given recognition in CET1 capital 121
Total CET1 capital prior to regulatory adjustments 277,655
Less:
Goodwill (25,971)
Total Common Equity Tier 1 capital after the regulatory adjustments above 251,684
Instruments issued by banking subsidiaries to third parties 26 35
Asset revaluation reserve - Property, plant, and equipment - 23,348
General financing loss provisions - 12,362
Total Available AT1 & T2 Capital 26 35,745
Total Tier 1 251,710
Total Capital (PD 1.3.20 a) 287,455
Table 3.2
(BD '000s)
Risk Weighted Exposures
Credit Operational Market
Risk Weighted Exposures (self-financed) 813,463 96,666 250
Risk Weighted Exposures (URIA) 170,292 - -
Aggregation of Risk Weighted Exposures 5,226 534 -
Risk Weighted Exposures after Aggregation 988,982 97,200 250
Total Risk Weighted Exposures 1,086,432
CET 1 T1 Total Capital

% of Total Risk Weighted Exposures (CAR) (PD 1.3.20 a) 23.17% 23.17% 26.46%
Minimum Required by CBB Regulations under Basel III (before CCB) 6.50% 8.00% 10.00%
Capital Conservation Buffer (CCB) 2.50% 2.50% 2.50%
Minimum Required by CBB Regulations under Basel III (after CCB) 9.00% 10.50% 12.50%
* Calculated in accordance with Capital Adequacy Module of Volume 2 issued by the CBB. ASBS has not been considered as a
significant subsidiary as the regulatory capital is less than 5% of the Group’s consolidated capital base.

31 December 2020
4 CAPITAL ADEQUACY RATIOS (CAR)

No impediments on the transfer of funds or reallocation of regulatory capital exist and the Group has adequate capital to support the
current and future activities of the Group. (PD 1.3.6.c and PD 1.3.16)
4.1 CAPITAL MANAGEMENT

Internal Capital Adequacy Assessment Process (ICAAP)
The Group’s capital management aims to maintain an optimum level of capital to enable it to pursue strategies that build long-term
shareholder value, whilst always maintaining minimum regulatory ratio requirements and for Pillar II risks.
The key principles driving capital management include:
• Adequate capital is maintained as buffer for unexpected losses to protect stakeholders i.e. shareholders and depositors.
• Optimize risk adjusted return on capital and generate sustainable return above the cost of capital.
The adequacy of the Group’s capital is monitored using, primarily, the rules and ratios established by the CBB. The primary objective
of the Group’s capital management is to ensure that it complies with externally imposed capital requirements. The Group complied in
full with all externally imposed capital requirements during the year ended 31 December 2020.
5 PROFILE OF RISK-WEIGHTED ASSETS AND CAPITAL CHARGE

The Group has adopted the standardized approach for credit risk and market risk and the basic indicator approach for operational
risk for regulatory reporting purposes. The Group’s risk-weighted capital requirement for credit, market and operational risks are given
below.
5.1 CREDIT RISK
A Definition of exposure classes per Standard Portfolio (PD 1.3.21 a)

The Group has a diversified funded and unfunded credit portfolio. The exposures are classified as per the Standard portfolio approach
mentioned under the CBB’s Basel III capital adequacy framework covering the standardized approach for credit risk.
The descriptions of the counterparty classes along with the risk weights to be used to derive the risk weighted assets are as follows:
a. Claims on sovereigns
These pertain to exposures to governments and their central banks. Claims on Bahrain and GCC sovereigns are risk weighted at
0%. Claims on all other sovereigns are given a risk weighting of 0% where such claims are denominated and funded in the relevant
domestic currency of that sovereign. Claims on sovereigns, other than those mentioned above are risk weighted based on their credit
ratings.
b. Claims on public sector entities (PSEs)

Bahrain PSEs are assigned 0% risk weight. Other sovereign PSE’s, in the relevant domestic currency and for which the local regulator
has assigned risk weight as 0%, are assigned 0% risk weight by the CBB. PSEs other than those mentioned above are risk weighted
based on their credit ratings.
c. Claims on banks
Claims on banks are risk weighted based on the ratings assigned to them by external rating agencies, however, short term claims on
locally incorporated banks may be assigned a risk weighting of 20% where such claims on the banks are of an original maturity of
three months or less and the claims are denominated and funded in either Bahraini Dinars or US Dollars.
Preferential risk weights that are one category more favorable than the standard risk weighting are assigned to claims on foreign
banks licensed in Bahrain of an original maturity of three months or less denominated and funded in the relevant domestic currency.
Such preferential risk weights for short-term claims on banks licensed in other jurisdictions are allowed only if the relevant supervisor
also allows this preferential risk weighting to short-term claims on its banks.
No claim on an unrated bank would receive a risk weight lower than that applied to claims on its sovereign of incorporation. Significant
investment in subordinated debt of banking, securities and financial entities are risk weighted at 250% and investments in excess of
15% of the Bank’s CET1, then the excess amount will be deducted from the bank’s capital.
d. Claims on corporate portfolio, including insurance companies

Claims on corporate portfolio including insurance companies are risk weighted based on credit ratings. Risk weightings for unrated
corporate claims are assigned at 100%.

31 December 2020
5 PROFILE OF RISK-WEIGHTED ASSETS AND CAPITAL CHARGE (continued)
5.1 CREDIT RISK (continued)
e. Claims on regulatory retail portfolio

Retail claims that are included in the regulatory retail portfolio are assigned risk weights of 75% (except for past due Islamic financing
contracts), if it meets the criteria mentioned in the CBB’s rule book.
f. Mortgages
Claims secured by mortgages on residential mortgage and commercial real estate are subject to a minimum of 35%, 75% and 100%
risk weight respectively.
g. Past due receivables (PD 1.3.22 a)

The unsecured portion of the account receivables and lease payment receivables (other than a qualifying residential mortgage
financing contract) that is past due for more than 90 days, is risk-weighted as follows (net of specific provisions and including partial
write-offs):
(a) 150% risk weight when specific provisions are less than 20% of the outstanding amount of the facility.
(b) 100% risk weight when specific provisions are 20% or more of the outstanding amount of the facility.
h. Investment in securities and sukuk

Investments in listed equities are risk weighted at 100% while unlisted equities are risk weighted at 150%. Investments in sukuk are
risk weighted based on respective counterparty’s credit ratings.
i. Holding of real estate

All other holdings of real estate by banks (i.e. owned directly, subsidiaries or associate companies or other arrangements such as
trusts, funds or REITs) are risk-weighted at 200%. Investment in listed real estate companies and investment in unlisted real estate
companies are risk-weighted at 300% and 400% respectively. Premises occupied by the Group are weighted at 100%.
j. Other assets
These are risk weighted at 100%.
Table 5.1 Funded and Unfunded Exposures

(BD '000s)
Contribution by Equity and Current Accounts
Gross Credit Net Credit Risk-Weighted Minimum
Exposure type Exposure CRM Exposure Assets (RWA) Capital Charge
Cash and balances with banks and Central Bank 179,096 - 179,096 37,173 4,647
Sovereign Sukuk 393,356 - 393,356 2,994 374
Placements with financial institutions - - - - -
Corporate Sukuk 15,644 - 15,644 15,644 1,955
Murabaha financing 39,065 10 39,055 48,866 6,108
Mudaraba financing 36,599 511 36,087 36,340 4,542
Musharaka 315 - 315 424 53
Credit Cards 157 - 157 120 15
Non-trading investments 98,797 - 98,797 385,733 48,217
Investment properties 67,586 - 67,586 135,172 16,897
Development properties 2,943 - 2,943 5,886 736
Investment in associates 12,036 - 12,036 30,091 3,761
Other assets 28,182 - 28,182 29,651 3,706
Total funded exposures 1,019,085 127,301 891,785 747,257 93,407
Contingent Liabilities & Commitments 91,748 - 91,748 66,206 8,276
Total unfunded exposures 91,748 - 91,748 66,206 8,276
Aggregation of Risk Weighted Exposures for
AlSalam Bank Seychelles Limited - - - 5,226 653
Total exposures 1,110,833 127,301 983,533 818,689 102,336

31 December 2020
Table 5.1 Funded and Unfunded Exposures (continued)

(BD '000s)
Contribution by Equity of Investment Accountholders
Risk-Weighted
Gross Credit Net Credit Assets Minimum
Exposure Type Exposure CRM Exposure (RWA)*30% Capital Charge
Cash and balances with banks and Central Bank 105,899 - 105,899 - -
Placements with financial institutions 34,782 - 34,782 6,377 797
Murabaha financing 346,004 27,413 318,591 38,920 4,865
Mudaraba financing 373,664 45,086 328,578 69,479 8,685
Musharaka 32,262 32,262 9,620 1,203
Credit Cards 2,739 2,739 680 85
Total funded exposures 1,221,245 94,946 1,126,299 170,292 21,287
Contingent Liabilities & Commitments - - - - -
Total unfunded exposures - - - - -
Total exposures 1,221,245 94,946 1,126,299 170,292 21,287
Note a: In accordance with the Public Disclosure requirements to disclose the regulatory capital requirements for credit risk under
standardised approach, have been extracted from the workings prepared based on the Form PIRI submitted to the CBB by the Bank.
Note b: The gross credit exposure is arrived at after considering the following:
- inclusion of unfunded exposure (after CCF); and
- deduction of excess amount over maximum permitted large exposure limit.
Note c: The unfunded exposure before (CCF) as of 31 December 2020 is BD 145,756 thousands.
Excessive risk concentration (PD 1.3.26 a)

developments affecting a particular industry or geographical location.
In order to avoid excessive concentrations of risk, the Group’s policies and procedures include specific guidelines to focus on country
and counterparty limits and maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed
accordingly.
Following is the Gross credit exposure by Islamic financing contracts which represents the exposure on accounts receivable and
lease payments receivable which are covered by eligible collateral: (PD 1.3.17) (PD 1.3.25 b, c)

31 December 2020
Table 5.2 Gross Credit Exposures (PD 1.3.26 b)

(BD '000s)
Gross Eligible Collaterals Held (after appropriate haircuts) *
Positive Fair Netted
Current Credit Exposure by Value (Net Current
Type of Islamic Financing of specific Netting Credit Govt. Real
Contracts provision) Benefits Exposures Cash Securities Guarantees Estate Total
Murabaha financing 385,069 - 385,069 7,560 32,264 - - 39,824
Mudaraba financing 410,262 - 410,262 63,340 - - - 63,340
Finance lease assets (Ijarah
Muntahia Bittamleek) 471,205 - 471,205 3,045 - - 259,517 262,563
Musharaka 32,577 - 32,577 - - - - -
Credit Cards 2,896 - 2,896 - - - - -
Total 1,302,009 - 1,302,009 73,945 32,264 - 259,517 365,726
* Over and above the collateral, considered as eligible under the CA Module, the Bank maintains additional collateral in the form of
mortgage of residential properties, corporate guarantees and other tangible assets, which could be invoked to claim the amount owed
in the event of default.
Credit risk concentrations and thresholds

The first level of protection against undue credit risk is through country, industry and threshold limits, together with customer and
customer bank credit limits, set by the Risk Committee. Credit exposure to individual customers or customer banks is then controlled
through a tiered hierarchy of delegated approval authorities.
Single name concentrations are monitored on an individual basis. Under the CBB’s single obligor regulations, banks incorporated
in Bahrain are required to obtain the CBB’s approval for any planned exposure to a single counterparty, or group of closely related
counterparties exceeding 15 percent of total capital.
As at 31 December 2020, the Group’s exposures in excess of 15% of the obligor limits to individual counterparties, and excluding
Central Bank exposures were BHD nil thousands. (PD 1.3.23 f)
Table 5.3 Gross Credit Exposures (PD 1.3.23 a)

(BD ‘000s)
Gross Credit Average Gross
Exposure Type Exposure Credit Exposure
Cash and balances with banks and Central Bank 181,132 177,255
Sovereign Sukuk 393,108 378,717
Placements with financial institutions - 23,420
Corporate Sukuk 16,395 13,976
Non-trading investments 98,034 101,027
Investment properties 67,586 71,293
Development properties 2,943 2,943
Investment in associates 12,036 12,163
Other assets 35,237 43,648
Goodwill 25,971 25,971
Total funded exposures 1,048,686 1,095,709
Contingent Liabilities & Commitments 108,768 104,446
Total unfunded exposures 108,768 104,446
Total exposures 1,157,454 1,200,155

31 December 2020
Table 5.3 Gross Credit Exposures (PD 1.3.23 a) (continued)

(BD '000s)
Gross Credit Average Gross
Exposure Type Exposure Credit Exposure *
Total funded exposures 1,212,667 1,094,912
Contingent Liabilities & Commitments - -
Total unfunded exposures - -
Total exposures 1,212,667 1,094,912
* The Group has calculated the average gross credit exposures based on average quarterly balances.
Risk mitigation, collateral and other credit enhancements

The amount and type of collateral depends on an assessment of the credit risk of the counterparty. The types of collateral mainly
include cash, lien on property and guarantees from banks. As at 31 December 2020, the collaterals eligible for CRM (after applying
regulatory haircuts) amounted to BD 365,726 thousands.
Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement,
and monitors the market value of collateral obtained during its review of the adequacy of the allowance for impairment losses with
respect to Murabaha and Ijarah facilities. The Bank also makes use of master netting agreements with counterparties where relevant.
(PD 1.3.25 a)
The main types of guarantors include rated banks and other financial institutions and Sovereigns which are rated by ECAI’s along
with personal guarantees of the Board of Directors/key management personnel of the borrower and other high net worth individuals.
The Group obtains additional collateral as and when the value of the collateral originally obtained is assessed at lower than the
minimum acceptable Loan to Value (LTV) ratio of collateral. Also, where the customer is not in a position to provide additional collateral,
the Group in consultation with its legal department evaluates the available legal and contractual options.
The Group ensures that at the inception of the facility, third parties valuation of the tangible collaterals is obtained and performs an
annual review of the facility whereby the revised collateral valuation is obtained from the third parties.
In case of default, the Group will work with the counterparty to discuss how the outstanding facility can be settled. As a last resort,
the counterparty’s assets will be used to settle the outstanding obligation.
5.1.1 Geographical Distribution of Exposures

The exposures are allocated to individual geographic areas based on the country where the exposure risk specific to the facility exists.
The Geographical distribution of exposures by exposure type (including financing contracts, non trading investments, investments in
real estate, development property and investment in associates) and funded or unfunded by is as follows:

31 December 2020
5.1.1 Geographical Distribution of Exposures (continued)
Table 5.4 (PD 1.3.23 b)

(BD '000s)
GCC Arab Asia North
Exposure type Countries World Europe Pacific America Others Total
Central Bank 99,351 28 20,121 1,556 57,737 2,339 181,132
Sovereign Sukuk 389,203 - - 3,905 - - 393,108
Placements with financial institutions - - - - - - -
Corporate Sukuk 15,615 - - - - 780 16,395
Murabaha financing 38,456 - - - - - 38,456
Mudaraba financing 28,109 - - - - 28,109
Musharaka 316 - - - - - 316
Credit Cards 27 1 - 1 - - 29
Finance lease assets 147,473 - - - - 1,861 149,334
Non-trading investments 92,347 - 2,675 - 3,012 - 98,034
Investment properties 67,586 - - - - - 67,586
Development properties - - 2,943 - - - 2,943
Investment in associates - 8,773 - - - 3,264 12,036
Other assets 22,206 5,429 5 6,732 5 861 35,237
Goodwill 25,971 - - - - - 25,971
Total funded exposures 926,660 14,230 25,745 12,194 60,753 9,105 1,048,686
Contingent Liabilities & Commitments 92,112 15,914 - 743 - - 108,769
Total unfunded exposures 92,112 15,914 - 743 - - 108,769
Total exposures 1,018,771 30,144 25,745 12,937 60,753 9,105 1,157,455
Table 5.5 (PD 1.3.23 b)

(BD '000s)
Contribution by Equity of investment account holders
GCC Arab Asia North
Exposure type Countries World Europe Pacific America Others Total
Central Bank 107,134 - - - - - 107,134
Placements with financial institutions 33,837 - - - 849 3,279 37,965
Murabaha financing 315,950 14,970 5,737 - - 6,007 342,665
Mudaraba financing 366,486 1,371 - - - 2,139 369,995
Musharaka 32,261 - - - - - 32,261
Credit Cards 2,595 7 - - 6 10 2,618
Finance lease assets 320,029 - - - - - 320,029
Total funded exposures 1,178,292 16,348 5,737 - 855 11,435 1,212,667
Contingent Liabilities & Commitments - - - - - - -
Total unfunded exposures - - - - - - -
Total exposures 1,178,292 16,348 5,737 - 855 11,435 1,212,667

31 December 2020
5.1.1 Geographical Distribution of Exposures (continued)
Table 5.6 The geographical distribution of exposures including impaired assets and the related impairment provisions (PD 1.3.23 i)
(BD '000s)
12 month ECL and
Gross Past Due Lifetime ECL not Gross Impaired Life time ECL credit
Financing Contracts impaired (Stage 1 & 2) Financing Contracts impaired (Stage 3)
GCC Countries 41,099 (1,268) 67,403 (24,245)
Arab World 4,958 (2) - -
Total 46,057 (1,270) 67,403 (24,245)
5.1.2 Exposure by Industry
Table 5.7 Exposure by type of credit exposure (PD 1.3.23 c)

(BD '000s)
Contribution by Equity and Current Account
Banks and
Trading and Financial Real
Exposure Type Manufacturing Institutions Estate Aviation Individuals Government Others Total
Cash and balances with
banks and Central Bank 1,337 74,579 - - - 96,349 8,868 181,132
Sovereign Sukuk 4,052 186,464 - - - 202,592 - 393,108
Placements with financial
institutions - - - - - - - -
Corporate Sukuk - 16,395 - - - - - 16,395
Murabaha financing 1,496 22,505 2,377 10,013 - 2,065 38,456
Mudaraba financing 14,126 - 3,170 2,397 - 8,416 28,109
Musharaka - - - 316 - - 316
Credit Cards 8 - - 20 - - 29
Finance lease assets 40,526 1,861 51,977 52,125 - 2,845 149,334
Non-trading investments - - 91,222 - - 6,812 98,034
Investment properties - - 67,586 - - - 67,586
Development properties - - 2,943 - - - 2,943
Investment in associates - 12,036 - - - - 12,036
Other assets 7,642 6,304 - 4,514 - 16,776 35,237
Goodwill - 25,971 - - - - - 25,971
Total funded exposures 69,189 346,116 219,274 - 69,386 298,940 45,782 1,048,686
Contingent Liabilities &
Commitments 53,487 18,510 20,257 7,501 1,015 7,998 108,769
Total unfunded exposures 53,487 18,510 20,257 - 7,501 1,015 7,998 108,769
Total exposures 122,675 364,626 239,531 - 76,887 299,956 53,780 1,157,455

31 December 2020
5.1.2 Exposure by Industry (continued)
Table 5.8 Exposure by type of credit exposure (PD 1.3.23 c)

(BD '000s)
Banks and
Trading and Financial Real
Exposure Type Manufacturing Institutions Estate Aviation Individuals Government Others Total
banks and Central Bank
of Bahrain 107,134 107,134
institutions 37,965 37,965
Murabaha financing 23,738 34,047 22,884 - 132,113 126,205 3,677 342,665
Mudaraba financing 114,626 9,181 81,088 - 54,935 86,785 23,380 369,995
Musharaka 13,963 - 11,471 - 6,827 - - 32,261
Credit Cards 57 10 7 - 2,543 2 - 2,618
Finance Lease Assets 47,268 - 26,692 - 241,005 2,033 3,031 320,029
Total funded exposures 199,652 188,336 142,142 - 437,423 215,024 30,089 1,212,667
Contingent Liabilities &
Commitments - - - - - - - -
Total unfunded exposures - - - - - - - -
Total exposures 199,652 188,336 142,142 - 437,423 215,024 30,089 1,212,667
Table 5.9 The exposure by industry including impaired assets and the related impairment is as follows: (PD 1.3.23 h)
(BD '000s)
Gross Past 12 month ECL and Gross Impaired
Due Financing Lifetime ECL not Financing Life time ECL credit
Contracts impaired (Stage 1 & 2) Contracts impaired (Stage 3)
Trading and Manufacturing 1,994 (110) 7,062 (2,172)
Banks and Financial Institutions 4,958 (2) 25,550 (3,045)
Real Estate 5,932 (372) 3,357 (1,602)
Individuals 31,154 (589) 15,272 (6,515)
Others 2,019 (196) 16,163 (10,911)
Total 46,057 (1,270) 67,403 (24,245)
Table 5.10 Ageing Analysis (PD 1.3.24 b (i))

(BD '000s)
Gross Impaired and Past Due Contracts Expected
Over 1 year Credit Losses Market
up to 3 (ECL) / Specific Net Value of
Up to 1 Year years Over 3 years Provisions Outstanding Collateral
Trading and Manufacturing 2,603 5,500 953 (2,282) 6,773 8,994
Banks and Financial Institutions 4,958 25,550 - (3,047) 27,460 5,637
Real Estate 6,304 1,584 1,401 (1,974) 7,315 15,075
Individuals 33,395 2,635 10,396 (7,105) 39,322 62,857
Others 16,882 160 1,140 (11,107) 7,075 11,618
Total 64,142 35,428 13,889 (25,515) 87,945 104,181

31 December 2020
5.1.3 Movement In Net Allowance For Credit Losses / Impairment (PD 1.3.24 d)
Table 5.11 The balance of allowance for credit loss in the below table includes all financial assets and off-balance sheet exposures
in addition to financing assets:
(BD '000s)
Stage 1: Stage 2: Stage 3:
12-month Lifetime ECL Lifetime
ECL not credit- ECL credit-
impaired impaired Total ECL
- transferred to Stage 1: 12 month ECL 1,464 (1,128) (336) -
- transferred to Stage 2: Lifetime ECL not credit-impaired (317) 810 (493) -
- transferred to Stage 3: Lifetime ECL credit-impaired (49) (1,815) 1,864 -
Recoveries / write-backs - (62) (433) (495)
Allowance for credit losses 7,355 (1,260) 11,041 17,136
Amounts written off during the year - - (3,239) (3,239)
5.1.4 Exposure by External Credit Rating

The Group uses public information provided by external rating agencies such as Standard & Poor’s, Fitch, Moody’s and Capital
Intelligence (accredited External Credit Assessment Institutions – ECAI). The lowest of the ratings based on information available to
public is used as an input in computing rated exposures. (PD 1.3.22 c, d, e)
Table 5.12
(BD '000s)
Gross Credit Rated Unrated
Exposure Type Exposure* Exposure Exposure
Cash 8,928 8,928
Claims on sovereigns 635,585 635,585
Claims on banks 275,202 246,087 29,115
Claims on corporate portfolio 299,997 299,997
Regulatory retail portfolio 95,456 95,456
Mortgages 677,811 677,811
Past due receivables over 90 days 48,211 48,211
Investments in Securities and Sukuk 13,247 13,247
Holding of Real Estate 169,024 169,024
Other assets and Specialized financing 108,618 108,618
Total 2,332,079 246,087 2,085,991
* Gross credit exposure above have been extracted from the workings prepared based on the Form PIRI submitted to the CBB by
the Bank.
It is the Group’s policy to maintain accurate and consistent risk ratings across the credit portfolio through the internal risk rating
system. As such, the Group uses internal risk ratings that are supported by a variety of financial analytics, combined with processed
market information, to provide main inputs for measurement of counterparty credit risk. All internal ratings are tailored to various
categories and are derived in accordance with the Group’s credit policy and are assessed and updated on a regular basis. (PD 1.3.22 e)
Note a: In accordance with the Public Disclosure requirements to disclose the regulatory capital requirements for credit risk under
standardised approach, the above amounts have been extracted from the workings prepared based on the Form PIRI submitted to
the CBB by the Bank.
Note b: The gross credit exposure is arrived at after considering the following:
- inclusion of unfunded exposure (after CCF);
- risk weighting of excess amount over maximum permitted large exposure limit at 800%.

31 December 2020
5.1.5 Maturity Analysis of Exposures

The table below summarizes the notional principal amounts and the relative exposure before applying credit risk mitigation:
Table 5.13
(BD '000s)
Notional Credit
Principal Exposure *
Contingent liabilities on behalf of customers 44,620 31,593
Irrevocable unutilised commitments 64,148 23,167
Forward foreign exchange contracts 36,988 36,988
Operating lease commitments 3,011 -
Total 148,767 91,748
* Credit exposure is after applying CCF.
Table 5.14 Contractual maturity analysis by major type of credit exposure - Funded (PD 1.3.23 g) (PD 1.3.24 a)
(BD '000s)
3 Total
Up to 3 months within 12 1–5 5 - 10 10 - 20 Over 20 Total Over
Exposure Type months to 1 year months years years years years 12 months Total
banks and Central Bank 288,266 - 288,266 - - - - - 288,266
Sovereign Sukuk 18,036 39,157 57,193 268,005 53,024 14,887 335,915 393,108
institutions 32,670 5,295 37,965 - - - 37,965
Corporate Sukuk 1,285 8,974 10,259 6,136 - 6,136 16,395
Financing assets and
finance lease assets 151,211 213,767 364,977 553,131 213,180 111,285 41,240 918,835 1,283,812
Non-trading investments - - - - 98,034 98,034 98,034
Investment properties - - - - 67,586 67,586 67,586
Development properties - - - - 2,943 2,943 2,943
Investment in associates - - - - 12,036 12,036 12,036
Other assets 12,032 397 12,428 1,166 21,377 264 - 22,808 35,237
Goodwill - - - 25,971 25,971 25,971
Total 503,498 267,590 771,088 828,438 494,151 111,550 56,126 1,490,265 2,261,353
Table 5.14 (a) Contractual maturity analysis by major type of credit exposure - Unfunded
(BD '000s)
3 Total
Up to 3 months within 12 1–5 5 - 10 10 - 20 Over 20 Total Over
Exposure Type months to 1 year months years years years years 12 months Total
Unutilised commitments 7,655 22,035 29,690 13,270 8,488 10,670 2,030 34,458 64,148
Contingent liabilities 25,995 13,879 39,874 4,733 13 - - 4,746 44,620
Operating lease
commitments - 1,343 1,343 1,668 - - - 1,668 3,011
Forward foreign exchange
contracts 34,045 2,943 36,988 - - - - - 36,988
Total 67,695 40,201 107,896 19,671 8,500 10,670 2,030 40,871 148,767
The above contractual maturity analysis is based on consolidated statement of financial position classification.

31 December 2020
5.1.5 Maturity Analysis of Exposures (continued)
Table 5.15 Contractual maturity analysis by major type of funding

(BD '000s)
3 Total Total
Up to 3 months within 12 1–5 5 - 10 10 - 20 Over 20 Over 12
months to 1 year months years years years years months Total
Placements from financial
institutions 59,283 57,298 116,581 302 - - - 302 116,883
Customer current accounts 363,970 - 363,970 - - - - - 363,970
Murabaha term financing 137,461 66,752 204,213 2,211 15,247 - - 17,459 221,671
Other liabilities 41,404 68 41,472 4,673 6,132 1 4 10,810 52,282
Equity of Investment
Accountholders 734,904 407,881 1,142,785 82,272 323 - - 82,595 1,225,380
Total 1,337,022 531,999 1,869,020 89,458 21,702 1 4 111,165 1,980,186
5.2 MARKET RISK

Market risk arises from fluctuations in market prices on financial instruments and foreign exchange rates that could have an indirect
effect on the Group’s assets value and equity prices. The Board of Directors has set limits on the risk that may be accepted. This is
monitored on a regular basis by the Group’s Asset and Liability Committee. (PD 1.3.27 a)
Table 5.16 The Group’s capital charge in respect of market risk in accordance with the standardized methodology is as follows:
(BD '000s)
Capital Capital
Risk Weighted Capital Period End Requirement – Requirement –
Asset Requirement Capital Charge Minimum* Maximum*
Foreign exchange risk 250 31 20 20 186
Total market risk 250 31 20 20 186
* The information in these columns shows the minimum and maximum capital charge of each of the market risk categories on a
quarterly basis during the year ended 31 December 2020.
Foreign exchange positions constitute a major component of the market risk capital charge. The Group maintains a conservative
market risk exposure that is focused on the foreign exchange risk coming from the Group’s banking book positions. The open positions
were taken in order of running the Group’s day to day operations that include funding for the Group’s investment portfolio. The Group
monitors and manages these open positions on a daily basis. (PD 1.3.27 a)
5.3 OPERATIONAL RISK

Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes or systems, or from external
events. Operational risk is inherent in all business activities and can never be eliminated entirely; however shareholder value can
be preserved and enhanced by managing, mitigating and, in some cases, insuring against operational risk. To achieve this goal, the
Group has developed an operational risk framework which encompasses identification, measurement, management and monitoring
of risk through risk control and mitigation. A variety of underlying processes are being deployed across the Group including risk and
control self assessments, Key Risk Indicators (KRI), event management, new product review and approval processes and business
contingency plans. (PD 1.3.21 c)

31 December 2020
5.3 OPERATIONAL RISK (continued)

The Group’s policy dictates that the operational functions of booking, recording and monitoring of transactions are carried out by staff
that are independent of the individuals initiating the transactions. Each business line including Operations, Information Technology,
Human Resources, Legal, Compliance and Financial Control is further responsible for employing the aforementioned framework
processes and control programs to manage its operational risk within the guidelines established by the policy, and to develop internal
procedures that comply with these policies. To ensure that all operational risks to which the Group is exposed to are adequately
managed, support functions are also involved in the identification, measurement, management, monitoring and control/mitigation of
operational risk, as appropriate. (PD 1.3.28) (PD 1.3.29)
Consistent with the fundamental principle of ownership, the relevant business units are accountable and responsible for managing
the operational risks relevant to their respective businesses. Consequently, business and support units have documented procedures
and controls in place along with departmental instruction manuals. All changes to such policies are subject to agreement by all
respective business units and approval of the Board of Directors following management review. Procedures are reviewed by the
respective business or support unit and approved at the management level. (PD 1.3.28) (PD 1.3.29)
The Group has a well established Business Continuity Policy and Disaster Recovery Program, and has documented updated
procedures covering all activities necessary for business continuity in case of a business disrupting event. Internal Audit also provides
an independent assessment to evaluate the program’s effectiveness.
In accordance with the basic indicator approach methodology of Basel III, the total consolidated minimum capital charge in respect
of operational risk was BD 12,150 thousands. This capital charge was computed by categorizing the Group’s activities into its specific
business lines (as defined by the Basel III framework) and multiplying the business line’s average gross income for the last three
financial years by a predefined beta factor and adding the aggregation of operational risk weighted exposures of ASB Seychelles.
(PD 1.3.19)
Table 5.17
(BD '000s)
Dec-2020
Average gross income 51,555
Risk weighted exposures 96,666
Minimum capital charge 12,083
The Group uses the Temenos T24 core system developed by Globus, for obtaining the data needed for analysis of events and
data related to credit, market and operational risk assessment. The Bank uses a dedicated system namely ‘Risk Nucleus’ system
developed by BenchMatrix for effective operational risk management.
Non-Shari’a compliant income for the year ended 31 December 2020 amounted to BD 209 thousands. This has arisen primarily
from conventional financing and investments, penalty charges from customers and income on current accounts balances held with
correspondent banks. No Sharia violations were identified during the year. (PD 1.3.30 a, b)
5.4 RATE OF RETURN RISK (PD 1.3.39)

Rate of return risk arises from the possibility that changes in return rates will affect future profitability or the fair values of financial
instruments. The Group is exposed to rate of return risk as a result of mismatches of return rate repricing of assets and liabilities.
In addition, rate of return risk can also affect the Group through market wide rate changes that are brought on by changes in the
economy. The effect of the market rates is reflected and can be seen in the Group’s pricing of contracts as they carry competitive
pricing that follows the market. When risks are high, the market tends to place a higher rate of return to maintain the risk/return
profile. Accordingly, the market reduces the rate of return when it identifies a decrease in the market wide risk that would be reflected
by banks decreasing their rate of return pricing.
This risk is minimized as the Group’s rate sensitive assets and liabilities are mostly for short tenures. In addition, the Group’s cautious
asset liability strategy avoids funding long term lending facilities from short term borrowings. The Group has set limits for profit return
risk and these are monitored on an ongoing basis by the Group’s Asset and Liability Committee (ALCO).

31 December 2020
5.4 RATE OF RETURN RISK (PD 1.3.39) (continued)

The below tables provides the asset and liability re-pricing profile on the contractual repricing or maturity dates, whichever is earlier
for the year ended 31 December 2020 . (PD 1.3.27 c)
Table 5.18
(BD '000s)
Upto 1 >1 to 3 >3 to 6 >6 to 12 >1 to 2 >2 to 3 Profit
Assets Total month months months months years years >3 years insensitive
banks and Central Bank 288,266 - - - - - 288,266
Sovereign Sukuk 393,108 9,275 8,760 671 38,321 57,880 17,892 260,308 -
institutions 37,965 32,670 - 2,016 3,279 - - - -
Corporate Sukuk 16,395 1,222 60 2,069 6,877 2,250 - 3,918 -
Murabaha financing 381,134 16,811 35,566 15,655 40,771 45,885 44,487 181,958 -
Mudaraba financing 398,091 20,303 43,806 51,798 60,527 54,804 39,589 127,265 -
Musharaka 32,577 20 766 443 15,932 2,520 8,312 4,583 -
Credit Cards 2,647 2,647 - - - - - - -
Finance lease assets 469,363 27,506 3,787 12,468 16,178 53,111 35,051 321,261 -
Non-trading investments 98,034 - - - - - - - 98,034
Investment properties 67,586 - - - - - - - 67,586
Development properties 2,943 - - - - - - - 2,943
Investment in associates 12,036 - - - - - - - 12,036
Other assets 35,237 999 - - 11 557 155 1,973 31,542
Goodwill 25,971 - - - - - - - 25,971
Total Assets (A) 2,261,353 111,454 92,745 85,121 181,895 217,008 145,486 901,266 526,379
Liabilities
Placements from financial
institutions 116,883 24,020 35,263 35,494 21,804 302 - - -
Customer current accounts 363,970 - - - - - - 363,970
Murabaha term financing 221,671 60,462 76,998 52,090 14,662 - - 17,459 -
Other liabilities 52,282 16,588 - - - - - - 35,694
Equity of investment
accountholders 1,225,380 269,000 219,773 124,813 283,068 60,288 5,405 16,902 246,131
Total Liabilities 1,980,186 370,070 332,034 212,397 319,533 60,590 5,405 34,361 645,795
Shareholders funds 281,167 - - - - - - - 2,81,167
Total Liabilities &
Shareholders Funds 2,261,353 370,070 332,034 212,397 319,533 60,590 5,405 34,361 926,962
Off-Balance Sheet
Liabilities 108,768 6,881 6,881 13,763 13,763 13,763 - - 53,717
Total liabilities with Off-
Balance Sheet Items (B) 2,370,121 376,952 338,915 226,160 333,296 74,352 5,405 34,361 980,678
Gap (A - B) (265,497) (246,170) (141,039) (151,401) 142,655 140,081 866,905

Cumulative Gap (265,497) (511,668) (652,706) (804,108) (661,453) (521,372) 345,533

31 December 2020
5.4 RATE OF RETURN RISK (PD 1.3.39) (continued)
Table 5.18 (a)

(BD ‘000s)
Profit rate risk in the Banking Book
200bp Profit Rate Shocks
Effect on net profit at 31
Rate shock December 2020
Upward rate shocks: (6,911)
Downward rate shocks: 6,911
5.5 EQUITY POSITION RISK (PD 1.3.21 d) (PD 1.3.31)

Equity position risk arises from the possibility of changes in the price of equities or equity indices and the corresponding effect
they will have on future profitability or the fair values of financial instruments. The Group is exposed to equity risk in the non-trading
position and investment portfolio primarily in its core international and GCC markets.
Equity risk in the banking book is effectively managed by the active involvement of the Executive and Investment committees;
adhering to the policies and procedures in place; involvement of competent professionals; adequate internal control environment and
independent internal audit department.
Executive and Investment Committee Oversight

The Board of Director’s involvement begins with the approval of the Investment Policy which essentially determines the following:
aggregate portfolio parameters, asset class restrictions, approval authorities, risk tolerance, maturity considerations, exit strategy
and governance issues.
The Executive Committee has delegated authority within the overall Board authority. It provides direction to the Executive
Management on all business matters and assumes the role of the Board to address matters arising between Board meetings. The
Committee is responsible for business matters concerning credit and market risks, strategy review and recommendations to the
Board. The Investment Committee reviews and approves all transactions related to corporate and real estate investments, as well as
monitoring their performance on an ongoing basis. In addition, the Committee is responsible to oversee the performance of the fund
managers and recommend exit strategies to maximize return to its investors.
Internal Controls
With regard to internal controls, the investment activity is subject to the same rigorous checks and balances in place for the commercial
banking activity. Adequacy of internal controls is ensured by the recruitment of adequate qualified professionals, proper definition and
communication of departmental and personnel roles, separation of responsibilities of origination and implementation, independent
reporting by the Financial Controls Department, periodic internal audit of the existence and implementation of processes and controls.
All recommendations of the Investment Department are documented in the form of Investment Portfolio Reports and Investment
Memorandums and are subject to independent due diligence review by Investment Middle Office. Responsibility for all deployments
and receipt of redemption proceeds vests with the Investment Administration Department. The Investment Department ensures
transparency in valuation by sourcing pricing from the available sources and using conservative valuation principles in accordance
with international accounting standards. In addition, the Investment Middle Office operates as an independent department that is
responsible for undergoing the due diligence for investments proposed by the Investments Department. This way, the Investment
Department can specialize in sourcing deals and performing the initial analysis, whereas the Investment Middle Office will focus on
preparing the detailed due diligence analysis at the start of an investment. Moreover, the Investment Administration Department will
perform the investment management duties of monitoring the investment company and preparing performance reports along with
other required documentation. This set-up helps streamline processes as each group will focus on a specific set of duties that results
in time savings as well as having independence controls.

31 December 2020
5.5 EQUITY POSITION RISK (continued)
Table 5.19 Equity positions in the Banking Book

(BD '000s) (BD '000s)
Risk-
Weighted Minimum
Gross Credit Gross Credit Assets Capital
Exposure Asset Categories for Credit Risk Exposure (RWA) Charge
Quoted Equities 4,162 Equity Investments - Unlisted 886 1,329 166
Unquoted Equities 93,872 Significant investment in the
common shares of financial
entities >10% 12,036 30,091 3,761
Investment in associates - Investment in listed real estate
equity accounted 12,036 companies 7,174 21,521 2,690
Net realized gain/ (loss) Investment in unlisted real estate
during the year (252) companies 90,558 362,234 45,279
Net unrealized gain/ (loss)
during the year (8,866)
The Group’s equity positions strategy consists of investments that are expected to bring in capital gains or for strategic reasons.
The strategy has been drafted after considering the Board’s risk appetite and the Board’s approved liquidity, market risk and capital
management policies. In line with the Board’s approved policies, the investment strategy is conservative in the sense that it avoids
investments with high volatility returns.
5.6 DISPLACED COMMERCIAL RISK (PD 1.3.41 a) (PD 1.3.21 f) (PD 1.3.32 i)
The Group is exposed to displaced commercial risk in the event of having Equity of investment accounts (EOIA) profit rates that are
lower than market rates, thus putting the Group in risk of paying EOIA account holders from shareholders funds to cover the profit
volatility risk. ASBB has mitigated this risk through regular monitoring of liquidity gaps, deposit rates and concentrations in terms
of the funding requirements by the Asset Liability Committee (ALCO). The ALCO reviews and monitors peer review analysis which
includes average deposit rates paid by its peers in order to realign the deposit rates with the current market.
5.7 LIQUIDITY RISK (PD 1.3.36) (PD 1.3.37)

The Group monitors in an active manner its liquidity profile through analysis of the liquidity gap across specific timeframes in order
to maintain the net asset liability position that is within the Board’s risk appetite. The maintenance of the net asset liability position is
done through the monitoring of the Group’s liquidity indicators through which the Group’s liquidity profile can be assessed. In addition,
the Group further mitigates its liquidity risk by establishing multiple funding sources to decrease it’s correlation to an individual
funding counterparty. The multiple funding lines can be used to offset any shortage resulting from the Group’s obligations and/or
to settle any shortage from each of the current accounts and Equity of investment accounts. The liquidity coverage ratio as of 31
December 2020 was 141.56%.
5.8 OTHER RISKS

The Group has an investment in a foreign banking subsidiary wherein the transactions are denominated in US Dollars (USD) and
since the BHD is pegged to USD there is no foreign exchange translation effect on the investment. (PD 1.3.42). The group has an
investment in associate denominated in Algerian Dinar and the impact of foreign currency translation is included under Foreign
Currency Translation Reserve (FCTR) in equity.
6 EQUITY OF INVESTMENT ACCOUNTHOLDERS

Equity of investment accountholders’ fund is commingled with Group’s and Wakala fund to form one general Mudaraba pool. This pooled
fund is used to fund and invest in banking assets generating income, however no priority is granted to any party for the purpose of
investments and distribution of profits. The Group does not allocate non-performing assets to IAH pool. All the impairment allowances
are allocated to owners’ equity. Recoveries from non-performing financial assets are also not allocated to IAH accountholders. Only
the profits earned on pool of assets funded from IAH and owners’ equity are allocated between the owners’ equity and IAH. As per
the policy of the Group, minimum of 15% of return on assets earned is distributed to investment accountholders and 85% is retained
by the Group as Mudarib share. The Group did not charge any administration expenses to investment accounts.

31 December 2020
6 EQUITY OF INVESTMENT ACCOUNTHOLDERS (continued)

The funds are invested and managed in accordance with Shari’a principles. (PD 1.3.32 b)
According to the terms of acceptance of the unrestricted investment accounts, 100% of the funds are invested after deducting a
mandatory reserve. In order to avoid excessive risk concentration the Group invests the commingled funds in such a way so as to
comply with the CBB’s large exposures limits. All Equity of investment accounts are classified as Mudarabas where fees are deducted
before profit allocation, as there is no limit against their withdrawal. It should however be noted that Mudaraba account fees are
subject to being partially or totally waived in order to match investment account holder market returns. (PD 1.3.32 c, j, k)
The Risk weighted assets of the Group include the contribution from EIAH which are subject to the 30% risk weight.
The EIAH and other customers can use the Group’s relationship managers for any advice, mediation services, grievances and
complaints. (PD 1.3.32 f, g)
There is no variation between Mudarib agreed sharing and contractual agreed ratio. Profit earned and paid and rate of return
comparatives for the Equity of investment account holders for the years ended 31 December 2020,2019, 2018,2017, 2016 and
2015 are as follows: (PD 1.3.33 e, l, m, n)
Table 6.1
(BD '000s)
Dec-2020 Dec 2019 Dec 2018 Dec 2017 Dec 2016 Dec 2015
Shareholders 29,335 28,425 246 119 119 155
EOIA (before smoothing) 60,186 50,271 492 230 216 282
Profit earned for EOIA before smoothing 60,186 50,271 492 230 216 282
Profit paid for EOIA after smoothing 29,335 28,425 246 119 119 155
Balance of:
PER N/A N/A N/A N/A N/A N/A
IRR N/A N/A N/A 7 7 7
Annual Rate of Return Benchmark 3% 3% 3% 3% 3% 3%

Annual Rate of Return (EOIA) - Profit earned 4.91% 4.86% 0.53% 0.23% 0.18% 0.41%
Annual Rate of Return (EOIA) - Profit paid 2.39% 2.75% 0.27% 0.12% 0.10% 0.23%
PER Amount - - - - - -
PER % - - - - - -
IRR Amount - - - - 7 7
IRR % - - - - - -
Reconciliation
Mudaraba Profit Earned 60,186 50,271 492 230 216 282
Mudarib fees (30,851) (21,846) (246) (111) (97) (127)
Profit credited to EOIA accounts 29,335 28,425 246 119 119 155
IRR movements - - - - - -
Profit on EOIA 29,335 28,425 246 119 119 155
Mudarib fee as a percentage of total

investment profit 51% 43% 50% 48% 45% 45%
EOIA Balance 1,225,380 1,034,743 99,761 118,881 68,796 62,351
RWA as per PIRI Report 170,292 11,469 6,886 18,727 4,128 1,952
* Year ended 2019 has been restated on account of adoption of FAS31 standard

31 December 2020
6 EQUITY OF INVESTMENT ACCOUNTHOLDERS (continued)
Table 6.2
(BD ‘000s)
Dec-20 Dec 2019 Dec 2018 Dec 2017 Dec 2016 Dec 2015
Rate of Return 2.39% 2.75% 0.25% 0.10% 0.17% 0.25%
Return on average EOIA assets (ROAA) 5.45% 15.23% 0.49% 0.26% 0.32% 0.42%
Return on average equity (Total Owner's Equity) (ROAE) 20.89% 16.15% 0.16% 0.14% 0.07% 0.09%
Table 6.3 Equity of investment accountholders by Counterparty Type and Islamic Product (PD 1.3.33 i)
Total assets breakdown by EOIA & Self financed

(BD '000s)
Total Funded by Self % of EOIA
Exposures EOIA Financed to Total
Sovereign 513,964 215,024 298,940 42%
Financial Institutions 534,452 188,336 346,116 35%
Corporate 706,127 371,883 334,244 53%
Retail 506,809 437,423 69,386 86%
Total 2,261,353 1,212,667 1,048,686 54%
Table 6.4 The changes in asset allocation are as follows: (PD 1.3.32 d)
(BD '000s)
Cash and balances
with banks and Placements with Finance Lease
Central Bank financial institutions Financing Assets Assets
Self Self Self Self
EOIA Financed EOIA Financed EOIA Financed EOIA Financed
Asset Allocation as on 31 December 2020 107,134 181,132 37,965 - 747,538 66,911 320,029 149,334
Asset Allocation as on 31 December 2019 117,829 101,627 76,660 38,143 656,985 28,771 183,269 206,473
Asset Allocation as on 31 December 2018 - - 99,761 63,544 - - - -
There are no off-balance sheet exposures arising from investment decisions attributable to the EOIA holders.
7 OTHER DISCLOSURES
7.1 CURRENCY RISK

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Board has
set limits on positions by currency. Positions are monitored on a daily basis by the Market Risk department and on a periodic basis
by the Audit and Risk Committee as well as ALCO to ensure positions are maintained within established limits. Substantial portion
of the Group’s assets and liabilities are denominated in Bahraini Dinars, US Dollars or Saudi Riyals. As the Bahraini Dinar and Saudi
Riyals are pegged to the US Dollars, positions in these currencies are not considered to represent significant currency risk as of 31
December 2020.
7.2 RELATED PARTY TRANSACTIONS

Related parties represent associated companies, major shareholders, directors and key management personnel of the Group and
entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are
approved by the Group’s Senior Management. For further details refer Note 29 titled Related Party Transactions in the consolidated
financial statements for the year ended 31 December 2020. The intra-group and related party transactions are made at arms length
basis during the year. (PD 1.3.10 e) (PD 1.3.23 d)

31 December 2020
7 OTHER DISCLOSURES (continued)
7.3 RESTRUCTURED FACILITIES

As at 31 December 2020, the balance of the renegotiated financing facilities to individuals and corporate was BD 46,896 thousands.
In general, facilities are renegotiated to optimize a facility’s credit profile with respect to its recoverability. This can involve changing
any of the profit rate, tenure or security package. Previous restructuring of any facilities to individual and corporate customers did
not have any significant impact on present and future earnings. (PD 1.3.23 j)
7.4 ASSETS SOLD UNDER RECOURSE AGREEMENTS

The Group has not entered into any recourse agreement during the year ended 31 December 2020. (PD 1.3.23 k)
7.5 LEGAL RISK AND CLAIMS

As at 31 December 2020, legal suits amounting to BD 2,379 thousands (2019: BD 385 thousands) were pending against the Group.
Based on the opinion of the Group’s legal counsel, the total estimated liability arising from these cases is not considered to be material
to the Group’s consolidated financial position as the Group has also filed counter cases against these parties. (PD 1.3.30 c)
7.6 DEPOSIT PROTECTION SCHEME

Certain customers’ deposits of the Group are covered by deposit protection schemes established by the Central Bank of Bahrain
(CBB). Customers’ deposits held with the Bank in the Kingdom of Bahrain are covered by the Regulation Protecting Deposits and
Equity of unrestricted investment accounts issued by the CBB in accordance with Resolution No.(34) of 2010. This scheme covers
eligible ‘natural persons’ (individuals) up to a maximum of BD 20,000 as set out by CBB requirements. A periodic contribution as
mandated by the CBB is paid by the Group under this scheme. (PD 4.4.2)
7.7 EXPOSURE TO HIGHLY-LEVERAGED AND OTHER HIGH-RISK COUNTERPARTIES

The bank has no exposure to highly-leverged and other high-risk counterparties as per the definition provided in the CBB rulebook
PD-1.3.24 (PD 1.3.23 e)
7.8 EXPOSURES IN EXCESS OF REGULATORY LIMITS

The CBB has set a single exposure limit of 15% of the bank’s total Capital Base on exposures to individuals and a combined exposure
limit of 25% of the total Capital Base of closely-connected counterparties. The excess amount of any exposure above the mentioned
thresholds must be risk-weighted at 800% unless it is an exempt exposure in accordance with the requirements in the CBB rulebook.
The bank has no exposures that are in excess of individual obligor limit of 15% of the bank’s Capital Base as of 31 December 2020
(PD 1.3.23 f)
7.9 CBB PENALTIES (PD 1.3.44)

During 2020 an amount of BD 10,000 was paid as penalty to the Central Bank of Bahrain (CBB) due to a matter deemed as
miscommunication from the Bank’s appointed respresentative. The matter was closed without any recourse on either parties.

31 December 2020
COMPOSITION OF CAPITAL DISCLOSURE
APPENDIX PD-2: RECONCILIATION REQUIREMENTS
Step 1: Disclosure of Balance Sheet under Regulatory scope of Consolidation

There are no differences between the regulatory and accounting consolidation, with both following line by line consolidation approach
using consistent account policies without excluding any entities. As mandated by the Central Bank of Bahrain (“CBB”), financing
facilities and investments have been grossed up with collective impairment provision, as presented below:
BHD '000
Balance sheet as per published financial statements 2,261,353
Collective provision impairment 20,581
Less: Provision related to Contingent Liabilities and Commitments (490)
Balance sheet as in Regulatory Return 2,281,444
Step 2: Reconcilation of published financial balance sheet to regulatory reporting as at 31 December 2020
BHD '000
Balance sheet
as in published
financial Consolidated
statements PIRI data Reference
Assets
of which Self financed 181,209
of which financed by URIA 107,134
Placements with banks and similar financial institutions 37,965 38,106
of which financed by URIA - 38,106
Financing assets 814,449 1,303,362
Finance lease assets 469,363 -
of which Self financed - 223,222
of which financed by URIA - 1,080,140
Available-for-sale investments 410,761 411,040
of which Non-trading investments 1,258
of which Sovereign Sukuk 393,108
of which Corporate Sukuk 16,395
Investment properties 70,529 70,529
of which Investments in real estate 67,586 -
of which Development properties 2,943 -
Investment in associates 12,036 12,036
Property, plant, and equipment (PPE) 1,961 1,961
Other Assets 156,023 156,068
Non-Trading investment 96,776 -
Other receivables and prepayments 33,276 -
Goodwill 25,971 - G
Total Assets 2,261,353 2,281,444
Liabilities
Placements from financial institutions 116,883 116,883
Funding Liabilities (e.g. reverse commodity murabaha, etc.) 221,671 221,671
of which Murabaha term financing 221,671 -
Accruals, deferred income, other liabilities, current and deferred tax liabilities (DTLs) 52,282 51,792
of which Other liabilities 51,143 50,653
of which Dividends payable 1,139 1,139
Unrestricted Investment Accounts 1,225,380 1,225,380
Total Liabilities 1,980,186 1,979,696

31 December 2020
COMPOSITION OF CAPITAL DISCLOSURE (continued)
APPENDIX PD-2: RECONCILIATION REQUIREMENTS (continued)

BHD '000
Balance sheet
as in published
financial Consolidated
statements PIRI data Reference
Owners' Equity
Total share capital 222,920 222,920 A
Share capital 230,450 230,450
Treasury stock (7,530) (7,530)
Reserves and retained earnings 57,846 57,846

Share premium 12,209 12,209 C-1
Statutory reserve 21,778 21,778 C-2
Retained earnings (excluding profit for the year) (16,834) (16,834) B-1
Subsidy from government 2,143 2,143
Modification Loss (24,768) (24,768)
Modification loss amortization 24,768 24,768 B-2
of which amount eligible for CET1 6,633 6,633 B-3
of which amount not eligible for CET1 2,509 2,509
Fx translation adjustment (3,784) (3,784) C-3
Changes in fair value - amount eligible for CET1 9,844 9,844 C-4
Real estate fair value reserve - amount eligible for T2 23,348 23,348 D
Minority interest in subsidiaries' share capital 401 401

of which amount eligible for CET1 - 121 E-1
of which amount eligible for AT1 - 26 E-2
of which amount eligible for T2 - 35 E-3
of which amount not eligible for regulatory capital - 220
Expected credit losses (Stages 1 & 2) - 20,581

of which amount eligible for T2 - 12,362 F
of which amount not eligible for regulatory capital - 8,218
Total Owners' Equity 281,167 301,748
Total Liabilities + Owners' Equity 2,261,353 2,281,444

31 December 2020
APPENDIX PD-1: RECONCILIATION REQUIREMENTS & TEMPLATE
Step 3: Composition of Capital Common Template as at 31 December 2020

BHD '000
Reference
numbers of
balance sheet
under the
regulatory
Component scope of
of regulatory consolidation
Composition of Capital and mapping to regulatory reports capital from step 2
Common Equity Tier 1 capital: instruments and reserves
1 Directly issued qualifying common share capital plus related stock surplus 222,920 A
2 Retained earnings 14,567 B1+B2+B3
3 Accumulated other comprehensive income (and other reserves) 40,047 C1+C2+C3+C4
4 Not Applicable
5 Common share capital issued by subsidiaries and held by third parties (amount allowed
in group CET1) 121 E1
6 Common Equity Tier 1 capital before regulatory adjustments 277,655
Common Equity Tier 1 capital: regulatory adjustments
7 Prudential valuation adjustments -
8 Goodwill (net of related tax liability) 25,971 G
9 Other intangibles other than mortgage-servicing rights (net of related tax liability) -
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 -
12 Shortfall of provisions to expected losses -
13 Securitisation gain on sale (as set out in paragraph 562 of Basel II framework) -
14 Not applicable
15 Defined-benefit pension fund net assets -
16 Investments in own shares -
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%
threshold) -
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 CBB 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 25,971
29 Common Equity Tier 1 capital (CET1) 251,684

31 December 2020
APPENDIX PD-1: RECONCILIATION REQUIREMENTS & TEMPLATE (continued)
Step 3: Composition of Capital Common Template as at 31 December 2020 (continued)

BHD '000
Reference
numbers of
balance sheet
under the
regulatory
Component scope of
capital from step 2
Additional Tier 1 capital: instruments
30 Directly issued qualifying Additional Tier 1 instruments plus related stock surplus -
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) 26 E-2
35 of which: instruments issued by subsidiaries subject to phase out -
36 Additional Tier 1 capital before regulatory adjustments 26
Additional Tier 1 capital: regulatory adjustments
37 Investments in own Additional Tier 1 instruments plus related stock surplus -
38 Reciprocal cross-holdings in Additional Tier 1 instruments -
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
(amount above 10% threshold) -
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 CBB 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) 26
45 Tier 1 capital (T1 = CET1 + AT1) 251,710
Tier 2 capital: instruments and provisions
46 Directly issued qualifying Tier 2 instruments plus related stock surplus 23,348 D
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) 35 E-3
49 of which: instruments issued by subsidiaries subject to phase out -
50 Provisions 12,362 F
51 Tier 2 capital before regulatory adjustments 35,745
Tier 2 capital: regulatory adjustments
52 Investments in own Tier 2 instruments -
53 Reciprocal cross-holdings in Tier 2 instruments -
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
(amount above the 10% threshold) -
55 Significant investments in the capital 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 -

31 December 2020
APPENDIX PD-1: RECONCILIATION REQUIREMENTS & TEMPLATE (continued)
Step 3: Composition of Capital Common Template as at 31 December 2020 (continued)

BHD '000
Reference
numbers of
balance sheet
under the
regulatory
Component scope of
Tier 2 capital: regulatory adjustments capital from step 2
58 Tier 2 capital (T2) 35,745
59 Total capital (TC = T1 + T2) 287,455
60 Total risk weighted assets 1,086,432
Capital ratios and buffers
61 Common Equity Tier 1 (as a percentage of risk weighted assets) 23.17%
62 Tier 1 (as a percentage of risk weighted assets) 23.17%
63 Total capital (as a percentage of risk weighted assets) 26.46%
64 Institution specific buffer requirement (minimum CET1 requirement plus capital
conservation buffer plus countercyclical buffer requirements plus D-SIB buffer
requirement expressed as a percentage of risk weighted assets) 9.00%
65 of which: capital conservation buffer requirement 2.50%
66 of which: bank specific countercyclical buffer requirement 0.00%
67 of which: D-SIB buffer requirement 0.00%
68 Common Equity Tier 1 available to meet buffers (as a percentage of risk weighted
assets) 23.17%
National minima including CCB (if different from Basel 3)
69 CBB Common Equity Tier 1 minimum ratio 9.00%
70 CBB Tier 1 minimum ratio 10.50%
71 CBB total capital minimum ratio 12.50%
Amounts below the thresholds for deduction (before risk weighting)
72 Non-significant investments in the capital of other financials -
73 Significant investments in the common stock of financials -
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) 20,581
77 Cap on inclusion of provisions in Tier 2 under standardised approach 12,362
78 N/A
79 N/A
Capital instruments subject to phase-out arrangements (only applicable between 1
Jan 2019 and 1 Jan 2023)
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) -

31 December 2020
APPENDIX PD-3: FEATURES OF REGULATORY CAPITAL

For the period ended 31 December 2020
1 Issuer Al Salam Bank, Bahrain
2 Unique identifier (e.g. CUSIP, ISIN or Bloomberg identifier SALAM
for private placement)
3 Governing law(s) of the instrument All applicable laws and regulations of the Kingdom of Bahrain
Regulatory treatment
4 Transitional CBB rules Common Equity Tier 1
5 Post-transitional CBB rules Common Equity Tier 1
6 Eligible at solo/group/group & solo Group
7 Instrument type (types to be specified by each jurisdiction) Common Equity shares
8 Amount recognised in regulatory capital (Currency in mil, BD 230.45 Million
as of most recent reporting date)
9 Par value of instrument BD 0.100
10 Accounting classification Shareholders’ Equity
11 Original date of issuance 13-Apr-06
12 Perpetual or dated Perpetual
13 Original maturity date No maturity
14 Issuer call subject to prior supervisory approval No
15 Optional call date, contingent call dates and redemption amount Not applicable
16 Subsequent call dates, if applicable Not applicable
Coupons / dividends
17 Fixed or floating dividend/coupon Dividend as decided by the Shareholders
18 Coupon rate and any related index Not applicable
19 Existence of a dividend stopper Not applicable
20 Fully discretionary, partially discretionary or mandatory Fully discretionary
21 Existence of step up or other incentive to redeem No
22 Noncumulative 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 No
31 If write-down, write-down trigger(s) Not applicable
32 If write-down, full or partial Not applicable
33 If write-down, permanent or temporary Not applicable
34 If temporary write-down, description of write-up mechanism Not applicable
35 Position in subordination hierarchy in liquidation (specify Not applicable
instrument type immediately senior to instrument)
36 Non-compliant transitioned features No
37 If yes, specify non-compliant features Not applicable

Net Stable Funding Ratio (NSFR) Disclosure
31 December 2020
BACKGROUND:
ASBB has been subjected to the Basel III NSFR standards from December 2019, pursuant to CBB circular No. EDBS/KH/54/2018
dated 16th August 2018. ASBB is required to maintain NSFR of at least 100% on an on-going basis. CBB has relaxed this ratio to 80%
until 31 December 2021 due to the pressures within the banking sector following the COVID-19 pandemic. However, ASBB still seeks
to maintain the original 100% requirement.
The objective of NSFR is to improve the resiliency of banks by promoting long term funding stability. NSFR is designed to limit the
risks emanating from excessive maturity mismatches over the medium to long term. More specifically, the NSFR requires ASBB to
fund illiquid assets with a minimum amount of stable liabilities over a horizon of one year.
The NSFR requires banks to maintain a stable funding profile in relation to the composition of their assets and off-balance sheet
activities. CBB circular stipulates the applicable Required Stable Funding (“RSF”) factor for each category of asset and Available
Stable Funding (“ASF”) factor for each type of funding source.
ASBB seeks to ensure that its NSFR remains above the specified regulatory minimum requirements. This is achieved by: (i) Monitoring
the NSFR closely against an established internal early warning trigger and management target. (ii) Managing and developing strategies
to build a diversified funding base with access to funding sources across retail and wholesale channels.
ANALYSIS AND MAIN DRIVERS:

Al Salam Bank strategy is to maintain stable and well-diversified funding sources by focusing on raising more stable free float and
long-term deposits from core clientele base in Bahrain and across oth er key GCC markets where strong banking relationships have
been successfully established. The main driver of this strategy is to fund bank’s core business activities with the widest deposit base
and hence maintaining conformable funding mix for the long-term assets and subsequently healthy NSFR.
The Assets and Labilities Committee (ALCO) regularly review the different liquidity indicators -including the NSFR- and set appropriate
action plans in maintaining adequate, sustainable and healthy liquidity position. ALCO review takes global economic indicators as well
as local micro economic factors into consideration. Hence effective liquidity management is set into practice steered by treasury and
risk department and collaborated with other key business units.
As at 31 December 2020, the weighted value of the Available Stable Funding (ASF) stood at BD 1.243 billion, while the total weighted
value of the Required Stable Funding (RSF) stood at BD 1.244 billion. The resultant NSFR stood at 99.96%, well above the current
80% threshold stipulated by CBB. The ASF is primarily driven by a strong capital base, substantial retail and private banking deposit
base and deposits from non-financial corporate customers.
Post application of the relevant factors, the contribution of regulatory capital, retail deposits and deposits from non-financial
corporates stood at 23%, 42% and 17% respectively. The bank does not rely on financial market funding sources (such as DCM) and
interbank funding activities are primarily used for short term funding gaps.
The RSF post application of relevant factors is driven by financing provided to non-financial corporate customers, retail and small
business customers, and some unlisted investments.
ASBB’s High-Quality Liquid Assets (HQLA) requires minimum funding due to its sovereign nature and high liquidity which, after
applying the relevant factors, makes up 1% of the RSF portfolio. Performing financing and Investment accounts for 73% and 14% of
the RSF.
At ASBB, there is considerable focus on growing and maintaining stability of demand and term deposits provided by private, corporate
and retail customers which will continue to form a significant part of the funding.

Net Stable Funding Ratio (NSFR) Report - Consolidated
31 December 2020
BHD '000
Unweighted Values
(before applying relevant factors)
More than 6
No months and Over Total
specified Less than less than one weighted
No. Item maturity 6 months one year year value
1 Capital:
2 Regulatory Capital 255,056 - - 35,745 290,801
3 Other Capital Instruments - - - - -
4 Retail deposits and deposits from small business
customers:
5 Stable deposits - - - - -
6 Less stable deposits - 442,336 125,503 66,951 578,006
7 Wholesale funding:
8 Operational deposits - - - - -
9 Other wholesale funding - 1,032,384 189,353 58,126 374,683
10 Other liabilities:
11 NSFR Shari’a-compliant hedging contract liabilities - - -
12 All other liabilities not included in the above categories - 64,101 - - -
13 Total ASF 1,243,490
14 Total NSFR high-quality liquid assets (HQLA) - - - - 17,604
15 Deposits held at other financial institutions for operational
purposes - - - - -
16 Performing financing and sukuk/ securities:
17 Performing financing to financial institutions secured by
Level 1 HQLA - - - - -
18 Performing financing to financial institutions secured by
non-level 1 HQLA and unsecured performing financing
to financial institutions - 245,585 416 4,911 41,956
19 Performing financing to non- financial corporate clients,
financing to retail and small business customers, and
financing to sovereigns, central banks and PSEs, of which: - 225,592 133,368 740,303 775,213
20 With a risk weight of less than or equal to 35% as per the
Capital Adequacy Ratio guidelines - - - 167,627 108,958
21 Performing residential mortgages, of which: - - - 131,367 85,388
22 With a risk weight of less than or equal to 35% under the
CBB Capital Adequacy Ratio Guidelines - - - 131,367 85,388
23 Securities/ sukuk that are not in default and do not qualify
as HQLA, including exchange-traded equities - 7,386 6,567 780 7,640
24 Other assets:
25 Physical traded commodities, including gold - -
26 Assets posted as initial margin for Shari’a-compliant
hedging contracts and contributions to default funds
of CCPs - - - -
27 NSFR Shari’a-compliant hedging assets - - - -
28 NSFR Shari’a-compliant hedging contract liabilities
before deduction of variation margin posted - - - -
29 All other assets not included in the above categories 292,513 3,980 24,007 308,941
30 OBS items 145,464 - - 7,273
31 Total RSF - - - 1,244,016
32 NSFR (%) 99.96%

Leverage Ratio - Consolidated
31 December 2020
CBB in June 2018 issued guidelines on leverage ratio as part of updates to the Capital Adequacy Module. The ratio measures how
well the banks’ Tier 1 capital covers its total exposures (self-financed exposures and adjusted exposures funded by EOIA) both on-
balance sheet and off-balance sheet. CBB has mandated a minimum consolidated leverage ratio of 3%.
Below is the bank’s consolidated financial leverage ratio as at 31 December 2020:
S.No. Description BHD '000

1 Total Self Financed Assets 1,031,930
2 Total URIA Financed Assets 1,226,225
3 Off Balance Sheet items - with relevant Credit Conversion Factors 94,387
4 Leverage ratio exposure [(1) + (2)*30% + (3)] 1,494,184
5 Regulatory Adjustments 25,971
6 Total exposures for the calculation of the leverage ratio [(4)-(5)] 1,468,213
7 Tier 1 Capital 229,085
Leverage Ratio [(7)/(6)] 16%
Minimum Leverage Ratio as required by CBB 3%

Liquidity Coverage Ratio (LCR) Report - Consolidated
31 December 2020
CBB issued its regulations on Liquidity Risk Management in August 2018. The regulations mandate that banks are required to
maintain LCR of at least 100% on a daily basis. The objective of LCR is banks must manage their assets and liabilities to create strong
short-term resilience and sufficient liquidity that is enough to fund cash outflow for 30 days. Due to the impact of Covid19 pandemic
on banks, CBB relaxed the LCR ratio to 80% until 31 December 2021.
Below is the bank’s average consolidated LCR for the period:
Q4-2020 Q3-2020
Total Total Total Total
unweighted weighted unweighted weighted
value value value value
(average) (average) (average) (average)
High-quality liquid assets
1 Total HQLA 195,494 158,653
Cash outflows
2 Retail deposits and deposits from small business customers,
of which:
3 Stable deposits 61,120 1,834 60,195 1,806
4 Less stable deposits 192,544 19,254 156,459 15,646
5 Unsecured wholesale funding, of which:
6 Operational deposits (all counterparties) and deposits in
networks of cooperative banks - - - -
7 Non-operational deposits (all counterparties) 567,464 340,060 551,869 324,543
8 Unsecured sukuk - - - -
9 Secured wholesale funding - -
10 Additional requirements, of which:
11 Outflows related to Shari’a-compliant hedging instruments
exposures and other collateral requirements - - - -
12 Outflows related to loss of funding on financing products - - - -
13 Credit and liquidity facilities 26,284 7,807 23,454 6,948
14 Other contractual funding obligations - - - -
15 Other contingent funding obligations 86,378 4,371 68,760 3,487
16 Total Cash Outflows 373,325 352,430
Cash inflows
17 Secured lending (e.g. reverse repos) - - - -
18 Inflows from fully performing exposures 55,157 35,075 47,794 31,324
19 Other cash inflows 185,573 180,946 185,501 180,776
20 Total Cash Inflows 240,730 216,021 233,295 212,100
Total Total
adjusted adjusted
Value Value
21 Total HQLA 195,494 158,653
22 Total net cash outflows 157,730 140,736
23 Liquidity Coverage Ratio (%)* 126% 115%
Represents simple average of daily LCR*

31 December 2020
31 December 2020
Al Salam Bank-Bahrain B.S.C.

P.O. Box 18282, Manama, Kingdom of Bahrain
Investor Relations
Tel: +973 1713 3399
Fax: +973 1713 1073
E-mail: [email protected]
www.alsalambahrain.com
Licensed and regulated as an Islamic Retail Bank by the Central Bank of Bahrain

Salam 2020

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Nurturing

2 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 3

Al Salam Bank-Bahrain B.S.C (ASBB) was established on 19 January 2006 in the

4 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 5

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

10 Fils BD 21 (USD 56)

9 Fils BD 19 (USD 49)

Earning Per Share

Solid strides have been made during 2020 to increase market

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 7

8 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 9

Mr. Hussein Mohammed Al Meeza Mr. Salim Abdullah Al Awadi

10 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 11

Mr. Alhur Mohammed Al Suwaidi Mr. Khalid Shehab Eddin Madi

12 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Sheikh Adnan Abdullah Al Qattan Dr. Nizam Mohammed Yaquby

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 13

Mr. Rafik Nayed Mr. Anwar Mohammed Murad

14 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 15

Mr. Abdulkarim Turki Mr. Ahmed Abdulla Saif

16 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 17

Mr. Ali Habib Qassim Mr. Mohammed Yaqoob Buhijji

18 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 19

Mr. Essa Abdulla Bohijji Ms. Muna Al Balooshi

20 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 21

Mr. Ali Al Khaja Mr. Ahmed Abdulrahim Al Mahmood Mahmood Qannati

24 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 25

2020 was an extremely challenging year for the banking

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 27

BUSINESS ENVIRONMENT CAPITAL ADEQUACY

30 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 31

32 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 33

Shareholding – 31 December 2020

34 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Nationality No. of Shares Ownership Percentage

Mandate of the Board of Directors and their Roles and Responsibilities

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 35

Board Elections System

36 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

As of 31-12-2020, the members of the Board were:

H.E. Shaikh Khalid bin Mustahil Al Mashani Chairman

Mr. Salim Abdullah Al Awadi Board Member

The Board Charter

Induction and Orientation for New Directors

Al Salam Bank-Bahrain B.S.C. - Annual Report 2020 37

Evaluation of Board Performance

38 Al Salam Bank-Bahrain B.S.C. - Annual Report 2020

Board Meetings and Attendances