CITI ISLAMIC INVESTMENT BANK E.C. ANNUAL REPORT 31

Commercial registration : 35731-1 (registered with Central Bank of Bahrain

as an Islamic wholesale investment bank)

Ultimate holding company : Citibank Inc., USA

Office : Citibank House

Al Seef District

P.O. Box 548, Manama, Kingdom of Bahrain

Telephone 17588588, Fax 17588654

Directors : Naveed Kamal (Chairman)

Mohammed Jaffer Nini (Deputy Chairman)

Omer Emre Karter

Kamal Benkabbou

Michel Sawaya

Iman Abdel Khalek

Imad Ali (Chief Executive Officer)

Auditors : KPMG Fakhro, Bahrain

CITI ISLAMIC INVESTMENT BANK E.C.

ANNUAL REPORT

31 December 2021

Citi Islamic Investment Bank E.C.

ANNUAL REPORT

for the year ended 31 December 2021

CONTENTS Page

Report of the Board of Directors 1

Corporate Governance 2 - 11

Shari’a Supervisory Board report 12

Independent auditors’ report to the shareholders 13 - 15

Financial statements

Statement of financial position 16

Income statement 17

Statement of changes in equity 18

Statement of cash flows 19

Statement of changes in restricted investment accounts 20

Notes to the financial statements 21 - 34

Supplementary disclosures – Financial impact of COVID-19 (unaudited) 35 - 36

Risk and Capital Management Disclosures 37- 50

Citi Islamic Investment Bank E.C. 2

ORPORATE GOVERNANCE

A) FRAMEWORK

The Bank’s Board of Directors comprise seven executive directors. The Directors on a regular basis

maintain oversight over the activities of the Bank. The nature of the Bank’s business is two-fold: offering

a Shari’a compliant Murabaha-based investment product to Islamic Financial Institutions and

Corporates and to provide structuring services to other Citigroup entities in respect of markets, capital

market and risk management transactions. The Bank at present does not offer, or intend to offer, any

asset products.

Michel Sawaya (Directors, CIIB) the Citi Country Officer (“CCO”) of Citibank, N.A., Bahrain Branch

(“Citibank”) chairs the combined Country Coordinating Committee (“CCC”) and the Business Risk

Compliance and Control Committee (“BRCC”) of all Citigroup Inc. entities in the Kingdom of Bahrain, in

which the CEO of the Bank / CIIB is also a member and participates representing CIIB. Furthermore,

the Bank’s Shari’a Supervisory Board conducts meetings on a frequent basis in order to review and

approve all Islamic transactions undertaken by the Bank.

B) ORGANISATION STRUCTURE

The Bank operates with certain functions and services outsourced to Citibank, and currently has two

employees. Since the scope of activities of the Bank is fairly limited, it utilises services from the various

Citibank departments via Intra Citi Service Agreements.

Employment of Relatives:

CIIB maintains Employment of Relatives policy to prevent creating actual or perceived conflicts of

interest. In the same context, CIIB’s SSB Charter indicates the need to report / notify in such a conflict

of interest.

Citi Islamic Investment Bank E.C. 3

CORPORATE GOVERNANCE

C) COMPOSITION OF THE BOARD OF DIRECTORS

The Board of Directors of the Bank consist of the following:

1)

Mr. Naveed Kamal

(Chairman - Executive Director)

2)

Mr. Mohammed Jaffer Nini

(Deputy Chairman - Executive Director)

3)

Mr. Omer Emre Karter

(Board Member - Executive Director)

4)

5)

6)

Mr. Kamal Benkabbou

Mr. Michel Sawaya

Ms. Iman Abdel Khalek

(Board Member - Executive Director)

7)

Mr. Imad Ali

(Chief Executive Officer - Executive Director)

The Board of Directors are appointed for a period of three years subject to re-appointment.

The CIIB Directors are appointed from other Citi entities, based on their seniority and experience. Each

Director serves on a non-remuneration basis and is appointed for their specific skills and

responsibilities, which brings appropriate balance of skills and experience on the Board for it to perform

constructively. New members are appointed and old members resign from the Board, as and when

such changes become necessary for the Board to execute its responsibilities effectively. In spirit, each

Board Member fulfils the requirements mentioned in the local regulations (expect where regulatory

exemptions are maintained). All CIIB’s Board Members are considered by the Central Bank of Bahrain

(CBB) as Executive Directors since all are Citi employees, and are also approved as such by the CBB

at the time of appointment. Given the nature of CIIB’s activities currently limited to structuring deals,

advisory services and reverse murabaha (where CIIB acts as an agent), CIIB obtained an exemption

from inducting Non-Executive Directors and Independent Non-Executive Directors.

Profile of the Directors

1. Mr. Naveed Kamal – Board member – Executive Director

Profession : Banker

Business title : Managing Director – Head of Corporate Banking, Middle East and

North Africa (MENA)

Experience in years : 30 years

Qualifications : Master of Business Administration

Start of term : 14 January 2020

Naveed is the Chairman of EMEA Emerging Markets Corporate Banking. He was the Head of

Corporate Banking, MENA and has been based in Dubai from 2004 until 2021. Naveed was previously

Head of Corporate Banking for the UAE and responsible for managing relationships with our most

important clients in Dubai and Abu Dhabi having developed the business through several economic

cycles.

Naveed has also managed Citi’s Public Sector client relationships across MENA and built up strong

partnerships with several governments and GREs in the region.

Citi Islamic Investment Bank E.C. 4

CORPORATE GOVERNANCE

2. Mr. Mohammed Jaffer Nini – Deputy Chairman – Executive Director

Profession : Banker

Business title : Managing Director, Chief Financial Officer – EMEA Emerging Markets

Cluster

Experience in years : 31 years

Qualifications : Fellow Chartered Accountant

Start of term : 8 April 2012

Mr. Mohammed Jaffer Nini is the Managing Director and Chief Financial Officer of Citi for EMEA

Emerging Markets Cluster. He is responsible for Finance function in the region across all businesses

and products.

Mr. Nini has been with Citi for last 27 years working in Pakistan, Saudi Arabia, Egypt and the UAE.

Before joining Citi, he worked with PwC as an Audit Manager. He is a Fellow member of the Institute of

Chartered Accounts of Pakistan.

Mr. Nini was assigned as Deputy Chairman for Citi Islamic Investment Bank effective from 16 June

2014.

3. Mr. Omer Emre Karter – Board member – Executive Director

Profession : Banker

Business title : CEO & Board Member, Citi Turkey

Experience in years : 25 years

Qualifications : M.Sc. in Intl Business and Finance – New Hampshire College,

Manchester, NH, USA

Start of term : 14 January 2020

Emre Karter is Chief Executive Officer and Board Member of Citi Turkey.

Prior to his current role, he was the Treasury and Trade Solutions Cluster Head for Middle East, North

Africa, based in Dubai, UAE. In this role, Emre Karter was responsible for driving Citi’s market-leading

Treasury and Trade Solutions. In addition to his responsibilities, he was also Governance Head for

Citi's Non-Presence Countries (NPC) in Central Asia and Transcaucasia.

Emre Karter’s other previous experience include; managing the Transaction Services business for

Russia, CIS, Central and Eastern Europe, Turkey; and several Sales & Coverage roles, where he led

origination and execution activities Citi's Multinational, Financial Institutions client segments, based in

Turkey.

Emre joined Citi in Turkey in 1996 and held various positions in Corporate Bank as a Banker, followed

by an assignment in Brussels coordinating the multinational (GSG) franchise across Central and

Eastern Europe, Middle East and Africa.

Emre holds a B.Sc. in Management from Bilkent University and a M.Sc. in International Business and

Finance from New Hampshire College.

Citi Islamic Investment Bank E.C. 5

CORPORATE GOVERNANCE

4. Mr. Kamal Benkabbou – Board member – Executive Director

Profession : Banker

Business title : Head of Global Investor Sales

Experience in years : 15 years

Qualifications : Masters in Management from ESCP Europe in France

Start of term : 25

th

October 2021

Kamal works in Citi’s Global Markets & Securities Services Division. He is in charge of Global Investor

Sales for the Middle East and North Africa. His team covers Sovereign Wealth Funds, Pension Funds,

Central Banks and Banks. The team provides Global Markets coverage to regional institutional

investors across assets classes.

Kamal has over 15 years Investment Banking experience in Paris, London and Dubai. He joined Citi in

2011 as a member of MENA Investor Sales. Prior to Citi, Kamal worked 5 years at Barclays Capital as

Markets coverage for MENA Financial Institutions. He started his career as M&A Analyst at Lazard.

September 2019 – Current: Citi, Head MENA of Investor Sales, based in Dubai, UAE

August 2011 – September 2019: Citi, MENA Investor Sales, based in Dubai, UAE

July 2009 – August 2011: Barclays, MENA Institutional Sales, based in Dubai, UAE

October 2006 – July 2009: Barclays, MENA Institutional Sales, based in London, UK

September 2004 – September 2005: Lazard, Investment Banking Analyst, Paris, France

Kamal holds a Masters in Management from ESCP Europe in France (2006). He also holds a

qualification in Islamic Finance (IFQ).

5. Mr. Michel Sawaya– Board member – Executive Director

Profession : Banker

Business title : CEO of Citibank Bahrain

Experience in years : 26 years

Qualifications : Bachelor of Business Administration and a Bachelor of Science in Biology

from the American University of Beirut

Start of term : 25

th

October 2021

Michel Sawaya was appointed as the Citi Country Officer of Citi Bahrain with effect from 5

th

of May

2021. Prior to this appointment and since April 2016 Michel was the CCO and Head of Corporate

Banking for Citi Lebanon He joined Citi in October 1995 as part of a team responsible for the

reestablishment of the franchise in the country Since that time, he has held several position in

Operations Technology and Internal Controls before moving to Treasury Trade Solutions in June 2006

he expanded that role to become Head of TTS for Levant Cluster in 2010 In 2013 Michel was appointed

as Head of Corporate Banking in addition to his role as the Lebanon TTS Head He holds a Bachelor of

Business Administration and a Bachelor of Science in Biology from the American University of Beirut.

As part of Michel’s community involvement, he is a Board Member at the American Chamber of

Commerce in Bahrain and Injaz Junior Achievement Bahrain, a non-profit organization dedicated to

educating students about work readiness, entrepreneurship and financial literacy through hands on

training programs He also is a board member at the Bahrain International School Association

Citi Islamic Investment Bank E.C. 6

CORPORATE GOVERNANCE

6. Ms. Iman Abdel Khalek – Board member – Executive Director

Profession : Banker

Business title : Head of CMO MENA

Experience in years : 20 years

Qualifications : BA in Business Administration from the American University in Cairo

Start of term : 25

th

October 2021

Iman is responsible for Citigroup’s Central Eastern Europe Middle East & North Africa Debt Capital

Markets Business, based in Dubai.

In her current role, Iman advises sovereigns, corporates and financial institutions on access to the

International Bond & Sukuk markets. She leads origination and execution efforts and has experience

with the vast majority of the region’s landmark financings over the last 10 years.

Iman’s career spans 20 year with Citi. She joined Citibank in 2000 as a Management Associate where

she worked in risk and corporate bank before moving to UAE in 2004 to cover financial institutions and

Abu Dhabi corporates. In 2007, Iman joined the Islamic Finance team and in 2009 joined debt capital

markets. In addition to being a product specialist in debt capital markets, Iman acquired credit, client

coverage, and structuring expertise through her various roles at Citi.

Iman holds a BA in Business Administration from the American University in Cairo.

7. Mr. Imad Ali – Board member – Executive Director

Profession : Banker

Business title : CEO of Citi Islamic Investment Bank E.C.

Experience in years : 19 years

Qualifications : Master’s in Comparative Laws from Islamic University Malaysia

Start of term : 18

th

May 2021

Mohammed Imad Ali is Chief Executive Officer for Citi Islamic Investment Bank E.C. (“CIIB”), a locally

incorporated subsidiary of Citigroup based in Bahrain which is engaged in wholesale banking on Islamic

principles, and serves as the global headquarter for Citigroup’s Islamic banking business. Imad is the

Executive Board Member of CIIB and also head of the Murabaha desk, which is part of TTS business.

Imad in his earlier role has been head of Islamic Control Function for CIIB for 11 years. Prior to CIIB,

Imad worked in Shari'a Compliance department in HSBC Amanah, Dubai, advising on Shari’a matters.

Prior to his working at HSBC Amanah, Imad worked as a lawyer with the Islamic finance team at

Dentons, a British law firm, in Dubai.

Imad obtained his master’s degree in comparative laws from Islamic University Malaysia specializing in

Islamic banking jurisprudence and is currently finalizing his Phd. He has read law and is admitted as a

lawyer in India.

D) FUNCTIONS OF THE BOARD OF DIRECTORS:

The Board is responsible for the overall business performance and strategy of the Bank.

The Board establishes the objectives of the Bank, the adoption of strategy and annual review thereof,

management structure and responsibilities and the systems and controls framework. It monitors

management performance and the implementation of strategy by management, keeps watch over

conflicts of interest and prevents abusive related party transactions.

Citi Islamic Investment Bank E.C. 7

CORPORATE GOVERNANCE

The Board delegates to management the responsibility for the day-to-day management of the Bank in

accordance with policies, guidelines and parameters set by the Board.

The Board of Directors is accountable to shareholders for the creation and delivery of strong

sustainable financial performance and long-term shareholder value. To achieve this, the Board

approves and monitors the Bank’s strategy and financial performance, within a framework of sound

corporate governance and effective risk management.

The Board of Directors of the Bank has responsibility for:

1 Preparation and fair presentation of financial statements in accordance with the Financial

Accounting Standards for Islamic Financial Institutions issued by the Accounting and Auditing

Organisation for Islamic Financial Institutions (“AAOIFI”) and for such internal controls as the Board

determines is necessary to enable the preparation of the financial statements that are free from

material misstatement, whether due to fraud or error.

2 The Bank’s undertaking to operate in accordance with Islamic Shari’a rules and principles.

3 Complying with the Bahrain Commercial Companies Law 2001, the Central Bank of Bahrain

Financial Institutions Law 2006 and applicable regulations of the rulebook issued by the Central

Bank of Bahrain.

4 Making available to the auditors access to all information of which management is aware that is

relevant to the preparation of the financial statements such as records, documentation, other

matters and additional information required for the purpose of the audit and unrestricted access to

persons within the entity from whom it is necessary to obtain audit evidence.

E) BOARD MEETINGS

As per the internal polices, the Board members are required to meet at least four times a year.

Summary of meetings of Board of Directors and attendance during the year:

Board Member

22 March

2021

28 June

2021

30 September

2021

6 December

2021

% of

attendance

Mr. Atiq Rehman

Yes*

-

100%

Mr. Mohammed Jaffer Nini

Yes*

100%

Mr. Naveed Kamal

Yes*

100%

Mr. Imad Ali

Yes*

100%

Mr. Omer Emre Karter

Yes*

No*

Yes*

75%

Mr. Michel Sawaya

-

Yes

100%

Mr. Kamal Benkabbou

-

Yes*

100%

Me. Iman Abdel Khalek

-

Yes*

100%

% of attendance

100%

75%

100%

* Attendance via video conference call.

Citi Islamic Investment Bank E.C. 8

CORPORATE GOVERNANCE

F) CODE OF ETHICS

The Board has adopted Citigroup Inc.’s Code of Ethics for Financial Professionals governing all the

Bank employees. A copy of the Code of Ethics is available on Citigroup website.

G) CODE OF CONDUCT

The Board has adopted Citigroup Inc.’s Code of Conduct, which outlines the laws, rules, regulations

and Citi policies that govern the activities of Citi and sets the standards of business behaviour and

ethics that apply across Citigroup. The Code of Conduct applies to every director, officer and employee

of the Bank. All employees, directors and officers are required to read and follow the Code of Conduct.

In addition, other persons performing services for CIIB are subject to the Code of Conduct by contract

or agreement. A copy of the Code of Conduct is available on Citigroup website at www.citigroup.com.

H) CHANGES IN THE STRUCTURE OF THE BOARD DURING THE YEAR

No changes during the year.

I) SHARI’A COMPLIANCE

CIIB business has a dedicated internal Islamic Control Function and a Shari’a Supervisory Board

(“SSB”) to ensure Shari’a compliance of its activities on an ongoing basis throughout the year

complying with the Shari’a Standards of AAOIFI. The Islamic Control Function and the SSB also

conduct Shari’a Audit every year.

J) SOCIAL RESPONSIBILITY

The Bank discharges its social responsibility at a group level in Bahrain. Together with Citibank CIIB

contributes/ donates to charitable organisations and participates in various community initiatives.

K) COMMUNICATIONS POLICY

The disclosure policy applies to all modes of communication to the public including written, oral and

electronic communications. These disclosures are made on a timely basis in a manner required by

applicable local and international laws and regulatory requirements. Information on new products or any

change in existing products will be placed on the Bank’s website www.citibank.com/ciib/ and / or

published in the media. Product details are also shared with customers through brochures and / or

advertisements.

L) COMPLAINT HANDLING

The Bank takes disputes and complaints from all customers very seriously. These have the potential for

a breakdown in relationships and can adversely affect the Bank’s reputation. Left unattended these can

also lead to litigation and possible censure by the regulatory authorities. The Bank has a

comprehensive policy on handling of external complaints. No complaints were lodged with the Bank

during the year.

M) MATERIAL TRANSACTIONS

Given the size of the organisation most of the transactions are subject to review and approval by the

Board of Directors. For day-to-day operations, the Board has delegated authority to the management /

CEO to approve transactions. All transactions are subject to the wider Citigroup policies and approval

processes. All non-routine transactions outside the normal course of business shall be subject to

approval by the Board of Directors.

N) COMPLIANCE WITH HC MODULE

In relation to the corporate governance requirements as specified in the HC module, the Bank has a

practice to explain its non-compliance if any to its shareholders at the annual general meeting. Further,

the Bank has been exempted by the CBB vide letter dated 3 May 2012 from the requirements under

paragraphs 1.2.7, 1.8, 1.9, 3.2, 3.3, 4.2 to 4.4, and 5.1 to 5.5, and vide letter dated 19 March 2012 from

paragraphs 1.4.6, 1.4.8 and 1.5.2, subject to an annual re-assessment, whereby the CBB has the right

to revoke the exemptions as it sees fit.

Citi Islamic Investment Bank E.C. 9

CORPORATE GOVERNANCE

O) COMPLIANCE WITH SG MODULE

In relation to the Shari’a Governance requirements as specified in the SG module, the Bank has been

exempted by the CBB vide letter dated 11 December 2017 from the requirements under paragraphs

SG-1.1.2, SG-2.3.3, SG-2.3.9, SG-2.3.29 and SG-4.

In reference to SG-2.5.4, none of the Bank’s SSB members are part of the Corporate Governance

Committee for CIIB given the scale and scope of CIIB's business as the Committee is merged in the

one-Citi CCC.

P) REMUNERATION POLICIES

The Bank’s employees are remunerated as per the Citigroup compensation policies. The operations,

compliance and other support functions are carried out by Citibank N.A., Bahrain as per a service level

agreement between CIIB and Citibank N.A., Bahrain. No remuneration is awarded by the Bank to the

Board of Directors of the Bank. The Sharia Supervisory Board is paid attendance fee for the meetings

held which is as per the resolution approved by the Board. The Shari’a Supervisory Board total

remunerations for 2021 was USD 136 thousand which is as per the resolution approved by the Board.

Citi Islamic Investment Bank follows Citigroup’s global compensation philosophy which is governed by

Citigroup Global Remuneration Committee.

Citigroup Inc’s Global Remuneration Committee which is known as the Personnel and Compensation

Committee (“P&C Committee”) is a duly constituted committee of the Board of Directors of the overall

US parent company, Citigroup Inc. The P&C Committee draws on considerable experience of the non-

executive directors of the Board of Citigroup Inc., and is empowered to draw upon internal and external

expertise and advice as it determines appropriate.

The EMEA Remuneration Oversight Group (EMEA ROG) is an executive group to provide EMEA wide

oversight and governance support across EMEA.

The following are members of the EMEA Remuneration Oversight Group: EMEA Senior HR Officer

(Chair); CEO of CGML, UK CCO, and Cluster Head for UK, Jersey, and Israel; CEO of CEP; CEO of

CGME, and Cluster Head of Europe; Head of CBNA London Branch, CBNA EMEA Regional

Coordinator, and EMEA Chief Administrative Officer; EMEA Head of Legal; EMEA Chief Risk Officer;

EMEA Chief Financial Officer; EMEA Head of Compliance; Cluster Head of EMEA Emerging Markets.

The P&C Committee retains ultimate oversight of Citi’s remuneration matters.

Citi’s global compensation principles are developed and approved by the P&C Committee in

consultation with management, independent consultants and Citi’s senior risk officers. The P&C

Committee comprises independent directors who have experience evaluating compensation structures,

especially for senior executives. Citi’s compensation principles are designed to advance Citi’s business

strategy by attracting, retaining and motivating the best talent available to execute the strategy, while

ensuring, among other things, unnecessary or excessive risk-taking is not encouraged.

The Link between Remuneration and Performance

Citi is committed to responsible compensation practices and structures. Citi seeks to balance the need

to compensate its employees fairly and competitively based on their performance, while assuring that

their compensation reflects principles of risk management and performance metrics that reward long-

term contributions to sustained profitability.

Citi’s compensation programmes aim to enhance stockholder value through the practice of responsible

finance, facilitate competitiveness by attracting and retaining the best talent, promote meritocracy by

recognising employee contributions and manage risk through sound incentive compensation practices.

Individual Performance Assessment and Award Determination Process

Citi has an annual performance management process which operates through the Performance

Management module of the cloud-based enterprise application Workday.

Citi Islamic Investment Bank E.C. 10

CORPORATE GOVERNANCE

The performance assessment is based on individually tailored goals as well as Manager/Business

cascaded goals and an assessment against Citi’s Core Leadership Principles which align an

employee’s individual performance and development with Citi’s culture (and strategic objectives). The

appraisal process also incorporates risk management and non-financial performance factors by

business areas.

Employees are assessed on a Bi-Annual basis with Ratings only being awarded during the Year End

Performance Management process. As part of this Performance management process, Individuals

complete a self-appraisal against their individual goal and Citi’s Leadership Principles. This is followed

by a discussion between the individual and their manager. The Managers complete their appraisal of

the individual against their goals and can incorporate Feedback from peers and other Citi Colleagues

through the Workday 360 Feedback process. The Manager also considers any other metrics that may

be pertinent to their business (and the employees’ performance) and records this in Workday to record

the individual’s performance and contribution. Employees are awarded a Goals (What) rating by the

manager based on the performance factors identified for the individual. The employee is also awarded

a Leadership rating (How) which describes how the employee achieved their goals linked to Citi’s

Leadership Principles. Both ratings are given equal weighting when assessing an employee’s overall

performance for the year.

Managers must carefully consider the risk metrics pertinent to their business unit when determining

individual performance ratings, especially when applying any discretion that results in an individual

compensation outcome varying from the level implied by the performance of their business unit. All

employees are assigned a Risk and Controls goals which clearly outlines Citi’s expectations in this area

and every employee’s responsibility for sound Risk and Controls practices.

Identified Staff are also subject to a Risk and Control Assessment (RCA) review process under which

the control functions (i.e., Finance, Risk and Internal Audit and Legal) provide an independent

evaluation of the individuals risk behaviours. The RCA process is included in the performance

evaluation system to inform the performance review conducted by the identified staff’s manager. The

RCA process is conducted for the Mid-Year and Year End Performance Management processes for

every in-scope employee.

Remuneration of Control Function Employees

Citi takes several measures to avoid conflicts of interest between the business and Control Functions.

They are:

• Employees engaged in control functions have direct reporting lines that are separate from the

business and those reporting lines within the control functions are responsible for the reward of

those employees both in terms of year end compensation, salary increases and promotion.

• The control functions are allocated a bonus pool separate from the revenue generating businesses

and decisions about allocations of those pools are made within the Control Functions themselves.

• Compensation (both salary and variable incentive) for the Control Functions is tested in line with

external market data to gauge whether it is in keeping with the market. The level of variable

remuneration for Control Function employees is determined by reference to performance against

objectives that are set and assessed within their respective functions.

Use of Stock as Deferred Variable Compensation

In general, amounts subject to Citi’s mandatory deferral policy are deferred into shares or share-linked

instruments. A portion of deferred remuneration may be in the form of deferred cash and/ or phantom

units related to Citi’s share price for regulatory or other reasons.

The Capital Accumulation Program (“CAP”) and Citigroup Stock Award Program (“CSAP”) are the main

programmes under which Citi may make awards of stock to selected employees.

Certain senior executives are subject to stock ownership commitments, further aligning the executives’

interests with those of stockholders and other stakeholders.

Citi Islamic Investment Bank E.C. 11

CORPORATE GOVERNANCE

Deferred stock awards made to identified staff are subject to Performance Based Vesting (“PBV”). The

trigger for application of a PBV reduction of a tranche of unvested deferred stock is the emergence of

pre-tax losses in the relevant “reference business” of the individual. If there are pre-tax losses in the

reference business, a portion of the deferred stock tranche is forfeited, the proportion of which is based

on the extent of the losses and prior year net profits.

Use of Deferred Cash as Deferred Compensation

Identified staff or staff subject to other regulations may have a portion of their incentive compensation

delivered in the form of deferred cash awards, subject to (“PBV”). PBV for the deferred cash portion of

the award is a discretionary feature. If it is determined that a Material Adverse Outcome (“MAO”) has

occurred and that a given Identified Staff is deemed to have had “significant responsibility” for that

MAO, then a discretionary reduction may be made to the unvested portion of the deferred cash award.

Determinations of when a MAO has occurred, which (if any) Identified Staff have significant

responsibility for the MAO and what reductions to awards will be made, are all based on the facts and

circumstances of a given outcome.

The Bank’s employees currently do not meet remuneration thresholds that would require deferral or

delivery of compensation in shares or share linked instruments. The total value of remuneration awards

for the current fiscal year 2021 are as follows:

Total value of remuneration awards

for the current fiscal year 2021

USD,000

Unrestricted

Deferred

Fixed remuneration:

- Cash-based

USD 256

Nil

-Shares and share-linked instruments

Nil

- Other

USD 98

Nil

Variable remuneration:

- Cash-based

USD 5

Nil

-Shares and share-linked instruments

Nil

- Other

Nil

Note: Above figures are for the two employees of Citi Islamic Investment Bank E.C. who were existing

during the year.

Citi Islamic Investment Bank E.C. 12

SHARI’A SUPERVISORY BOARD REPORT

as at 31 December 2021

Citi Islamic Investment Bank E.C. 18

STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2021 US$ 000's

Share

capital

Statutory

reserve

Retained

earnings

Total

Balance at 1 January 2021

10,000

3,577

1,003

14,580

Profit for the year

-

959

Total recognised income and expense for the year

-

959

Dividends paid for 2020

-

(1,000)

Transfer to statutory reserve

-

96

(96)

-

As at 31 December 2021

10,000

3,673

866

14,539

Share

capital

Statutory

reserve

Retained

earnings

Total

Balance at 1 January 2020

10,000

3,465

931

14,396

Profit for the year

-

1,115

Total recognised income and expense for the year

-

1,115

Dividends paid for 2019

-

(931)

Transfer to statutory reserve

-

112

(112)

-

As at 31 December 2020

10,000

3,577

1,003

14,580

The accompanying notes 1 to 18 form an integral part of these financial statements.

Citi Islamic Investment Bank E.C. 19

STATEMENT OF CASH FLOWS

for the year ended 31 December 2021 US$ 000's

2021

2020

OPERATING ACTIVITIES

Receipt of advisory income

2,345

2,437

Receipt of income from Murabaha contracts

34

120

Receipt of income from restricted investment accounts

405

97

Payments to employees and suppliers

(842)

(597)

Management fees paid

(841)

(789)

Net cash from operating activities

1,101

1,268

FINANCING ACTIVITIES

Dividends paid

(1,000)

(931)

Net cash used in financing activities

(1,000)

(931)

Net increase in cash and cash equivalents

101

337

Cash and cash equivalents at 1 January

14,460

14,123

Cash and cash equivalents at 31 December

14,561

14,460

Cash and cash equivalents comprise:

Bank balances

1,558

1,462

Murabaha receivables

13,003

12,998

14,561

14,460

The accompanying notes 1 to 18 form an integral part of these financial statements.

Citi Islamic Investment Bank E.C. 20

STATEMENT OF CHANGES IN RESTRICTED INVESTMENT ACCOUNTS

for the year ended 31 December 2021 US$ 000's

2021

2020

As at 1 January

378,519

390,663

Net deposits / (withdrawals)

579,790

(15,092)

Gross income

2,103

3,045

Bank’s income as an agent

(405)

(97)

As at 31 December

960,007

378,519

The Bank acts as an agent for deposit Murabaha transactions for its customers and invests the funds

only in commodity Murabaha transactions on behalf of its customers.

The accompanying notes 1 to 18 form an integral part of these financial statements.

Citi Islamic Investment Bank E.C. 21

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2021 USD 000’s

1 REPORTING ENTITY

Citi Islamic Investment Bank E.C. (the “Bank”) was incorporated in the Kingdom of Bahrain as

an exempt closed shareholding Bank on 29 June 1996. 99.99% of the Bank’s shares are owned

by Citicorp Banking Corporation, USA and 0.01% of the Bank’s shares are owned by Citicorp

Global Holding Inc., USA. CitiBank Inc., USA is the ultimate parent for the Bank. The Bank

operates as Wholesale Islamic Investment Bank under a licence granted by the Central Bank of

Bahrain (the “CBB”).

The Bank’s principal activities are to undertake and carry out banking and investment activities in

compliance with the principles of Islamic Shari’a.

The Bank's activities are supervised by a Shari’a Supervisory Board (the “SSB”) consisting of three

members. The role of the SSB is defined in a separate agreement between the Bank and SSB

members. The Financial Control and administrative activities of the Bank are carried out by Citibank

N.A., Bahrain under intra Citi service agreements between the two parties.

The transactions, balances and results reported in these financial statements are those of Citi Islamic

Investment Bank E.C. Bahrain, only and accordingly do not include the results of other Islamic banking

activities carried out by Citibank N.A. or any of its affiliates worldwide.

2 SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the preparation of the financial statements are set out

below. These policies have been applied consistently to all periods presented in the financial

statements unless stated otherwise.

(a) Statement of Compliance

The financial statements of the Bank have been prepared in accordance with applicable rules and

regulations issued by the Central Bank of Bahrain (the "CBB") including the CBB circulars on

regulatory concessionary measures in response to Coronavirus (COVID-19) issued during the year.

These rules and regulations require the adoption of all Financial Accounting Standards (“FAS”) issued

by the Accounting and Auditing Organisation of Islamic Financial Institutions (AAOIFI), except for:

i. 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 account 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; and

ii. Recognition of financial assistance received from the government in response to its COVID-19

support measures that meets the government grant requirement, in equity, instead of the profit

or loss account 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 recognised in

equity as a result of (i) above. In case this exceeds the modification loss amount, the balance

amount is recognised in the profit or loss account. Any other financial assistance is recognised

in accordance with the requirements of FAS (refer to Note 9).

The Bank incurred no modification loss and therefore (i) above did not apply to the Bank.

The above framework for basis of preparation of the financial statements is hereinafter referred to as

“Financial Accounting Standards as modified by the CBB”.

Citi Islamic Investment Bank E.C. 22

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2021 USD 000’s

2 SIGNIFICNAT ACCOUNTING POLICIES (continued)

The modification to accounting policies have been applied retrospectively and did not result in any

change to the financial statements reported for the comparative period.

In line with the requirement of AAOIFI and the CBB Rulebook, for matters that are not covered by

AAOIFI standards, the Bank uses guidance from the relevant International Financial Reporting

Standards.

(b) Basis of Preparation

The financial statements are prepared on the historical cost basis. The preparation of financial

statements may require the use of certain critical accounting estimates. It also may require

management to exercise its judgement in the process of applying the Bank’s accounting policies.

There were no significant estimates and judgement made in the process of preparation of financial

statements for the year ended 31 December 2021.

The Bank classifies its expenses by the nature of expense method.

(c) New Standards, Amendments and Interpretations Effective from 1 January 2021

There were no new standards, amendments and interpretations adopted during the year.

(d) New Standards, Amendments and Interpretations Issued but not yet Effective

The following new standards and amendments to standards are effective for financial years beginning

after 1 January 2022 with an option to early adopt. However, the Bank has not early adopted any of

these standards. Adoption of these standards are not expected to have a significant impact on the

Bank’s financial statements.

▪ FAS 38 Wa’ad, Khiyar and Tahawwut

▪ FAS 39 Financial Reporting for Zakah

▪ FAS 1 General Presentation and Disclosures in the Financial Statements

▪ FAS 32 Ijarah

(e) Functional and Presentation Currency

Items included in the financial statements of the Bank are measured using the currency of the primary

economic environment in which the entity operates (the functional currency). The financial statements

are presented in US dollars, which is the Bank’s functional and presentation currency.

(f) Foreign Currencies

Foreign currency transactions are translated into the functional currency using the exchange rates

prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the

settlement of such transactions and from the translation at year end exchange rates of monetary

assets and liabilities denominated in foreign currencies are recognised in the income statement.

(g) Murabaha Receivables

Murabaha receivables comprise placements with Citicorp Banking Corporation, Bahrain. Murabaha

receivables are stated at amortised cost less impairment allowances, if any. Murabaha receivables are

impaired when they are considered to be uncollectible. The deferred income relating to Murabaha

contracts is netted off against the related receivable for the purpose of presentation in the financial

statements.

(h) Income from Murabaha Contracts

Income from Murabaha contracts is recognised on a time-apportioned basis over the period of the

contract.

Citi Islamic Investment Bank E.C. 23

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2021 USD 000’s

2 SIGNIFICNAT ACCOUNTING POLICIES (continued)

(i) Restricted Investment Accounts

Restricted investment accounts represent assets acquired using funds provided by holders of

restricted investment accounts and their equivalent and managed by the Bank as an agent. The

restricted investment accounts are exclusively designated for investment in specified instruments as

directed by the investments account holders. Restricted investment accounts are not included in the

Bank's statement of financial position and are considered as funds under management.

(j) Income from Advisory Services

Income from advisory services is measured at the fair value of the consideration received and

receivable and recognised at a point in time when the service is provided and income is earned. This

is usually when the Bank has performed all significant acts in relation to the service, and it is highly

probable that the economic benefits from the transaction will flow to the Bank and income can be

reliably measured.

(k) Income from Restricted Investment Accounts

The Bank’s share of fee charged as an agent to restricted investment accounts are normally

recognised on the basis of the Bank's entitlement to receive such revenue from the restricted

investment accounts, as per agreed contractual terms, except when the Bank elects to waive its

entitlement in favour of its customers.

(l) Statutory Reserve

In accordance with the requirements of the Commercial Companies Law, a minimum of 10% of the net

profit is appropriated to a statutory reserve, until it reaches 50% of the paid-up share capital. This

reserve is not normally distributable, except in the circumstances stipulated in the Commercial

Companies Law.

(m) Employee Benefits

All short term employee benefits are recognised in the income statement. Pensions and other social

benefits for Bahraini employees are covered by the General Organisation for Social Insurance

scheme, which is a “defined contribution scheme” in nature under IAS 19 ‘Employee Benefits’, 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.

(n) Segment Reporting

The Bank’s activities are limited to carrying out banking and investment advisory activities in

compliance with the principles of Islamic Shari’a. The Bank does not have any reportable segments

and the revenue, assets, liabilities and performance is evaluated on an entity basis. Accordingly, no

segment information is reported in these financial statements.

(o) Trade Date Accounting

All “regular way” purchases and sales of financial assets are recognised on trade date, i.e. the date

that the Bank contracts to purchase or deliver the asset. Regular way purchases or sale are purchases

or sale of financial assets that require delivery of assets within the time frame generally established by

regulation or convention in the market place.

(p) Provisions

A provision is recognised in the balance sheet when the Bank has a legal or constructive obligation as

a result of a past event that can be measured reliably and it is probable that an outflow of economic

benefits will be required to settle the obligation.

(q) Offsetting

Financial assets and liabilities are offset only when there is a legal or religious enforceable right to set

off the recognised amounts and the Bank intends to either settle on a net basis, or to realise the asset

and settle the liability simultaneously.

Citi Islamic Investment Bank E.C. 24

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2021 USD 000’s

2 SIGNIFICNAT ACCOUNTING POLICIES (continued)

(r) Impairment of financial instruments

The Bank recognises loss allowances for Expected Credit Losses (“ECL”) on financial assets

measured at amortised cost.

The Bank measures loss allowances at an amount equal to lifetime ECLs.

When determining whether the credit risk of a financial asset has increased significantly since initial

recognition when estimating ECLs, the Bank 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 Bank’s historical experience and informed credit assessment

including forward-looking information.

The Bank assumes that the credit risk on a financial asset has increased significantly if it is more than

30 days past due.

The Bank considers a financial asset to be in default when:

➢ the borrower is unlikely to pay its credit obligations to the Bank in full, without recourse by the

Bank to actions such as realising security (if any is held); or

➢ the financial asset is more than 90 days past due.

The Bank applies a three-stage approach to measuring ECL on financial assets carried at amortised

cost and debt instruments classified as FVOCI. Assets migrate through the following three stages

based on the change in credit quality since initial recognition.

Stage 1: 12-month ECL

Stage 1 includes financial assets on initial recognition and that do not have a significant increase in

credit risk since initial recognition or that have low credit risk. 12-month ECL is the expected credit

losses that result from default events that are possible within 12 months after the reporting date. It is

not the expected cash shortfalls over the 12-month period but the entire credit loss on an asset

weighted by the probability that the loss will occur in the next 12 months.

Stage 2: Lifetime ECL - not credit impaired

Stage 2 includes financial assets that have had a significant increase in credit risk since initial

recognition but that do not have objective evidence of impairment. For these assets, lifetime ECL are

recognised. Lifetime ECL are the expected credit losses that result from all possible default events

over the expected life of the financial instrument. Expected credit losses are the weighted average

credit losses with the life-time probability of default (‘PD’).

Stage 3: Lifetime ECL - credit impaired

Stage 3 includes financial assets that have objective evidence of impairment at the reporting date in

accordance with the indicators specified in the CBB’s rule book. For these assets, lifetime ECL is

recognised.

Measurement of ECLs

The estimation of credit exposure for risk management purposes is complex and requires the use of

models, as the exposure varies with changes in market conditions, expected cash flows and the

passage of time. The assessment of credit risk of a portfolio of assets entails further estimations as to

the likelihood of defaults occurring, of the associated loss ratios and of default correlations between

counterparties. The Bank measures expected credit loss using Probability of Default (PD), Exposure at

Default (EAD) and Loss Given Default (LGD).

Citi Islamic Investment Bank E.C. 25

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2021 USD 000’s

2 SIGNIFICNAT ACCOUNTING POLICIES (continued)

Write-off

The gross carrying amount of a financial asset is written off when the Bank has no reasonable

expectations of recovering a financial asset in its entirety or a portion thereof. For corporate

customers, the Bank individually makes an assessment with respect to the timing and amount of write-

off based on whether there is a reasonable expectation of recovery. The Bank expects no significant

recovery from the amount written off. However, financial assets that are written off could still be subject

to enforcement activities in order to comply with the Bank’s procedures for recovery of amounts due.

3 MURABAHA RECEIVABLES

2021

2020

Gross contract value

13,010

13,007

Less: Deferred profits

(6)

(4)

Less: Expected credit loss

(1)

(5)

13,003

12,998

All Murabaha receivables are financed through equity. Profit and/ or principal repayment in respect of

Murabaha receivables are not past due at 31 December 2021.

4 OTHER ASSETS

2021

2020

Prepayments

35

Other receivables

748

556

783

591

5 SHARE CAPITAL

2021

2020

Authorised

20,000,000 shares of US$ 1 each

20,000

Subscribed, issued and paid-up

10,000,000 shares of US$ 1 each

10,000

Dividends declared for the year amounted to 863 thousand (2020: US$ 1,000 thousand).

6 INCOME FROM ADVISORY SERVICES

Income from advisory services is earned by the Bank in its capacity as an agent for Shari’a compliant

structuring and arranging execution of Islamic financing deals. The Bank mainly provides such

advisory services in relation to financing deals in which other CitiBank entities originate/ participate.

For such deals, advisory income is recognised only on completion of the transaction. The revenue

recognition of fees earned from syndication is dependent upon the level of participation of CitiBank in

the syndication, the aggregate fees received by CitiBank and the fees received by other participants.

The fee earned on each financing transaction is shared between the Bank and other Citibank entities

on an agreed proportion by way of a charge as per the service level agreement. The Bank recognises

revenue at a point in time only when it is highly probable that it will be entitled to its share of income

from participation in each deal. The Bank recognises revenue, net of expenses paid to other Citibank

entities as part of syndication.

Citi Islamic Investment Bank E.C. 26

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2021 USD 000’s

7 STAFF COST

2021

2020

Salaries and benefits

351

367

Social security costs

5

16

356

383

8 OTHER EXPENSES

2021

2020

Shari’a Supervisory Board expenses

143

91

Management fees

841

789

Head office charges

301

149

Professional fees

50

8

CBB license fees

35

34

Travel expenses

-

2

Others

107

83

1,477

1,156

9 GOVERNMENT GRANTS

The Government of Kingdom of Bahrain has announced various economic stimulus programmes to

support businesses in these challenging times.

During the year, the Bank has received grants towards Bahraini for staff cost of USD nil (2020: USD

22 thousand) from the government as part of its COVID-19 measures which was adjusted against staff

cost for the year.

10 RELATED PARTY TRANSACTIONS

A significant portion of the Bank’s transactions in the normal course of business are with other

branches of Citibank N.A. and other companies of CitiBank. All transactions are subject to controls

embedded in respective processes in line with the CitiBank policies and procedures.

The significant income, expenses and balances arising from dealing with related parties included in the

financial statements are as follows:

2021

2020

Murabaha receivables

13,003

12,998

Bank balances

1,558

1,462

Other assets

748

538

Other payables

662

432

Income from advisory services

2,263

2,189

Income from Murabaha contracts

35

120

Key management personnel

308

293

Shari’a Supervisory Board expenses

143

91

Management fees

841

789

Head office charges

301

149

No remuneration is being paid to the Board of Directors.

Citi Islamic Investment Bank E.C. 27

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2021 USD 000’s

11 ZAKAH

The Bank is not obliged to pay Zakah. Further, the Bank does not collect or pay Zakah on behalf of its

shareholders and investors in restricted investment accounts.

12 SHARI’A SUPERVISORY BOARD

The Bank’s Shari’a Supervisory Board consists of three Islamic scholars who review the Bank’s

compliance with general Shari’a principles and specific fatwas, rulings and guidelines issued. Their

review primarily includes examination of evidence relating to the documentation and procedures

adopted by the Bank to ensure that its activities are conducted in accordance with Islamic Shari’a

principles.

13 CONCENTRATION OF ASSETS, LIABILITIES AND RESTRICTED INVESTMENT

ACCOUNTS

The concentration of the Bank’s credit exposures on financial instruments and the distribution of other

assets and liabilities as at 31 December 2021 were as follows:

(a) Sectoral Classification

31 December 2021

Banks and

financial

institutions

Inter-Bank

Others

Total

Bank balances

-

1,558

-

1,558

Murabaha receivables

-

13,003

-

13,003

Other assets

-

748

-

748

Total assets

-

15,309

-

15,309

Payables and other accrued expenses

75

662

65

802

Total liabilities

75

662

65

802

Restricted investment accounts

582,016

-

377,991

960,007

31 December 2020

Banks and

financial

institutions

Inter-Bank

Others

Total

Bank balances

-

1,462

-

1,462

Murabaha receivables

-

12,998

-

12,998

Other assets

6

538

12

556

Total assets

6

14,998

12

15,016

Payables and other accrued expenses

-

431

26

457

Total liabilities

-

431

26

457

Restricted investment accounts

378,519

-

378,519

Citi Islamic Investment Bank E.C. 28

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2021 USD 000’s

13 CONCENTRATION OF ASSETS, LIABILITIES AND RESTRICTED INVESTMENT ACCOUNTS

(continued)

(b) Geographical Distribution

31 December 2021

Middle East

Asia

Europe

Americas

Total

Bank balances

-

1,558

Murabaha receivables

13,003

-

13,003

Other assets

328

-

19

401

748

Total assets

13,331

-

19

1,959

15,309

Payables and other accrued

expenses

771

20

11

-

802

Total liabilities

771

20

11

-

802

31 December 2020

Middle East

Asia

Europe

Americas

Total

Bank balances

-

1,462

Murabaha receivables

12,998

-

12,998

Other assets

337

-

33

186

556

Total assets

13,335

-

33

1,648

15,016

Payables and other accrued

expenses

448

-

9

-

457

Total liabilities

448

-

9

-

457

Restricted Investment Accounts

2021

2020

Americas

377,991

-

Middle East

582,016

378,519

Citi Islamic Investment Bank E.C. 29

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2021 USD 000’s

14 MATURITY PROFILE

This note presents the expected maturity profile of assets and liabilities of the Bank. The contractual

maturity of the assets and liabilities is not significantly different from the profile presented below.

31 December 2021

Within 8

days

9 days to

1 month

Over 1

month to 3

months

Over 3

months to

1 year

Over 1

year

Total

Bank balances

1,558

-

1,558

Murabaha receivables

-

5,003

8,000

-

13,003

Other assets

-

564

184

-

748

Total assets (a)

1,558

5,567

8,184

-

15,309

Payables and other

accrued expenses

607

66

118

-

11

802

Total liabilities (b)

607

66

118

-

11

802

Net (a-b)

951

5,501

8,066

-

(11)

14,507

31 December 2020

Within 8

days

9 days to

1 month

Over 1

month to 3

months

Over 3

months to 1

year

Over 1

year

Total

Bank balances

1,462

-

1,462

Murabaha receivables

-

5,000

7,998

-

12,998

Other assets

-

522

34

-

556

Total assets (a)

1,462

5,522

8,032

-

15,016

Payables and other

accrued expenses

408

33

16

-

457

Total liabilities (b)

408

33

16

-

457

Net (a-b)

1,054

5,489

8,016

-

14,559

The maturity profile of restricted investment accounts:

31 December 2021

Within 8

days

9 days to 1

month

Over

1 month to

3 months

Over 3

months to

1 year

Total

Restricted investment

accounts

260,003

690,002

10,002

-

960,007

31 December 2020

Within 8

days

9 days to 1

month

Over

1 month to

3 months

Over 3

months to 1

year

Total

Restricted investment

accounts

352,491

26,028

-

378,519

Citi Islamic Investment Bank E.C. 30

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2021 USD 000’s

15 RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

OVERVIEW

Financial instruments consist of financial assets and financial liabilities.

Financial assets of the Bank include bank balances, accrued income on restricted investment

accounts and Murabaha receivables. Financial liabilities of the Bank include payables and other

accrued expenses.

The Bank has the following risks from the use of financial instruments:

• Credit risk

• Liquidity risk

• Market risks

• Operational risk

This note presents information about the Bank’s exposure to each of the above risks and the Bank’s

management of capital.

RISK MANAGEMENT FRAMEWORK

The Board of Directors has overall responsibility for the establishment and oversight of the Bank’s risk

management framework. The Bank’s risk management framework is aligned with CitiBank risk policies

and procedures.

The Bank’s risk management policies are established to identify and analyse the risks faced by the

Bank, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk

management policies and systems are reviewed regularly to reflect changes in market conditions and

the Bank’s activities.

CREDIT RISK

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and

cause the other party to incur a financial loss. The Bank attempts to control credit risk by monitoring

credit exposures, limiting transactions with specific counterparties, continually assessing the

creditworthiness of counterparties and securing exposures by collateral, where appropriate.

Exposure to Credit Risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum

exposure to credit risk at the reporting date was:

2021

2020

Bank balances

1,558

1,462

Murabaha receivables

13,003

12,998

Other financial assets

748

556

15,309

15,016

The Bank’s exposure to credit risk on these financial assets is limited as the Murabaha

receivables and the bank balances are placed with CitiBank entities. During the year, there

have been no transfer of exposures between various stages. All the exposures are classified as

stage 1 and the expected credit loss is also allocated to stage 1. The are no exposures which are past

due as at 31 December 2021 (2020: Nil).

Citi Islamic Investment Bank E.C. 31

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2021 USD 000’s

15 RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)

LIQUIDITY RISK

Liquidity risk is the Bank’s inability to meet a financial commitment to a customer, creditor, or investor

when due, on account of maturity mis-match between assets and liabilities. This risk is dimensioned

and continuously monitored through limits on maximum cumulative outflow across various tenors.

The Bank’s exposure to liquidity risk is limited as it does not have any significant liabilities. For maturity

profile of assets and liabilities refer to note 14.

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 period. 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 over the next 30 calendar

days. Effective from 30 June 2019, the Bank is required to maintain LCR greater than 100%. As of 31

December 2021, the Bank’s LCR ratio was 2247% (2020: 3873%).

NSFR is to promote the resilience of banks’ liquidity risk profiles and to incentivise a more resilient

banking sector over a longer time horizon. The NSFR will require banks to maintain a stable funding

profile in relation to the composition of their assets and off-balance sheet activities. A sustainable

funding structure is intended to reduce the likelihood that disruptions to a bank’s regular sources of

funding will erode its liquidity position in a way that would increase the risk of its failure and potentially

lead to broader systemic stress. 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.

NSFR as a percentage is calculated as “Available stable funding” divided by “Required stable funding”.

Effective from 31 December 2019, the Bank is required to maintain NSFR ratio greater than 100%. As

of 31 December 2021, the Bank’s NSFR ratio was 532% (2020: 574%).

MARKET RISK

Market risk is the risk that changes in market prices, such as foreign exchange rates, profit rates and

equity prices will affect the Bank’s income or the value of its holdings of financial instruments. The

objective of market risk management is to manage and control market risk exposures within

acceptable parameters, while optimising the return on risk. The Bank does not have a trading portfolio

and is therefore not exposed to equity price risk.

The Central Bank of Bahrain introduced Liquidity Coverage Ratio (“LCR”) and Net Stable Funding

Ratio (NSFR) during 2019.

PROFIT RATE RISK

Profit rate risk arises due to different timing of re-pricing of the Bank’s assets and liabilities. The Bank’s

profit rate risk arises from Murabaha receivables and is considered limited due to the short- term

nature of Murabaha receivables.

FOREIGN EXCHANGE RISK

Foreign exchange risk is the risk that the Bank’s earning will be affected as a result of fluctuations in

currency exchange rates. The Bank’s exposure to foreign exchange risk is limited as most of its

transactions are in US$ which is the Bank’s functional and presentational currency or in Bahraini

dinars which is pegged to US$.

Citi Islamic Investment Bank E.C. 32

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2021 USD 000’s

15 RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)

OPERATIONAL RISK

Operational risk is the risk of loss arising from systems and control failures, fraud and human errors,

which can result in financial and reputation loss, and legal and regulatory consequences. The Bank

manages operational risk through appropriate controls, instituting segregation of duties and internal

checks and balances, including internal audit and compliance.

16 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair values represent the amount at which an asset could be exchanged or a liability settled, in a

transaction between knowledgeable, willing parties in an arm's length transaction. Differences can

therefore arise between the book values under the historical cost method and fair value estimates.

The estimated fair values of the financial assets and liabilities are not significantly different from their

book values as the items are primarily short-term in nature.

17 CAPITAL MANAGEMENT

The Bank’s lead regulator, the CBB, sets and monitors capital requirements for the Bank. In

implementing the current capital requirements, the CBB requires the Bank to maintain a prescribed

ratio of total capital to total risk-weighted assets. The CBB’s capital adequacy framework is based on

the Basel III accord which became effective 1 January 2015 and IFSB guidelines. The Bank has

adopted the standardised approach to credit and market risk management and the basic indicator

approach for the operational risk management. The Bank’s policy is to maintain sufficient capital to

sustain investor and market confidence and to support future development of the business.

The Bank’s regulatory capital position at 31 December was as follows:

2021

2020

Tier 1 Capital

14,539

14,580

Tier 2 Capital

1

5

Total capital base (tier 1 + tier 2)

14,540

14,585

Total risk-weighted assets

12,473

11,582

Total regulatory capital expressed as a percentage of total

risk weighted assets

116.57%

125.92%

The Bank has complied with all externally imposed capital requirements throughout the year.

18 Net stable funding ratio

The CBB's Net Stable Funding Ratio (NSFR) regulations became effective on 31 December 2019. The

objective of the NSFR is to promote the resilience of banks’ liquidity risk profile and to incentivise a

more resilient banking sector over a longer time horizon. The NSFR requires banks to maintain a

stable funding profile in relation to assets and off-balance sheet activities. A sustainable funding

structure is intended to reduce the likelihood of disruptions to a bank’s regular sources of funding that

will erode its liquidity position in a way that would increase the risk of its failure and potentially lead to

broader systemic stress. The NSFR limits over-reliance 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 NSFR is calculated in accordance with the Liquidity Risk Management

module guidelines issued by the CBB. The minimum NSFR ratio has reduced from 100% to 80%

The tables below provides information on the Bank's NSFR:

Citi Islamic Investment Bank E.C. 33

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2021 USD 000’s

18 Net stable funding ratio (continue)

The NSFR (as a percentage) as at 31 December 2021 is calculated as follows:

Unweighted value (before applying factors)

Item

No specified

maturity

Less than 6

months

More than 9

months and

less than

one year

Over

one year

Total

weighted

value"

Available Stable Funding (ASF)

Capital:

Regulatory capital

14,539

-

1

14,540

Other capital instruments

-

Retail deposits and deposits from small

business customers:

Stable deposits

-

Less stable deposits

-

Wholesale funding:

Operational deposits

-

Other wholesale funding

-

Other liabilities:

NSFR Shari’a-compliant hedging

contract liabilities

-

All other liabilities not included in

the above categories

-

795

-

12

Total ASF

14,539

795

-

13

14,552

Required Stable Funding (RSF):

Total NSFR high-quality liquid

assets (HQLA)

1,558

-

Deposits held at other financial

institutions for operational purposes

-

13,010

-

1,951

Performing financing and

sukuk/securities:

Performing financing to financial

institutions secured by Level 1

HQLA

-

Performing financing to financial

institutions secured by non-level 1

HQLA and unsecured performing

financing to financial institutions

-

Performing financing to nonfinancial

corporate clients, financing to retail and

small business customers, and financing to

sovereigns, central banks and PSEs,

of which:

-

With a risk weight of less than or equal to

35% as per the CBB Capital Adequacy

Ratio guidelines

-

Performing residential mortgages, of

which:

With a risk weight of less than or equal to

35% under the CBB Capital Adequacy

Ratio Guidelines

-

Securities/sukuk that are not in default and

do not qualify as HQLA, including

exchange-traded equities

-

Other assets:

Physical traded commodities, including gold

-

"Assets posted as initial margin for Shari’a-

compliant hedging contracts and

contributions to default funds of CCPs"

-

NSFR Shari’a-compliant hedging assets

-

NSFR Shari’a-compliant hedging contract

liabilities before deduction of variation

margin posted

-

All other assets not included in the above

categories

590

-

590

OBS items

-

Total RSF

2,052

13,007

-

2,541

NSFR (%)

574%

Citi Islamic Investment Bank E.C. 35

Supplementary Public Disclosure for the year ended 31 December 2021

Reporting on Financial Impact of COVID-19 (unaudited)

The COVID-19 pandemic has severely impacted global health, financial markets, consumer and

business spending, and economic conditions in all of the jurisdictions where Citi operates. The extent

of the future pandemic impacts remains uncertain but may include, among other impacts, disruption of

the global supply chain, higher inflation or interest rates, financial market volatility, increase in credit

costs for Citi, and public health impacts. The pandemic may continue to have negative impacts on

Citi’s businesses and overall results of operations and financial condition.

Citi Islamic Investment Bank E.C. 36

Supplementary Public Disclosure for the year ended 31 December 2021

Reporting on Financial Impact of COVID-19 (unaudited)

On 11 March 2020, the 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. Global equity and commodity markets, and

in particular oil prices, have also experienced great volatility and a significant drop in prices. 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. This includes

disruption to capital markets, deteriorating credit markets and liquidity concerns. Authorities have

taken various measures to contain the spread including implementation of travel restrictions and

quarantine measures. The pandemic as well as the resulting measures and policies have had some

impact on the Bank. The Bank 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.

In preparing the financial statements, judgements made by management in applying the Bank’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.

Government assistance and subsidies:

Governments and central banks across the world have responded with monetary and fiscal

interventions to stabilise economic conditions. The Government of Kingdom of Bahrain has announced

various economic stimulus programmes (“Packages”) to support businesses in these challenging

times.

The Bank has not received any reimbursement for staff cost or utilities bills from the government as

part of its COVID-19 measures for the period ended 31 December 2021.

RISK AND CAPITAL MANAGEMENT

DISCLOSURES

FOR THE YEAR ENDED

31 December 2021

These disclosures have been prepared in accordance with the Public Disclosure Module (“PD”), Section PD-1.3: Disclosures in

Annual Reports, CBB Rule Book, Volume II for Islamic Banks. To avoid any duplication, information required under PD module but

already disclosed in other sections of annual report has not been reproduced. These disclosures are part of the annual report for

the year ended 31 December 2021 and should be read in conjunction with the financial statements for the year ended

31 December 2021 and other sections of the annual report.

38

RISK AND CAPITAL MANAGEMENT DISCLOSURES

for the year ended 31 December 2021 USD 000’s

1. EXECUTIVE SUMMARY

The Central Bank of Bahrain’s (CBB) Basel 3 guidelines outlining the capital adequacy framework for banks

incorporated in the Kingdom of Bahrain. Banks are required to maintain minimum capital adequacy ratio of

12.5% on a consolidated basis [i.e. CET1 – 6.5%, AT1-1.5%, Tier 2 – 2% and CCB – 2.5%] and a capital

adequacy ratio of 8% on a solo basis [i.e. CET1 – 4.5%, AT1 – 1.5% and Tier 2 – 2%].These disclosures have

been prepared in accordance with the CBB requirements outlined in the Public Disclosure Module (“PD”),

Section PD-1.3: Disclosures in Annual Reports, CBB Rule Book, Volume II for Islamic Banks. Section PD-1.3

reflects the requirements of Basel 2 - Pillar 3 and the Islamic Financial Services Board’s (“IFSB”) recommended

disclosures for Islamic banks on their web site along with the audited financial statements.

The PD Module requires disclosure of the Bank’s exposure to risks on its banking and trading book. As the

Bank does not have a trading book all its disclosures are limited to the risks faced on its banking book.

The Bank has adopted the Standardised Approach for Credit and Market Risk and the Basic Indicator Approach

for Operational Risk to determine the capital requirement. This section contains a description of the Bank’s risk

management and capital adequacy policies and practices including detailed quantitative information on risk

components and capital adequacy.

The nature of CIIB’s business is mainly focused on offering a Sharia compliant Murabaha-based deposit product

to Financial Institutions and Corporates and to provide structuring services to other Citigroup entities in respect

of capital market, cash management and market services transactions. The Bank at present does not offer, or

intend to offer, any asset products. All policies and procedures have been designed to cover risks arising from

these products of the Bank.

As at 31 December 2021, the Bank’s total risk weighted assets amounted to US$ 12,473; Tier 1 Capital

amounted to US$ 14,539 and Tier 2 capital US$ 1. Accordingly, CET1,Tier 1 and Total Capital Adequacy Ratios

were 116.56% and 116.57% respectively. These ratios exceed the minimum capital requirements under the

CBB’s Basel 3 framework.

2. RISK FRAMEWORK

The Bank operates under the One-Citi model. The Board of Directors and the Sharia Supervisory Board (SSB)

maintain the Board level oversight of the Bank’s activities. The Bank is represented on the main country level

management committees (Country Coordinating Committee, Business Risk Compliance and Control

Committee) of Citi Bahrain by its Managing Director to ensure oversight of the Bank’s transactions and activities.

The Bank has been exempted by Central Bank of Bahrain from the requirements of forming Audit Committee,

Nomination, and Remuneration Committee.

The Sharia Supervisory Board (SSB) of the Bank along with the Group Internal Control Function is responsible

for approval and oversight of all Islamic transactions undertaken at the Group level. The SSB is further assisted

by the Group Internal Control Function which conducts annual Sharia Audits over all the Islamic products and

transactions undertaken by the Bank.

CIIB has a dedicated CEO to oversee all Islamic business activity. The operations, compliance, financial control,

risk management and other support functions are managed by Citi Bahrain staff through Inter-Citi Service

Agreements with the Bank (under the one-Citi approach).

As per the CBB capital adequacy framework, the Bank is exposed to the following risks:

• Credit and counterparty risk

• Market risk (limited to forex risk in the banking book)

• Operational risk

• Liquidity risk

• Profit rate risk in the banking book

39

RISK AND CAPITAL MANAGEMENT DISCLOSURES

for the year ended 31 December 2021 USD 000’s

2. Risk Framework (continued)

(a) Credit and Counterparty Risk

Transactions booked in CIIB entity has no or very limited third party credit risk. All Murabaha placements of the

Bank are on a short term basis (maturing within 3 months) and are placed only with Citigroup entities.

All the new Islamic products introduced by the Bank are approved by the New Product Approval Committee

(NPAC) of Citigroup. Moreover, Islamic financing/product structures are discussed in the Board meetings to

discuss the risks involved in them.

There are no loans extended or other asset products offered by the Bank to its customers. Moreover, the off

balance sheet exposures where the Bank acts as an agent between a purchaser (restricted investment account)

and a seller (a Citi entity) do not expose the Bank to any type of credit risk.

Structuring and advising on capital market transactions don’t expose the entity to credit risk as CIIB doesn’t

carry any underwriting activity.

Quarterly updates on the current credit exposures of the Bank are reported to the Business Risk Compliance

and Control Committee (“BRCC”) and the Country Coordinating Committee (“CCC”).

Overall, the Bank considers that its policies and procedures constitute a reasonable approach to managing the

credit risk in the activities it is engaged in.

(b) Foreign Exchange Risk

The Bank has no on-balance sheet exposures to foreign exchange risk as all of its transactions are denominated

in US$ which is the Bank’s functional currency and the bank currently has no trading Book. The inter-bank

Murabaha transactions do not expose the Bank to any commodity price risk.

Moreover, the FX risk in the off balance sheet exposures is borne by the purchaser and the seller of the contract,

and the Bank does not incur any market risk in these transactions since it undertakes the role of an agent.

(c) Operational Risk

The on-balance sheet activities of the Bank are limited in volume. However, as a part of its asset management

activities, where the Bank acts as an agent between a purchaser and a seller, the Bank is exposed to operational

risk in the event of any negligence on its part.

Citi Bahrain’s Risk Management Function is headed by the Operation Risk Manager (ORM). Along with its risk

management related responsibilities, the Risk Management function is also responsible for coordinating the

Management Control Assessment (MCA) exercise at the country level which includes the Bank’s operations.

As part of the MCA, all processes and activities undertaken by the various departments at Citi Bahrain are

identified. The processes and activities relating to the Bank are also documented as part of the Citi Bahrain

MCA. Furthermore, the relevant risks and controls are identified and tested on a quarterly basis through the

operational risk management system “CitiRisk”.

The individual departments undertake tests to assess the effectiveness of the existing controls. Any issues

arising from these tests are escalated to the BRCC and the summary results are discussed in the CCC.

The Managing Director of the Bank chairs these committees, hence fulfilling the oversight role over the

operational risk management framework encompassing the Bank.

Furthermore, corrective actions agreed on all issues identified are discussed and tracked in the CCC meeting.

Major business issues are also escalated to the regional management committees.

40

RISK AND CAPITAL MANAGEMENT DISCLOSURES

for the year ended 31 December 2021 USD 000’s

2. Risk Framework (continued)

(c) Operational Risk (continued)

The operational risk is supplemented by the Internal Control Function. The Internal Control Function conducts

annual Sharia audits in order to ensure the Bank’s adherence to the CBB Rulebook for Islamic Financial

Institutions, Sharia and AAOIFI standards as well as Fatwas issued by the Sharia Advisory Board.

The management assesses the effectiveness of the Bank’s internal control annually. Based on this assessment,

management believes that, as of December 31, 2021, the bank’s internal control over financial reporting was

effective. In addition, there were no changes in the Bank’s internal control over financial reporting during the

fiscal year ended December 31, 2021 that materially affected, or are reasonably likely to materially affect, the

Bank’s internal control over financial reporting.

The Internal Audit (IA) which is the group audit team responsible for global reviews covers the Bank based on

the frequency derived from the global risk based approach. During the year, the Internal Audit performed audit

over certain functions of the Bank.

(d) Liquidity Risk

Based on the financial statements as at 31 December 2021, the bank does not have any liquidity risk as

documented in ALCO. The Bank also does not have any equity from investment account holders on its

statement of financial position. If the Bank receives a deposit from customers, the Bank place it in short term

inter-bank Murabaha with Citigroup entities. The Bank matches the tenor of its Murabaha receivables with the

deposits received in order to avoid a short term liquidity mismatch.

The Bank follows the global liquidity management policy of Citibank which provides the overall guidelines for

liquidity management. Refer Note 14 for the maturity profile of assets, liabilities and restricted investment

accounts.

Following are the key liquidity ratios as at 31 December 2021:

Description

Ratio

Short Term Assets : Total Assets

1.00 : 1.00

Short Term Assets : Short Term Liabilities

19.35 : 1.00

(e) Profit Rate Risk in Banking Book

Currently the Bank does not have any profit bearing liabilities and therefore does not face the risk of mismatch

between the rate of return earned on assets and liabilities.

(f) Compliance Risk

The Compliance Function at Citi Bahrain is the designated compliance function for the country and covers the

Bank’s compliance activities. The Compliance Function has established a “Regulatory Risk Matrix” which

constitutes the rules and regulations pertaining to all businesses operating under the umbrella of Citi Bahrain.

This includes the Bank as well (local regulatory requirements and global policy compliance requirements).

The MCA is intended to encompass all the businesses and control activities in Citi Bahrain including the Bank.

The MCA includes the Regulatory Risk Matrix which identifies the key local regulatory requirements as well as

global policy compliance requirements pertaining to Citi Bahrain. As part of the MCA process, the Bank has

identified procedures for every department to conduct tests in order to ensure adherence to all rules and

regulations. These tests are conducted by the business and support units on a quarterly basis. The results of

these tests are reviewed by the Enterprise Risk Manager on an ad-hoc basis, who in turn reports to the BRCC.

41

RISK AND CAPITAL MANAGEMENT DISCLOSURES

for the year ended 31 December 2021 USD 000’s

2. Risk Framework (continued)

All material compliance issues identified during these tests are escalated to the BRCC. A member of the Bank’s

team is also represented on the BRCC. The BRCC is headed by the Citi Country Officer who is also the

Managing Director of the Bank, hence fulfilling the Bank’s oversight role over its management of compliance

risk.

(g) Displaced Commercial Risk

Displaced Commercial Risk refers to the market pressure to pay returns that exceeds the rate that has been

earned on the assets financed by the liabilities, when the return on assets is under performing as compared

with competitor’s rates. Currently the Bank is not exposed to any displaced commercial risk that may arise from

its restricted investment accounts as it only acts as an agent for its customers.

(h) Restricted Investment Accounts (RIA)

The Bank structures its RIA products to offer its customers an opportunity to choose from a wide range of

returns, maturity periods, sectors, asset classes and risk levels.

All RIA offering documents (“Offering Document”) are drafted and issued with input from the Bank’s Investment

Banking, Sharia, Financial Control, Legal and Risk Management Departments to ensure that the investors have

sufficient information to make an informed decision after considering all relevant risk factors.

The Board of Directors is responsible for providing clear guidelines for the development, management and risk

mitigation of its RIA investments and to ensure that there exist sound management and internal control systems

to ensure that the interests of the investment account holders are protected at all times.

The Bank is aware of its fiduciary responsibilities in management of the RIA investments and has clear policies

on discharge of these responsibilities. The Bank’s objectives regarding its fiduciary responsibilities to the RIA

investors and their funds, includes the following:

• Ensuring that the investment structure, Offering Documents and the investment itself are fully compliant

with Islamic Sharia principles and the CBB regulations;

• Appropriately advising Investors, as part of the RIA Offering Document, of all the relevant and known risk

factors and making it clear that the investment risk is to be borne by the Investor before accepting the

investment funds;

• Ensuring that the funds are invested strictly in accordance with the provisions outlined in the Offering

Documents;

• Distributing the capital and profits to the Investor in a just and equitable manner as agent; and

• In all matters related to the RIA, and the investment, act with the same level of care, good faith and diligence

as the Bank would apply in managing its own investments.

Historical returns over the past five years:

Product

Launch

date

Annualised returns

Status

2021

2020

2019

2018

2017

Deposit Murabaha

1996

0.18%

0.71%

20.02%

0.91%

Active

The movement in the Restricted Investment Accounts is disclosed on page 20.

42

RISK AND CAPITAL MANAGEMENT DISCLOSURES

for the year ended 31 December 2021 USD 000’s

3. CAPITAL STRUCTURE AND CAPITAL ADEQUACY

The Bank is comfortably placed in terms of regulatory capital adequacy and the current regulatory Capital

Adequacy Ratio (CAR) is 116.57% as opposed to the minimum CBB requirement of 12.5%.

The Bank’s paid up capital consists only of ordinary equity shares and does not have any other type of capital

instruments.

The Bank’s Tier 1 capital comprise share capital, retained earnings and eligible reserves. Retained profits are

included in Tier 1 pursuant to an external audit.

The Bank’s Tier 2 capital comprise expected credit loss provision.

The capital of the Bank is currently not subject to any regulatory adjustments/ deductions.

(a) Capital structure, minimum capital requirement and capital adequacy:

Amount

Tier 1

Issued and fully paid ordinary shares

10,000

Statutory reserves

3,673

Retained earnings

866

Total Tier 1 capital (A)

14,539

Tier 2 (Expected credit loss provision)

1

Total eligible capital (B)

14,540

Risk

weighted

exposure

Capital

requirement

@ 12.5%

Claims on Banks

7,654

957

Other assets

35

4

Credit risk exposures

7,689

961

Market risk exposures

-

Operational risk exposures

4,784

598

Total risk weighted exposures (C)

12,473

1,559

Total capital adequacy ratio (B/C)

116.57%

Tier 1 capital adequacy ratio (A/C)

116.56%

43

RISK AND CAPITAL MANAGEMENT DISCLOSURES

for the year ended 31 December 2021 USD 000’s

3. Capital Structure and Capital Adequacy (continued)

(b) Credit risk weighted assets

The exposure to credit risk for the Bank is from the following:

Gross

credit

exposure

Risk

weight

Credit risk

weighted

assets

Average

gross credit

exposures

during the

year *

Claims on Banks with Citigroup

15,309

50%

7,654

14,933

Other assets

35

100%

35

23

Total gross credit risk exposures

15,344

7,689

14,956

* These have been computed based on a quarterly average.

The claims on banks with Citigroup comprise of Murabaha receivables, cash and bank balances and other

receivables. The Bank uses the rating provided by External Credit Assessment Institutions (ECAI) to ascertain

the risk weight of the assets. As per the rating provided by Standard & Poor’s rating services, Citigroup falls in

the bucket of A+ to A- based on which a risk weight of 50% is used to arrive at the credit risk weighted assets.

For short term receivables from third parties the bank used rating from Standard & Poor’s and MOODY’s.

None of the exposures are either past due, impaired or restructured. The exposures are not backed by

collaterals and hence no benefits for credit risk mitigation is applicable.

The Bank does not have any unfunded exposures.

Refer Note 13 for the geographical and sectoral concentration and Note 14 for the maturity profile of assets,

liabilities and restricted investment accounts in the financial statements.

Large exposure limits

The Bank has significant exposure to Citigroup entities (as a Group) as mentioned below.

Type of exposure

Amount of

exposure

% of capital

base

Direct exposure

15,309

105.30%

Restricted investment accounts

960,007

6,602.98%

Combined exposure

975,316

6,708.27%

However, these exposures qualify as exempt exposures as they are in the nature of short term inter-bank

exposures and hence no regulatory capital deduction is considered necessary.

(c) Operational risk weighted assets

The operational risk weighted assets are computed as per the guidelines of the CBB which are as follows:

[Average gross income (excluding extraordinary and exceptional income) for the past 3 years x 15% x 12.5].

44

RISK AND CAPITAL MANAGEMENT DISCLOSURES

for the year ended 31 December 2021 USD 000’s

3. Capital Structure and Capital Adequacy (continued)

Particulars

Amount

Average gross income (A)

2,551

Alpha (B)

15%

(C) = (A) * (B)

383

Risk weighted exposures ((C) * 12.5)

4,784

The Bank did not have any non-sharia complaint income/ sharia violations/ material legal contingencies during

the year 2021.

(d) Capital management and allocation

The Bank’s capital management framework is intended to ensure that there is sufficient capital to support the

underlying risks of the Bank’s business activities and to maintain a well-capitalised status under regulatory

requirements. The allocation of capital between specific operations and activities is primarily driven by

regulatory requirements. The Bank’s capital management policy seeks to maximise return on risk adjusted while

satisfying all the regulatory requirements.

4. COMPOSITION OF CAPITAL DISCLUSURE

Step1 : Balance sheet under the regulatory scope of consolidation

This step in not applicable to the Bank since the scope of regulatory and accounting is identical and the bank

is a standalone entity.

Step 2: Reconciliation of published financial balance sheet to regulatory reporting As at 31 December 2021

USD ‘000s

Statement of financial

position in published

financial statements

USD’000s

Statement of financial

position as per

regulatory reporting

USD’000s

Reference

Assets

Bank balances

1,558

-

of which placements with banks and similar

financial institution

-

1,558

Murabaha receivables

13,003

-

of which placements with banks and similar

financial institution

-

13,004

Other assets

783

Total assets

15,344

15,345

Payables and other accrued expenses

805

-

of which other liabilities

-

806

Total Liabilities

805

806

Equity Investment

Share capital

10,000

A

Statutory reserve *

3,673

3,577

B1

Retained earnings *

866

-

B2

of which Net profit/ (loss) for the current

period *

-

959

of which retained earnings/ (losses) brought

forward

-

2

Expected credit losses (Stages 1 & 2)**

-

1

C

Total shareholder’s equity

14,539

45

RISK AND CAPITAL MANAGEMENT DISCLOSURES

for the year ended 31 December 2021 USD 000’s

4. COMPOSITON OF CAPITAL DISCLOSURE (continued)

Note (*): In the financial statements 10% of the net profit for the year transferred to statutory reserve

Note (**): Expected credit loss on Murabaha receivables of USD 1 thousands being presented net in the

statement of financial position.

Step 3: Composition of Capital Disclosure Template as at 31 December 2021

Composition of Capital and mapping to regulatory reports

Component

of

regulatory

capital

Reference numbers of

balance sheet under

the regulatory scope

of consolidation from

step 2

Common Equity Tier 1 capital: instruments and reserves

1

Directly issued qualifying common share capital plus related

stock surplus

10,000

A

2

Retained earnings

866

B2

3

Accumulated other comprehensive income (and other

reserves)

3,673

B1

4

Not Applicable

5

Common share capital issued by subsidiaries and held by third

parties (amount allowed in group CET1)

-

6

Common Equity Tier 1 capital before regulatory

adjustments

14,539

Common Equity Tier 1 capital: regulatory adjustments

7

Prudential valuation adjustments

-

8

Goodwill (net of related tax liability)

-

9

Other intangibles other than mortgage-servicing rights (net of

related tax liability)

-

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)

-

46

RISK AND CAPITAL MANAGEMENT DISCLOSURES

for the year ended 31 December 2021 USD 000’s

4. COMPOSITON OF CAPITAL DISCLOSURE (continued)

Composition of Capital and mapping to regulatory reports

Component

of

regulatory

capital

Reference numbers of

balance sheet under

the regulatory scope

of consolidation from

step 2

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

-

29

Common Equity Tier 1 capital (CET1)

14,539

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)

-

35

of which: instruments issued by subsidiaries subject to

phase out

-

36

Additional Tier 1 capital before regulatory adjustments

-

47

RISK AND CAPITAL MANAGEMENT DISCLOSURES

for the year ended 31 December 2021 USD 000’s

4. COMPOSITON OF CAPITAL DISCLOSURE (continued)

Composition of Capital and mapping to regulatory reports

Component

of

regulatory

capital

Reference numbers

of balance sheet

under the regulatory

scope of

consolidation from

step 2

Additional Tier 1 capital: regulatory adjustments

37

Investments in own Additional Tier 1 instruments

-

38

Reciprocal cross-holdings in Additional Tier 1 instruments

-

39

Investments in the capital of banking, financial and

insurance entities that are outside the scope of regulatory

consolidation, net of eligible short positions, where the bank

does not own more than 10% of the issued common share

capital of the entity (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)

-

45

Tier 1 capital (T1 = CET1 + AT1)

14,539

Tier 2 capital: instruments and provisions

46

Directly issued qualifying Tier 2 instruments plus related

stock surplus

-

47

Directly issued capital instruments subject to phase out

from Tier 2

-

48

Tier 2 instruments (and CET1 and AT1 instruments not

included in rows 5 or 34)

issued by subsidiaries and held by third parties (amount

allowed in group Tier 2)

-

49

of which: instruments issued by subsidiaries subject to

phase out

-

50

Provisions

1

C

51

Tier 2 capital before regulatory adjustments

1

48

RISK AND CAPITAL MANAGEMENT DISCLOSURES

for the year ended 31 December 2021 USD 000’s

4. COMPOSITON OF CAPITAL DISCLOSURE (continued)

Composition of Capital and mapping to regulatory reports

Component

of

regulatory

capital

Reference numbers of

balance sheet under

the regulatory scope

of consolidation from

step 2

Tier 2 capital: regulatory adjustments

52

Investments in own Tier 2 instruments

-

53

Reciprocal cross-holdings in Tier 2 instruments

-

54

Investments in the capital of banking, financial and insurance

entities that are outside the scope of regulatory consolidation,

net of eligible short positions, where the bank does not own

more than 10% of the issued common share capital of the

entity (amount above the 10% threshold) Investments in the

capital of banking, financial and insurance entities that are

outside the scope of regulatory consolidation, net of eligible

short positions, where the bank does not own more than 10%

of the issued common share capital of the entity (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

CBB specific regulatory adjustments

-

57

Total regulatory adjustments to Tier 2 capital

-

58

Tier 2 capital (T2)

1

59

Total capital (TC = T1 + T2)

14,540

60

Total risk weighted assets

12,473

Capital ratios and buffers

61

Common Equity Tier 1 (as a percentage of risk weighted

assets)

116.56%

62

Tier 1 (as a percentage of risk weighted assets)

116.56%

63

Total capital (as a percentage of risk weighted assets)

116.57%

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)

10%

65

of which: capital conservation buffer requirement

2.5%

66

of which: bank specific countercyclical buffer requirement

N/A

67

of which: D-SIB buffer requirement

N/A

68

Common Equity Tier 1 available to meet buffers (as a

percentage of risk weighted

assets)

116.56%

49

RISK AND CAPITAL MANAGEMENT DISCLOSURES

for the year ended 31 December 2021 USD 000’s

4. COMPOSITON OF CAPITAL DISCLOSURE (continued)

Composition of Capital and mapping to regulatory reports

Component

of

regulatory

capital

Reference numbers of

balance sheet under

the regulatory scope

of consolidation from

step 2

National minima including CCB (where different from Basel III)

69

CBB Common Equity Tier 1 minimum ratio

9.0%

70

CBB Tier 1 minimum ratio

10.5%

71

CBB total capital minimum ratio

12.5%

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)

-

77

Cap on inclusion of provisions in Tier 2 under standardised

approach

-

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

-

50

RISK AND CAPITAL MANAGEMENT DISCLOSURES

for the year ended 31 December 2021 USD 000’s

5. DISCLOSURE TEMPLATE FOR MAIN FEATURE OF REGULATORY CAPITAL INSTRUMENTS

1

Issuer

Citi Islamic Investment bank E.C.

2

Unique identifier (Bahrain Bourse ticker)

NA

3

Governing law 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 & Solo

7

Instrument Type

Common Equity shares

8

Amount recognized in regulatory capital (currency in Millions, as of most

recent reporting date)

USD 10 million

9

Par Value of instrument

USD 1 per share

10

Accounting classification

Shareholders' equity

11

Original date of issuance

1996

12

Perpetual or dated

NA

13

Original maturity date

NA

14

Issuer call subject to prior supervisory approval

NA

15

Optional call date, contingent call dates and redemption amount

NA

16

Subsequent call dates, if applicable

NA

Coupons / dividends

Dividends

17

Fixed or floating dividend/coupon

Dividend is declared by shareholders

in the AGM

18

Coupon rate and any related index

NA

19

Existence of a dividend stopper

NA

20

Fully discretionary, partially discretionary or mandatory

Refer to 17 above

21

Existence of step up or other incentive to redeem

NA

22

Noncumulative or cumulative

NA

23

Convertible or non-convertible

NA

24

If convertible, conversion trigger (s)

NA

25

If convertible, fully or partially

NA

26

If convertible, conversion rate

NA

27

If convertible, mandatory or optional conversion

NA

28

If convertible, specify instrument type convertible into

NA

29

If convertible, specify issuer of instrument it converts into

NA

30

Write-down feature

NA

31

If write-down, write-down trigger(s)

NA

32

If write-down, full or partial

NA

33

If write-down, permanent or temporary

NA

34

If temporary write-down, description of write-up

mechanism

NA

35

Position in subordination hierarchy in liquidation (specify instrument type

immediately senior to instrument)

NA

36

Non-compliant transitioned features

NA

37

If yes, specify non-compliant features

NA