Investor Presentaiton
OVERVIEW
In November 2009, The Central Bank of the United Arab Emirates ("CBUAE") issued guidelines for implementation
of Basel II Capital Accord in the banks in UAE. As per the circular, the Standardised Approach for Credit Risk
was to apply immediately with an expectation that internationally active UAE banks and larger institutions will
migrate to the Foundation Internal Rating Based (FIRB) in due course. The CBUAE Basel II framework is intended to
strengthen the market discipline and risk management while enhancing the safety and soundness of the banking
industry in UAE.
In February 2017, the new Basel III capital regulations issued by CBUAE came into effect for all Banks in the UAE.
The guidelines for Pillar 1 - Calculation of Credit Risk pertain to the Standardised Approach of Basel II only. One of
the major changes brought in with the new guidelines is the ability to apply, on an asset class basis, risk weightings
determined from ratings provided by External Credit Assessment Institutions ("ECAI") approved by CBUAE.
CBUAE requires the Pillar 2 - Supervisory Review Process to focus on each bank's Internal Capital Adequacy
Assessment Process (ICAAP) in addition to Pillar 1 Capital calculations. The ICAAP should include a risk based
forward looking view of, but not limited to, Credit, Market and Operational Risk Capital.
The purpose of Pillar 3 - Market Discipline is to complement the minimum capital requirements (Pillar 1) and the
supervisory review process (Pillar 2). The CBUAE supports the enhanced market discipline by developing a set of
disclosure requirements which will allow market participants to assess key pieces of information on the scope
of application, capital, risk exposure, risk assessment process and hence the capital adequacy of the institution.
The Pillar 3 disclosures, based on a common framework, are an effective means of informing the market about
the risks faced by a bank, and provide a consistent and understandable disclosure framework that enhances
transparency and comparability.
In compliance with the CBUAE guidelines and Basel II accord, these disclosures include information on the Group's
risk management objectives and policies, risk assessment processes and computation, capital management and
capital adequacy.
Quantitative information on risk assessment (per standardised approach) includes:
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Risk weighted assets of the Group - credit risk, market risk and operational risk
Credit risk profile of gross credit exposure by counterparty classifications, rated/unrated
Profile of gross credit exposure by economic activity, geographical region and maturity
Profile of credit risk mitigation by economic activity, geographical region and maturity
Profile of impaired loans by economic activity and geographical region
Information on capital adequacy includes:
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Capital adequacy computation
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Capital profile CET 1, Tier I and Tier II
OVERVIEW (continued)
Introduction
The CBUAE supervises Emirates NBD ("ENBD" or the "Bank") and its subsidiaries (together referred to as the
"Group") on a consolidated basis, and therefore receives information on the capital adequacy of, and sets capital
requirements for, the Group as a whole. The capital requirements are computed at a Group level using the
Basel III framework of the Basel Committee on Banking Supervision ("Basel Committee"), after applying the
amendments advised by the CBUAE, within national discretion. The Basel III framework, like Basel II, is structured
around three 'pillars': minimum capital requirements (Pillar I); supervisory review process (Pillar II); and market
discipline (Pillar III).
Pillar III disclosures 2020
Pillar Ill complements the minimum capital requirements and the supervisory review process. Its aim is to
encourage market discipline by developing disclosure requirements which allow market participants to assess
certain specified information on the scope of application of Basel III, capital, particular risk exposures and risk
assessment processes, and hence the capital adequacy of the institution. Disclosures consist of both quantitative
and qualitative information and are provided at the consolidated level.
The CBUAE issued Basel III capital regulations, which came into effect from 1 February 2017 introducing minimum
capital requirements at three levels, namely Common Equity Tier 1 ('CET1'), Additional Tier 1 ('AT1') and Total
Capital. Additional capital buffers (Capital Conservation Buffer and Countercyclical Capital Buffer - maximum up to
2.5% for each buffer) introduced are over and above the minimum CET1 requirement of 7%.
Significant Developments
Target Economic Support Scheme (TESS) Standards
During Q1 2020 in light of the Covid situation, the CBUAE issued TESS standards for Banks operating in UAE. Following
key relief are provided by CBUAE to UAE banks;
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As per the standards, the banks are allowed to tap into the capital conservation buffer up to a maximum of
60% without supervisory consequences. The Domestic Systemically Important Banks (D-SIBS) are allowed to
use 100% of their D-SIB buffer without supervisory consequences. With the Tess relaxations, the overall capital
buffer reduced by 3% - Capital Conservation Buffer (1.5%) and D-SIB buffer by 1.5%. The relief is effective until
31 December 2021.
Cash Reserve Ratio (CRR) - on Demand Deposits reduced from 14% to 7%.
Liquidity Coverage Ratio (LCR) thresholds reduced from 100% to 70%.
Eligible Liquid Asset Ratio (ELAR) threshold reduced from 10% to 7%.
The CBUAE has also postponed the June 2020 implementation of new Basel III standards in phased manner
including Basel III Pillar 3 disclosures to 2021 and 2022.
ECL add back - In Q1'20, the CBUAE issued a regulation for a 'Prudential Filter' that permits Banks to add back
incremental ECL (Stage 1 and Stage 2) from 1 January 2020 to the regulatory capital. The ECL add back will be
100% for the first 2 years and subsequently needs to be phased out over 3 years.
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EMIRATES NBD BANK PJSC - BASEL II - PILLAR III DISCLOSURES - FOR THE YEAR ENDED 31 DECEMBER 2020
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بنك الإمارات دبي الوطني
Emirates NBDView entire presentation