BBK Annual Report 2011

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For the year ended 31 December 2011Basel II Pillar III disclosures contineud18. Market Risk Disclosures for banks using the Internal Models Approach (IMA) for trading portfoliosThe “Market Risk Internal Model” is being used to measure Value-at-Risk (VaR) for calculating Capital Charge arising from Market Risk exposures (mainlyForeign Exchange and Interest Rate Risk positions) of the Trading book. The VaR model quantifies the maximum potential loss that could occur in theTrading book risk positions under normal market conditions, at 99 per cent confidence level, on a 10 day horizon.BBK maintains a prudent approach to handle Market Risk exposures guided by Market Risk Policy and Procedure. The Position, Stop-loss and VaRlimits are monitored by Middle Office (reporting to Risk Management Department and Independent of Business unit) and a daily risk report is circulated tothe Senior Management.In addition to the above, the Middle Office also carries out valuation of the Investment Portfolio independently as per the internal policies and procedures.Furthermore BBK also conducts Stress Testing and Back Testing of Market Risk positions.The summary of VaR of the trading book during 2011 is as follows:Asset class Limit VaRVaR Results for the December 31, 2011 (10 day 99%)Global (BAHRAIN and KUWAIT)January 1 - December 31, 2011HighVaRLowVaRVaR Results for the December 31, 2010 (10 day 99%)Global (BAHRAIN and KUWAIT)January 1 - December 31, 2010AverageVaR Limit VaRHighVaRLowVaRAverageVaRBD ‘000 BD ‘000 BD ‘000 BD ‘000 BD ‘000 BD ‘000 BD ‘000 BD ‘000 BD ‘000 BD ‘000Foreign exchange 641 75 216 25 84 641 93 323 37 118Interest rate 151 0 3 0 0 151 2 72 0 26Total 792 75 217 26 85 792 95 339 37 144The Bank conducts Backtesting of VaR on a daily basis in compliancewith CBB regulations to validate the internal VaR model and to checkwhether or not the model can predict potential losses with a fair degreeof accuracy. Under Backtesting, the daily VaR numbers are comparedwith the mark-to-market profit or loss figures (on actual average Profit &Loss basis and also hypothetical Profit & Loss basis). If this comparison isclose enough, the Backtest raises no issues regarding quality of the riskmeasurement model.The Backtesting results for the period January to December 2011 confirmedthat there was no occasion on which a daily trading loss exceeded VaR figure.Month end Var (10 day 99%)MonthVar in BD’00031/01/2011 10928/02/2011 4931/03/2011 6030/04/2011 7431/05/2011 3530/06/2011 7831/07/2011 9831/08/2011 9630/09/2011 9231/10/2011 9930/11/2011 7931/12/2011 75The following graph shows that the daily average Profit & Loss (Actual Average P&L basis) vis-à-vis one day VaR, for the review period.Backtesting VaR January to December 2011250200150100500-50-100-150-200Jan 2011Apr 20111 Day VaR 99% Average P&LJul 2011Oct 2011-250-300BBK Annual Report 201176
For the year ended 31 December 201119. Concentration risk to individuals where the total exposure is in excess of single obligor limit of 15 per cent2011 2010BD ‘000 BD ‘000Sovereign 570,400 283,000Total 570,400 283,00020. Credit derivatives exposure2011 2010BD ‘000 BD ‘000First to default - 7,540Credit derivative swaps and collateral debt obligations 109,115 125,563Total credit derivatives 109,115 133,103Basel II Pillar III disclosures contineud21. Equity positions in the banking book2011 2010BD ‘000 BD ‘000Publicly traded equity shares 39,936 40,957Privately held equity shares 21,930 19,630Total 61,866 60,587Capital required 7,424 7,27022 . Gains on equity instruments2011 2010BD ‘000 BD ‘000Realised Gains/ Losses in statement of income (178) 17,360Unrealised Gains/ Losses in tier 1 Capital (eligible portion) (3,571) (4,872)Unrealised Gains/ Losses in tier 2 Capital (eligible portion) 2,796 1,870BBK Annual Report 201177
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Annual Report 2011peopleheritagecom
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June 1999Inauguration ofBBK Pedestr
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Contents03 04 06 10 11 14 22 32 37
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Our visionBBK will be the premier r
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2007 2008 2009 2010 2011Income stat
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Message from the ChairmanI am pleas
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Board of Directors(left to right)Mu
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Board of Directors' report continue
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Corporate Governance reportCorporat
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Corporate Governance report continu
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BBK’s respectablefinancial perfor
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Management Review continuedMuch of
Page 30 and 31: Management Review continuedCredit M
Page 32 and 33: Executive ManagementAbdulkarim Ahme
Page 34 and 35: Organisation informationBOARD OF DI
Page 36 and 37: Financial ReviewThis review incorpo
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Page 44 and 45: Consolidated statement of financial
Page 46 and 47: Consolidated statement of comprehen
Page 48 and 49: Consolidated statement of cash flow
Page 50 and 51: 31 December 2011Notes to the consol
Page 72 and 73: For the year ended 31 December 2011
Page 74 and 75: Basel II Pillar III disclosures con
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BBK Annual Report 2011

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