Bank muscat SAOG : Q1 2024 Basel Pillar III Report

bank muscat SAOG

Basel III Disclosures

March 31, 2024

Basel-III Disclosures

Contents
TABLE 1 BASEL III COMMON DISCLOSURE TEMPLATE	2
TABLE 2A RECONCILIATION BETWEEN PUBLISHED FINANCIAL STATEMENTS AND REGULATORY SCOPE OF CONSOLIDATION ..	4
TABLE 2B RECONCILIATION BETWEEN EXPANDED LINE ITEMS AS PER PUBLISHED FINANCIAL STATEMENTS AND
REGULATORY SCOPE OF CONSOLIDATION WITH REFERENCE TO TABLE 1	5
TABLE 2B RECONCILIATION BETWEEN PUBLISHED FINANCIAL STATEMENTS AND REGULATORY SCOPE OF CONSOLIDATION
WITH REFERENCE TO REGULATORY CAPITAL WORKING IN TABLE 1	6
TABLE 3 MAIN FEATURES OF REGULATORY CAPITAL INSTRUMENTS	7
LEVERAGE RATIO	8
LCR COMMON DISCLOSURE	9
NSFR DISCLOSURES	10

Page 1 of 10

Basel-III Disclosures

The Central Bank of Oman has issued final guidelines on the implementation of the new capital norms as well as the Liquidity norms along with reporting and disclosure norms. bank muscat SAOG remains strongly capitalised. The appended tables are part of the disclosures under the new accord:

Table 1 Basel III common disclosure template as at March 31, 2024:

						RO '000
	Common Equity Tier 1 capital: instruments and reserves			Ref.to
			Table 2b
1		Directly issued qualifying common share capital (and equivalent for non-joint stock companies) plus related stock surplus	906,855		a= a1+ a2
2		Retained earnings	207,092		b
3		Accumulated other comprehensive income (and other reserves)	570,732		c= c1+c2
4		Directly issued capital subject to phase out from CET1 (only applicable to non-joint stock companies)	-
5		Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET1)	-
	6		Common Equity Tier 1 capital before regulatory adjustments	1,684,679
			Common Equity Tier 1 capital: regulatory adjustments
7		Prudential valuation adjustments			d=(Absolute
	13,911		d1+d2)
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 14.9 of CP-1)	-
14		Gains and losses due to changes in own credit risk on fair valued liabilities.	-
15		Defined-benefit pension fund net assets	-
16		Investments in own shares (if not already netted off paid-in capital on reported balance sheet)	-
17		Reciprocal cross-holdings in common equity	-
			Investments in the capital of banking, financial, insurance and takaful entities that are outside the scope of regulatory
18		consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued share capital (amount	-
			above 10% threshold)
19		Significant investments in the common stock of banking, financial, insurance and takaful entities that are outside the scope of	49,149		e
	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)	-		f=(f1-f2)
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	-
			National specific regulatory adjustments

26 REGULATORY ADJUSTMENTS APPLIED TO COMMON EQUITY TIER 1 IN RESPECT OF AMOUNTS SUBJECT TO PRE-BASEL III TREATMENT

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		63,060
29			Common Equity Tier 1 capital (CET1)		1,621,619
Additional Tier 1 capital: instruments
30			Directly issued qualifying Additional Tier 1 instruments plus related stock surplus	505,320	g
31			of which: classified as equity under applicable accounting standards 5	505,320
32			of which: classified as liabilities under applicable accounting standards 6	-
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		505,320
Additional Tier 1 capital: regulatory adjustments
37			Investments in own Additional Tier 1 instruments	-
38			Reciprocal cross-holdings in Additional Tier 1 instruments	-
			Investments in the capital of banking, financial, insurance and takaful entities that are outside the scope of regulatory
39			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, insurance and takaful entities that are outside the scope of regulatory	-
		consolidation (net of eligible short positions)
			National specific regulatory adjustments
41			REGULATORY ADJUSTMENTS APPLIED TO ADDITIONAL TIER 1 IN RESPECT OF AMOUNTS SUBJECT TO PRE-BASEL III		-
			TREATMENT
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)		505,320

Page 2 of 10

Basel-III Disclosures

45		Tier 1 capital (T1 = CET1 + AT1)	2,126,939
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 and Cumulative gains on fair value	80,333
51		Tier 2 capital before regulatory adjustments	80,333
Tier 2 capital: regulatory adjustments
52		Investments in own Tier 2 instruments	-
53		Reciprocal cross-holdings in Tier 2 instruments	-
		Investments in the capital of banking, financial, insurance and takaful entities that are outside the scope of regulatory
54		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, insurance and takaful entities that are outside the scope of regulatory	-
	consolidation (net of eligible short positions)
56		National specific regulatory adjustments	-
	REGULATORY ADJUSTMENTS APPLIED TO TIER 2 IN RESPECT OF AMOUNTS SUBJECT TO PRE-BASEL III TREATMENT
57		Total regulatory adjustments to Tier 2 capital	-
58		Tier 2 capital (T2)	80,333
59		Total capital (TC = T1 + T2)	2,207,272
Risk Weighted Assets
		RISK WEIGHTED ASSETS IN RESPECT OF AMOUNTS SUBJECT TO PRE-BASEL III TREATMENT
60		Total risk weighted assets (60a+60b+60c)	10,755,703
60a	Of which: Credit risk weighted assets	9,723,124
60b	Of which: Market risk weighted assets	127,747
60c	Of which: Operational risk weighted assets	904,832
Capital Ratios
61		Common Equity Tier 1 (as a percentage of risk weighted assets)	15.08%
62		Tier 1 (as a percentage of risk weighted assets)	19.77%
63		Total capital (as a percentage of risk weighted assets)	20.52%
64		Institution specific buffer requirement (minimum CET1 requirement plus capital conservation buffer plus countercyclical buffer	9.25%
	requirements plus G-SIB/D-SIB buffer requirement expressed as a percentage of risk weighted assets)
65		of which: capital conservation buffer requirement	1.25%
66		of which: bank specific countercyclical buffer requirement	-
67		of which: D-SIB/G-SIB buffer requirement	1.00%
68		Common Equity Tier 1 available to meet buffers (as a percentage of risk weighted assets	6.82%
National minima (if different from Basel III)
69		National Common Equity Tier 1 minimum ratio (if different from Basel 3 minimum)	7.00%
70		National Tier 1 minimum ratio (if different from Basel 3 minimum)	11.25%
		National total capital minimum ratio (if different from Basel 3 minimum)	13.25%
71
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)	78,409
77		Cap on inclusion of provisions in Tier 2 under standardised approach	-
78		Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of	-
	cap)
79		Cap for inclusion of provisions in Tier 2 under internal ratings-based approach	-
80		Current cap on CET1 instruments subject to phase out arrangements	-
81		Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities)	-
82		Current cap on AT1 instruments subject to phase out arrangements	-
83		Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities)	-
84		Current cap on T2 instruments subject to phase out arrangements	-
85		Amount excluded from T2 due to cap (excess over cap after redemptions and maturities)	-

1. =
   (h1+h2)

Page 3 of 10

Basel-III Disclosures

Step-1

Table 2a Reconciliation between published financial statements and regulatory scope of consolidation

		Balance sheet as in		Under regulatory scope
		published financial		of consolidation
		statements
		As at 31-Mar-2024		As at 31-Mar-2024
		in RO '000		in RO '000
Assets
Cash and balances with CBO	771,725	771,725
Due from banks	706,317	706,317
Loans & Advances/Islamic Financing - Net,	9,860,338	9,860,338
Investments in securities	2,207,664	2,207,664
Investments in associates	9,218	9,218
Loans and advances to banks	209,023	209,023
Fixed assets	77,965	77,965
Deferred Tax Asset (CET1 adjustment)	1,860	1,860
Other assets	164,993	164,993
Total Assets		14,009,103		14,009,103
Liabilities
Due to banks	1,223,836	1,223,836
Customer deposits	9,750,423	9,750,423
Current tax liabilities	67,493	67,493
Other liabilities	406,499	406,499
Deferred Tax Liabilities (CET1 adjustment)	4,993	4,993
Sukuk	63,094	63,094
Euro Medium term notes	192,853	192,853
Total liabilities		11,709,191		11,709,191
Shareholder's Equity
Share capital	750,640	750,640
Share premium	156,215	156,215
General reserve	410,258	410,258
Retained profit	261,332	302,399
Legal reserve	160,474	139,229
Foreign currency translation reserve	(3,652)	(3,652)
Cumulative changes in fair value	46,170	(8,335)
Non-Qualifying Components of Basel III:
Cash flow hedge reserve	6,115	6,115
Revaluation reserve	4,904	4,904
Impairment reserve for Restructured loans	2,136	2,136
Non-Qualifying Components of Cumulative changes in fair value			54,505
Total shareholder's equity		1,794,592		1,794,592
Perpetual Tier I capital	505,320	505,320
Total equity		2,299,912		2,299,912
Total Liability and shareholders' funds	14,009,103	14,009,103

Page 4 of 10

Basel-III Disclosures

Step-2

Table 2b Reconciliation between expanded line items as per published financial statements and regulatory scope of consolidation with reference to Table 1.

	As per financial	Under regulatory	Reference
	statements	scope	with Table
		of consolidation	1
	As at	As at
	31-Mar-2024	31-Mar-2024
	in RO '000	in RO '000
Assets
Cash and balances with CBO	771,725	771,725
Due from banks	706,317	706,317
Investments:
-Designated as Amortised Cost	1,874,535	1,874,535
-Designated as Fair Value through OCI	278,206	278,206
- Designated as fair value through profit or loss	14,992	14,992
Strategic Investment (CET1 adjustment)	39,931	39,931	e
Investment in associates (CET1 adjustment)	9,218	9,218
Loans & Advances/Islamic Financing - Net of provisions	10,069,361	10,069,361
Of which:
- Loans and advances to domestic banks	47,563	47,563
- Loans and advances to non-resident banks	374,078	374,078
- Loans and advances to domestic customers	8,253,462	8,253,462
- Loans and advances to non-resident for operations abroad	182,918	182,918
- Loans and advances to SMEs	264,936	264,936
- Financing from Islamic banking window	1,527,783	1,527,783
Provision against Loans and Advances, Of which:
- Stage 3 ECL Allowance	(323,538)	(323,538)
- Stage 2 and 1 ECL Allowance Eligible as Tier 2 Capital	(257,841)	(78,409)	h2
- Stage 2 ECL Allowance not eligible as Tier 2 Capital 1	-	(179,432)
Fixed assets	77,965	77,965
Other assets:	166,853	166,853
Acceptances	39,944	39,944
Positive value of Derivatives	7,265	7,265
Deferred Tax Asset (CET1 adjustment)	1,860	1,860	f1
Accrued Interest & Others	117,784	117,784
Total Assets	14,009,103	14,009,103

1 The bank has applied in its capital adequacy calculation the "Prudential filter" under interim adjustment arrangement for Stage-I and Stage-II ECL in line with CBO guidelines Circular letter (BSD/CB/2020/005) dated June 03, 2020. The impact of above filter on the bank's regulatory capital is 30 bps.

Page 5 of 10

Basel-III Disclosures

Step-2 (Continued)

Table 2b Reconciliation between published financial statements and regulatory scope of consolidation with reference to regulatory capital working in Table 1

	As per	Under
	regulatory	Reference
	financial
	scope	with Table
	statements
	of consolidation
	As at	As at
	31-Mar-2024	31-Mar-2024
	in RO '000	in RO '000
Capital & Liabilities
Paid-up Capital, Of which:
Amount eligible for CET1
Paid-up share capital	750,640	750,640	a1
Share Premium	156,215	156,215	a2
Legal reserve	160,474	160,474	c1
General reserve	410,258	410,258	c2
Retained earnings	207,092	207,092	b
Current Year Profit	54,240	54,240
Cumulative loss on Fair Value		(10,259)	d1
Cash flow Hedge Reserve - Non- Qualifying for Basel	6,115	6,115
Foreign Currency Translation Reserve (CET1 adjustment)	(3,652)	(3,652)	d2
Amount eligible for AT1
Perpetual Tier I capital	505,320	505,320	G
Amount eligible for Tier 2
Cumulative gains on fair value- (Positive MTM after applying 55% haircut)		1,924	h1
Reserve for restructured accounts	2,136	-
Reserve for restructured accounts - Non-qualifying for Regulatory Capital		2,136
Cumulative gains on fair value	46,170	54,505
Revaluation reserve	4,904
Revaluation reserve- Non- Qualifying for Basel		4,904
Total Capital	2,299,912	2,299,912
Deposits from banks	1,223,836	1,223,836
Customer deposits	9,750,423	9,750,423
Unsecured bonds	63,094	63,094
Borrowings in the form of bonds and Notes	192,853	192,853
Other liabilities	401,506	401,506
Deferred Tax Liabilities (CET1 adjustment)	4,993	4,993	f2
Taxation	72,486	72,486
Total Capital & Liabilities	14,009,103	14,009,103

Page 6 of 10

Basel-III Disclosures

Table 3 Main features of regulatory capital instruments

1. Issuer
2. Unique identifier (eg CUSIP, ISIN or Bloomberg identifier for private placement)
3. Governing law(s) of the instrument Regulatory treatment
4. Transitional Basel III rules
5. Post-transitional Basel III rules
6. Eligible at solo/group/group & solo
7. Instrument type (types to be specified by each jurisdiction)
8. Amount recognised in regulatory capital - in RO million
9. Par value of instrument - in RO
10. Accounting classification
11. Original date of issuance
12. Perpetual or dated
13. Original maturity date
14. Issuer call subject to prior supervisory approval
15. Optional call date, contingent call dates and redemption amount
16. Subsequent call dates, if applicable
17. Fixed or floating dividend/coupon
18. Coupon rate and any related index
19. Existence of a dividend stopper
20. Fully discretionary, partially discretionary or mandatory
21. Existence of step up or other incentive to redeem
22. Noncumulative or cumulative
23. Convertible or non-convertible
24. If convertible, conversion trigger (s)
25. If convertible, fully or partially
26. If convertible, conversion rate
27. If convertible, mandatory or optional conversion
28. If convertible, specify instrument type convertible into
29. If convertible, specify issuer of instrument it converts into
30. Write-down feature

Position in subordination hierarchy in

1. liquidation (specify instrument type immediately senior to instrument)
2. If write-down,write-down trigger(s)
3. If write-down, full or partial
4. If write-down, permanent or temporary
5. If temporary write-down, description of write- up mechanism
6. Non-compliant transitioned features
7. If yes, specify non-compliant features

Additional Equity Tier 1 Capital

(AET1)

-

Governed by the Laws of the Sultanate of Oman. Additional Tier 1 Capital Additional Tier 1 Capital Group

AET1 Capital

130.000

RO 1

Equity

April 03, 2017

Perpetual

Perpetual

Yes, After 5 years

Redemption of the capital deposit pursuant to agreement and CBO may only occur on the first call date or on any call date thereafter or on any interest payment date after the first call date.

The first call date (fifth anniversary of the deposit date) or the second call date or the call date falling on any interest payment date after the first call date.

Fixed

5.50%

No

Fully discretionary

No

Non-cumulative

Non-convertible

NA

NA

NA

NA

NA

NA

Yes

The instrument is subordinated to depositors, general creditors and subordinated debt/sukuk of the bank.

Non-viability event

In Full or partial, as determined by the Bank in conjunction with CBO and in accordance with the Basel Regulations.

Permanent

NA

None

NA

Additional Equity Tier 1 Capital

(AET1) 2022

ISIN OM0000008892

Governed by the Laws of the Sultanate of Oman. Additional Tier 1 Capital

NA

Group

AET1 Capital

375.320

RO 1

Equity

Nov 20, 2022

Perpetual

Perpetual

Yes, After 5 years

Redemption of the AET 1 Perpetual Bonds either in full or in part pursuant to conditions mentioned in prospectus on first call date or subsequent call date (every six months after first call date).

The First call date is 20 November 2027, being the date falling on the fifth anniversary of the bond Issue Date. Subsequent call dates, every six

(6) months after the first call date.

Fixed until first call date and based on

index thereafter.

4.25% until first call date, thereafter it is sum of Reset Reference Rate (weighted average interest rate payable on Rial Omani Deposits) plus Relevant Margin (2.25%)

No

Fully discretionary

Non-cumulative

Non-convertible

NA

NA

NA

NA

NA

NA

The instrument is subordinated to deposit holders, general creditors, holders of subordinated debt/ bonds/ sukuk of the Bank.

Non-viability event

In Full or partial, as determined by the Bank in conjunction with CBO and in accordance with conditions mentioned in prospectus and the extant Basel Regulations. Permanent

NA

None

NA

Paid-up share capital

MSX code: BKMB

CMA Oman

CET1 Capital

CET1 Capital

CET1 Capital

Group

Paid-up share capital

750.640

0.100 baisa

Equity

Various

Perpetual

Various

No

NA

NA

Floating

NA

No

Partially discretionary

No

NA

Non-convertible

NA

NA

NA

NA

NA

No

Sub-Debt

NA

NA

NA

NA

None

NA

Page 7 of 10

Basel-III Disclosures

Leverage Ratio

Under its Basel III guidelines, Basel Committee for Banking Supervision (BCBS) introduced a non-risk sensitive Leverage Ratio to address excessive build-up of on and off-balance sheet exposures, which was the root cause of the Financial/Credit crisis of 2008. The ratio is calculated by dividing the Tier I capital of the bank by the Bank's total assets (sum of all on and off-balance sheet assets). Being a DSIB the Bank is required to maintain a higher Leverage ratio of 5% considering the systemic importance.

Table 1: Summary comparison of accounting assets vs leverage ratio exposure measure as at March 31, 2024

#	Item	RO'000
1	Total consolidated assets as per published financial statements	14,009,103
2	Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for accounting	(49,149)
	purposes but outside the scope of regulatory consolidation

3 Adjustment for fiduciary assets recognised on the balance sheet pursuant to the operative accounting framework but excluded from the leverage ratio exposure measure

4		Adjustments for derivative financial instruments	115,906
5		Adjustment for securities financing transactions (i.e., repos and similar secured lending)
6		Adjustment for off-balance sheet items (i.e., conversion to credit equivalent amounts of off-balance sheet exposures)	1,001,299
7		Other adjustments	-
8	Leverage ratio exposure	15,077,159
Table 2: Leverage ratio common disclosure template
			Item		RO'000
1		On-balance sheet items (excluding derivatives and SFTs, but including collateral)	14,009,103
2		(Asset amounts deducted in determining Basel III Tier 1 capital)	(49,149)
3		Total on-balancesheet exposures (excluding derivatives and SFTs) (sum of lines 1 and 2)	13,959,954
			Derivative Exposures
4		Replacement cost associated with all derivatives transactions (i.e., net of eligible cash variation margin)	34,245
5		Add-on amounts for PFE associated with all derivatives transactions	81,661

6 Gross-up for derivatives collateral provided where deducted from the balance sheet assets pursuant to the operative accounting framework

7	(Deductions of receivables assets for cash variation margin provided in derivatives transactions)
8	(Exempted CCP leg of client-cleared trade exposures)
9	Adjusted effective notional amount of written credit derivatives
10	(Adjusted effective notional offsets and add-on deductions for written credit derivatives)
11	Total derivative exposures (sum of lines 4 to 10)	115,906
	Securities financing transaction exposures
12	Gross SFT assets (with no recognition of netting), after adjusting for sale accounting transactions	-
13	(Netted amounts of cash payables and cash receivables of gross SFT assets)	-
14	CCR exposure for SFT assets	-
15	Agent transaction exposures	-
16	Total securities financing transaction exposures (sum of lines 12 to 15)	-
	Other Off-balance sheet exposures
17	Off-balance sheet exposure at gross notional amount	2,066,031
18	(Adjustments for conversion to credit equivalent amounts)	(1,064,732)
19	Off-balance sheet items (sum of lines 17 and 18)	1,001,299
	Capital and total exposures
20	Tier 1 capital	2,126,939
21	Total exposures (sum of lines 3, 11, 16 and 19)	15,077,159
22	Basel III leverage ratio (%)	14.1

Page 8 of 10

Basel-III Disclosures

LCR Common Disclosure
		Total unweighted	TOTAL CASH
			value (Average)		INFLOWS
			As at		As at
			31-Mar-2024		31-Mar-2024
			in RO '000		in RO '000
High Quality Liquid Assets
1	Total High-Quality Liquid Assets (HQLA)			2,527,581
Cash Outflows
2	Retail deposits and deposits from small business customers, of which:	4,044,305	215,137
3	Stable deposits	2,288,445	69,361
4	Less stable deposits	1,755,861	145,776
5	Unsecured wholesale funding, of which:	2,653,795	1,272,149
6	Operational deposits (all counterparties) and deposits in networks of cooperative banks
7	Non-operational deposits (all counterparties)	2,653,795	1,272,149
8	Unsecured debt
9	Secured wholesale funding			0

10	Additional requirements, of which	307,065	45,420
11	Outflows related to derivative exposures and other collateral requirements	16,348	16,348
12	Outflows related to loss of funding on debt products
13	Credit and liquidity facilities	290,717	29,072
14	Other contractual funding obligations	143,450	143,450
15	Other contractual funding obligations	1,766,561	88,328
16 TOTAL CASH OUTFLOWS		1,764,484
17	Secured lending (e.g. reverse repos)
18 Inflows from fully performing exposures	1,036,941	579,489
19	Other cash inflows
20 TOTAL CASH INFLOWS	1,036,941	579,489
			Total Adjusted
			Value
21	TOTAL HQLA		2,527,581
22	TOTAL NET CASH OUTFLOWS		1,184,995
23	LIQUIDITY COVERAGE RATIO (%)		213

Page 9 of 10