Commercial Bank of Dubai : Period Ended 31 March 2024

Basel III - Pillar III Disclosures

For The Period Ended 31 March 2024

COMMERCIAL BANK OF DUBAI

For the period ended 31 March 2024

Contents

1.	Introduction	3
2.	Purpose and basis of preparation	3
3.	Overview of Pillar III	4
	3.1	Policy and verification	5
	3.2	Implementation of Basel III standards and guidelines	5
4.	Highlights	5
5.	Key Metrics (KM1)	6
6.	Overview of Risk Weighted Assets (OV1)	7
7	Leverage Ratio	8
	7.1	Summary comparison of accounting assets vs leverage ratio exposure (LR1)	8
	7.2	Leverage ratio common disclosure template (LR2)	9
8	Liquidity Risk	10
	8.1	Eligible Liquid Assets Ratio (ELAR)	10
	8.2	Advances to Stables Resource Ratio (ASRR)	10
9	Comparative Figures	11
10	Acronyms	11

2

COMMERCIAL BANK OF DUBAI

For the period ended 31 March 2024

1. Introduction

Commercial Bank of Dubai PSC ("the Bank") was incorporated in Dubai, United Arab Emirates (U.A.E.) in 1969 and is registered as a Public Joint Shareholding Company (PJSC) in accordance with Federal Law No. 32 of 2021. The Bank is listed on the Dubai Financial Market. The Bank's principal activity is commercial and retail banking. The registered address of the Bank is CBD Head Office, Al Ittihad Street, P.O. Box 2668, Dubai, United Arab Emirates.

2. Purpose and basis of preparation

The Central Bank of the UAE ("CBUAE") supervises the Bank and its subsidiaries (together referred 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 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 framework is structured around three pillars as follows:

• Pillar I prescribes the minimum capital requirements;
• Pillar II addresses the associated supervisory review process; and
• Pillar III specifies further public disclosure requirements in respect of the Group's capital and risk profile.

The disclosures have been prepared in line with the disclosure templates introduced by the CBUAE guidelines on disclosure requirements (CBUAE/BSD/N/2020/4980, CBUAE/BSD/N/2021/5508 and CBUAE/BSD/2022/5280) published in November 2020, November 2021 and December 2022 respectively.

The Pillar III report of the Group for the period ended 31 March 2024 comprises condensed information on the underlying drivers of risk-weighted assets (RWA), capital of the Bank, its wholly owned subsidiaries and the Group's interest in an associate. The report should be read in conjunction with the Group's reviewed Financial Statements as at 31 March 2024.The direct subsidiaries and associate of the Group are as follows:

Name of Subsidiary	Ownership	County of	Principle activities
Interest	Incorporation
Subsidiary
CBD Financial Services LLC	100%	UAE	Providing brokerage facilities for
			local shares and bonds.
CBD Employment Services One	100%	UAE	Supply of manpower services.
Person Company LLC
Attijari Properties LLC	100%	UAE	Self-owned property management
			services as well as buying and
			selling of real estate.
Noor Almethaq Real Estate	100%	UAE	Development of real estate.
Development LLC
Special Purpose Entity
CBD (Cayman) Limited	100%	Cayman	Issuance of debt securities.
		Islands
CBD (Cayman II) Limited	100%	Cayman	Transact and negotiate derivative
		Islands	agreements.
VS 1897 (Cayman) Limited	100%	Cayman	Manage investment acquired in the
		Islands	settlement of debt.
CBD Digital Lab Limited [Subsidiary	100%	UAE	Technology research and
of VS 1897 (Cayman) Limited]			development.

3

COMMERCIAL BANK OF DUBAI

For the period ended 31 March 2024

Name of Subsidiary	Ownership	County of	Principle activities
Interest	Incorporation
Hortin Holding Limited [Subsidiary of	100%	British Virgin	Manage real estate related
VS 1897 (Cayman) Limited]		Islands	investment acquired in the
			settlement of debt.
Lodge Hill Limited	100%	British Virgin	Manage real estate related
[Subsidiary of VS 1897 (Cayman)		Islands	investment acquired in the
Limited]			settlement of debt.
Westdene Investment Limited	100%	British Virgin	Manage real estate related
[Subsidiary of VS 1897 (Cayman)		Islands	investment acquired in the
Limited]			settlement of debt.
Associate
National General Insurance Co.	17.8%	UAE	Life and general insurance business
(PJSC)			as well as certain reinsurance
			business.

3. Overview of Pillar III

Pillar III 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 access 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 comprises of quantitative and qualitative information and are provided at the consolidated level.

The CBUAE issued Basel III capital regulations, which came into effect from February 1st, 2017 introducing minimum capital requirements at three levels, namely Common Equity Tier 1 ("CET1"), Tier 1 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%.

In November 2020, CBUAE issued revised standards and guidelines for Capital Adequacy in UAE. The new version to the Standards includes additional Guidance on the topics of Credit Risk, Market Risk and Operational Risk. Following are the changes in the revised standards which have been adopted:

• The Tier Capital Supply Standard
• Tier Capital Instruments Standard
• Pillar II Standard: Internal Capital Adequacy Assessment Procedures (ICAAP)
• Credit Risk, Market Risk and Operational Risk
• Equity Investments in Funds, Securitization, Counterparty Credit Risk and Leverage Ratio
• Credit Value Adjustment (CVA) for Pillar I and III

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 III - Market Discipline is to complement the minimum Capital requirements (Pillar I) and the supervisory review process (Pillar II). The revised Pillar III disclosures, based on the common framework, are an effective means of informing the market about the risks faced by the Bank, and provide a consistent and understandable disclosure framework that enhances transparency and improve comparability and consistency.

4

COMMERCIAL BANK OF DUBAI

For the period ended 31 March 2024

In compliance with the CBUAE Basel III standards and guidelines, these disclosures include qualitative and quantitative information of the Group's risk management objectives and policies, risk assessment process, capital management and capital adequacy. The Group's Pillar III disclosures are governed by the disclosure policy framework in line with CBUAE Basel III standards.

1. Policy and verification
   The Bank has operated within a framework of internal controls and procedures for accessing the appropriateness of Pillar III market disclosure for period ended 31 March 2024.
   These Pillar III disclosures have been subject to review from internal auditors and appropriate senior management within the Group and attested by the Board Audit Committee.
   We confirm that the Bank's Pillar III disclosures, to the best of our knowledge, comply with the revised CBUAE Pillar III market disclosures requirements and have been prepared in compliance with the Bank's internal control framework.
2. Implementation of Basel III standards and guidelines
   The Group has adopted the standardized approach for Credit Risk, Counterparty Credit Risk, Credit Valuation Adjustment (CVA) and Market Risk, mandate-based approach (MBA) for equity investments in funds held in the banking book and the basic indicator approach for Operational Risk (Pillar I) for regulatory reporting purposes.
   The Group also assigns capital on other than Pillar I risk categories, for example 'Interest rate risk in the banking book' and for 'Concentration risk', within the Pillar II framework.

4. Highlights

In line with Article 2.2. of Capital Adequacy Regulation, CBUAE requires banks to apply the following minimum requirement:

1. CET1 must be at least 7% of risk weighted assets (RWA);
2. Tier 1 Capital must be at least 8.5% of RWA;
3. Total Capital, calculated as the sum of Tier 1 Capital and Tier 2 Capital, must be at least 10.5% of RWA.
4. In addition to the minimum CET1 capital of 7% of RWA, banks must maintain a capital conservation buffer (CCB) and Countercyclical Capital Buffer (CCyB), each a maximum of 2.5% of RWAs in the form of CET1 capitals.
5. All banks must maintain a leverage ratio of at least 3.0%.

The Group has complied with all the externally imposed capital requirements and is well capitalized with low leverage and high levels of loss-absorbing capacity. As at 31 March 2024:

• The Group's Common Equity Tier 1 (CET1) ratio of 12.41% (31 December 2023: 12.54%), Tier 1 capital Ratio of 14.54%
  (31 December 2023: 14.81%), Capital Adequacy Ratio of 15.67% (31 December 2023: 15.95%), are all above the regulatory requirements.
• The Group's leverage ratio of 10.22% (31 December 2023: 9.97%) is above the current regulatory requirement.
• The Group continues to manage its balance sheet proactively, with focus on sound RWA management.

5

COMMERCIAL BANK OF DUBAI

For the period ended 31 March 2024

5. Key Metrics (KM1)

Key prudential metrics related to regulatory capital have been included in the following table:

			Mar'24		Dec'23	Sep'23		Jun'23	Mar'23
	Available capital (amounts)								(AED '000s)
1	Common Equity Tier 1 (CET1)	12,847,161		12,203,222	12,705,960		12,066,821	11,478,911
1a	Fully loaded ECL accounting model	12,773,630		12,094,797	12,599,023		11,984,233	11,421,845
2	Tier 1	15,050,961		14,407,022	14,909,760		14,270,621	13,682,711
2a	Fully loaded ECL accounting model Tier 1	14,977,430		14,298,597	14,802,823		14,188,033	13,625,645
3	Total capital	16,222,228		15,517,077	16,007,085		15,346,074	14,716,322
3a	Fully loaded ECL accounting model total capital	16,148,697		15,408,652	15,900,148		15,263,486	14,659,256
	Risk-weighted assets (amounts)
4	Total risk-weighted assets (RWA)	103,535,259		97,300,973	95,280,172		93,429,931	90,119,130
	Risk-based capital ratios as a percentage of RWA
5	Common Equity Tier 1 ratio (%)	12.41%		12.54%	13.34%		12.92%	12.74%
5a	Fully loaded ECL accounting model CET1 (%)	12.34%		12.43%	13.22%		12.83%	12.67%
6	Tier 1 ratio (%)	14.54%		14.81%	15.65%		15.27%	15.18%
6a	Fully loaded ECL accounting model Tier 1 ratio (%)	14.47%		14.70%	15.54%		15.19%	15.12%
7	Total capital ratio (%)	15.67%		15.95%	16.80%		16.43%	16.33%
7a	Fully loaded ECL accounting model total capital ratio (%)	15.60%		15.84%	16.69%		16.34%	16.27%
	Additional CET1 buffer requirements as a percentage of RWA
8	Capital conservation buffer requirement (2.5% from 2019) (%)	2.50%		2.50%	2.50%		2.50%	2.50%
9	Countercyclical buffer requirement (%)	0.00%		0.00%	0.00%		0.00%	0.00%
10	Bank D-SIB additional requirements (%)	0.00%		0.00%	0.00%		0.00%	0.00%
11	Total of bank CET1 specific buffer requirements (%) (row 8 + row	2.50%		2.50%	2.50%		2.50%	2.50%
9+ row 10)
12	CET1 available after meeting the bank's minimum capital	5.17%		5.45%	6.30%		5.92%	5.74%
requirements (%)
	Leverage Ratio
13	Total leverage ratio measure	147,306,539		144,437,305	140,264,456		137,014,819	132,591,794
14	Leverage ratio (%) (row 2/row 13)	10.22%		9.97%	10.63%		10.42%	10.32%
14a	Fully loaded ECL accounting model leverage ratio (%) (row 2A/row	10.17%		9.90%	10.55%		10.36%	10.28%
13)
14b	Leverage ratio (%) (excluding the impact of any applicable temporary	10.22%		9.97%	10.63%		10.42%	10.32%
exemption of central bank reserves)
	Liquidity Coverage Ratio
15	Total HQLA	-		-	-		-	-
16	Total net cash outflow	-		-	-		-	-
17	LCR ratio (%)	-		-	-		-	-
	Net Stable Funding Ratio
18	Total available stable funding	-		-	-		-	-
19	Total required stable funding	-		-	-		-	-
20	NSFR ratio (%)	-		-	-		-	-
	ELAR
21	Total HQLA	20,959,946		22,975,374	21,448,358		19,815,907	20,973,020
22	Total liabilities	115,273,562		113,094,418	111,073,278		108,814,581	105,784,429
23	Eligible Liquid Assets Ratio (ELAR) (%)	18.18%		20.31%	19.31%		18.21%	19.83%
	ASRR
24	Total available stable funding	102,988,492		101,299,524	100,473,742		98,972,555	94,846,361
25	Total Advances	91,907,018		88,384,200	87,640,901		85,298,646	80,413,439
26	Advances to Stable Resources Ratio (%)	89.24%		87.25%	87.23%		86.18%	84.78%

"Fully Loaded" means bank's regulatory capital compared with a situation where the transitional arrangement had not been applied. CBUAE introduced transitional arrangements as per circular no. 04/2020 "Regulation Regarding Accounting Provisions and Capital Requirements - Transitional Arrangements".

6

COMMERCIAL BANK OF DUBAI

For the period ended 31 March 2024

6. Overview of Risk Weighted Assets (OV1)

The following table provides an overview of RWAs, calculated in accordance with Basel III, by risk type and calculation approach.

				RWA			Minimum capital
		(AED '000s)				requirements
				Mar'24		Dec'23		Mar'24
1	Credit risk (excluding counterparty credit risk)	92,811,911		87,871,210	9,745,251
2		Of which: standardised approach (SA)	92,811,911		87,871,210	9,745,251
3		Of which: foundation internal ratings-based(F-IRB) approach
4		Of which: supervisory slotting approach
5		Of which: advanced internal ratings-based(A-IRB) approach
6	Counterparty credit risk (CCR)	482,694		474,420	50,683
7		Of which: standardised approach for counterparty credit risk	482,694		474,420	50,683
8		Of which: Internal Model Method (IMM)
9		Of which: other CCR
10	Credit valuation adjustment (CVA)	231,510		281,971	24,309
11		Equity positions under the simple risk weight approach
12	Equity investments in funds - look-through approach	-		-	-
13	Equity investments in funds - mandate-based approach	175,253		176,771	18,402
14	Equity investments in funds - fall-back approach	-		-	-
15	Settlement risk	-		-	-
16	Securitisation exposures in the banking book	-		-	-
17		Of which: securitisation internal ratings-based approach (SEC-IRBA)
18		Of which: securitisation external ratings-based approach (SEC-ERBA)	-		-	-
19		Of which: securitisation standardised approach (SEC-SA)	-		-	-
20	Market risk	1,162,614		1,038,385	122,074
21		Of which: standardised approach (SA)	1,162,614		1,038,385	122,074
22		Of which: internal models approach (IMA)
23	Operational risk	8,671,277		7,458,217	910,484
24		Amounts below thresholds for deduction (subject to 250% risk weight)
25		Floor adjustment
26	Total (1+6+10+11+12+13+14+15+16+20+23)	103,535,259		97,300,973	10,871,202

During Q1 2020, the CBUAE issued a regulation for a 'Prudential Filter' that permits Banks to add back increase in IFRS 9 stage 1 and stage 2 provisions to the regulatory capital over a transition period of 5 years on proportionate basis. The increase in IFRS 9 provision requirements is determined by calculating the difference between the IFRS 9 provision as at December 31, 2019 and the IFRS 9 provision as of the respective reporting date. The proportion of the increase in IFRS 9 provisions that is permitted to be added-back to regulatory capital from 1 January 2020 onwards will be phased out over a 5-year transition period as follows:

Years	2020	2021	2022	2023	2024
Proportion of Provision	100%	100%	75%	50%	25%

7

COMMERCIAL BANK OF DUBAI

For the period ended 31 March 2024

7 Leverage Ratio

7.1 Summary comparison of accounting assets vs leverage ratio exposure (LR1)

The following table reconciles the total assets in the published financial statements to the leverage ratio exposure measure.

		31 Mar	31 Dec
		2024	2023
		(AED 000s)	(AED 000s)
1	Total consolidated assets as per published financial statements	130,976,428	128,987,491
2	Adjustments for investments in banking, financial, insurance or commercial entities that are consolidated for	-	-
accounting purposes but outside the scope of regulatory consolidation
3	Adjustment for securitised exposures that meet the operational requirements for the recognition of risk transference	-	-
4	Adjustments for temporary exemption of central bank reserves (if applicable)	-	-
5	Adjustment for fiduciary assets recognised on the balance sheet pursuant to the operative accounting framework but	-	-
excluded from the leverage ratio exposure measure
6	Adjustments for regular-way purchases and sales of financial assets subject to trade date accounting	-	-
7	Adjustments for eligible cash pooling transactions	-	-
8	Adjustments for derivative financial instruments	684,032	656,051
9	Adjustment for securities financing transactions (ie repos and similar secured lending)	-	-
10	Adjustments for off-balance sheet items (ie conversion to credit equivalent amounts of off-balance sheet exposures)	15,807,303	14,953,666
11	Adjustments for prudent valuation adjustments and specific and general provisions which have reduced Tier 1	-	-
capital
12	Other adjustments	(161,224)	(159,903)
13	Leverage ratio exposure measure	147,306,539	144,437,305

8

COMMERCIAL BANK OF DUBAI

For the period ended 31 March 2024

7.2 Leverage ratio common disclosure template (LR2)

The following table provides a detailed breakdown of the components of the leverage ratio denominator, as well as information on the actual leverage ratio, minimum requirements and buffers.

		31 March	31 December
		2024	2023
		AED 000s	AED 000s
On-balance sheet exposures
1	On-balance sheet exposures (excluding derivatives and securities financing transactions (SFTs), but	130,976,428	128,987,491
including collateral)
2	Gross-up for derivatives collateral provided where deducted from balance sheet assets pursuant to the	-	-
operative accounting framework
3	(Deductions of receivable assets for cash variation margin provided in derivatives transactions)	-	-
4	(Adjustment for securities received under securities financing transactions that are recognised as an asset)	-	-
5	(Specific and general provisions associated with on-balance sheet exposures that are deducted from Tier 1	-	-
capital)
6	(Asset amounts deducted in determining Tier 1 capital)	(161,224)	(159,903)
7	Total on-balance sheet exposures (excluding derivatives and SFTs) (sum of rows 1 to 6)	130,815,204	128,827,588
Derivative exposures
8	Replacement cost associated with all derivatives transactions (where applicable net of eligible cash	284,431	309,530
variation margin and/or with bilateral netting)
9	Add-on amounts for PFE associated with all derivatives transactions	399,601	346,521
10	(Exempted CCP leg of client-cleared trade exposures)	-	-
11	Adjusted effective notional amount of written credit derivatives	-	-
12	(Adjusted effective notional offsets and add-on deductions for written credit derivatives)	-	-
13	Total derivative exposures (sum of rows 8 to 12)	684,032	656,051

Securities financing transactions

14	Gross SFT assets (with no recognition of netting), after adjusting for sale accounting transactions	-
15	(Netted amounts of cash payables and cash receivables of gross SFT assets)	-
16	CCR exposure for SFT assets	-
17	Agent transaction exposures	-
18	Total securities financing transaction exposures (sum of rows 14 to 17)	-

Other off-balance sheet exposures

-

-

-

-

-

19	Off-balance sheet exposure at gross notional amount	49,372,887	46,871,050
20	(Adjustments for conversion to credit equivalent amounts)	(33,565,584)	(31,917,384)
21	(Specific and general provisions associated with off-balance sheet exposures deducted in determining Tier	-	-
1 capital)
22	Off-balance sheet items (sum of rows 19 to 21)	15,807,303	14,953,666
Capital and total exposures
23	Tier 1 capital	15,050,961	14,407,022
24	Total exposures (sum of rows 7, 13, 18 and 22)	147,306,539	144,437,305
Leverage ratio
25	Leverage ratio (including the impact of any applicable temporary exemption of central bank	10.22%	9.97%
reserves)
25a	Leverage ratio (excluding the impact of any applicable temporary exemption of central bank reserves)	10.22%	9.97%
26	CBUAE minimum leverage ratio requirement	3.00%	3.00%
27	Applicable leverage buffers	7.22%	6.97%

9

COMMERCIAL BANK OF DUBAI

For the period ended 31 March 2024

8 Liquidity Risk

8.1 Eligible Liquid Assets Ratio (ELAR)

The following table presents the breakdown of the Bank's available high-quality liquid assets (HQLA), as measured and defined according to the CBUAE Liquidity Regulations.

						31 Mar 2024	31 Dec 2023
	1			High Quality Liquid Assets		Nominal		Eligible Liquid	Nominal	Eligible Liquid
						amount		Asset	amount	Asset
								(AED 000s)
1.1		Physical cash in hand at the bank + balances with the CBUAE	11,556,618			15,133,339
1.2		UAE Federal Government Bonds and Sukuks	7,355,801			5,621,204
				Sub Total (1.1 to 1.2)		18,912,419		18,912,419	20,754,543	20,754,543
1.3		UAE local governments publicly traded debt securities	1,550,711			1,554,630
1.4		UAE Public sector publicly traded debt securities	-			-
				Subtotal (1.3 to 1.4)		1,550,711		1,550,711	1,554,630	1,554,630
1.5		Foreign Sovereign debt instruments or instruments issued by their	496,816	496,816	666,201	666,201
	respective central banks
1.6			Total		20,959,946		20,959,946	22,975,374	22,975,374
2		Total liabilities		115,273,562		113,094,418
3		Eligible Liquid Assets Ratio (ELAR)			18.18%		20.31%

8.2 Advances to Stables Resource Ratio (ASRR)

The following table presents the breakdown of the Bank's Advances to Stables Resource ratio as per the Liquidity regulations.

		Items	31 Mar 2024	31 Dec 2023
1		Computation of Advances	(AED 000s)
	1.1	Net Lending (gross loans - specific and collective provisions + interest in suspense)	85,603,180	82,061,841
	1.2	Lending to non-banking financial institutions	2,383,944	2,390,221
	1.3	Net Financial Guarantees & Stand-by LC (issued - received)	1,838,401	1,864,999
	1.4	Interbank Placements	2,081,493	2,067,139
	1.5	Total Advances	91,907,018	88,384,200
2		Calculation of Net Stable Resources
	2.1	Total capital + general provisions	16,560,813	17,126,845
		Deduct:
	2.1.1	Goodwill and other intangible assets	161,224	159,903
	2.1.2	Fixed Assets	1,814,662	1,617,391
	2.1.3	Funds allocated to branches abroad	-	-
	2.1.5	Unquoted Investments	312,887	280,590
	2.1.6	Investment in subsidiaries, associates and affiliates	105,112	102,390
	2.1.7	Total deduction	2,393,885	2,160,274
	2.2	Net Free Capital Funds	14,166,928	14,966,571
	2.3	Other stable resources:
	2.3.1	Funds from the head office	-	-
	2.3.2	Interbank deposits with remaining life of more than 6 months	7,688,353	7,100,680
	2.3.3	Refinancing of Housing Loans	-	-
	2.3.4	Borrowing from non-Banking Financial Institutions	4,493,498	3,547,418
	2.3.5	Customer Deposits	74,527,988	73,573,130
	2.3.6	Capital market funding/ term borrowings maturing after 6 months from reporting date	2,111,725	2,111,725
	2.3.7	Total other stable resources	88,821,564	86,332,953
	2.4	Total Stable Resources (2.2+2.3.7)	102,988,492	101,299,524
3		Advances to stable resources ratio (1.5 / 2.4*100)	89.24%	87.25%

10