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Annual Report2015

A Annual Report 2015

His HighnessSheikh Tamim Bin Hamad Al-Thani

Emir of the State of Qatar

His Highness the Father EmirSheikh Hamad Bin Khalifa Al-Thani

A Annual Report 2015A Annual Report 2015

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Corporate OverviewFinancial highlightsBoard of directorsChairman’s messageExecutive managementManaging Director’s messageReview of OperationsCorporate Social ResponsibilityCorporate governanceIndependent Auditors’ ReportConsolidated Financial StatementsGlossary

Table of contents

Corporate Overview


Corporate OverviewThe International Bank of Qatar (A) is a well-established commercial institution, offering a full range of retail, private, and corporate banking solutions. A has a strong commitment to build long-lasting relationships with its customers and provide them with excellent customer service with a focus on making banking seamless, convenient and tailored to their needs.

A is one of the oldest existing banks in Qatar and will celebrate its 60th anniversary in 2016. The Bank has a growing network of branches, service centres and ATMs strategically located throughout Qatar.

A has received various international accolades which are testaments to its position as one of Qatar’s leading banks. The bank has received various awards for its Corporate Banking, Private Banking and Retail Banking services from Euromoney, Arabian Business, International Banker, International Finance Magazine, Global Banking and Finance Review, Banker Magazine and Banker Middle East.

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Financial highlights

2013

2013

2013

2013

2013

553

313

12.8%

529

5.03

5.27

Reported Net Income (QAR m)

Costs (QAR m)

Return on Average Equity

Normalised Net Income(QAR m) (a)

Earnings per share

(a) Adjusted for non-core business and excepional items

2014

2014

2014

2014

2014

579

286

12.9%

482

2015

2015

2015

2015

2015

400

264

9.0%

498

3.64

2013

2013

2013

2013

28,678

4.37

17,033

74%83%

Total Assets(QAR m)

Dividend per Share(QAR m)

Net Loans(QAR m)

QCB Credit Ratio

2014

2014

2014

2014

30,882

4.55

19,857

2015

2015

2015

2015

31,910

3.16

20,669

86%


Board of Directors


Board of directorsH.E. Sheikh Hamad Bin Jassim Bin Jabor Al-Thani Chairman

Ibrahim S. Dabdoub Vice Chairman

Sheikh Jabor Bin Hamad Bin Jassim Al-Thani Board Member

H.E. Sheikh Sultan Bin Jassim Bin Mohammed Al-Thani Board Member

H.E. Sheikh Thani Bin Hamad Bin Khalifa Al-Thani Board Member

Sheikh Suhaim Bin Abdullah Bin Khalifa Al-Thani Board Member

Mohammed Mahmoud Al-Okar Board Member


Chairman’s message


Against a backdrop of geopolitical and economic headwinds, particularly with the continued drop in hydrocarbon prices, 2015 was a challenging year, but it was also a year when we took decisive action to refocus our strategy and reposition the Bank for future long term growth.

At the same time, we are mindful of the rapid changes in the operating environment which are impacting our current performance, and require us to rethink the shape of our business in order to meet the demands of the current economic and regulatory landscape in Qatar and the Middle East.Despite these headwinds, the Board is comfortable that the Bank’s current fundamentals, be it capitalisation, liquidity or credit quality, are solid, and will allow it to move forward with confidence.

In this context, the Board is determined to refocus the Bank’s strategy in order to fully realize the opportunities offered by our franchise market. We were pleased with the arrival of a new Managing Director in the latter half of 2015. Omar Bouhadiba is an experienced banker, who comes with a strong track record and an in depth knowledge of Middle Eastern markets. We are happy to have him join the management team at this strategically important time and wish him well in his new role.

2015 was a year when two significant milestones were achieved. Firstly, I am immensely proud of the Bank’s achievement in its initial credit rating. To be assigned A2 by Moody’s and A+ by Fitch is a testament to A’s robust framework and financial strength. The Board was pleased that the rating agencies recognized the strength and stability of A’s franchise.

Secondly, the Bank put in place a US$2 Billion Note Programme. The drawdown of the initial tranche of US$500 million was completed in Mid-November during very testy market conditions. It was nevertheless significantly oversubscribed by international and regional investors, reflecting their belief and trust in the value proposition offered by A.

With regard to the financial results, the Bank’s net profit was QAR 400.1 million, lower than expected due to a challenging environment which prompted the Bank to consolidate its position with increased provisions as well as the exiting of a non-core business. The Board continues to task A’s senior management to focus on delivering profitable sustainable growth that is within A’s risk appetite.

On behalf of the Board of Directors, I am pleased to present the annual report for the Bank for the year ending December 2015 together with the financial statements and the auditor’s report.

Chairman’s messageThe Bank witnessed growth in the balance sheet with total assets increasing by 3 per cent to QAR 31.9 Billion and loans and advances increasing by 4 per cent to QAR 20.7 Billion. A’s capital adequacy ratio at the end of 2015 remains comfortably above the minimum requirement set by the Qatar Central Bank for Basel III.

Going forward, the Board is confident, following the appointment of a new MD that, as we enter 2016, the Bank will resume its growth, while supporting clients across all sectors of the economy, and continuing to provide them with superior service.

A will celebrate its 60th anniversary in 2016. By any standard of corporate longevity in Qatar this is a remarkable achievement. The relentless focus of your Board and the senior management team has been, and will continue to be, on ensuring that the bank is primed for success for many more generations to come.

I wish to express on behalf of the Board of Directors our sincere thanks to His Highness the Emir, Sheikh Tamim Bin Hamad Al-Thani whose perceptive, measured leadership has ensured continued prosperity for the State of Qatar. We also extend our thanks to His Excellency the Governor of the Qatar Central Bank, Sheikh Abdullah Saud Al-Thani for his continued support and counsel.

I would also like to once again express our collective thanks to all our shareholders for their support, guidance and encouragement.Finally, the Bank’s continued achievements could not happen without the support of its clients and customers for their trust and loyalty but above all its management and staff for their hard work, professionalism and ongoing commitment to A.

Hamad Bin Jassim Bin Jabor Al-ThaniChairman


Executive management


Executive management Omar Bouhadiba Managing Director

Muhannad Kamal Deputy Chief Executive Officer

Sheikh Fahad Bin Hamad Bin Jassim Al Thani DGM - Business Development

Chaouki Daher GM - Head of Private Banking

Bhupendra Jain DGM – Head of Corporate Banking

Hassan Al Mulla Head of Retail Banking

Fadi Abu Aitah Treasurer

Daren Warner Chief Financial Officer

Chandramohan Ganapathy Chief Risk Officer

Shah Tajdar Chief Credit Officer

Abeer Al Emadi Head of Operations

Georges Hobeika Head of IT

Saleh Al Kawari AGM – Head of Human Resources and Governmental Affairs

Chandramohan Pillai AGM - Head of Administration and Facilities

John Scott McIvor Chief Internal Auditor


Managing Director’smessage


This year the current management team worked hard to obtain an initial rating for the bank, which culminated in a successful conclusion with Moody’s rating A A2 and Fitch A+. This was a major milestone which should open a number of opportunities in the future.

The establishment of the US$2 Billion Note Programme and the successful drawdown of the first tranche of US$500 million in November during a period of interest rate uncertainty and Middle East volatility confirmed the Bank’s positive image in international financial markets. It was the first conventional bond transaction in Qatar for more than a year, and its achievement is further testament to Qatar’s continuing success story.

That said, the past twelve months presented a number of challenges to the bank. Externally, falling energy prices weighed on Qatar’s economic sentiment, and impacted business volumes as well as stock markets in the region. Liquidity became tighter, and, while the bank’s liquidity position remains very comfortable, cost of funds rose.

These factors were partly the reason for the lower than planned net profit of QAR 400.1 million as the Bank consolidated its position with increased provisions and the exiting of a non-core business.

We have now established a solid foundation for growth in 2016 and beyond.

Financial Review

While the reported net profit of QAR 400.1 million is lower than the previous year, the adjusted net profit, excluding any year-on-year effects of provisions and significant exceptional items, increased marginally by 3.3 per cent on the normalised net profit of 2014.

Headline income was lower by 16 per cent year-on-year with net interest income lower by 6 per cent. This was a reflection of the changing macroeconomic environment and our resulting focus on risk management.Costs in 2015 continued to be tightly controlled with overall staff costs lower by 3 per cent and all other costs lower by 14 per cent. Costs are, and will continue to be, a strategic battleground for the banking industry, and working cost effectively is essential to the Bank’s future success.

The Bank exited a large proprietary position, and discontinued this particular line of business which over the years proved unattractive. The Bank also took the proactive step of conservatively providing an old exposure despite being secured.

Having only joined A in October 2015, these last few months have been an exciting and intense experience, and the learning curve very steep. I believe it would be appropriate for me to share my initial thoughts and observations, with regard to the challenges we faced and the aspirations we pursue as we progress into 2016.

Managing Director’s message

Total NPLs account for 2.1 per cent of the gross loan book and this has only marginally increased year-on-year. Our credit management process remains conservative as always, and the portfolio tightly managed. In fact, excluding one sizable collateralised exposure, in process of resolution, the bank’s adjusted NPL to gross loans ratio would be marginally north of 1 per cent; significantly better than the market average.

The balance sheet is in good shape, diversified, well-structured and comfortably liquid. The Bank more than meets the minimum Basel III requirements for both the net stable funding ratio and the liquidity coverage ratio.

Loans and advances to customers increased by QAR 1.6 Billion, or 8 per cent, in the second half. The loans-to-deposits ratio and liquidity ratio were within guidelines set by the Qatar Central Bank. Total assets rose 3 per cent compared to 2014 as the Bank deployed some cash from the drawdown of the US$500 million bond issue.

Capital

The Bank starts 2016 from a strong position. Our total capital adequacy is a robust 16.14 per cent, well ahead of the minimum requirement set by the Qatar Central Bank. This capital ratio shows resilience even in a tough market and should enable the Bank to grow in 2016 and beyond.

Business Overview

Corporate Banking continues to be A’s largest contributor in terms of operating income and net profit. It participated successfully in the financing of many major infrastructure projects, and maintained its strategy of conservative client selection, prudent risk management and exemplary value addition. The business is in a very good position to grow substantially in 2016.

Private Banking continues to drive excellence in service quality, and deepen long term and sustainable client relationships. As a result of this client centricity, and consistent relationship management, the Bank was recognised by many forums for the “Best Private Bank of the year” award.

Retail Banking more than delivered on net profit expectations but more importantly it continues to be “best in class” in a number of areas for which it won awards. The Retail Banking business continues to develop innovative product offerings to customers so as to grow its franchise. 26

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Outlook and Aspirations

2016 will inevitably offer opportunities as well as challenges and we have taken a precautionary measure in 2015 to remain solidly capitalised and very liquid. Our priorities for 2016 include (i) generating quality sustainable operating income growth driven by our client franchise and (ii) intensifying risk management, particularly with regard to liquidity and credit, two areas where we expect a heightened risk environment.

With a longer time frame in mind, the management team is now working on an ambitious five year road map. While it is still work in progress, some main themes are starting to emerge from our discussions, which if implemented should better adapt our business model to changing market conditions. While none of the ideas are inherently new, there needs to be a change in emphasis so as to ensure a sustainable positive growth trajectory. This can only be achieved with the help of all associates inside the bank and I have high expectations from everyone to contribute accordingly.

With the continued acceleration of projects in Qatar from 2016 onwards, new business opportunities should foster new relationships as well as deepen our reach with existing clients. Putting the needs of the client first, and deepening the overall relationship, will ensure that A remains a core Bank and a key provider in any period of tightening credit and liquidity.

Community

A continues to contribute to the social well-being of Qatar through its long standing corporate social responsibility programme. In 2015 the Bank supported a wide range of activities including youth, education and art, sports and health awareness, knowledge based economy events and philanthropic activities during the Holy month of Ramadan. This will remain a key social commitment going forward.

Staff

People are our main asset. All the Bank’s employees are critical to the success in any implementation of the Bank’s strategy and the achievement of its business goals. The Bank is fortunate to employ a dedicated workforce of both Qataris and Expatriates and I believe that continuing professional development is key to fostering a good working environment. It is critical that the Bank attracts the right talent and continues to train and develop its intellectual capital accordingly. I was very pleased to see that in 2015 the Bank took the decision of appointing experienced Qatari professionals as Head of Retail, Deputy Head of Corporate Banking and Head of Operations. In addition, six high potential Qatari employees were sent to a variety of leadership development programmes undertaken by major universities and our Qatari Development Programme (QDP) almost doubled in staff numbers from 20 to 39.

Thanks and Appreciation

To conclude, I would like to thank our shareholders and Board of Directors as well as His Excellency the Governor of Qatar Central Bank Sheikh Abdullah Saud Al-Thani for their support and counsel. I am also indebted to our clients and customers for their trust and loyalty, and to our staff for their hard work, commitment and professionalism.

Omar BouhadibaManaging Director

Review of operations


Review of operations


Corporate Banking

In 2015, A Corporate Banking maintained its strategy of conservative growth supported by exceptional customer service, prudent client selection and robust portfolio risk management.

As a testament to its strategy, A Corporate Banking received “The Best Customer Service - Corporate” award from The Banker Middle East for the year 2015.

A Corporate Banking continued to diversify its portfolio by initiating meaningful relationships with strong Qatari companies as well as selectively pursuing regional and international companies.

In order to support the Qatari Government’s initiative to pay workers salary electronically, A was among the first banks to be successfully certified in this important project. The Bank is now offering electronic wage payments under the government’s Wage Protection System (WPS) to all its corporate clients. The Bank’s proactive approach to the rollout of this initiative has been very well received by the customers.

In 2015, A successfully upgraded its Corporate Online Banking platform to enable all corporate clients to manage their trade finance transactions electronically. This is being formally launched in the first quarter of 2016 and will increase efficiency and transparency both for the bank and more importantly the bank’s clients.

A Corporate Banking is now very well placed to support the Bank’s growth aspirations.

Private Banking

A Private Banking’s outstanding service and continued commitment to the industry was once again acknowledged by its peers in 2015 by being honored with the title of ‘Best Private Bank - Qatar’ by both the ‘Global Banking & Finance Community’ and the ‘Banker Middle East’. An additional recognition from the ‘International Banker’ for being the ‘Private Bank of the Year – Qatar’ also reaffirmed our strong market position and distinguished track record.

2015 was a challenging year for A Private Banking as we continued to face uncertain and volatile market conditions. Despite this, we managed to record sustained growth in terms of asset base and earnings. Our core business remains robust as we strive to deliver more sophisticated and expert solutions to our loyal client base, from which we derive a substantial portion of new business and client referrals.

A Private Banking also began to develop its new wealth management platform which is to be launched in 2016, and which is designed to enhance our product and service offering to the bank’s clients. It will have the capabilities to provide a personalized tailor-made estate planning and wealth management solution which will be based on our deep understanding of our clients and their needs.

Looking ahead, we believe that we are well positioned for 2016 and beyond. We remain fully committed to our long term goals, as well as our core values of privacy, confidentiality, integrity and service excellence; which coupled with A’s experienced team places the bank in a unique position to guide its clients in meeting their wealth management aspirations and reaching their personal financial objectives.



Retail Banking

A continued to market its product offering through a number of successful campaigns in partnership with Qatar Airways and Vodafone. Our innovative approach to products saw the launch of a suite of mortgage solutions, including land financing and equity release. The Bank also unveiled offers in Ramadan on Personal Loans by providing an interest rate of 3.5 per cent. A credit cardholders were able to purchase vehicles using their A credit card and double their points on purchases made outside Qatar.

In 2015, A’s Retail Banking division won several accolades for the “Best Customer Service” and the “Best Customer Loyalty Programme in Qatar” for the Bank’s unique rewards programme. Winning these awards is a testament to our commitment to provide our valued customers with exceptional service and reflects our innovative approach to retaining customer loyalty to our brand by delivering the very best in loyalty programmes and rewards schemes.

The Bank also designed an in-house service quality assessment programme for branch staff to assess staff interaction with customers based on service quality parameters and a scoring system. We also established a bank@work function to offer retail services to corporate clients and enhance our retail customer acquisition capability.

Operations and IT

During 2015, for the fifth consecutive year A Operations and IT services were presented with the Straight Through processing (STP) award from Commerzbank in recognition for its performance and execution of commercial and financial payments in Euros.

The Operations and IT teams continued to modernize the Bank’s banking systems and have successfully completed the upgrade of the Trade Finance System and the Electronic Cheque Clearing systems.

We were one of the leading local Banks to implement the wages protection system (WPS), and provided all resources and controls to absorb the vast increment in accounts opening / payments and cards services. We also implemented “QIPS” Qatar internal payment system to a successful conclusion and rollout.

Other notable rollouts in 2015 include the implementation of electronic statements and the upgrade to the call centre. HR Initiatives

A’s investment in the development of our people is a core component of our ability to realize our long-term goals and maintain customer service excellence. A is committed to developing the emerging generation of Qatari nationals by playing a leading role in achieving Qatar’s 2030 vision of promoting a knowledge based economy with local talent.

A’s structured training programmes and initiatives have helped to ensure we remain an ‘Employer of Choice’ in Qatar. A actively participates in university careers fairs and has placed a number of Qatari nationals in scholarship programmes in the country’s leading universities.

We offer new graduates the opportunity to participate in our Graduate Trainee Programme which is a year-long training module that allows the graduates to be immersed in the Bank’s business environment. The key advantage of this programme is the ability to rotate throughout various departments in the Bank under the personal guidance of an employee as mentor. This ensures that sufficient exposure to the Bank’s various functions is undertaken before a final career path or specialist role is chosen.

All Qatari employees are allocated a personalized 5-year Qatari Development Plan. This is an initiative which helps Qatari nationals build and acquire the required in-depth knowledge in banking and finance to allow them to progress in their chosen careers at A.

Corporate socialresponsibility



Community Outreach

A continues to support community development initiatives in Qatar. Accordingly, A extended its corporate social responsibility (CSR) activities mainly in the areas of education and youth development, social and philanthropic support, promoting local sports, arts and cultural diversity. Below are the highlights on some CSR initiatives carried out during 2015.

Cultural Diversity through Art

A partnered with Qatar Museums Family and Schools Programmes to host a children’s drawing workshop at the Qatar Museums Fire Station. The event targeted children aged between 7-11 of A customers to demonstrate and explore their creativity at painting and drawing in the Workshop. QM Family & Schools Programmes developed and implemented the one-day art programme for A’s ‘Young Saver Account’ customers and other A customers’ children. The idea behind the workshop was for the attending young artists to create an A Eid Greeting Card.

A also sponsored the “Made with Our Hands” Fair organized by the Educational Centre for the Handicapped and Girls Rehabilitation Centre at the Qatar Society for Rehabilitation of Special Needs (QSRSN). The fair showcased QSRSN students’ creations that reflected their abilities, talents and skill.

Sports Promotion

A has been supporting Sports initiatives in Qatar for many years as it is an important pillar of its corporate social responsibility (CSR) policy. This includes National Sports Day held every year in February, HH The Emir Basketball Cup, and the A Masters Cricket tournament. In addition to supporting a range of different sports tournaments in Qatar, A’s own football team has participated in different tournaments.

A also sponsored the Qatari Businesswomen Association’s (QBWA) second annual Mentoring Walk. This international annual initiative, the Global Mentoring Walk - “Walk and Talk”, brought together established women leaders and rising stars for a two-hour walk around Aspire Park to discuss their professional challenges and successes and establish relationships through mentoring. It also focused on encouraging collaboration and networking among emerging and established women leaders in the business community.Furthermore, A extended its support to the Zumba ‘Party in Pink™’ initiative organized by The Zumba Fitness Doha Qatar Team and hosted by the Sheraton Doha Resort & Convention Hotel. On the occasion of the Breast Cancer Awareness Month, all proceeds from the event were donated to the Qatar Cancer Society (QCS) to support its diverse awareness activities.

Finally, A proudly sponsored the fundraising networking social gathering organized by 3 popular social media bloggers in Qatar where proceeds from the event were donated to “Qatar Cancer Society”.

Philanthropic Initiatives

In celebration of the Holy Month of Ramadan and as part of A’s “Do Good Deeds” annual campaign, A organized a number of initiatives to support the community in Qatar and activities to involve A staff. An Iftar banquet was held at Al Rumailah Hospital in Doha for the elderly and traumatized patients, as well as residents of the Qatar Foundation for Elderly People Care (Ihsan). The event was aimed at paying tribute to elderly citizens who have greatly contributed to the development and well-being of our society and help them better integrate with others.

At an Iftar event held at Qatar Cancer Society, staff were joined by adult cancer survivors. Likewise, the staff celebrated Garangaou at the Pediatrics Ward of Hamad General Hospital.

Education and Youth Development

A is committed to developing young talent. Accordingly, the Bank actively participated in different career fairs in 2015 such as the Qatar International College Fair and open days at the CCQ (Community College of Qatar). A also sponsored the “International Conference on Access to Financing SMEs and Entrepreneurs in the Arab World”. This event was part of a two-day conference organized by Qatar University’s College of Business and Economics.

Knowledge-based Economy

Qatar’s transition into a knowledge-based economy is well underway and is gathering momentum. In line with this development, A sponsored different events in the country, including an Information security conference for the financial sector organized by Qatar Central Bank, and the 12th MEED Annual Qatar Projects Conference 2015.

Corporate social responsibility

Corporate governance


Corporate Governance


A considers sound corporate governance to be a critical factor in protecting the rights and interests of all stakeholders, and achieving business integrity and efficiency. In 2015 (circular 68/2015), the Qatar Central Bank introduced new rules for sound corporate governance that are based on international best practices. A is committed to achieving full compliance with these rules.

Ownership Structure

As of 31 December 2016, the ownership of A is held by Qatari nationals and the details of the ownership structure is mentioned below:

Name of the Owner Percentage of ownership

Broog Trading Company 24.50%

Al Sanad Commercial Company 24.50%

Alfiya Holding Company 10.50%

QIPCO 10.50%

Al Mirqab Capital Company 10.00%

Al Areen Holding Company 10.00%

Al Sudra Qatari Holding Company 10.00%

Board Composition & Meetings

The owners of A appoint their representatives on the Board which comprised of seven members. The presence of two independent Directors enhances the bank’s corporate governance practices. The Board meetings are held regularly and are attended by a minimum of five members as a quorum.

Board of Directors qualifications

The Board of Directors possess proper educational qualifications and industry knowledge and expertise to carry out the assigned leadership roles effectively and professionally. The skills and expertise of the Board of Directors are mentioned below:

H.E. Sheikh Hamad Bin Jassim Bin Jabor Al-ThaniChairman

H.E. Sh. Hamad Bin Jassim Bin Jabor Al-Thani has been a member of the Board for 14 years.

H.E. Sh. Hamad Bin Jassim Bin Jabor Al-Thani is the former Prime Minister of Qatar (from 2007 to 2013); Minister of Foreign Affairs of Qatar (from 1992 to 2013) and was the former Chief Executive Officer of Qatar Investment Authority.

Ibrahim DabdoubVice Chairman

Mr. Dabdoub has been a member of the Board for 10 years. Mr. Dabdoub Studied at the Middle East Technical University in Ankara, Turkey and at Stanford University in California, USA.

Mr. Dabdoub’s previous experience includes Group Chief Executive Officer of National Bank of Kuwait, which he held from 1983 until his retirement in March 2014.

Sheikh Jabor Bin Hamad Bin Jassim Al-Thani

Sh. Jabor Al-Thani has been a member of the Board for 14 years.

Sh. Jabor Al-Thani is a prominent businessman in the State of Qatar and has held various Board memberships including Qatar Insurance Company and Gulf Warehousing Company. He is a graduate of the Royal Military Academy, Sandhurst.

H.E. Sheikh Sultan Bin Jassim Bin Mohammed Al-Thani

H.E. Sh. Sultan Al-Thani has been a member of the Board for 14 years. H.E. Sh. Sultan Al-Thani holds a Bachelor of Science degree in Business Administration (Marketing) from the University of Baltimore Maryland, USA, which he gained in July 1990.

H.E. Sh. Sultan Al-Thani is the Director of the office of H.H. Sh. Mohammed Bin Khalifa Bin Hamad Al-Thani (former Deputy Prime Minister of Qatar).H.E. Sh. Sultan Al-Thani was previously the Chairman of the Qatar Tourism Authority.

H.E. Sheikh Thani Bin Hamad Bin Khalifa Al-Thani

H.E. Sh. Thani Al-Thani has been a member of the Board for seven months. H.E. Sh. Thani Al-Thani holds a Degree in Communication from North western University, USA.H.E. Sh. Thani Al-Thani is the brother of H.H. the Emir of Qatar.

Sheikh Suhaim Bin Abdullah Bin Khalifa Al-Thani

Sh. Suhaim Al-Thani has been a member of the Board for five years. Sh. Suhaim Al-Thani holds a BA degree in Business & Law which he gained in 2006 from London Metropolitan University, UK.

Sh. Suhaim Al-Thani is the Vice Chairman of Mannai Corporation and a Board member of Qatar Investments and Projects Development Holding Company.

Mohammed Mahmoud Al-Okar Mr. Al-Okar has been a member of the Board for 14 years and has more than 35 years’ banking experience.

Mr. Al-Okar’s experience includes Regional General Manager with Grindlays Private Bank Middle East.


Terms of Reference of the Board of Directors

The Board provides oversight with the primary objective of ensuring effective governance over A’s key affairs, including the review and approval of short and long term business strategies, business policies and risk policies. The Board fulfils its responsibilities in accordance with the provisions and requirements of the QCB.

The core transactions that requires BOD approvalApprove the delegation of authority matrices for: The extension of credit facilities The write-off of bad debts General and specific provisions Capital and other expenditures

Board Members Powers and Roles

The Board of Directors are collectively responsible for providing a sustainable value for A’s shareholders in an ethical manner. The presence of a well-established corporate governance framework supports the Board of Directors in determining the strategic objectives and policies for the bank. The main roles of the Board of Directors of A are disclosed below:

- Determines the overall strategic objectives and policies for the bank and ensures its consistent application.

- Ensures the existence of a well-defined corporate governance structure while affirming transparency at all levels.

- Ensures implementation of appropriate internal controls and effective risk management processors to safe guard the interest of shareholders while conforming to rules and regulations of Qatar.

- Regular review of strategic objectives and policies to ensure adaptation to surrounding business environment.

- Oversees the conduct of board committees to provide overall strategic direction.

The Board may exercise its powers, in accordance with the effective laws, regulations and the company’s Articles of Association. The Board shall delegate and confer on the chief executive officer the powers and authorities to act on behalf of, and manage, the Bank. The Board may limit the powers and authorities of the chief executive officer and of any other executive officer with the Bank and reserve to itself the decisions on certain operational, management and executive matters.

Board Members responsibilities in financial statement disclosure

It is the responsibility of the Board of Directors to prepare the Annual Financial Reports in accordance with applicable laws and regulations. The regulation stipulates that the bank should prepare its Financial Statements at the end of each year complying with International Financial Reporting Standards (IFRS). The Board’s responsibilities regarding the Annual Report and Financial Statements are as follows:

- Ensures the financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) and the applicable provisions of Qatar Central Bank (‘QCB’) regulations.

- Consistent application of suitable accounting policies.- Keeping adequate records to explain and disclose transactions with reasonable accuracy.- Ensures application of prudent and reasonable assumptions in determining the effects of future events

on transactions.- Prepare Financial Statements on ‘going concern’ basis unless, it is presumed inappropriate to do so.- Approve the Financial Statements only if they give a fair and true view of the A‘s operations and

profit/loss.

Board Committees and composition

Currently, the Board committees, appointed by the Board with their respective Terms of Reference, are:

Board Audit Committee(BAC)

It is the responsibility of BAC to review and advise the Board of Directors regarding the internal financial controls of the bank and matters related to Financial Reporting. BAC is also responsible to oversee the internal and external audit function.

Board Executive Committee(BEC)

It is the responsibility of BEC to review and approve credit facilities above the management authority level as delegated by the Board of Directors. BEC is also responsible in reviewing the investment and credit portfolio and recommend actions regarding litigation matters and impaired loans.

Board Remuneration, Nomination & Corporate Governance Committee(BRNCGC)

It is the responsibility of BRNCGC to determine the remuneration guidelines for the Board of Directors and executive management. It is also the responsibility of BRNCGC to review and assess the corporate governance policies of the bank and recommend improvements to the Board of Directors.

Board Risk and Compliance Committee(BRCC)

It is the responsibility of BRCC to oversee the overall financial and operational risk profile of the bank. It is also the responsibility of BRCC to monitor and set limits for distinct types of risks.



The memberships of the Board Committees

Members Name Board Audit Committee

Board Executive Committee

Board Remuneration, Nomination & Corporate Governance Committee

Board Risk and Compliance Committee

H.E. Sh. Thani Bin Hamad Bin Khalifa Al Thani √

Sh. Jabor Bin Hamad Bin Jassim Bin Jabor Al-Thani √ √

H.E. Sh. Suhaim Bin Abdullah Bin Khalifa Al-Thani √ √

Ibrahim Dabdoub √ √ √

H.E. Sh. Sultan Bin Jassim Bin Mohammad Al-Thani √ √

Mohammad Mahmoud Al-Okar √ √ √

The overlapping membership among the distinct committees is to ensure the link between the decision making in each committee to support overall strategic objective congruence.

Board Committee Meetings

The Board Committees meet as required or in accordance with the minimum number specified in the respective Terms of Reference.

Board Committee No of meetings held

Board Audit Committee 1

Board Executive Committee 3

Board Remuneration, Nomination & Corporate Governance Committee 4

Board Risk and Compliance Committee 12

Board Training & Development

Board Members are provided with a training and development package for the purpose of enhancing and maintaining their ability to meet all of their professional responsibilities and duties.

Board Remuneration

Board members remuneration is in accordance with the Qatar Central Bank circular 18/2014 and the remuneration structure and amount is presented and approved by the shareholders during the General Assembly accordingly.

The Board of Directors, and members of the various committees, is paid a fixed annual remuneration. For the year 2015, a total amount of QAR 3.6 million was paid to the Board members.

Management Committees

The following management committees are established for effective corporate governance at A. The functioning of these committees is guided by their respective terms of reference:

Asset Liability & Investment Committee(ALICO)

ALICO has been established to monitor and manage specific elements of the balance sheet; capital structure, funding and liquidity requirements, market and regulatory aspects of the trading and non-trading portfolios as well as developing A’s investment portfolio thereby assisting the Bank to manage investments, optimise returns and oversee risk.

Executive Credit Committee(ECC)

ECC has been established to exercise the power and authority delegated to it by the Board of Directors (BOD) and the Board Executive Committee (BEC). The ECC shall ensure that the quality of A’s credit portfolio remains within approved risk limits, in terms of both qualitative and quantitative parameters and credit policies approved by the BOD.

Human Resources Committee(HRC)

HRC has been established to review human resources strategy, evaluate progress and administer all elements of compensation, ensuring that A can successfully attract, retain and motivate employees. The HRC will also review Qatarization initiatives, progress and strategy and develop new and innovative training concepts to ensure that the workforce is operating at optimum levels.

Management Executive Committee(MEC)

MEC has been established to exercise the power and authority delegated to it by the Board of Directors (BOD) or the Board Executive Committee (BEC) to manage A.

Risk Management Committee(RMC)

RMC has been established to oversee the risk and compliance issues currently arising from the business activities now and potentially in the future. The RMC oversees all material risks affecting the bank and in particular – credit, liquidity, interest rate, market, operational, legal and reputational risks. The RMC oversees the implementation and adherence to the approved policies of A across its business lines to ensure that compliance with these policies and with regulatory requirements is properly managed, monitored, measured and reported.



Risk Management

Risk is inherent in the Bank’s activities and it is managed at various levels of the Bank, including the Board level. The Board’s sub-committees, the executive management team, and management committees manage risk through a process of ongoing identification, measurement, monitoring and reporting, within the approved risk limits and other internal controls. Documented policies, procedures and the Bank’s risk appetite document provide the parameters within which risk is ultimately controlled.

As part of enhancing the bank's risk management framework, quantitative models for internal capital adequacy assessment process (ICAAP) including stress tests which were internally developed are being continuously enhanced. Further, in order to ensure integration of ICAAP into the bank's day-to-day business and operations, regular education and orientation is being promoted. The bank also regularly reviews its risk policies following which key revisions are carried out so that the policies and limits remain relevant to the bank’s business and operating environment. Credit risk management is being improved by enhancing the predictive power of the existing risk rating tools. Further, portfolio level credit risk management is now also being guided by early warning indicators selected around macro-economic parameters. The Bank has strengthened its operational risk framework by implementing risk control self-assessments (RCSA) and an automated tool for operational risk management. Given the increasing vulnerability of the financial system to cyber and other information security threats, the Bank has invested in additional security tools that prevent external intrusions and monitor logs to detect potential wrongdoing. Emphasis is also being given to raising bank wide and customer awareness of potential areas of threat to improve their vigilance.

Internal Audit

The Internal Audit function reports to the Board Audit Committee. The function carries out independent and comprehensive reviews of activities in all the areas of A using a risk-based approach, and assists A in assessing its operations and identifying any process gaps that could be enhanced through further controls.

Statutory Auditor & fees

A’s statutory auditor is KPMG. In accordance with Qatar Commercial law and Qatar Central Bank guidelines (article no 141 of the commercial companies law no 5 of year 2002) the duration of the contract between the bank and the auditor must not exceed five years, after which a different auditor must be appointed. The earlier auditor may be appointed after two years from its last appointment in the bank. KPMG has been A’s statutory auditor since 2012 and a tender will be conducted in 2016 with a view to rotating the statutory audit firm for the 2017 audit onwards. KPMG will consequently not be asked to tender.

Audit fees 2015 ‘000 (QAR)

Audit fee 255

Other assurance fees 736

Other fees 996

Total Audit fees 1987

A’s statutory auditor is used for non-audit services only when Qatar Central Bank (QCB) specifically nominates the A’s statutory auditor to perform a specific assignment and/or there is no alternative in terms of quality, cost and availability and there is no actual or perceived conflict of interest in executing their duties as external auditors.

Any non-audit services to be performed by statutory auditors require written approval of the Board Audit Committee (BAC) or any other delegated authority. These non-audit assignments are not a prescribed list, hence to be considered on case by case basis based on its own merits.

Compliance

The Compliance function reports to the Board Risk & Compliance Committee (BRCC) with administrative reporting to the Head of Risk. The function ensures that A procedures and activities meet statutory requirements and regulations. It also ensures and reports that the activities of the Bank are in compliance with Qatar Central Bank’s regulations and laws. The Compliance function operates in accordance with an approved policy and compliance manual, updated to reflect current requirements.

Executive Management Team

Day-to-day management of A is delegated to the Managing Director, who is aided by an experienced Executive Management team. The Executive Management team meets on a quarterly basis to discuss all areas pertinent to the Bank’s strategic and tactical direction. More details on the executive management team are available in A website.


Independent auditors’ report


Report on the consolidated financial statements

We have audited the accompanying consolidated financial statements of International Bank of Qatar (Q.S.C.) (the “Bank”) and its subsidiaries (together referred to as the “Group”), which comprise the consolidated statement of financial position as at 31 December 2015, and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Responsibility of the board of directors for the consolidated financial statements

The board of directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards and the applicable provisions of Qatar Central Bank regulations and for such internal control as the board of directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we considered internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

to the shareholders ofInternational Bank of Qatar (Q.S.C.)

Independent auditors’ report


Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2015, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards and applicable provisions of the Qatar Central Bank regulations.

Report on other legal and regulatory requirements

We have obtained all the information and explanations which we consider necessary for the purpose of our audit. The Bank has maintained proper accounting records and consolidated financial statements are in agreement therewith. We are not aware of any violations of the applicable provisions of Qatar Central Bank Law No.13 of 2012, Qatar Commercial Law No. 11 of 2015 or the terms of Articles of Association which might have had a material adverse effect on the business of the Bank or its consolidated financial position as at 31 December 2015.

Yacoub HobeikaPartnerKPMG, Statutory auditorQatar Auditor’s Registry No. 289Date: 18 January 2016 Doha, Qatar


International Bank of Qatar (Q.S.C.) Consolidated Statement of Financial Position

QAR ‘000s


The attached notes 1 to 31 form an integral part of these consolidated financial statements.

As at 31 December Notes 2015 2014

ASSETS

Cash and balances with Qatar Central Bank 7 1,074,277 1,756,698

Due from banks 8 6,100,929 5,799,708

Loans and advances to customers 9 20,668,895 19,856,625

Investment securities 10 3,560,109 2,954,936

Property and equipment 11 225,312 226,142

Other assets 12 280,490 287,990

TOTAL ASSETS 31,910,012 30,882,099

LIABILITIES

Due to banks 13 4,869,916 4,332,343

Customer deposits 14 20,175,679 21,209,805

Debt securities 15 1,803,515 -

Other liabilities 16 664,728 798,178

TOTAL LIABILITIES 27,513,838 26,340,326

EQUITY

Share capital 17 (a) 1,100,000 1,100,000

Legal reserve 17 (b) 2,025,884 2,025,884

Risk reserve 17 (c) 483,710 482,953

Fair value reserve 17 (d) 52,332 97,511

Retained earnings 734,248 835,425

TOTAL EQUITY 4,396,174 4,541,773

TOTAL LIABILITIES AND EQUITY 31,910,012 30,882,099

These consolidated financial statements for the year ended 31 December 2015 were approved by the Board of Directors on 18 January 2016 and were signed on its behalf by:

……………….......................................................... ................................................................. H.E. Sheikh Hamad Bin Jassim Bin Jabor Al Thani Omar Bouhadiba Chairman Managing Director

International Bank of Qatar (Q.S.C.)for the year ended 31 December 2015

Consolidated financial statements


For the year ended 31 December Notes 2015 2014

Interest income 18 744,904 753,582

Interest expense 19 (175,820) (154,355)

Net interest income 569,084 599,227

Fee and commission income 157,710 154,003

Fee and commission expense (29,495) (30,387)

Net fee and commission income 20 128,215 123,616

Net gain from foreign exchange 21 66,167 62,062

Net (loss) / income from investment securities 22 (12,188) 85,257

Net operating income 751,278 870,162

Staff costs 23 (159,161) (164,767)

Depreciation 11 (17,170) (18,568)

Net impairment loss on investment securities (15,003) (1,462)

Net impairment loss on loans and advances to customers 9 (c) (72,405) (3,271)

Other expenses 24 (87,459) (102,650)

Profit 400,080 579,444

Earnings per share

Basic and diluted earnings per share(QAR per share) 25 3.64 5.27

International Bank of Qatar (Q.S.C.)Consolidated Income Statement

QAR ‘000s

The attached notes 1 to 31 form an integral part of these consolidated financial statements. 56ــــــــــــــــــــ57

For the year ended 31 December Notes 2015 2014

Profit 400,080 579,444

Other comprehensive income

Items that are or may be reclassified subsequently to consolidated income statement

Available-for-sale investments:

Net valuation charged to equity 17 (d) (62,525) 53,622

Net amount transferred to consolidated income statement 17 (d) 17,346 (59,685)

Other comprehensive income (45,179) (6,063)

Total comprehensive income 354,901 573,381

International Bank of Qatar (Q.S.C.)Consolidated Statement of Comprehensive Income

QAR ‘000s



International Bank of Qatar (Q.S.C.)Consolidated Statement of Changes in Equity

QAR ‘000s


Notes Share capital

Legal reserve

Risk reserve

Fair value reserve

Retained earnings

Total equity

Balance as at 1 January 2014 1,100,000 2,025,884 415,407 103,574 804,227 4,449,092

Total comprehensive income

Profit - - - - 579,444 579,444

Other comprehensive income - - - (6,063) - (6,063)

Total comprehensive income - - - (6,063) 579,444 573,381

Transactions with equity holders

Transfer to risk reserve 17 (c) - - 67,546 - (67,546) -

Dividends paid 17 (e) - - - - (480,700) (480,700)

Total contributions and distributions - - 67,546 - (548,246) (480,700)

Balance as at 31 December 2014 1,100,000 2,025,884 482,953 97,511 835,425 4,541,773


International Bank of Qatar (Q.S.C.)Consolidated Statement of Changes in Equity (continued)

QAR ‘000s


Notes Share capital

Legal reserve

Risk reserve

Fair value reserve

Retained earnings

Total equity

Balance as at 1 January 2015 1,100,000 2,025,884 482,953 97,511 835,425 4,541,773

Total comprehensive income

Profit - - - - 400,080 400,080

Other comprehensive income - - - (45,179) - (45,179)

Total comprehensive income - - - (45,179) 400,080 354,901

Transactions with equity holders

Transfer to risk reserve 17 (c) - - 757 - (757) -

Dividends paid 17 (e) - - - - (500,500) (500,500)

Total contributions and distributions - - 757 - (501,257) (500,500)

Balance as at 31 December 2015 1,100,000 2,025,884 483,710 52,332 734,248 4,396,174

Cash dividend of QAR 347,600 thousand (2014: QAR 500,500 thousand) has been proposed by the Board of Directors for the year ended 31 December 2015, and has been approved by the shareholders at the Annual General Meeting.

International Bank of Qatar (Q.S.C.)Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2015 QAR ‘000s


For the year ended 31 December Notes 2015 2014Cash flows from operating activitiesProfit 400,080 579,444Adjustments for:Net impairment loss on loans and advances to customers 9 (c) 72,405 3,271Net impairment loss on investment securities 15,003 1,462Provision for staff indemnity 16 (a) 7,457 6,597Depreciation 11 17,170 18,568Amortisation of premium on investment securities 24,884 16,291Amortisation of discount and transaction costs on debt securities 15 256 -Dividend income 22 (6,516) (1,100)Net loss / (gain) on disposal of investment securities 22 18,704 (84,157)Net loss / (gain) on disposal of property and equipment 57 (2,222)Profit before changes in operating assets and liabilities 549,500 538,154Changes in operating assets and liabilities:Change in cash reserve with Qatar Central Bank 122,835 141,247Change in due from banks 1,037,400 -Change in loans and advances to customers (977,495) (2,849,671)Change in other assets 7,500 (35,391)Change in due to banks 537,573 2,794,729Change in customer deposits (1,034,126) (617,038)Change in other liabilities (43,881) (46,294)Cash from / (used in) operations 199,306 (74,264)Dividend received 6,516 1,100Staff indemnity paid 16 (a) (4,206) (3,897)Net cash from / (used in) operating activities 201,616 (77,061)Cash flows from investing activitiesAcquisition of investment securities (1,068,038) (5,369,115)Proceeds from sale/redemption of investment securities 359,095 9,956,447Acquisition of property and equipment 11 (16,462) (188,569)Proceeds from disposal of property and equipment 65 9,739Net cash (used in) / from investing activities (725,340) 4,408,502Cash flows from financing activitiesProceeds from issue of debt securities 15 1,803,259 -Dividends paid 17 (e) (500,500) (480,700)Net cash from / (used in) financing activities 1,302,759 (480,700)Net increase in cash and cash equivalents 779,035 3,850,741Cash and cash equivalents as at 1 January 5,507,976 1,657,235Cash and cash equivalents as at 31 December 27 6,287,011 5,507,976Operational cash flows from interests Interest received 766,440 716,011Interest paid 143,500 180,018

International Bank of Qatar (Q.S.C.)Consolidated Statement of Cash Flows

QAR ‘000s

The attached notes 1 to 31 form an integral part of these consolidated financial statements. 60ــــــــــــــــــــ61

1. REPORTING ENTITYThe International Bank of Qatar (Q.S.C.) (the “Bank”) was established in the State of Qatar on 1 November 1956 as Ottoman Bank. On 31 July 2000, the Bank was incorporated as Grindlays Qatar Bank under Emiri Decree Number 4 of 2000. The principal shareholders were four Qatari incorporated companies with limited liability (W.L.L.) holding 60% of the Bank’s share capital and Standard Chartered Grindlays Bank Ltd. holding 40%.

Standard Chartered Grindlays Bank Ltd. sold its shareholding to the Qatari shareholders on 31 May 2003.

On 30 August 2004, National Bank of Kuwait S.A.K (“NBK”) acquired 20% of the shareholding in the Bank and the name of the Bank was changed to International Bank of Qatar (Q.S.C.) effective 1 September 2004. Subsequently, the shareholding of NBK was increased to 30% effective 1 August 2007. In 2014 a sale and purchase agreement was signed by NBK and certain Qatari investors by which NBK sold its entire 30% shareholding in the Bank to them.

The Bank is engaged in commercial banking activities and operates through its Head Office at Suhaim Bin Hamad Street, Doha (Postal address P.O. Box 2001, Doha, Qatar) and five branches established in the State of Qatar.

The consolidated financial statements for the year ended 31 December 2015 comprise the Bank and its subsidiary (together referred to as “the Group”). The principal subsidiary of the Group is as follows:

Company’s name

Country of incorportaion

Company’sactivities

Percentage of ownership

Year of incorporation

A Finance Limited

Cayman Islands

Debt issuance

100% 2015

2. BASIS OF PREPARATION(a) Statement of complianceThe consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and IFRS Intepretations Committee (“IFRIC”) interpretations issued by the International Accounting Standards Board (“IASB”) and the applicable provisions of Qatar Central Bank (“QCB”) regulations.

International Bank of Qatar (Q.S.C.)Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2015 QAR ‘000sQAR ‘000s


International Bank of Qatar (Q.S.C.)Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2015

2. BASIS OF PREPARATION (CONTINUED)(b) Basis of measurementThe consolidated financial statements have been prepared on the historical cost convention, as modified by the revaluation of available for sale assets and financial assets and liabilities (including derivatives and trading investments) at fair value through profit or loss.

(c) Functional and presentation currencyThese consolidated financial statements are presented in Qatari Riyals (“QAR”), which is the Bank’s functional and presentation currency. Except as otherwise indicated, financial information presented in QAR has been rounded to the nearest thousand.

(d) Use of estimates and judgementsIn determining the carrying amounts of certain assets and liabilities, the Group makes assumptions of the effects of uncertain future events on those assets and liabilities at the consolidated financial position date.

Estimates and underlying assumptions are based on historical experience and expectations of future events and are reviewed periodically. Further information about key assumptions concerning the future, and other key sources of estimation uncertainty are set out in the relevant disclosure notes contained within these consolidated financial statements (note 5). 3. SIGNIFICANT ACCOUNTING POLICIESThe accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and have been applied consistently by all Group entities.

(a) Basis of consolidationThe consolidated financial statements comprise the financial statements of the Bank and its subsidiary (“the Group”) as at 31 December 2015.

Structured entities are consolidated when the substance of the relationship between the Bank and the structured entity indicates the Bank’s power over the entity.

i) SubsidiariesSubsidiaries are all entities (including structured entities) controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(a) Basis of consolidation (continued)i) Subsidiaries (continued)Control is achieved when the Group is exposed, or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The accounting policies of subsidiaries have been aligned to the Group accounting policies

ii) Loss of ControlUpon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in consolidated income statement. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or in accordance with the Group’s accounting policy for financial instruments depending on the level of influence retained.

iii) Transactions eliminated on consolidationIntra-group balances, transactions and unrealised gains arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are also eliminated.

(b) Foreign currencyTransactions and BalancesForeign currency transactions are translated in to the functional currency using the exchange rates prevailing at the transaction date. Foreign exchange gains and losses resulting from the settlement of such transactions and from translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated income statement. Non-monetary assets and liabilities are translated at the historical exchange rate if held at historical cost, or year-end exchange rates if held at fair value, and the resulting foreign exchange gains and losses are recognised in either the consolidated income statement or shareholder’s equity depending upon the treatment of the gain or loss on the asset or liability.





3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(c) Financial assets and financial liabilities(i) Recognition and initial measurementPurchases and sales of financial assets and liabilities held at fair value through profit or loss, and financial assets classified as held-to-maturity and available-for-sale are initially recognised on the trade-date (the date on which the Group commits to purchase or sell the asset). Loans are recognised when cash is advanced to the borrowers. All financial instruments are initially recognised at fair value, which is normally the transaction price plus, for those financial assets and liabilities not carried at fair value through profit and loss, directly attributable transaction costs.

In certain circumstances, the initial fair value may be based on a valuation technique which may lead to the recognition of profits or losses at the time of initial recognition. However, these profits or losses can only be recognised when the valuation technique used is based solely on observable market data. In those cases where the initially recognised fair value is based on a valuation model that uses inputs which are not observable in the market, the difference between the transaction price and the valuation model is not recognised immediately in the consolidated income statement. The difference is amortised to the consolidated income statement until the inputs become observable, or the transaction matures or is terminated.

(ii) ClassificationThe Group classifies its financial assets into the following measurement categories: financial assets held at fair value through profit or loss; loans and receivables; held-to-maturity; and available-for-sale. Financial liabilities are classified as either held at fair value through profit or loss, or at amortised cost. Management determines the classification of its financial assets and liabilities at initial recognition or, where applicable, at the time of reclassification.

Financial assets and liabilities held at fair value through profit or lossThis category has two sub-categories: financial assets and liabilities held for trading, and those designated at fair value through profit or loss at inception. A financial asset or liability is classified as trading if acquired principally for the purpose of selling in the short term.

Financial assets and liabilities may be designated at fair value through profit or loss when:

The designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities on a different basis

A group of financial assets and/or liabilities is managed and its performance evaluated on a fair value basis

The assets or liabilities include embedded derivatives and such derivatives are required to be recognised separately.

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(c) Financial assets and financial liabilities (continued)(ii) Classification (continued)Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and it is expected that substantially all of the initial investment will be recovered, other than because of credit deterioration.

Held-to-maturityHeld-to-maturity assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the intention and ability to hold to maturity.

Available-for-saleAvailable-for-sale assets are those non-derivative financial assets intended to be held for an indefinite period of time, which may be sold in response to liquidity requirements or changes in interest rates, exchange rates, commodity prices or equity prices.

Financial liabilities held at amortised costFinancial liabilities, which include borrowings, not classified held at fair value through profit or loss are classified as amortised cost instruments.

(iii) DerecognitionFinancial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Group has transferred substantially all risks and rewards of ownership. If substantially all the risks and rewards have been neither retained nor transferred and the Group has retained control, the assets continue to be recognised to the extent of the Group’s continuing involvement.

Financial liabilities are derecognised when they are extinguished. A financial liability is extinguished when the obligation is discharged, cancelled or expires. If the Group purchases its own debt, it is removed from the consolidated financial position, and the difference between the carrying amount of the liability and the consideration paid is included in ‘Other income’.

(iv) OffsettingFinancial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.





3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(c) Financial assets and financial liabilities (continued)(v) Measurement principles• Subsequent measurementFinancial assets and liabilities held at fair value through profit or loss are subsequently carried at fair value, with gains and losses arising from changes in fair value taken directly to the net trading income line in the consolidated income statement.

Available-for-sale financial assets are subsequently carried at fair value, with gains and losses arising from changes in fair value taken to the available-for-sale reserve within equity until the asset is sold, or is impaired, when the cumulative gain or loss is transferred to the consolidated income statement.

Loans and receivables and held-to-maturity financial assets are subsequently carried at amortised cost using the effective interest method.

Financial liabilities are subsequently stated at amortised cost, with any difference between proceeds net of directly attributable transaction costs and the redemption value recognised in the consolidated income statement over the period of the borrowings using the effective interest method.

• Fair value measurement‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

The fair value of financial instruments is generally measured on the basis of the individual financial instrument. However, when a group of financial assets and financial liabilities is managed on the basis of its net exposure to either market risks or credit risk, the fair value of the group of financial instruments is measured on a net basis.

The fair values of quoted financial assets and liabilities in active markets are based on current prices. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If the market for a financial instrument, and for unlisted securities, is not active, the Group establishes fair value by using valuation techniques.

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(c) Financial assets and financial liabilities (continued)(vi) Identification and measurement of impairmentAt each reporting date, the Group assesses whether there is objective evidence that financial assets not carried at fair value through profit or loss are impaired. A financial asset or a group of financial assets is impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset(s), and that the loss event has an impact on the future cash flows of the asset(s) that can be estimated reliably.

Objective evidence that financial assets are impaired can include significant financial difficulty of the borrower, default or delinquency by a borrower, restructuring of a loan or advance by the Group on terms that the Group would not otherwise consider, indications that a borrower will enter bankruptcy, the disappearance of an active market for a security, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers in the group, or economic conditions that correlate with defaults in the group of assets.

The Group considers evidence of impairment loss for loans and advances to customers at both a specific asset and collective level. All individually significant loans and advances to customers and investment securities are assessed for specific impairment. All individually significant loans and advances to customers and investment securities found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and advances to customers that are not individually significant are collectively assessed for impairment by grouping together loans and advances to customers with similar risk characteristics.

Impairment losses on financial assets carried at amortised cost are measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. Impairment losses are recognised in income statement and reflected in an allowance account against financial assets.

The Group writes off loans and advances to customers and investment securities when it is known not to be collectible.

For listed investments, a decline in the market value by 20% from cost or more, or for a continuous period of nine months or more, are considered to be indicators of impairment.





3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(c) Financial assets and financial liabilities (continued)(vi) Identification and measurement of impairment (continued)Impairment losses on available-for-sale investment securities are recognised by transferring the cumulative loss that has been recognised in other comprehensive income to income statement as a reclassification adjustment. The cumulative loss that is reclassified from other comprehensive income to income statement is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in the income statement. Changes in impairment provisions attributable to time value are reflected as a component of interest income.

While in subsequent periods, the appreciation in fair value of impaired available-for-sale investment securities is recorded in fair value reserves, debt instruments appreciation in fair value that can be related to an event occurring after the impairment loss is recognised as part of the income statement.

(vii) ReclassificationsReclassifications of financial assets, other than as set out below, or of financial liabilities between measurement categories are not permitted following initial recognition.

Held for trading non-derivative financial assets can only be transferred out of the held at fair value through profit or loss category in the following circumstances: to the available-for-sale category, where, in rare circumstances, they are no longer held for the purpose of selling or repurchasing in the near term; or to the loan and receivables category, where they are no longer held for the purpose of selling or repurchasing in the near term and they would have met the definition of a loan and receivable at the date of reclassification and the Group has the intent and ability to hold the assets for the foreseeable future or until maturity.

Financial assets can only be transferred out of the available-for-sale category to the loan and receivables category where they would have met the definition of a loan and receivable at the date of reclassification and the Group has the intent and ability to hold the assets for the foreseeable future or until maturity.

Held-to-maturity assets must be reclassified to the available-for-sale category if the portfolio becomes tainted following the sale of other than an insignificant amount of held-to-maturity assets prior to their maturity.

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(c) Financial assets and financial liabilities (continued)(vii) Reclassifications (continued)Financial assets are reclassified at their fair value on the date of reclassification.For financial assets reclassified out of the available-for- sale category into loans and receivables, any gain or loss on those assets recognised in shareholders’ equity prior to the date of reclassification is amortised to the consolidated income statement over the remaining life of the financial asset, using the effective interest method.

(d) Cash and cash equivalents consolidatedFor the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash, on demand and overnight balances with central banks (unless restricted) and balances with less than three months’ maturity from the date of acquisition, including treasury bills and other eligible bills, loans and advances to banks, and short-term government securities.

Cash and cash equivalents are carried at amortised cost in the consolidated statement of financial position

(e) Derivatives(i) Derivatives held for trading purposesThe Group sells derivatives to customers in order to enable them to transfer, modify or reduce current and future risks. These derivative instruments are fair valued as at the reporting date and the corresponding fair value changes is taken to the consolidated income statement.

(ii) Other non-trading derivatives When a derivative is not held for trading, and is not designated in a qualifying hedge relationship, all changes in its fair value are recognised immediately in the consolidated income statement.

(f) Property and equipment(i) Recognition and measurementItems of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and capitalised borrowing costs.





3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(f) Property and equipment (continued)(i) Recognition and measurement (continued)When parts of an item of property or equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.

The gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of the item of property and equipment, and is recognised in other expenses.

(ii) Subsequent costsThe cost of replacing a component of an item of property or equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property and equipment are recognised in consolidated income statement as incurred.

(iii) DepreciationDepreciable amount is the cost of property and equipment, or other amount substituted for cost, less its residual value.

Depreciation is recognised in the consolidated income statement on a straight-line basis over the estimated useful lives of each part of an item of property and equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset and is based on cost of the asset less its estimated residual value.

Freehold land is not depreciated although it is subject to impairment testing.

The estimated useful lives for the current and comparative years are as follows:

Leasehold improvements 5 – 7 years

Computer equipment 3 – 5 years

Furniture and equipment 5 – 7 years

Vehicles 5 years

Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted prospectively, if appropriate.

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(g) Impairment of non-financial assetsAssets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

(h) ProvisionsA provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(i) Financial guaranteesFinancial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee liabilities are recognised initially at their fair value, and the initial fair value is amortised over the life of the financial guarantee. The financial guarantee liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment when a payment under the guarantee has become probable.

(j) Contingent liabilities and other commitmentsAs at the reporting date, contingent liabilities and other commitments do not represent actual liabilities of the Group. Details of contingent liabilities and other commitments of the Group are provided in note 26.

(k) Employee benefitsThe Group provides end of service benefits to its expatriate employees. The entitlement to these benefits is based upon the employees’ final salary and length of service, subject to the completion of a minimum service period. The expected cost of these benefits is accrued over the period of employment. The provision for employees’ end of service benefits is disclosed under ‘‘Other liabilities’’.





3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(k) Employee benefits (continued)With respect to Qatari employees, the Group makes contributions to the Qatari Pension Fund calculated as a percentage of the employees’ salaries. The Group’s obligations are limited to these contributions.

(l) Dividends to shareholdersDividends to shareholders are recognised in equity in the period in which they are approved by the Annual General Meeting (AGM).

(m) Interest income and expenseInterest income and expense are recognised in consolidated income statement using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability to the carrying amount of the financial asset or liability. When calculating the effective interest rate, the Group estimates future cash flows considering all contractual terms of the financial instrument, but not future credit losses.

The calculation of the effective interest rate includes all transaction costs and fees and points paid or received that are an integral part of the effective interest rate.

Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or liability.

(n) Fees and commission Fees and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate.

Other fees and commission income, including account servicing fees, sales commission and syndication fees are recognised as the related services are performed. When a loan commitment is not expected to result in the draw-down of a loan, the related loan commitment fees are recognised using effective interest rate method over the commitment period.

Other fees and commission expense relate mainly to transaction and service fees, which are expensed as the services are received.

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(o) Income from investment securitiesGains or losses on the sale of investment securities are recognised in the consolidated income statement as the difference between fair value of the consideration received and carrying amount of the investment securities.

Income from held to maturity investment securities is recognised based on the effective interest rate method.

(p) Dividend on equityDividends on equity instruments are recognised in the consolidated income statement within “Net income from investment securities” when the Group’s right to receive payment is established.

(q) Fiduciary assetsThe Group commonly acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of customers. The assets and income arising thereon are excluded from these consolidated financial statements as they are not assets and income of the Group.

(r) Repossessed collateralRepossessed collaterals against settlement of customers’ debts are stated within the consolidated statement of financial position under “Other assets” at their acquisition value net of allowance for impairment.

According to QCB instructions, the Group should dispose of any land and properties acquired against settlement of debts within a period not exceeding three years from the date of acquisition although this period can be extended after obtaining approval from QCB.

(s) Renegotiated loans and advancesLoans whose original terms have been modified including those subject to forbearance strategies are considered renegotiated loans. If the renegotiations are on terms that are not consistent with those readily available on the market, this provides objective evidence of impairment and the loan is assessed accordingly.





3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(t) New standards, amendments and interpretations effective from 1 January 2015Except for the below authoritative pronouncement which introduce certain improvements to existing standards, the Group has consistently applied the accounting policies. The following amendments, became effective as of 1 January 2015, and were adopted by the Group in preparation of these consolidated financial statements and did not have any significant impact on the accounting policies, financial position and performance of the Group;

• Annual Improvements to IFRSs 2010–2012 and 2011–2013 Cycles various standards

(u) New standards, amendments and interpretations issued but not yet effectiveA number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2015 and earlier application is permitted; however, the Group has not early adopted the following new or amended standards in preparing these consolidated financial statements:

• IFRS 9 Financial InstrumentsIFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Group is assessing the potential impact on its financial statements resulting from the application of IFRS 9.

• IFRS 15 Revenue from Contracts with CustomersIFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue and IFRIC 13 Customer Loyalty Programmes.

IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 15.

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(u) New standards, amendments and interpretations issued but not yet effective (continued)• Clarification of Acceptable Methods of Depreciation and Amortisation

(Amendments to IAS 16 and IAS 38)The amendment to IAS 16 prohibits entities from using a revenue based depreciation method for items of property, plant and equipment. The amendments to IAS 38 introduce a rebuttable presumption that revenue is not an appropriate basis for amortisation of an intangible asset. This presumption can only be rebutted if the intangible asset is expressed as a measure of revenue or when it can be demonstrated that revenue and consumption of the economic benefits of the intangible asset are highly correlated.

The amendments apply prospectively for annual periods beginning on or after 1 January 2016. Early adoption is permitted.

The Group does not expect this standard to have a significant impact on its consolidated financial statements.

• Annual Improvements to IFRSs 2012–2014 Cycle – various standardsThe annual improvements to IFRSs to 2012-2014 cycles include a number of amendments to various IFRSs. Most amendments will apply prospectively for an annual period beginning on or after 1 January 2016; earlier application is permitted (along with the special transitional requirement in each case), in which case the related consequential amendments to other IFRSs would also apply.

The Bank is assessing the potential impact on its consolidated financial statements resulting from the application.

The following are the key amendments in brief:• IFRS 7 – specific guidance for transferred financial assets to help

management determine whether the terms of a servicing arrangement constitute ‘continuing involvement’ and, therefore, whether the asset qualifies for derecognition.

• Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)Amendments made to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in associates and joint ventures clarify that: • The exception from preparing consolidated financial statements is also available

to intermediate parent entities which are subsidiaries of investment entities.





3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)(u) New standards, amendments and interpretations issued but not yet effective (continued)• An investment entity should consolidate a subsidiary which is not an

investment entity and whose main purpose and activity is to provide services in support of the investment entity’s investment activities.

• Entities which are not investment entities but have an interest in an associate or joint venture which is an investment entity have a policy choice when applying the equity method of accounting. The fair value measurement applied by the investment entity associate or joint venture can either be retained, or a consolidation may be performed at the level of the associate or joint venture, which would then unwind the fair value measurement.

• The amendments to IFRS 10 apply prospectively for annual periods beginning on or after 1 January 2016. Early adoption is permitted.

• Disclosure Initiative (Amendments to IAS 1)The amendments to IAS 1 Presentation of Financial Statements are made in the context of the IASB’s Disclosure Initiative, which explores how financial statement disclosures can be improved. The amendments provide clarifications on a number of issues, including:• Materiality – an entity should not aggregate or disaggregate information

in a manner that obscures useful information. Where items are material, sufficient information must be provided to explain the impact on the financial position or performance.

• Disaggregation and subtotals – line items specified in IAS 1 may need to be disaggregated where this is relevant to an understanding of the entity’s financial position or performance. There is also new guidance on the use of subtotals.

• Notes – confirmation that the notes do not need to be presented in a particular order.

• OCI arising from investments accounted for under the equity method – the share of OCI arising from equity-accounted investments is grouped based on whether the items will or will not subsequently be reclassified to profit or loss. Each group should then be presented as a single line item in the statement of other comprehensive income.

According to the transitional provisions, the disclosures in IAS 8 regarding the adoption of new standards/accounting policies are not required for these amendments. The amendments apply prospectively for annual periods beginning on or after 1 January 2016. Early adoption is permitted.

4. FINANCIAL RISK MANAGEMENT(a) Risk management framework Risks are inherent in the Group’s activities with the material risks being credit risk, concentration risk, operational risk, liquidity risk, business risk, market risk and, interest rate risk in the banking book. As part of the Group’s Internal Capital Adequacy Assessment Process (ICAAP), these risks are managed through an appropriate governance and infrastructure around identifying, measuring, monitoring and reporting risks. The Group considers its risk management and ICAAP framework as indispensable in meeting its primary objectives of protecting depositors, creditors, shareholders and the financial system at large.

GovernanceGovernance provides the basic corporate framework around which the Group’s businesses and risks are managed. This includes the establishment of board and management committees with due segregation of roles, business and risk strategy, risk appetite and policies.

Governance structureThe Board of Directors (BoD) has the ultimate responsibility for the bank’s performance and position. The Board is also responsible for establishing the bank’s strategy, identifying and controlling risks, and for establishing the Group’s risk appetite limits. The BoD is responsible for ensuring that the overall strategic and organisational objectives of the Group are attained. To accomplish this objective, the Group has established independent bodies responsible for managing and monitoring specific risks. The Group has five Management Level committees who report into four Board Level committees.

Board Committees

Board Risk and Compliance Committee (BRCC)The Board Risk and Compliance Committee (BRCC) oversees the risk and compliance issues arising from current and future business activities. The BRCC oversees all material risks to which the Group is exposed and recommends the most appropriate risk strategy, appetite, policies and limits to the BoD. The BRCC also oversees the implementation of, and adherence to the approved policies of A across its business lines to ensure that risk and compliance with these policies and with regulatory requirements are properly managed, monitored, measured and reported. In line with the need to maintain independence, the Risk and Compliance functions report to the BRCC.





4. FINANCIAL RISK MANAGEMENT (CONTINUED)(a) Risk management framework (continued)Board Executive Committee (BEC)The Board Executive Committee (BEC) oversees the strategic issues of the Group’s business activities. The BEC ensures, through a regular review of ongoing performance, that the management implements and adheres to the approved strategic and budgetary requirements of the Group as established by the Board. The BEC has also been delegated the BoD’s authority to approve credit facilities that are beyond the authorities of the management.

Board Remuneration, Nominations & Corporate Governance Committee (BRN&CGC)The Board Remuneration, Nominations & Corporate Governance Committee (BRN&CGC) has been established to ensure the smooth management of the Group corporate governance and human capital matters. It oversees the governance of the BoD, Board Committees and Executive Management and undertakes the development and promotion of corporate governance procedures and culture throughout the Group. Its mandate includes adherence to regulatory requirements and public reporting on corporate governance matters.

Board Audit Committee (BAC)The BoD established the Board Audit Committee (BAC) to assist in fulfilling its responsibilities for ensuring adequate internal controls throughout the Group. In particular, the BAC reviews all audit and inspection reports and monitors implementation of the recommendations.

Management Committees

Risk Management Committee (RMC)The Risk Management Committee (RMC) oversees implementation of the approved risk management framework. The RMC also monitors the implementation of and adherence to the approved policies of the Group across its business lines to ensure that risk and compliance with these policies and with regulatory requirements is properly managed, monitored, measured and reported. The RMC is charged amongst other things, with encouraging a risk aware culture within the Group at all levels.

Executive Credit Committee (ECC)A management level Executive Credit Committee (ECC) exercises the power and authority delegated to it by the BoD and the BEC to review and decide on credit proposals and transactions.

4. FINANCIAL RISK MANAGEMENT (CONTINUED)(a) Risk management framework (continued)Asset Liability and Investment Committee (ALICO)The Asset and Liability Committee (ALICO) monitors and manages the financial position of the Group; capital, funding, liquidity and the market risk of the trading and non-trading portfolios as well as developing the Group’s investment portfolio and assisting the Group to manage investments, optimise returns and oversee risk.

Management Executive Committee (MEC)The Management Executive Committee (MEC) exercises the power and authority delegated to it by the BoD and the BEC to establish operating plans to meet strategic objectives and to monitor and review progress of actions against budgets and plans.

Human Resources Committee (HRC)The Human Resources Committee (HRC) reviews HR strategy, evaluates progress and administers all elements of compensation ensuring that the Group can successfully attract, retain and motivate employees. HRC also reviews Qatarization initiatives, progress and strategy and develops new and innovative training concepts to ensure that the workforce is operating at optimum levels.

Internal auditRisk management processes throughout the Group are audited regularly by the internal audit function, which examines both the adequacy of the procedures and the Group’s compliance with the procedures. Internal Audit discusses the results of all assessments with management and reports its findings and recommendations to the Audit Committee.

Strategy, policies and infrastructureThe BoD approves the Group’s long-term strategy defining the primary objectives and targets. The BoD also lays down the risk strategy setting the constraints within which targets need to be met. Policies and risk appetite limits are defined by the BoD based on RMC recommendations.

Risk management processes throughout the Group are audited regularly by the Internal Audit function, which examines both the adequacy of the procedures and the Group’s compliance with the procedures. Internal Audit discusses the results of all assessments with management and reports its findings and recommendations to the BAC. In addition, the Group’s ICAAP is specifically audited by external auditors every year in line with QCB instructions.





4. FINANCIAL RISK MANAGEMENT (CONTINUED)(a) Risk management framework (continued)Information compiled from all businesses are examined and processed in order to analyse, control and identify risks in a timely manner. Monitoring and controlling risks is primarily performed based on limits established by the Board. These limits reflect the business strategy of the Board and the market environment as well as the level of risk approved by the Board. The risk positions vis-à-vis the limits are presented and discussed with the BOD, the Risk Management Committee, and the head of each business division.

(b) Credit riskCredit risk is the risk of financial loss to the Group if a borrower or counterparty in a financial transaction fails to meet its contractual obligations. It arises from lending, trade finance, treasury and other activities undertaken by the Group. The Group has established appropriate credit standards, policies and procedures for the management and monitoring of credit risks.

Retail lending procedures include adequate controls and pre-defined lending parameters as well as close portfolio monitoring to ensure that portfolio accretion and performance remains within the established risk appetite.

For Wholesale banking, the Group manages its credit risk exposure through careful screening and assessment of borrower’s and guarantor’s credit and through periodic credit and portfolio reviews.o The Group risk rates its wholesale customers using a rating tool that has

recently been validated. o The Group avoids undue concentrations of risks by limiting exposures to a

single name and sector. o The Group obtains collateral or credit support where appropriate, as a way

to mitigate credit risks. The types of collateral obtained include cash, mortgages over real estate properties and pledges over equity instruments. Credit support includes personal and/or corporate guarantees.

Note 9 discloses the distribution of loans and advances to customers by industrial sector. Note 4(b)(ii) discloses the geographical distribution of the Group’s assets at the reporting date.


4. FINANCIAL RISK MANAGEMENT (CONTINUED)(b) Credit risk (continued)(i) Maximum exposure to credit risk before collateral held or other credit enhancements

2015 2014

Credit risk exposures relating to assets recorded on the consolidated statement of financial position are as follows:

Balances with Qatar Central Bank 954,302 1,652,369

Due from banks 6,100,929 5,799,708

Loans and advances to customers 20,668,895 19,856,625

Investment securities - debt 3,559,893 2,826,289

Other assets 247,423 259,366

Total as at 31 December 31,531,442 30,394,357

Other credit risk exposures are as follows:

Guarantees 5,724,121 4,928,677

Letters of credit 803,951 743,193

Unutilised credit facilities 4,853,267 2,662,878

Total as at 31 December 11,381,339 8,334,748

The above table represents a worse-case scenario of credit risk exposure to the Group, without taking account of any collateral held or other credit enhancements attached. For financial assets recorded the exposures set out above are based on net carrying amounts as reported in the consolidated statement of financial position.




4. FINANCIAL RISK MANAGEMENT (CONTINUED)(b) Credit risk (continued)(ii) Concentration of risks of financial assets with credit risk exposure

Geographical sectorsThe following table breaks down the Group’s credit exposure at their carrying amounts (without taking into account any collateral held or other credit support), as categorised by geographical region. For this table, the Group has allocated exposures to regions based on the country of domicile of its counterparties.

31 December 2015 Qatar GCC Countries

Other Middle East

Rest of the world Total

Balances with Qatar Central Bank 954,302 - - - 954,302

Due from banks 4,909,230 293,482 1,439 896,778 6,100,929

Loans and advances to customers 20,309,109 359,786 - - 20,668,895

Investment securities - debt 3,241,204 318,689 - - 3,559,893

Other assets 244,004 2,965 454 - 247,423

29,657,849 974,922 1,893 896,778 31,531,442


Other Middle East


Balances with Qatar Central Bank 1,652,369 - - - 1,652,369

Due from banks 5,746,893 12,236 928 39,651 5,799,708

Loans and advances to customers 19,390,393 466,232 - - 19,856,625

Investment securities - debt 2,698,616 72,618 - 55,055 2,826,289

Other assets 258,392 273 - 701 259,366

29,746,663 551,359 928 95,407 30,394,357


4. FINANCIAL RISK MANAGEMENT (CONTINUED)(b) Credit risk (continued)(ii) Concentration of risks of financial assets with credit risk exposure (continued)

Geographical sectors


Other Middle East


Guarantees 3,892,710 261,310 2,252 1,567,849 5,724,121

Letters of credit 709,134 - 46,786 48,031 803,951

Unutilised credit facilities 4,793,792 59,475 - - 4,853,267

9,395,636 320,785 49,038 1,615,880 11,381,339


Other Middle East


Guarantees 3,079,560 148,951 113,720 1,586,446 4,928,677

Letters of credit 676,875 - 24,982 41,336 743,193

Unutilised credit facilities 2,662,878 - - - 2,662,878

6,419,313 148,951 138,702 1,627,782 8,334,748




4. FINANCIAL RISK MANAGEMENT (CONTINUED)(b) Credit risk (continued)(ii) Concentration of risks of financial assets with credit risk exposure (continued)

Industry sectorsThe following table, as an illustration, breaks down the Group’s credit exposure before taking into account collateral held or other credit enhancements, as categorised by the industry sectors of the Group’s counterparties.

Exposure 2015 Exposure 2014

Funded and unfunded

Government 5,641,242 9,738,053

Government agencies 1,650,156 1,921,492

Industry 1,061,047 488,522

Commercial 3,402,640 2,987,480

Services 6,820,527 6,882,077

Contracting 746,266 683,447

Real estate 6,267,334 3,338,612

Personal 5,938,654 4,350,578

Others 3,576 4,096

Contingent liabilities 11,381,339 8,334,748

42,912,781 38,729,105


4. FINANCIAL RISK MANAGEMENT (CONTINUED)(b) Credit risk (continued)(iii) Credit quality

Loans and advances to customers Due from banks Investment

securities - debtOther credit risk

exposure

2015 2014 2015 2014 2015 2014 2015 2014

Neither past due nor impaired

Low risk 20,185,498 19,046,019 6,100,929 5,799,708 3,559,893 2,826,289 11,346,860 8,334,748

Special mention 192,994 - - - - - 34,479 -

20,378,492 19,046,019 6,100,929 5,799,708 3,559,893 2,826,289 11,381,339 8,334,748

Past due but not impaired

Low risk 58,617 166,881 - - - - - -

Special mention - 465,615 - - - - - -

58,617 632,496 - - - - - -

Impaired

Substandard 243,980 224,854 - - - - - -

Doubtful 4,827 6,145 - - - - - -

Bad debts 205,995 166,913 - - - - - -

454,802 397,912 - - - - - -

Less: impairment allowance-specific (219,436) (216,222) - - - - - -

Less: impairment allowance-collective (3,580) (3,580) - - - - - -

(223,016) (219,802) - - - - - -

Total carrying amount 20,668,895 19,856,625 6,100,929 5,799,708 3,559,893 2,826,289 11,381,339 8,334,748




4. FINANCIAL RISK MANAGEMENT (CONTINUED)(b) Credit risk (continued)(iii) Credit quality (continued)Impaired loans and advances to customers and investment in debt securitiesIndividually impaired loans and advances to customers and investment debt securities are exposures which the Group determines that there is objective evidence of impairment and it does not expect to collect all principal and interest due according to the contractual terms of the loan/investment security agreement(s).

Loans and advances to customers past due but not impairedPast due but not impaired loans and advances to customers are those for which contractual interest or principal payments are past due, but the Group believes that impairment is not appropriate on the basis of the level of security/collateral available and/or the stage of collection of amounts owed to the Group.

2015 2014

Up to 30 days 3,700 105,460

31 to 60 days 54,221 58,246

61 to 90 days 696 468,790

Gross 58,617 632,496 Rescheduled loans and advances to customersRestructuring activities include; extended payment arrangements, approved management plans, modification and deferral of payments. During the year, the Group has rescheduled loans amounting QAR 208 thousand (2014: QAR 445,365 thousand).

Cash and cash equivalentsThe Group held cash and cash equivalents of QAR 6,287,011 thousand at 31 December 2015 (2014: QAR 5,507,976 thousand). The cash and cash equivalents held with QCB and financial institution counterparties that are rated at least A- amounted to QAR 5,884,678 thousand (2014: QAR 3,902,274 thousand). (iv) CollateralThe Group holds collateral and other credit enhancements against certain of its credit exposures. The determination of eligible collateral and the value of collateral are based on QCB regulations and are assessed by reference to market price or indexes of similar assets.


4. FINANCIAL RISK MANAGEMENT (CONTINUED)(b) Credit risk (continued)(iv) Collateral (continued)The Group has collateral in the forms of blocked deposits, pledge of shares or legal mortgage against the past due loans and advances to customers.

The aggregate collateral is QAR 4.39 million (2014: QAR 31.08 million) for past due up to 30 days and QAR 2.65 million (2014: QAR Nil) for past due from 61 to 90 days.

(v) Repossessed collateral

The Group obtained assets by taking possession of collateral held as security as follows:

2015 2014

Property 1,901 1,901

1,901 1,901

Repossessed properties are sold as soon as practicable, with the proceeds used to reduce the outstanding indebtedness. Repossessed property is classified in the consolidated statement of financial position within other assets.

(vi) Provisioning and write-off policyThe Group carries provisions on irregular and non-performing loans in accordance with QCB regulations. Furthermore, the Group writes-off a loan, accrued interest, and any related allowances for impairment losses, or an investment debt security balance, when the Group determines that the amounts owed are uncollectible after exhausting all means of collection. The determination to write-off an exposure is made after evaluating all relevant information, including the borrower’s, guarantor’s or issuer’s financial position, sources of repayment, proceeds from collateral and legal recourse. The amount written off during the year was QAR 663 thousand (2014: QAR 498 thousand).

(c) Liquidity riskLiquidity risk is the risk that the Group will be unable to meet its funding requirements. Liquidity risk arises from fluctuations in cash flows due to market disruptions or credit down grades, which may cause certain sources of funding to cease immediately.




4. FINANCIAL RISK MANAGEMENT (CONTINUED)(c) Liquidity risk (continued)(i) Management of liquidity riskThe Group maintains a portfolio of highly marketable and diverse assets that can be easily liquidated in the event of an unforeseen interruption of cash flow. In addition, the Group maintains a statutory deposit with the QCB. The liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specifically to the Group.

(ii) Exposure to liquidity riskLiquidity risk is monitored and managed by observing key liquidity ratios such as the Liquidity Adequacy Ratio and Loans to Deposit Ratio which ensure availability of adequate liquid assets. In addition the Group monitors Liquidity Coverage Ratio and the Net Stable Funding Ratio as part of the Basel III metrics applied by the QCB. These ratios assess the Group’s ability to meet short term liquidity stress situations and its availability of long-term / stable funds respectively. The Group also closely monitors its exposure to concentration risks on the liability side by regularly reviewing counterparties who provide significant funding (more than 1% of total liabilities). These reviews enable the Bank to identify and manage high risk significant counterparties.

Details of the reported Bank ratio of net liquid assets to deposits from customers at the reporting date and during the year were as follows:

2015 2014

At 31 December 114.08% 125.46%

Average for the year 105.94% 128.74%


4. FINANCIAL RISK MANAGEMENT (CONTINUED)(c) Liquidity risk (continued)(iii) Maturity analysis

Carrying amount

Less than 1 month 1-3 months 3-12

months 1-5 years More than 5 years

31 December 2015

Cash and balances with Qatar Central Bank 1,074,277 240,682 - - - 833,595

Due from banks 6,100,929 5,860,689 203,840 - 36,400 -

Loans and advances to customers 20,668,895 662,703 1,511,801 4,990,830 8,822,117 4,681,444

Investment securities 3,560,109 - - 2,763 3,285,348 271,998

Others assets 280,490 189,172 18,698 72,620 - -

Total 31,684,700 6,953,246 1,734,339 5,066,213 12,143,865 5,787,037

Due to banks 4,869,916 4,754,058 115,858 - - -

Customer deposits 20,175,679 15,891,629 2,797,699 1,434,112 52,239 -

Debt securities 1,803,515 - - - 1,803,515 -

Other liabilities 664,728 249,739 177,628 129,570 71,596 36,195

Total 27,513,838 20,895,426 3,091,185 1,563,682 1,927,350 36,195

Difference (13,942,180) (1,356,846) 3,502,531 10,216,515 5,750,842




4. FINANCIAL RISK MANAGEMENT (CONTINUED)(c) Liquidity risk (continued)(iii) Maturity analysis (continued)

Carrying amount

Less than 1 month 1-3 months 3-12 months 1-5 years More than 5

years

31 December 2014

Cash and balances with Qatar Central Bank 1,756,698 800,268 - - - 956,430

Due from banks 5,799,708 4,292,182 415,526 1,092,000 - -

Loans and advances to customers 19,856,625 2,098,029 4,596,338 3,947,276 6,214,985 2,999,997

Investment securities 2,954,936 128,647 - - 2,763,789 62,500

Others assets 287,990 223,675 51,445 12,338 532 -

Total 30,655,957 7,542,801 5,063,309 5,051,614 8,979,306 4,018,927

Due to banks 4,332,343 3,385,943 946,400 - - -

Customer deposits 21,209,805 16,140,837 2,763,425 2,211,343 94,200 -

Other liabilities 798,178 370,110 226,177 147,919 53,972 -

Total 26,340,326 19,896,890 3,936,002 2,359,262 148,172 -

Difference (12,354,089) 1,127,307 2,692,352 8,831,134 4,018,927


4. FINANCIAL RISK MANAGEMENT (CONTINUED)(c) Liquidity risk (continued)(iv) Maturity analysis The table below set out the remaining contractual maturities of the Group’s financial assets and financial liabilities.

Carrying amount

Gross nominal inflow (outflow)

Less than 1 month

1-3 months

3-12 months 1-5 years More than

5 years

31 December 2015

Non-derivative financial liabilities

Due to banks 4,869,916 4,871,012 4,755,092 115,920 - - -

Customer deposits 20,175,679 20,245,141 15,915,111 2,818,464 1,457,388 54,178 -

Debt securities 1,803,515 2,122,015 - - 63,877 2,058,138 -

Other liabilities 664,728 664,728 249,739 177,628 129,570 71,596 36,195

Total liabilities 27,513,838 27,902,896 20,919,942 3,112,012 1,650,835 2,183,912 36,195

Derivative financial instruments

Outflow 1,977,449 1,977,449 1,009,174 934,812 33,463 - -

Inflow (1,977,449) (1,974,315) (1,009,641) (931,406) (33,268) - -

27,513,838 27,906,030 20,919,475 3,115,418 1,651,030 2,183,912 36,195

31 December 2014

Non-derivative financial liabilities

Due to banks 4,332,343 4,333,733 3,387,197 946,536 - - -

Customer deposits 21,209,805 21,243,542 16,151,640 2,774,789 2,221,772 95,341 -

Other liabilities 798,178 798,178 370,110 226,177 147,919 53,972 -

Total liabilities 26,340,326 26,375,453 19,908,947 3,947,502 2,369,691 149,313 -

Derivative financial instruments

Outflow 1,608,592 1,608,592 1,467,649 66,798 74,145 - -

Inflow (1,608,592) (1,613,035) (1,472,464) (66,631) (73,940) - -

26,340,326 26,371,010 19,904,132 3,947,669 2,369,896 149,313 -




4. FINANCIAL RISK MANAGEMENT (CONTINUED)(d) Market risksThe Group takes on exposure to market risk, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk arises from open positions in, currency and equity instruments, both of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as foreign exchange rates and equity prices. The Group does not assume trading positions in interest rate risk.

(i) Management of market risksOverall authority for market risk is vested with the ALICO. Market risks are monitored by the Middle Office within the Risk Department and the positions are managed as per limits prescribed in the Bank’s Market Risk Management Policy.

(ii) Exposure to interest rate risk in the banking booksThe principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the future cash flows or fair values of financial instruments because of a change in market interest rates. Interest rate risk is managed principally through monitoring interest rate gaps and their potential impact on net interest income and economic value of equity.


4. FINANCIAL RISK MANAGEMENT (CONTINUED)(d) Market risks (continued)(ii) Exposure to interest rate risk in the banking books (continued)

A summary of the Group’s interest rate gap position on non-trading portfolios is as follows:

Repricing in:

Carrying amount

Less than 3 months


5 years

Non-interest

sensitive

Effective interest rate

2015

Cash and balances in Qatar Central Bank 1,074,277 - - - - 1,074,277 0.00%

Due from banks 6,100,929 6,049,031 - - - 51,898 0.79%

Loans and advances to customers 20,668,895 18,597,349 1,691,512 12,822 - 367,212 3.41%

Investment securities 3,560,109 2,763 - 3,285,348 271,782 216 4.64%

Property and equipment 225,312 - - - - 225,312 0.00%

Other assets 280,490 - - - - 280,490 0.00%

31,910,012 24,649,143 1,691,512 3,298,170 271,782 1,999,405

Due to banks 4,869,916 4,857,858 - - - 12,058 0.68%

Customer deposits 20,175,679 15,479,598 1,434,112 52,239 - 3,209,730 1.26%

Debt securities 1,803,515 - - 1,803,515 - - 3.53%

Other liabilities 664,728 - - - - 664,728 0.00%

Equity 4,396,174 - - - - 4,396,174 0.00%

31,910,012 20,337,456 1,434,112 1,855,754 - 8,282,690

Statement of financial position items 4,311,687 257,400 1,442,416 271,782 (6,283,285)

Cumulative interest rate sensitivity gap 4,311,687 4,569,087 6,011,503 6,283,285 -





Repricing in:

Carrying amount

Less than 3 months


5 years

Non-interest

sensitive

Effective interest rate

2014

Cash and balances in Qatar Central Bank 1,756,698 550,000 - - - 1,206,698 0.75%

Due from banks 5,799,708 4,663,718 1,092,000 - - 43,990 1.17%

Loans and advances to customers 19,856,625 18,469,751 936,837 45,267 - 404,770 3.40%

Investment securities 2,954,936 6,430 - 2,757,359 62,500 128,647 3.66%

Property and equipment 226,142 - - - - 226,142 0.00%

Other assets 287,990 - - - - 287,990 0.00%

30,882,099 23,689,899 2,028,837 2,802,626 62,500 2,298,237

Due to banks 4,332,343 4,265,370 - - - 66,973 0.42%

Customer deposits 21,209,805 15,493,407 2,211,343 94,200 - 3,410,855 0.79%

Other liabilities 798,178 - - - - 798,178 0.00%

Equity 4,541,773 - - - - 4,541,773 0.00%

30,882,099 19,758,777 2,211,343 94,200 - 8,817,779

Statement of financial position items 3,931,122 (182,506) 2,708,426 62,500 (6,519,542)

Cumulative interest rate sensitivity gap 3,931,122 3,748,616 6,457,042 6,519,542 -



Sensitivity analysisThe sensitivity of the consolidated income statement is the effect of the assumed changes in interest rates on the net interest income for one year, based on the observed repricing gaps between assets and liabilities held at the reporting date, including the effect of hedging instruments, if any.

The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, on the Group’s consolidated income statement. There is no impact on the Group’s equity. The effect of decreases in basis points is expected to be equal and opposite to the effect of the increases shown.

Sensitivity of net interest income

Currency Increase in basis points 2015 2014

QAR +10 6,494 5,832

USD +10 19 906

EUR +10 (421) (198)

GBP +10 31 54

Others +10 164 146

6,287 6,740

Interest rate movements affect reported equity in the following ways:

• retained earnings arising from increases or decreases in net interest income and the fair value changes reported in consolidated income statement; and

• fair value reserves arising from increases or decreases in fair values of available-for-sale-investments is reported directly in other comprehensive income.

Overall non-trading interest rate risk positions are managed by Bank central Treasury, which uses investment securities, advances to banks, deposits from banks and derivative instruments to manage the overall position arising from the Group’s non-trading activities.




4. FINANCIAL RISK MANAGEMENT (CONTINUED)(d) Market risks (continued)(iii) Exposure to other market risks in the banking books

Foreign currency transactionsCurrency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group takes on exposure to fluctuation in foreign currency exchange rates within the limits approved for net overnight open position and stop loss levels. These positions are monitored and reported daily by the Middle Office. The Group had the following net open long (short) positions as at 31 December.

2015 2014

Net foreign currency exposure:

GBP (1,849) (640)

EUR (5,288) (25,903)

AED 1,180 1,110

Other currencies 6,609 146,058

2015 2014

5% change in currency exchange rate

GBP (92) (32)

EUR (264) (1,295)

AED 59 56

Other currencies 330 7,303

Equity price riskEquity price risk is the risk that the fair value of equities decreases as a result of changes in the equity indices and individual stocks. The non-trading equity price risk exposure arises from equity securities classified as available-for-sale.

The Group is also exposed to equity price risk and the Group uses Value at Risk (VaR) as means of measuring potential losses from this position. As at 31 December 2015, the VaR on its equity investments was Nil (31 December 2014: 8.6% of the fair value at 99% confidence level assuming a 10-days holding period).


4. FINANCIAL RISK MANAGEMENT (CONTINUED)(d) Market risks (continued)(iii) Exposure to other market risks in the banking books (continued)

The Group is also exposed to equity price risk and the sensitivity analysis thereof is as follows:

2015 2014

5% change in QE 30 index

Change in other comprehensive income - 6,426

The above analysis has been prepared on the assumption that all other variables such as interest rate, foreign exchange rate, etc are held constant and is based on historical cross-correlation of the equity securities.

(e) Operational risksOperational risk refers to the loss resulting from inadequate or failed internal processes, people and systems or from external events. The Group endeavours to minimise operational losses by ensuring that effective infrastructure, controls, systems and individuals are in place throughout the organisation. Regulatory, legal and reputation risks are controlled through a set of internal policies and procedures. Where required, external legal advice is obtained to confirm legal and regulatory requirements.

Regulatory risk is controlled through a framework of compliance policies and procedures. Legal risk is managed through the effective use of the Group’s Legal Department and external legal advisers. Reputational risk is controlled through the regular examination of issues that are considered to have reputational repercussions for the Group, with guidelines and policies being issued as appropriate.

(f) Internal capital adequacy assessment process (ICAAP)The primary objectives of the Group’s capital management are to ensure that the Group complies with externally imposed capital requirements and that the Group maintains healthy capital ratios in order to support its business and to maximise shareholders value. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders or issue additional capital instruments.

The Group maintains an adequate capital base to cover risks inherent in the business. The adequacy of the Group’s capital is monitored using, among other measures, the rules and ratios established by the Basel Committee on Banking Supervision and adopted by QCB in supervising the Group. In line with these regulations, Basel III norms have been implemented whereby new minimum capital requirements have been put in place for different levels of capital.




4. FINANCIAL RISK MANAGEMENT (CONTINUED)(f) Internal capital adequacy assessment process (ICAAP) (continued)Risk weighted assets and carrying amounts

2015Basel III Risk

weighted amount

2014Basel III Risk

weighted amount

2015 Carrying amount

2014 Carrying amount

Cash and balances with Qatar Central Bank - - 1,074,277 1,756,698

Due from banks 1,257,707 1,487,600 6,100,929 5,799,708

Loans and advances to customers 17,410,552 13,336,437 20,668,895 19,856,625

Investment securities 166,048 198,974 3,560,109 2,954,936

Property and equipment 225,312 226,142 225,312 226,142

Other assets 282,153 287,990 280,490 287,990

Off balance sheet assets 4,165,679 3,538,607 13,505,271 9,990,989

Total risk weighted assets for credit risk 23,507,451 19,075,750 45,415,283 40,873,088

Risk weighted assets for market risk 14,389 10,405 - -

Risk weighted assets for operational risk 1,567,980 1,611,891 - -

Total risk weighted assets 25,089,820 20,698,046 45,415,283 40,873,088

Common equity tier 1 (CET 1) capital 4,048,574 4,041,273

Total eligible capital 4,048,574 4,041,273

Capital adequacy ratio 16.14% 19.52%

Common equity tier 1 is the highest quality form of regulatory capital under Basel III that comprises common shares issued, retained earnings and other reserves excluding the cash flow hedging reserve, less specified regulatory adjustments.

The Bank has followed QCB Basel III Capital Adequacy Ratio (CAR) in accordance with QCB regulations. The minimum accepted CAR Basel III requirement are as follows:

Minimum limit without Capital Conservation Buffer is 10%.Minimum limit with Capital Conservation Buffer is 12.5%.


5. USE OF ESTIMATES AND JUDGEMENTS(a) Key sources of estimation uncertaintyThe Group makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(i) Allowances for credit lossesAssets accounted for at amortised cost are evaluated for impairment on a basis described in accounting policy.

The specific counterparty component of the total allowances for impairment applies to financial assets evaluated individually for impairment and is based upon management’s best estimate of the present value of the cash flows that are expected to be received. In estimating these cash flows, management makes judgements about counterparty’s financial situation and the net realisable value of any underlying collateral. Each impaired asset is assessed on its merits and estimate of cash flows considered recoverable are independently approved by the Credit Risk function. Minimum impairment on specific counter parties are determined based on the QCB regulations.

Collectively assessed impairment allowances cover credit losses inherent in portfolios of loans and advances to customers and investment securities measured at amortised cost with similar credit risk characteristics when there is objective evidence to suggest that they contain impaired financial assets, but the individual impaired items cannot yet be identified. In assessing the need for collective loss allowances, management considers factors such as credit quality, portfolio size, concentrations and economic factors. In order to estimate the required allowance, assumptions are made to define the way inherent losses are modelled and to determine the required input parameters, based on historical experience and current economic conditions. The accuracy of the allowances depends on the estimates of future cash flows for specific counterparty allowances and the model assumptions and parameters used in determining collective allowances.

(ii) Determining fair valuesThe determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques as described in accounting policy. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.




5. USE OF ESTIMATES AND JUDGEMENTS (CONTINUED)(b) Critical accounting judgements in applying the Group’s accounting policies(i) Valuation of financial instrumentsThe Group’s accounting policy on fair value measurements is discussed in the significant accounting policies section.

The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.

• Quoted market prices (Level 1) - Assets and liabilities are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly occurring market transactions. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis.

• Valuation technique using observable inputs (Level 2) - Assets and liabilities classified as Level 2 have been valued using models whose inputs are observable in an active market. Valuations based on observable inputs include assets and liabilities such as swaps and forwards which are valued using market standard pricing techniques, and options that are commonly traded in markets where all the inputs to the market standard pricing models are observable.

• Valuation technique using significant unobservable inputs (Level 3) - Assets and liabilities are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). A valuation input is considered observable if it can be directly observed from transactions in an active market, or if there is compelling external evidence demonstrating an executable exit price. Unobservable input levels are generally determined via reference to observable inputs, historical observations or using other analytical techniques.

Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments, the Group determines fair values using valuation techniques.


5. USE OF ESTIMATES AND JUDGEMENTS (CONTINUED)(b) Critical accounting judgements in applying the Group’s accounting policies (continued)(i) Valuation of financial instruments (continued)Valuation techniques include net present value and discounted cash flow models, comparison to similar instruments for which market observable prices exist, Black-Scholes and polynomial option pricing models and other valuation models. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia used in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations. The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the reporting date that would have been determined by market participants acting at arm’s length.

The table below analyses financial instruments measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorised:

Level 1 Level 2 Level 3 Total

31 December 2015

Derivative assets - 18,081 - 18,081

Available-for-sale investments 2,066,238 1,493,871 - 3,560,109

2,066,238 1,511,952 - 3,578,190

Derivative liabilities - 8,523 - 8,523

- 8,523 - 8,523

Level 1 Level 2 Level 3 Total

31 December 2014

Derivative assets - 17,092 - 17,092

Available-for-sale investments 1,395,449 1,559,487 - 2,954,936

1,395,449 1,576,579 - 2,972,028

Derivative liabilities - 12,458 - 12,458

- 12,458 - 12,458

During the year ended 31 December 2015, there were no transfer between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.




5. USE OF ESTIMATES AND JUDGEMENTS (CONTINUED)(ii) Financial asset and liability classificationThe Group’s accounting policies provide scope for assets and liabilities to be designated at inception into different accounting categories in certain circumstances:

In classifying financial assets as held-to-maturity, the Group has determined that it has both the positive intention and ability to hold the assets until their maturity date as required by accounting policies.

Details of the Group’s classification of financial assets and liabilities are given in Note 6.

(iii) Impairment of investments in equity and debt securitiesInvestments in equity and debt securities are evaluated for impairment on the basis described in the significant accounting policies section.

(iv) Useful lives of property and equipmentThe Group’s management determines the estimated useful life of property and equipment for calculating depreciation. This estimate is determined after considering the expected usage of the asset, physical wear and tear, technical or commercial obsolescence.


6. FINANCIAL ASSETS AND LIABILITIESAccounting classifications and fair valuesThe table below sets out the carrying amounts and fair values of the Group’s financial assets and financial liabilities:

Fair value through

profit or loss

Loans and receivables

Available-for-sale

Other amortised

cost

Total fair

value

Total carrying amount

31 December 2015

Cash and balances with Qatar Central Bank - 1,074,277 - - 1,074,277 1,074,277

Due from banks - 6,100,929 - - 6,100,929 6,100,929

Derivative assets 18,081 - - - 18,081 18,081

Loans and advances to customers - 20,668,895 - - 20,668,895 20,668,895

Investment securities:

Measured at fair value - - 3,560,109 - 3,560,109 3,560,109

18,081 27,844,101 3,560,109 - 31,422,291 31,422,291

Derivative liabilities 8,523 - - - 8,523 8,523

Due to banks - - - 4,869,916 4,869,916 4,869,916

Customer deposits - - - 20,175,679 20,175,679 20,175,679

Debt securities - - - 1,803,515 1,803,515 1,803,515

8,523 - - 26,849,110 26,857,633 26,857,633




6. FINANCIAL ASSETS AND LIABILITIES (CONTINUED)Accounting classifications and fair values (continued)

Fair value through

profit or loss

Loans and receivables

Available-for-sale

Other amortised

cost

Total fair

value

Total carrying amount

31 December 2014

Cash and balances with Qatar Central Bank - 1,756,698 - - 1,756,698 1,756,698

Due from banks - 5,799,708 - - 5,799,708 5,799,708

Derivative assets 17,092 - - - 17,092 17,092

Loans and advances to customers - 19,856,625 - - 19,856,625 19,856,625

Investment securities:

Measured at fair value - - 2,954,936 - 2,954,936 2,954,936

17,092 27,413,031 2,954,936 - 30,385,059 30,385,059

Derivative liabilities 12,458 - - - 12,458 12,458

Due to banks - - - 4,332,343 4,332,343 4,332,343

Customer deposits - - - 21,209,805 21,209,805 21,209,805

12,458 - - 25,542,148 25,554,606 25,554,606


7. CASH AND BALANCES WITH QATAR CENTRAL BANK

2015 2014

Cash 119,975 104,329

Cash reserve with QCB* 833,595 956,430

Other balances with QCB 120,707 695,939

1,074,277 1,756,698

*The cash reserve with QCB is mandatory reserve not available for use in the Group’s day to day operations.

8. DUE FROM BANKS

2015 2014

Current accounts 51,898 43,990

Placements 6,012,631 5,755,718

Loans 36,400 -

6,100,929 5,799,708

9. LOANS AND ADVANCES TO CUSTOMERS(a) By type

2015 2014

Loans 16,397,105 15,906,831

Overdrafts 4,123,732 3,715,171

Bills discounted 59,125 49,655

Bankers acceptances 311,949 404,770

20,891,911 20,076,427

Specific impairment of loans and advances to customers (219,436) (216,222)

Collective impairment allowance (3,580) (3,580)

Net loans and advances to customers 20,668,895 19,856,625

The aggregate amount of non-performing loans and advances to customers amounted to QAR 454,802 thousand, which represents 2.18% of total loans and advances to customers (2014: QAR 397,912 thousand, 1.98% of total loans and advances to customers).




9. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)(b) By industry

At 31 December 2015: Loans Overdrafts Bills discounted

Bankers acceptances Total

Government 333,333 1,008,789 - - 1,342,122

Government agencies 1,650,156 - - - 1,650,156

Industry 876,226 95,547 - 89,274 1,061,047

Commercial 2,666,199 389,926 48,126 209,781 3,314,032

Services 302,691 118,028 2,999 3,771 427,489

Contracting 468,890 260,253 8,000 9,123 746,266

Real estate 6,269,223 2,683 - - 6,271,906

Personal 3,830,387 2,248,506 - - 6,078,893

16,397,105 4,123,732 59,125 311,949 20,891,911

Less:

Specific impairment of loans and advances to customers (219,436)

Collective impairment allowance (3,580)

20,668,895

At 31 December 2014: Loans Overdrafts Bills discounted

Bankers acceptances Total

Government 4,420,667 935,568 - - 5,356,235

Government agencies 1,921,492 - - - 1,921,492

Industry 411,672 74,682 - 2,168 488,522

Commercial 2,160,084 460,947 18,179 285,866 2,925,076

Services 660,048 89,302 - 104,150 853,500

Contracting 461,113 178,272 31,476 12,586 683,447

Real estate 3,315,304 25,053 - - 3,340,357

Personal 2,556,451 1,951,347 - - 4,507,798

15,906,831 3,715,171 49,655 404,770 20,076,427

Less:

Specific impairment of loans and advances to customers (216,222)

Collective impairment allowance (3,580)

19,856,625106ــــــــــــــــــــ107

9. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)(c) Net impairment loss on loans and advances to customers

2015 2014

Corporate Real Estate Personal Total Corporate Real

Estate Personal Total

Balance at 1 January - 8,475 207,747 216,222 - 8,043 177,418 185,461

Charge for the year 4,311 599 106,799 111,709 - 796 51,707 52,503

Recoveries - (524) (16,516) (17,040) - (364) (23,081) (23,445)

Net charges/(recovery) for the year 4,311 75 90,283 94,669 - 432 28,626 29,058

Amounts written off - - (663) (663) - - (498) (498)

Reclassification - (1,193) (89,599) (90,792) - - 2,201 2,201

Individual impairment 4,311 7,357 207,768 219,436 - 8,475 207,747 216,222

Collective impairment 1,750 - 1,830 3,580 1,750 - 1,830 3,580

Allowance for impairment losses 6,061 7,357 209,598 223,016 1,750 8,475 209,577 219,802

Interest in suspense of QAR 65,860 thousand as at 31 December 2015 (2014: QAR 63,859 thousand) is included in the above analysis of credit losses for the purpose of QCB regulation requirements. Movement in interest in suspense during the year amounted to a net charge of QAR 22,264 thousand (2014: net charge of QAR 25,787 thousand).

At 31 December 2015, the net carrying amount of impaired loans and advances to customers amounted to QAR 235,366 thousand (2014: QAR 181,690 thousand) and the value of identifiable collateral held against those loans and advances amounted to QAR 248,970 thousand (2014: QAR 277,050 thousand).

An aggregate amount of QR 90,792 thousand, fully provisioned non-performing loans and advances and financing activities to customers with no movements and no recoveries during the past 12 months, were transferred to off-balance sheet memorandum accounts as per Qatar Central Bank instructions. This has resulted in a reduction of non-performing loans and advances and financing activities to customers and allowance for impairment.




10. INVESTMENT SECURITIES

2015 2014

Available-for-sale 3,560,109 2,954,936

Total 3,560,109 2,954,936

Available-for-sale 2015 2014

Quoted Unquoted Total Quoted Unquoted Total

Equities - 216 216 128,526 121 128,647

State of Qatar debt securities 1,726,706 1,493,655 3,220,361 1,132,820 1,559,366 2,692,186

Other debt securities 339,532 - 339,532 134,103 - 134,103

Total 2,066,238 1,493,871 3,560,109 1,395,449 1,559,487 2,954,936

Fixed rate securities and floating rate securities amounted to QAR 3,557,130 thousand and QAR 2,763 thousand, respectively (2014: QAR 2,819,859 thousand and QAR 6,430 thousand, respectively).


11. PROPERTY AND EQUIPMENT

Land Leasehold improvements

Computer equipment

Furniture and

equipmentVehicles Work in

progress Total

Cost

Balance at 1 January 2014 - 46,366 102,304 19,525 1,618 17,862 187,675

Acquisitions / Transfers 170,025 1,397 18,552 909 - (2,314) 188,569

Disposals - (599) (17,169) (1,896) - (7,081) (26,745)

Balance at 31 December 2014 170,025 47,164 103,687 18,538 1,618 8,467 349,499

Acquisitions / Transfers - 667 7,300 1,199 195 7,101 16,462

Disposals - - (2,980) (709) (158) (103) (3,950)

Balance at 31 December 2015 170,025 47,831 108,007 19,028 1,655 15,465 362,011

Accumulated depreciation

Balance at 1 January 2014 - 27,486 82,814 12,855 862 - 124,017

Charged during the year - 6,361 9,442 2,548 217 - 18,568

Transfers - (23) 8 15 - - -

Disposals - (451) (17,086) (1,691) - - (19,228)

Balance at 31 December 2014 - 33,373 75,178 13,727 1,079 - 123,357

Depreciation for the year - 4,915 10,208 1,820 227 - 17,170

Disposals - - (2,980) (691) (157) - (3,828)

Balance at 31 December 2015 - 38,288 82,406 14,856 1,149 - 136,699

Carrying amounts

Balance at 1 January 2014 - 18,880 19,490 6,670 756 17,862 63,658

Balance at 31 December 2014 170,025 13,791 28,509 4,811 539 8,467 226,142

Balance at 31 December 2015 170,025 9,543 25,601 4,172 506 15,465 225,312




12. OTHER ASSETS

2015 2014

Interest receivable 206,426 227,962

Prepaid expenses and advances 31,166 26,723

Clearing cheques 19,340 10,592

Positive fair value of derivatives (Note 28) 18,081 17,092

Repossesed collateral 1,901 1,901

Others 3,576 3,720

280,490 287,990

13. DUE TO BANKS

2015 2014

Current accounts 12,058 66,973

Placements 4,857,858 4,265,370

4,869,916 4,332,343

14. CUSTOMER DEPOSITS

2015 2014

a) By type

Current and call deposits 5,114,285 7,350,146

Saving deposits 868,588 1,028,034

Time deposits 14,192,806 12,831,625

20,175,679 21,209,805

b) By sector

Government 3,055,239 4,071,962

Goverment and semi goverment agencies 532,779 77,995

Individuals 12,300,288 14,306,039

Corporate 4,287,373 2,753,809

20,175,679 21,209,805 110ــــــــــــــــــــ111

15. DEBT SECURITIES

On 25 November 2015 the International Bank of Qatar, through a wholly-owned subsidiary, A Finance Limited, completed an issuance of US$ 500 million (QAR 1,820 million) five year senior unsecured fixed rate notes under its US$ two billion European Medium Term Note (“EMTN”) Programme established in 2015. The notes carry a fixed interest coupon of 3.50% per annum with interest payable semi-annually in arrears and are listed on the Irish Stock Exchange.

Movements in debt securities are analysed as follows:

2015 2014

Balance as at 1 January - -

Addtitions 1,803,259 -

Amortisation of discount and transaction costs 256 -

Balance at 31 December 1,803,515 -

16. OTHER LIABILITIES

2015 2014

Acceptances 311,950 404,770

Unearned income 159,832 154,734

Accrued expenses and payables 66,783 144,549

Interest payable 48,453 16,133

Staff indemnity (Note a) 34,661 31,410

Negative fair value of derivatives 17,861 14,634

Cash margins 16,641 21,022

Others 8,547 10,926

664,728 798,178




16. OTHER LIABILITIES (CONTINUED)(a) Staff indemnity

2015 2014

Balance at 1 January 31,410 28,710

Provisions made during the year 7,457 6,597

38,867 35,307

Payments during the year (4,206) (3,897)

Balance at 31 December 34,661 31,410

17. CAPITAL AND RESERVES(a) Share capital

Number of shares

Class A Class B

2015thousand 2014

thousand 2014thousand

Authorised

Shares of QAR 10 each 110,000 77,000 33,000

Number of

shares thousand

QAR’000

Issued and fully paid

At 1 January 2015 110,000 1,100,000

At 31 December 2015 110,000 1,100,000

During 2014, share capital comprised of class (A) ordinary shares held by the local shareholders and class (B) shares held by foreign shareholders. Both class (A) and Class (B) shares carried equal voting rights and had same voting powers. In 2015, both share classes were consolidated as shares were all held by local shareholders and as a result carry equal voting rights and same voting powers.


17. CAPITAL AND RESERVES (CONTINUED)(b) Legal reserve In accordance with Qatar Central Bank’s Law No. 33 of 2006 as amended, 10% of the net profit for the year is required to be transferred to legal reserve until the legal reserve equals 100% of the paid up capital. This reserve is not available for distribution except in circumstances specified in the Qatar Commercial Companies’ Law No.11 of 2015 and is subject to the approval of QCB.

The legal reserve includes share premium received on issuance of new shares in accordance with Qatar Commercial Companies’ Law No.11 of 2015.

(c) Risk reserveIn accordance with QCB rules and regulations, a risk reserve is made to cover contingencies on loans and advances to customers, up to 2.5% of the total direct credit facilities granted, net of allowance for impairment of loans and advances to customers, cash secured facilities and facilities to or guaranteed by Ministry of Finance.

(d) Fair value reserve

2015 2014

Available-for-sale investments:

Balance at 1 January 97,511 103,574

Net change in fair value (62,525) 53,622

Net amount transferred to consolidated income statement 17,346 (59,685)

Balance at 31 December 52,332 97,511

Negative fair value reserve as of 31 December 2015 amounted to QAR 11,532 thousand (2014: QAR 10,279 thousand). (e) Proposed dividendA cash dividend of QAR 3.16 per share amounting to QAR 347,600 thousand has been proposed by the Board of Directors for the year ended 31 December 2015 which is subject to approval at the annual general meeting of the shareholders (2014: QAR 4.55 per share amounting to QAR 500,500 thousand).

During the year, the Group has paid an amount of QAR 500,500 thousand (2014: QAR 480,700 thousand) as cash dividends for the year 2014.




18. INTEREST INCOME

2015 2014

Loans and advances to customers 601,480 580,545

Debt securities 105,807 121,118

Amounts deposited with banks 35,598 47,255

Amounts deposited with Qatar Central Bank 2,019 4,664

744,904 753,582

19. INTEREST EXPENSE

2015 2014

Customer deposits 143,315 146,914

Amount deposited by banks 25,879 7,441

Debt securities 6,626 -

175,820 154,355

20. NET FEE AND COMMISSION INCOME

2015 2014

Credit related fees 58,951 59,788

Commission on unfunded facilities 44,021 45,182

Others 54,738 49,033

Total fee and commission income 157,710 154,003


Net fee and commission income 128,215 123,616

21. NET GAIN FROM FOREIGN EXCHANGE

2015 2014

Dealing in foreign currencies 65,947 59,604

Revaluation of derivatives securities 220 2,458

66,167 62,062 114ــــــــــــــــــــ115

22. NET (LOSS) / INCOME FROM INVESTMENT SECURITIES

2015 2014

Net (loss) / gains on sales of investment securities (18,704) 84,157

Dividend income 6,516 1,100

(12,188) 85,257

23. STAFF COSTS

2015 2014

Basic salaries and allowances 143,723 149,921

Staff indemnity (Note 16a) 7,457 6,597

Staff pension fund 1,260 1,340

Others 6,721 6,909

159,161 164,767

24. OTHER EXPENSES

2015 2014

Occupancy and rent 37,764 35,828

Computer 10,893 12,368

Communication 8,002 8,063

Marketing 7,945 13,539

Legal and professional fees 6,077 6,050

Strategic initiative 4,162 7,520

Directors’ remuneration 3,589 5,000

Management fees - 3,925

Others 9,027 10,357

87,459 102,650




25. EARNINGS PER SHARE

Earning per share of the Group is calculated by dividing profit for the year by the weighted average number of ordinary shares in issue during the year:

2015 2014

Profit– QAR’000 400,080 579,444

Weighted average number of shares 110,000,000 110,000,000

Earnings per share (QAR) 3.64 5.27

There were no potentially dilutive shares outstanding at any time during the year, and therefore, the dilutive earnings per share are equal to the basic earnings per share. 26. CONTINGENT LIABILITIES AND OTHER COMMITMENTS

2015 2014

(a) Contingent liabilities

Guarantees 5,724,121 4,928,677

Letters of credit 803,951 743,193

Unused credit facilities 4,853,267 2,662,878

11,381,339 8,334,748

(b) Other commitments

Forward foreign exchange contracts 1,977,449 1,608,592

Options 146,483 47,649

2,123,932 1,656,241

Unused credit facilitiesCommitments to extend credit represent contractual commitments to make loans and revolving credits. Commitments generally have fixed expiry dates or other termination clauses. Since commitments may expire without being drawn upon, the total contractual amounts do not necessarily represent future cash requirements.


26. CONTINGENT LIABILITIES AND OTHER COMMITMENTS (CONTINUED)Guarantees and letters of creditGuarantees and letters of credit commit the Group to make payments on behalf of customers in the event of a specific event. Guarantees and standby letters of credit carry the same credit risk as loans.

OptionsOptions are contractual agreement under which the seller (writer) grants the purchaser (holder) the right, to exercise an interest rate based on certain indices with a predetermined cap and a floor at the end of the option life. These options are entered into to hedge the Group commitments to specific customer deposits. Related risks and rewards are fully passed onto the customers.

Lease commitmentsNon-cancellable operating lease rentals are payable as follows:

2015 2014

Less than one year 25,852 24,884

Between one and five years 52,089 71,881

More than five years 4,447 5,781

82,388 102,546

The Group leases its head office and a number of branches under operating leases.

27. CASH AND CASH EQUIVALENTS

2015 2014

Cash 119,975 104,329

Other balances with QCB 120,707 695,939

Due from banks maturing within three months or less 6,046,329 4,707,708

6,287,011 5,507,976

*Cash and balances with QCB do not include the mandatory cash reserve.

International Bank of Qatar (Q.S.C.)Notes to the Consolidated Financial Statements As at and for the year ended 31 December 2015QAR ‘000s


QAR ‘000s


28. DERIVATIVESThe table below shows the positive and negative fair values of derivative financial instruments, together with the notional amounts analysed by the term to maturity. The notional amounts, which provide an indication of the volumes of the transactions outstanding at the year end, do not necessarily reflect the amounts of future cash flows involved. These notional amounts, therefore, are not indicative of the Group’s exposure to credit risk, which is generally limited to the positive fair value of the derivatives.

Notional / Expected amount by term to maturity

31 December 2015 Positive fair value

Negative fair value

Total notional amount

Within 3 months

3-12 months

1-5 years

More than 5 years

(a) Held for trading

Forward foreign exchange contracts 8,743 8,523 1,977,449 1,943,986 33,463 - -

(b) Designated as fair value through profit and loss

Purchased options 9,338 - 146,483 1,393 95,545 49,545 -

Total 18,081 8,523 2,123,932 1,945,379 129,008 49,545 -

Notional / Expected amount by term to maturity

31 December 2014 Positive fair value

Negative fair value

Total notional amount

Within 3 months

3-12 months

1-5 years

More than 5 years

(a) Held for trading

Forward foreign exchange contracts 14,916 12,458 1,608,592 1,534,447 74,145 - -

(b) Designated as fair value through profit and loss

Purchased options 2,176 - 47,649 - 3,449 44,200 -

Total 17,092 12,458 1,656,241 1,534,447 77,594 44,200 -

The derivative transactions under the designated as fair value through profit and loss category are on a back to back basis.118ــــــــــــــــــــ119

29. RELATED PARTIESParties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. Related parties include entities over which the Group exercises significant influence, major shareholders, directors and key management personnel of the Bank. The Group enters into transactions with major shareholders, directors and key management personnel of the Group. All the loans, advances and financing activities to related parties are given at market rates and these are performing and free of any allowance for possible credit losses.

The related party transactions and balances included in these consolidated financial statements are as follows:

2015 2014

Board of Directors Shareholders Others Board of

Directors Shareholders Others

Assets

Loans and advances to customers 2,166,687 128,744 985,201 1,933,400 578 618,687

Due from banks - - - - 2,221 -

Liabilities

Customer deposits 905,384 57,722 2,687,612 2,302,241 196,390 4,241,045

Due to banks - - - - 56,014 -

Contingent liabilities and other commitments

Letters of guarantee, letters of credit, expected commitments and indirect credit facilities 8,566 11,772 249,056 9,005 367,943 244,883

Income statement

Interest and commission income 64,762 1,305 10,522 51,407 9,123 31,828

Interest and commission expense 2,269 137 20,740 2,246 1,552 32,252

A portion of the above loans and advances to customers is secured against tangible collateral or personal guarantees.

An amount of QAR 19,161 thousand (2014: QAR 18,608 thousand) represents rental expense paid for the use of premises belonging to a related party.

Board of Directors remuneration amounted to QAR 3,589 thousand (2014: QAR 5,000 thousand). During the 2014, there was a purchase of land amounting to QAR 170 million from a related party.



International Bank of Qatar (Q.S.C.)Supplementary Information to the Consolidated Financial Statements

29. RELATED PARTIES (CONTINUED)

Transactions with key management personnelKey management personnel and their immediate relatives have transacted with the Group during the year as follows:

2015 2014

Loans and advances 2,674 1,932

2015 2014

Salaries and other benefits 22,850 28,916

Staff indemnity 701 820

23,551 29,736

30. FIDUCIARY ASSETSThe Group provides custody services to customers. Those assets that are held in a fiduciary capacity are excluded from these consolidated financial statements and amounted to QAR 298,480 thousand at 31 December 2015 (2014: QAR 2,912 thousand).

31. COMPARATIVESThe comparative figures presented for 2014 have been reclassified where necessary to preserve consistency with the 2015 figures. However, such reclassifications did not have any effect on the net profit, other comprehensive income or the total equity for the comparative year.


FINANCIAL STATEMENTS OF THE PARENT BANK(a) Statement of Financial Position – Parent Bank

As at 31 December 2015 2014

ASSETS

Cash and balances with Qatar Central Bank 1,074,277 1,756,698

Due from banks 6,100,929 5,799,708

Loans and advances to customers 20,668,895 19,856,625

Investment securities 3,560,109 2,954,936

Property and equipment 225,312 226,142

Other assets 290,861 287,990

TOTAL ASSETS 31,920,383 30,882,099

LIABILITIES

Due to banks 4,869,916 4,332,343

Customer deposits 21,995,679 21,209,805

Other liabilities 658,358 798,178

TOTAL LIABILITIES 27,523,953 26,340,326

EQUITY

Issued capital 1,100,000 1,100,000

Legal reserve 2,025,884 2,025,884

Risk reserve 483,710 482,953

Fair value reserve 52,332 97,511

Retained earnings 734,504 835,425

TOTAL EQUITY 4,396,430 4,541,773

TOTAL LIABILITIES AND EQUITY 31,920,383 30,882,099


QAR ‘000s


International Bank of Qatar (Q.S.C.)Supplementary Information to the Consolidated Financial StatementsFINANCIAL STATEMENTS OF THE PARENT BANK (CONTINUED)(b) Income Statement – Parent Bank

For the year ended 31 December 2015 2014

Interest income 744,904 753,582

Interest expense (175,564) (154,355)

Net interest income 569,340 599,227

Fee and commission income 157,710 154,003


Net fee and commission income 128,215 123,616

Net gain from foreign exchange 66,167 62,062

Net (loss) / income from investment securities (12,188) 85,257

Net operating income 751,534 870,162

Staff costs (159,161) (164,767)

Depreciation (17,170) (18,568)

Net impairment loss on investment securities (15,003) (1,462)

Net impairment loss on loans and advances to customers (72,405) (3,271)

Other expenses (87,459) (102,650)

Profit 400,336 579,444


Glossary

A

Additional Tier 1 capital (‘AT1’): This capital consists of instruments issued by the Group and related share premiums that meet the criteria for inclusion in AT1 (and are not included in Common Equity Tier 1), and regulatory adjustments required in the calculation of AT1.

Arrears: Customers are said to be in arrears (or in a state of delinquency) when they are behind in fulfilling their obligations, with the result that an outstanding loan is unpaid or overdue. When a customer is in arrears, the total outstanding loans on which payments are overdue are described as delinquent.

B

Basel II: The capital adequacy framework issued by the Basel Committee on Banking Supervision (BCBS) in June 2006 in the form of the ‘International Convergence of Capital Measurement and Capital Standards’.

Basel III: In December 2010, the Basel Committee issued ‘Basel III rules: a global regulatory framework for more resilient banks and banking systems’ and ‘International framework for liquidity risk measurement, standards and monitoring’. Together these documents present the Basel Committee’s reforms to strengthen global capital and liquidity rules with the goal of promoting a more resilient banking sector. In June 2011, the Basel Committee issued a revision to the former document setting out the finalized capital treatment for counterparty credit risk in bilateral trades, and represents the details of strengthened global regulatory standards on bank capital adequacy and liquidity. The new requirements will be phased in and fully implemented by 1 January 2019.

Basis point (‘bps’): One hundredth of a per cent (0.01%), so 100 basis points is 1%. For example, this is used in quoting movements in interest rates or yields on securities.

C

Capital conservation buffer (‘CCB’): A capital buffer prescribed by regulators under Basel III and designed to ensure banks build up capital buffers outside periods of stress which can be drawn down as losses are incurred. Should a bank’s capital levels fall within the capital conservation buffer range, capital distributions will be constrained by the regulators.

Client due diligence (‘CDD’): CDD is an important part of the Group’s management of financial crime, reputational and regulatory risk. CDD enables A to understand our clients and their activities so that financial crime risks are identified and mitigated. CDD is performed at the point of onboarding the client and on an ongoing basis. As a general rule, no products or services can be provided to a client until CDD has been completed.

Collectively assessed loan impairment provisions: Impairment assessment on a collective basis for homogeneous groups of loans that are not considered individually significant. This is to cover losses which have been incurred but have not yet been identified on loans subject to individual assessment.

Commercial real estate loans: Includes office buildings to let, retail space, multi-family residential buildings (eg residential towers or mixed use towers covering residential and commercial), industrial or warehouse space, hotels etc. where the prospects of repayment and recovery on the exposure depend primarily upon the cashflows generated by the commercial mortgage.


Common equity tier 1 capital (‘CET1’): The highest quality form of regulatory capital under Basel III that comprises common shares issued, retained earnings and other reserves excluding the cash flow hedging reserve, less specified regulatory adjustments.

CET1 ratio: A Basel III measure, of CET1 capital expressed as percentage of total risk weighted assets.

Contractual maturity: The date on which the final payment (principal or interest) of any financial instrument is due to be paid, at which point all the remaining outstanding principal and interest have been repaid.

Cost-to-income ratio: Represents the proportion of total operating expenses to total operating income.

Countercyclical capital buffer: Regulatory capital of up to 2.5 per cent of risk-weighted assets that is required to be held under Basel III rules to ensure that banks build up surplus capital when macroeconomic conditions indicate excess credit growth.

Counterparty credit risk: The risk that a counterparty defaults before satisfying its obligations under a contract.

Cover ratio: Represents the extent to which non-performing loans are covered by impairment allowances.

Credit institutions: An institution whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account.

Credit ratio: The ratio of total net loans and advances to customers (total funded exposure to customers, less: provision for bad debt, suspended interests) plus acceptances to customers relative to total customer deposits, foreign borrowings from banks (up to 50% of tier 1 capital) and debt securities and tier 1 capital minus net fixed assets and net investments.

Credit risk: Risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. It arises mainly from direct lending, trade finance and leasing business, but also from products such as guarantees, derivatives and debt securities.

Credit risk mitigation: A technique to reduce the credit risk associated with an exposure by application of credit risk mitigants such as collateral, guarantee and credit protection.

Customer deposits: Money deposited by all individuals and companies that are not credit institutions including securities sold under repurchase agreement (repo). Such funds are recorded as liabilities.

D

Debt securities: Financial assets on the Group’s balance sheet representing certificates of indebtedness of credit institutions, public bodies or other undertakings, excluding those issued by central banks.

Debt securities in issue: Debt securities in issue are transferable certificates of indebtedness of the Group to the bearer of the certificate. These are liabilities of the Group.

Delinquency: A debt or other financial obligation is considered to be in a state of delinquency when payments are overdue. Loans and advances are considered to be delinquent when consecutive payments are missed. Also known as arrears.

Deposits by banks: All deposits received from domestic and foreign banks, excluding deposits or liabilities in the form of debt securities or for which transferable certificates have been issued.

Dividend per share: Represents the entitlement of each shareholder in the share of the profits of the company. Calculated in the lowest unit of currency in which the shares are quoted.

Domestic systemically Important Bank (‘DSIB’): These are banks defined by the Qatar Central Bank as those banks whose failure or distress may lead to significant adverse impact on the Qatar banking sector, the financial system and/or the economy.

E

Exposures: Credit exposures represent the amount lent to a customer, together with any undrawn commitment.

Exposure at default (‘EAD’): The estimation of the extent to which the Group may be exposed to a customer or counterparty in the event of, and at the time of, that counterparty’s default. At default, the customer may not have drawn the loan fully or may already have repaid some of the principal, so that exposure is typically less than the approved loan limit.

External Credit Assessment Institutions (‘ECAI’): For the standardised approach to credit risk for sovereigns, corporates and institutions, external ratings are used to assign risk weights. These external ratings must come from approved rating agencies, known as ECAI; namely Moody’s, Standard & Poor’s, Fitch and Capital Intelligence.

F

Fair value adjustment: An adjustment to the fair value of a financial instrument which is determined using a valuation technique (level 2 and level 3) to include additional factors that would be considered by a market participant that are not incorporated within the valuation model.

Free funds: Free funds includes equity capital, retained reserves, current year unremitted profits and capital injections net of proposed dividends. It does not include debt capital instruments, unrealised profits or losses or any non-cash items.

Funded/unfunded exposure: Exposures where the notional amount of the transaction is funded or unfunded. Represents exposures where there is a commitment to provide future funding but funds have been released/not released.

G

Guarantee: An undertaking by a party to pay a creditor should a debtor fail to do so.

H

High-quality liquid assets: Assets that are unencumbered, liquid in markets during a time of stress and, ideally, are central bank eligible. These include, for example, cash and claims on central governments and central banks. The Basel III Rules require this ratio to be at least 100 per cent. 124



I

Impaired loans: Loans where individual identified impairment provisions have been raised and also include loans which are collateralised or where indebtedness has already been written down to the expected realisable value. The impaired loan category may include loans which, while impaired, are still performing.

Impairment allowances: Impairment allowances are a provision held on the balance sheet as a result of the raising of a charge against profit for the incurred loss. An impairment allowance may either be identified or unidentified and individual (specific) or collective (portfolio).

Individually assessed loan impairment provisions: Also known as specific impairment provisions. Impairment is measured individually for assets that are individually significant to the Group. Typically, assets within the Wholesale Bank are assessed individually and all other accounts that do not qualify form a basis for collective assessment.

Internal Capital Adequacy Assessment Process (‘ICAAP’): The Group’s own assessment of the levels of capital that it needs to hold through an examination of its risk profile from regulatory and economic capital viewpoints.

Investment grade: Represents a risk profile similar to a rating of BBB- or better, as defined by an external rating agency.

Interest rate risk (‘IRR’): IRR arises due to the investment of equity and reserves into rate-sensitive assets, as well as some tenor mismatches between debt issuance and placements.

J

Jaws: The rate of income growth less the rate of expense growth. Expressed as positive jaws when income growth exceeds expense growth (and vice versa for negative jaws).

L

Legal risk: The risk of financial loss, sanction and/or reputational damage resulting from contractual risk (the risk that the rights and/or obligations within a contractual relationship are defective); dispute risk (the risk due to an adverse dispute environment or the management of potential or actual disputes); legislative risk (the risk that the Group fails to adhere to laws of the jurisdiction in which it operates); and non-contractual rights risk (the risk that a Group’s assets are not properly owned or are infringed by others or the infringement by the Group of another party’s rights).Level 1 – quoted market price: Financial instruments with quoted prices for identical instruments in active markets.

Level 2 – valuation technique using observable inputs: Financial instruments with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable.

Level 3 – valuation technique with significant unobservable inputs: Financial instruments valued using valuation techniques where one or more significant inputs are unobservable.

Leverage ratio: A measure, prescribed by regulators under Basel III, which is the ratio of tier 1 capital to total exposures. Total exposures include on-balance sheet items, off-balance sheet items and derivatives, and should generally follow the accounting measure of exposure. This supplementary measure to the risk-based capital requirements is intended to constrain the build-up of excess leverage in the banking sector.

Liquidity and credit enhancements: Credit enhancement facilities are used to enhance the creditworthiness of financial obligations and cover losses due to asset default. Two general types of credit enhancement are third-party loan guarantees and self-enhancement through over-collateralisation. Liquidity enhancement makes funds available if required, for other reasons than asset default, e.g. to ensure timely repayment of maturing commercial paper.

Liquidity coverage ratio (‘LCR’): The ratio of the stock of high quality liquid assets to expected net cash outflows over the following 30 days. High quality liquid assets should be unencumbered, liquid in markets during a time of stress and, ideally, be central bank eligible. The LCR is still subject to an observation period and review to address any unintended consequences.

Liquidity risk: The risk that the Group does not have sufficient financial resources to meet its obligations as they fall due, or will have to do so at an excessive cost. This risk arises from mismatches in the timing of cash flows.

Loans and advances: This represents lending made under bilateral agreements with customers entered into in the normal course of business and is based on the legal form of the instrument.

Loans to banks: Amounts loaned to credit institutions including securities bought under reverse repurchase agreement (repo).

Loans to individuals: Money loaned to individuals rather than institutions. The loans may be for car or home purchases, medical care, home repair, holidays and other consumer uses.

Loan-to-value ratio: The loan-to-value ratio is a mathematical calculation that expresses the amount of a first mortgage lien as a percentage of the total appraised value of real property. The loan-to-value ratio is used in determining the appropriate level of risk for the loan and therefore the correct price of the loan to the borrower.

Loans past due: Loans on which repayments are overdue.

Loss given default (‘LGD’): LGD is the percentage of an exposure that a lender expects to lose in the event of obligor default.

M

Market risk: The risk that movements in market risk factors, including foreign exchange rates and commodity prices, interest rates, credit spreads and equity prices will reduce income or portfolio values.

Medium term notes (‘MTN’s’): Issued by corporates across a range of maturities. Under MTN Programmes notes are offered on a regular and continuous basis to investors.

N

Net asset value per share: Ratio of net assets (total assets less total liabilities) to the number of ordinary shares outstanding at the end of a reporting period.



Net exposure: The aggregate of loans and advances to customers/loans and advances to banks after impairment provisions, restricted balances with central banks, derivatives (net of master netting agreements), investment debt and equity securities, and letters of credit and guarantees.

Net interest income: The amount of interest received or receivable on assets net of interest paid or payable on liabilities.

Net interest margin: The margin is expressed as net interest income divided by average interest-earning assets.

Net stable funding ratio (‘NSFR’): The ratio of available stable funding to required stable funding over a one year time horizon, assuming a stressed scenario. Available stable funding would include items such as equity capital, preferred stock with a maturity of over one year and liabilities with an assessed maturity of over one year. The NSFR is still subject to an observation period and review to address any unintended consequences.

Non-performing loans (‘NPLs’): A non-performing loan is any loan that is more than 90 days past due or is otherwise individually impaired, other than a loan which is:• Renegotiated before 90 days past due, and on which no default in interest payments or loss of principal

is expected; or• Renegotiated at or after 90 days past due, but on which there has been no default in interest or principal

payments for more than 180 days since renegotiation, and against which no loss of principal is expected.

Normalised net income: Profit attributable to ordinary shareholders adjusted for profits or losses of a capital nature; amounts consequent to investment transactions driven by strategic intent; and other infrequent and/or exceptional transactions that are significant or material in the context of the Group’s normal business earnings for the period.

O

Operational risk: The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk.

Over-the-counter (‘OTC’): A bilateral transaction (e.g. derivative) that is not exchange traded and that is valued using valuation models.

P

Pillar 1: The first Pillar of the three pillars of Basel II/Basel III which provides the approach to calculation of the minimum capital requirements for credit, market and operational risk.

Pillar 2: Pillar 2 requires banks to undertake a comprehensive assessment of their risks and to determine the appropriate amounts of capital to be held against these risks where other suitable mitigants are not available.

Pillar 3: Pillar 3 aims to provide a consistent and comprehensive disclosure framework that enhances comparability between banks and further promotes improvements in risk practices.

Probability of default (‘PD’): PD is an internal estimate for each borrower grade of the likelihood that an obligor will default on an obligation.

Profit attributable to ordinary shareholders: Profit for the year after non-controlling interests and dividends declared in respect of preference shares classified as equity.

R

Renegotiated loans: Loans and advances are generally renegotiated either as part of an ongoing customer relationship or in response to an adverse change in the circumstances of the borrower. In the latter case renegotiation can result in an extension of the due date of payment or repayment plans under which the Group offers a concessionary rate of interest to genuinely distressed borrowers. Such assets will be individually impaired where the renegotiated payments of interest and principal will not recover the original carrying amount of the asset and are defined as forborne loans. In other cases, renegotiation may lead to a new agreement, which would be treated as a new loan.

Repo/Reverse repo: A repurchase agreement or repo is a short-term funding agreement which allows a borrower to sell a financial asset, such as asset backed securities or government bonds as collateral for cash. As part of the agreement, the borrower agrees to repurchase the security at some later date, usually less than 30 days, repaying the proceeds of the loan. For the party on the other end of the transaction (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement or reverse repo.

Reputational risk: The risk that illegal, unethical or inappropriate behaviour by the Group itself, members of staff or clients or representatives of the Group will damage A’s reputation, leading, potentially, to a loss of business, fines or penalties.

Residential mortgage: A loan that is granted to a bank’s customers which is secured by the collateral of residential property that is either self-occupied or is generating rental income wherein the prospects for repayment and recovery on the exposure depend primarily on the cashflows generated by the residential mortgage. The residential property should be wholly mortgaged in favour of the bank.

Retail loans: Money lent to individuals rather than institutions. This includes both secured and unsecured loans such as mortgages and credit card balances.Return on average equity: Represents the ratio of the current year’s profit available for distribution to ordinary shareholders to the weighted average ordinary shareholders equity for the reporting period.

Return on risk-weighted assets: Operating profit (excluding civil monetary penalty, goodwill impairment and own credit) divided by average total risk-weighted assets.

Risk appetite: The aggregate level and types of risk a firm is willing to assume within its risk capacity to achieve its strategic objectives and business plan.

Risk-weighted assets (‘RWA’s’): A measure of a bank’s assets adjusted for their associated risks. Risk weightings are established in accordance with the Basel Capital Accord as implemented by the Supervisory Regulatory Authority.

S

Secured (fully and partially): A secured loan is a loan in which the borrower pledges an asset as collateral for a loan which, in the event that the borrower defaults, the Group is able to take possession of. All secured loans are considered fully secured if the fair value of the collateral is equal to or greater than the loan at the time of origination. All other secured loans are considered to be partly secured. 128



Senior debt: Senior debt, frequently issued in the form of senior notes, is debt that takes priority over other unsecured or otherwise more ‘junior’ debt owed by the issuer. Senior debt has greater seniority in the issuer’s capital structure after subordinated debt. In the event the issuer goes bankrupt, senior debt theoretically must be repaid before other creditors receive any payment.

Standardised approach: In relation to credit risk, a method for calculating credit risk capital requirements using ECAI ratings and supervisory risk weights. In relation to operational risk, a method of calculating the operational capital requirement by the application of a supervisory defined percentage charge to a supervisory defined gross income.

Stressed value at risk: A regulatory market risk measure based on potential market movements for a continuous one-year period of stress for a trading portfolio.

Structured entities (‘SE’s’): An entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.

Structured finance/notes: A structured note is an investment tool which pays a return linked to the value or level of a specified asset or index and sometimes offers capital protection if the value declines. Structured notes can be linked to equities, interest rates, funds, commodities and foreign currency.

Subordinated liabilities: Liabilities which, in the event of insolvency or liquidation of the issuer, are subordinated to the claims of depositors and other creditors of the issuer.

T

Tier 1 capital (‘T1’): A component of regulatory capital, comprising CET1 and AT1.

Tier 1 capital ratio: T1 as a percentage of risk-weighted assets.

Tier 2 capital (‘T2’): Tier 2 capital includes instruments issued by the Group that meet the supervisory definition of T2, the related share premium resulting from such issue, certain loan loss provisions less any supervisory deductions and adjustments.

Total eligible capital: Sum of T1 and T2 after regulatory adjustments.

V

Value-at-risk (‘VaR’): A measure of the loss that might occur on risk positions as a result of adverse movements in market risk factors (e.g. rates, prices, volatilities) over a specified time horizon and to a given level of confidence.

W

Wholesale loans: Money lent to sovereign borrowers, banks, non-bank financial institutions and corporate entities.

Write-off: When a financial asset is written down or written off, a customer balance is partially or fully removed, respectively, from the balance sheet. Loans (and related impairment allowance accounts) are normally written off, either partially or in full, when there is no realistic prospect of recovery. Where loans are secured, this is generally after receipt of any proceeds from the realization of security. In circumstances where the net realizable value of any collateral has been determined and there is no reasonable expectation of further recovery, write-off may be earlier.

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