Bahrain Islamic Bank B.S.C.

BISB

BH0004648950

Banks

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04-28	Bahrain Islamic Bank B.S.C. Announces the Retirement of Its Board Member, Khalid Yousif Abdulrahman	CI
04-24	Bahrain Islamic Bank B.S.C. Announces Board Changes	CI

Bahrain Islamic Bank B S C : Annual Financial & Sustainability Report 2020

March 22, 2021 at 09:15 am

CONNECTED DESPITE

THE DISTANCE

Annual Financial & Sustainability Report 2020

His Royal Majesty

King Hamad bin Isa Al Khalifa The King of the Kingdom of Bahrain

His Royal Highness

Prince Salman bin Hamad Al Khalifa The Crown Prince and Prime Minister

CONNECTED DESPITE THE DISTANCE

1.	INTRODUCTION	02	8. CORPORATE GOVERNANCE AND
ETHICAL BEHAVIOUR	46
CORPORATE PROFILE	02
CORPORATE GOVERNANCE REVIEW	63
BisB BRAND	03
COMPLIANCE	63
FINANCIAL HIGHLIGHTS	06
INTERNAL AUDIT	66
OPERATIONAL HIGHLIGHTS	08
RISK MANAGEMENT	67
BOARD OF DIRECTORS' REPORT	10
REMUNERATION DISCLOSURES	71
BOARD OF DIRECTORS	12
SHARI'A SUPERVISORY BOARD REPORT	77
SHARI'A SUPERVISORY BOARD	18
CHIEF EXECUTIVE OFFICER REPORT	20	9. FINANCIAL STATEMENTS	78
EXECUTIVE MANAGEMENT	22	INDEPENDENT AUDITORS' REPORT	79
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	83
2.	SUSTAINABILITY	28
CONSOLIDATED STATEMENT OF INCOME	84
STAKEHOLDER DIALOGUE	28
CONSOLIDATED STATEMENT OF CASH FLOWS	85
MATERIAL TOPICS	30
CONSOLIDATED STATEMENT OF CHANGES IN
3.	RESPONSIBLE BANKING	32	OWNERS' EQUITY	86
ISLAMIC FINANCE	32	CONSOLIDATED STATEMENT OF SOURCES AND
USES OF GOOD FAITH QARD FUND	87
FINANCIAL INCLUSION	32
CONSOLIDATED STATEMENT OF SOURCES AND
4.	SERVING OUR CUSTOMERS	33	USES OF ZAKAH AND CHARITY FUND	88
RETAIL BANKING	34	NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS	89
CORPORATE AND FINANCIAL
INSTITUTIONAL BANKING	36	SUPPLEMENTARY DISCLOSURES TO THE
CONSOLIDATED FINANCIAL STATEMENTS	139
TREASURY	37
CUSTOMER RELATIONS	37	10. RISK AND CAPITAL MANAGEMENT DISCLOSURE	141
BACKGROUND	142
5.	NURTURING OUR WORKFORCE	39
STATEMENT OF FINANCIAL POSITION UNDER
CORPORATE CULTURE AND ETHICS	40	THE REGULATORY SCOPE OF CONSOLIDATION	142
DIVERSITY AND INCLUSION	40	CAPITAL ADEQUACY	144
HEALTH AND SAFETY	41	RISK MANAGEMENT	147
TRAINING AND EDUCATION	41	GLOSSARY OF TERMS	176
6.	COMMUNITY INVESTMENT	43	11. GRI CONTENT INDEX	177
FINANCIAL LITERACY	43	GENERAL DISCLOSURES	178
SUPPLIER RELATIONS	44	MATERIAL TOPICS	180
7.	PRESERVING NATURAL RESOURCES	45
WATER AND ENERGY SAVING	45
WASTE MANAGEMENT	45

Bahrain Islamic Bank B.S.C.

Diplomatic Area

P.O. Box 5240, Manama, Kingdom of Bahrain Tel: (+973) 17 515 151

Fax: (+973) 17 535 808

Email:corporate.communications@bisb.com

Licensed as an Islamic Retail Bank by the Central Bank of Bahrain

NO MATTER WHERE YOU ARE

BisB IS ALWAYS CONNECTED TO YOU

CORPORATE PROFILE

Founded in 1979 as the ﬁrst Islamic Bank in the Kingdom of Bahrain, and the fourth in the GCC, Bahrain Islamic Bank (BisB) has played a signiﬁcant role in the development not only of the Kingdom's economy, but also of the Islamic banking industry. The Bank operates under an Islamic Retail Bank license from the Central Bank of Bahrain and is listed on the Bahrain Bourse. The Bank operates with four branches, four innovative ﬁnancial malls, one Digital branch and 52 ATMs located throughout the Kingdom.

Driven by our Islamic values, BisB has developed itself in the Kingdom of Bahrain as a leader of the Islamic industry and the leading provider of integrated ﬁnancial solutions compliant with Shari'a. Adopting a customer-centered approach, we have shown our forward-thinking by constantly developing in anticipation of the needs and expectations of our customers.

Innovation has always been at the core of our operations and ﬁnancial offerings. We believe we are the industry's "mover and shaker", and as part of our strategic drive for digitalisation, we have achieved major milestones since our establishment. We have succeeded in changing the norms of banking within the Kingdom, thus improving the lives of society.

The role of Bahrain Islamic Bank as the leading Shari'a- compliant Bank has been cemented by a steady emphasis on sound corporate governance and risk management, employee growth, and the use of state-of-the-art technology to provide superior customer service.

The Bank has successfully built a strong base of excellence from the implementation of the Back-to-Basics Ishraq strategy; digitalisation, streamlining operations, restructuring our ﬁnancial role and engaging with our employees and local partners to grow deeper and more meaningful roots. We wish to promote the principles of sustainability in all markets, as this shift will further maximize total positive impact in Bahrain. Nourished by our combined efforts and hard work, the ideals of BisB have evolved and ﬂourished, giving birth to a new DNA brand that will lead us to a stronger and brighter future, where we compete by being different.

During 2020, the National Bank of Bahrain (NBB) acquired additional shares of Bahrain Islamic Bank, which increased NBB's shareholding in BisB from 29.06% as reported at 31 December 2019 to 78.81%. Hence, NBB is considered as Parent of the Bank for ﬁnancial reporting purposes.

This successful integration of NBB and BisB - two of the country's historic banks - into a robust banking Group, is a proud achievement that serves as a national benchmark and has contributed to strengthening the Kingdom's position as a regional ﬁnancing hub. The integration has served to reinforce both brand positions by drawing on their respective strengths and best practices to maximise their potential and deliver operational excellence. Both entities are beneﬁtting from the delivery of signiﬁcant synergies in business and investments; access to a shared talent pool of expertise, resources and technologies; improved efﬁciencies and optimised performance; and an expanded solutions portfolio, all of which serve to enhance proﬁtability and shareholder returns as well as better the customer experience, sharing the same aspirations and sustainability framework.

BisB BRAND

OUR BRAND PROMISE

FUELED BY BAHRAINI DEVOTION, WE CRAFT

NEW WAYS OF SIMPLIFYING YOUR MONEY MATTERS

BAHRAINI	Our legendary national warmth and caring for others guide our approach to our
DEVOTION	customers, partners, personnel and broader society.
WE	Our entire team and organisation is committed to your ﬁnancial well-being.
CRAFT	We sculpt and reﬁne our services and products to best serve your needs.
NEW WAYS	Innovation and continuous development drive us to challenge the ordinary
SIMPLIFYING	We remove barriers and get things done eﬃciently and easily for you.

BRAND VALUES

Bahraini

We are Muslims, generous, polite, modest and respect others. We are hospitable and treat everyone with warmth. We desire to establish trust and build relationships with people before doing business. Family at home and at work is important to us and we are loyal to them. We care about the people we interact with and oﬀer a helping hand. We are modern, intelligent and very literate.

Simple

We strive for clarity and consistency, make decisions quickly and pragmatically and focus on what's essential. We go out of our way to simplify the lives of everyone around us because we understand that banking is complicated. We always challenge ourselves to ﬁnd better ways. We celebrate successful improvements and learn from experiences.

Innovative

We move rocks to create more eﬀective processes, products and ideas. Being innovative does not only mean inventing something new but changing the status quo and adapting to change to deliver better products and services to everyone.

Bold

We think big and work with others across boundaries to drive transformational growth. We always attempt to stand out within the boundaries of simplicity. Being diﬀerent does not always mean digitalisation and does not always require us to reinvent the wheel. We seek to challenge the norm and be heard - to be a head turner.

OUR GUIDING PRINCIPLES

BisB Tree of Life Pillars

Bahrain-ness

We want to instill our Bahraini insights and local values in our daily tasks at work and our business approach, cementing our "Bahrain-ness" as a living value. We want to capture the hearts of our customers, and be known for our friendly and open voice, treating our customers with warmth and respect, dedicated to surpassing their expectations.

Banking re-imagined

Constantly ﬁnding new solutions for our customers, we connect people to the right technology, adding world-class security measures to deal with the increased risks they face in an increasingly digital world.

Start-up mindset

A creative space, our BisB Innovation Lab fosters idea generation and is one of the achievements we are most passionate about. We want to celebrate every day success stories in our culture of continuous learning.

Social innovation

Social innovation is at the heart and soul of all that we do at BisB. We are excited about the projects we are developing and will be counting on all of our stakeholders to actively participate in creating a positive impact on local society.

FINANCIAL HIGHLIGHTS

2020	2019	2018	2017	2016
Earnings (BD Millions)
Net proﬁt income	34.4	34.7	33.9	32.9	30.6
Other income	4.6	7.6	9.5	7.0	8.2
Operating expenses	23.4	25.1	23.1	23.5	20.7
Net proﬁt/(loss)	(12.6)	6.2	11.4	10.1	8.4
Cash dividend	-	-	-	-	5.1
Stock dividend	-	-	-	5.1	-
Financial Position (BD Millions)
Total assets	1,211.6	1,223.6	1,280.5	1,228.6	1,022.0
Total Islamic ﬁnancing	783.6	779.3	766.9	740.7	666.8
Investment securities	276.6	246.2	240.1	258.4	145.7
Earning assets	1,139.9	1,139.0	1,190.4	1,133.5	932.4
Total deposits	1,091.9	1,081.1	1,137.6	1,094.9	890.7
Customer deposits	1,033.5	963.3	935.0	721.2	786.8
Owners' equity	96.0	120.9	117.7	122.3	116.5
Ratios (%)
Earnings
Return on average equity	(11.6)	5.2	9.5	8.5	7.5
Return on average assets	(1.0)	0.5	0.9	0.9	0.8
Earnings per share (ﬁls)	(11.9)	5.9	10.8	9.7	8.4
Cost-to-income ratio	60.0	59.3	55.5	61.9	56.4
Earnings per head count (BD 000's)	(35.5)	17.2	31.2	28.1	23.1
Capital
Owners' equity as % of total assets	7.9	9.9	9.2	10.0	11.4
Total liabilities and URIA to owners' equity (times)	11.6	9.1	9.9	9.0	7.8
Capital adequacy ratio	16.0	14.9	17.1	19.4	20.3
BisB ANNUAL FINANCIAL & SUSTAINABILITY REPORT 2020
06

FINANCIAL HIGHLIGHTS

NET PROFIT/(LOSS)

(BD Millions)

(12.6) M

CUSTOMER DEPOSITS	TOTAL ISLAMIC FINANCING	TOTAL INCOME
(BD Millions)	(BD Millions)	(BD Millions)
1,033.5 M	783.6 M	39.0 M

39.9 10.1

2018 2019 2020

OWNERS' EQUITY	CAPITAL ADEQUACY	EARNINGS PER SHARE
(BD Millions)	(%)	(FILS)
96.0 M	16.0%	(11.9) Fils

116.5 786.8

2016 2017
122.3 721.2
117.7 935.0
120.9 963.3
2016 2017

2018 2019 2020

2016 2017
19.4 740.7
17.1 766.9
14.9 779.3
16.0 783.6
2016 2017

2018 2019 2020

2016 2017
2018 2019 2020
43.4 11.4
6.2
(12.6)
2016 2017
2018 2019 2020
5.9
2016 2017

2018 2019 2020

(11.9)

OPERATIONAL HIGHLIGHTS

Corporate Governance and Ethical Behaviour

• Created a best governance framework, not only in terms of introducing technology to our governance and compliance processes but also building a robust framework for accountability, transparency and regulatory relations.
• First Bank in Bahrain to obtain the ISO Certiﬁcate for Business Continuity Management System, as part of our efforts to address potential risks or disruptions.
• Hosts annual events, ordinary and extra-ordinary General meetings virtually via video conferencing in celebration of the Spirit of Innovation and Collaboration.

Serving our Customers

• Launched Tejoori Instant Finance, allowing Tejoori credit holders to take instant ﬁnance against a pledge from their Tejoori accounts.
• Installed new digitally empowered self-service kiosks across all branches and Financial Malls, enabling existing and potential retail customers to open an account without the need for human intervention.
• Worked with Omar Farooq, social media inﬂuencer and our ofﬁcial new Brand ambassador, to promote products, services, and other innovations in exciting ways through social media channels.
• Enabled instant cash withdrawal online from credit cards to savings and current accounts.
• Launched "End-to-End Mobile Account Opening for Corporate Customers", allowing individual establishments and Sijili customers to open and operate a corporate account using facial recognition.
• Upgraded digital services by rolling out new open banking services, in partnership with Tarabut Gateway, enabling customers to link and view multiple bank accounts through the BisB Digital mobile application.
• The ﬁrst Bank in Bahrain to automate the Know Your Customer providing eKYC processes.

Responsible Banking

• Signed an agreement with Bahrain Bourse for its newly launched Murabaha Financing Digital Service, as part of the Bank's commitment to position the Kingdom of Bahrain as the regional FinTech hub and global capital of Islamic banking.
• Offered relief measures to retail and corporate clients, providing credit facilities and restructuring advice; and urged the use of digital platforms to ensure personal safety, in line with our commitment to help lessen the ﬁnancial burden of companies and individuals under our portfolio.
• Rewarded frontline customers during the coronavirus outbreak and increased the ﬁnancial rewards to BD 57,000.

Nurturing our Workforce

• Embraced work from home to safeguard employees and implemented health and safety measures during COVID-19.
• We revealed the #Faces_of_BisB, where we celebrate the success stories and lives of our employees.

Community Investment

• Supported Bahrain Polytechnic University students with laptops, as part of our corporate responsibility Program, Jood. We partnered with Polytechnic University to provide a number of initiatives which aimed to equip students with enhanced soft skills such as innovation, creativity, entrepreneurship and leadership in order to create a future-ready workforce.
• Participated in the government's national campaign "Feena Khair" by donating BD 250,000.
• Extended support to the Capital Governorate's "Together we care" campaign, donating BD 30,000.
• Took part in the Global Islamic and Sustainable FinTech Center (GISFC) Acceleration Program where participants are required to contribute to at least one of the UN Sustainable Development Goals. Under this program, we

OPERATIONAL HIGHLIGHTS (Cont'd)

embarked a strategic partnership with CBB to launch the CBB Digital Lab "FinHub 973" and launched the exclusive "Digital Marketing - Tech Minds of Tomorrow" Program in collaboration with Bahrain FinTech Bay.

• Organized the annual digital event for the Bank "#BisB" under the theme title: Celebrating the Spirit of Innovation & Collaboration. This event, broadcasted on social media channels, gathered several ﬁnance and banking ofﬁcials in Bahrain as well as media, social media inﬂuencers and customers.
• Supported the 9th conference of the Shari'a Islamic Boards of Islamic Financial Institutions as a silver sponsor, organized by the Accounting and Auditing Organisation for Islamic Financial Institutions. The conference addressed Murabaha and Musharaka proﬁt calculation, utilizing al Wafa sale and cash option in treating liquidity problems, or Shari'a methods in handling non-performing ﬁnancing.

Preserving Natural Resources

• Enabled a seamless paperless onboarding process for new customers at BisB branches.
• Introduced water sensors in the BisB datacenter to monitor and detect leakage as part of our Business Continuity Management requirements to protect the devices and eliminate water waste.

•

Awards in 2020

• Received an Award for "Best Corporate Social Responsible Bank- Bahrain" and "Most Innovative Retail Bank Product-Bahrain" and the 2020 Asian Banking & Finance Wholesale Banking Award "Bahrain Domestic Initiative of the Year for Open Banking".
• Awarded "Excellence in Islamic Banking" at Finnovex Middle East Awards 2020.
• Received two gold awards for the categories of "Product Launch" and "Internal Communications Campaign" at the 2020 MarCom Awards, honoring excellence in Marketing and Communication.
• The head of Internal Shari'a Audit has been ranked #35 in the Womani Awards, honoring the 150 most inﬂuential women in Islamic business and ﬁnance.

• Rewarded at the 'Transformers Awards®' ceremony held in Morocco, organized by Trusted Advisors Group, certiﬁed in change management and transformation management. The ﬁrst 'Transformers Award' was given in light of our success in facilitating ﬁnancial transactions for customers through digital innovations, the second 'Customer Journey Award' was presented for the deployment of 'Selﬁe' Mobile Account Opening digital solution.
• The Chief Information Ofﬁcer of BisB, Osama Nasr, was named "CIO of the Year" during the 2020 Bahrain Smart SMB Summit and Awards, which focused on topics related to transformation which impact the business dynamics in the market.
• Recognized as the 'Most Innovative Retail Bank Product - Bahrain', for the year 2020 from International Finance Magazine (IFM), a publication that recognizes and honors organisations that have developed innovative products or services that have set benchmarks for their peers across a variety of ﬁelds.
• Rewarded "Bahrain Domestic Initiative of the Year for Open Banking" category from the Asian Banking and Finance Wholesale Banking Awards 2020, honoring the most outstanding banks in Asia with successful and innovative wholesale banking initiatives.
• The Head of Information Security, Mohammed Isa Hammad, was named 'Continuity and Resilience Professional (Private Sector)' during the Business Continuity Institute (BCI) Middle East Awards 2020, recognizing the outstanding contributions of business continuity, risk and resilience professionals and organisations living or operating within the Middle East region.
• Won the platinum 'Marketing Effectiveness Award' in the social media category for our efforts on 'End-to-End Mobile Account Opening through Face ID Authentication' at the Summit International Awards 2020 which was announced in February 2021, USA.

BOARD OF DIRECTORS REPORT

Dr. Esam Abdulla Fakhro Chairman of the Board

The COVID-19 pandemic created unprecedented challenges in 2020. The Bank rose to these challenges, with our focus on simplifying customer matters and digital banking, which has proved to be essential in the pandemic context.

In the name of Allah, the Most Beneﬁcent.

Prayers and Peace be upon the last Apostle and Messenger, His Comrades and Relatives.

On behalf of the Board of Directors, I am privileged to present the annual report and consolidated ﬁnancial statements of Bahrain Islamic Bank for the year 2020.

The Bank managed to capitalize on the low rate environment and improve its deposits composition further towards CASA accounts reducing its cost of funding by 17%.

The Bank also took immediate steps to begin beneﬁting from the acquisition of additional 49.75% shares in BisB by the National Bank of Bahrain ("NBB"). In particular, the Bank sold certain non-yielding assets to NBB and accelerated the write-off of impaired assets, which allowed the Bank's ﬁnancing portfolio to become signiﬁcantly healthier and resulted in a lower NPF of 7% as of 31 December 2020 compared to 16% as of 31 December 2019. This step will allow theBank to demonstrate the true quality of its ﬁnancial performance.

The Bank's risk management, governance and compliance policies and practices remain prudent and are constantly under review and enhancement, in order to keep up with regulations and equally important increased external risks.

The COVID-19 pandemic was a stark reminder that the success of the Bank is directly linked to the health, safety and economic vitality of the society. Accordingly, the Bank increased its focus on the Environmental, Social and Governance ("ESG") risks and opportunities, including specialized ESG and sustainability training for the Board.

On behalf of the shareholders, the Board of Directors convey their sincere gratitude and appreciation to His Majesty King Hamad bin Isa Al Khalifa - the King of Bahrain; to His Royal Highness Prince Salman bin Hamad Al Khalifa - the Crown Prince, Prime Minister for their wise leadership and continuous support for Islamic Banking sector.

The Directors also express their appreciation to all Government ministries and authorities - in particular to the Central Bank of Bahrain and the Ministry of Industry, Commerce & Tourism for their invaluable guidance, kind considerationand constant support, particularly in the context of this unprecedented year. Moreover, the Directors would like to take this opportunity to express their gratefulness for the guidance and counsel of the Bank's Shari'a Supervisory Board.

Ultimately, as with every year but even more so this year, we could not have demonstrated such resilience without the outstanding dedication of BisB's staff and management, the loyalty of our customers, and the reliability of our business partners. BisB is grateful and honored that these relationships grew in strength during such extraordinary circumstances. We look forward to the new possibilities these strengthened relationships can offer.

Dr. Esam Abdulla Fakhro Chairman of the Board

BOARD OF DIRECTORS

Dr. Esam Abdulla Fakhro Chairman

Mr. Khalid Yousif Abdul Rahman Vice Chairman

Non-Executive Director Chairman--Noomininaattioionn,,Remuneration & GReomveurnearnacteioCno&mGmoivtteerena(nNcReGCCo)mmittee (NRGC)

Non-Executive Director

Vice Chairman- Executive Committee

Dr. Esam Fakhro is a holder of a PhD Degree in Mechanical Engineering from London University. He was awarded the Bahrain Medal - FirstClass. He is also a member of the Supreme Council for Education Development, and a member of the board of Trustees of AMA International University. Dr. Fakhro was a former member of the Economic Development Board. Previously, he chaired the Aluminum Bahrain Co. (ALBA), in addition to chairing the Bahrain Chamber of Commerce & Industry, and the Federation of GCC Chambers. Dr. Fakhro was a former member of Mumtalakat. Currently, he chairs Abdullah Yousif Fakhro & Sons Group in the ﬁeld of transport and electronics, as well as foods and ﬁnancial services. Dr. Fakhro is also the Chairman of the Board of Directors of the Bahrain Cinema Company. In addition, he assumes the post of the Deputy Chairman of National Bank of Bahrain, and the Qatar Bahrain Cinema Company and Vox Cineco. He is also a member of the Board of Directors of Trafco and Bahrain Livestock Company.

Mr. Khalid Yousif Abdul Rahman is Vice Chairman and Chief Executive Oﬃcer of Yousif Abdul Rahman Engineer Holding Company W.L.L. He is also Chairman of Food Supply Company Limited, Vice Chairman of National Establishment of Technical and Trade Services, Vice Chairman of National Transport Company, and Vice Chairman of Awal Dairy Company. He is a member of the Board of several major companies in Bahrain, including National Bank of Bahrain and Bahrain Ship Repairing & Engineering Company. He gained his B.Sc. Mechanical Engineering from Plymouth Polytechnic University, UK, and is a registered member of Bahrain Society of Engineers and the Committee for Organizing Engineering Professional Practice (COEPP) Mechanical Engineering Cat. B. Mr. Abdul Rahman has over 45 years of professional experience.

Mr. Jean-Christophe Durand joined the National Bank of Bahrain (NBB) as the CEO in December 2016 with a focus on reinforcing and expanding the Bank's role as a driver for economic growth and development. Mr. Durand brings over 39 years of international and regional banking and ﬁnance experience gained from senior leadership roles at leading global banking institutions, 32 years of which were in the GCC. Mr. Durand graduated from ESSEC Business School (Ecole Superieure des Sciences Economiques et Commerciales) in Paris. Prior to taking on the role of CEO of NBB, he was the regional CEO of BNP Paribas for Middle East and Africa, and was responsible for Corporate and Institutional Banking and Asset Management, and served on the board of a retail bank owned by the BNP Paribas group. He holds several Board positions locally and regionally, including sitting on the boards of Gulf Air, Bahrain Telecommunications Company (Batelco) and Bahrain Islamic Bank. He serves as the Chairman of Batelco's Audit Committee, Chairman of BisB's Executive Committee and is a member of the Human Resources Committee at Gulf Air. Additionally, he is the Chairman for Umniah Telecommunication Company in Jordan, Director of the Bahrain Institute of Banking and Finance (BIBF) and Chairman of the French Chamber of Commerce and Industry in Bahrain (FCCIB). Mr. Durand was awarded the 'Legion d' Honneur' by the Government of France.

Mr. Yaser Alshariﬁ joined NBB in 2017 as the Chief Strategy Oﬃcer, leading the Bank's transformation and innovation eﬀorts, heading NBB's project management oﬃce and business development arm, as well as the Bank's operations in Saudi Arabia and the United Arab Emirates. Mr. Alshariﬁ was appointed as the Group Chief Strategy Oﬃcer in 2020. He boasts over 25 years of experience in investment management and corporate ﬁnance across the GCC, Europe and the US, with past roles in Al Rajhi Holdings, and Partner at Ernst & Young. Additionally, Mr. Alshariﬁ serves as the Chairman of the Bahrain Institute for Pearls and Gemstones (Danat). He is also a Board Member of Bahrain Real Estate Investment Company (Edamah), Bahrain Bourse, Bahrain Clear and Bahrain Car Parks Company B.S.C. Mr. Alshariﬁ represents NBB on the Board of Bahrain Islamic Bank, and is part of the Limited Partners Advisory Committee of the Al Waha Fund of Funds. Furthermore, he is a Member of the Young Presidents Organisation (YPO) and holds a Bachelors in Business Administration from the University of Massachusetts at Amherst, USA.

Mr. Khalid Abdulaziz Al Jassim Board Member

Mr. Mohammed Abdulla Al Jalahama Independent, Non-Executive Director

Independent Non-Executive Director Chairman - Audit Committee (AC)

Member - Audit Committee (AC)

Member - Board Risk & Compliance Committee (BRCC)

Mr. Khalid Abdulaziz Al Jassim is the Chairman and the Managing Director of Afkar Holding Company, which specializes in investments. Prior to that, he was an Executive Director at Arcapita Bank. Mr. Al Jassim has also worked for Arthur Anderson as a senior business consultant. He holds a BSC in Computer Science & Mathematics from the California State University, Long Beach, USA as well as an Executive MBA from Pepperdine University in California, USA.

Mr. Mohammed Abdulla Al Jalahama is the former Secretary General of the General Secretariat of Awqaf in Kuwait. In addition to holding previous board positions on several governmental institutions, Mr. Al Jalahmah was on the Board of Directors at both Bangladesh Islamic Bank as well as Al Madar Finance and Investment Company. He holds a Bachelor's degree in Business Administration from Concordia University, Canada.

Mr. Marwan Khaled Tabbara Board Member

Mr. Mohamed Abdulla Nooruddin Board Member

Independent Non-Executive Director

Chairman - Board Risk & Compliance Committee (BRCC) Member - Nomination, Remuneration & Governance Committee (NRGC)

Member - Nomination, Remuneration & Governance Committee (NRGC)

Member - Board Risk & Compliance Committee (BRCC)

Mr. Tabbara is a co-founder and Managing Partner of Stratum, a boutique advisory services ﬁrm based in the Kingdom of Bahrain, and has over 20 years of experience in strategic, ﬁnancial, and transaction advisory. Prior to Stratum, Mr. Tabbara worked in the Global Corporate & Investment Banking division of Citigroup in New York, London, and Bahrain, and supported large private and public sector clients on ﬁnancing transactions within the Middle East and internationally. He currently also serves as Chairman of the Board of Directors of Bahrain Flour Mills Company BSC (publicly listed and majority owned by Mumtalakat, the sovereign wealth fund of the Kingdom of Bahrain) and as Board Member of Bahrain Development Bank BSC (c). He has also previously served as Vice Chairman of the Board of Directors of Bahrain Bourse BSC (c) (Bahrain's National Stock Exchange). Mr. Tabbara holds a Master of Engineering Management and a Bachelor of Science in Electrical Engineering and Economics from Duke University, USA.

Mr. Mohamed Abdulla Nooruddin is the Chairman of Newbury Investments W.L.L., a private entity ﬁrm established in the Kingdom of Bahrain that provides ﬁnancial and investment advisory services. He was also a Board member at Al Baraka Bank-Egypt and Tadhamon Capital. He is also an ex-board member of Ibdar Bank. In the past, Mr. Nooruddin has held several executive positions at Arcapita Bank, First Islamic Investment Bank, Bahrain International Bank and Gulf International Bank. He holds a BSc in Business Administration from the University of Bahrain.

Mrs. Dana Abdulla Buheji Board Member

Mr. Isa Hasan Maseeh Board Member

Executive Director

Member - Nomination, Remuneration & Governance Committee (NRGC)

Member - Audit Committee (AC)

Member - Board Risk & Compliance Committee (BRCC)

Mrs. Dana Buheji joined NBB in 2017 as the Chief Human Resources Ofﬁcer with a mandate to ensure that the Bank efﬁciently maximises its talent base, invests in the training and development of staff and effectively recruits and retains staff to support the Bank's efforts to grow and diversify, and she currently holds the positions of the Group Chief Human Resources Ofﬁcer. Mrs. Buheji has 19 years of experience in Human Recourses with previous positions in Bahrain Economic Development Board (EDB), Bahrain Mumtalakat Holding Company, Ministry of Finance and National Economy, and Ahli United Bank. She also represents NBB on the Board of Bahrain Islamic Bank and serves as a Board Member in Injaz Bahrain, Member of Consultative Committee for Bahrain International Federation for Business and Professional Women (BPW) and a Member of the Human Resources and Remuneration Committee of Bahrain Association of Banks (BAB). Mrs. Buheji holds a Certiﬁcate in Personnel Practice (CPP), London, UK and B.A.

Mr. Isa Maseeh joined NBB in 2017 as Deputy Chief Risk Ofﬁcer and took over as Chief Risk Ofﬁcer in July 2019 to focus on reinforcing and further developing the risk management framework in support of the Bank's future growth and transformation. He has since assumed the position of Group Chief Risk Ofﬁcer. Moreover, he was appointed as Acting Chief Compliance Ofﬁcer in 2020.

Mr. Maseeh carries with him over 23 years of banking experience spanning commercial and investment banking in the Kingdom of Bahrain in the areas of risk management, credit and compliance. Prior to joining NBB, Mr. Maseeh was the Group Chief Risk Ofﬁcer of Al Salam Bank Bahrain where he was focused on the integration and management of the risk function post the acquisition of BMI Bank. He has also held various other senior risk management positions with Islamic and conventional banks including BMI Bank, United Gulf Bank, and Gulf Finance House. Additionally, Mr. Maseeh is a Board Member representing NBB on Bahrain Islamic Bank B.S.C., and RE Property S.P.C. Mr. Maseeh holds an MBA (Hons) from DePaul University, USA and a Bachelor of Commerce from Concordia University, Canada. He is also a Chartered Financial Analyst (CFA) and a Professional Risk Manager (PRM).

THE PRIMARY RESPONSIBILITY OF THE BOARD OF DIRECTORS IS TO PROVIDE EFFECTIVE GOVERNANCE OVER THE BANK'S AFFAIRS FOR THE BENEFIT OF ITS STAKEHOLDERS AND TO BALANCE THE INTERESTS OF ITS DIVERSE CONSTITUENCIES, INCLUDING ASSOCIATED CONCERNS, EMPLOYEES, AND OTHER STAKEHOLDERS.

SHARI'A SUPERVISORY BOARD

Shaikh Dr. Abdul Latif Mahmood Al Mahmood Chairman of Shari'a Supervisory Board

Shaikh Mohammed Jaffar Al Juffairi

Vice Chairman of Shari'a Supervisory Board

• Former Head of Arabic Language and Islamic Studies Department at the University of Bahrain.
• Member of the Supreme Council for Islamic Aﬀairs, Bahrain.
• Member of the Shari'a Supervisory Board of Bahrain Central Bank, Oman Central Bank, AlBaraka Banking Group ,Takaful International, and ABC Islamic Bank Kingdom of Bahrain and London.
• Preacher at a number of Bahrain's Masjeds since 1973.
• He gives lessons in Quran interpretation, jurisprudence, principles of jurisprudence and preaching.
• He participated and spoke in a number of jurisprudence, educational, economic, intellectual, social and cultural conferences and seminars.

• Studied at Al Ahliya University of Najaf, and joined the Hawza studies for higher education in Shari'a sciences (Comparative Studies).
• Judge of the High Shari'a Court of Appeal and seconded as President of the High Shari'a Court, Ministry of Justice, Kingdom of Bahrain.
• Former Member of the Zakah Committee, Ministry of Justice.
• He participated in a number of Islamic committees, courses, seminars and conferences.

• Chairman of Shari'a section, Cassation Court, Ministry of Justice and Islamic Aﬀairs and Awqaf, Kingdom of Bahrain.
• Vice Chairman of the Royal Charity Organisation.
• Chairman of the Pilgrimage Mission, of the Kingdom of Bahrain.
• Puisne Justice of the High Shari'a Court.
• Preacher of Ahmed Al Fateh Islamic Masjed.
• He participated in a number of Islamic committees, courses, seminars and conferences.
• He worked as a lecturer at the Islamic Studies Department, University of Bahrain.
• Member of the Shari'a Supervisory Board of Al Salam Bank, Ibdar Bank, and LMC.

• Member of various Shari'a Supervisory Boards including Central Bank of Bahrain, Abu Dhabi Islamic Bank, UAE., Sharjah Islamic Bank, UAE, Ithmaar Bank, Kingdom of Bahrain, Gulf Finance House, Kingdom of Bahrain, Khaleeji Commercial Bank Bahrain, ABC Islamic Bank, Kingdom of Bahrain, ABC Islamic Bank, London.
• Member of Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).
• Holds a number of Academic degrees and awards, First Degree Award of Capability for Islamic services within and outside Bahrain, from the King of Bahrain, Euro Money Award for innovation in Islamic banking supervision, Malaysia, Malaysia Award for contribution to Islamic Banking, Malaysia.
• He participated and is a speaker in a number of jurisprudence, educational, economic, intellectual, social and cultural conferences and seminars.

• Professor of Comparative Jurisprudence and Faculty of Shari'a and Islamic Studies, University of Kuwait.
• Member of Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI),
• Member of the Shari'a Supervisory Board at Boubyan Bank - State of Kuwait, Alahli Bank, Investment Dar - State of Kuwait, Kuwait Zakah House.
• He participated and is a speaker in a number of jurisprudence, educational, economic, intellectual, social and cultural conferences and seminars.

CHIEF EXECUTIVE OFFICER REPORT

Mr. Hassan Amin Jarrar Chief Executive Oﬃcer

We are grateful that our ongoing focus on "Simplifying your money matters" and the digitalisation of the Bank and its services were extremely well-suited to meet these twin goals of safety and economic security for our key stakeholders. We spent every eﬀort possible in 2020 accelerating our simpliﬁcation and digitalisation eﬀorts to make banking as easy and reliable as possible throughout the year.

2020 presented rare challenges. As the COVID-19 pandemic affected individuals, families, communities and the economy, BisB's utmost priority was, and continues to be, safety and security. Safety for our customers. Safety for our employees. Safety for our business partners. Safety for society. And as much economic security as possible for each of these stakeholders in such uncertain circumstances.

their families was essential. Our simplicity and digitalisation efforts made it possible for more than 50% of our employees to work effectively from home, particularly for those who are caregivers in their family, offering them support and training sessions to ensure their mental well-being.

We are grateful that our ongoing focus on "Simplifying your money matters" and the digitalisation of the bank and its services were extremely well-suited to meet these twin goals of safety and economic security for our key stakeholders. We spent every effort possible in 2020 accelerating our simpliﬁcation and digitalisation efforts to make banking as easy and reliable as possible throughout the year.

In terms of responsible banking and taking care of our customers, we introduced more ways for individual and companies to access banking services without having to leave their homes, interact unnecessarily with others, touch paper or even touch money. For example, companies can now set up accounts online, or update their records uploading all necessary forms strictly online through the "BisB Digital" smart phone application, in the same ﬁve- minute timeframe that we have achieved for individual banking customers. We also worked in a co-operative spirit with regulators, going beyond their requests, to reschedule or extend ﬁnancing repayment terms for our customers in need.

With our partners, we are particularly proud that much of the ﬁnancial technology (or FinTech) that is making our user interface and experience so friendly is developed in Bahrain, particularly in a time when the economy has been impacted by the pandemic. We continued to invest in the growth of this Bahrain FinTech ecosystem by supporting Finhub 973, a partnership with the CBB and other leading banks in Bahrain, and similar initiatives, that promote innovation on a local level, further enabling the Kingdom of Bahrain's FinTech sector to thrive and cementing its position as a FinTech hub in the region.

'Simpliﬁcation' approach is to mirror the seamless, reliable, and predictable end-user experience in banking, as much as it is in other services. Just as millennials and 'Generation Z' expect this technological capability and experience, we recognize they also increasingly expect a clear, genuine focus on sustainability. They have a preference to bank with, purchase from, work for and invest in products, services and companies that understand sustainability, value it, and demonstrate better sustainability performance.

As an Islamic Bank, values always come ﬁrst.

This combined annual and sustainability report captures how we perform not only in terms of ﬁnancial performance, but also sets out our social, socio-economic, environmental and governance performance.

Financially, the business demonstrated remarkable resilience. There were savings in some areas such as cost of funding and operational expenses, while other areas such as fees and commissions income suffered as a result of the pandemic. NBB's completion of the acquisition of a majority stake in BisB has been particularly timely and valuable for BisB. With prudent provisioning including acceleration of write off of impaired assets and sale of certain assets to NBB, we have been able to improve our balance sheet, even while taking extra care of our customers during the pandemic.

It is a ﬁtting way to report on a year that was so focused on working together with our stakeholders to preserve and create value for both shareholders and society. I extend my sincere thanks to all of our stakeholders for their engagement and collaboration.

To take care of our employees, we made it clear that their safety and the well-being of

Last year, I emphasized that as millennials and 'Generation Z' continue to rely heavily on mobile and smart phones, the aim of our

Hassan Amin Jarrar Chief Executive Ofﬁcer

EXECUTIVE MANAGEMENT

Mr. Hassan Amin Jarrar Chief Executive OﬃcerMr. Wesam Abdul Aziz Baqer

Chief Corporate & Institutional Banking

Mr. Hassan Amin Jarrar is one of the most prominent banking leaders in the region with more than 30 years of international, regional and local banking experience. Prior to joining Bahrain Islamic Bank on July 1, 2015 as Chief Executive Oﬃcer, Mr. Jarrar held the position of Chief Executive Oﬃcer of Standard Chartered Bank, Bahrain. Mr. Jarrar's diverse career in banking includes extensive experience in retail, SME, and Corporate Banking in the Middle East and the US. Regionally, he served as Head of Corporate and SME Banking at Abu Dhabi Commercial Bank, and Head of Corporate Banking at Mashreq Bank, Abu Dhabi. Internationally, he has over two decades of experience in key management positions in leading banking institutions in the USA, namely Security Paciﬁc Bank, and Bank of America. He is the Chairman of Liquidity Management Center "LMC" and serves on the Boards of Bahrain Bourse, the Bahrain Association of Banks, and Tamkeen. Mr Jarrar holds a BSc in Finance from California State University, San Jose, USA.

Mr. Wesam Baqer is an approved international arbitrator, an experienced banking professional with a diverse career in Corporate Banking, Private Banking, and Business Development. Mr. Baqer joined BisB in 2008 as Head of Corporate Banking. Previously, he held the same position at National Bank of Kuwait. Prior to that, he managed corporate relationships with HSBC for eight years. He is a Certiﬁed Financial Advisor (CeFA), and a member of the Chartered Institute of Bankers. Mr. Baqer is a Board Member representing BisB in various companies across Bahrain, and is an active member in several local charities and community service societies. Mr. Baqer completed an Executive Management Leadership Diploma from Darden Graduate School of Business, University of Virginia, in the US. He also holds an MSc (Economics) in Finance and Investment Management from the University of Aberdeen, Scotland, and a BS in Business Administration from the University of Bahrain.

Mrs. Dalal Al Qais is the ﬁrst Bahraini woman to hold a GM position at Bahrain Islamic Bank (BisB) with over 18 years of extensive ﬁnancial and banking experience. Prior to joining BisB in October 2017 as the ﬁrst Bahraini woman to hold the position of Head of Retail Banking for the Bank, she headed the Consumer Banking Division of Standard Chartered Bank in Bahrain, with regional responsibilities covering Bahrain, Qatar and Oman. During her 16 years with Standard Chartered Bank, her management roles covered retail branch banking, SMEs, credit cards, and wealth management. Mrs. Al Qais also brings to the Bank in-depth knowledge of consumer banking digitalisation channels. Ms. Al Qais holds a BSc in Management and Marketing from the University of Bahrain and an MSc in Finance.

Mr. Ameer A.Ghani Dairi has over 19 years of experience in ﬁnancial management and accounting in addition to a broad commercial banking background in Bahrain. He joined BisB in 2007 and holds the position of Chief Financial Oﬃcer at BisB. Mr. Dairi is a Board Member and Chairman of Audit Committee in Liquidity Management Centre (LMC), representing BisB. He is also the Chairman of the Board of Directors of Abaad Real Estate Company.

Mr. Dairi is a Certiﬁed Public Accountant (CPA) from New Hampshire Board of Accountancy, a Certiﬁed Management Accountant (CMA) licensed by the Chartered Institute of Management Accountants, US and holds a BSc in Accounting from the University of Bahrain. Mr. Dairi has been awarded a certiﬁcate of excellence in data science and analytics from Berkeley University of California and a leadership grooming program certiﬁcate from Ivey Business School, Canada, a program designed by CBB Waqf Fund for Islamic Banking future leaders.

Mr. Fahim Ahmed Shaﬁqi Chief Risk Oﬃcer

Mr. Mazar Rashid Mohammed Jalal Chief Compliance & Governance

Mr. Fahim Ahmed is an experienced banker with over 20 years of international experience gained through various roles in Corporate Banking and Risk Management, spanning the markets of Pakistan, GCC, Africa and the UK. Prior to joining BisB, Mr. Ahmed held the position of Chief Risk Oﬃcer at Standard Chartered Bank Bahrain. He holds a Diploma in Islamic Finance (CDIF) and an MBA from the University of Warwick, UK.

Mr. Mazar Rashid Mohammed Jalal has over 18 years of experience in the ﬁnancial services industry, covering Asset Management, Risk Management, Corporate Governance and Compliance. Prior to joining BisB, he was Head of Compliance at Kuwait Finance House, Bahrain. Mr. Mazar has had extensive experience with various Central Bank regulators in the ﬁeld of compliance and corporate governance, AML procedures, and FATCA, among others. He holds a BSc in Accounting from the University of Bahrain, and a Diploma in Islamic Banking and Insurance from the Institute of Islamic Banking and Insurance, UK and Wales, with which he also has an Associate Fellowship. In 2014, he acquired the International Diploma in Compliance with distinction.

Mr. Khaled Waheeb Alnaser has over 10 years' experience in the ﬁelds of external audit, ﬁnancial reporting and control, internal control, and internal audit. Prior to joining BisB in 2014 he worked at EY as an external auditor with focus on Islamic ﬁnancial institutions. He joined BisB as a Senior Manager in Financial Control in charge of ﬁnancial reporting and payables, then moved to establish and head the Internal Control department prior to joining Internal Audit and holding his current position as Chief Internal Auditor. He is a Certiﬁed Public Accountant (CPA) from New Hampshire Board of Accountancy, Certiﬁed Internal Auditor (CIA) from the Institute of Internal Auditors (IIA), Certiﬁed Islamic Professional Accountant (CIPA) from Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), and a Chartered Global Management Accountant (CGMA). Mr. Alnaser also completed a Leadership Development Program from Darden School of Business, University of Virginia, in the US.

Mr. Osama Nasr has over 20 years of experience in Information Technology (IT) and is currently the Head of Information Technology at BisB. Prior to joining BisB in 2007 as Head of Application Services in the IT department, Mr. Osama has held various key positions in several specialized companies abroad. Mr. Osama Nasr holds a Masters degree in Information System Management from the University of Liverpool in the United Kingdom. He also participates in several courses and workshops specialized in his ﬁeld of work.

Mrs. Maisa Jawdat Shunnar Chief Digital Transformation

Mr. Hussain Ebrahim Al Banna Head of Treasury Department

Mrs. Maisa has substantial experience in Transformation and Business Process Re-engineering (BPR). She oversees Business Planning and is responsible for strategy alignment to the latest industry practices within the FinTech ﬁeld for Bahrain Islamic Bank (BisB). Mrs. Maisa is a notable speaker and active participant on topics such as FinTech and Transformation. She has participated in many conferences within the Middle East & Europe. Furthermore, she is a member of many national committees in the ﬁelds of FinTech and Innovation. Additionally, Mrs. Maisa serves on the Advisory Board of Bahrain FinTech Bay. Prior to holding her current position in BisB, Mrs. Maisa worked in the National Bank of Abu Dhabi as Transformation Manager, headed the BPR Department in the Electronic Government Authority of Bahrain and served as the Manager of Performance and Productivity Improvements for Electronic Data Systems

- Bahrain. Prior to moving to the Middle East, Mrs. Maisa worked in Shell Oil and Gas and for the City of Houston in the State of Texas, USA.

Mrs. Maisa holds a B.Sc. degree in Business Administration majoring in Computer Information Systems from the University of Houston (Texas, USA), and a Master's degree in Business Communication and Leadership from Jones International University (Colorado, USA). Mrs. Maisa has also acquired a Certiﬁcate from Oxford University on FinTech, a Diploma in Islamic Finance Studies from CIMA, UK and a Certiﬁcate in Business Excellence from Columbia Business School in FinTech, Digital and Analytics.

Mr. Hussain Al Banna is a banking professional with more than 15 years of conventional and Islamic banking experience in various capacities. He joined BisB in 2008 and is currently Assistant General Manager heading the treasury department with a mandate of handling Foreign Exchange (FX), Money Markets (MM) as well as the Bank's sukuk portfolio. His banking career started in 2004 when he joined BNP Paribas as an Oﬃcer in the Regional Treasury Operations and was later selected for the prestigious Executive Management Trainee Program in 2005 at Bank of Bahrain and Kuwait (BBK) where he gained experience in the Treasury & Investments Department. During the program, he gained in-depth knowledge of FX, MM - Asset Liability Management (ALM), Corporate Treasury sales and handled over US$ 700 million ﬁxed income bond portfolio. He holds a BS in Banking and Finance from the University of Bahrain and has successfully completed a diploma in Treasury and Capital Markets from Bahrain Institute of Banking and Finance (BIBF).

Mrs. Eman Ali Abdulla Ebrahim has more than 23 years experience in Banking sector, including banking operation front and back oﬃce coordination for Trade Finance, Treasury and Islamic Finance. She is well-versed in conventional and Islamic banking operations, as well as banking products and services support. Mrs. Eman joined BisB in 2006, after completing eight years with Ahli United Bank in customer service and related support functions. Mrs. Eman has MBA in Islamic Finance from University College of Bahrain.

Bringing to the role over 20 years of work experience,

Ms. Afnan Saleh began her career at the Career Counseling Oﬃce of the University of Bahrain where she worked for ﬁve years, ultimately heading Professional Liaisons Division as Senior Counselor. She later joined Intelnacom as a Corporate Aﬀairs Manager in 2006. From 2008, Ms. Afnan Saleh held several leading positions at Tharawat Investment House, namely as Director of HR & Corporate Management and Secretary of the Board of Directors. Ms. Afnan joined BisB in 2015 as a Manager in the Bank's HR Department, where she was promoted to Chief Human Resources Oﬃcer. In addition to her work experience, she holds a B.Sc. in Business Administration from the University of Bahrain, and an MBA in Business Administration from Strathclyde University, UK.

SUSTAINABILITY

As an Islamic Bank, we have strong ethical foundations, and we believe that sustainability is essential to business and society. We aim to embed it in our DNA, at the core of our business and operations.

Sustainability is an institutional commitment and comprises an integral part of our pursuit of both good corporate citizenship and the fundamentals of sound business practice. We share the vision and aspirations of NBB, our main shareholder, and we too believe that sustainability can make our Bank the "banking partner of choice" as it can bring strong growth in the high impact sectors that will shape the future economy and competitiveness of Bahrain. As such, we wish to promote the principles of sustainability in all markets, as this shift will further maximize total positive impact in Bahrain.

We believe that eﬀective communication is a key component of sustainability, involving understanding the needs of our stakeholders and ensuring that their voices are heard and that their concerns are acted upon. In this, sustainability is fully aligned with our own philosophy of listening to our customers and putting their needs ﬁrst.

This spirit of engagement is also an integral part of reporting on sustainability - ensuring that we have a proper process in place to identify our stakeholders, understand their concerns, and make sure that our reporting focuses on the issues of most importance to them and to our future success.

Since last year, the Bank has reported important non-ﬁnancial information about its operations, promoting transparency and providing comprehensive coverage of signiﬁcant sustainability topics. This year is the ﬁrst time that we are publishing a consolidated Annual and Sustainability Report which highlights our goal to implement sustainability in our business. We will assess our sustainability practice in accordance with international standards and best practice.

Stakeholder dialogue

We value our stakeholders, who have invested in us, and with whom we have built strong relationships. Our stakeholders are the customers, our employees, shareholders and investors, government and regulators, the communities, and our suppliers.

Customers

In BisB, we want to diﬀerentiate by oﬀering superior customer service. The aim is to capture the heart of our customers and be known for a friendly and open voice, treating them with warmth, respect and dedication to surpassing their expectations. We desire to establish trust, build relationships before doing business with our customers. BisB aims to provide new and innovative solutions for its customers, connecting people with the right technology, adding world-class security measures to deal with the increased risks in an increasingly digital world.

Employees

BisB invests in people and their talents by developing an ecosystem of continuous learning, creativity and innovation. For BisB it is important for the employees to love their job and love coming to work every day. We want to share the Bahraini values with employees, so that they in return oﬀer that spirit to our customers. Shareholders and investors

BisB considers that delivery of strong sustainable ﬁnancial performance and long-term shareholder value through strategic initiatives is crucial for future investors and current shareholders. The Board is responsible and accountable for this.

Shareholders and investors

Government and regulators

The Bank works with regulators, government authorities, regional and international professional organisations, to develop security, privacy, resilient standards and policies. BisB corporate governance is crucial for optimal service delivery. Security, privacy and reliance are important elements of our culture. The Bank has also been oﬀering products and services in accordance with the provisions of Islamic Shari'a.

Communities

Our sustainability framework works as a reminder of how we aspire to drive change. Giving back to the community has helped the Bank reach where it is today and is at its heart and its soul. BisB undertakes community-centric projects focused on shared goals. We believe that traditional sustainability approaches simply are not suﬃcient to drive solutions to the problems of our world today, nor address the long-term needs of our community.

Suppliers

BisB is committed to its partners and suppliers, who provide essential services and technology in support of our oﬀeringto customers. Through its contractual terms, the Bank aims to ensure that all security requirements are identiﬁed, along with protection of personal data and resilience requirements to ensure continuity of services and operations.

Communication

BisB conducts all communications with its stakeholders in a professional, honest, transparent, understandable, accurate and timely manner. Key communication channels include this Report, our website and regular announcements in the appropriate local media.

Our strong media presence ensures our stakeholders are provided with transparent and day-to-day information about our activities. We understand their needs by informing, consulting, and collaborating with them through various channels. We found new ways to engage with our audience creating our own community of followers, through engagement on social media channels such as Facebook, Twitter, Instagram and LinkedIn, which reﬂect our bold fresh approach. We have worked with Omar Farooq, social media inﬂuencer and our oﬃcial new Brand Ambassador, to promote products, services, and other innovations in exciting ways through social media channels.

We have our YouTube channel that we are continuing to develop with new content, including a series called "Suwalif BisB" which features industry professionals who discuss a wide range of topics related to the banking sector and other economic sectors, the ﬁrst of its kind in Bahrain.

The Bank wants to be in close contact with its stakeholders and as such, facilitates contact even with departmental heads. Moreover, we share our Bank's achievements, we revealed the #Faces_ of_BisB, where we celebrate the success stories and lives of our employees.

Another communication channel used is the virtual employee, Dana, our appointed Head of Simpliﬁcation, who has her own channel on Instagram and Twitter. We created a virtual employee because we believe in doing things diﬀerently. Dana is a living reﬂection of our promise to simplify,and our desire to break boundaries, to question the status quo, to innovate and imagine. Our ongoing commitment, and engagement helps us meet our stakeholders' expectations.

Speciﬁcally, the social media channels used are:

LinkedIn:https://www.linkedin.com/ company/bahrain- islamic-bank-bisb/

YouTube: https: // www. youtube. com/ user / BahrainIslamicBank

BisB: Instagram, Facebook @Bahrain Islamic Bank Twitter @_BisB

Dana: Instagram @Dana_Simpliﬁes Twitter @dana_ simply

Material topics

To ensure that this report focuses on the issues of most importance to our stakeholders, we have conducted a materiality assessment to identify the most important sustainability topics we should focus on. Material topics are those that reﬂect our economic, environmental and social impact or any matters that signiﬁcantly inﬂuence the assessments and the decisions of our stakeholders. The materiality analysis was developed to deﬁne our understanding of the inﬂuence of each topic and link them with our sustainability goals.

Material topics are identiﬁed based on customer, employee, shareholder and other stakeholder priorities. They also take into account the Bahrain 2030 vision, the SDGs, ESG analyst priorities, GRI guidance and standards, and overall, our impacts which have the greatest ﬁnancial implications for shareholders and overall beneﬁt for society.

BisB Material Matrix Material Topic

Least MaterialSomewhat MaterialVery Material

1.5

5 Governance, transparency and accountability 7.5

6 Digital transformation and Innovation
7 Employee training and Development

8 Financial inclusion
9 Diversity, inclusion and equal opportunity
10 Community investment
11 Workforce wellbeing
12 Integration of Environmental and Social Factors in Lending Activities
13 Integration of ESG in Investment Activities

14 Direct environmental footprint
3.5
5.5
7.5
9.5
Signiﬁcance of Impact
15 Responsible sourcing

The materiality analysis identiﬁed 15 topics which are presented below. We have considered the issues and grouped then into six focus areas, which link to our beliefs and aspirations:

• Responsible banking: We believe we have an important role to play, engaging with the CBB and National Bank of Bahrain, in supporting sustainable and responsible banking and delivering innovative solutions to our customers.
• Serving our customers: Our customers come ﬁrst. In delivering services to them, simpliﬁcation lies at the heart of our approach.
• Nurturing our workforce: Human capital remains our most valuable resource and our employees are at the heart of everything we do.
• Community investment: The spirit of giving and generosity is rooted in our values. Our initiatives create a positive and sustainable impact on our local communities.
• Preserving natural resources: Reducing direct carbon footprint and conserving our natural resources to ﬁght climate change will help leave our planet habitable for future generations.
• Corporate governance and ethical behaviour: Our rigorous systems of governance and control reinforce our commitment to behave ethically and transparently at all times.

Responsible Banking

• Integration of Environmental and Social
Factors in Lending Activities (12)
• Integration of ESG in Investment
Activities(13)
• Financial and Economic Performance (4)
• Financial Inclusion (8)

Community investment

• Community Investment (10)

Preserving Natural Resources

• Direct Environmental Footprint (14)
• Responsible Sourcing (15)

Serving our Customers

Corporate Governance and Ethical Behaviour

•	Responsible Customer Relationships (3)
•	Compliance and Ethical Behaviour (1)
•	Data Privacy and Security (2)
•	Data Privacy and Security (2)
•	Digital Transformation and Innovation (6)
•	Governance, Transparency, and
Accountability (5)
BisB ANNUAL FINANCIAL & SUSTAINABILITY REPORT 2020
31

Nurturing our Workforce

• Workforce Wellbeing (11)
• Diversity, Inclusion, and Equal Opportunity(9)
• Employee Training and Development (7)

RESPONSIBLE BANKING

BisB is a member of the Bahrain Association of Banks, and follows the priorities and aspirations set by it. The Association has prioritized sustainability by establishing a permanent committee that examines what sustainable development means for the banking sector in Bahrain. The committee's purpose is to work on highlighting the areas in which the banking and ﬁnancial sector should engage with the CBB and the Government of Bahrain to help develop a framework of policies and measures to promote sustainable and green ﬁnance in the Kingdom. We want to play an important role in supporting responsible banking and delivering innovative solutions to our customers.

In the framework of responsible banking, we have supported the Government of Bahrain Social Housing Finance Scheme 'Mazaya Program', which is designed to provide aﬀordable housing for the lower mass market. We also structured a unique new product to cater for the beneﬁciary housing needs with an inclusive credit policy and pricing.

Moreover, we have engaged in several initiatives and speciﬁc measures to mitigate the impact of COVID-19, for the beneﬁt of our customers and our community. We have provided support to our customers including deferral of ﬁnancing installments without accruing additional proﬁt or late fees, and ﬁnancing restructuring based on mutually agreed terms and conditions. We have also oﬀered cash rewards to our COVID-19 frontline customers, contributing to the wellbeing of the society.

We have participated in Tamkeen's Solar Energy Panel Financing Program and we were the ﬁrst Bank to sign on the ﬁnancing scheme approval.

Next year, we plan to enhance our responsible product lines and to implement ESG criteria on our investment and lending activities.

Islamic Finance

We aim to conduct our ﬁnancing activities in compliance with national and international regulations, ensuring high ethical standards in decision making. We propose Shari'a compliant products that prohibit investments in uncertainty and risk, while promoting activities that have a positive impact on society, achieving equality, inclusion and economic prosperity.

As part of our commitment to position the Kingdom of Bahrain as the regional FinTech hub and global capital of Islamic banking, and our continuous eﬀorts in providing innovative Islamic Banking solutions, we have signed an agreement with Bahrain Bourse for our newly launched Murabaha ﬁnancing Digital Service. This Murabaha ﬁnancing framework is using a Shari'a compliant lending service provided by the CBB. We are working on bringing ethical alternatives to traditional investments and promoting Islamic Finance in the Kingdom and internationally. We have supported the ninth conference of the Shari'a Boards of Islamic Financial Institutions as a silver sponsor. The conference addressed Murabaha and Musharaka proﬁt calculation, utilizing al Wafa sale and cash option in treating liquidity problems, or Shari'a methods in handling non-performing ﬁnances.

Financial inclusion

At BisB, we constantly work on ensuring accessibility to our products for all our users across the Kingdom, helped by our digitalisation initiatives. In 2020, the proportion of new accounts held by ﬁrst time account holders (74%) demonstrates the eﬀectiveness of our eﬀorts in ensuring our ﬁnancial services are extended to all populations. Moreover, we make sure that we provide access to our services on our branches, for disabled customers.

Serving our Customers

Simpliﬁcation lies at the heart of our approach to the delivery of service for all our customers, personal and corporate. We are committed to simplifying and supporting our customers' journey by transforming our services and our customer's acceptance of digital approaches to banking. We are at work continuously to simplify money matters and transform traditional customer service to digital solutions.

We believe we are becoming an industry leader in digital transformation and innovation. Our three-year journey to simplicity has enabled us not only to commit to our objectives of simplifying key business processes but also to manage an internal process of transformation, in which change management and eﬀective project management have developed our people and corporate culture. We are also preserving our Islamic values and staying faithful to our traditional roots, the cement of our reputation. We are embedding innovation at the core of our strategy and operations. As a digital Bank, our aim is to create a unique multi-channel experience for our customers and to become the one stop shop Bank, helping elevate standards of banking in the Kingdom.

Digitalisation has been helpful in enabling people to respond to the consequences of the COVID-19 pandemic. We were able to provide customers with digital services that ensured their safety as well as that of our employees. The Bank has developed new and attractive oﬀerings for its customers and employees - enabling people to remain connected despite social distancing. In 2020, we introduced various new products and services mainly through our digital platform including kiosks, credit card online acquisition, Tejoori instant ﬁnance, and cash ﬁnance.

Financial inclusion: accounts and lending

New accounts held by ﬁrst-time account holders (%) New accounts held by ﬁrst-time credit card holders (%) Financing-to-deposit ratio for overall domestic lending (%) Financing default rates for overall domestic lending (%)

2018

2019

2020

79 5 79 4

79 5 82 5

74 3 84 3

SERVING OUR CUSTOMERS

OUR JOURNEY TO DIGITALISATION

Digital Channels:

Rollout of Mobile app and revamped online services for Retail clients with over 60+ services and features.

Two key services were added to the service portfolio: Introduced in- app digital onboarding for retail clients using selﬁe & automated ID veriﬁcation services as well as instant account opening for all account types. Introduced online ﬁnance topup service.

Kiosk:

No kiosks were available

Number of total kiosks: 1 Number of total services: 1

Services: New to Bank Clients: Retail customer onboarding

Branches:

Paperless retail clients onboarding in all branches.

Digital Channels:Digital Channels:

Kiosk:

Rollout of Mobile app and revamped online services for Corporate Clients.

Added 9 new additional services to Retail Clients and Corporate clients.

Number of total kiosks: 10

Number of total services: 11

Delivering the same experience provided to retail clients, in addition to key services for corporate clients; such as salary transfer, online batch transfers and trade ﬁnance service. Introduced PayPal services for Retail & Corporate clients.

1. Credit Card Applications
Services Details:
2. Online disputes
New to Bank Clients:
3. PIN reset
1. Retail customer onboarding Existing to Bank Clients:
4. Certiﬁed Digital Certiﬁcates
- 1. Get Prepaid Card,
  Kiosk:
5. Certiﬁed Digital Statement
No kiosks were available
6. Small business online onboarding & account opening
- 2. Update Your Address. Customers can update their address with their ID(CPR) card.
7. Finance against tejoori account
- 3. Issue or Replace Card,
  - a. New Prepaid Card
8. Credit Card Cash Finance service
- b. New ATM Card,
9. Open Banking - Account Aggregation service

c. Replace Debit/Prepaid Card,

4. Print Statements & Certiﬁcates, a.Print Oﬃcial Statement, b.Print IBAN Certiﬁcate, c.Print Balance Certiﬁcate,
5. Update Personal Details. Customer can update their expired IDs expiry dates (CPR card and Passport), monthly income and expense, and FATCA/CRS details.
6. Update Employment Info. Customers can update their employer information with the data fetched from their ID(CPR) card, and the salary amount.

SERVING OUR CUSTOMERS (Cont'd)

We believe in 'Everything Customer' by providing services and support across diﬀerent channels, anywhere, anytime. We are committed to using digital technology to bridge the gap between us and our customers and to cater to all types of customers. We are currently pursuing several exciting new projects:

• Business process automation - aiming to achieve complete automation across all functions, services and products.
• Corporate simpliﬁcation - platform for getting easy and quick decisions on corporate credit applications.
• Implementation of Dana Chatbot - implementation of Chatbot to provide better customer experience using artiﬁcial intelligence.
• Branch automation - fast track automation of branch services with high volumes to minimize physical interactions during COVID-19.

Retail banking

Embracing technology to deliver innovative, digital and sustainable products and services is a priority for BisB. The journey to digital innovation has been undertaken with a focus on achieving eﬃciency through automating processes, empowering customers by providing more self-service using digital channels, and continuously improving the services delivered. The simplicity we provide to our customers' banking experience makes use of advanced technologies.

Highlights in 2020

• Introducing digital mobile onboarding using selﬁe veriﬁcation, the ﬁrst of its kind in Bahrain.
• Rolling out small footprint self-service kiosks machines in diﬀerent locations in Bahrain.

• Enabling a seamless paperless onboarding process for new customers at BisB branches.
• Becoming the ﬁrst bank in Bahrain to automate the Know Your Customer providing eKYC processes.
• Providing an open Banking enabled service within the BisB app, in partnership with Tarabut Gateway, allowing customers to add other bank's accounts, providing them with the ability to view their consolidated net worth across banks as well as view their statement and search through transactions from all accounts.
• Enabling withdraw cash online from credit cards to savings and current accounts instantly.

Our clients can open a Bank account using a mobile phone, instead of a traditional process taking two to three days. Our digital virtual employee "Dana" joined us in 2019 and since then has been setting measures and instilling creative methodologies to ensure the BisB's portfolio of products and services are developed in a way that puts simplicity at their core. This is in line with our objective to make customers' money matters easy, by enabling them to conduct daily transactions with the ultimate convenience.

BisB has established and adopted Open Banking Services in line with Central Bank of Bahrain directives. We were amongst the ﬁrst banks in Bahrain to enable such services, oﬀering a streamlined experience from within its mobile app. In 2019, the open banking platform was established and Application Programing Interfaces (APIs) for any licensed FinTech to use was published. During 2020, the open banking was launched within BisB app by enabling customers to add other banks accounts into the BisB app, providing them with the ability to view their consolidated net worth across banks and view their statement and search through the transactions in all accounts.

This shift to automation of our ﬁnancial processes not only involves oﬀering online services to customers, but also ensuring end-to-end integration through APIs to the key third parties involved in the delivery chain. The personal ﬁnancing process is automated, oﬀering service to customers online through integration of end-to-end third-party personal ﬁnance agent ALFAJER to provide a Shari'a compliant ﬁnancing. This enabled the Bank to oﬀer a paperless and instant ﬁnancing service. In this context, the services enabled are personal ﬁnance online top-up and additional ﬁnance application of existing approved clients, instantly and online. Instant Tejoori ﬁnance oﬀers clients with existing Tejoori accounts the capacity to obtain ﬁnancing services entirely online. Additional online ﬁnancing services will soon be added to the diﬀerent customer segments.

Credit card processes have also been automated, enabling BisB clients to apply for a card online. The card request will be sent through APIs to the card payment processor to issue the cards instantly. In addition, a feature for instant credit card withdrawal has been oﬀered online, enabling customers in need of cash to instantly transfer funds.

More speciﬁcally, the total new retail clients onboarded through branches other than headquarters was approximately 92% of the total onboarding in 2019 across a total of 8 branches working six days a week. The other 8% were onboarded online. During 2020, 63% of the total new retail clients were onboarded online.

SERVING OUR CUSTOMERS (Cont'd)

2018	2019	2020
Non-Financial transactions	Financial transactions	No. of Channels	Non-Financial transactions	Financial transactions	No. of Channels	Non-Financial transactions	Financial transactions	No. of Channels
Branch	25%	99%	9	18%	86%	9	13%	60%	9
ATM	52%	0%	52	50%	0%	54	44%	0%	52
KIOSK	0%	0%	0	0%	0%	1	1%	19%	10
Call center	0%	1%	4	0%	4%	6	0%	2%	6
ITM	0.01%	0%	1	0.2%	0%	1	0.2%	0%	2
Digital	23%	0%	1	32%	10%	1	42%	19%	1

We are proud to see that 40% of the ﬁnancial transactions were completed in 2020 electronically, over 60% in branches. This shows a dominant shift to digital banking, and to simplifying money matters. For non-ﬁnancial transactions, we are seeing substantial increases, with an increase of more than 28% since 2019. Our journey to digitalisation is progressing, conﬁrming the appropriateness of our plan to add further online ﬁnancial and non-ﬁnancial services to reach diﬀerent customers segments.

Innovation and simpliﬁcation in action: kiosk development

Our goal was to introduce self-service machines across all our branches and in ﬁnancial malls enabling the customer to do most of the transactions 24/7, without the need to enter the branch. To achieve this required overcoming security challenges and raising customer awareness and conﬁdence, while simultaneously addressing regulatory and compliance requirements.

The kiosks were developed from start to ﬁnish by the Bank's employees as a result of their collaborative eﬀorts and creativity. The development was housed within the Bank's Innovation Lab, a creative spacewithin the Bank headquarters dedicated to brainstorming and empowered by advanced technology that seeks to change the face of traditional customer service by creating new and better customer experiences.

By using face recognition technology and streamlined processes, we succeeded in making the transition as smooth and seamless as possible for the customer. The response and take-up of the kiosks has been a good source of service, beneﬁting the community throughout the COVID-19 pandemic, restricting levels of human interaction. A measure of the success has been that in the course of 2020, kiosks were used up to 63% of prepaid cards for printing, and up to 20% of total account opening.

"We are delighted to introduce the self-service kiosks, developed by the Bank's in-house team of local Bahraini talent from their extensive experience of information technology. Our ultimate goal is to simplify the customer's experience by providing them with the ability to conduct multiple transactions independently, so they will no longer be forced to stand in a long queue simply to execute a routine transaction such as the issue of pre-paid cards. We've installed these innovative self-service kiosks across every branch and in ﬁnancial malls with the aim of simplifying our customer's money matters".

Hassan Jarrar,

BisB Chief Executive Oﬃcer.

SERVING OUR CUSTOMERS (Cont'd)

Corporate and ﬁnancial institutional banking

Our strategy is to focus on digitalisation to gain competitive advantage over large local rivals in the banking industry. We are committed to provide our customers with a diﬀerentiated banking experience in which digital transformation plays a central role. We believe we have made a good start in this journey and will reap the beneﬁts of ﬁrst-mover advantages in the market.

The main corporate digital service launched by BisB is our online banking platform. The platform represents a disruptive innovation introduced to improve end-user experience through eﬃcient and cost-eﬀective measures of instigating banking transactions. The online banking platform eliminates the need to invest in expensive physical infrastructure to cater for our products and services. The platform is currently considered BisB's core strength in creating sustainable outcomes.

We believe that we gain much from eﬃcient ﬁnancial and administrative processes, especially in the face of intensifying regulatory compliance demands, both in the case of Central Bank of Bahrain speciﬁc directives and adhering to existing policies and procedures. We also seek to distinguish ourselves and keep up with the general trend to focus oncontrol of people and processes within BisB to avoid an exposure or risk to our banking practices.

Innovation has supported the Bank's corporate customers. Since September 2020, more than 400 corporate customers have been able to open an account digitally. The Banks' end-to-end digital service allows both individual establishments and Sijili customers to open a corporate account using advanced facial recognition technology via the Bank's corporate mobile application, BisB Corporate Digital, within a matter of minutes. The service is seamless and provides the ultimate level of convenience, eliminating the hassle of customers visiting branches or ﬁnancial malls in person.

In 2020, we launched our enhanced Corporate online digital banking platform to cope with the increased pressure to shift processes online and remotely, allowing corporations to open online accounts without visiting branches. We successfully expanded our customer base both for corporations and ﬁnancial institutions, with a total ﬁnancing portfolio of BD 262 million (BD 251 million for corporations and BD 11 million for ﬁnancial institutions). With a diversiﬁed portfolio, we have supported critical sectors of the economy including healthcare, informationtechnology, telecommunication services, SMEs, and others.

Given the current economic diﬃculties, credit facilities are being restructured to meet customers' cash ﬂow requirements and give room to enhance their oﬀerings and growth potential. We have provided support measures through a six-month grace period, advising customers on solutions for their liquidity positioning and cash collection services at a reasonable rate. During the recovery phase, accounts across the board will be closely monitored to ensure their robustness and timely delivery of obligations. Otherwise, BisB will take proactive measures to ensure the eﬃcacy of the ﬁnancing/ deposit portfolio.

BisB has also participated in Tamkeen's solar energy panel ﬁnancing program and was the ﬁrst Bank to sign on to the ﬁnancing scheme approval. We will market Tamkeen's solar energy panel ﬁnancing program once it becomes available.

Total ﬁnancing to companies in the following sectors (BD Millions)	2018	2019	2020
Industrials	174	169	134
Infrastructure	112	104	101
Financials	26	21	11
Healthcare	5	4	7
Consumer Staples	6	6	5
Oil and gas	20	20	2
Consumer Discretionary	5	3	1
Information Technology	2	2	1
TOTAL	350	329	262
Total ﬁnancing to companies by size	2018	2019	2020
Micro	2	2	1
Small	18	20	19
Medium	39	44	42
Commercial	291	263	200
TOTAL	350	329	262
BisB ANNUAL FINANCIAL & SUSTAINABILITY REPORT 2020
36

SERVING OUR CUSTOMERS (Cont'd)

Treasury

As the leading retail Islamic Bank within the Kingdom of Bahrain, the Treasury department arranges for a large proportion of local and international funding and investments that facilitate economic support.

The COVID-19 pandemic has created unprecedented levels of market uncertainty and economic disruption, with severe ﬁnancial and social implications across all sectors of the economy. It has put signiﬁcant ﬁnancial and organisational strain on the banking system, with serious consequences for many of our customers and clients - both personal and corporate. Several sectors have been disrupted by the need for social distancing and lockdowns, supply chain constraints and transportation diﬃculties. We have witnessed a deceleration in world economies with higher risks faced by emerging economies.

Within the region, the dual eﬀects of the coronavirus-induced economic contraction coupled with record low oil prices resulted in negative repercussions on the economies, liquidity and credit spreads. However, we witnessed central banks and governments pump monetary and ﬁscal stimulus at an unprecedented pace which helped to oﬀset and reverse part of the damage done by the lockdowns initiated.

Despite market conditions, BisB maintained healthy liquidity and continued to focus on reducing the cost of funding by fully repaying USD 78 million of repurchase agreements, thereby lowering the costs associated with its interbank liabilities, while simultaneously improving regulatory metrics, such as Liquidity Coverage Ratio and Net Stable Funding Ratio.

In terms of portfolio management, the Sukuk portfolio grew 18% to BD 252 million with the sovereign portfolio constituting more than 97% of the Sukuk book.

During 2020, as part of our digital transformation eﬀorts, we have implemented the phase one upgrade of our treasury management solution that will enhance and automate our treasury operations. We aim to provide more innovative products and services to our customers, and thus improve our customer experience.

Customer relations

We believe in building a sustainable relationship with our customers, based on openness, trust and conﬁdence. We dedicate all our eﬀorts to meet their expectations, enhance and facilitate their experience, while treating them with warmth, respect and dedication.

We are committed to do everything we can to meet our customer needs. Their satisfaction lies at the top of our priorities and we pledge to continue valuing and preserving them and our community. Our enduring aim is to ﬁnd new and innovative solutions for our customers, connecting people to the right technology, and protecting them from the increasing risks of the digital world by providing world-class security measures. We are solution-oriented, and are known for being bold, and diﬀerent, for re-imagining the traditional way of doing things and creating entirely new solutions to simplify their lives.

Despite the challenging market circumstances this year, BisB has sought to grow its products and services oﬀering to serve customer's requirements and ensure companies and individuals are oﬀered suitable ﬁnancing schemes. Moreover, products were developed to cater for the demand for digital banking as a support channel to ensure business continuity during periods of restriction. We have also succeeded in providing several speciﬁc measures to support our customers in the light of the global health and economic crisis, including deferral of ﬁnancing installments, without fees and grace periods.

Awarding medical staff

In line with government eﬀorts to tackle COVID-19, the Bank announced in April 2020 an initiative to reward its customers who worked in the medical sector on the front-line in government hospitals and health centers during the pandemic.

As a gesture of gratitude for their eﬀorts, the Bank dedicated a total of BD 57,000 to reward its customers in treating COVID-19 patients and for going over and above their normal responsibilities to keep the Bahraini community safe during this challenging period. The initiative included Bahraini doctors and nurses.

Customer security and privacy

We continue to embed awareness of security and privacy into the culture of our organisation. We aim to ensure that security by design principles are applied to existing and newly enhanced processes, products and services. Our layered security controls approach is entrenched in everything we do as we transform our business.

At BisB, we value customer data privacy and security. We have made a formal commitment in our Security and Privacy Statement, publicly available on our website. We commit to respect our customers' privacy, cyber security, recovery and resilience. The Bank has internal processes to enforce privacy protection internally and in outsourcing contracts. In addition, the Bank is certiﬁed against the standard ISO 22301:2019 Business Continuity Management System, PCI-DSS 3.2 for card security and SWIFT Customer Security Framework 2020.

As part of the Bank's information security strategy, people play a signiﬁcant role in providing the ﬁrst line of defense against security threats. At BisB, we ensure that we cover all security and privacy topics through our social media and communication channels, targeting all our stakeholders. The department is staﬀed with subject matter experts in the ﬁelds of information security, cyber security, privacy management and business continuity. There are more than 20 professional certiﬁcations in these ﬁelds in the team, including some qualiﬁcations that are the ﬁrst in the region.

Furthermore, we protect our customers' personal information with the highest care to maintain their trust and conﬁdence. The numerous security and privacy measures implemented enable us to safeguard our customers and facilitate transactions across diﬀerent platforms: online, mobile, and ATMs. We are happy to say that no security breaches including those involving customers' personally identiﬁable information have been reported since 2017.

SERVING OUR CUSTOMERS (Cont'd)

Customer security and privacy (Cont'd)

At BisB, we value the importance of transparency. We want our customers to trust their Bank's products and services. It is our core mandate to ensure that all communications with customers are fair and transparent and that any sensitive communications with customers and third parties are suﬃciently vetted by respective departments such as Marketing, Corporate Communications, Legal, Compliance and Business Units with professionally trained frontline staﬀ.

Customer satisfaction

We are committed to measuring and enhancing our customers' experience and to increase our Net Promoter Score (NPS). We are proud of our levels of customer satisfaction as reﬂected in our high scores of 94.77%.

We take action to stay in touch with what our customers want and are always prepared to launch new ideas. This year, for example, we surveyed customers on the idea of opening coﬀee shops in ﬁnancial malls to serve customers during waiting times. The idea was positively received, and having secured the necessary regulatory approvals, shops were opened at Budiaya and Riﬀa ﬁnancial malls.

Customer satisfaction	2018	2019	2020
Overall customer satisfaction (%)	90	96	95
Customer complaints

A customer complaint form is available on BisB website. Customers can raise concerns, with all complaints categorized, investigated, and shared with the respective business units and involved parties. If the proposed resolution is not satisfactory to the customer, we seek further resolution depending on the circumstances until the incident is closed. This year only 76 complaints were reported, a decrease of 44% which reﬂects our dedication to always provide high quality services.

Customer complaints

Number of complaints received Number of complaints closed

2018 204 204

2019 136 136

2020 76 76

Response rate to customer queries

Avg. 3-5 working days

Know Your Customer

To further facilitate and enhance the customer experience at BisB, we have automated the Know Your Customer process all through the mobile phone, delivering the eKYC (electronic KYC). Historically, a customer would have to update their records once or twice per year depending on the classiﬁcation within the Bank, which entailed coming up with copies, waiting in line, handling paperwork and coming into physical contact with people. This has saved time for customers and de-cluttered branches, while supporting the health and safety of customers and employees.

NURTURING OUR WORKFORCE

We empower the Human Resources function to play a role as a strategic business partner as part of creating a sustainable and productive work environment. This necessitates ﬂexibility in the way the department approaches its work, to respond to the rapidly changing operating environment in which we live and work. This need for ﬂexibility extends to the need for our people management processes to have a positive impact on the social, environmental and governance factors.

Human capital remains our most valuable resource. Our employees are at the heart of what we do, and we consider them to be our most valued asset. We have responded to the pandemic in many ways that help our employees. We implemented all the necessary safety precautions across our buildings and facilities by practicing social distancing and installing barriers where required. Around 80% of our people were enabled to work remotely during the pandemic.

We have used BisB's LinkedIn page to attract the best professional talent from the market and to showcase the Bank's achievements, promote its thought leaders and position BisB as an employer of choice.

Workforce composition	2017	2018	2019	2020
Total workforce (excluding trainees, students and outsourced)	357	364	359	347
Senior management employees	40	47	45	41
Middle management employees	97	105	110	107
Non-management employees	220	212	204	199
Trainees and sponsored students	-	35	30	14
Workforce by age and gender (excluding trainees, students and outsourced employees)	2017	2018	2019	2020
Employees aged 18-30	121	101	89	76
Employees aged 31-50	226	253	262	261
Employees aged 51+	10	10	8	10
Male employees	234	237	231	227
Female employees	123	127	128	120
Female employees in middle management	38	45	45	39
Female employees in senior management	5	8	8	8
New hires and turnover	2017	2018	2019	2020
Total new employee hires	34	28	23	8
Male	20	18	16	6
Female	14	10	7	2
Employee turnover (voluntary and involuntary)	38	21	28	20

NURTURING OUR WORKFORCE (Cont'd)

Corporate Culture and Ethics

Everyone who works at BisB is a representative of the Bank. This goes far beyond simply having a Bank email signature or our logo on a business card. It is about the fact that every interaction with a customer is representative of the Bank and that each of our employees is a reﬂection of the Bank. At BisB, we want everyone to thrive in their job, love coming to work every day, enabling all to bring the best versions of themselves each day.

Our employees' opinions matter. Everyone is encouraged to share thoughts, feedback and suggestions. We have an open-door policy at Human Resources, and our department heads are happy to hear ideas for a new product, or a new way of working. It is part of our culture of collaboration.

We are planning on setting a fully implemented employee self-service within Human Resources Management System (HRMS), which will be addressing all subjects related to our HR policy, employee leave, overtime, career development, performance management, succession planning and learning. We are working towards enabling a data analytics training academy to capture highﬂier employees and train them to satisfy the Bank's needs in data analytics.

Employee engagement

2020 has seen further intensive investment in our employees and management.

We continued to build employee engagement, employee experience, and improve productivity through focusing on accountabilities.

On our journey of digitalisation, we have made remarkable progress in our HR system automation through the implementation of a Performance Management System. The system allows interactive communication between employees and their line managers in setting up job objectives and development plans with the ability to monitor them in real-time and provide continuous feedback throughout the year. Moreover, it allows for annual performance reviews, which are conducted for all employees via this automated HRMS portal eﬃciently and eﬀectively.

On employee engagement, communicationat a departmental level was initiated and an action plan prepared to increase engagement levels. We have updated our HRMS portal with all the necessary COVID-19 precautions and government requirements. We also have a quarterly newsletter in place.

We oﬀer our employees a wide range of beneﬁts. For example, we facilitate workers' access to non-occupational medical and healthcare services. Employees and their families are covered by a comprehensive medical scheme with wide network coverage nationally and internationally. In addition, optical, dental and maternity cover is included in their medical plan and delivered in private hospitals. We also oﬀer life insurance, year-end bonuses, and health club membership payment. From 2021, we will continue providing a medical scheme for all employees with additional beneﬁts across the group.

Diversity and Inclusion

Nationalisation

Bahrain-ness reﬂects our desire to instill our Bahraini insights, which have grown from our Islamic roots. It is how we transcend our local values in daily tasks at work and in our approach to business. It is a living value in the way we try to capture the hearts of our customers, and to be known for our friendly, expert voice by treating our customers with warmth and respect, maintaining our dedication to surpassing their expectations.

Recruitment, retention and development of qualiﬁed Bahraini remains at the very top of our people agenda. With a Bahrainisation rate of 93% in 2020, we are proud that BisB is one of the most successful organisations in the country in recruiting and investing in Bahrainis, in all bank's levels, including senior management. We are currently building career programmes for young Bahrainis, which will enable them to be the long-term successors for expatriates.

Empowering Women

Acknowledging the importance of women in the workforce is essential. We attach great importance to female participation and are proud to report that our commitment to female representation in our Bank is in line with the Kingdom of Bahrain's strategy to empower women. We have appointed women to managerial and chiefs' positions withinBisB and worked on a tailored development program targeting them as part of the diversity and inclusion. We currently have 120 female employees, accounting for 35% of our total workforce. 33% of women are in middle management roles and 7% are senior managers. Our Board of Directors includes one female member.

The ratio of basic remuneration between women and men has improved since last year. The average wage gap between male and female employees (excluding Chief level and above) has improved from 4% at the end of 2019 to 2.4% at the end of 2020, getting closer to our equal pay target and in line with our initiatives to empower women. Our HR policy is also addressing parental leave. Female employees are entitled for maternity leave as per Bahraini labour law. Male employees eligible for paternity leave are entitled to paid paternity, and new parent leave of one paid calendar day. Leave must be taken within one month of the birth.

The Bank oﬀers voluntary health services to its employees to address non-work-related health issues. Every year and as part of a 'Think Pink' campaign within the Bank, all female employees are oﬀered a mammogram breast checkup. We maintain a list of all employees with chronic illnesses and have arrangements in place to anticipate any issues arising to ensure people are properly cared for in a timely manner.

We have a grievance mechanism in place and a whistleblowing policy that has been communicated to all employees. We are pleased to report that no incidents of discrimination or harassment have been reported this year.

NURTURING OUR WORKFORCE (Cont'd)

Health and Safety

The COVID-19 pandemic has placed extraordinary demands on our people and on our systems to ensure their health and wellbeing. We have had to adapt and show ﬂexibility in our response. In compliance with CBB and the Ministry of Health guidelines, we have introduced all necessary measures to control this outbreak within our premises. Our main oﬃce and branches are equipped with temperature screenings and no entry is allowed without a face covering. Safety screens have been erected where appropriate. All waiting area seating is segregated by a minimum of 2-2.5 meters to abide by social distancing requirements. Furthermore, all our employees working from the oﬃce during COVID-19 have been oﬀered COVID-19 tests and supported with the care and equipment they need. All employees who can work remotely have been asked to do so, to limit unneeded interaction between employees. To further reduce risk, all roles have identiﬁed a main group of employees and a backup doing the same role, with the groups being deployed on two diﬀerent ﬂoors.

As the safety of our people matters for us the most, we are in the process of formalizing our safety management system, and embedding it to our risk management guidelines, in accordance with Bahrain Health and Safety (H&S) legal requirements. The system will cover important areas such as a safety manual, legal compliance, inspection, induction material and procedures, employees H&S training matrix, incidents, and unsafe condition reporting and investigation procedures. The scope also covers contractors' management, ﬁre aid and safety communication procedures, emergency, workstation safety, manual and chemicals handling processes. The system will build on the Health & Safety policy and the safety and security manual that we already have in place.

We also conduct regular safety and security training, and all ﬂoors and branches have trained ﬁrst aid personnel and two trained ﬁre marshals, whose roles are clearly deﬁned. A yearly ﬁre drill is carried out with the help of the Civil Defense to calculate the response time of employees, ﬁre marshal counts, and how employees react.

To further safeguard our people, we compilemonthly information on H&S incidents and report this to the Bank's senior management. These are also reported to the Operational Risk and Human Resources depending on the nature of the incident. We are pleased to report that no employee fatalities were recorded in 2020.

As part of NBB Group, BisB has been part of a health and safety audit that will result in an action plan to address the ﬁndings and ensure the Bank fulﬁlls the requirements of being a healthy and safe workplace for everyone.

Training and Education

Empowering our people is the key to achieving best performance. At BisB we have developed a wide set of policies and processes that ensure that our employees possess the necessary tools to develop their skills and knowledge and increase the use of e-learning. Our management training plan for 2020 ensured that professional development plans are in place for all employees, through mandatory learning and development objectives and personal development plans for all employees. We have identiﬁed several areas that are important for development such as leadership and management skills, business awareness or policies and procedures.

During 2020, the Bank delivered:

• 12,004 training hours compared to 7,392 hours in 2019, an increase of 62%.
• Female employees undertook 4,337 hours of training during 2020.
• Average training per employee totalled 34.6 hours in 2020.
• 38 of our employees completed sustainability awareness e-learning programs.
• Our 300 courses, webinars and e-learning training sessions were attended by our employees.

We work on ensuring that our DNA is embedded within our performance reviews. The plan has also allowed us to launch a BisB/NBB monthly calendar webinar and select 10 hours of e-learning courses for each employee. We make sure that courses and interventions target employees based on their knowledge, skills, and needs as well as their professional development plans.

We want to create an environment that inspires new ways of thinking and working to boost collaboration, creativity and innovation, to be able to deliver the best customer service. We maximised the utilisation of our own training academy where more than 600 online tutorials in various subjects are available on the portal. In addition, 88 employees have been certiﬁed as holding professional qualiﬁcations, representing 25% of total workforce. As sustainability holds an important role in our day-to-day work, we oﬀered two ESG webinars in 2020 to our employees and Board Members, to enhance their knowledge of environmental, social and governance topics.

Furthermore, through our online learning portal, BisB Academy, learning opportunities were extended for all BisB personnel, giving them the opportunity to register for any of more than 600 courses. Over 340 employees have beneﬁted from the courses provided by the academy in topics like anti-money laundering, FATCA, blockchain, and trade ﬁnance.

The Bank also maintains a comprehensive information security awareness program that aims to embed information security, privacy and continuity into the organisation's culture. Targeted training programs are provided to speciﬁc groups, along with computer-based security training modules, tests and knowledge assessment, and phishing simulation activities.

Several initiatives have taken place to elevate managers and senior managers personal and interpersonal growth through attending 7 habits of highly eﬀective people and eﬀective presentation skills to reﬂect an immediate and lasting impact on their leadership skill. In addition, a customized Branch Heads' training workshop was attended by all branch managers and their deputies.

NURTURING OUR WORKFORCE (Cont'd)

Training during the pandemic

As part of our response to the pandemic, we launched initiatives to ensure an eﬀective work-from-home policy, to enable eﬀective and safe remote working. We have continuously worked to safeguard the mental wellbeing of those working-from-home in isolation. For example, we held virtual training programmes, and motivational online sessions for home workers. The sessions focused on promoting positive mental health practices and were led by inﬂuential medical professionals. The events were designed to inspire and motivate on a professional and personal level.

The organisational changes necessitated by the pandemic have reinforced our long-standing belief in adapting. 'Virtual' is the 'new normal', and we will continue to have virtual onboarding sessions for new employees and will continue to conduct virtual training. For the health of our planet, and our mental wellbeing, our meetings and conferences

will continue to be held online. Meetings will be held via Microsoft Teams, or Zoom because we have realized we can all be more productive using the virtual technology we have at hand.

During the holy month of Ramadan, when the global pandemic was still in full force, we continued to check in and maintain our social ties. We held weekly virtual 'Coﬀee Rooms' to check on wellbeing as part our eﬀorts to stay connected, including the attendance of the CEO.

COMMUNITY INVESTMENT

As part of the brand DNA, the Bank is committed to community investment. 'Jood' is our corporate sustainability pillar and serves as a reminder of how we aspire to make a change. We chose the name Jood because of its Arabic meaning of 'giving' and 'generosity' which is rooted within our values. Its focus is on investment in initiatives which foster education and innovation in a digital age, creating a positive and sustainable impact on our local communities. We recognize that we need to start working together across industries to create an innovative ecosystem of learning and foster creative minds to solve the problems of tomorrow. Ultimately, our aim as a Bank is to simplify banking. We have been working to drive digitalisation in the ﬁnancial industry and launch innovative ﬁnancial solutions to make banking less complicated and more intuitive, more human. Similarly, we wanted to simplify the act of giving back to the community. The Bank also invests in the wellness of the community through its Zakah and non-halal income.

Many and varied Jood initiatives were undertaken by the Bank's personnel during the year. Jood is structured as an over-arching umbrella, covering the following:

• Donations
• Sponsorships
• Volunteering activities
• Zakah amounts

We have a committee in charge of donations, reporting to the Chairman. Our sponsorship guidelines are embedded within our corporate communications policy manual. The Bank's motive for sponsorship should always be in line with our DNA to create goodwill in the community. Moreover, sponsorships for promotional purposes and activities are carried out by the Zakah committee and should always be aligned with Shari'a principles. All event sponsorships need to be approved by the CEO.

During 2020, we supported the national initiative "Feena Khair" to support the underprivileged and those who have been adversely aﬀected by the COVID-19 pandemic, by donating BD 250,000. BisB also extended its support to the Capital Governorate's 'Together We Care' campaign. We havelaunched this initiative, which involves distributing meals, to support underprivileged members of our community as well as those adversely aﬀected by COVID-19, by donating BD 30,000. Overall, the Bank invested BD 784,762, BD 934,779, and BD 1,001,163 in 2018, 2019 and 2020 respectively in the community.

Our employees manned road intersections, serving Iftar meal boxes to motorists as they travelled home during the Holy Month of Ramadan. We also delivered Iftar meals and maintained houses to needy families and others. Other support was given to our less fortunate neighbours during the heavy rains period. Through Jood, we also bought Eid clothes for orphaned children. In medical and care, we supported the Ministry of Health in buying devices for heart-scanning, and devoted time for the 'Yoko' elderly care centre.

On the educational front, in partnership with the Ministry of Education, BisB sponsored its Iqra campaign, aimed at motivating school children to read. In a further alliance with Injaz, two Innovations Camps for BIBF students and the Royal University for Women were conducted. Our Islamic aﬃliation continued in sponsoring the AAIOFI and WIBC Conferences. Within the framework of the existing partnership with Bahrain Polytechnic University, we have provided students in need, in coordination with the university's Student Services Directorate, with laptop computers to help them continue their e-learning. Many of these students had been unable to access the university library given the preventive measures undertaken by the Government to limit the spread of coronavirus.

We have initiated a contest in collaboration with the Ministry of Commerce, and the Chamber of Commerce, for a locally owned coﬀee house, to be the ﬁrst coﬀee house to open an outlet inside a bank branch, to enhance customer experience, and attract younger people. More than 6,000 applicants participated, and an external auditor was engaged to validate the results. The winner was given a space of approximately 200 m2 for a symbolic monthly rental fee of 1 BD including all ﬁxed costs for three years.

At BisB, we want to celebrate everyday success stories and support an ecosystem of continuous learning, creativity and innovationthrough all the community. We have partnered with CBB to launch the CBB Digital Lab "FinHub 973" in 2020, the Kingdom's latest innovation platform that enables the testing and development of FinTech solutions. We are proud to sponsor Bahraini small FinTech start-ups, oﬀering space on an entire ﬂoor in one of BisB centers, who are given ﬁnancial aid, to ﬁnd solutions for problems that BisB is facing on a periodic basis. The winners are rewarded and can be oﬀered the opportunity to join our Bank.

Moreover, we took part in the Global Islamic and Sustainable FinTech Center (GISFC) Acceleration Program where participants are required to contribute to at least one of the UN Sustainable Development Goals. Under this program, BisB will be collaborating with Bahrain FinTech Bay (BFB) to launch the program "Digital Marketing-Tech Minds of Tomorrow" providing local talents and startups with the opportunity to develop a digital marketing tech program for the Bank's marketing division. BisB will sign a one-year contract with the winners to host their software and will assist them build it during a 3 month-residency at BFB.

Financial literacy

As part of Jood, the Bank has entered into partnership with Bahrain Polytechnic University, developing synergies between our organisations through initiatives that allow future talents and leaders to beneﬁt and develop a range of skills such as innovation, creativity, entrepreneurship and leadership.

Each year, our Human Resources department welcomes many students from the Ministry of Education as well as various universities in the Kingdom. These training programs allow our young talents to learn further about banking, ﬁnance and become familiar with diﬀerent Bank departments. BisB hosted 17 interns during the year.

COMMUNITY INVESTMENT (Cont'd)

Following our successful participation in the "Iqra Bus Campaign" in 2019, we have hosted three lectures to polytechnic students and employees in Marketing and Communication, Islamic Banking and Information Security. Our BisB Innovation Lab fosters idea generation and is one of the achievements we are most passionate about. The end result is the development of the industry as a whole, providing the next generation with the tools and knowledge to rise to the challenges of the future.

We have also supported the ﬁeld of information security and business continuity management by:

• Forming part of the National Cybersecurity Strategy working group, with active participation in development of the ﬁnancial sector cybersecurity strategy and the overall strategy for the Kingdom.
• Contributing to Draft ISO22301 (Security and resilience - Business continuity management systems Consultation) guidance, providing feedback and comments into general requirements, which contributes to making the standard accepted internationally.
• Working with the Business Continuity Institute (BCI) to review the Arabic version of professional certiﬁcation exam.
• Serving in professional judging panels of various BCI Awards in APAC, Americas, Europe, Africa India and South Asia, and Global since 2018 in many categories (Team, Provider, Contributor, Private Sector, Innovation and most Eﬀective recovery) committing more than 62 hours in 2020.
Contribution to the profession in hours 8
62 74
2017201820192020

Supplier Relations

BisB is committed to its responsibility towards all partners and suppliers. We make sure that through our procurement activities, we have a positive impact on our local economy.

We continuously seek to mitigate risks associated with our supply chain, streamlining our performance and sustaining our operations. In all agreements signed with suppliers, especially with technology partners, relations are governed by contractual terms ensuring protection for both parties. Contractual arrangements are reviewed by Information Security to ensure security requirements are identiﬁed, along with protection of personal data and resilience requirements to ensure continuity of services and operations. As part of our supplier selection process, we measure service quality, vendor capability and cost.

Local procurement	2020
Total number of suppliers engaged	134
Total number of local suppliers engaged	83
Total local procurement spending (BD Millions)	2.2
BisB ANNUAL FINANCIAL & SUSTAINABILITY REPORT 2020
44

PRESERVING NATURAL RESOURCES

Bahrain Islamic Bank puts the future of the next generations at the forefront of its decisions. Our management team reviews yearly new ways to ensure we act in an environmentally responsible manner - through initiatives to increase recycling, decrease waste, reduce paper use, and minimize electricity and water consumption. In the year ahead, we will develop an Environmental Management system at a group level, to help us align targets, processes and monitoring activities with NBB Bank.

Water and Energy Saving

BisB recognizes that water is a valuable resource in the world and particularly in our region. All water taps are ﬁtted with water saving nozzles and are checked weekly for leakage, including all other water outlets. All newly renovated ﬂoors have been ﬁtted with smaller WC water tanks, and motion detection water taps. Bahrain Islamic Bank Tower water consumption in 2019 totalled 9,076 m3 and in 2020, 8,326 m3.

Water consumption	2019	2020
Total water consumption (litres)	9,076,000	8,326,000
Water consumption intensity (litres/employee)	27,503	26,100

To reduce water leakage, we introduced, in 2020, water sensors in the BisB datacenter to monitor and detect leakage as part of our Business Continuity Management requirements to protect the devices and eliminate water waste.

On energy eﬃciency, we in BisB, have a long history of implementing initiatives. Since 2015, BisB has procured Capacitor Banks to correct consumption power factors. In 2016, the Bank changed all the lighting ﬁxtures used at its premises to energy eﬃcient LED lights, and ﬁtted motion detectors in all its oﬃces, corridors, lift lobbies, service areas and emergency staircases. In 2018, BisB upgraded all four lifts in its tower to energy eﬃcient lifts that work on regenerative energy, which reduced power consumption by more than 30%. BisB is also currently in process of procuring solar panels for two of its branches which would collectively produce approximately 370 kwh annually in clean renewable energy.

Energy consumption	2019	2020
Total electricity consumption (kWh)	3,863,000	3,711,000
Energy consumption from electricity (GJ)	13,907	13,360
Energy intensity (GJ/employee)	42.14	41.88

Since 2012, BisB has redeﬁned the design of the cooling system distribution on-premises for its data centre and server room to drive greater energy eﬃciency. The beneﬁts continue to be realized today.

We are committed to building on the steps we have taken to continue to improve our energy eﬃciency and reduce our energy use. BisB plans to procure new Building Management Systems (BMS) for the main oﬃce and branches by 2022, and to have two branches using clean green energy, by covering the carparks with Solar Panels that generate up to 60% of over the year usage. The Solar Power generated would give back to the grid in winter months.

Waste Management

One of the beneﬁts of BisB's drive through the journey of digital transformation has been the corresponding reduction of waste and paper.

Since 2017, BisB has stopped printing all yearly statements for customers and has introduced E-Statement, with physical statements provided to regulatory deﬁned segments. All mandatory paper transactions are shredded after the end of the regulatory and legal period and are recycled at a local welfare society. We have also reduced the cost of printing items by 57% over the past four years and have ensured that all printing is recyclable.

Over the years, we have seen growth in customer adoption of digital services and various alternative channels like mobile, web, the call center.

There has been a signiﬁcant increase in the use of digital channels for ﬁnancial and non-ﬁnancial services compared to the traditional branch channel, where most transactions are handled on paper. In addition, 2020 has witnessed paperless onboarding activities - which has also resulted in a reduction of transport activity. By automating the retail customers onboarding process, BisB has minimized the transit of papers between diﬀerent branches and headquarters. BisB has also launched its ﬁrst Self-Service kiosk machine, reducing our carbon footprint through lower energy consumption. The kiosks are stationed across the country providing around the clock services to customers, according to their convenience.

BisB recognizes the importance of materials management and waste minimization. We are planning to introduce a waste management system to ensure minimal damage to the environment. We do not procure non-reusable plastic. We are also seeking to recycle in all areas of our operations.

A good example of this is the measures we have taken to recycle the old ATM machines components. In 2020, around 60 machines were sold as spare parts to the vendor to be reused/recycled in diﬀerent regions.

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR

Corporate Governance Framework

Bahrain Islamic Bank B.S.C. ("BisB" or the "Bank") is committed to upholding the highest standards of corporate governance by way of balancing entrepreneurship, regulatory compliance, and industry best practices, while creating value for all stakeholders. It also involves having the right checks and balances in place throughout the organisation to ensure that the Bank's processes are within an adequate, eﬃcient, and robust internal control and governance framework.

Statement of Responsibility

The Board of Directors (the "Board") is ultimately accountable to the shareholders for the creation and delivery of strong sustainable ﬁnancial performance and long-term shareholder value through strategic initiatives. The Chairman is responsible for leading the Board, ensuring its eﬀectiveness, monitoring the performance of the Executive Management and maintaining a dialogue with the Bank's shareholders. The Board has established the following Committees to assist it in carrying out its responsibilities:

1. Executive Committee* ("EC");
2. Audit Committee ("AC");
3. Nomination, Remuneration and Governance Committee ("NRGC"); and
4. Board Risk and Compliance Committee ("BRCC").

*The responsibilities of the Board's Credit Committee have been enhanced and accordingly the committee has been renamed to EC during 2020. Moreover, the Board's compliance and governance oversight responsibility were transferred to BRCC and NRGC respectively.

BisB's corporate governance framework is built on a code of business conduct, policies, procedures, internal controls, risk management, Shari'a review and audit, internal and external audit and compliance functions. The framework is based on eﬀective communications, transparent disclosures, performance measurement and accountability. An independent Internal Audit function is established within the Bank that reports directly functionally to the AC.

Code of Business Conduct

BisB conducts its business in accordance with the highest standards of ethical behaviour. A Code of Business Conduct has been developed, based on the Central Bank of Bahrain ("CBB") Principals of Business regulations, to govern the personal and professional conduct of the directors and employees of the Bank. The code is based on the following principals:

1. Integrity
2. Conﬂicts of Interest
3. Due Skill, Care and Diligence
4. Conﬁdentiality
5. Market Conduct
6. Customer Assets
7. Customer Interests
8. Relations with Regulators
9. Adequate Resources
10. Management, System and Controls

The requirements under each of the above principals are made available to the Board and employees of the Bank. The Board monitors any exceptions to the above principals by way of reviewing formal reports issued to the Board's AC.

Compliance

Compliance is an independent function that reports to the BRCC. The Compliance function, guided by the Board approved policies, works with various business and controlled functions of the Bank to ensure compliance with the applicable rules and regulations of the CBB.

Given the digital business strategy of the Bank, as well as the expanding regulatory scrutiny and enforcement, the Compliance & Governance Department of the Bank is keeping up with the digital advancements by also taking on an active role in directly participating in the risk management process.

Communications

BisB conducts all communications with its stakeholders in a professional, honest, transparent, understandable, accurate and timely manner. Main communication channels include the annual ﬁnancial & sustainability report, website, and regular announcements in the appropriate local media.

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Governance Structure

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Bank's Structure

Group Chief Executive Ofﬁcer

Centralized Function

Centralized Function with BisB Team (as per Approved Group Structure)

BisB Approved Person

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Board of Directors Composition

No.	Director	Designation	Start Date	Term
1	Dr. Esam Abdulla Fakhro	Non-Executive & Non-Independent	23rd March 2016	Second
2	Mr. Khaled Yusuf Abdul Rahman	Non-Executive & Non-Independent	23rd March 2016	Second
3	Mr. Jean-Christophe Durand	Executive Director	05th February 2020	First
4	Mr. Khalid Abdulaziz Al Jassim	Non-Executive & Independent	21st March 2019	First
5	Mr. Mohammed Abdulla Al Jalahama	Non-Executive & Independent	21st March 2019	First
6	Mr. Marwan Khaled Tabbara	Non-Executive & Independent	21st March 2019	First
7	Mr. Mohammed Abdulla Nooruddin	Non-Executive & Independent	21st March 2019	First
8	Mr. Yaser Abduljalil Alshariﬁ	Executive Director	05th February 2020	First
9	Ms. Dana Abdulla Buheji	Executive Director	05th February 2020	First
10	Mr. Isa Hasan Maseeh	Executive Director	19th April 2020	First
11	Gen. Ebrahim Abdulla Al Mahmood (Until 27th January 2020)	Non-Executive & Non-Independent	28th May 2017	-
12	Mr. Muhammad Zarrug Rajab (Until 27th January 2020)	Non-Executive & Non-Independent	23rd March 2016	-
13	Mr. Abdulla Ahmed Kamal (Until 27th January 2020)	Non-Executive & Non-Independent	21st March 2019	-

The detailed proﬁles of the Board members are available on the Bank's website.

Board of Directors' Responsibilities

The primary responsibility of the Board of Directors is to provide eﬀective governance over the Bank's aﬀairs for the beneﬁt of its stakeholders and to balance the interests of its diverse constituencies, including associated concerns, employees, and other stakeholders. In all actions taken by the Board, the Directors are expected to exercise their business judgment in what they reasonably believe to be in the best interests of the Bank.

The Board will approve and oversee the implementation of the Bank's strategies and will review and approve the Bank's strategic plan. As part of its strategic review process the Board will review major action and business plans, set performance objectives, and oversee major investments, divestitures, and acquisitions. The Board is alsoultimately responsible to ensure eﬀective risk management function, regulatory compliance, adequate internal controls, preparation of ﬁnancial statements as well as compliance with Shari'a rulings. Every year, at an annual Board strategy session, the Board will formally reassess the Bank's objectives, strategies and plans.

One of the Board's most important responsibilities is identifying, evaluating and selecting candidates for the Board of Directors. The Board will seek members from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. Directors should have had experience in positions with a high degree of responsibility, be leaders in the companies or institutions with which they are aﬃliated and be selected based upon thecontributions they can make to the Board.

The Board may not necessarily carry out all these responsibilities but should ensure that these have been delegated to various board committees or executive management committees to act on their behalf and communicate periodic reports to the Board for their review.

Induction of New Directors

The Bank provides an orientation program for new Directors which includes presentations by senior management on the Bank's strategic plans, its signiﬁcant ﬁnancial, accounting and risk management issues, its compliance programs, its operations, its Code of Conduct, its management structure and executive oﬃcers and its internal and external auditors.

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Code of Conduct

The Bank adopts a Code of Conduct and other internal policies and guidelines to comply with the laws, rules and regulations that govern the Bank's business operations. The Code of Conduct applies to all employees of the Bank as well as to Directors.

Review of Internal Control Processes and Procedures

The Audit Committee assists the Board in fulﬁlling its oversight responsibility relating to the performance of the internal audit function, which regularly reviews and ensures adherence to internal control processes and procedures.

Board Meetings and Attendance

Minimum Number of Meetings Required = 4

Board Membership

The Board of Directors' membership term is three years, subject to renewal. Shareholders owning 10% or more of the share capital must nominate a representative on the Board of Directors in proportion to the number of Board members. A secret ballot is held at the Ordinary General Meeting for the remaining Board members. The Board of Directors elect, by a secret ballot, a Chairman and Vice Chairman for a renewable term of three years.

Membership of the Board of Directors can be terminated in the following cases:

• If a member fails to attend at least 75% of the meetings without a reasonable excuse;

• If he/she tenders his/her resignation in writing;
• If he/she fails to fulﬁll any related conditions referred to in the Bank's Articles of Association;
• If he/she is appointed or elected in violation of the provisions of the CBB Law and/or Bahrain Commercial Companies Law;
• If he/she abuses his/her membership for carrying on other business that competes with or is detrimental to the Bank's business; or
• If the shareholder who nominates himself/herself applied for his/her removal.

Members	11-Feb 20	20-Apr 20	21-May 20	20-Jul 20	25-Oct 20	26-Nov 20
Dr. Esam Abdulla Fakhro						
Mr. Khalid Yousif Abdul Rahman						
Mr. Jean-Christophe Durand						
Mr. Mohamed Abdulla Nooruddin						
Mr. Khalid Abdulaziz Al Jassim						
Mr. Mohammed Abdulla Al Jalahma						
Mr. Marwan Khaled Tabbara						
Mr. Yaser Abduljalil Alshariﬁ						
Ms. Dana Abdulla Buheji						
Mr. Isa Hasan Maseeh (Elected on April 19th, 2020)	-					

 Participated via phone/video link

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Board Committees' Members

Board Committee	Members	Objectives
Executive Committee (EC)	Mr. Jean-Christophe Durand Chairman Members • Mr. Khalid Yousif Abdul Rahman • Mr. Yaser Abduljalil Alshariﬁ • Mr. Hassan Amin Jarrar (non-voting member)	The EC assist the Board of Directors in fulﬁlling their responsibilities with regards to ﬁnancing and investments activities, as well as any other matters not delegated to a speciﬁc Board Committee. Accordingly, the EC is empowered to approve speciﬁc credit and investment proposals, review budgets, plans and major initiatives for eventual submission to the Board for approval, and to monitor the Bank's performance against business plan objectives.
Audit Committee (AC)	Mr. Khalid Abdulaziz Al Jassim Chairman Members • Mr. Mohammed Abdulla Al Jalahma • Mr. Isa Hasan Maseeh	The AC oversights the integrity and reporting of the Bank's quarterly and annual ﬁnancial statements. It also covers review of audit ﬁndings, provisions, and impairments.
Nomination, Remuneration and Governance Committee (NRGC)	Dr. Esam Abdulla Fakhro Chairman Members • Mr. Mohamed Abdulla Nooruddin • Mr. Marwan Khaled Tabbara • Ms. Dana Abdulla Buheji	The NRGC is responsible for developing and recommending changes from time to time in the Bank's nomination and remuneration policy, including the variable payment policy. It is also entrusted to identify and recommend persons occupying senior positions including Board Members. Furthermore, the committee also oversee Bank's governance related matters.
Board Risk and Compliance Committee (BRCC)	Mr. Marwan Khaled Tabbara Chairman Members • Mr. Mohamed Abdulla Nooruddin • Mr. Khalid Abdulaziz Al Jassim • Mr. Isa Hasan Maseeh	The BRCC is formed to assist the Board of Directors in fulﬁlling their regulatory as well as ﬁduciary responsibilities towards the stakeholders. Furthermore, the Committee also oversee compliance with legal and regulatory requirements.

Executive Committee Meetings and Attendance Minimum Number of Meetings Required = 4

Members	01-Apr-20	23-Jun-20	29-Sep-20	22-Nov-20
Mr. Jean-Christophe Durand				
Mr. Khalid Yousif Abdul Rahman				
Mr. Yaser Abduljalil Alshariﬁ				
Mr. Hassan Amin Jarrar (non-voting member)				

 Participated via phone/video link

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Audit Committee Meetings and Attendance

Minimum Number of Meetings Required = 4

Members	11-Feb-20	01-Mar-20	09-Mar-20	11-May-20	14-May-20	19-Jul-20	17-Sep-20	22-Oct-20	20-Dec-20
Mr. Khalid Abdulaziz Al Jassim									
Mr. Mohammed Abdulla Al Jalahma									
Mr. Marwan Khaled Tabbara*		-	-	-	-	-	-	-	-
Mr. Mohammed Abdulla Nooruddin*	-			-	-	-	-	-	-
Mr. Isa Hasan Maseeh	-	-	-						

 Participated via phone/video link

*Due to the end of Mr. Abdulla Ahmed Kamal's membership, Mr. Marwan Khaled Tabbara and Mr. Mohammed Abdulla Nooruddin were temporarily inducted to meet the minimum quorum requirement.

Nomination, Remuneration and Governance Committee Meetings and Attendance

Minimum Number of Meetings Required = 2

Members	11-Feb-20	23-Feb-20	06-Jul-20	09-Nov-20
Dr. Esam Abdulla Fakhro				
Mr. Mohamed Abdulla Nooruddin				
Mr. Marwan Khaled Tabbara				
Ms. Dana Abdulla Buheji (inducted in the 3rd meeting)	-	-		

 Participated via phone/video link

Board Risk and Compliance Committee Meetings and Attendance

Minimum Number of Meetings Required = 2

Members	23-Jan 20	05-Feb 20	27-Feb 20	30-Mar 20	07-May 20	25-Jun 20	23-Jul 20	16-Aug 20	13-Sep 20	05-Nov 20	10-Dec 20
Mr. Marwan Khaled Tabbara											
Mr. Mohamed Abdulla Nooruddin											
Mr. Khalid Abdulaziz Al Jassim											
Mr. Isa Hasan Maseeh	-	-	-	-							

 Participated via phone/video link

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Evaluation of the Board and Each Committee

The NRGC carried out an evaluation of the Board and its Committees through the distribution of questionnaires to each Board Member, followed by an assessment of the Committees and Members. The Committee expressed its satisfaction with the positive results.

Board of Directors' Remuneration and Sitting Fees

The Board of Directors are paid an annual remuneration as approved by the shareholders at the Ordinary General Meeting. While the amount of the remuneration is not directly linked to the performance of the Bank, factors such as the Bank's performance, industry comparison and the time and eﬀort

Shari'a Supervisory Board Meetings

committed by the Directors to the Bank, are considered for determining the total remuneration. In addition, Directors are paid sitting fees for attending the various subcommittees of the Board of Directors. Non-resident directors are also entitled to travel expenses. Further details on the remunerations paid to Board as well as Senior Management are available under the remuneration disclosures of the annual ﬁnancial & sustainability report.

Shari'a Supervisory Board Objective

The main objective of Shari'a Supervisory Board is to advise the Bank on any Shari'a matter and to ensure compliance with the Shari'a tenets and requirements in theiroperations. The Shari'a Supervisory Board is entrusted with the duty of directing, reviewing, and supervising the activities of the Bank in order to ensure that the Bank is in compliance with Shari'a rules and AAOIFI. The proﬁles of the Shari'a Supervisory Board are available on the Bank's website.

The Shari'a Supervisory Board has established a Shari'a Coordination & Implementation function to assist the Bank in its day to day management of business. The Shari'a Supervisory Board has also established an independent Internal Shari'a Audit function that reports any exceptions to the Shari'a fatwas and guidelines.

Members	4-Mar-20	17-Jun-20	14-Sep-20	23-Nov-20	26-Nov-20*
Sh. Dr. Abdul Latif Al Mahmood					
Sh. Mohammed Al Juﬀairi					
Sh. Adnan Al Qattan					
Sh. Dr. Nedham Yacoubi					
Sh. Dr. Essam Al Enizi					

* With Board of Directors

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Executive Management

The management structure that clearly deﬁnes roles, responsibilities, and reporting lines, is available in the annual ﬁnancial & sustainability report of the Bank. Within the management structure there are separate committees responsible to meet on a regular basis to discuss and decide on the various strategic and tactical issues within their respective areas.

Name & Designation	Profession	Experience in years	Qualiﬁcation
Hassan Amin Jarrar Chief Executive Oﬃcer	Banking	More than 30	BSc in Finance from California State University, San Jose, USA.
Wesam A.Aziz Baqer Chief Corporate & Institutional Banking Oﬃcer	Banking	More than 19	MSc (Economics) in Finance and Investment Management from the University of Aberdeen, Scotland. BS in Business Administration from the University of Bahrain. Certiﬁed Financial Adviser (CeFA).
Dalal Ahmed Al Qais Chief Retail Banking Oﬃcer	Banking	More than 18	MBA in Finance from AMA University. BSc in Business Management from the University of Bahrain.
Ameer Abdul Ghani Dairi Chief Financial Oﬃcer	Accounting	More than 19	CPA from New Hampshire Board of Accountancy. Certiﬁed Management Accountant (CMA) licensed by the Chartered Institute of Management Accountants, USA. BSc in Accounting from University of Bahrain.
Fahim Ahmed Shaﬁqi Chief Risk Oﬃcer	Banking	More than 20	Diploma in Islamic Finance (CDIF). MBA from University of Warwick, UK.
Eman Ali Abdulla Ebrahim Head of Central Operations	Banking	More than 23	Associate Diploma in Accounting, University of Bahrain.
Hussain Ebrahim Al Banna Head of Treasury	Banking	More than 15	BSc in Banking & Finance from the University of Bahrain. Treasury and Capital Markets Diploma, BIBF.
Afnan Ahmed Saleh Chief HR & Administration Oﬃcer	Human Resources	More than 20	SHRM Senior Certiﬁed Professional (SHRM-SCP) in 2015. MBA University of Strathclyde in 2006.
Mahmood Qannati Chief Marketing & Corporate Communication Oﬃcer (Resigned in November 2020)	Marketing	More than 20	MSc in Computer Based Information Systems from the University of Sunderland. BSc in Marketing from the University of Bahrain.
Osama Ali Nasr Chief Information Oﬃcer	Information Technology	More than 20	MSc in Information Systems Management from the University of Liverpool. BSc in Computer Science from Al-Isra University, Jordan.
Mazar Rashed Jalal Chief Compliance & Governance Oﬃcer	Banking	More than 18	BSc in Accounting from the University of Bahrain. International Compliance Associate Diploma from UK. Diploma in Islamic Banking and Insurance from UK, Wales.

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Executive Management (Cont'd)

Name & Designation	Profession	Experience in years	Qualiﬁcation
Mohammed Ayada Mattar Money Laundering Reporting Oﬃcer	Banking	More than 15	Masters in Finance from AMA International University. Certiﬁed Anti-Money Laundering Specialist. Diploma in Governance, Risk & Compliance from International Compliance Association.
Maisa Jawdat Shunnar Chief Strategy Implementation & Transformation Oﬃcer	Strategy Implementation & Transformation	More than 20	BSc in Business Administration majoring in Computer Information Systems from University of Houston (Texas, USA). Masters of Business Communication & Leadership, Jones International University, Colorado, USA.
Hamad Farooq Al- Shaikh Head of Shari'a Coordination & Implementation	Banking	More than 15	Masters of Shari'a at ALEmam ALAwzaie University in Lebanon Chartered Islamic Finance Professional Advanced Diploma in Islamic Commercial Jurisprudence Bachelors Degree in law and Shari'a from Qatar University
Eman Mohammed AlBinghadeer Head of Internal Shari'a Audit	Banking	More than 15	Professional Diploma in Shari'a Auditing - CIBAFI. CSIA - Certiﬁed Specialist in Islamic Accounting - CIBAFI. CIB - Certiﬁed Islamic Banker - CIBAFI. CSAA - Certiﬁed Shari'a Adviser and Auditor - AAOIFI. Diploma in Computing and Business Studies - Bournemouth University and Technology Centre - UK.
Khaled Waheeb Al Naser Chief Internal Audit Oﬃcer	Auditing & Banking	More than 10	Certiﬁed Public Accountant - CPA Certiﬁed Internal Auditor - CIA Certiﬁed Islamic Professional Accountant - CIPA BSC Managerial Accounting - NYIT CGMA - AICPA/ CIMA COSO Internal Control - COSO

Management Committees

Committee(s)

Members

Objectives

Management Committee (MANCO)

Hassan Amin Jarrar Chairman Members

• Wesam A. Aziz Baqer
• Dalal Ahmed Al Qais
• Ameer Abdul Ghani Dairi
• Fahim Ahmed Shaﬁqi
• Eman Ali Abdulla Ebrahim
• Afnan Ahmed Saleh
• Osama Ali Nasr
• Mazar Rashed Jalal
• Maisa Jawdat Shunnar

MANCO is the highest management body that reviews the Bank's strategy implementation. In addition, the committee also plays a signiﬁcant role in establishing the policies, procedures and frameworks covering risk management, compliance, retail and corporate banking. The Committee also monitors the performance of business, support and control functions of the Bank.

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Management Committees (Cont'd)

Committee(s)	Members	Objectives
Asset & Liability Committee (ALCO)	Ameer Abdul Ghani Dairi Chairman Members • Hassan Amin Jarrar • Dalal Ahmed Al Qais • Fahim Ahmed Shaﬁqi • Hussain Ebrahim Al Banna • Wesam A. Aziz Baqer	The purpose of Asset & Liability Committee is to act as a decision-making body and guiding force responsible for balance sheet planning from risk return perspective, including strategic management of yield and liquidity risks.
Credit & Investment Committee (C&IC)	Hassan Amin Jarrar Chairman Members • Ameer Abdul Ghani Dairi • Wesam A. Aziz Baqer • Dalal Ahmed Al Qais • Fahim Ahmed Shaﬁqi (Dissenting Vote)	C&IC determines the Credit & Investment Policy of the Bank, identiﬁed possible risks assumed by the Bank for diﬀerent types of transactions. The C&IC has the authority to make a decision on approval or rejection or proposed transactions within its authority as well as to monitor the performance and quality of the Bank's credit & Investment portfolios.
Qard Al Hassan, Donation & Zakah Committee	Hamad Farooq AlShaikh Chairman Members • Khaled Waheeb AlNasser • Nada Ishaq Abdul Karim • Hamad Al Bassam	The main objective of Qard Al Hassan, Donation and Zakah Committee is to discharge the Group's social responsibilities toward its society through distributing Zakah, charity funds, donations & good faith Qard for marriage, medical treatments, etc.
Provisioning Committee (PC)	Fahim Ahmed Shaﬁqi Chairman Members • Ameer Abdul Ghani Dairi • Khalid Waheeb AlNasser (Observer) • Saleh Al Mehri	Provisioning Committee reviews the Bank's provisions as well as formulates policies with a view to maintain the strategic risk level objectives.
Operational Risk Committee (ORC)	Fahim Ahmed Shaﬁqi Chairman Members • Sohail Kabeer • Wesam A. Aziz Baqer • Dalal Ahmed Al Qais • Ameer Abdul Ghani Dairi • Eman Ali Abdulla Ebrahim • Afnan Ahmed Saleh • Osama Ali Nasr • Mazar Rashed Jalal	The purpose of the Operational Risk Committee is to: a) Oversee and review the Bank's operational risk framework. b) Assist the management in fulﬁlling its operational risk management responsibilities as deﬁned by applicable laws and regulations.
Purchasing & Evaluation Committee	Hamad Mohammed Al Bassam Chairman Members • Maitha Abdulla Saad Faraj • Aysha Ali AlNasser • Salman Mattar	The Bank has formed a Purchasing & Evaluation Committee that independently oversees the vendor management and procurement process.

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Succession Planning

Succession planning in the Bank is driven by our Business strategy and forward-looking approach. The primary objective of the plan is to develop people to meet future demands of the Bank. On an annual basis, the Human Resources Department of the Bank reviews and consults the Board's NRGC to ensure availability of a practical and executable succession plan.

Related Party Transactions and Conﬂict of Interest

Under the Bahrain Commercial Companies Law and the CBB's regulations are required to disclose potential conﬂicts as well as refrain from participating in any conﬂicted decisions. This includes potential conﬂicts that may arise when a Director takes up a position with another company or has any materialExceptions to guidance are explained as follows:transactions with the Bank. In addition, exposures to major shareholder, directors and senior management are governed by the regulations of the CBB.

Related party transactions are approved in compliance with Article 189 of the Commercial Companies Law. All material service providers are selected following a satisfactory tendering process which is governed by the vendor management policy of the Bank. Any director or member of the senior management conﬂicted is excluded throughout the decision-making process. Details of related party transactions are disclosed in Note 27 of the ﬁnancial statements.

Material Transactions Requiring Board Approval

The Board has delegated certain authorities to the Executive Management to ensuresmooth and eﬀective day to day management however, all material ﬁnancing transaction, as provided in the delegation of authority matrix of the Bank, are subject to Board approval. Furthermore, major decisions such as change in strategy, changes in the organisation structure, capital expenditures, amending policies and hiring executive management is subject to approval of either Board or relevant Board committees.

Exceptions to CBB's Corporate Governance Regulations

Banks are required to comply with the High Level Controls (HC) Module of the CBB Rulebook. The HC Module contains both Rules and Guidance; Rules must be complied with, but Guidance may either be complied with or non-compliance explained to the shareholders and to the CBB.

Reference	Explanation
HC-1.3.13	HC-1.3.13 states that no one person should hold more than three directorships in public companies in the Kingdom of Bahrain, with the provision that no conﬂict of interest may exist. Dr. Esam Abdulla Fakhro, the Chairman of the Board, holds more than three directorships in public companies in the Kingdom of Bahrain. The Board is of the opinion that this does not impact the eﬀectiveness and eﬃciency of the Board of Directors, as he provides adequate attention to his responsibilities and there is no conﬂict of interest between his other directorships and that of the Bank.
HC-1.4.6	HC 1.4.6 states that the Chairman of the Board of Directors should be an independent director. The Bank's Chairman, Dr. Essam Abdulla Fakhro is nominated by the National Bank of Bahrain (NBB) which is a Controller of the Bank. Accordingly, Dr. Fakhro is reported as a Non-Independent Director. The Board is of the view since BisB has no material business transactions with NBB, there exist no conﬂict of interest and therefore, the chairmanship of Mr. Fakhro is appropriate.
HC-1.8.2	HC-1.8.2 states that the Board should establish a Corporate Governance Committee of at least three independent members and HC-1.8.5 allows combination of committees. The Bank has combined the responsibility of the Corporate Governance Committee with that of the NRGC. The Board is of the view that this does not compromise the high standards of corporate governance as the NRGC has suﬃcient resources and time to discharge its duties and holds suﬃcient number of meetings to fulﬁl its responsibilities.
HC-5.3.2	HC-5.3.2 states that the Remuneration Committee should include only independent directors or, alternatively, only non-executive directors of whom a majority are independent directors and the chairman is an independent director. The Remuneration Committee of the Bank is combined with the Nomination and Governance Committee as allowed under HC-1.8.5. The Chairman of the NRGC, Dr. Essam Abdulla Fakhro, is treated as Non-Independent on the basis that his nomination is through NBB, a Controller of the Bank. The Board is of the view that since the remuneration of the Board is governed by the Bahrain Commercial Company Law, there exists no conﬂict of interest in Dr. Fakhro being the Chairman of the Board. Furthermore, the Board has also approved the appointment of Ms. Dana Buheji, an Executive Director, as an additional NRGC member due to her extensive experience in HR.

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Employments of Relatives

The Bank has a policy in place on employment of relatives to prevent the potential conﬂict of interest. As a matter of policy, employment of relatives is not allowed however, in case of any exception, the approval of the Board's NRGC is sought.

Remuneration of the External Auditors

KPMG Fakhro was the Bank's external auditors for the ﬁnancial year ended 31st December 2020. The details of the audit fee paid to the auditors during the year 2020 as well as the details of non-audit services and fees paid are held at the Bank's premises, which is available to eligible shareholders upon speciﬁc request.

Major Shareholders Ownership (5% and above)Information on Products & Services & Availability of Financial Information

New product information, announcements and information related to all stakeholders are made available in a timely manner through various channels of communication which may include publications, website, direct mailers, electronic mail and local media. In addition, the Consolidated Financial Statements of at least past 5 years in addition to all supplementary disclosures required by CBB regulations, are available on the Bank's website.

Customer Complaints

The Compliance and Governance Department is responsible for managing customercomplaints. BisB customers may use the Bank's website or the call center for lodging a complaint. All complaints are logged, monitored, and reported to the CBB. A user-friendly guide is made available to customers by way of a conspicuous notice and Bank's website.

Whistleblowing Policy

The Board has adopted a Whistleblowing Policy which provides all employees an opportunity to raise any observation regarding unethical and improper practices or any other wrongful conduct of a ﬁnancial or legal nature in the Bank and to prohibit managerial personnel from taking any adverse action against employees for doing so.

Shareholder	Nationality	Number of Shares	Percentage	Type of Ownership
National Bank of Bahrain	Bahraini	838,630,728	78.81%	Majority Sovereign
General Council of Kuwaiti Awqaf	Kuwaiti	76,366,321	7.18%	Sovereign

Distribution of Ownership of Shares by Nationality

Country	Percentage	Number of Shares
Kingdom of Bahrain	87.52%	931,246,714
Kingdom of Saudi Arabia	0.76%	8,102,338
Kuwait	8.72%	92,782,018
United Arab Emirates	2.78%	29,624,863
Qatar	0.13%	1,381,185
Others	0.09%	921,469
Total	100.00%	1,064,058,587

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Changes in Distribution of Ownership shares of Directors, Shari'a Members and Approved Persons

Directors	Shares as of 31st December 2019	Sold During 2020	Acquired During 2020	Shares as of 31st December 2020
Dr. Esam Abdulla Fakhro	352,500	-	-	352,500
Mr. Khaled Yusuf Abdul Rahman	-	-	-	-
Mr. Jean-Christophe Durand	-	-	-	-
Mr. Khalid Abdulaziz Al Jassim	-	-	-	-
Mr. Mohammed Abdulla Al Jalahama	-	-	-	-
Mr. Marwan Khaled Tabbara	-	-	-	-
Mr. Mohammed Abdulla Nooruddin	-	-	-	-
Mr. Yaser Abduljalil Alshariﬁ	-	-	-	-
Ms. Dana Abdulla Buheji	-	-	-	-
Mr. Isa Hasan Maseeh	-	-	-	-
*Khaled Yusuf Abdul Rahman owns 30.25% of shares in Yousif Abdul Rahman Engineer Holding Co WLL. which owns 536,020 number of shares in BisB
Shari'a Supervisory Board	Shares as of 31st December 2019	Sold During 2020	Acquired During 2020	Shares as of 31st December 2020
Shaikh Dr. Abdul Latif Mahmood Al Mahmood	174,426	-	-	174,426
Shaikh Dr. Nedham Mohamed Saleh Yacoubi	13,237	-	-	13,237
Shaikh Mohammed Jaﬀar Al Juﬀairi	-	-	-	-
Shaikh Adnan Abdulla Al Qattan	-	-	-	-
Shaikh Dr. Essam Khalaf Al Enizi	-	-	-	-

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Changes in Distribution of Ownership shares of Directors, Shari'a Members and Approved Persons (Cont'd)

Approved Persons	Shares as of 31st December 2019	Sold During 2020	Acquired During 2020	Shares as of 31st December 2020
Hassan Amin Jarrar Chief Executive Oﬃcer	943,958	943,958	-	-
Wesam A. Aziz Baqer Chief Corporate & Institutional Banking Oﬃcer	168,520	-	-	168,520
Dalal Ahmed Al Qais Chief Retail Banking Oﬃcer	-	-	-
Ameer Abdul Ghani Dairi Chief Financial Oﬃcer	-	-	-	-
Fahim Ahmed Shaﬁqi Chief Risk Oﬃcer	-	-	-	-
Afnan Ahmed Saleh Chief Human Resources & Administration Oﬃcer	-	-	-	-
Eman Ali Abdulla Head of Central Operations	-	-	-	-
Hamad Farooq AlShaikh Head of Shari'a Supervisory Department	-	-	-	-
Eman Mohammed AlBinghadeer Head of Shari'a Internal Audit	-	-	-	-
Hussain Ebrahim Al Banna Head of Treasury	-	-	-	-
Osama Ali Nasr Chief Information Oﬃcer	12,675	-	-	12,675
Maisa Jawdat Shunnar Chief Strategy Implementation & Transformation Oﬃcer	-	-	-	-
Khaled Waheeb AlNasser Chief Internal Audit Oﬃcer	-	-	10,565	10,565
Nayef Naser Yusuf Acting Head of Special Assets	14,383	14,383	-	-
Mazar Jalal Chief Compliance & Governance Oﬃcer	-	-	-	-
Mohammed Ayada Matar Money Laundering Reporting Oﬃcer	-	-	-	-
Hamad Hussain Al Qattan Deputy Money Laundering Reporting Oﬃcer	-	-	-	-
Ali Yousif Al Aradi Head of Branches	-	-	-	-
Salman Mazen Matar Head of Internal Control	-	-	-	-

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Changes in Distribution of Ownership shares of Directors, Shari'a Members and Approved Persons (Cont'd)

Approved Persons	Shares as of 31st December 2019	Sold During 2020	Acquired During 2020	Shares as of 31st December 2020
Mohamed Jamal Aish Deputy Money Laundering Reporting Oﬃcer	-	-	-	-
Ammar Fuad Alsabah Head of Financial Institution	-	-	-	-
Faisal Al Abdulla Head of Priority Banking	-	-	-	-
Hussain Ali Bahram Head of Wealth Management	-	-	-	-
Mohammed Shawqi Albinmohammed Head of Sales	-	-	-	-
Mohammed A. Rahman Alabbasi Head of Retail Collection	-	-	-	-
Sohail Kabiruddin Head of Operational Risk	-	-	-	-
Siddharth Kumar Head of Corporate & Liquidity Risk	-	-	-	-
Salah Dawood Alansari Head of Credit Admin	-	-	-	-
Saleh Isa Almehri Head of Retail Credit Review	-	-	-	-
Dalal AlRayes Head of Human Resources	-	-	-	-
Mohammed Isa Hammad Head of Information Security	-	-	-	-
Hamad Mohamed Albassam Head of General Services & Properties	-	-	-	-

As of 31st December 2020, the total number of shares held by Board of Directors, Shari'a Supervisory Board members and the Approved Persons of the Bank are 731,923 which represents 0.07% of the total issued shares of the Bank. The shares held by the Approved Persons includes shares granted by the Bank under the Share Incentive Scheme.

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Corporate Governance Review

Compliance

Compliance is an independent function that reports to the Board, Risk, and Compliance Committee (BRCC). The Compliance function, guided by the Board approved policies, supports various business and controlled functions of the Bank to ensure alignment with the applicable rules and regulations of the CBB. Given the Bank's digital business strategy, as well as the expanding regulatory scrutiny and enforcement, the Compliance and Governance department keeps up with digital advancements by taking an active role in directly participating in the risk management process.

Due to the pandemic, conducting day-to-day business in the traditional way has been disrupted. With its agile model in place, however, the Bank was able to move several services from traditional to digital channels. This required the compliance function to adapt to the new ways of doing business and adjust procedures to be in-sync with digital platforms.

Despite a challenging year with almost no means of allowing the physical review of documents, the compliance function managed to complete a regulatory review with the Central Bank of Bahrain using virtual communication tools and secured means of sharing information digitally.

Digitalisation of policy and procedure review and approval workﬂow

Background

Document preparation and amendment for any governance related paperwork had been carried out manually. Knowing the value of digitalisation, the goal was to transition the process from manual to electronic.

In manual processing, documents were prepared by the business, shared with various stakeholders through email to collect their feedback, then reviewed and collated, with suggested changes recirculated for ﬁnalization. The process was labour intensive and time consuming, involving many diﬀerent parties and introducing a high chance of human error.

As a result, the idea of digitalizing the process of review and approval was developed, through the Risk Nucleus system used to store all governance related documents.

Approach

Following discussions with the vendor, an initial workﬂow-based process was built within our existing system. The transition has worked well, and the system has evolved over time to function smoothly.

The outcomes have included reduced turnaround times, a clearer system audit trail for documents, expiry reports, automatic alerts and notiﬁcations, wider access to documents, enhanced controls, and the introduction of a paperless working environment.

To further strengthen compliance within the Bank, our whistleblowing policy is publicly disclosed, and available on our website. This policy is a key element for safeguarding the Bank's integrity, enhancing the Bank's transparency and underpinning its system for combating practices that might damage its activities and reputation. We ensure that employees can report any violation by having a clear process to follow. Any BisB stakeholder should report their concern in writing by providing minimum details around the issue.

We expect our management to exercise due care in complying with regulatory requirements and avoid any violation. However, system and human errors cannot be fully eliminated while serving a large customer base. Financial penalties paid during the year are disclosed in accordance with CBB requirements. In 2020, ﬁnancial penalties paid mainly related to technical issues and a customer complaint.

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Raising an incident

The following channels are available to report any irregularity/ incident.

• The employee can send an email to the Head of Internal Audit on "whistleblow@BisB.com" which will be used only by the Head of Internal Audit, or the deputized Internal Audit personnel, in the case of his absence.
• A written letter can be delivered by hand at any BisB Branch clearly addressed to the Head of Internal Audit or a letter can be posted to P.O. Box 5240 Manama, addressed to the Head of Internal Audit.
• A whistleblower may also use the dedicated phone hotline # 17511988.

BisB has policies and procedures in place to combat money laundering and other ﬁnancial crimes. The Bank relies on industry best standards in terms of anti-money laundering/Combatting the Financing of Terrorism (latest Financial Action Task Force (FATF) Recommendations, Basel Committee Publications on 'Customer Due Diligences for Banks', Wolfsberg Standards for Anti Money Laundering (AML)/KYC/Combat Financing of Terrorism (CFT) and the CBB Rulebook Volume 2 under FC Module). The policies and procedures are reviewed annually and approved by the Bank's Board of Directors.

In addition, for high-risk customers, enhanced due diligence measures are adopted with continuous monitoring as stipulated in the CBB Rulebook Volume 2. The Bank does not maintain anonymous accounts, does not conduct business with shell banks, and does not transact or conduct business with correspondent banks which are domiciled in jurisdictions classiﬁed as non-cooperative countries or territories by FATF.

The Bank does not tolerate bribery and/or corruption. Our Anti Financial Crimes policy draws up the reporting of material external ﬁnancial crimes, non-material external ﬁnancial crimes, and internal/collusion ﬁnancial crimes incidents, and monitors their implementation by means of the Anti-Financial Crime program. This is designed to oversee the Bank's compliance with the policy, providing training, maintaining Board and Senior Management commitment, and establishing enterprise-wide anti-ﬁnancial crimes compliance processes and culture.

Any breach of this policy may result in disciplinary action, including dismissal for gross misconduct or other termination of employment.

Systems and Controls

The Bank has an automatic monitoring system and implements a risk-based approach. All types of transactions are mapped and monitored using the AML system by using pre-deﬁned scenario-based transaction monitoring software. The Bank maintains appropriate screening measures to ensure it does not provide ﬁnancial services to listed terrorists and/or sanctioned names notiﬁed by competent authorities.

AML and CFT policies and procedures are subject to independent internal and external audits and CBB inspection. This year, we have not been subject to any investigations, ﬁnes or penalties relating to AML and CFT issues.

We have succeeded in implementing our risk-based approach. We continue to strengthen our compliance culture and are committed to enhancing our compliance procedures, policies, and systems by continuously engaging and working with CBB, conducting impact assessments of new regulations on the Bank and reporting, and enhancing our AML system.

CORPORATE GOVERNANCE AND ETHICAL BEHAVIOUR (Cont'd)

Designing the compliance framework and obtaining regulatory approvals for digital corporate onboarding

Background and outcomes

Entrepreneurs in the Kingdom of Bahrain can digitally form Individual Establishments ("IEs" or "Sijili"), Limited Liability Companies("WLLs") using the Ministry of Industry, Commerce and Tourism Sijilat portal (business licensing system). After obtaining commercial registration, however, they would have to wait to open a simple Bank account.

At BisB, we looked at this matter and explored options to simplify the onboarding of legal entities, keeping in mind all the mandatory regulatory requirements.

In collaboration with the Ministry, integrating Sijilat, enabled SMEs to use BisB digital to open a simple depository relationship with Bank.

The service was the ﬁrst of its kind for legal entities across the MENA region. It has resulted in enhanced customer experience and reduced turnaround times. More than 400 IEs and Sijili were onboarded in the last quarter of 2020, compared to an average of 300+ corporate customers onboarding in a year.

Designing and establishing a compliance framework for updating KYC information through MoICT and CBB

Background and outcomes

Maintaining valid KYC information ratio is always a challenge for banks. To update customer KYC information, the Bank needs to contact and request them to visit the branch for submitting and updating the required documents.

Most customers do not adhere to such requests, resulting in increased ratios of expired KYC information. To improve the KYC information for corporate customers, BisB collaborated with MoICT to tackle the issue. We have become the ﬁrst Bank in the Kingdom of Bahrain to enter into an agreement with MOICT to connect through APIs for updating corporate KYC information through their digital system Sijilat.

The initiative has improved valid KYC ratios, enhanced customer experience, and improved data quality and alignment.

INTERNAL AUDIT

An independent Internal Audit function is established within the Bank, which regularly monitors the system of internal controls. Monitoring includes overseeing the appropriateness and eﬀectiveness of the risk management system through the assessment of risks and controls in each operating unit and matters arising. We work on delivering audit plans while maintaining the agility to take on ad-hoc engagements and the commitment to integrate areas of social and environmental policies in relevant engagement scopes next year.

This year, and despite the challenges faced, the team has succeeded in increasing its productivity. The delivery of the audit plan was made by a fully remote working team that introduced a control maturity rating scale applied in every audit engagement, coupled with internal audit outlook insights on the process audited. A revision of the audit was undertaken upon the COVID-19 surge, prioritizing key information technology areas. The team has formed a temporary continuous monitoring unit to increase surveillance of key controls during the initial months of the pandemic whilst delivering the audit plan.

We have collaborated with Group internal audit on several projects including the Audit Committee charter, the internal audit charter, risk assessment methodology, and annual planning process and documentation. We have introduced enhanced dashboards, checklists, and reports supporting the Audit Committee in fulﬁllment of their oversight duties. We are committed to increasing data analytics capabilities through tools implementation, and to enhancing the skills of the team (non-IT auditors) in areas of information and system security.

RISK MANAGEMENT

Risk Management Philosophy

The risk management philosophy of BisB is to identify, capture, monitor and manage the various dimensions of risk. The objective is to protect asset values, income streams, and optimize portfolio quality so that the interests of the Bank's stakeholders are safeguarded, while optimizing shareholders' returns, and maintaining risk exposure within the parameters set by the Board.

The Bank's risk appetite is embodied through its risk strategy; BisB reviews and aligns its risk appetite in line with its evolving business plan, and changing economic and market scenarios, in addition to evolving regulatory requirements. The Bank also assesses its tolerance for speciﬁc risk categories and its strategy to manage these risks. To monitor and report exposures to these identiﬁed risks, the Bank has adopted a comprehensive enterprise-wide risk management framework that encompasses the risk limit identiﬁcation, monitoring, and reporting structures.

The Risk Management Function

At the heart of the Bank's activities is the risk management function, through which the ongoing identiﬁcation, measurement, monitoring and reporting of all the Bank's inherent risks is conducted; the risks considered are identiﬁed in the Bank's risk appetite, alongside corresponding strategies deﬁned for each risk. The Board of Directors, under the guidance of the Board Risk & Compliance Committee, sets the Bank's risk appetite framework. These elements foster a sound risk management culture at the Bank, for which all individuals in the institution are accountable in their area of expertise.

Key Risks

The Bank is primarily exposed to credit risk, liquidity risk, market risk (including proﬁt rate risk, equity price risk, and foreign exchange risks), operational risk, reputational and strategic risk, in addition to Shari'a-compliance risk. We manage, control and monitor risks arising from foreign exchange risk, proﬁt rate risk in the banking book, and commercial displacement risk through active portfolio monitoring and limit controls, funding gap and liquidity risk by monitoring key liquidity metrics in line with regulatory requirements, operational risk through periodic bank-wide risk and control self-assessment process as well as key risk indicator monitoring, cybersecurity risk through the development and execution of a strategic information security program.

For reputational and strategic risk, we preserve our shareholders' integrity through the monitoring of the Bank's brand image and rating proﬁle. As an Islamic Bank licensee in the Kingdom of Bahrain, we are required to abide by Islamic jurisprudence and Shari'a principles in customer dealings, in addition to the nature of the products oﬀered and portfolio proﬁle. The Shari'a non-compliance risk is therefore a key operational risk which is at the base of the Bank's ethical risk objective. The Bank is committed to deliver Shari'a compliant products and services, with controls in place to ensure that the Bank does not invest in non-ethical businesses from an Islamic jurisprudence perspective, such as weapons dealing, alcohol and tobacco manufacturers and traders. This is also in line with the broader objective of preserving its reputational risk proﬁle, as mandated by the CBB Rulebook.

Controls

The risk culture is managed through appropriate policies, controls, and risk monitoring systems, and the Board ensures that these are implemented eﬀectively. This framework includes internal limits for the various types of risk to which the Bank may be exposed. Appropriate management information systems are in place to monitor risk exposures, and report to relevant stakeholders. The fundamental objective of the risk framework is to ensure that the risk appetite, and the associated returns, are commensurate with the risks taken, thereby creating and simultaneously preserving shareholder value. In this light, the Bank's risk management framework considers the regulations set forth by the CBB, in addition to the provisions of the Basel Accord and industry best practices.

Board Risk & Compliance Committee

The Board Risk & Compliance Committee is the ultimate governing body responsible for overseeing the Bank's risk management and compliance functions. The committee's role is to institute and supervise an eﬀective risk management framework within the Bank. The committee also monitors the Bank's risk proﬁle and its ongoing and potential exposures to various types of risks, to ensure that all risks are identiﬁed, measured, managed, and mitigated.

The Board Risk & Compliance Committee has supported the Board of Directors in eﬀecting turnkey risk deliverables, such as eﬀecting the risk appetite framework (and the associated monitoring mechanism) in addition to overseeing risk governance. Such duties were fulﬁlled under the supervision and approval of the Board of Directors, who retain ultimate responsibility and authority for all risk matters, including establishing overall policies and procedures.

Credit & Risk Management

Credit risk is the most signiﬁcant and pervasive risk for the Bank, which is the risk that the counter-party to a ﬁnancial transaction will fail to discharge an obligation causing the Bank to incur a ﬁnancial loss. Credit risk arises principally from ﬁnancing (credit facilities provided to customers), investment in Sukuk and from cash and deposits held with other banks. Further, there is credit risk in certain oﬀ-balance sheet ﬁnancial instruments, including guarantees relating to purchase and sale of foreign currencies, letters of credit, acceptances and commitments to extend credit. Credit risk monitoring and control is performed by the Credit andRisk Management Department which sets parameters and thresholds for the Bank's ﬁnancing activities.

The Credit & Risk Management (C&RM) division - headed by the Chief Risk Oﬃcer - has day-to-day responsibility for managing the risks involved across all areas of the Bank. C&RM provides independent identiﬁcation, measurement, monitoring and control of all risk parameters, while liaising with the business divisions that ultimately own the risks. C&RM comprises several specialist units, including Corporate and Retail Credit Review & Analysis, Operational Risk, Liquidity Risk, Retail Collections and Credit Administration.

The credit risk analysis process ensures that customers meet debt service ratio requirements, have suﬃcient and stable income sources or alternatively appropriate collaterals. If customers do not meet the Bank's stringent risk criteria, the Bank refrains from ﬁnancing them. The process includes reviewing the customer's credit history, to ensure that repeat defaulters are not extended any ﬁnancing. Additionally, it is critical to note that the credit risk analysis division is entirely independent from the Retail & Corporate business, eliminating any conﬂicts of interest. We manage, monitor, and control credit risk through underwriting exposures while preserving the integrity overall portfolio quality.

The Risk Management umbrella includes other critical functions such as Operational Risk in addition to Market & Liquidity Risk oversight. C&RM also encompasses critical functions in the Bank, such as retail collections. BisB maintains a process for assessing potential risks through the Risk Control Self-Assessment (RCSA) process. In addition, the Bank has a governance forum "Operational Risk Committee" where all Operational Risk incidents are reported for management review and discussion.

C&RM is continuously upgrading its risk management infrastructure following the regulations eﬀected by the Central Bank of Bahrain. The regulations are related to the Basel III accord, and speciﬁcally tackle liquidity risk, reputational risk, the Bank's internal capital adequacy and assessment process, in addition to enhancing the existing stress-testing framework. The regulations speciﬁcally focus on enterprise-risk management. Additional information on the Bank's risk management framework, policies, processes, and procedures is included in the Notes to the Consolidated Financial Statements, Risk and Capital Management Disclosure sections and Annual Financial & Sustainability Report. A summary of the Bank's operational risk and loss proﬁle is provided to the Board on a quarterly basis.

Next Projects and Commitments:

• Implement and operate privacy centered processes.
• Expand and streamline business continuity processes and enhance organisational resilience.
• Implement behavioural scorecards for retail customers to streamline retail credit application process and data analytics.
• Paperless ﬁnancing and customer-related credit documentation, with the intent of having them processed in an automated fashion.
• Keep technical vulnerabilities on internet facing infrastructure close to zero.

Data Security and Privacy

We have enabled our business to respond to COVID-19 challenges in an eﬀective way without impacting our productivity and operations, while ensuring the highest levels of protection for our people, customers and other stakeholders. We have been collaborating with regulators, government authorities, regional and international professional organisations in the development of security, privacy and resilience standards, policies, strategies, and initiatives.

As an active participant in all security, privacy and resilience programs and events, in 2020, we represented the ﬁnancial sector in the development of Bahrain's National Cyber Security strategy, participated in the BCI Award program as professional judges in global programs, and provided feedback on regulatory consultancy rules. We also participated in the largest cyber security conference in the region (GISEC Virtual 2020), as well as other specialized conferences and provided training and awareness sessions to local universities.

We have implemented numerous security and privacy measures to safeguard our customers and facilitate transactions. The Bank's processes are fully aligned to ISO 27001, and certiﬁcation against the standard is planned as part of the group integration processes. Internal audits on IT, Information Security, Cybersecurity and Business Continuity processes are performed annually to ensure compliance with regulatory requirements.

We have also developed various incident response plans to handle incidents arising from various scenarios, including a cyber security incident. Assessments and simulation exercises have been conducted by independent third parties and our Crisis Management Team (CMT). Collaborative working relations have been established with various stakeholders to share threat information and enable us to respond and recover from incidents, including the Central Bank of Bahrain, National Cyber Security Center, General Directorate of Anti-Corruption & Economic & Electronic Security, Telecommunication Regulatory Authority and the Information and e-Government Authority.

As part of our eﬀorts to maintain the trust of our customers, we continuously inform them about the collection and the use of their data, and general security threats through a number of social media channels. A privacy by design and security-by-design approach is followed in the development and enhancement process of new services and products. These principles ensure that we always advocate the best customer behaviour in relation to use of digital services and products. During 2020, we had zero data security breaches.

Control of Technical Vulnerabilities

2018

2019

2020

Number of technical vulnerabilities on public assets and websites rated medium, high or critical

Security Breaches Reported Internally Number of reported security breaches

2018 -2019 100

2020 -

Team Competency

Number of professional certiﬁcations in the information security, continuity and privacy ﬁeld

2018 21

2019 23

2020 25

Fraud Prevention

The Bank has created a number of processes to orchestrate the handling, management and response to fraudulent activities. The Bank has set a clear process where all such incidents should be reported to the Money Laundering Reporting Oﬃcer.

During 2020, the amount of fraudulent transaction activity (total value of account holder transactions refunded to account holders due to fraud) was BD 80,663. The percentage of activity from card-not-present fraud was 77%, while the percentage of activity from card-present and other fraud was 23%.

We want to safeguard our customers, and as such we have implemented fraud prevention actions, which include:

• The ﬁrst AI driven seamless customer identiﬁcation and authentication system, using facial recognition, document authenticity and liveness checks that enables customers to open new accounts by verifying their identities through strong customer authentication practices.
• Fraud management Back oﬃce continued to serve customers and identify fraudulent card activities through use of global block lists and trends.
• Customers received various educational messages through the mobile app and SMS, along with an extensive social media campaign about fraud prevention and response.
• Coordinated activities with regulators to ensure controls are implemented to protect the ﬁnancial sector at large.

Business Continuity Management

We have become the ﬁrst organisation in Bahrain, and among the ﬁrst worldwide, to achieve ISO 22301:2019 Business Continuity Management System certiﬁcation. We have implemented a Business Continuity Management program that allows us to enhance the resilience and continuity of critical services.

This existing BCM framework was built to satisfy core regulatory requirements and was operated and managed through physical documents and ﬁles that were diﬃcult to update, maintain and analyze. Our team leveraged internal capabilities and expertise to drive and automate the BCM program. Several exercises were conducted to simulate the response to site unavailability, cyber-attacks, and business disruptions. The organisation procured a cloud-based solution that enabled the team to automate review, analysis, and maintenance processes of BCM plans, documents, critical contacts. As part of the continuous improvement processes, the crisis management plan included scenarios to respond to loss of facilities, people, technology, key supplier(s), and cyber-attacks. Pandemic response plans were part of the continuously updated and reviewed plans.

Before the ﬁrst COVID-19 case, the ﬁrst warning was issued to begin pandemic planning by updating and reviewing response plans, and analysis of working locations to implement operational splitting to minimize risks of infections within critical departments. Laptops were procured and enhancements made to remote working facilities for all critical units and vulnerable groups.

The crisis management team continued to observe, respond, and adapt to a changing situation eﬀectively, ensuring the safety of our people, limiting the impact of degraded third parties and critical supplier performance, and ensuring that all activities could be safely resumed and continued throughout the peak of the pandemic.

The Bank was able to prepare for COVID-19 challenges ahead of time. With emergency pandemic plans maintained, reviewed and updated on an ongoing basis, incident response processes were updated, and remote working facilities were established for all critical processes and vulnerable employees.

The implementation of an automated paper free Business Continuity Management cloud-based solution enables us to update plans that are available everywhere, identify processes, technologies and people interdependencies and reach all employees, contractors and third parties through an emergency notiﬁcation system featuring mass messages, emails, and phone calls with bi-directional response.

The Bank's Head of Information Security won the Best Continuity and Resilience Professional (Private Sector) Award, in the Business Continuity Institute Middle East Award program and reached the top seven ﬁnalists in the global award program. Our team also reached the ﬁnalist round for Best Continuity and Resilience team for the Middle East.

CEO on achieving ISO 22301:2019

"This achievement of obtaining the ISO 22301:2019 certiﬁcation reiterates our commitment to the continuous development of our information security systems with the aim of protecting against, preparing for, responding to, reducing the possibility of occurring and recovering from any emergencies if they arise. We consider the development of our business continuity management system a top priority to be able to quickly overcome any emergency that may arise at any given time, the COVID-19 outbreak notwithstanding, to maintain the health and continuity of our business while ensuring a seamless delivery of products and services."

CEO on Winning the BCI Awards Middle East - Best Continuity and Resilience Professional (Private Sector)

"Our sincere congratulations go out to Mr. Mohammed Isa Hammad for leading his team to this remarkable achievement. This award reﬂects the Bank's continuous eﬀorts to promote a culture of continued learning and innovation, encouraging our people to excel in their roles. It is a testament to our ability as a Bank to adapt rapidly and respond to changing circumstances while ensuring business continuity in light of the challenges posed in 2020."

REMUNERATION DISCLOSURES

The Bank's total compensation approach, which includes the variable remuneration policy and the Share Incentive Scheme, sets out the Banks's policy on remuneration for Directors and Senior Management and the key factors that are taken into account in setting the policy.

The Bank adopted regulations concerning Sound Remuneration Practices issued by the Central Bank of Bahrain. The revised policy framework and incentive components were approved by the Board of Directors and the policy came into eﬀect as of January 2014.

The key features of the proposed remuneration framework are summarised below:-

Remuneration strategy

It is the Bank's basic compensation philosophy to provide a competitive level of total compensation to attract and retain qualiﬁed and competent employees. The Bank's variable remuneration policy will be driven primarily by a performance based culture that aligns employee interests with those of the Shareholders of the Bank.

These elements support the achievement of the Bank's objectives through balancing rewards for both short-term results and long-term sustainable performance. This strategy is designed to share success, and to align employees' incentives with the risk framework and risk outcomes.

The quality and long-term commitment of all BisB's employees is fundamental to success. The Bank therefore aims to attract, retain and motivate the very best people who are committed to maintaining a career with the Bank, and who will perform their role in the long-term interests of Shareholders. The Bank's reward package comprises the following key elements:

1. Fixed pay
2. Beneﬁts
3. Annual performance bonus

A robust and eﬀective governance framework ensures that the Bank operates within clear parameters of its compensation strategy and policy. All compensation matters, and overallcompliance with regulatory requirements, are overseen by the Board Nomination, Remuneration and Governance Committee (NRGC).

The Bank's remuneration policy in particular, considers the role of each employee and has set guidance on whether an employee is a Material Risk Taker and / or an Approved Person in a business line, control or support function. An Approved Person is an employee whose appointment requires prior regulatory approval because of the signiﬁcance of the role within the Bank; and an employee is considered a Material Risk Taker if they are the Head of a signiﬁcant business line or any individuals within their control who have a material impact on the Bank's risk proﬁle.

In order to ensure alignment between what BisB pays its people and the business strategy, individual performance is assessed against annual and long-term ﬁnancial and non-ﬁnancial objectives summarized in the performance management system. This assessment also takes into account adherence to the Bank's values, risks and compliance measures and above all integrity. Altogether, performance is therefore judged not only on what is achieved over the short and long-term, but also importantly on how it is achieved, as the NRGC believes the latter contributes to the long-term sustainability of the business.

NRGC role and focus

The NRGC has oversight of all reward policies for the Bank's employees. The NRGC is the supervisory and governing body for compensation policy, practices and plans. It is responsible for determining, reviewing and proposing variable remuneration policy for approval by the Board. It is responsible for setting the principles and governance framework for all compensation decisions. The NRGC ensures that all persons must be remunerated fairly and responsibly. The remuneration policy is reviewed on a periodic basis to reﬂect changes in market practices, the business plan and risk proﬁle of the Bank.

The responsibilities of the NRGC with regards to the Bank's variable remuneration policy, as stated in its mandate, include but are notlimited to, the following: -

• Approve, monitor and review the remuneration system to ensure the system operates as intended.
• Approve the remuneration policy and amounts for each Approved Person and Material Risk-Taker, as well as total variable remuneration to be distributed, taking account of total remuneration including salaries, fees, expenses, bonuses and other employee beneﬁts.
• Ensure remuneration is adjusted for all types of risks and that the remuneration system takes into consideration employees that earn the same short-run proﬁt but take diﬀerent amounts, of risk on behalf of the Bank.
• Ensure that for Material Risk-Takers, variable remuneration forms a substantial part of their total remuneration.
• Review the stress testing and back testing results before approving the total variable remuneration to be distributed including salaries, fees, expenses, bonuses and other employee beneﬁts.
• Carefully evaluate practices by which remuneration is paid for potential future revenues whose timing and likelihood remain uncertain. The NRGC will question payouts for income that cannot be realised or whose likelihood of realisation remains uncertain at the time of payment.
• Ensure that for Approved Persons in risk management, internal audit, operations, ﬁnancial control and compliance functions, the mix of ﬁxed and variable remuneration is weighted in favour of ﬁxed remuneration.
• Recommend Board Member remuneration based on their attendance and performance and in compliance with Article 188 of the Bahrain Commercial Companies Law.
• Ensure appropriate compliance mechanisms are in place to ensure that employees commit themselves not to use personal hedging strategies or remuneration-and liability-related insurance to undermine the risk alignment eﬀects embedded in their remuneration arrangements.

REMUNERATION DISCLOSURES (Cont'd)

Scope of application of the remuneration policy

The variable remuneration policy has been adopted on a bank-wide basis.

Board remuneration

The Bank's Board remuneration is determined in line with the provisions of Article 188 of the Bahrain Commercial Companies Law. The Board of Directors' remuneration will be capped so that total remuneration (excluding sitting fees) does not exceed 10% of the Bank's net proﬁt after all required deductions as outlined in Article 188 of the Bahrain Commercial Companies Law, in any ﬁnancial year. In 2020, MOICT approved exceptional Board remuneration. Board remuneration is subject to approval of the shareholders in the Annual General Meeting as well as Ministry of Commerce, Industry and Tourism. Remuneration of non-executive Directors does not include performance-related elements such as grants of shares, share options or other deferred stock-related incentive schemes, bonuses or pension beneﬁts.

Variable remuneration for staff

Variable remuneration is performance related and consists primarily of the annual performance bonus award. As a part of staﬀ's variable remuneration, the annual bonus rewards delivery of operational and ﬁnancial targets set each year, the individual performance of the employees in achieving those targets, and their contribution to delivering the Bank's strategic objectives.

The Bank has adopted a Board approved framework to develop a transparent link between variable remuneration and performance. The framework is designed on the basis of meeting both satisfactory ﬁnancial performance and the achievement of other non-ﬁnancial factors, that will, all other things being equal, deliver a target bonus pool for employees, prior to consideration of any allocation to business lines and employees individually. In the framework adopted for determining the variable remuneration pool, the NRGC aims to balance the distribution of the Bank's proﬁts between shareholders and employees.

Key performance metrics at the Bank level include a combination of short term and long term measures and include proﬁtability, solvency, liquidity and growth indicators. The performance management process ensures that all goals are appropriately cascaded down to respective business units and employees.

In determining the amount of variable remuneration, the Bank starts from setting speciﬁc targets and other qualitative performance measures that result in a target bonus pool. The bonus pool is then adjusted to take account of risk via the use of risk-adjusted measures (including forward- looking considerations).

The NRGC carefully evaluates practices by which remuneration is paid for potential future revenues whose timing and likelihood remain uncertain. NRGC demonstrates that its decisions are consistent with an assessment of the Bank's ﬁnancial condition and future prospects.

The Bank uses a formalised and transparent process to adjust the bonus pool for quality of earnings. It is the Bank's objective to pay out bonuses out of realised and sustainable proﬁts. If the quality of earnings is not strong, the proﬁt base could be adjusted based on the discretion of the NRGC.

For the overall Bank to have any funding for distribution of a bonus pool, threshold ﬁnancial targets have to be achieved. The performance measures ensure that total variable remuneration is generally, considerably contracted where subdued or negative ﬁnancial performance of the Bank occurs. Furthermore, the target bonus pool as determined above is subject to risk adjustments in line with the risk assessment and linkage framework.

Remuneration of control functions

The remuneration level of staﬀ in the control and support functions allows the Bank to employ qualiﬁed and experienced personnel in these functions. The Bank ensures that the mix of ﬁxed and variable remuneration for control and support function personnel should be weighted in favour of ﬁxed remuneration. The variable remuneration of control functions is to be based on function-speciﬁc objectivesand is not be determined by the ﬁnancial performance of the business are as they monitor.

The Bank's performance management system plays a major role in deciding the performance of the support and control units on the basis of the objectives set for them. Such objectives are more focused on non-ﬁnancial targets that include risk, control, compliance and ethical considerations, as well as the market and regulatory environment apart from value adding tasks which are speciﬁc to each unit.

Variable compensation for business units

The variable remuneration of the business units is primarily determined by key performance objectives set through the performance management system of the Bank. Such objectives contain ﬁnancial and non-ﬁnancial targets, including risk control, compliance and ethical considerations as well as market and regulatory requirements. The consideration of risk assessments in the performance evaluation of individuals ensures that any two employees who generate the same short-run proﬁts but take diﬀerent amounts of risk on behalf of the Bank are treated diﬀerently by the remuneration system.

Risk assessment framework

The purpose of risk linkages is to align variable remuneration to the risk proﬁle of the Bank.

In its endeavour to do so, the Bank considers both quantitative measures and qualitative measures in the risk assessment process. Both quantitative measures and human judgement play a role in determining any risk adjustments. The risk assessment process encompasses the need to ensure that the remuneration policy as designed reduces employees' incentives to take excessive and undue risks, is symmetrical with risk outcomes, and delivers an appropriate mix of remuneration that is risk aligned.

The NRGC considers whether the variable remuneration policy is in line with the Bank's risk proﬁle, and ensures that through the Bank's ex-ante and ex-post risk assessment framework and processes, remuneration practices where potential future revenues whose timing and likelihood remain uncertain are carefully evaluated.

REMUNERATION DISCLOSURES (Cont'd)

Risk adjustments take into account all types of risk, including intangible and other risks such as reputation risk, liquidity risk and the cost of capital. The Bank undertakes risk assessments to review ﬁnancial and operational performance against business strategy and risk performance prior to distribution of the annual bonus. The Bank ensures that total variable remuneration does not limit its ability to strengthen its capital base. The extent to which capital needs to be built up is a function of the bank's current capital position and its ICAAP.

The bonus pool takes into account the performance of the Bank which is considered within the context of the Bank's risk management framework. This ensures that the variable pay pool is shaped by risk considerations and Bank-wide notable events.

The size of the variable remuneration pool and its allocation within the bank takes into account the full range of current and potential risks, including:

(a) The cost and quantity of capital required to support the risks taken.
(b) The cost and quantity of the liquidity risk assumed in the conduct of business.
(c) Consistency with the timing and likelihood of potential future revenues incorporated into current earnings.

The NRGC keeps itself abreast of the Bank's performance against the risk management framework. The NRGC will use this information when considering remuneration to ensure returns, risks and remuneration are aligned.

Risk adjustments

The Bank has an ex-post risk assessment framework which is a qualitative assessment to back-test actual performance against prior risk assumptions.

In years where the Bank suﬀers material losses in its ﬁnancial performance, the risk adjustment framework will work as follows:

• There will be considerable contraction of the Bank's total variable remuneration.
• At an individual level, poor performance by the Bank will mean individual KPIs are not met and hence employee performance ratings will be lower.
• Reduction in the value of deferred shares or awards.

• Possible changes in vesting periods and additional deferral applied to unvested rewards.
• Lastly, if the qualitative and quantitative impact of a loss incident is considered signiﬁcant, a malus or clawback of previous variable awards may be considered.

The NRGC, with the Board's approval, can rationalise and make the following discretionary decisions:

• Increase / reduce the ex-post adjustment.
• Consider additional deferrals or increase in the quantum of non-cash awards.
• Recovery through malus and clawback arrangements.

Malus and Clawback framework

The Bank's malus and clawback provisions allow the Board of Directors to determine that, if appropriate, unvested elements under the deferred bonus plan can be forfeited / adjusted or the delivered variable remuneration recovered in certain situations.

The intention is to allow the Bank to respond appropriately if the performance factors on which reward decisions were based turn out not to reﬂect the corresponding performance in the longer term. All deferred compensation awards contain provisions that enable the Bank to reduce or cancel the awards of employees whose individual behaviour has had a materially detrimental impact on the Bank during the concerned performance year.

Any decision to take back an individual's award can only be made by the Bank's Board of Directors.

The Bank's malus and clawback provisions allow the Board to determine that, if appropriate, vested / unvested elements under the deferred bonus plan can be adjusted / cancelled in certain situations. These events include the following:

• Reasonable evidence of willful misbehaviour, material error, negligence or incompetence of the employee causing the Bank/ the employee's business unitto suﬀer material loss in its ﬁnancial performance, material misstatement of the Bank's ﬁnancial statements, material risk management failure or reputational loss or risk due to such employee's actions, negligence, misbehaviour orincompetence during the concerned performance year.

• The employee deliberately misleads the market and/or shareholders in relation to the ﬁnancial performance of the Bank during the concerned performance year.
• Clawback can be used if the malus adjustment on the unvested portion is insuﬃcient given the nature and magnitude of the issue.

Components of Variable remuneration

Variable remuneration has the following main components:

Upfront Cash:

The portion of the variable compensation that is awarded and paid out in cash on conclusion of the performance evaluation process for each year.

Deferred Cash:

The portion of variable compensation that is awarded and paid in cash on a pro-rata basis over a period of 3 years.

Upfront shares:

The portion of variable compensation that is awarded and issued in the form of shares on conclusion of the performance evaluation process for each year.

Deferred shares:

The portion of variable compensation that is awarded and paid in the form of shares on a pro-rata basis over a period of 3 years.

All deferred awards are subject to malus provisions. All share awards are released to the beneﬁt of the employee after a six-month retention period from the date of vesting. The number of equity share awards is linked to the Bank's share price as per the rules of the Bank's Share Incentive Scheme. Any dividend on these shares is released to the employee along with the shares (i.e. after the retention period).

REMUNERATION DISCLOSURES (Cont'd)

Deferred Compensation

The CEO, his deputies and 5 most highly paid business line employees are subject to the following deferral rules:

Elements of variable remuneration

Payout percentages

Vesting period

Retention

Malus

Clawback

Immediate

Upfront cashDeferred cashDeferred share awards

40% 10% 50%

3 years

- -6 monthsAll other covered staﬀ, i.e. Assistant General Manager level and above are subject to the following deferral rules:

YesYes

Yes

Elements of variable remuneration

Payout percentages

Vesting period

Retention

Malus

Clawback

Upfront cash

Upfront share awardsDeferred share awards

50% 10% 40%

Immediate

3 years

-6 months

6 months

-Yes

YesThe NRGC, based on its assessment of the role proﬁle and risk taken by an employee could increase the coverage of employees that will be subject to deferral arrangements.

Details of remuneration paid

(a) Board of Directors & committees

Yes

BD 000's

2020

2019

Sitting fees

*161

*221

Remuneration

*Includes NRGC sitting fees as of 31 December 2020 amounted to BD 14 thousand (2019: BD 12 thousand). **Subject to AGM and regulatory approval

(b) Shari'a's Supervisory Board

**141

**282

BD 000's

2020

2019

Remuneration, Fees and Expenses

REMUNERATION DISCLOSURES (Cont'd)

Approved persons

- Business lines

- Control & Support

10 23

1,312 1,994

- -

- -- -- -- -65 68

53 29

2 5

1,432 2,096

Other material risk takers

--Other staﬀTotal

317 350

7,792 11,098

- - -- - -- - -

-317 317

- --216

- -

**349

**82

- - 7

-8,325

*11,853

*Includes end of service compensations & includes staﬀ cost of employees who have left the bank during the year

**NRGC in its meeting on 11 February 2021 approved the bonus of BD 431 thousand for the performance year 2020, subject to certain additional vesting conditions. These vesting conditions will be monitored throughout the year and a formal assessment would be carried out before the end of the year. Accordingly bonus that would have ordinarily been paid upfront as per the variable remuneration policy have been disclosed as part of the deferred variable remuneration. This amounts to BD 123 thousand and BD 6 thousand for cash bonus and bonus shares, respectively.

2019

Approved persons

- Business lines

- Control & Support

12 24

1,507 2,176

- -

- -- -128 152

-26

-128 57

3 7

1,792

2,406

Other material risk takers

--Other staﬀTotal

325 361

8,069 11,752

- - -- - -- - -

-983

- -- -- -- --9,052

1,263

185

*13,250

*Includes end of service compensations.

REMUNERATION DISCLOSURES (Cont'd)

Deferred awards disclosures 2020

BD 000's	Cash	Shares
Number**	BD 000's	Total

Opening balance	88	5,072,049	694	782
Adjustment based on ﬁnal award price of 2019	-	72,264	-	-
Awarded for the year*	11	916,224	82	93
Paid out / released during the year**	(30)	(1,657,617)	(217)	(247)
Service, performance and risk adjustments	-	-	-	-
Corporate action adjustment	-	-	-	-
Closing balance	69	4,402,920	559	628

* Number of shares for 2020 deferred share awards has been calculated using the year end share price, as the award share price in accordance with the share plan policy of the Bank will be determined at a later date. Refer to note under the table (c) Employee Remuneration, above.

**As approved by the Central Bank of Bahrain, during the year, 1,354,127 shares were bought back at market price by the Bank as treasury shares, upon completion of vesting period.

2019

BD 000's	Cash	Shares
Number*	BD 000's	Total

Opening balance	91	4,957,743	710	801
Adjustment based on ﬁnal award price of 2018	-	71,457	-	-
Awarded for the year	26	1,662,106	199	225
Paid out / released during the year*	(29)	(1,619,257)	(215)	(244)
Service, performance and risk adjustments	-	-	-	-
Corporate action adjustment	-	-	-	-
Closing balance	88	5,072,049	694	782

*As approved by the Central Bank of Bahrain, during the year, 987,012 shares were bought back at market price by the Bank as treasury shares, upon completion of vesting period.

SHARI'A SUPERVISORY BOARD REPORT

FOR THE YEAR ENDED ON 31/12/2020

In The Name of Allah, most Gracious, Most Merciful Peace and Blessings Be Upon His Messenger.

To the shareholders of Bahrain Islamic Bank B.S.C.

Assalam Alaykum Wa Rahmatu Allah Wa Barakatoh.

deemed necessary to conﬁrm that the Bank did not violate the Shari'a principles and Fatwas and decisions of the Shari'a Board.

The Shari'a Board hereby present the following report on its activities in supervising the Bank's ﬁnances and investments from a Shari'a perspective for the ﬁnancial year ending on 31st December 2020, in fulﬁllment to the mandate conferred upon it by BisB's Articles of Association:

2) Independent External Shari'a Compliance Audit

1. All the Financial Statements inspected by the Shari'a Board conform to what has been approved by the Board, and to the standards issued by the Accounting & Auditing Organisation for Islamic Financial Institutions (AAOIFI).
First: Supervision and Revision of the Bank's Business
In coordination with the Shari'a Coordination and implementation, the Shari'a Supervisory Board has monitored the implementation on the Bank's Finances and its applicable fees and the relevant policies and procedures, in addition to advising and providing fatwas in regards to the ﬁnance agreements up to 31st December 2020 to ensure the Bank's adherence to the provisions and principles of Islamic Shari'a.
The Shari'a Supervisory Board reviewed the audit report provided by the Independent External Shari'a Auditor on the Bank's activities and the progress of work in the Shari'a Departments, which demonstrated that the Bank's operations, transactions and services have been implemented based on appropriate procedures that conﬁrms its compliance with the Islamic Shari'a rules, principles and provisions, and that they have went through the Bank's necessary administrative channels from Senior Management, Internal Audit and Shari'a Supervisory Board.
2. Contracts, and transactions conducted by the Bank throughout were in accordance with the standard contracts pre-approved by the Shari'a Supervisory Board.
3. The distribution of proﬁt and allocation of losses on investment accounts was in line with the basis and principles approved by the Shari'a Supervisory Board and in accordance to Islamic Shari'a.
Third: Shari'a Governance
The Shari'a Supervisory Board believes that ensuring the conformity of Bank's activities and investments with the provisions of Islamic Shari'a is the sole responsibility of the Management while the Shari'a Supervisory Board is only responsible for expressing an independent opinion and preparing a report to you.
The Shari'a Supervisory Board reviewed the Bank's Management report on Shari'a Compliance and Governance, which shows the proper functioning of the supervision procedures related to compliance structures and Shari'a governance in the Bank, and the Management's assertion on the eﬀectiveness of the mechanism and operation of supervision procedures.
4. Any gains resulted from sources or means prohibited by the provisions and principles of Islamic Shari'a, have been directed to the Charity and Donations Fund.
5. Zakah was calculated according to the provisions and principles of Islamic Shari'a, by the net invested assets method. And the shareholders should pay their portion of zakah on their shares as stated in the ﬁnancial report.
Second: Shari'a Audit of the Bank's Business 1) Shari'a Internal Audit
The Shari'a Supervisory Board aﬃrms that it has fulﬁlled all the requirements of Shari'a Governance issued by the Central Bank of Bahrain with the Shari'a Coordination and Implementation Department and the Internal Shari'a Audit Department.
6. The Bank was committed to the provisions and principles of Shari'a as per Shari'a standards issued by the (AAOIFI).

Sixth: National Bank of Bahrain's Acquisition of the Majority of BisB's Shares

We planned with the Shari'a Internal Audit department to carry out monitoring functions by obtaining all the information and clariﬁcations that were deemed necessary to conﬁrm that the Bank did not violate the principles and provisions of Islamic Shari'a and Fatwas and decisions of the Shari'a Board.

Fourth: Shari'a Supervisory Board Operations

The Shari'a Board and its Committees held (28) meetings during the year and issued (167) decisions and fatwas, and approved (57) contracts.

Our supervision constituted of inspection, documenting of policies followed by the Bank on the basis of examining each kind of operation either directly or indirectly by the internal Shari'a Department in conformity with the Plan and methodology approved by the Shari'a Board.

Fifth: Financial Statements and Zakah Calculation Methods

The Shari'a Supervisory Board has not found any Shari'a impediment to the National Bank of Bahrain's acquisition of BisB's shares; accordingly, the Shari'a Supervisory Board established the Shari'a terms and regulations and the administrative conditions to regulate the said acquisition and to safeguard the independence of both banks as two separate entities.

The Shari'a Board has reviewed the ﬁnancial Statements for the year ended on 31st December 2020, the income statement, the attached notes and the zakah calculation methods.

The Shari'a Supervisory Board had some administrative observations on the implementation of the acquisition, which were communicated in writing to the Board of Directors of Bahrain Islamic Bank and the Central Bank of Bahrain.

The Shari'a Internal Audit department performed its mission of auditing the transactions executed by the Bank and submitted its periodic reports to the Shari'a Supervisory Board, which conﬁrmed the Bank's adherence in its dealings and investments with the Shari'a Board's fatwas and decisions.

Based on the above, the Shari'a Supervisory Board decides that:

We pray that Allah may grant all of us further success and prosperity.

Wassalam Alaykum Wa Rahmatu Allah Wa Barakatoh

The 22 reports submitted by Internal Shari'a Audit Department to the Shari'a Supervisory Board included results of auditing the ﬁles, contracts, executed deals in fulﬁllment to the Shari'a Board annual approved audit plan. The Shari'a Board obtained the requested information and explanations from the departments it

Shaikh. Dr. A. Latif Mahmood Al MahmoodShaikh. Mohammed Jaffar Al Juffairi

Chairman

Vice Chairman

Shaikh. Adnan Abdulla Al QattanShaikh. Dr. Nedham M. Saleh YacoubiShaikh. Dr. Essam Khalaf Al Onazi

Member

CONTENTS

79 Independent Auditors' Report
83 Consolidated Statement of Financial Position
84 Consolidated Statement of Income
85 Consolidated Statement of Cash Flows
86 Consolidated Statement of Changes in Owners' Equity
87 Consolidated Statement of Sources and Uses of Good Faith Qard Fund
88 Consolidated Statement of Sources and Uses of Zakah and Charity Fund
89 Notes to the Consolidated Financial Statements
139 Supplementary Disclosures to the Consolidated Financial Statements

To the Shareholders of Bahrain Islamic Bank B.S.C. Manama, Kingdom of Bahrain

Report on the audit of the consolidated ﬁnancial statements

Opinion

We have audited the accompanying consolidated ﬁnancial statements of Bahrain Islamic Bank B.S.C. (the "Bank"), and its subsidiaries (together the "Group") which comprise the consolidated statement of ﬁnancial position as at 31 December 2020, the consolidated statements of income, changes in equity, cash ﬂows, sources and uses of good faith qard fund and sources and uses of Zakah and charity fund for the year then ended, and notes, comprising signiﬁcant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated ﬁnancial statements present fairly, in all material respects, the consolidated ﬁnancial position of the Group as at 31 December 2020, and consolidated results of its operations, changes in owners' equity, its cash ﬂows, sources and uses of good faith qard fund and its sources and uses of Zakah and charity fund for the year then ended in accordance with the Financial Accounting Standards ("FAS") issued by the Accounting and Auditing Organisation for Islamic Financial Institutions ("AAOIFI") as modiﬁed by the Central Bank of Bahrain (the "CBB").

In our opinion, the Group has also complied with the Islamic Shari'a Principles and Rules as determined by the Group's Shari'a Supervisory Board during the year ended 31 December 2020.

Basis for opinion

We conducted our audit in accordance with Auditing Standards for Islamic Financial Institutions ("ASIFIs") issued by AAOIFI. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the consolidated ﬁnancial statements section of our report. We are independent of the Group in accordance with AAOIFI's Code of Ethics for Accountants and Auditors of Islamic Financial Institutions, together with the ethical requirements that are relevant to our audit of the consolidated ﬁnancial statements in the Kingdom of Bahrain, and we have fulﬁlled our other ethical responsibilities in accordance with these requirements and the Code. We believe that the audit evidence we have obtained is suﬃcient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most signiﬁcance in our audit of the consolidated ﬁnancial statements of the current period. These matters were addressed in the context of our audit of the consolidated ﬁnancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Impairment allowance on ﬁnancing assets, Ijarah muntahia bittamleek, and Ijarah rental receivables

(refer to accounting policy in note 3 z, use of estimates and judgments in note 3 bb and management of credit risk in note 28 e).

Description

How the matter was addressed in our audit

We focused on this area because:

• of the signiﬁcance of ﬁnancing assets, Ijarah muntahia bittamleek and Ijarah rental receivables representing 65% of total assets;
• impairment of ﬁnancing assets, Ijarah muntahia bittamleek and Ijarah rental receivables involves:
- - complex estimates and judgement over both timing and recognition of impairment including susceptibility to management bias;
- - use of statistical models and methodologies for determination of expected credit losses. The Group exercises signiﬁcant judgments and makes a number of assumptions in developing its ECL models which is determined as a function of the assessment of the probability of default ("PD"), loss given default ("LGD"), and exposure at default ("EAD") associated with the underlying ﬁnancial assets; and
- - complex disclosure requirements regarding credit quality of the portfolio including explanation of key judgments and material inputs used in determination of expected credit losses.

Our audit procedures, amongst others, to address signiﬁcant risks associated with impairment included:

• Evaluating the appropriateness of the accounting policies adopted based on the requirements of FAS 30, our business understanding, and industry practice.
• Conﬁrming our understanding of management's processes, systems and controls implemented, including controls over expected credit loss ("ECL") model development.

Controls testing

We performed process walkthroughs to identify the key systems, applications and controls used in the ECL processes. We tested the relevant General IT and application controls over key systems used in the ECL process incorporating consideration of the economic disruption caused by COVID-19. Key aspects of our control testing involved the following:

• Performing detailed credit risk assessment for a sample of performing and non-performing loans to test controls over credit rating and its monitoring process;
• Testing the design and operating eﬀectiveness of the key controls over the completeness and accuracy of the key inputs and assumptions elements into the FAS 30 ECL models;
• Testing controls over the transfer of data between underlying source systems and the ECL models that the Group operates;

To the Shareholders of Bahrain Islamic Bank B.S.C. Manama, Kingdom of Bahrain

Description

How the matter was addressed in our audit

• The need to measure ECLs on an unbiased forward-looking basis incorporating a range of economic conditions. Signiﬁcant management judgment is applied in determining the economic scenarios used and the probability weightings applied to them; and
• Adjustments to the ECL model results are made by management to address known impairment model limitations or emerging trends or risks. The assumptions regarding the economic outlook are more uncertain due to COVID-19 which, combined with government response (e.g. deferral programs and government stimulus package), increases the level of judgement required by the Group in calculating the ECL.

• Testing controls over the modelling process, including governance over model monitoring, validation and approval;
• Testing key controls relating to selection and implementation of material economic variables; and
• Testing controls over the governance and assessment of model outputs and authorisation and review of post model adjustments and management overlays including selection of economic scenarios and the probability weights applied to them.

Test of details

Key aspects of our testing involved:

• Sample testing over key inputs and assumptions impacting ECL calculations including economic forecasts and weights to conﬁrm the accuracy of information used;
• Re-performing key aspects of the Group's signiﬁcant increase in credit risk ("SICR") determinations and selecting samples of ﬁnancial instruments to determine whether a SICR was appropriately identiﬁed;
• Re-performing key elements of the Group's model calculations and assessing performance results for accuracy; and
• Selecting a sample of post model adjustments and management overlays in order to assess the reasonableness of the adjustments by challenging key assumptions, testing the underlying calculation and tracing a sample back to source data.

Use of specialists

For the relevant portfolios examined, we have involved KPMG specialists to assist us in assessing IT system controls and challenging key management assumptions used in determining expected credit losses. Key aspects of their involvement include:

• We involved our information technology specialists to test controls over the IT systems, recording of data in source systems and transfer of data between source systems and the impairment models;
• We involved our credit risk specialists in:
- - evaluating the appropriateness of the Groups' ECL methodologies (including the staging criteria used);
- - on a test check basis, re-performing the calculation of certain components of the ECL model (including the staging criteria);
- - evaluating the appropriateness of the Group's methodology for determining the economic scenarios used and the probability weighing applied to them; and
- - evaluating the overall reasonableness of the management economic forecast by comparing it to external market data and our understanding of the underlying sector and macroeconomic trends including the impact of COVID-19.

Disclosures

Evaluating the adequacy of the Group's disclosure in relation to use of signiﬁcant estimates and judgement and credit quality of ﬁnancing assets, Ijarah muntahia bittamleek and Ijarah rental receivables by reference to the requirements of relevant accounting standards.

To the Shareholders of Bahrain Islamic Bank B.S.C.

Manama, Kingdom of Bahrain

Other information

The board of directors is responsible for the other information. The other information comprises the annual report but does not include the consolidated ﬁnancial statements and our auditors' report thereon. Prior to the date of this auditors' report, we obtained the board of directors' report which forms part of the annual report, and the remaining sections of the annual report are expected to be made available to us after that date.

Our opinion on the consolidated ﬁnancial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated ﬁnancial statements, our responsibility is to read the other information identiﬁed above and, in doing so, consider whether the other information is materially inconsistent with the consolidated ﬁnancial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we have obtained prior to the date of this auditors' report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the board of directors for the consolidated ﬁnancial statements

The board of directors is responsible for the Group's undertaking to operate in accordance with Islamic Shari'a Rules and Principles as determined by the Group's Shari'a Supervisory Board.

The board of directors is also responsible for the preparation and fair presentation of the consolidated ﬁnancial statements in accordance with FAS as modiﬁed by CBB, 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.

In preparing the consolidated ﬁnancial statements, the board of directors is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the board of directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditors' responsibilities for the audit of the consolidated ﬁnancial statements

Our objectives are to obtain reasonable assurance about whether the consolidated ﬁnancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ASIFIs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to inﬂuence the economic decisions of users taken on the basis of these consolidated ﬁnancial statements.

As part of an audit in accordance with ASIFIs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated ﬁnancial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is suﬃcient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the board of directors.
• Conclude on the appropriateness of the board of directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast signiﬁcant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the ﬁnancial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated ﬁnancial statements, including the disclosures, and whether the consolidated ﬁnancial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain suﬃcient appropriate audit evidence regarding the ﬁnancial information of the entities or business activities within the Group to express an opinion on the consolidated ﬁnancial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

To the Shareholders of Bahrain Islamic Bank B.S.C.

Manama, Kingdom of Bahrain

We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and signiﬁcant audit ﬁndings, including any signiﬁcant deﬁciencies in internal control that we identify during our audit.

We also provide the board of directors with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the board of directors, we determine those matters that were of most signiﬁcance in the audit of the consolidated ﬁnancial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest beneﬁts of such communication

Report on other regulatory requirements

As required by the Commercial Companies Law and Volume 2 of the Rule Book issued by the Central Bank of Bahrain (CBB), we report that:

a) the Bank has maintained proper accounting records and the consolidated ﬁnancial statements are in agreement therewith;
b) the ﬁnancial information contained in the board of directors' report is consistent with the consolidated ﬁnancial statements;
c) except for non-compliance with the Licensing Requirements module - LR-2.5.2.A (maintaining minimum total shareholders' equity of BD 100 million) of Volume 2 of the Rule Book issued by CBB, we are not aware of any other violations during the year of the Commercial Companies Law, the Central Bank of Bahrain and Financial Institutions Law No. 64 of 2006 (as amended), the CBB Rule Book (Volume 2, applicable provisions of Volume 6 and CBB directives), the CBB Capital Markets Regulations and associated resolutions, the Bahrain Bourse rules and procedures or the terms of the Bank's memorandum and articles of association that would have had a material adverse eﬀect on the business of the Bank or on its ﬁnancial position; and
d) satisfactory explanations and information have been provided to us by management in response to all our requests.

The engagement partner on the audit resulting in this independent auditors' report is Salman Manjlai.

KPMG Fakhro

Partner Registration number 213 15 February 2021

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2020

2020	2019
Note	BD'000	BD'000
ASSETS
Cash and balances with banks and Central Bank	4	50,362	61,629
Placements with ﬁnancial institutions	5	44,442	76,068
Financing assets	6	571,513	574,851
Investment securities	7	276,608	246,213
Ijarah Muntahia Bittamleek	9	191,365	179,857
Ijarah rental receivables	9	20,677	24,546
Investment in associates	8	19,024	18,750
Investment in real estate	11	16,226	18,756
Property and equipment	10	14,047	13,591
Other assets	12	7,317	9,299
TOTAL ASSETS	1,211,581	1,223,560
LIABILITIES, EQUITY OF INVESTMENT ACCOUNTHOLDERS AND OWNERS' EQUITY
Liabilities
Placements from ﬁnancial institutions	147,893	126,964
Placements from non-ﬁnancial institutions and individuals	261,002	213,420
Borrowings from ﬁnancial institutions	13	-	29,566
Customers' current accounts	188,742	181,692
Other liabilities	14	23,642	21,516
Total Liabilities	621,279	573,158
Equity of Investment Accountholders
Financial institutions	33,986	61,587
Non-ﬁnancial institutions and individuals	460,274	467,892
Total Equity of Investment Accountholders	15	494,260	529,479
Owners' Equity
Share capital	16	106,406	106,406
Treasury shares	16	(892)	(892)
Shares under employee share incentive scheme	(257)	(281)
Share premium	206	180
Reserves	(9,421)	15,510
Total Owners' Equity	96,042	120,923
TOTAL LIABILITIES, EQUITY OF INVESTMENT ACCOUNTHOLDERS AND OWNERS' EQUITY	1,211,581	1,223,560

The consolidated ﬁnancial statements were approved by the Board of Directors on 15 February 2021 and signed on its behalf by:

Dr. Esam Abdulla Fakhro	Khalid Yousif Abdul Rahman	Hassan Amin Jarrar
Chairman	Vice Chairman	Chief Executive Oﬃcer

The attached notes 1 to 34 form an integral part of these consolidated ﬁnancial statements.

CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED 31 DECEMBER 2020

INCOME

Income from ﬁnancing

Income from investment in Sukuk

Total income from jointly ﬁnanced assets Return on equity of investment accountholders Group's share as Mudarib

Net return on equity of investment accountholders

Group's share of income from jointly ﬁnanced assets (both as mudarib and investor)

Expense on placements from ﬁnancial institutions

Expense on placements from non-ﬁnancial institutions and individuals Expense on borrowings from ﬁnancial institutions

Fee and commission income, net

Income from investment securities Income from investment in real estate, net Share of results of associates, net

Other income, net

Total income

EXPENSES Staﬀ costs Depreciation Other expenses Total expenses

Proﬁt before impairment allowances Impairment allowance, net

(LOSS) / PROFIT FOR THE YEAR

(4,977) (2,957)

BASIC AND DILUTED EARNINGS PER SHARE (ﬁls)

Dr. Esam Abdulla Fakhro

Chairman

Khalid Yousif Abdul Rahman

Vice Chairman

The attached notes 1 to 34 form an integral part of these consolidated ﬁnancial statements.

(9,533) (4,687)

2019 BD'000

45,464

11,932

57,396

(35,686)

23,001

(12,685)

44,711

(178) (2,386)

5,929

613

(2,423) (274)

(235) (133)

(11.94)

(10,998)

1,491 42,307

14,119

1,353 9,623 25,095 17,212

6,214

5.91

Hassan Amin Jarrar Chief Executive Oﬃcer

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2020

2020	2019
Note	BD'000	BD'000
OPERATING ACTIVITIES
(Loss) / Proﬁt for the year	(12,563)	6,214
Adjustments for non-cash items:
Depreciation	10	1,381	1,353
Impairment allowance, net	24	28,162	10,998
Fair value movement in investment in real estate	21	2,476	484
Loss / (Gain) on sale of investment in real estate	21	34	(63)
Loss / (Gain) on foreign exchange revaluation	95	(5)
Gain on sale of investment securities	20	(836)	-
Share of results of associates, net	8	235	133
Operating proﬁt before changes in operating assets and liabilities	18,984	19,114
Working capital adjustments:
Mandatory reserve with Central Bank of Bahrain	11,803	(410)
Financing assets	(22,531)	(2,061)
Ijarah Muntahia Bittamleek	(24,338)	(18,780)
Other assets	873	1,565
Customers' current accounts	7,050	48,448
Other liabilities	3,571	(3,744)
Placements from ﬁnancial institutions	20,929	75,960
Placements from non-ﬁnancial institutions and individuals	47,582	217,376
Equity of investment accountholders	(35,219)	(329,310)
Net cash from operating activities	28,704	8,158
INVESTING ACTIVITIES
Disposal of investment in real estate	130	2,308
Redemption of investment in associates	3,155	887
Purchase of investment securities	(63,857)	(36,059)
Purchase of property and equipment	(1,837)	(1,303)
Proceeds from disposal of investment securities	32,322	29,511
Net cash used in investing activities	(30,087)	(4,656)
FINANCING ACTIVITIES
Purchase of treasury shares	(149)	(121)
Repayment of borrowings from ﬁnancial institutions	(29,287)	(66,820)
Dividends paid	(271)	(7)
Net cash used in ﬁnancing activities	(29,707)	(66,948)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(31,090)	(63,446)
Cash and cash equivalents at 1 January	99,670	163,116
CASH AND CASH EQUIVALENTS AT 31 DECEMBER	68,580	99,670
Cash and cash equivalents comprise of:
Cash on hand	4	15,820	16,221
Balances with CBB, excluding mandatory reserve deposits	4	74	465
Balances with banks and other ﬁnancial institutions excluding restricted balances	4	8,244	6,916
Placements with ﬁnancial institutions with original maturities less than 90 days	5	44,442	76,068
68,580	99,670
The attached notes 1 to 34 form an integral part of these consolidated ﬁnancial statements.

CONSOLIDATED STATEMENT

OF CHANGES IN OWNERS' EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2020


Share
capital
2020	BD'000

Shares
under
employee	Real	Investment	(Accumulated
share	estate	securities	losses)/	Total
Treasury	incentive	Share	Statutory	fair value	fair value	Retained	Total	owners'
shares	scheme	premium	reserve	reserve	reserve	earnings	reserves	equity
BD'000	BD'000	BD'000	BD'000	BD'000	BD'000	BD'000	BD'000	BD'000
Balance at 1 January 2020 106,406	(892)	(281)	180	4,736	2,049	718	8,007	15,510	120,923
-	-	-	-	-	-	(12,563)	(12,563)	(12,563)
-	-	-	-	-	-	(328)	(328)	(328
-	-	-	-	-	-	(250)	(250)	(250)
-	-	-	-	-	-	1,814	1,814	1,814
-	-	-	-	-	-	(14,711)	(14,711)	(14,711)
-	173	26	-	-	-	-	-	199
(149)	-	-	-	-	-	-	-	(149)
149	(149)	-	-	-	-	-	-	-
-	-	-	-	-	978	-	978	978
-	-	-	-	129	-	-	129	129
(892)	(257)	206	4,736	2,178	1,696	(18,031)	(9,421)	96,042
(892)	(391)	120	4,115	4,830	718	2,843	12,506	117,749
-	-	-	-	-	-	6,214	6,214	6,214
-	-	-	-	-	-	(179)	(179)	(179)
-	-	-	-	-	-	(250)	(250)	(250)
-	231	60	-	-	-	-	-	291
(121)	-	-	-	-	-	-	-	(121)
121	(121)	-	-	-	-	-	-	-
-	-	-	-	(2,781)	-	-	(2,781)	(2,781)
-	-	-	621	-	-	(621)	-	-
(892)	(281)	180	4,736	2,049	718	8,007	15,510	120,923

106,406

Loss for the year Zakah approved Donations approved

Government subsidy

(note 2)

Modiﬁcation loss (note 2)

Shares allocated to staﬀ during the year

Purchase of treasury shares

Transfer to shares under employee share incentive scheme

Net movement in investment securities fair value reserve

Net movement in real estate fair value reserve

Balance at 31 December 2020

2019

Balance at 1 January 2019

Proﬁt for the year

Zakah approved Donations approved

Shares allocated to staﬀ during the year

Purchase of treasury shares

Transfer to shares under employee share incentive scheme

Net movement in real estate fair value reserve

Transfer to statutory reserve

Balance at 31 December 2019

106,406 - - - - -

- -

106,406

The attached notes 1 to 34 form an integral part of these consolidated ﬁnancial statements.

CONSOLIDATED STATEMENT OF SOURCES AND USES OF GOOD FAITH QARD FUND

FOR THE YEAR ENDED 31 DECEMBER 2020

Balance at 1 January 2020

Sources of Qard Fund

Repayments

Total sources during the year

Uses of Qard fund

Marriage

Others (Waqf)

Total uses during the year

Balance at 31 December 2020

Balance at 1 January 2019

Sources of Qard Fund

Non-Islamic income

Repayments

Total sources during the year

Uses of Qard fund

Marriage

Others (Waqf)

Total uses during the year

Balance at 31 December 2019

Sources of Qard fund

Contribution by the Bank

Donation

Non-Islamic income

The attached notes 1 to 34 form an integral part of these consolidated ﬁnancial statements.

Funds
Qard Hasan	available for
receivables	Qard Hasan	Total
BD'000	BD'000	BD'000
57	160	217
(23)	23	-
(23)	23	-
12	(12)	-
33	(33)	-
45	(45)	-
79	138	217
71	57	128
-	89	89
(37)	37	-
(37)	126	89
14	(14)	-
9	(9)	-
23	(23)	-
57	160	217
2020	2019
BD'000	BD'000
125	125
3	3
89	89
217	217

CONSOLIDATED STATEMENT OF SOURCES AND USES OF ZAKAH AND CHARITY FUND

FOR THE YEAR ENDED 31 DECEMBER 2020

2020	2019
BD'000	BD'000
Sources of zakah and charity funds
Undistributed zakah and charity funds at the beginning of the year	401	314
Non-Islamic income / late payment fee	255	580
Contributions by the Bank for zakah	328	192
Contributions by the Bank for donations	250	250
Others	10	-
Total sources of zakah and charity funds during the year	1,244	1,336
Uses of zakah and charity funds
Philanthropic societies	264	334
Aid to needy families	350	527
Others	387	74
Total uses of funds during the year	1,001	935
Undistributed zakah and charity funds at the end of the year	243	401
The attached notes 1 to 34 form an integral part of these consolidated ﬁnancial statements.
BisB ANNUAL FINANCIAL & SUSTAINABILITY REPORT 2020
88

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

1. REPORTING ENTITY

Bahrain Islamic Bank B.S.C. (the "Bank") was incorporated in the Kingdom of Bahrain in 1979 by Amiri Decree No.2 of 1979 and registered with the Ministry of Industry, Commerce and Tourism ("MOICT") under Commercial Registration (CR) number 9900, to carry out banking and other ﬁnancial trading activities in accordance with the teachings of Islam (Shari'a). The Bank operates under an Islamic retail banking license issued by the Central Bank of Bahrain ("CBB"). The Bank's Shari'a Supervisory Board is entrusted to ensure the Bank's adherence to Shari'a rules and principles in its transactions and activities. The Bank is listed on the Bahrain Bourse.

During 2019, one of the signiﬁcant shareholders, National Bank of Bahrain (NBB) made a voluntary oﬀer to acquire additional issued and paid up ordinary shares of the Bank. NBB is a licensed retail bank regulated by the Central Bank of Bahrain and listed on the Bahrain Bourse. The acquisition oﬀer included a cash or share exchange option at the preference of each shareholder of the Bank. On 22 January 2020, this oﬀer was closed and after settlement with the shareholders of the Bank, NBB's shareholding in the Bank increased from 29.06% as reported at 31 December 2019 to 78.81%. Hence, NBB is considered as Parent of the Bank for ﬁnancial reporting purposes.

The Bank's registered oﬃce is at Building 722, Road 1708, Block 317, Manama, Kingdom of Bahrain.

The Bank has nine branches (2019: nine), all operating in the Kingdom of Bahrain.

The consolidated ﬁnancial statements include the results of the Bank and its wholly owned subsidiaries (together the "Group"). The Bank holds 100% of the share capital of Abaad Real Estate W.L.L.

Abaad Real Estate W.L.L ("Abaad")

Abaad was incorporated in the Kingdom of Bahrain on 8 April 2003 with an authorised and fully paid-up share capital of BD 25 million. Abaad started operations in 2007. The main activity of Abaad is investment in real estate (in accordance with the Islamic Shari'a rules and principles).

The consolidated ﬁnancial statements were authorised for issuance in accordance with a resolution of the Board of Directors issued on 15 February 2021.

a. Basis of preparation

The consolidated ﬁnancial statements have been prepared on a historical cost basis, except for "investments in real estate" and "equity type instruments carried at fair value through equity" that have been measured at fair value.

The preparation of consolidated ﬁnancial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods aﬀected. Management believes that the underlying assumptions are appropriate and the Group's consolidated ﬁnancial statements therefore present the ﬁnancial position and results fairly. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signiﬁcant to the consolidated ﬁnancial statements, are disclosed in note (3 (bb)).

The consolidated ﬁnancial statements have been presented in Bahraini Dinars ("BD"), which is also the functional currency of the Group's operations. All the values are rounded to the nearest BD thousand except when otherwise indicated.

b. Statement of Compliance

The consolidated ﬁnancial statements of the Group have been prepared in accordance with applicable rules and regulations issued by the Central Bank of Bahrain ("CBB"). These rules and regulations require the adoption of all Financial Accounting Standards (FAS) issued by the Accounting and Auditing Organisation of Islamic Financial Institutions (AAOIFI), except for:

(a) recognition of modiﬁcation losses on ﬁnancial assets arising from payment holidays provided to customers impacted by COVID-19 without charging additional proﬁts, in equity instead of the proﬁt or loss as required by FAS issued by AAOIFI. Any other modiﬁcation gain or loss on ﬁnancial assets is recognised in accordance with the requirements of applicable FAS. Please refer to note (2) for further details; and
(b) recognition of ﬁnancial assistance received from the government and/ or regulators in response to its COVID-19 support measures that meet the government grant requirement, in equity, instead of the proﬁt or loss as required by the statement on "Accounting implications of the impact of COVID-19 pandemic" issued by AAOIFI to the extent of any modiﬁcation loss recorded in equity as a result of (a) above, and the balance amount to be recognized in the proﬁt or loss. Any other ﬁnancial assistance is recognised in accordance with the requirements of FAS. Please refer to note (2) for further details.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

1. REPORTING ENTITY (Continued)

b. Statement of Compliance (Continued)

The above framework for basis of preparation of the consolidated ﬁnancial statements is hereinafter referred to as 'Financial Accounting Standards as modiﬁed by CBB'.

The modiﬁcation to accounting policies has been applied retrospectively and did not result in any change to the comparatives.

In line with the requirements of AAOIFI and the CBB rule book, for matters not covered by AAOIFI standards, the group takes guidance from the relevant International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB").

2. COVID-19 IMPACT

On 11 March 2020, the COVID-19 outbreak was declared, a pandemic by the World Health Organization (WHO) and has rapidly evolved globally. This has resulted in a global economic slowdown with uncertainties in the economic environment. Global equity and commodity markets, and in particular oil prices, have also experienced great volatility. The estimation uncertainty is associated with the extent and duration of the expected economic downturn and forecasts for key economic factors including GDP, employment, oil prices etc. This includes disruption to capital markets, deteriorating credit markets and liquidity concerns. Authorities have taken various measures to contain the spread including implementation of travel restrictions and quarantine measures. The pandemic as well as the resulting measures and policies have had some impact on the Group. The Group is actively monitoring the COVID-19 situation, and in response to this outbreak, has activated its business continuity plan and various other risk management practices to manage the potential business disruption on its operations and ﬁnancial performance.

The management and the Board of Directors (BOD) have been closely monitoring the potential impact of the COVID-19 developments on the Group's operations and ﬁnancial position; including possible loss of revenue, impact on asset valuations, impairment, review of onerous contracts and debt covenants, outsourcing arrangements etc. The Group has also put in place contingency measures, which include but are not limited to enhancing and testing of business continuity plans including its liquidity requirements.

In preparing the consolidated ﬁnancial statements, judgements made by management in applying the Group's accounting policies and sources of estimation are subject to uncertainty regarding the potential impacts of the current economic volatility and these are considered to represent management's best assessment based on available or observable information.

As of 31 December 2020, the Bank is compliant with the required Capital Adequacy Ratio, Net Stable Funding Ratio (NSFR) and Liquidity Coverage Ratios (LCR). As of 31 December 2020, the Group's NSFR ratio was 126%.

Following are some of the signiﬁcant concessionary measures which were announced by CBB:

• For assessment of SICR from stage 1 to stage 2 Increase in number of days from 30 to 74 days
• Payment holiday for 6 months to eligible customers;
• Concessionary repo to eligible banks at zero percent;
• Reduction of cash reserve ratio from 5% to 3%;
• Reduction of LCR and NSFR ratio from 100% to 80%;
• Aggregate of modiﬁcation loss and incremental ECL provision for stage 1 and stage 2 from March to December 2020 to be added back to Tier 1 capital for the two years ending 31 December 2020 and 31 December 2021. And to deduct this amount proportionately from Tier 1 capital on an annual basis for three years ending 31 December 2022, 31 December 2023 and 31 December 2024.

During the second quarter, based on a regulatory directive issued by the CBB as concessionary measures to mitigate the impact of COVID-19, the one-oﬀ modiﬁcation losses amounting to BD 14,711 thousand arising from the 6-month payment holidays provided to ﬁnancing customers without charging additional proﬁt was recognized directly in equity. The modiﬁcation loss was calculated as the diﬀerence between the net present value of the modiﬁed cash ﬂows calculated using the original eﬀective proﬁt rate and the current carrying value of the ﬁnancial assets on the date of modiﬁcation. The Group had provided payment holidays on ﬁnancing exposures amounting to BD 554,875 thousand as part of its support to impacted customers.

In September 2020 and December 2020, the CBB issued another regulatory directive to extend the concessionary measures, i.e. holiday payments to customers till end of December 2020 and June 2021 respectively. However, customers will be charged proﬁts during this holiday payment extension period, and hence the Group does not expect signiﬁcant modiﬁcation loss as a result of the extension.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

2. COVID-19 IMPACT (Continued)

Governments and central banks across the world have responded with monetary and ﬁscal interventions to stabilize economic conditions. The Government of Kingdom of Bahrain has announced various economic stimulus programmes ("Packages") to support businesses in these challenging times.

As per the regulatory directive, ﬁnancial assistance amounting to BD 1,814 thousand (representing speciﬁed reimbursement of a portion of staﬀ costs, waiver of fees, levies and utility charges) and zero cost funding received from the government and/or regulators, in response to its COVID-19 support measures, has been recognized directly in equity.

3. SIGNIFICANT ACCOUNTING POLICIES

The signiﬁcant accounting polices applied in the preparation of these consolidated ﬁnancial statements are set out below. These accounting policies have been consistently applied by the Group and are consistent with those used in the previous year except as described in Note 1 "Statement of Compliance" and those arising from the adoption of the following standards and amendments to Standards early adopted by the Group.

a. New standards, amendments, and interpretations i) New standards, amendments, and interpretations issued but not yet eﬀective A. Early adoption of standards

(i) FAS 31 Investment Agency (Al-Wakala Bi Al-lstithmar)

FAS 31 Investment Agency (Al-Wakala Bi Al-Istithmar) is eﬀective from annual ﬁnancial periods beginning on 1 January 2021. The Group has early adopted FAS 31 as issued by AAOIFI eﬀective 1 January 2020. The Group uses wakala structure to raise funds from interbank market and from customers, these were reported under placements from ﬁnancial institutions and placements from non-ﬁnancial institutions and individuals, respectively as of 31 December 2019.

After adopting FAS 31, all new funds raised using wakala structure, together called "wakala pool" are comingled with the Bank's pool of funds based on an underlying mudaraba agreement. This comingled pool of funds is invested in a common pool of assets in the manner which the Group deems appropriate without laying down restrictions as to where, how and what purpose the funds should be invested. Wakala pool is reported in equity of investment account holders and the proﬁt paid on these contracts is reported in return on equity of investment account holders.

As per the transitional provisions of FAS 31, the entity may choose not to apply this standard on existing transactions executed before

1 January 2020 and have an original contractual maturity before 31 December 2020. However, the Bank has decided to apply the standard on all transactions outstanding as of the year end and the corresponding previous year end. The adoption of this standard has resulted in additional disclosures (refer to note 15).

(ii) FAS 33 Investment in Sukuks, shares and similar instruments

FAS 33 Investment in Sukuks, shares and similar instruments is eﬀective from annual ﬁnancial periods beginning on 1 January 2021. The Group has early adopted FAS 33 as issued by AAOIFI eﬀective 1 January 2020. The standard is applicable on a retrospective basis. However, the cumulative eﬀect, if any, attributable to owners' equity, equity of investment account holders relating to previous periods, shall be adjusted with investments fair value pertaining to assets funded by the relevant class of stakeholders.

The adoption of FAS 33 has resulted in changes in accounting policies for recognition, classiﬁcation and measurement of investment in sukuks, shares and other similar instruments, however, the adoption of FAS 33 had no signiﬁcant impact on any amounts previously reported in the consolidated ﬁnancial statements for the year ended 31 December 2020. Set out below are the details of the speciﬁc FAS 33 accounting policies applied in the current year.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

a. New standards, amendments, and interpretations (Continued)

(ii) FAS 33 Investment in Sukuks, shares and similar instruments (Continued)

1) Changes in accounting policies

Categorization and classiﬁcation

FAS 33 contains a classiﬁcation and measurement approach for investments in Sukuk, shares and similar instruments that reﬂects the business model in which such investments are managed and the underlying cash ﬂow characteristics. Under the standard, each investment is to be categorized as investment in:

(a) equity-type instruments;
(b) debt-type instruments, including:
- (i) monetary debt-type instruments; and
- (ii) non-monetary debt-type instruments; and
(c) other investment instruments

Unless irrevocable initial recognition choices provided in para 10 of the standard are exercised, an institution shall classify investments as subsequently measured at either of (i) amortised cost (except for equity-type instruments), (ii) fair value through equity or (iii) fair value through income statement, on the basis of both:

(a) the Bank's business model for managing the investments; and
(b) the expected cash ﬂow characteristics of the investment in line with the nature of the underlying Islamic ﬁnance contracts.

2) Changes to signiﬁcant estimates and judgements

a) Investment classiﬁcation

Assessment of the business model within which the investments are managed and assessment of whether the contractual terms of the investment represents either a debt-type instrument or other investment instrument having reasonably determinable eﬀective yield.

b) Impairment on equity-type investments classiﬁed as fair value through equity

In the case of equity-type investments classiﬁed as fair value through equity and measured at fair value, a signiﬁcant or prolonged decline in the fair value of an investment below its cost is considered in determining whether the investments are impaired. If such evidence exists for equity-type investments classiﬁed as fair value through equity, the cumulative loss previously recognized in the consolidated statement of changes in equity is removed from equity and recognized in the consolidated statement of income. Impairment losses recognized in the consolidated statement of income on equity-type investments are subsequently reversed through equity.

3) Classiﬁcation and measurement of investment securities

The Bank has performed a detailed analysis of its business models for the investment securities as well performed an analysis of their cash ﬂow characteristics. There is no change in the classiﬁcation of investment securities.

B. New standards not yet adopted

The following new standards and amendments to standards are eﬀective for ﬁnancial years beginning after 1 January 2021 with an option to early adopt. However, the Bank has not early adopted any of these standards.

(i) FAS 32 Ijarah

AAOIFI has issued FAS 32 "Ijarah" in 2020. This standard supersedes the existing FAS 8 "Ijarah and Ijarah Muntahia Bittamleek".

The objective of this standard is to set out principles for the classiﬁcation, recognition, measurement, presentation and disclosure of Ijarah (Ijarah asset, including diﬀerent forms of Ijarah Muntahia Bittamleek) transactions entered into by the Islamic ﬁnancial institutions as a lessor and lessee. This new standard aims to address the issues faced by the Islamic ﬁnance industry in relation to accounting and ﬁnancial reporting as well as to improve the existing treatments to be in line with the global practices. This standard shall be eﬀective for the ﬁnancial periods beginning on or after 1 January 2021 with early adoption permitted. The Group is currently evaluating the impact of adopting this standard.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

a. New standards, amendments, and interpretations (Continued)

B. New standards not yet adopted (Continued)

(ii) FAS 38 Wa'ad, Khiyar and Tahawwut

AAOIFI has issued FAS 38 Wa'ad, Khiyar and Tahawwut in 2020. The objective of this standard is to prescribe the accounting and reporting principles for recognition, measurement and disclosures in relation to Shari'a compliant Wa'ad (promise), Khiyar (option) and Tahawwut (hedging) arrangements for Islamic ﬁnancial institutions. This standard is eﬀective for the ﬁnancial reporting periods beginning on or after 1 January 2022.

This standard classiﬁes Wa'ad and Khiyar arrangements into two categories as follows:

a) "ancillary Wa'ad or Khiyar" which is related to a structure of transaction carried out using other products i.e. Murabaha, Ijarah Muntahia Bittamleek, etc.; and

b) "product Wa'ad and Khiyar" which is used as a stand-alone Shari'a compliant arrangement.

Further, the standard prescribes accounting for constructive obligations and constructive rights arising from the stand-alone Wa'ad and Khiyar products.

The Group is currently evaluating the impact of adopting this standard.

b. Basis of consolidation

Subsidiaries are all entities (including special purpose entities) controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the ﬁnancial and operating policies of an enterprise so as to obtain beneﬁts from its activities. Subsidiaries are consolidated from the date on which control is transferred to the Group to the date that control seizes.

The ﬁnancial statements of the subsidiaries are prepared for the same reporting year as the Group, using consistent accounting policies.

All intra-group balances, income, expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

c. Cash and cash equivalents

For the purpose of the consolidated cash ﬂows statement, "cash and cash equivalents" consist of cash on hand, balances with the Central Bank of Bahrain excluding mandatory reserve deposits, balances with banks and other ﬁnancial institutions excluding restricted balances and placements with ﬁnancial institutions with original maturities less than 90 days when acquired.

d. Placements with and borrowings from ﬁnancial institutions

i) Placements with ﬁnancial institutions

Placements with ﬁnancial institutions comprise of commodity Murabaha receivables and Wakala receivables. Commodity Murabaha receivables are stated at amortised cost net of deferred proﬁts and provision for impairment, if any. Wakala receivables are stated at amortised cost less provision for impairment, if any.

ii) Borrowings from ﬁnancial institutions

Borrowings from ﬁnancial institutions comprise of borrowings obtained through a murabaha contract recognized on the origination date and carried at amortized cost.

e. Financing assets

Financing assets comprise of Shari'a compliant ﬁnancing contracts with ﬁxed or determinable payments. These include ﬁnancing provided through Murabaha and Musharaka contracts. Financing assets are recognised on the date at which they are originated and carried at their amortised cost less impairment allowance, if any.

f. Murabaha ﬁnancing

Murabaha ﬁnancing consist mainly of deferred sales transactions which are stated net of deferred proﬁts and provisions for impairment, if any.

Murabaha ﬁnancing is a sale on deferred terms. The Group arranges a Murabaha transaction by buying a commodity (which represents the object of the Murabaha) and then resells this commodity to a Murabeh (beneﬁciary) after computing a margin of proﬁt over cost. The sale price (cost plus proﬁt margin) is repaid in instalments by the Murabeh over the agreed period.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

g. Musharaka ﬁnancing

Musharaka ﬁnancing are stated at the fair value of consideration given less impairment, if any.

Musharaka ﬁnancing are a form of capital partnership. Musharaka ﬁnancing capital provided by the Group at inception in kind (if other than cash) is measured at the fair value of the assets. If the valuation of the assets results in a diﬀerence between fair value and book value, such diﬀerence is recognised as proﬁt or loss to the Group.

h. Investment securities

Investment securities comprise of debt type instruments carried at amortised cost and equity type instruments carried at fair value through equity.

All investments securities, are initially recognised at fair value, being the value of the consideration given including transaction costs directly attributable to the acquisition.

i) Debt type instruments carried at amortised cost

These are investments which have ﬁxed or determinable payments of proﬁt and capital. Subsequent to initial recognition, these are measured at amortised cost using the eﬀective proﬁt rate method less impairment, if any. Any gain or loss on such instruments is recognised in the consolidated statement of income when the instruments are de-recognised or impaired.

ii) Equity type instruments carried at fair value through equity

Equity-type instruments are investments that do not exhibit features of debt-type instruments and include instruments that evidence residual interest in the assets of an entity after reducing all its liabilities. On initial recognition, equity-type instruments that are not designated to fair value through consolidated statement of income are classiﬁed as investments at fair value through equity.

Subsequent to acquisition, these are remeasured at fair value, with unrealised gains and losses recognised in a separate component of equity until the investment is derecognised or the investment is considered as impaired. Upon derecognition or impairment, the cumulative gain or loss previously recorded in equity is recognised in the consolidated statement of income for the year.

Impairment losses on equity type instruments carried at fair value through equity are not reversed through the consolidated statement of income and increases in their fair value after impairment are recognised directly in owners' equity.

i. Measurement principles

i) Fair value measurement

For investments traded in organised ﬁnancial markets, fair value is determined by reference to quoted market bid prices at the close of business on the reporting date.

For investments where there is no quoted market price, a reasonable estimate of the fair value is determined by reference to the current market value of another instrument, which is substantially the same or is based on the assessment of future cash ﬂows. The cash equivalent values are determined by the Group at current proﬁt rates for contracts with similar terms and risk characteristics.

ii) Amortised cost

The amortised cost of a ﬁnancial asset or liability is the amount at which the ﬁnancial asset or liability is measured at initial recognition, minus capital repayments, plus or minus the cumulative amortisation using the eﬀective proﬁt method of any diﬀerence between the initial amount recognised and the maturity amount, minus any reduction (directly or through use of an allowance account) for impairment or uncollectability. The calculation of the eﬀective proﬁt rate includes all fees and points paid or received that are an integral part of the eﬀective proﬁt rate.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

j. Investment in associates

Associates are all entities in which the Group holds, between 20% and 50% of the voting rights and exercises signiﬁcant inﬂuence, but not control or joint control, over the ﬁnancial and operating policies of the entities. Investment in associates are accounted for using the equity method of accounting.

Investments in associates are initially recognised at cost and the carrying amount is increased or decreased to recognise the investor's share of the proﬁt or loss of the investee after the date of acquisition. Distributions received from an investee reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the investor's proportionate interest in the investee arising from the changes in the investee's equity. When the Group's share of losses exceeds its interest in an associate, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued, except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investments in associates are impaired. If this is the case, the Group calculates the amount of impairment as being the diﬀerence between the recoverable amount of the associates and the carrying value and recognises this amount in the consolidated statement of income.

Accounting policies of the associates are consistent with the policies adopted by the Group.

k. Ijarah Muntahia Bittamleek

Ijarah Muntahia Bittamleek are stated at cost less accumulated depreciation and any impairment in value. Under the terms of the lease, the legal title of the asset passes to the lessee at the end of the lease term, provided that all lease installments are settled. Depreciation is calculated on a straight line basis at rates that systematically reduce the cost of the leased assets over the period of the lease. The Group assesses at each reporting date whether there is objective evidence that the assets acquired for leasing are impaired. Impairment losses are measured as the diﬀerence between the carrying amount of the asset (including ijarah rental receivables) and the estimated recoverable amount. Impairment losses, if any, are recognised in the consolidated statement of income.

l. Investment in real estate

Properties held for rental, or for capital appreciation purposes, or both, are classiﬁed as investment in real estate. Investments in real estate are initially recorded at cost, being the fair value of the consideration given and acquisition charges associated with the property. Subsequent to initial recognition, investments in real estate are re-measured to fair value and changes in fair value (only gains) are recognised in a property fair value reserve in the consolidated statement of changes in owners' equity.

Losses arising from changes in the fair values of investment in real estate are ﬁrstly adjusted against the property fair value reserve to the extent of the available balance and then the remaining losses are recognised in the consolidated statement of income. If there are unrealised losses that have been recognised in the consolidated statement of income in previous ﬁnancial periods, the current period unrealised gain shall be recognised in the consolidated statement of income to the extent of crediting back such previous losses in the consolidated statement of income. When the property is disposed of, the cumulative gain previously transferred to the property fair value reserve, is transferred to the consolidated statement of income.

m. Property and equipment

Property and equipment are recognised at cost. The cost of additions and major improvements are capitalised; maintenance and repairs are charged to the consolidated statement of income as incurred. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets as follows:

Buildings	25 to 35 years
Fixtures and ﬁttings	5 years
Equipment	5 years
Furniture	5 years

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

n. Equity of investment accountholders

Equity of investment accountholders are funds held by the Group in unrestricted investment accounts, which it can invest at its own discretion. The investment account holder authorises the Group to invest the account holders' funds in a manner which the Group deems appropriate without laying down any restrictions as to where, how and for what purpose the funds should be invested. The Group charges management fee (Mudarib fees) to the investment account holders. Of the total income from investment accounts, the income attributable to customers is allocated to investment accounts after setting aside provisions, reserves (proﬁt equalisation reserve and investment risk reserve) and deducting the Group's share of income as a Mudarib. The allocation of income is determined by the management of the Group within the allowed proﬁt sharing limits as per the terms and conditions of the investment accounts. Administrative expenses incurred in connection with the management of the funds are borne directly by the Group and are not charged separately to investment accounts. Only proﬁts earned from the pool of assets funded by the equity of investment accountholders are allocated between the owners' equity and equity of investment accountholders.

Investment accounts are carried at their book values and include amounts retained towards proﬁt equalisation and investment risk reserves, if any. Proﬁt equalisation reserve is the amount appropriated by the Group out of the Mudaraba income, before allocating the Mudarib share, in order to maintain a certain level of return to the deposit holders on the investments. Investment risk reserve is the amount appropriated by the Group out of the income of investment account holders, after allocating the Mudarib share, in order to cater against future losses for investment account holders. Creation of any of these reserves results in an increase in the liability towards the pool of unrestricted investment accounts.

o. Investment risk reserve

Investment risk reserves are amounts appropriated out of the income of equity of investment accountholders, after allocating the Mudarib share, in order to cater for future losses for equity of investment accountholders.

p. Proﬁt equalisation reserve

The Group appropriates a certain amount in excess of the proﬁt to be distributed to equity of investment accountholders before allocating the Mudarib share of income. This is used to maintain a certain level of return on investment for equity of investment accountholders.

q. Zakah

Zakah is calculated on the Zakah base of the Group in accordance with FAS 9 issued by AAOIFI using the net invested funds method. Zakah is paid by the Group based on the consolidated ﬁgures of statutory reserve, general reserve and retained earning balances at the beginning of the year. The remaining Zakah is payable by individual shareholders. Payment of Zakah on equity of investment accountholders and other accounts is the responsibility of investment accountholders.

r. Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) arising from a past event and it is probable that an outﬂow of resources embodying economic beneﬁts will be required to settle the obligation and a reliable estimate can be made of the amount of obligation.

s. Dividends

Dividends are recognised as liabilities in the year in which they are declared / approved by the shareholders.

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Bahrain Islamic Bank BSC published this content on 21 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 March 2021 09:14:00 UTC.

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Bahrain Islamic Bank B.S.C. Appoints Ajay Kumar as the Chief Risk Officer	09/07/23	CI
Bahrain Islamic Bank B.S.C. Announces Executive Changes	22/05/23	CI
Bahrain Islamic Bank B.S.C. Appoints Salman Mahmood Sayyar as Chief Internal Audit Officer	14/05/23	CI
Bahrain Islamic Bank B.S.C. Announces Resignation of Dana Buheji as Board Member	10/05/23	CI
Bahrain Islamic Bank B.S.C. Reports Earnings Results for the First Quarter Ended March 31, 2023	04/05/23	CI
Fatema Alalawi Bahrain Islamic Bank Appoints Alalawi as Chief of Retail Banking	02/05/23	CI
Bahrain Islamic Bank B.S.C Appoints Mohamed Kadhem Ebrahim as Chief Strategy & Sustainability Officer	02/05/23	CI
Bahrain Islamic Bank B.S.C. Reports Earnings Results for the Full Year Ended December 31, 2022	21/02/23	CI
Bahrain Islamic Bank B.S.C. Announces Board Changes	11/01/23	CI
Bahrain Islamic Bank B.S.C. Announces Resignation of Khaled Waheeb Alnaser as Chief Internal Audit Officer, Effective 15 December 2022	04/12/22	CI
Bahrain Islamic Bank B.S.C. Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2022	25/10/22	CI
Bahrain Islamic Bank B.S.C. Announces Appointment of Yaser Al Sharifi as Chief Executive Officer, Effective October 1, 2022	14/09/22	CI
Bahrain Islamic Bank B.S.C. Announces Resignation of Yaser Al Sharifi as Board Member	14/09/22	CI
Bahrain Islamic Bank Appoints Jawad Abdulhadi Humaidan as New Chief Corporate and Institutional Banking Officer	15/08/22	CI
Bahrain Islamic Bank Appoints Naeema Taheri as Chief Compliance Officer	02/08/22	CI
Bahrain Islamic Bank B.S.C. Reports Earnings Results for the Second Quarter and Six Months Ended June 30, 2022	28/07/22	CI
Bahrain Islamic Bank B.S.C Appoints Jawad Abdulhadi Humaidan as Chief Corporate & Institutional Banking Officer, Effective 27 July 2022	27/07/22	CI
Bahrain Islamic Bank B.S.C. Announces Resignation of Fahim Ahmed Shafiqi as Chief Risk Officer	18/07/22	CI

Chart Bahrain Islamic Bank B.S.C.

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Company Profile

Bahrain Islamic Bank BSC (BISB) is a Bahrain-based commercial bank involved in the provision of Islamic Sharia-complaint banking and financial services. The Bank offers its services through two divisions: Retail Banking and Corporate Banking. The Retail Banking offers financing products such as Tasheel, Auto and Property finance products; credit cards services; accounts services, such as current and savings, tejoori, iqra, vevo and investment deposit accounts, and e-Banking, among others. The Corporate banking segment offers real estate finance, structured finance, small and medium enterprises (SME) banking, financial institutions (FI) & government, treasury services, private banking, very important person (VIP) banking, trade finance, as well as other Islamic financial and investment policies. BISB offer its services through a network of 13 branches distributed across Bahrain with a total 48 automated teller machine (ATM) network.

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Sector Islamic Banks

	1st Jan change	Capi.
BAHRAIN ISLAMIC BANK B.S.C.	+6.25%	191M
THE SAUDI NATIONAL BANK	-7.12%	56.59B
KUWAIT FINANCE HOUSE K.S.C.P.	+11.54%	40.15B
ABU DHABI ISLAMIC BANK	+19.37%	11.89B
BANK ALBILAD	-1.95%	11.65B
BOUBYAN BANK K.S.C.P.	+6.54%	8.23B
PT BANK SYARIAH INDONESIA TBK	+32.18%	7.29B
MASRAF AL RAYAN (Q.P.S.C.)	-10.17%	6.1B
DUKHAN BANK Q.P.S.C.	-4.13%	5.46B
BANK ALJAZIRA	+7.35%	4.35B