3.1. Introduction

(1) This Chapter sets out the prudential reporting requirements for an Islamic Bank.

(2) Prudential returns of an Islamic Bank must reflect its management accounts, financial statements, risk reports or ancillary reports, as appropriate for every return. An Islamic Bank’s returns, accounts, statements and reports must all be prepared using the same standards and practices, and must be easily reconcilable with one another.

(3) A return is referred to as a solo return if it reflects one Islamic Bank’s accounts, statements and reports.

(4) A consolidated return deals with the accounts, statements and reports of an Islamic Bank consolidated with those of the other members of its Financial Group.

Guidance

Financial Group is defined in Rule 11.2 and is used for consolidated reporting instead of ‘corporate group’.

3.2. Information about Financial Group

If directed by the AFSA, an Islamic Bank must give AFSA the following information about its Financial Group:

• (a) details about the entities in the group;
• (b) the structure of the group;
• (c) how the group is managed;
• (d) any other information that the AFSA requires.

Guidance

(1) The AFSA needs to know about the following activities of the members of an Islamic Bank’s Financial Group:

• (a) regulated activities;
• (b) activities that are not regulated activities but are financial in nature and have an effect on an Islamic Bank’s supervision by the AFSA

3.3. Financial Group and risks

1) If an Islamic Bank is part of a Financial Group, credit risk, market risk, operational risk, liquidity risk, equity participation risk and risk of return risk apply on a consolidated basis to that Islamic Bank and to Financial Group as a whole.

(2) An Islamic Bank must have systems to enable it to calculate its Financial Group Capital requirement and Financial Group Capital resources. The Islamic Bank must ensure that its Financial Group Capital resources exceed its Financial Group Capital requirement, at all times.

3.4. Reporting to the AFSA

(1) An Islamic Bank must comply with the accounting and prudential reporting requirements set out in this chapter and elsewhere in this IBB Rules.

(2) The AFSA may impose additional reporting requirements on an Islamic Bank.

(3) An Islamic Bank must prepare the prudential returns that it is required to prepare in accordance with the provisions of this IBB Rules, the instructional guidelines provided by the AFSA, as specified in a notice published by the AFSA or notified by way of a directive by the AFSA.

(4) An Islamic Bank must submit the return to the AFSA within the period stated in the notice.

(5) The AFSA may, by written notice:

• (a) require an Islamic Bank to prepare additional prudential returns;
• (b) exempt an Islamic Bank from a requirement to prepare annual, biannual, quarterly or monthly returns (or a particular return); or
• (c) extend the period within which to give a return.

(6) An exemption referred in (b) above may be subject to one or more conditions. The Islamic Bank must comply with any condition attached to an exemption.

(7) An Islamic Bank must submit prudential returns in accordance with the AFSA’s instructions. The instructions may require that the return be prepared and/or submitted through specially designated electronic/online submission systems designated for that purpose by the AFSA.

(8) The instructions may be set out in the return itself, in a separate document published by the AFSA on its website or by written notice.

(9) The AFSA may by way of a written notice direct an Islamic Bank to submit its returns in a form, manner or frequency other than as prescribed in Rule 3.4.3. An Islamic Bank must continue to submit its returns in accordance with this direction until the AFSA by way of written notice directs otherwise.

3.5. Giving information

(1) The AFSA may, by written notice, require an Islamic Bank to give to it information additional to that required under these rules.

(2) An Islamic Bank must give information to the AFSA in accordance with the instructions provided by it and within the period stated in the notice.

3.6. Accounts and statements to use international standards

An Islamic Bank must prepare and keep its financial accounts and statements in accordance with accounting standards specified in the AIFC GEN Rules.

3.7. Signing returns

A prudential return must be signed by the Finance Officer and the Chief Executive Officer of the Islamic Bank. If either or both of those individuals is or are unable to sign, the return must be signed by the chief risk officer of the Islamic Bank or any of its Approved Individuals.

3.8. Notification to the AFSA

(1) An Islamic Bank must notify the AFSA if it becomes aware, or has reasonable grounds to believe, that an Islamic Bank has breached, or is about to breach, a prudential requirement.

(2) In particular, the Islamic Bank must notify the AFSA as soon as practicable of:

• (a) any breach (or foreseen breach) of its minimum Capital requirement;
• (b) any concern (including because of projected losses) it has about its Capital adequacy;
• (c) any indication of significant adverse change in the market pricing of, or trading in, the Capital instruments of an Islamic Bank or its Financial Group (including pressure on an Islamic Bank to purchase its own equity or debt);
• (d) any other significant adverse change in its Capital; and
• (e) any significant departure from its ICAAP.

(3) The Islamic Bank must also notify the AFSA about any measures taken or planned to deal with any breach, prospective breach or concern.