Sohar International Annual Report - 2020 - EN

SHARP
VISION
TOWARDS
WINNING
ANNUAL REPORT 2020
Sohar
Soha
har International
Inte
ernational 2020 1
2 Sohar International 2020 Sohar International 2020 3
... we should continue to follow prudent financial and economic policies, We appreciate your response and your positive reaction to government
the most important of which are reduction of expenditure and guidance measures under these financial and economic conditions undergone by
and awareness in order to encourage saving, and resistance to the the Sultanate with the purpose of rationalizing spending and shrinking
inclination to indulge in unnecessary consumption, and also to encourage fiscal deficit and general state debt. The aim of these procedures and
the individual citizen effectively to contribute to the national economy. plans is to achieve the State’s Fiscal Sustainability and to establish
Financial institutions must be urged to make their resources available to grounds for the execution of strategic developmental projects in all
assist the development of the productive sector... parts of the Sultanate.
Speech of His Majesty Sultan Qaboos Bin Said on the occasion of the Speech of His Majesty Sultan Haitham Bin Tarik On the occasion of the
29th National Day, 18th November 1999 50th National Day, 18th November 2020
Late His Majesty His Majesty

Sultan Qaboos Bin Said Sultan Haitham Bin Tarik Al Said
4 Sohar International 2020 Sohar
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VISION &
VALUES
A winning future inspired
by a collective vision
VISION VALUES
- -
To be a world-leading Omani • Be straight up
Act with honesty, courage and kindness.
service company, that helps
customers, communities and • Be open minded
Listen openly. Encourage ideas.
people to prosper and grow. Embrace innovation. Welcome feedback.
• Do the right thing

Take responsibility. Make the tough calls.
Think of others.
• Make it better
Find or create solutions - step up,
own it, do it.

INTRODUCTION
Steering businesses into
realms of growth

TABLE OF
CONTENTS
REGULATORY DISCLOSURES - SOHAR INTERNATIONAL 148
-
Auditors’ Report on Regulatory Disclosures
under Basel II and Basel III 150
Regulatory Disclosures
under Basel II and Basel III Framework 151
SOHAR ISLAMIC 178
BOARD OF DIRECTORS 12 Shari’ah Supervisory Board 180

Shari’ah Supervisory Board Report 182
Chairman’s Report 16
List of Fatwas 184
CORPORATE GOVERNANCE 18
FINANCIAL STATEMENTS - SOHAR ISLAMIC 194
Auditors’ Report on Corporate Governance 20 Auditors’ Report on Financial Statements 196
Corporate Governance Report 21 Statement of Financial Position 199
Statement of Comprehensive Income 200
Statement of Owner’s Equity 201
MANAGEMENT 34
Statement of Cash Flows 202
Management Team 36
Notes to the Financial Statement 203
Chief Executive Officer's Message 38
Management Discussion and Analysis 41 REGULATORY DISCLOSURES - SOHAR ISLAMIC 248
Business Continuity Management statement 47 Auditors’ Report on Regulatory Disclosures

under Basel II and Basel III 250
Regulatory Disclosures
FINANCIAL STATEMENTS - SOHAR INTERNATIONAL 48
under Basel II and Basel III Framework 251
Auditor’s Report on Financial Statements 50
Statement of Financial Position 55 CONTACTS 284

Statement of Comprehensive Income 56 Branch Network, Contact Details & ATM Locations 286
Statement of Changes in Equity 57
Statement of Cash Flows 61
Notes to the Financial Statement 62

BOARD OF
DIRECTORS
Directed towards
a vision of winning

Left to Right Left to Right
Mr. Said Ahmed Safrar Mr. Tareq Mohammed Al Mugheiry Mr. Said Mohammed Al Aufi Mr. Mohammed Mahfoudh Al-Ardhi Mr. Salim Mohamed Al Mashaiky Engr. Ahmed Hamed Al Subhi
Director Director Deputy Chairman Chairman Director Director
Mr. Bipin Dharamsey Nensey

Director

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functionalities including extensions to our Point-of-sale in establishing the platform for the financial sector to grow
CHAIRMAN’S
terminals, resulting in a significant expansion and acquisition under the umbrella of strong governance, transparency and
of key strategic merchants catering to a wide audience of leadership.
beneficiaries.
Finally, I extend on behalf of the Board of Directors and our
loyal employees heartfelt thanks to His Majesty Sultan Haitham
REPORT
A CUSTOMER-FIRST APPROACH
Bin Tariq for his vision and leadership of our beloved country,
The Bank continues to emerge strong by being consistent to its and the commendable efforts of His Majesty’s government in
-
customer-oriented strategy involving the increase of dedicated promoting the Banking sector in Oman.
customer experience assets, nationwide network expansions,
digitalization and online stakeholder engagement. In line with
this approach, the Bank has centralized the overall customer
related issues through “Winning Basics” forum for monitoring
and resolving grievances, if any. With service excellence at the
core of the Bank’s daily operations, dedicated staff members
have been specifically deployed for the Special Asset Group to
address issues in a timely and exhaustive manner.
Mohammed Mahfoudh Al Ardhi Mohammed Mahfoudh Al Ardhi
The acquisition of large national projects has provided impetus
to Sohar International’s objective of creating In-Country Value Chairman
Chairman and more job opportunities. The Bank steered its greenfield
The year 2020 has been an extraordinary learning journey 5.97% in December 2020 reflecting the deterioration in asset investment to commercial operations, besides developing and
for Sohar International, responding to economic challenges quality of certain corporate customers. The Bank continues to launching new propositions catering to the Omani community
arising from COVID-19 and lower oil prices and continuing focus on the pro-active management of credit exposures in line and the ever-changing world we are living in. This includes the
to pursue a prudent growth strategy aimed at being a world with its credit risk management policies. Sohar|First proposition that is aimed at providing an ecosystem
leading Omani Service Company that helps people, customers of banking and non-banking services to the mass affluent
and communities to grow and prosper. The Bank has emerged CONNECTING WITH OUR COMMUNITY segment offering them a wide range of solutions that provides
with greater confidence and renewed purpose continuing to a sense of exclusivity, upside benefits and a clear price versus
redefine banking within the country, building better financial Sohar International played a meaningful role in supporting the benefit proposal.
security for its customers, while enhancing its capabilities of community, supplying basic necessities to severely impacted
withstanding the vagaries of business cycles. segments of our society and supplies to healthcare workers Giving more control over their expenditure, the Bank
during the COVID-19 pandemic. The Bank has allocated more expanded its card portfolio to offer convenient payment
FINANCIAL PERFORMANCE than RO 1 million to combat the impacts of the crisis, and to solutions to customers by launching the new prepaid card in a
support the nation in its actions towards ensuring the safety bid to engage with a wider customer base. This, coupled with
Net profit for the year ended 31 December 2020 declined by of its people. Sohar International supported its institutional strategic local and international partnerships by on-boarding
41.8% to RO 20.01 million compared to RO 34.41 million during and retail customers, including SMEs, alleviating their financial a diversified range of large and key clients across sectors,
the same period in 2019. The Board of Directors, recognizing burden, by offering fee waivers and instalment deferments. Sohar International continues to contribute positively to the
the need to maintain a strong capital base to support our socio-economic goals.
customers and wider community in the face of continued Continuing to bring global learning and perspective to
economic uncertainty, do not propose a dividend for the year. locally relevant topics, numerous editions of Viewpoints
were hosted through successful virtual sessions. The topics AWARDS
Total assets as at 31 December 2020 increased by 3.0% to were carefully chosen to resonate with the prevailing market
conditions and circumstances, providing global insights and A futuristic, institutional building approach has put several
RO 3,611 million (31 December 2019: RO 3,505 million). Net local, regional and international accolades to the credit of
loans and advances increased by 2.0% to RO 2,504 million learning on subjects such as success of multi-generational
family businesses, transformation of education, and others. Sohar International covering performance, growth, brand,
(31 December 2019: RO 2,454 million). Customer deposits and CSR. Earlier in the year, the Bank received Infosys Finacle
increased by a strong 6.44% to RO 2,232 million (31 December Prominent speakers and personalities were featured during the
2020 virtual sessions, who delved into the changing dynamics Client Innovation Awards - frontrunner under the Innovative
2019: RO 2,097 million) demonstrating the Bank’s ability to Custom Components category. This was soon followed by
strengthen its funding base. in different sectors across the world, in light of the COVID-19
pandemic. the prestigious ‘Best Performing Banks’ in Oman Award by
the UK based Financial Times. Acknowledging the results of
Net interest income for the year ended 31 December 2020 its sustainable growth strategy, the Bank received ‘Best Bank
increased by 2.5% to RO 71.97 million (31 December 2019: RO Furthermore, Sohar International’s internship program,
Tomohi, which aims to enhance skillsets of the Omani youth to (Large Size) in Growth’ Award at the Oman Banking & Finance
70.19 million). Operating income decreased by 12.1% to RO Awards 2020. Later in the year, the brand was rated within the
91.99 million, (31 December 2019: RO 104.66 million) driven by better their chances of employment, successfully on-boarded
the second batch of talented Omanis to the program. top three best brand experience and received an accolade at
a reduction in fee income and net foreign exchange income. Transform Awards MEA 2020.
Operating expenses improved by 0.3% to RO 45.16 million (31 REDEFINING WITH DIGITAL Furthermore, in recognition for its outstanding contribution
December 2019: RO 45.29 million. We continue to manage supporting the government and society during the
the expense base to support the Bank’s strategic objectives as Sohar International has demonstrated tremendous leadership COVID-19 pandemic, Sohar International was conferred
well as maintain a strong cost/income ratio, reporting 49.1% for in making the commitment to introduce the latest technology with the ‘Industry Leadership in Social Impact’ award at the
the year ended 31 December 2020 compared to 43.3% for the in Oman’s banking sector while driving its vision in delivering prestigious Alam Al-Iktisaad Awards 2020. The recognition is
same period last year. service, convenience and choice to all of its customers. As an industry benchmark and highlights the Bank’s continued
part of its digital transformation journey, the ‘bank from home’ socio-economic commitment to the Sultanate of Oman and its
Net impairment charges and other credit risk provisions for experience was enhanced through digital channels, higher people.
the year ended 31 December 2020 was RO 23.13 million cyber security and innovative products.
compared to RO 18.85 million for the same period last year.
Increase in credit provisions are directly in response to Year 2020 witnessed Sohar International’s Mobile Banking RECOGNITION
expected credit deterioration due to the economic impact of penetration growing two-fold whereas the launch of exclusive
the COVID-19 pandemic and lower oil prices. Given the high Mobile Banking Service for SMEs (sole proprietorship I thank our stakeholders for their continued trust and
degree of uncertainty in relation to future economic impacts companies) was well received in the market. Continuing to confidence as well as our team of dedicated employees for their
of COVID-19, management will continue to monitor and assess invest in existing digital platforms, the bank’s eFloos digital commitment and enthusiasm especially during the current
the adequacy of its impairment charges and provisions. mobile wallet app ensuring quick, secure and easy payments, exceptional period.
was upgraded with additional features and services such
The ratio of non-performing loans and advances to gross loans as instant remittances to nine countries and other key I recognize the outstanding support, guidance and vision of
and advances increased from 4.82% in December 2019 to the Central Bank of Oman and the Capital Market Authority

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CORPORATE
GOVERNANCE
Strong governance
anchor our business

1. PHILOSOPHY ON CORPORATE GOVERNANCE
The Corporate Governance Philosophy in Sohar International Bank SAOG (the “Bank” and/or “Sohar International”) has been
developed within the directives and guidelines of the Central Bank of Oman (“CBO”), the Capital Market Authority (“CMA”) and the
Commercial Companies Law of Oman (“CCL”). The four universal values synonymous with corporate governance – accountability,
fairness, responsibility and transparency are an integral part of it.
Corporate governance is a set of processes, customs, policies, laws and practices affecting the manner in which the organization – namely
Sohar International is directed, administered or controlled. Corporate governance also covers the relationships between the many
parties or stakeholders involved in the Bank and the aims and objectives for which the Bank is governed. The principal relationships
at the Bank are between the shareholders of the Bank, the management and the Board of Directors. Other relationships include
the customers, employees of the Bank, regulators, suppliers, the environment and the community in which the Bank exists. An
additional aspect of governance is that of an economic efficiency view, through which the governance system of the Bank also aims
to optimize economic results, thereby placing emphasis on the shareholder’s welfare.
The Board of Directors of the Bank is committed to the highest standards of Corporate Governance. The Bank is committed to raising
the bar even further so as to set a leading example of commitment with the letter and spirit of the Code of Corporate Governance
laid out by the CMA and the regulations for Corporate Governance of Banking and Financial Institutions issued by CBO. The CMA
Code of Corporate Governance for Public Listed Companies and the CBO circular BM 932, Corporate Governance of Banking and
Financial Institutions are the principal codes and drivers of Corporate Governance practices in the Sultanate of Oman. The Bank
has complied with all of their provisions, except for certain instances which are stated in the ‘Statement of Compliance’ section of
this report. The CMA Code of Corporate Governance can be found at the following website ww.cma.gov.om.
The basic framework of the Bank’s corporate governance requires that the Board of Directors, Shari'ah ‘Supervisory Board (“SSB”)
for its Islamic Banking Window (Sohar Islamic) and management shall:
y Maintain the highest standards of corporate governance and regulatory compliance.

y Promote transparency, accountability, responsiveness and social responsibility.
y Conduct its affairs with its stakeholders, customers, employees, investors, vendors, government and the society at large in
fairness and in an open manner.
y Create an image of the Bank as a legally and ethically compliant entity.
2. BOARD OF DIRECTORS
The Bank’s Board of Directors (the “Board”) is the highest governing authority within the Bank structure. Its role is to ensure that the
Bank conducts itself in accordance with its core values and develops them further on a continuous and sustainable basis. The Board
consists of professionals from various fields and professions and gives representation to the stakeholders and administrators in the
process of decision making. The predominance of independent directors has enabled the Board to have meaningful discussions
and take an unbiased and qualitative view on matters placed before it. There is a clear segregation between the ownership of
the Bank and the management. The roles of the Chairman of the Board and the Chief Executive Officer (“CEO”) are separated
with a clear division of responsibilities at the head of the Bank between the running of the Board and the executive management
responsibility for running the Bank’s business. The Board is responsible for overseeing how management serves the long-term
interests of shareholders and other key stakeholders.
2.1 Composition and classification of the Board

The constitution of the Board, election process for Board members and shareholders’ interests are areas of prime concern for the
good governance commitment of the Bank. Details of the elected Board members are outlined in “Table 1”.
Table 1: Composition and classification of the Board
Name of Director Category Represents

Mr. Mohammed Bin Mahfoodh Alardhi,
Chairman Non-Executive Independent
Mr. Said Mohamed Al-Aufi
Deputy Chairman Non-Executive Independent
Mr. Salim Mohammed Al Mashaikhy Non-Executive Independent
Mr. Said Ahmed Safrar Non-Executive Independent
Engr. Ahmed Hamed Al Subhi Non-Executive Non- Independent
Mr. Tareq Al Mugheiry Non-Executive Independent
Mr Bipin Dharamsey Nensey Non-Executive Independent

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2. BOARD OF DIRECTORS (CONTINUED) 2. BOARD OF DIRECTORS (CONTINUED)
2.2 Profile of Directors 2.2 Profile of Directors (continued)

Mr. Mohammed Bin Mahfoodh Al Ardhi - Chairman Engr. Ahmed Hamed Al Subhi – Director
The Executive Chairman of the global investment firm Investcorp www.investcorp.com Engr. Ahmed Hamed Al Subhi is the Chief Executive Officer of ACWA Power Barka SAOG.
A retired Air Vice Marshal by profession, Mr. Al Ardhi joined the Royal Air Force of Oman in 1978, and was subsequently appointed Engr. Ahmed Hamed Al Subhi holds an MBA from the University of Strathclyde, two Post Gradate Diplomas in Engineering and
as Chief of Omani Air Force. In 2000, he was awarded the “Order of Oman” by His Majesty Sultan Qaboos bin Said Al-Said. Honours Degree in Electrical Power engineering.
Two years after taking up his role at Investcorp, and under his mandate and new vision of growth, Investcorp doubled its assets Engr. Ahmed Al Subhi is widely recognized in the power generation and desalination industry. He has been actively involved in
under management to USD 22 billion. developing and implementing of Mega Independent Power and Desalination Project and other such projects in the region.
Mr. Alardhi holds a Bachelor of Science degree in Military Science from the Royal Air Force Staff College in Bracknell, UK and a Ahmed has been involved in many transformations and restructuring of private companies based in his solid operational experience
Master’s in Public Policy from John F. Kennedy School of Government, Harvard University USA. He also graduated from the Royal working with many multinational organizations.
Air Force Military Academy in Cranwell, UK and the National Defense University in Washington D.C., USA.
Currently, he is the Chairman and member of Board of Directors of few listed Companies in Muscat Securities Market.
Mr. Al Ardhi regularly speaks on international trade, the relationship between the Middle East and the West and the security of the
Gulf. He is also the author of three books: “Arabs Down Under”, “Pearls from Arabia” and “Arabs Unseen”. In addition to his role as a member of the Bank’s Board of Directors, Engr. Ahmed Al Subhi is also the Chairman of the Board Risk
Committee (BRC) and member of the Board Audit Committee.
Current affiliations:
y International Advisory Board of The Brookings Institution in Washington, D.C. Mr. Tareq Al Mugheiry – Director
y Trustee for the Eisenhower Fellowship in Philadelphia
Mr. Tareq Al Mugheiry is the Chief Investment Officer of Oman Investment Corporation SAOC (OIC). Prior to joining OIC, Tareq
y Member of Community Chairmen Group, World Economic Forum
worked with a number of international companies including: Philips Electronics in corporate strategy and mergers & acquisitions;
y Member of Harvard Kennedy School Dean’s Council
J.P. Morgan in investment banking covering the European technology sector; and Oman LNG’s project finance team. He holds a
y Member of The Arab Gulf States Institute in Washington
Bachelor of Law (LLB) and Bachelor of Commerce (B. Com) from the University of Western Australia. Tareq serves on the boards
In addition to his position as the Chairman of the Board of Directors at the Bank, he also holds the position of the Chairman of the of Innovation Development Oman, Takaful Oman Insurance, Sembcorp Salalah O&M Company and TMK GIPI.
Executive, Nomination and Remuneration committee (ENRC).
Mr. Tareq Al Mugheiry is a member of the Credit Approval Committee (CAC), and the Executive, Nomination and Remuneration
Mr. Said Mohammed Al-Aufi – Deputy Chairman committee (ENRC).
Mr. Al Aufi is the Head of Investments at Mars Development and Investment “MDI”, and he is responsible for managing a multi- Mr. Bipin Dharamsey Nensey - Director
asset class portfolio in the financial services, Fintech, technology and commodities sectors. Before joining MDI, Mr. Said worked in
Mr. Bipin Dharamsey Nensey holds a Bachelor’s Degree in Accounting and Finance. He is the Director of Dharamsey Nensey
the Asset Allocation and Business Strategy team in the State General Reserve Fund (SGRF).
Company since 1977. He is currently Independent Non-Executive Director of Al Suwadi Power Company SAOG as well as Muscat
Mr. Said Al Aufi has a Double Degree in Commercial Law & Banking and Finance from Monash University in Australia, he is a Insurance Company SAOG since 14th July 2007. He served as the Vice Chairman of one of the local Banks for over 15 years. In
Chartered Financial Analyst "CFA" and Chartered Alternative Investment Analyst “CAIA”. He has also completed several executive Sohar International, he is a member of the Credit Approval Committee.
management programs in the areas of executive leadership, Block chain, Cryptocurrency, Fintech, Artificial Intelligence, Internet
of Things (IOT) and Venture Capital. Mr. Al Aufi is a member of the Board of Oman Telecommunication SAOC and the Board of 2.3 Board of Directors – Executive Powers
Oman Broadband Company SAOC.
Sohar International’s Board of Directors:
Mr. Salim Mohamed Masaud Al Mashaiky – Director y Is vested with the powers of general superintendence, direction and management of the affairs and business of the Bank.
y Has the ultimate responsibility for the overall compliance and management of the Bank
Mr. Salim Mohamed Masaud Al Mashikhi Holds a Bachelor's Degree in Mathematics, he is currently employed in the Expenditure y Guides the Bank to achieve its objectives in a prudent and efficient manner.
Department of the Royal Court Affairs. Mr. Salim Al Mashaikhy is the Deputy Chairman of Oman Fixed Income Fund (OMFI). Mr. y Is primarily responsible for ensuring that all financial transactions are legal and that all disclosures are made as per regulations.
Salim Al Mashaiky is a member of the Board Audit Committee, and the Board Risk Committee (BRC) y Lays down a comprehensive code of conduct for all Board Members and Senior Management of the Bank, to be followed
under all circumstances.
Mr. Said Ahmed Safrar – Director y Approves the delegation of power to the executive management as well as nominee members of the sub-committees and
specify their roles, responsibilities and power.
Mr. Said Ahmed Safrar holds a Master in Business Administration (MBA) from the University of Hull in the UK, a Business y Authorises the management to implement the strategy for the Bank that is designed to deliver increasing value to the
Management Diploma from King’s College Bournemouth in the UK and a Specialised Diploma from the Arab Academy for Banking shareholders.
and Financial Science in Jordan. y Develops strategies for managing risks associated with the business and for meeting challenges posed by competitors.
y Develops vision to anticipate crisis and to act proactively when necessary.
Mr. Said has over 24 years of experience in the Banking and Telecommunications’ Sector, he is Board member of The Financial
y Ensures that information flows upward and that authority flow downward and thus the Bank is under their control, direction
Corporation (FINCORP) and Dhofar Power, currently Mr. Said holds the position of Chief Executive Officer of Oman Investment
& Finance Co. SAOG. and superintendence.
In addition to his role as a member of the Bank’s Board of Directors, Mr. Said Safrar is also the Chairman of the Credit Approval During the year under review, the Board has:
Committee (CAC) and member of Executive, Nomination and Remuneration committee (ENRC). y Reviewed and approved the Bank’s financial objective, plans and actions.
y Reviewed the Bank’s performance.
y Evaluated whether the business is properly managed according to the Bank’s objectives.
y Ensured compliance with laws and regulations through proper internal systems of controls.
y Reviewed the efficiency and adequacy of the internal control systems and confirmed its compliance with internal rules and
regulations.
The Board of Directors has approved the Code of Conduct, including the Standards of Professional Conduct, which covers the
standards of conduct expected from the directors and the Senior Management of the Bank. The purpose of this code is to articulate
highest standards of honesty, integrity, ethical and law abiding behavior.

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2. BOARD OF DIRECTORS (CONTINUED) 2. BOARD OF DIRECTORS (CONTINUED)
2.3 Board of Directors – Executive Powers (continued) 2.4 Meetings and Remuneration of the Board (continued)
The Board has approved the three quarterly reports and the annual financial statements and report to the shareholders on the Sitting fees paid to Directors during 2020 is given below:
annual report about the ongoing concern status of the Bank with supporting assumptions and qualifications as necessary.
The Board has taken steps to comply with rules, regulations and international best practice, reviewed compliance reports prepared Sl. No Name Sitting fees paid during 2020 (RO)
by the Bank’s management of all applicable provisions of the law. 1 Mr. Mohammed Mahfoodh Al Ardhi 5,500
Sohar International’s Board of Directors has exercised all such powers and performed all such acts as the Board is authorized to 2 Mr. Abdullah Salim Al Harthi 3,500
exercise and do.
3 Mr. Salim Mohammed Al Mashaikhy 5,800
The Bank prepares a Management Discussion and Analysis report which is included as a separate section in the Annual Report. 4 Mr. Said Ahmed Safrar 6,300
2.4 Meetings and Remuneration of the Board 5 Eng. Ahmed Hamed Al Subhi 6,300
6 Mr. Tareq Mohamed Al Mugheiry 6,300

The Board of Directors meets regularly, monitors the executive management, and exercises necessary control over the Bank’s
functioning. The Board conducts its business in formal meetings. In Board meetings, the “majority” is computed as the absolute 7 Mr. Bipin Dharamsey Nensey 4,300
majority of the directors present in person or proxy, whether or not they participate in the voting process.
8 Mr. Said Al-Aufi 3,100
The total number of meetings of the full Board during the year 2019 was 7. The maximum interval between any two meetings was
Total 41,100
in compliance with rule (10) of the 2nd principle of the CMA’s Code of Corporate Governance, which requires meetings to be held
within a maximum time gap of four months. The dates of the meetings of the Board of Directors, and its sub-committees during 2.5 Committees of the Board
year 2019 were as follows::
The Board of Directors has created various subcommittees for specific purposes with clearly defined terms of reference and
Table 2: Board Meetings held in 2020 and dates on which they were held responsibilities. The committees’ mandate is to ensure focused and specialized attention to specific issues related to the Bank’s
governance. The various sub-committees of the Board together with the Internal Audit and Compliance department form an
Name of Director 26 Jan 30 Jan 5 May 29 July 29 Aug 28 Oct 27 Dec important tool in the process of corporate governance. The subcommittees and their primary responsibilities were as follows:
Mr. Mohammed Al Ardhi 9 9 9 9 9 9 9 The Corporate Governance Structure of Sohar International Bank SAOG is depicted below:
Mr. Abdullah Al Harthi 9 9 9 - - - -
Board of Directors
Mr. Salim Al Mashaikhy 9 9 9 9 - 9 9
Mr. Said Ahmed Safrar 9 9 9 9 9 9 9

Executive
Eng. Ahmed Al Subhi 9 9 9 9 9 9 9 Nominations &
Audit Credit Approval Board Risk
Mr. Tareq Al Mugheiry 9 9 9 9 9 9 9 committee Remuneration Committee Committee
Committee
Mr. Bipin Dharamsey Nensey 9 9 9 9 9 9 9
Mr. Said Al-Aufi - - - - 9 9 9 Table 4: Board Sub-Committees meetings held in 2020 / number of meetings attended
Sitting fee remuneration is paid to the Directors for attending the Board or its sub-committee meetings. The fee is within the limits
stipulated by the Commercial Companies Law and the directives of the Capital Markets Authority. Executive,
Nomination &
Remuneration Audit Credit Approval Board Risk
Table 3: Attendance & Remuneration – Board of Directors
Name of Director Committee (ENRC) Committee Committee Committee
No of Mr. Mohammed Al Ardhi 4 1 - -

No of Board Board Subcommittee Total Sitting Attendance of
Meetings Subcommittee Name of meetings Fees (Board & AGM - March Mr. Abdullah Al Harthi 1 2 - 3
Name of Director Attended memberships Subcommittee attended Subcommittees) 2020 Mr. Salim Mohammed Al Mashaikhy - 4 - 3
ENRC 4
Mr. Mohammed Al Ardhi 7 1 ENRC AC 1 5,500 Present Mr. Said Ahmed Safrar 4 - 3 -
ENRC 1 Mr. Ahmed Al Subhi - 4 - 3

AC 2
Mr. Abdullah Al Harthi 3 3 ENRC, AC, BRC BRC 2 3,500 Present Mr. Tareq Al Mugheiry 4 - 3 -
AC 4 Mr. Bipin Dharamsey Nensey - - 2 -
Mr. Salim Al Mashaikhy 6 2 AC, BRC BRC 3 5,800 Present
Mr. Said Al-Aufi 2 1 - 1
ENRC 5
Mr. Said Ahmed Safrar 7 2 ENRC, CAC CAC 5 6,300 Present
2.5a Executive Nomination & Remuneration Committee
BRC 5
Mr. Ahmed Al Subhi 7 2 BRC, AC AC 3 6,300 Absent The Board Executive, Nomination and Remuneration Committee (“ENRC”) is a sub-committee of the Board of directors and, as
ENRC 5 such, assists the Directors to discharge the Board’s responsibilities of oversight and governance in relation to:
Mr. Tareq Al Mugheiry 7 2 ENRC, CAC CAC 5 6,300 Present
(1) General Performance aspects of the Bank such as strategy setting and implementation, banking business, annual budget
Mr. Bipin Dharamsey 7 1 CAC CAC 4 4,300 Present recommendations, information technology and generally to assist the board in reviewing business proposals and other
ENRC 2 related issues that require a detailed study and analysis.
AC 1 (2) HR, Nomination and Remuneration issues such as to provide direction and guidance to have the right CEO and Senior
Mr. Said Al-Aufi 3 3 ENRC, AC, BRC BRC 1 3,100 absent Management team and provide support and direction to the Bank and its stakeholders and ensure their interests are
protected, etc.
An amount of RO 156,600 was paid in 2020 as board remuneration for the year ended 31st, December 2019. The remuneration
paid was within the limit prescribed by the commercial law No. (4/1974) as amended by Royal Decree No. (99/2005).
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2. BOARD OF DIRECTORS (CONTINUED) 3. SHARI’AH SUPERVISORY BOARD OF SOHAR ISLAMIC (ISLAMIC BANKING WINDOW OF SOHAR
INTERNATIONAL BANK SAOG) (CONTINUED)
2.5 Committees of the Board (continued)
Shari’ah Supervisory Board of Sohar Islamic (Islamic Banking Window of Sohar International) (continued)
2.5b Audit Committee
Biography of Shari'ah Supervisory Board: (continued)
The main functions of Audit Committee are to assess and review the financial reporting system of the Bank to ensure that the
financial statements are correct, sufficient and credible. The Committee reviews with the Management the quarterly / annual Sheikh Fahad Mohamed Hilal Al Khalili (Non-Voting Member)
financial statements before their submission to the Board for adoption. The Committee also reviews the adequacy of regulatory
compliance, regulatory reporting, internal control systems and structure of Internal Audit and Compliance Departments. The Sheikh Fahad graduated from the Florida Atlantic University USA after which he joined the Central Bank of Oman (CBO), where
Committee also holds discussions with the internal auditors / external auditors on significant finding on the control environment. he was part of Treasury and Investment Division. Thereafter, Sheikh Fahad joined Al Madina Investment where he quickly became
the Deputy General Manager of Investment Banking. His key responsibilities included portfolio management, promotion of
The role of Head of Internal Audit is to provide reasonable assurance that the management control framework used within the Greenfield ventures and handling high net worth individuals. Recently, Fahad founded Bayan Investment House, which is focused
Bank is operating effectively. The role of Head of Compliance is to ensure that the Bank complies with all the Laws, rules and on building long term relationships by provided investment banking and advisory services.
regulations as applicable under the regulatory framework in Sultanate of Oman and international best practice. Both heads report
directly to the Audit committee of the Board. Dr. Hussain Hamed Hassan (Member until June 2020)
2.5c Credit Approval Committee Honorable Dr. Hussain is a Professor of Shari'ah and Comparative Law at Cairo University, he did his PhD in the Faculty of Shari’ah
from Al Azhar University, Egypt and Master of Comparative Jurisprudence from University of New York, USA and graduated in
The Board Credit Approval Committee (CAC) is a sub-committee of the Board of Directors and as such approves loans which are Law and Economics from University of Cairo, Egypt, and he has an honorable PhD in Civil Law from Durham University in United
above the lending mandate of Executive Credit Committee (ECC) of the management, reviewing credit product policies, credit Kingdom. He has over 50 years of experience in Islamic Banking and is the Chairman of Shari’ah Supervisory Boards of more than
policy, credit portfolio and existing credit facilities on annual basis. 30 banks and financial intuitions. He is also the author of more than 50 books and research papers, has written over 400 extensive
articles and has also supervised the grand plan of translating 200 Islamic books into different languages. Additionally, he has
2.5d Board Risk Committee successfully converted many conventional banks and financial intuitions into Islamic ones
The Board Risk Committee (BRC) assists the Directors to discharge the Board’s responsibilities of oversight and governance in Shari'ah Supervisory Board attendance & remuneration for 2020
relation to the risk performance of the Bank. The Committee is responsible for making recommendations to the Board of Directors
on the risk appetite of the Bank in relation to credit, interest rate, market, liquidity and operational risk. Table 5: Attendance & Remuneration – Shari'ah Board
The committee ensures the implementation of risk strategy and policy in addition to ensuring that a robust risk framework is in Annual
place within the Bank which optimises the quality and return on deployment of assets. The Committee also provides guidance and remuneration
direction on all credit, market, interest rate, liquidity and operational risk policy matters. Meeting received by
20 Jul 20 Jul 14 Oct 28 Jan allowance in members in
3. SHARI’AH SUPERVISORY BOARD OF SOHAR ISLAMIC (ISLAMIC BANKING WINDOW OF SOHAR Name of Shari’ah Board Members 2020 2020 2020 2021 Attended USD USD
INTERNATIONAL BANK SAOG) Dr. Hussain Hamed Hassan* - - 20,000
Shari’ah Supervisory Board of Sohar Islamic (Islamic Banking Window of Sohar International) Dr. Mudassir Siddiqui 9 9 9 9 4 4,000 30,000
Sheikh Azzan bin Nasser Al Amri 9 9 9 9 4 4,000 40,000

Biography of Shari'ah Supervisory Board:
Sheikh Fahad Mohamed Al Khalili 9 9 9 9 4 4,000 20,000
Sheikh Azzan bin Nasir Farfoor Al Amri (Chairman from June 2020)
Sheikh Al Muatasim Said Al Maawali** - - 9 9 2 2,000 10,000
Holding bachelor’s degree in Islamic Studies and with a specialization in Judiciary, Sheikh Azzan bin Nasir Farfoor Al Amri has been
working as the secretary to the Grand Mufti of the Sultanate of Oman in the Fatwa Section since 2001. He is also well versed in
Shari’ah Law, having done numerous courses in relevant fields and participated in many related workshops and conferences. * Dr. Hussain Hammad resigned from Shari'ah Supervisory Board, his last day was on 15th Jun 2020. Paid remuneration for the
period until 15th Jun 2020.
Dr Muddassir Siddiqui (Deputy Chairman)
** Sheikh Al Muatasim Al Maawali was appointed on the 15th Jun 2020 as Shari'ah Supervisory Board Member.
Dr. Mudassir Siddiqui is an internationally renowned expert of Islamic Studies and Western laws. He did his PhD in law from Chicago
Kent College of Law, USA; Master of Law from Harvard Law School, USA; and Islamic Studies from, Islamic University of al-Madina
al-Munawwarah, Kingdom of Saudi Arabia. He is a member of the AAOIFI Shari'ah Standards Committee; the Fiqh Council of
North America; and a Research Fellow at the International Shari’ah Research Academy for Islamic Finance in Malaysia. He has
more than 30 years of experience in providing Shari’ah and Law consultancy, Islamic banking documentation, research, lectures
and arbitration for more than 40 worldwide organizations, universities and research center.
Sheikh Al-Mu’tasim Said Al Maawali (Member from June 2020)
Al-Mu’tasim Said Al-Maawali is a religious supervisor working for The Omani Studies Centre at Sultan Qaboos University. He holds
an MA degree in Islamic Studies from the University of Birmingham, 2016. Al-Mu’tasim authored a seven-volume series in Islamic
Jurisprudence called al-Mu‘tamad, including the sixth volume in Islamic Financial Transactions, and the seventh in Islamic Banking.
In 2016, he published his English book Articles on Ibāī Studies. In February 2017, he published his translation of the first volume
‘The Reliable Jurisprudence of Prayer’ from Arabic into English. In 2019, he also translated ‘Christians in Oman’ from English into
Arabic. Al-Mu’tasim presented some academic papers at some international conferences in Islamic Studies, including TIMES 2017
at Birmingham University and BRISMES 2018 at King’s College London, and BRISMES 2019 at the University of Leeds.

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4. MANAGEMENT TEAM such diverse experience, he is involved in the Re-structuring, Implementation of Strategies and in Facilitating Change Management
within the organization. He is also a certified Islamic Banker and was part of the Islamic Banking Formation Committee, as well as
The management of the Bank has been entrusted by the Board to a Management Team. The top management team has over 200 held leadership roles in a prominent local bank before joining Sohar International. Mr. Abdulali completed his ILM IMQ Diploma in
years of banking expertise between them. The top management keeps the Board of Directors informed on all issues concerning Management. He was subsequently awarded ‘The Level 7 Diploma in Strategic Management and Leadership’ from the Chartered
the operations of the Bank and takes directions from the Board on matters that concern and affect the business of the Bank and Management Institute (CMI), UK and is a member and fellow of CMI.
the objectives it should pursue. In the interest of good governance, the top management places all the key information before the
Board, where it forms part of the agenda papers. 4. MANAGEMENT TEAM (CONTINUED)
4.1 Profile Senior Management Team 4.1 Profile Senior Management Team1 (continued)
Mr. Ahmed Al Musalmi Craig Barrington Bell

Chief Executive Officer Chief Financial Officer
Mr. Ahmed Al Musalmi joined Sohar International in May 2018 as the Chief Executive Officer. He has been a catalyst in the bank’s Mr. Craig Barrington Bell joined Sohar International as Chief Financial Officer in January 2019 bringing with him over 25 years
transformation and a proven leader who combines business vision and people skills. Mr Musalmi has more than two decades of of banking experience; 15 of which have been in CFO roles with HSBC and Deutsche Bank including three years as CFO of the
experience. He is a results oriented and strategic thinker with extensive industry and functional expertise that includes Wholesale Saudi British Bank. Mr. Bell has extensive finance background and deep experience of managing complex international businesses
Banking, Capital Markets, Retail Banking and Wealth Management, Trade Finance, Risk Management, Operations Management, across dynamic and changing markets. Commencing his banking career with Citibank in 1985, Mr. Bell has a plethora of technical
Information Technology, Human Resources, Finance and Strategy Development & Business Planning. and management skills in financial and regulatory reporting, management reporting, financial analytics, system infrastructure
& controls, balance sheet management, strategic planning, investor relations and tax. Prior to joining Sohar International, Mr.
Mr Al Musalmi is a talented leader who uses keen analysis & insights, and team approach to drive organizational performance and Bell served for over 2 years as CFO with Al Hilal Bank (Abu Dhabi). He is a distinguished member of the Institute of Chartered
motivate employees to peak performance. He held leadership positions and has worked across several national and international Accountants of Australia & New Zealand and graduated from Auckland University with a Bachelor of Commerce degree majoring
financial institutions in his career. He was the CEO and successfully led transformation of National Bank of Oman prior to his move in Accounting.
to Sohar International.
Mr. Khalid Khalfan Rashid Al Subhi
Mr Al Musalmi is a graduate of Harvard Business School and holds an MBA degree with distinction from the University of AGM and Head of Compliance
Bedfordshire, UK. He also holds an International Diploma in Financial Services. Mr Al Musalmi is a Chartered Market Analyst with
Financial Analyst Designate, a Chartered Portfolio Manager and a Chartered Wealth Manager to add on to his wealth of expertise. Khalid Khalfan Rashid Al Subhi is AGM & Head of Compliance. Before joining the service of the Bank, Mr. Khalid Al Subhi
He is a fellow of the American Academy of Financial Management and has been a part of several advanced programs including in associated with Central Bank of Oman for last 19 years’ experience in banking. He has worked as a Bank Examiner conducting on-
IMD-Switzerland and Stanford Graduate School of Business-USA. site examinations of Banks and Finance and Leasing Companies, including Islamic Banks and the operations of Islamic banking
windows. Mr. Khalid holds a Bachelor in Banking and Financial Sciences from Arab Academy for Banking and Financial Sciences.
Mr. Al Musalmi is the Deputy Chairman of ASYAD Group and Chairman of its Board Audit Committee. He is also a board member
of the College of Banking and Financial studies’ board Mr. Elsamawal Abdulhadi Idris
AGM - Head of Legal Affairs & Board Secretary
Mr. Khalil Salim Al Hedaifi
GM- Chief Retail Banking Officer Before joining the service of the Bank, Mr. Elsamawal worked for major banks and law firms in Sudan. He has around 18 years of
Mr. Khalil Salim Al Hedaifi enjoys an experience of more than 18 years in banking business in general and the areas of Retail Banking, extensive legal experience. He holds Master’s degree ‘LLM’ and Bachelor’s degree ‘LLB’ in the field of law from the University of
Wealth Management, Strategic Planning, Product Management, and People Management, in particular. Mr. Khalil holds an MBA Khartoum.
qualification from Northampton University and his last position was the DGM – Deputy Chief Retail Banking Officer in one of the
Mr. Hamood Khalfan Badar Al-Aisri
local banks.
Chief Internal Auditor
Mr. Manish Dhameja
Mr. Hamood is a qualified Chartered Certified Accountant with over 25 years of professional experience across different functions
Chief Wholesale Banking Officer
of the Banking sector. He has been associated with Sohar International since December 2020 and prior to his current role in Sohar
Mr. Manish is a seasoned banking professional with over 23 years of working experience, during which he worked in UAE, Africa International, he was Chief Internal Auditor of National Bank of Oman – Muscat. Mr. Hamood holds Senior Leadership qualification
& across various cities in India. He is an Engineer, MBA & CFA. He has earlier worked in Standard Chartered Bank, where he held from London Business School, and Islamic Financial qualification from Chartered Institute of Investment & Security – UK.
multiple leadership roles and led many businesses & large teams. Mr. Manish strength lies in establishing and growing new and
Mr. Majid Nasser Khamis Al Busaidi
large businesses, improved business profitability, client connections & team engagement.
Chief Risk Officer
Ewan John Macleod
Chief Transformation Officer Mr. Majid has been associated with Sohar International since November 2020. He has over 17 years of professional experience
across different functions of the Banking sector. Prior to his role in Sohar International, he was Heading the Division of Credit
Mr. MacLeod joined Sohar International on February 2020 as Chief Transformation Officer. With over 24 years of experience in Review in Oman Arab Bank – Muscat. Mr. Majid holds Bachelor Degree in Commerce & Economics from Sultan Qaboos University
leading digital transformation in large global banks and organisations, Mr. MacLeod complements the Executive Management Team (SQU).
in driving the Bank’s transformation & digitization agenda. His wealth of experience includes strategy, delivery and prioritization
of digital transformation capable of supporting users and transactions, thereby adding value for the Bank’s stakeholders. Prior to Ms. Mahira Saleh Abdul Nabi Al-Raisi
joining Sohar International, Mr. MacLeod played key leadership positions in several international organizations such as Nordea Chief Human Resources Officer
Bank AB in Denmark and Royal Bank of Scotland. He is a seasoned corporate entrepreneur, and holds a Bachelor of Science
Ms. Mahira is an HR professional with an extensive experience of 21 years plus in Human Resources Management, all in Banking
degree in Information Management from University College London.
Sector. Joined Bank Sohar in the year 2007 and has since then moved up the chain of command within the Bank’s Human
Mr. Abdul Wahid Al Murshidi Resources Operations. Areas of strengths lie in implementation of HR strategies by department accountabilities, leading and
Chief Islamic Banking Officer supporting of HR policies and best practices across all areas of the organization. Ms. Mahira holds Post Graduate Diploma in
Human Resources Management & Development from University of Leicester, UK. Her Strategy Execution in Financial Services is
Mr. Abdul Wahid has been associated with Sohar International since July 2019. He has over 18 years of professional experience from Harvard Business. She has Management Diploma from Institute of Leadership & Management and Bachelors in Commerce
across different functions of the Banking sector including Audit, Finance, Investment, and Islamic Banking. Prior to his role in Sohar from University of Karachi, Pakistan.
International, he was the Deputy General Manager at one of the prominent local Islamic banks. Mr. Abdul Wahid holds an EMBA
degree from London Business School and has completed his Bachelors in Science from Sultan Qaboos University (SQU). 4.2 Remuneration of senior managers for the year 2020
Abdulali Abdullah Al Lawati The total remuneration paid/accrued to the top seven (7) management executives of the Bank for the year 2020 was Rial Omani
Chief Corporate Services Officer 1,601,000/- This remuneration includes salary, allowances, gratuity, pensions and performance related incentives.
Mr. Abdulali AI Lawati Joined Sohar International in August 2008, he holds the position of Senior AGM and Acting Head of HR
& Corporate Support at Sohar International. He comes with over 38 years of experience in varied industries including Education,
Administration, Corporate Governance, Corporate Support, IT, and Management, before joining the Banking sector. Coming with

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5. PROCEDURES FOR STANDING AS CANDIDATE FOR THE BOARD OF DIRECTORS 8. CHANNELS OF CONTACT WITH SHAREHOLDERS AND INVESTORS
The Board of Directors is elected by the shareholders of the Bank at the Annual General Meeting. The term of office of the Board of Sohar International has endeavored to establish meaningful relations with its shareholders and investors. The Bank is committed to
Directors is for a maximum period of three years, subject to re-election. The Board reports to the shareholders at the Annual General ensure timely disclosure and communication of all material to the shareholders and the market regulators. The Bank has provided
Meeting (AGM) or specially convened general meetings of the shareholders. The meetings of the shareholders are convened after investor related information in the quarterly, half-yearly reports and the Annual Report as per the statutory guidelines and the
giving adequate notice and with detailed agenda notes being sent to them. The Board comprised of seven members, elected by terms of the Bank’s listing agreement.
the shareholders at the Bank’s AGM on 31 March 2016 for a period of three years. The Board exercised its right to appoint alternate
directors to fill vacant seats of the Board. The Annual Report includes inter alia, the report of the Board of Directors, Corporate Governance report, Management Discussion
and Analysis report and the Audited Financial results. The management has taken the responsibility for the preparation, integrity
The election process is through direct secret ballot by the shareholders of the bank, where each shareholder shall have a number and fair presentation of the financial statements and other information in the Annual Report of the Bank. The summary of Annual
of votes equal to the number of shares held by them. Every shareholder shall have the right to vote in entirety to one candidate or Report will be sent to all shareholders of the Bank in line with the rules for the same as stipulated by the Capital Markets Authority.
divide the shares amongst the nominees, subject to the stipulation that the total votes cast shall not exceed the number of shares
owned by such shareholders. Additionally the bank has posted the financial statements on its website www.soharinternational.com.
The entire process of nomination and election of the Board of Directors, including the eligibility criteria, is governed by Articles 19 8.1 Sohar International Shares - Market Price
to 21 of the Bank’s Articles of Association, as well as in compliance with the relevant provisions of the Commercial Companies Law
of the Sultanate of Oman, the Code of Corporate Governance for General Omani Joint Stock Companies (S.A.O.G.) issued by the Monthly share prices of Sohar International’s shares quoted at the Muscat Securities Market (MSM) and the bands for the banking
Capital Market Authority and the relevant guidelines issued by the Central Bank of Oman. sector stocks on the MSM. (This information is available from news agencies and it is a published information. This is given here as
part of the requirements of the Code of Corporate Governance for MSM listed companies. This is not a solicitation in any manner
6. DIVIDEND POLICY to subscribe to the Bank’s shares.)
The Bank’s dividends policy complies with the CBO & CMA guidelines. The Board of Directors follow a conservative dividend policy The following table represents monthly share prices of Sohar International SAOG as listed with Muscat Security Market “MSM”
and recommend on the distribution of the dividends to the shareholders after due consideration of the regulatory guidelines, the (Par value of share is 100 Baizas/ share)
future growth expectations and other factors.
Table 6: Sohar International Shares - Market Price
7. STATEMENT ON COMPLIANCE
Sohar International Share price Rial Omani
The Board of Directors of the Bank have been appointed in line with the guidelines of the Commercial Companies Law of Oman MSM Banks & Investment
and in accordance with the regulations of the Central Bank of Oman. The Board of Directors has complied with all the guidelines Month 2020 High Low Closing Index closing
for the appointment of Directors prescribed by the Commercial Companies Law of Oman and the Central Bank of Oman’s January 31 0.112 0.112 0.112 6524.36
regulations with reference to eligibility.
February 29 0.112 0.110 0.111 6518.6
The Board of Directors of the Bank consists of seven directors from among shareholders and non-shareholders. The Directors of
the Bank affirm that no member of the Board: March 31 0.082 0.080 0.081 5442.54
April 30 0.084 0.082 0.083 5569.26

y Is an employee of the Bank or an employee of any other bank in the Sultanate of Oman.
y Is on the Board of any other Bank registered in the Sultanate of Oman. May 21 0.086 0.085 0.085 5577.46
y Sits on the Board of more than four joint stock companies registered in Oman.
June 30 0.081 0.081 0.081 5586.27
y Is a Chairman of more than two joint stock companies registered in Oman.
July 31 0.093 0.092 0.093 5706.39
During the year under report, the Bank has complied with the directives of the CMA, Rules and Guidelines on Disclosure by Issuer
of Securities and Insider Trading, the Guidelines of the Commercial Companies Law and the Code of Corporate Governance of the August 31 0.107 0.107 0.107 6125.98
Capital Markets Authority for listed companies except for the following: September 30 0.098 0.095 0.096 5833.24
y The Chairman of the Board Audit Committee is also a member of the Board Risk Management Committee and the Executive, October 31 0.093 0.093 0.093 5621.77
Nomination and Remuneration committee. This is due to the limited number of Board Members as compared to the number of
November 30 0.098 0.096 0.097 5709.48
board committees, required to be formed by the Board of Directors.
y The evaluation of the Bank’s Board of Directors is still under progress and will be completed prior to the AGM. December 31 0.092 0.091 0.091 5651.08
In the last three years, the Bank paid a total amount of RO OMR 108,950.880 in penalties to both the Central Bank of Oman “CBO” 8.2 Distribution of share ownership
and the Capital Market Authority “CMA”. The CBO penalties for the year 2020 were ranging from High to Low risk categories;
mainly for non-compliance with customer risk ratings, asset related ceilings, charges, outsourcing controls, policy reviews and The authorized share capital of the Bank is 4,000,000,000 shares of RO 0.100 each (31 December 2019: 4,000,000,000 of
system related matters. The Bank has addressed most of the issues and is taking time bound action on the remaining points. RO 0.100 each). The issued and paid up share capital of the Bank is 2,434,506,735 shares of RO 0.100 each (31 December 2019:
2,363,598,772 shares of RO 0.100 each). As of 31 December 2020, the following shareholders held 5% or more of the Bank’s capital:
Name of Shareholder Percentage of Shareholding
OIFC 15.36909
Royal Court Affairs 14.56903
Seventh Moon Investment LLC 9.02803
Neptune National Investment company LLC 7.81079
Western Sea Investments LLC 7.60147
MARS Development and Investment LLC. 6.37899
Oman Investment Authority /1 5.23736

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9. STATUTORY ACCOUNTS
The Bank has adopted the International Financial Report Standards (“IFRS”) in the preparation of its accounts and financial
statements.
10. AUDITOR’S PROFILE

Deloitte provides audit, consulting, financial advisory, risk advisory tax and related services to public and private clients spanning
multiple industries. Deloitte serves four out of five Global 500R companies through a globally connected network of member
firms in more than 150 countries and territories bring world class capabilities, insights and high quality service to address clients’
most complex business challenges. Deloitte & Touche (ME) is a member firm of Deloitte Touche Tohmatsu Limited (DTTL) and is a
leading professional services firm established in the Middle East region with uninterrupted presence since 1926. DTME’s presence
in the middle lease is established through its affiliated independent legal entities which are licensed to operate and to provide
services under the applicable laws and regulations of the relevant country.
Deloitte provides audit, tax, consulting, financial advisory and risk advisory services through 25 offices in 14 countries with more
than 3300 partners, directors and staff. It is a Tier 1 Tax advisor in the GCC region since 2010 (according to the International tax
Review World Tax Rankings).
During the year 2020 an amount of RO 103,500/- was charged by external auditors against the services rendered by them to the
organization (RO 87,500/- for audit of bank’s conventional and Islamic banking operations, RO 14,000/- for Shari'ah audit and
RO 2,000/- for tax services).
11. RIGHTS OF SHAREHOLDERS

All the Bank’s shares shall carry equal rights which are inherent in the ownership thereof, namely the right to receive dividends
declared and approved at the general meeting, the preferential right of subscription for new shares, the right to a share in the
distribution of the Bank’s assets upon liquidation, the right to transfer shares in accordance with the law, the right to inspect the
Bank’s statement of financial position, statement of comprehensive income and register of shareholders, the right to receive notice
of and the right to participate and vote at general meetings in person or by proxy, the right to apply for annulment of any decision by
the general meeting or the Board of Directors, which is contrary to the law or the Articles of the Bank or regulations, and the right
to institute actions against the directors and auditors of the Bank on behalf of the shareholders or on behalf of the Bank pursuant
to the provisions of the Commercial Companies Law and its amendments. Sohar International gives minority shareholders prime
importance in terms of safeguarding their interests and ensuring that their views are reflected in shareholders’ meetings. The “one
share one vote” principle applies to all shareholders so that minority shareholders can nominate members of the Board and can
take action against the Board or the management if the actions of the Board or management are in any way prejudicial to their
interests.
12. RELATED PARTY TRANSACTIONS, DEALINGS AND POLICY

There is a comprehensive policy on related party dealings, and processes and procedures laid down which are followed in the
matter of all loans and advances given to directors and their related parties and also any transactions with companies in which
directors have a significant/ controlling interest. Details of loans and advances, if any, given to any Director or his related parties
are furnished with full details in the notes to the financial statements given in the annual report as public disclosures. Any other
transactions with Directors carried in the normal course of business and without any preferential treatment are disclosed to the
shareholders along with the agenda notes for the AGM.
13. CONCLUSION
The Board of Directors acknowledge that the preparation of the Annual Report of the Bank together with the Management
Discussion and Analysis Report, the Corporate Governance Report and the audited financial statements has been done with their
full knowledge and in line with the standards for accounting and the statutory rules governing disclosure by the Capital Markets
Authority and the Central Bank of Oman.
The Board of Directors also acknowledge that there is no material information and material things that will in any way affect the
continuation of the business of the Bank in the coming financial year.

MANAGEMENT
Navigating with a
strategy of winning

BACK ROW (Left to Right) BACK ROW
Mr. Craig Barrington Bell Mr. Khamis Al Rahbi Mr. Ewan John Macleod
Chief Financial Officer Chief Operations Officer Chief Transformation Officer
MIDDLE ROW (Left to Right) MIDDLE ROW (Left to Right)
Mr. Manish Dhameja Mr. Majid Nasser Al Busaidi Mr. Khalid Khalfan Al Subhi Mr. AbdulAli Abdullah Al Lawati Mr. Hamood Khalfan Al Aisri Mr. Elsamawal Abdulhadi Mohammed
Chief Wholesale Banking Officer Chief Risk Officer Chief Compliance Officer Chief Corporate Services Officer Chief Internal Audit Officer Chief Legal Officer & Board Secretary
FIRST ROW (Left to Right) FIRST ROW (Left to Right)
Ms. Mahira Saleh Al Raisi Mr. Ahmed Al Musalmi Mr. Khalil Salim Al Hedaifi Mr. Abdul Wahid Mohamed Al Murshidi
Chief Human Resources Officer Chief Executive Officer Chief Retail Banking Officer Chief Islamic Banking Officer

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CHIEF
as enabling the country to go paperless as a natural outcome. The banking sector in the short term may continue to face
These have furthered the government’s effort in protecting the challenges such as rising cost of credit and cost of funds.
environment and working towards sustainability. Besides these, the rising interest rates and fluctuating global oil
EXECUTIVE
prices also pose potential challenges to the sector.
The remarkable leadership of the Late His Majesty Sultan
Qaboos bin Said enabled the transformation of Oman to a Oman has huge opportunities though given its young and
modern and progressive nation, while remaining rooted to its digitally advanced demographic. It comes as no surprise that
tradition, heritage and historical identity. Carrying forward this moving away from traditional channels has put a lot of pressure
OFFICER
rich legacy, His Majesty Sultan Haitham bin Tarik, is leaving no on banks to adapt faster to the customer’s ever-changing
stone unturned to maintain the development and progress of needs.
the country.
A focus on the future of this sector is only imminent, keeping
MESSAGE
A strong regulatory and legal framework has been a salient in mind the ever-changing world, and the magnitude of the
feature of Oman since the beginning of the Blessed limitations that economies are currently going through. This
Renaissance. The last two years has brought about a number requires us to shift our thinking fundamentally about the
-
of new laws such as the Public Private Partnership Law, purpose of being financially inclusive and technologically
Bankruptcy Law, Commercial Companies Law ushering in path advanced.
breaking changes. These along with fiscal and monetary policies
such as the Medium-Term Fiscal Plan, have been lauded by Developing a collaborative ecosystem of digital partnerships
the International Monetary Fund. According to a report by the to harness the latest thinking and technologies from a wide
International Monetary Fund, the Sultanate’s recent adoption community of innovators is the way ahead for the sector. Digital
Ahmed Al Musalmi of important reforms in the areas of commercial law and skills can help accelerate Oman’s drive to develop its economy.
arbitration and licensing procedures, is praiseworthy. The country’s vibrant digital ecosystem, supported by an
Chairman innovative start-up and SME environment, will facilitate the
The report states that Oman Vision 2040’s emphasis on development of capabilities in these areas creating immense
With a vision of becoming a world-leading Omani service Oman’s economy is largely dependent on the hydrocarbon fiscal sustainability, governance and rule of law is welcome. opportunities across the lives of individuals apart from affecting
company that helps customers, communities and people to sector; hence, global oil prices play a crucial role in determining Further efforts to strengthen the business environment, diverse industries including financial services, retail, media,
prosper and grow, Sohar International has persistently delivered economic performance. As global oil prices traded at new lows including reducing obstacles to foreign direct investment, travel, hospitality and healthcare.
robust growth, reflecting our capabilities and continued in 2020, Oman’s economy continued its diversification efforts. fostering competition, and further easing trade barriers would
investment in strategic growth initiatives. Despite the vagaries Given the new policy initiatives and renewed thrust on non-oil help strengthen external competitiveness. The regulatory 2020: A YEAR OF AGILITY AND RESILIENCE
of the business cycle, Sohar International has been determined sectors, we expect them to gain traction in the coming years. changes will enhance Oman’s attractiveness as a business and
to deliver along with long-term sustainable growth, following Oman has undertaken major reforms to liberalize and diversify investment destination, boosting its economy. Sohar International has demonstrated utmost agility and
an institutional building approach for the future. its economy in line with the Sultanate’s 2040 Vision. These resilience in adapting to changes posed by the COVID-19
reforms are expected to pay off in the medium to long run with BANKING SECTOR: POISED FOR GROWTH pandemic. The Bank continued to serve its wide customer base
It gives me great pleasure to provide an insight into a challenging the non-oil and gas sectors further contributing to the GDP. with no disruption in overall service delivery, ensuring business
yet effective year for the organization and the economy Despite a challenging operating environment, Oman’s banking endurance, enabled by a spontaneous responsive banking
within which we operate.. 2020 has been unprecedented yet Furthermore, the introduction of VAT which is scheduled to sector remained resilient while supporting the growth of environment. We continued to grow our client base, in line
transformative as we continue to redefine banking for an ever- be implemented from April 2021 besides major other reforms diversified economic activities in the Sultanate in 2020. The with our principles of providing them with more vision, more
changing world. undertaken so far should further augment government economic downturn impacted the performance of banking value, and more velocity. The Bank also continues to invest
revenue. Such measures demonstrate the government’s intent sector in Oman especially during the second, third and fourth in its infrastructure to ensure that it is well geared to provide
ECONOMIC DIVERSIFICATION & FISCAL and capability to deliver progress and development to usher in quarters of 2020. According to the Central Bank of Oman, the customers with an ecosystem of products and services to help
REFORMS the Renaissance. combined balance sheet of conventional banks indicates a them ‘win’ in this ever-changing world.
year-on-year (y-o-y) growth of 1.2 percent in total outstanding
The COVID-19 pandemic has resulted in dramatic stress on all Economic diversification underlines the Sultanate’s We have successfully navigated the financial impacts of
credit as of end-August 2020. Conventional banks’ credit to
economies and hence demanded unprecedented responses. operating environment, and augurs well with its people- COVID-19 , demonstrating a robust financial performance in
the private sector decreased marginally by 0.7 percent to RO
focused approach. It supports the agenda of job creation and 2020, a testament to the strategic business continuity plan
With His Majesty Sultan Haitham bin Tarik taking on the reign 18.8 billion. Aggregate deposits held with conventional banks
Omanization while also emphasizing on the need for research, and crisis preparedness set forth by the Bank’s leadership team
of the Sultanate in 2020, it was inevitable to expect key policy increased to RO 20.4 billion in August 2020, registering a
learning and education, as a right of citizens. Investment in and the collective performance of its workforce.
changes and new strategies being implemented to effectively growth of 4 percent over the level a year ago. Government
diverse sectors by the government and the private sector will
respond to the challenge and further advance plans for deposits with conventional banks decreased by 16.9 percent
help promote these sectors, creating more job opportunities. Net profit for the year ended 31 December 2020 declined by
economic diversification and overall national development. to RO 4.5 billion, while deposits of public enterprises increased
41.8% to RO 20.0 million compared to RO 34.4 million during
Oman’s Vision 2040 recognizes education as the cornerstone by 14.6 percent to RO 1.1 billion. Private sector deposits, which
the same period in 2019 due primarily to the adverse impacts
Pragmatism and agility become key to success when economies for the nation’s ever-growing developments and change accounted for 70 percent of total deposits with conventional
of COVID-19 on the Bank’s revenue streams and the need to
are faced with a sea change in the way they function. The Omani for a better tomorrow. It outlines, “A national system that banks, increased by 11.5 percent to RO 14.3 billion.
increase credit risk provisions. However, the Bank reported a
government has enacted a number of much needed major empowers human capabilities in the educational sector and
Presently, a majority of Oman’s banks are feeling the impact cost to income ratio of 49.1% compared to 43.3% for the same
fiscal reforms, which are commendable to help the economy nurtures scientific research, innovation, and creativity to
of tightening operating conditions. However, despite the period last year reflective of the strong underlying operating
adapt to the new normal, characterized by low oil prices, in build a knowledge-based economy and society”. The Vision
multitude of challenges, banks have remained resilient. Across profit performance.
order to maintain sustainability of public finances. 2040 stresses on improving educational outcomes that have
the GCC, governments and central banks announced various
become necessary to build Omanis’ confidence in their identity Despite the economic challenges of 2020 the Bank reported
Oman’s nominal GDP declined by 13.4 percent during the economic support measures as the pandemic intensified
and commitment to their social values. modest growth in net loans and advances of 2.0% to RO 2,504
second quarter of 2020 compared to the same period of towards H2 of 2020.
million and continues to demonstrate its ability to source
last year, according to preliminary data released by National Acting in response to global climate change, Oman has taken
The Central Bank of Oman, too, has taken swift action to address liquidity in a competitive market, successfully increasing its
Center for Statistics and Information (NCSI). The nominal a number of strides towards environmental sustainability
concerns, through its relief measures including an extension of deposit base by 6.44% to RO 2,232 million compared to RO
contraction in the economy was driven by a 20 percent decline through developed projects that employ renewable energy
its stimulus package until the end of March 2021. The banks in 2,097 million in 2019.
in the hydrocarbon sector, as well as the decline on non- sources like solar and wind power. Research and development
hydrocarbon sector by 9.9 percent during the second quarter Oman have displayed resilience, providing banking services
coupled with high-technology services related to renewable The year 2020 has also been a year of expanding our digital
of 2020. The Omani oil price averaged $47.7 per barrel during efficiently to all segments of the economy while pursuing
energy is expected to create new businesses and help in capabilities to deliver increased value from existing services and
the first eight months of 2020, which is lower by 26.3 percent prudent practices to mitigate risks. The Central Bank of Oman
country’s diversification efforts. Besides this, digitization and introduce new services to customers across the Bank. At the
over the corresponding period of last year. Oman’s economic continued to pursue policies so that the banking sector fulfils
rapid adoption of technology has contributed in bringing about heart of our vision for the digital age is a collaborative approach
performance was on expected lines given the contraction of its role of financial intermediation efficiently without posing any
transparency and faster processing with other benefits such to innovation, where we actively look to develop new, radical
the global economy. threat to financial stability.
ways of working to maintain our competitive edge. To this end,

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MANAGEMENT
we are adopting futuristic technologies to help validate, build crisis. Moving head adaptability & agility will be key to being
and grow our business. Accelerating digital transformation responsive. Serving the community in which you operate is
supports the Bank in delivering further value to customers, another fundamental to staying relevant, and being impactful.
DISCUSSION AND
improve existing services and create new areas of growth. At When you support your surroundings and appreciate
the same time, we also help innovators and innovation hubs to efforts, the returns are high and invaluable, humanising your
succeed, and share in their pace, inventiveness and energy. We organisation and reinforcing your commitment to the nation.
recognize that some of the best digital capabilities exist outside It has been rightly said that “necessity is the mother of
of our business. For Sohar International to cement its industry
ANALYSIS
invention”, and the past year is a testament to the same.
leadership position, and be a financial partner of choice, we Individuals and corporates were made to think beyond
recognize the importance of championing collaboration, traditional ways, channeling their imagination to innovate
-
ushering in a new era of financial technology. and make things better. How you use innovation to engage is
The increasing adoption of technology is also enabling another key learning. During a period of crisis, it is imperative
achievement of the other objectives of the government, such to interact with customers, employees and the community at
as ‘financial inclusion’. An integral part of ‘financial inclusion’ multiple levels, both personally and professionally. A good
is to provide timely access to affordable credit, which is a communication process is reflective of individual, team and
challenge for small businesses and SMEs. Sohar International organisational performance. OPERATING ENVIRONMENT
consciously ensured access to credit, providing the required Lastly, as one builds an organisation for the long-term,
impetus to SME development. With businesses in lockdown The COVID-19 pandemic has been a game changing experience for economies and organisations across the world. According
de-risking and ring fencing for the future is an inevitable process
for most part of the year, SMEs were also provided with relief to the IMF recent World Economic Outlook, it is estimated that the global economy shrunk by 3.5% in 2020 and has described
and must be undertaken to hedge against future uncertainties.
measures to minimize their financial burden. However, despite the decline as the worst since the Great Depression of the 1930s. Businesses continue to struggle amidst an uncertain and highly
the adaptation of technology, Sohar International stays true to Looking ahead, Sohar volatile environment, across all sectors of the economy. Nonetheless, banks in particular and financial institutions in general will
the belief that great customer service is still driven by human International is optimistic continue to play a catalystic role, thereby driving post-pandemic economic recovery.
about the government’s Learnings from the
interaction. With that approach, the bank aims to broaden its
product range and services for its customers with access to economic diversification COVID-19 pandemic Oman has been no exception to the impact of this unprecedented crisis. With global oil prices playing a critical role in Oman’s
global marketplaces and insights. plans, which will lead to experience economy, the Sultanate witnessed an expected deficit in the face of falling oil & gas prices, as preliminary data issued by the
overall economic recovery, authorities indicate that the nominal GDP contracted by 3.9% in Q1/2020 (y/y); and non-oil activities contracted by over 6%. The
Sohar International’s ability to continue its growth trajectory under the visionary Ability to Adapt is the Omani oil price averaged $47.7 per barrel (against a budgeted oil price of $58 per barrel) during the first eight months of 2020
and deliver on its strategic imperatives is exemplified in leadership of His Majesty key to not just survive but which is lower by 26.3 percent over the corresponding period of last year. Fiscal and external deficits remained under strain due to
the confidence that shareholders have in the Bank. This Sultan Haitham bin Tarik. thrive low oil and gas prices.
reaffirms Sohar International’s strengthening market position Oman’s 2040 Vision will
and investor confidence, despite a challenging operating further strengthen the Ability to Serving others Amidst a global crisis, the Sultanate implemented measures to curb the short term as well as long term impacts on the national
environment. economy in the years ahead. is cardinal to staying economy. At the beginning of the year, we saw Oman embrace policies liberalising foreign investment, contributing to both
We recognize the importance of being socially responsible relevant productivity growth and income growth in the domestic market, providing the required impetus towards the socio-economic
While the Bank diversification plans of the Sultanate. Moreover, key policy changes announced at the end of the year, are expected to be
towards the community we serve reflecting the human aspect acknowledges that the
of our brand personality. The Bank is committed towards Ability to Innovate by implemented by the government in the next two years, positively affecting the business environment.
operating environment
running its business in a way that generates sustainable value always making it better
continues to be challenging, The roll-out of a 5% VAT in April 2021 has put the Sultanate on the world map for financial prudence, as this move is expected to
for all stakeholders. Year 2020 has demanded this more than and thinking beyond
we are cautiously optimistic generate RO 300 million ($780 million) approximately, a touch over one percent of the projected GDP of the Sultanate, within the
ever and we have led the way in ensuring that the right help traditional ways
about the year ahead. first 12 months of implementation. It is encouraging to note that the oil prices steadily bouncing back since April 2020, coupled
and support reaches out to the right people in a timely manner. With oil prices on the rise with the Government’s proactive measures to contain budget deficit, should augur well into the new year. The Fiscal Balance
Rising to the call of duty for the nation, Sohar International Ability to Engage with
due to increased global customers, employees, Plan seeks to boost government revenues to OMR 12.1 billion by 2024, and will help create the right conditions for Oman Vision
ensured adequate and timely support to the health sector to consumption and demand, 2040. This includes supporting economic growth through various sectoral initiatives; revitalizing and diversifying government
ensure it could help in saving more lives through supporting shareholders, regulators
markets are slowly but and the community is investment returns through a unified approach across all sectors, and by introducing new, and strengthening existing taxation
entities such as Royal Hospital as part of its pandemic relief steadily stabilizing. Sohar policies at multiple levels. Rationalizing and improving efficiency of government spending through a process of continuous review
measures. critically important
International intends to and reorientation is also a key pillar in this agenda.
In any crisis, it is imperative that organizations stay calm strike a balance between Ability to De-risking
and ensure a steady yet efficient way forward, staying well continuity and change. At and ring fencing for the The Vision 2040 also emphasizes on establishing and strengthening the social protection plan, by implementing measures
connected to stakeholders including customers. This is exactly an operational level, we future is essential to build across subsidies and taxation to help adapt to current financial and economic conditions. This will be supplemented by raising
what we achieved during the early days of the pandemic where will work towards bringing a long term sustainable the efficiency of public financial management through modernization and development of government systems and processes in
we replaced all physical connectivity with customers and other new products in sync with organisation order strengthen existing capabilities.
key stakeholders with digital technology to connect virtually. changing customer needs,
enhanced service standards Additionally, the recently announced 10th five-year plan (2020–2025) of Oman, is the first implementation plan of Vision 2040,
One of the major activities that saw a paradigm shift were and will focus its efforts towards achieving economic diversification. The government authorities very well recognize the paramount
and technological adoption. I am proud to share that during the
the Bank’s Prize Scheme Draw events that used to act as a importance of the nonhydrocarbon sector attaining a critical mass to reduce the economy’s dependence on the hydrocarbon
past year we received a diversified range of prestigious awards
platform to engage with customers and reveal the winners of sector and ensure sustainable development over the medium to long run. Therefore, this plan has earmarked five sectors that have
and accolades for performance, business leadership, growth,
the product. With agility, and instead of eliminating the entire high growth potential and economic returns, namely, agriculture and fisheries, manufacturing, logistics and transport, energy and
and CSR initiatives.
activity, we adopted the approach of virtual draws through our mining, and tourism.
official social media platforms as first movers, therefore stay The Bank has set new benchmarks in thought leadership
well connected to our customers and followers as well as ensure through Viewpoints – Sohar International Chairman’s Forum. BANKING SECTOR
uninterrupted activities. This helped broaden the Bank’s overall It has demonstrated that it is an institution with a social
market coverage and audience. conscience by promoting growth opportunities for young Banks globally have shown resilience with high capital and liquidity position pre-pandemic, in addition to a flexible policy support
Omanis and contributing to society. At Sohar International from central banks. However, banking industry’s profitability was severely hit and remains a challenge coupled with concerns
In a crisis like the one we have and are going through, customer
we are committed to serving our customers, working with of rising non-performing financing. The Omani economy, too, is not spared from these challenges coupled with a low oil price
and stakeholder confidence is largely measured on three
regulatory authorities to strengthen the banking sector in environment. As has been visible in the global banking industry, the economic downturn has impacted the performance of
key parameters – a bank’s capitalization, liquidity and the
Oman and proactively contributing towards the Sultanate’s banking sector in Oman especially during the second and third quarters of 2020. According to the Central Bank of Oman, the
overall resilience to stand strong against tough economic
progress. combined balance sheet of conventional banks indicates a year-on-year (y-o-y) growth of 1.2 percent in total outstanding credit
headwinds. At Sohar International, our strategic approach was
implemented keeping these factors in mind and are aimed at Overall, our vision is to ensure that the Bank’s strategic digital as of end-August 2020. Conventional banks’ credit to the private sector decreased marginally by 0.7 percent to RO 18.8 billion.
achieving excellence, and stainable growth in the long run. transformation agenda contributes positively to the national Private sector deposits, which accounted for 70 percent of total deposits with conventional banks, increased by 11.5 percent to
economy and the country’s socioeconomic development RO 14.3 billion. Even so, Omani banks remained resilient and robust.
The future is based on learnings from the past year, teaching
efforts.
individuals and corporates to respond more effectively to a

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A lot of factors have been responsible for this sectoral degrowth, including, a deteriorating operating environment, increased Sohar International concluded a USD 100 million two-year syndication, which is a landmark transaction for the Bank in year
credit risk, tight market liquidity, increased cost of credit as well as cost of fund, declining profitability, higher OPEX & potential 2020. The successful closure of the syndicated loan reflects the confidence of international banks in the Sultanate and in Sohar
losses, cyber risks and an increased probability of corporate bankruptcies. International as a local leading financial institution. The new funding is a part of Sohar International’s concerted efforts to extend
financing solutions for general corporate purposes, thereby delivering more velocity, more value and more vision, to its customers
What must be noted here is that the Omani banking sector has had a firm foundation and remains sound with strong capital buffers, and beyond.
ample liquidity coverage ratio and sound risk management systems.
During year 2020, Sohar International not only met its commitments and supported its customers at an “hour of need” but also,
Furthermore, the Central Bank of Oman is swift in providing regulatory support to the Banking system whenever required as seen advised and disbursed customized value-added financing structures to its clients, highlighting strong customer-oriented approach,
in recent RO 8 billion extra liquidity through regulatory policy measures and announcing economic stimulus financial incentives. distinctive management expertise and sound liquidity management in turbulent times. With customer-centricity philosophy and
The Central Bank of Oman has taken swift action to address concerns, and implement relief measures including an extension of its a strong market position, the Bank is ahead of the curve in adopting a culture of innovation and winning; which is key to its brand
stimulus package until the end of March 2021, which is highly commendable. proposition.
Despite recent economic bans, the Omani banking sector displays resilience and continues to support the economy with HARNESSING INSIGHTS FOR INNOVATION
uninterrupted service. The commitments of Oman banks remain robust and strong in the face of economic and market pressures.
Prudent policy measures implemented by the Central Bank of Oman has helped banks in mitigating losses and providing relief Technological innovation and sustainable development goals are two key themes of the future. The increasing adoption of
packages to its customers. The Banks in Oman have been swift in adopting new modes of service delivery and technologies to serve technology is enabling achievement of the other national objectives in line with the Vision 2040. Oman’s banking sector has been
the market more effectively especially during the COVID-19 related challenging times. The Central Bank of Oman is providing undergoing a transformation in sync with the path breaking changes seen globally with adoption of new technologies, leading to
the enabling environment to facilitate the existing players, the start-ups and all the stakeholders to reap the benefits of greater fintech based customer offerings.
technological usage and innovations. In the second quarter of 2020, the Central Bank of Oman put in place, a ‘Fintech Regulatory
Sandbox Framework’, which will enable applicants, both from the licensed and non-licensed institutions, to test their proposed In its pursuit to be a technologically advanced organisation, Sohar International offers innovative solutions for managing the wealth
fintech solutions, live under Central Bank of Oman's view. of corporate, institutions and individuals alike.
The increasing adoption of technology is also enabling achievement of the other objectives of the government and the central The Bank has successfully capitalised on new opportunities and intensified investments in the digitalisation of assets and
bank, such as ‘financial inclusion’. An integral part of ‘financial inclusion’, is to provide timely access to affordable credit, which transactional channels by integrating an array of relevant technologies and capabilities to ensure it is fully geared for the near and
is a challenge for small businesses and SMEs. The establishment of the National Databank Centre, Mala’a, the National Credit far future. With such advancements and technological implementations, cybersecurity continues to be at the forefront as the
Registry in December 2019 will empower access to credit, financial inclusion and SME development. Mala’a, will be operating with Bank strives to embed digitalisation as a way of life. Given the fact that technology plays a pivotal role in Sohar International’s short
world class technology, scalable data-modelling engines and credit bureau platforms. It will initially provide ‘credit risk scores’ for and long-term strategy, the Bank is encouraging customers and staff to increasingly embrace digital platforms for engagement –
consumers and corporates. while ensuring appropriate levels of awareness and adoption of best practices.
FINANCIAL PERFORMANCE As part of its digital transformation journey, the Bank commenced implementation of key technological projects that would not
only contribute internally to automate and create efficiencies, but more importantly contribute towards the overall experience of
Net profit for the year ended 31 December 2020 declined by 41.8% to RO 20.0 million compared to RO 34.4 million during the customers and stakeholders in general; whether on a retail and/or corporate level. Such key projects will witness the Bank truly
same period in 2019 due primarily to the adverse impacts of COVID-19 on the Bank’s revenue streams and the need to increase redefine banking ultimately contributing to all stakeholders and the nation at large. In line with this digitalization journey, the Bank
credit risk provisions. has managed to increase mobile banking penetration two-fold during year 2020 as well as launch the exclusive Mobile Banking
Service for SMEs (Sole proprietorship companies) which was received well in the market.
With a clear vision and strategy, the Bank retains its focus on diversifying its income streams and optimizing the expense base to
maintain a healthy cost to income ratio, reflective of the strong underlying operating profit performance. For the year 2020, the Continuing to invest in existing digital platforms, and launching new fintech based solutions, the Bank remains focused on building
Bank reported a cost to income ratio of 49.1% compared to 43.3% for the same period last year. its core capabilities catering to a wide audience of beneficiaries. Imbibing a culture of innovation within the Bank is directed towards
having digitally enabled business model to keep pace with customer demands in an era of much faster innovation cycles. With the
Despite the economic challenges of 2020 the Bank continued to support its loyal customer base reporting modest growth in net Bank’s vision set forth to the long term benefits, these key milestones will continue to contribute to the digitalization journey of the
loans and advances of 2.0% to RO 2,504 million. The Bank continued to demonstrate its ability to source liquidity in a competitive Bank and changing the mind-sets of all affiliates.
market, successfully increasing its deposit base by 6.44% to RO 2,232 million compared to RO 2,097 million in 2019.
With the market changes seen at present, Sohar International is focusing on adopting global best practices to bring about a
The Board of Directors, recognizing the need to maintain a strong capital base to support our customers and wider community in fundamental change in people mindset, and hence delivering benchmark customer experience. The Bank has demonstrated
the face of continued economic uncertainty, did not propose a dividend for the year. The Bank has emerged with greater confidence tremendous leadership in making the commitment to introduce the latest technology in Oman’s banking sector while driving its
and renewed purpose continuing to redefine banking within the country, building better financial security for its customers, while vision in delivering service, convenience and choice to all of its customers.
enhancing its capabilities of withstanding the vagaries of business cycles.
SERVICE EXCELLENCE & CUSTOMER CENTRICITY
The capital adequacy ratio, calculated in accordance with the guidelines set by the Bank of International Settlements (BIS)
improved to 19.05% as at 31 December 2020 compared to 18.86% last year which is well above the BIS minimum of 8% and Central The Bank continues to emerge strong by being consistent to its customer-oriented strategy involving the increase of dedicated
Bank of Oman’s regulatory minimum of 12.25%. customer experience assets, nationwide network expansions, digitalization and online stakeholder engagement. The customer
centric culture spans across the Bank, placing renewed thrust on employee engagement with the implementation of various
GROWTH & STRATEGY initiatives to create an organisational mind-set that ensures more consistent value for customers and their lifestyles. In line with
this approach, the Bank has set up a dedicated “Customer Experience Unit” and streamlined processes to enhance customer
The past year has been an extraordinary learning journey for Sohar International as it stayed ahead of the curve by adopting experience across channels, products and services.
a digital-first approach. An important lesson has been prudence – financial and socioeconomic. This also means that crisis
preparedness is important and should be built on resilience and sustainability. Moving forward, the Bank is pursuing a prudent With a highly skilled and experienced team of professionals, the Bank is more than capable of guiding companies on services that
growth strategy in line with its objective of being a “World Leading Omani Service Company that helps people, customers and most efficiently meet their desired financial requirements. With service excellence at the core of the Bank’s daily operations and
communities to grow and prosper.” It has emerged with greater confidence and renewed purpose continuing to redefine banking considering the challenging economic environment, a dedicated Special Assets Group was created with specialized staff that can
within the country, while serving its customers as part of the Bank’s robust growth strategy. On the back of ensuring business address and consult corporate clients in a timely and exhaustive manner
continuity, Sohar International is focused on building better financial security for its customers, while enhancing its capabilities of
withstanding the vagaries of business cycles. During the year, the Bank continued rolling out new products basis its assessment of customer needs and an in-depth understanding
of the then prevailing market requirements. The relatively new proposition - Sohar|First proposition aims at providing an ecosystem
With this in mind, we are focusing our efforts to enhance our transaction banking and digital offerings. During the year and with of banking and non-banking services underlined by exemplary customer experience, to the mass affluent segment offering them a
significant customer loyalty and trust, the deposits within the Bank witnessed the highest growth within the Banking sector wide range of solutions that provide a sense of priority, upside benefits and a clear price versus benefit proposal.
alongside a healthy increase in asset growth enabling the Bank to achieve a market share of about 11% inching up to become the
third largest bank in size within the Sultanate. This significant milestone has positioned Sohar International as one of the leading The youth is another customer segment that the Bank focused on with the launch of Sohar|Youth. The Youth proposition is part of
banks within the country that continues to contribute to the overall socioeconomic scene within the Nation acting as a positive the Bank’s strategy to ensure that being a service-oriented organization, it caters to the smallest of financial needs of the consumer,
catalyst for change. thereby encouraging them to plan ahead and adopt prudent financial practices especially in a country such as Oman with a large
proportion of the population being youth.

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Expanding its card portfolio to offer convenient payment solutions, Sohar International launched its new prepaid card in a bid to Nurturing and scaling up SMEs in Oman remain a key priority of the Bank. SME business of the Wholesale Banking Group unit
engage with a wider customer base. The Bank’s newest proposition offers individuals everyday convenience, whether or not they plays a vital role to nurture nascent industrial clusters in Oman. It continues to focus on following the Government’s directives
are an accountholder with the Bank thereby empowering the cardholder with control, security, and ease of payment. in diversifying from an oil dependent economy and helping unlock the potential of the SME sector. In view of COVID-19, and
its adverse impact on businesses - in particular SMEs, which are vital constituent of the economy, the Bank, based on the spirit
WEALTH MANAGEMENT & guidance of the economic stimulus measures taken by the Government through the Central Bank of Oman, had waived the
interest and fees, and defer the due installments appropriately. The SME unit is positioned as a knowledge partner, providing total
A suite of services specially designed to meet the needs of the exclusive customer, the Bank’s Wealth Management offering have business solutions to budding entrepreneurs, and introduce SMEs to entry level risk management by educating them on early
been curated to provide fiduciary advice and highly customised financial and related facilities, that include a bouquet of exclusive warning signs. Promoting the ‘Ecosystem Financing” to ensure cross-selling of products has been another key aspect to further
products, services and features; all delivered with commitment and personalized attention. Exclusive credit cards, free insurances, assist them financially.
competitive rates on financing, advisory services and discount offers on dining, and shopping, are among privileges offered to the
Bank’s wealth management customers. Sohar International is at a stage in its journey, where the Bank’s strong capabilities and customer focus has been instrumental
in acquiring a number of new institutional clients and relationships. Such prestigious partnerships with large corporate and
These customised solutions, launched in 2019, have been well received by customers and has helped Sohar International’s strategy institutional clientele with investments in diverse areas of national importance, has helped us further contribute towards advancing
of diversifying its revenue streams by providing banking as well as value added service, bettering the experience of customers the government’s economic diversification agenda. The Bank is now uniquely positioned to sign up large projects, and steer large
as well as enhancing the overall contribution to the sector. Wealth Management Investment Fee Income witnessed a significant size greenfield investments, for the purpose of creating in-country value, boosting production & manufacturing, creating jobs and
incremental growth of 400% as the proposition continues to attract an important customer segment to the already diversified achieving the national goals of indigenization, self-reliance and self-sufficiency. The Wholesale Banking team has rich & diverse
range of clients the Bank caters to. experience across sectors in line with Oman’s Vision 2040. Trade pacts with leading Government Institutions and Corporate
Institutions in Oman, bear testament to the Bank’s equity and customer centricity as well as the diversified portfolio of businesses
The Bank also established an exclusive strategic alliance with European Financial Group (EFG) - one of the leading global players
it has managed to penetrate in a very short period of time.
in Wealth Management based in Zurich Switzerland - to broaden its product ranges and services for its customers with access to
global marketplaces and insights. This strategic alliance has propelled the Bank’s strategic agenda on Wealth Management and
ISLAMIC BANKING
offerings to its customers.
Under Sohar International’s vision and strategy, Sohar Islamic continues to realign itself to provide the right mix of products, people,
WHOLESALE BANKING and systems to help drive its next phase of growth. Sohar Islamic forms an integral part of all of the Bank’s strategic way forward
plans, with digitalisation being a key driver for growth.
The Wholesale Banking Group has a heterogeneous institutional client base comprising Government Institutions & Agencies,
Financial Institutions, Large Business Groups, Mid-Corporates and SMEs. The Wholesale Banking Group also offers a multitude A key milestone in this journey is the new, fully upgraded corporate website of Sohar Islamic. The Sohar Islamic website provides more
of products & solutions viz. Project Finance, Financing for Working Capital & Expansion, Transaction Banking (cash management, value through engaging content, more velocity through quick and easy access to information, and more vision by demonstrating
trade solutions & supply-chain finance), Global Markets (treasury and cross border risk management) and Investment Banking how the brand facilitates a winning journey for all stakeholders. In order to expand transactional convenience for Sohar Islamic
(business advisory and asset management) to service the banking requirements of its clients. customers, Sohar International CDMs (Cash Deposit Machine) have been reconfigured to accept cash deposits to Sharia banking
accounts. The Bank is also upgrading the Sohar Islamic Mobile App and Islamic eBanking channel to offer customers a superior,
Our “One Bank-One Team” approach and “Client Centric” focus propel us to offer an integrated suite of banking products and
more intuitive digital banking interface.
solutions to our clients viz. credit products, payment & trade solutions, digital banking solutions, investment advisory, forex &
interest rate risk management, and retail products (example salary, wealth management, insurance, home loans, cards, etc.)
SOCIAL CONSCIENCE
for business owners and employees. Wholesale Banking Group strives to understand client strategic goals to identify a holistic
solution thereby up-tiering themselves from relationship managers to trusted advisors, providing value enriching services and During the year, Sohar International has been involved with a number of initiatives contributing to larger national goals. The Bank’s
ensuring Sohar International is the Bank of Choice. service to the community was paramount in establishing meaningful connections as it stood by the nation to combat impacts
of COVID-19 and continued to discharge its social responsibilities, aligning these for maximised socio-economic impact. The
During the year, the Bank improved many business processes and reinvigorated the organization structure of the Wholesale
situation also provided opportunity for the Bank to further bring the best of international to Oman through various channels with
Banking Group with an objective to align the strategic business imperatives of the Bank with the present operating business
extremely relevant and engaging topics with renowned world leaders continuing to focus on educating and sharing knowledge
environment. This has allowed the Group to have pre-defined roles and responsibilities across various customer segments with
with the youth and the future of this Nation.
razor sharp focus on effective & efficient service delivery.
COVID-19 pandemic. Staying committed to the cause of the community it operates in, Sohar International has adopted measures
Wholesale Banking is positioned on the path for New-Age Banking for clients, who are strategically positioned to take advantage
to ensure that the health and wellbeing of its stakeholders and the nation at large remain priority during these unforeseen
and leverage the benefits of the digital transformation journey undertaken by the Bank. During the pandemic, the Bank has
circumstances created by the Covid-19 pandemic. The Bank continued to play a meaningful role in nurturing a sustainable society,
successfully migrated its clients from physical banking to digital banking thereby ensuring unfettered seamless banking services.
by ensuring the supply of basic necessities to severely impacted sections as well as for the healthcare workers.
A calibrated roadmap was laid out by the Bank to hand-hold the clients to our proprietary digital banking solution platform, thereby
ensuring a safe banking experience for all. More than RO 1Mn was allocated to combat the impacts of the crisis, and to support the nation in its actions towards ensuring
the safety of the people. The fund was effectively utilized to equip health workers with necessary gear and through other related
The Bank continues with its digital transformation journey and has invested into Next-Gen Transaction Banking platforms to ease
initiatives. Furthermore, the Bank supported its institutional and retail customers, including SMEs, alleviating their financial
customer experience & scale-up transaction volumes in treasury, trade and cash management. The Bank is planning to introduce
burden, by offering fee waivers and instalment deferments as well as enhancing their ‘bank from home’ experience through digital
the Next-Gen platform in a phased manner during early 2021 enabling clients to be able to process their transactions digitally
channels, higher cyber security and innovative products.
including seamless reconciliation.
In line with Central Bank of Oman directives, Sohar International & Sohar Islamic rolled out the “Modification of Personal Loans/
Sohar International has customized agreements with leading banks in US, Europe, Japan and GCC regions for respective local
Finance of Pensioners” Scheme. This comes as the Bank’s collaborative efforts to ease financial burden on pensioners.
currency payments. By leveraging extensive global network of banking relationships, we provide uninterrupted and regulatory
compliant remittances, payments services and cross border trade to clients across multiple geographies at competitive rates. Viewpoints. The Bank also engaged with its customers by continuing to bring learnings from global best practices on subjects of
local relevance through Viewpoints – Sohar International Chairman’s Forum. Prominent speakers and personalities were featured
The Investment Banking Advisory department is providing guided assistance and asset management to both Government
during the 2020 virtual sessions, who shared global insights and best practices on subjects that delve into the changing dynamics
agencies and corporates in framing the best capital structure, raising growth capital and monetizing non-core assets. The Bank’s
in different sectors across the world, in light of the Covid-19 pandemic. Majority of these were hosted virtually on the Bank’s official
asset management department has all the required platforms for investors to tap the local and international markets. Our window
YouTube page garnering wide live audience, with more than 100K Video Views across Social Media Platforms witnessing guests
to access international trading platforms with leading financial institutions provides an edge for investments for our Institutional
such as Lord Gerry Grimstone, Minister for Investment, Department for International Trade and the Department for Business,
clients. Bank’s exclusive strategic alliance with European Financial Group (EFG) has offered alternative investment opportunities
Energy and Industrial Strategy, Ms. Mina Al-Oraibi, Editor-in-Chief of The National newspaper, Dr. Reinhard Christian Zinkann, a
for institutional clients.
fourth-generation Executive Director and Co-proprietor at the 121-years old Miele Group, Ms. Maysa Jalbout, A visiting Scholar
The Global Markets team offer customized treasury services and solution to proactively manage the interest rate risk and foreign and Special Advisor, at the Massachusetts Institute of Technology and Arizona State University, and most recently Dr. Robbert
exchange risk of clients. The Global Markets team apart from securing the best-interests of the clients also deftly manages liquidity Dijkgraaf, Director and Leon Levy Professor at Institute for Advanced Study, Princeton (New Jersey), USA.
and statutory reserve requirements.

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BUSINESS
Tomohi. With the belief that the educated and skilled youth are the country’s true strength, Sohar International’s one-year
internship program, which aims at enhancing skillsets of the Omani youth to better their chances of employability, Tomohi is a first
of its kind initiative in the Sultanate to make young Omanis future ready. The batch 2 of the program was successfully on-boarded
CONTINUITY
in 2020, reasserting Tomohi’s role in advancing skills and capabilities to Omani college and university graduates in line with the
national agenda of making Oman a knowledge based society
Supporting sports tourism in Oman. The Sultanate’s abundant and diverse terrains truly make it worthy of being an international
sports tourism destination on the global map. In 2020, the Bank associated with the Oman National Cycling Championship
MANAGEMENT
organized by Oman Cycling Organization (OCA) to lead this proposition further by staying true to its purpose of promoting the
spirit of ‘Winning’ and bringing positive socioeconomic change in the country. Furthermore, the Bank sponsored Oman Open
Golf Tournament for the second year in a row as a statement towards the Bank’s continued efforts in supporting the government’s
efforts of promoting Oman as a thriving sport tourism destination and its drive to achieve optimal economic diversification across
STATEMENT
diverse avenues.
PEOPLE DEVELOPMENT
-
Bringing a truly international experience to Oman’s maturing customers, requires a strong, capable and competent team, that not
only understands current market demands, but foresees perception shifts and evolving needs. At Sohar International, the passion
and commitment of its people drives the Bank’s growth strategy, and we believe that it is of utmost importance to fuel these virtues
with the right learning, training and development opportunities.
The Bank invests heavily to provide its employees with extensive training to enhance their skillsets along with technological
upgradation of systems and processes to enable most efficient utilisation and development of talents. In line with this, a
Transformation Division had been created and manned with professionals with extensive experiences to enable positive change
underscored by the Bank’s vision of digitalisation amongst other key roles within the organisation that show a paradigm shift. In
fact, digitalisation has been a key driver of all of the Bank’s seamless operations, ensuring strategic and operational continuity
during the pandemic. The Bank ensured that extensive measures are taken to keep employees aware with relevant and related
information, through various means and channels. BCM testing of Sohar international for 2020 was successfully completed within defined scope, nevertheless the bank will ensure
a continual improvement to whole bank operations. Our BCPs and DRPs are reviewed and tested at least annually. Any areas
Sohar International is committed to Omanisation and sees this as a key pillar of its immediate plan. The organisation has promoted for improvement that are identified are tracked to ensure appropriate resolution and our plans and infrastructure updated as
Omanis and is led and managed by a local workforce across all levels. It is committed to growing national talent and creating more appropriate. Capacity and resource requirements are also reviewed periodically.
employment opportunities for Omani youth both within the Bank and in the larger community that it serves. For this purpose,
Sohar International takes pride in its Integrated Performance Management & Capability Development System – Erteqa, delivered Sohar international has established a Business Continuity Management (BCM) Program designed to minimize service disruption
in partnership with Harvard Business Publishing, which was initiated for capacity building and fostering a high-performance and the potential impact on the Bank, our customers and our staff. This includes a BCM Policy that is approved by our Board
culture. In 2020, the Bank launched Ertiqa’+ program for grooming the Middle Management under this program, that will enable together with written Business Continuity and Disaster Recovery plans and procedures that are subject to period independent
them to take on leadership roles in the future. review. Although the specific details of our BCM arrangements are confidential for security reasons, Sohar international maintains
Business Continuity Plans (BCPs) that address risk scenarios and events of varying scope including, but not exclusively, loss of
Sohar International accords the highest value to acquiring the right people, providing them with an enabling and growth services or infrastructure, denial of access, cyber-attack, pandemics and regional crises.
environment and retaining them by looking after their personal and self-actualization needs. The Bank initiated a ‘Branch Visit
Program’ for Senior Management and with digitalisation embedded in the Bank’s culture, a highly advanced cloud-based staff Sohar international BCPs are focused on maintaining critical processes, including treasury, capital & liquidity and payment services,
management platform now forms the core of Sohar International’s Human Resource Management System. providing customers with uninterrupted access to their funds and maintaining effective communications with our customers, staff
and other stakeholders.”
WAY FORWARD
2020 has provided the world with learnings to plan for uncertainties and crisis scenarios. The Bank believes that 2021 will bring a new
dawn on Oman as it progresses towards the goals laid down in its Vision 2040. The Bank’s vision and clearly defined strategic path
is aligned with the government’s vision 2040. The Bank aims at achieving excellence in everything we do, setting the organization
on a sustainable growth path and contributing to the advancement of the Sultanate’s economic diversification agenda.
2021 may continue to be challenging but the Bank is optimistic that there will be a lot of opportunities too. Moving ahead, the Bank
will be launching a number of new products and services for its customers delivered through newly developed digital platforms that
are designed to scale-up the market coverage, simplify and speed-up service delivery, while strike a balance between continuity
and change in its overall business model, which is in line with the Bank’s purpose to help customers, communities and people
proper and grow in this ever-changing world.
The Bank strives to assume an all-pervasive culture of digitalization for its internal and external stakeholders. While digitalization
will underpin all of the Bank’s initiatives and efforts, a strong people interface will be equally important.
Sohar International is confident about Oman’s steady growth under the visionary leadership of His Majesty Sultan Haitham bin
Tarik. The new five-year rolling plan will bring in new products in sync with changing customer needs, enhanced service standards
and technological adoption. The Bank will set new benchmarks as a thought leader and an institution with a social conscience by
promoting growth opportunities for young Omanis and contributing to the society at large.

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FINANCIAL
STATEMENTS
SOHAR INTERNATIONAL
Setting statements
for future success

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STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
31 December 31 December 31 December 31 December

2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
Note
ASSETS
232,655 526,312 Cash and balances with Central Bank 6 202,630 89,572
514,901 211,906 Due from banks and other money market placements 7 81,584 198,237
6,374,423 6,502,590 Loans, advances and financing, net 8 2,503,497 2,454,153
1,655,779 1,821,086 Investment securities 9 701,118 637,475
99,712 115,008 Property, equipment and fixtures 10 44,278 38,389
7,532 7,532 Investment properties 11 2,900 2,900
219,166 194,753 Other assets 12 74,980 84,379
9,104,168 9,379,187 TOTAL ASSETS 3,610,987 3,505,105
LIABILITIES
1,909,769 1,871,586 Due to banks and other money market borrowings 13 720,561 735,261
5,447,558 5,796,273 Customer deposits 14 2,231,565 2,097,310
261,101 237,034 Other liabilities 15 91,258 100,524
91,927 91,927 Subordinated loans 16 35,392 35,392
1,322 1,322 Certificates of deposit 17 509 509
7,711,677 7,998,142 TOTAL LIABILITIES 3,079,285 2,968,996
SHAREHOLDERS’ EQUITY
613,922 637,285 Share capital 18 245,355 236,360
51,797 46,852 Share premium 18 18,038 19,942
74,075 79,272 Legal reserve 19 30,520 28,519
2,566 2,566 General reserve 20 988 988
(5,748) (8,927) Fair value reserve 21 (3,437) (2,213)
36,364 54,546 Subordinated loans reserve 16 21,000 14,000
- 14,193 Impairment reserve 22 5,464 -
100,034 35,777 Retained earnings 13,774 38,513
873,010 861,564 TOTAL SHAREHOLDERS’ EQUITY 331,702 336,109
519,481 519,481 Perpetual Tier 1 capital securities 23 200,000 200,000
1,392,491 1,381,045 TOTAL EQUITY 531,702 536,109
9,104,168 9,379,187 TOTAL LIABILITIES AND EQUITY 3,610,987 3,505,105
1,020,026 1,093,631 CONTINGENT LIABILITIES 25.a 421,048 392,710

907,446 1,137,932 COMMITMENTS 25.b 438,104 349,367
Cents Cents Baizas Baizas

36.94 35.39 Net assets per share 24 136.25 142.20
The financial statements were approved and authorised for issue by the Board of Directors on 28 January 2021 and signed on
their behalf by:
____________________________ ____________________________
Chairman Board member
The accompanying notes 1 to 41 form an integral part of these financial statements
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Total Equity
536,109
17,934
531,702
20,013
(7,091)
(2,079)
-
(15,250)
-
-
-
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
Perpetual
Shareholders’ Tier 1 Capital
Securities
200,000
200,000
-
-
-
-
-
-
-
-
2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
Note
381,005 381,784 Interest income 26 146,987 146,687
(198,691) (194,847) Interest expense 27 (75,016) (76,496)
Total
Equity
336,109
17,934
-
20,013
(7,091)
331,702
(2,079)
-
(15,250)
-
-
-
182,314 186,937 Net interest income 71,971 70,191
15,205 14,803 Net income from Islamic financing and investing activities 28.b 5,699 5,854
Retained
earnings
38,513
20,013
-
20,013
(7,091)
13,774
-
(7,091)
(15,250)
(855)
(5,464)
(9,001)
74,322 37,182 Other operating income 29 14,315 28,614
271,841 238,922 TOTAL OPERATING INCOME 91,985 104,659
Subordinated Impairment
reserve
-
-
-
5,464
-
-
-
-
5,464
-
(73,706) (70,826) Staff costs (27,268) (28,377)
(37,348) (38,743) Other operating expenses 30 (14,916) (14,379)
(6,571) (7,717) Depreciation 10 (2,971) (2,530)
(117,625) (117,286) TOTAL OPERATING EXPENSES (45,155) (45,286)
loans reserve
14,000
-
-
21,000
-
-
-
-
-
7,000
NET OPERATING INCOME BEFORE
154,216 121,636 IMPAIRMENT PROVISIONS 46,830 59,373
Fair value
reserve
(2,213)
(2,079)
-
-
(3,437)
(2,079)
-
-
855
-
-
(48,949) (60,088) Loan impairment charges and other credit risk 31 (23,134) (18,845)
provisions (net)
105,267 61,548 PROFIT BEFORE TAX 23,696 40,528
General
reserve
988
-
-
988
-
-
-
-
-
-
(15,901) (9,566) Income tax expense 32.a (3,683) (6,122)
89,366 51,982 PROFIT FOR THE YEAR 20,013 34,406
Legal
reserve
28,519
-
-
30,520
-
-
-
-
-
2,001
OTHER COMPREHENSIVE INCOME /(EXPENSE)
Items that will not be reclassified to the income statement
Revaluation losses on equity instruments held at fair value
Share
premium
19,942
(1,904)
-
18,038
-
-
-
-
-
-
74,880 85,449 through other comprehensive income (FVOCI) (2,079) (749)

OTHER COMPREHENSIVE EXPENSE FOR THE
(1,945) (5,400) YEAR, NET OF INCOME TAX (2,079) (749)
Share
capital
236,360
1,904
-
245,355
-
7,091
-
-
-
-
FOR THE YEAR ENDED 31 DECEMBER 2020 (RO’000)
TOTAL COMPREHENSIVE INCOME FOR THE
STATEMENT OF CHANGES IN EQUITY

87,421 46,582 YEAR, NET OF INCOME TAX 17,934 33,657
PROFIT FOR THE YEAR

85,449 50,720 Conventional banking 19,527 32,898
Reclassification of net change in fair value of equity

3,917 1,262 Islamic banking 486 1,508
Total Total comprehensive income for the year
Additional Tier 1 coupon paid during the year

89,366 51,982 20,013 34,406
Share premium transferred to share capital
Provision for credit Impairment (BM1149)

Other comprehensive loss for the year
Cents Cents Baisas Baisas
Balance as at 31 December 2020

instruments upon de-recognition
2.65 0.51 Basic earnings per share for the year 33 1.956 10.200
Balance as at 1 January 2020
Issue of bonus shares for 2019

Dividends paid for 2019
Transfers (Note 16 & 19)

Profit for the year

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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020 (RO’000)
Total Perpetual
Share Share Legal General Fair value Subordinated Impairment Retained Shareholders’ Tier 1 Capital
capital premium reserve reserve reserve loans reserve reserve earnings Equity Securities Total Equity
Balance as at 1 January 2019 198,265 18,037 24,375 988 (2,124) 7,000 38,883 285,424 100,000 385,424
Profit for the year - - - - - - - 34,406 34,406 - 34,406
Other comprehensive loss for the year - - - - (749) - - - (749) - (749)
Total comprehensive income for the year - - - - (749) - - 34,406 33,657 - 33,657
Sohar International 2020

Issue of rights shares 38,095 - - - - - - - 38,095 - 38,095
Share premium received - 1,905 - - - - - - 1,905 - 1,905
Rights issue expenses (Note 22) - - 704 - - - - - 704 - 704
Issue of perpetual Tier 1 capital securities - - - - - - - - - 100,000 100,000
Dividends paid for 2018 - - - - - - - (11,896) (11,896) - (11,896)
Additional Tier 1 coupon paid during the year - - - - - - - (11,531) (11,531) - (11,531)
Issue expenses - Additional Tier 1 capital - - - - - - - (226) (226) - (226)
instruments upon de-recognition - - - - 683 - - (683) - - -
Reclassification of fair value of debt instruments from
FVOCI to investment securities - - - - (23) - - - (23) - (23)
Transfers (Note 16 & 19) - - 3,440 - - 7,000 - (10,440) - - -
Balance as at 31 December 2019 236,360 19,942 28,519 988 (2,213) 14,000 - 38,513 336,109 200,000 536,109
STATEMENT OF CHANGES IN EQUITY (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2020 (USD’000)
Total Perpetual
Share Share Legal General Fair value Subordinated Impairment Retained Shareholders’ Tier 1 Capital
capital premium reserve reserve reserve loans reserve reserve earnings Equity Securities Total Equity
Balance as at 1 January 2020 613,922 51,797 74,075 2,566 (5,748) 36,364 - 100,034 873,010 519,481 1,392,491
Profit for the year - - - - - - - 51,982 51,982 - 51,982
Other comprehensive loss for the year - - - - (5,400) - - - (5,400) - (5,400)
Total comprehensive income for the year - - - - (5,400) - - 51,982 46,582 - 46,582
Share premium transferred to share capital 4,945 (4,945) - - - - - - - - -

Dividends paid for 2019 - - - - - - - (18,418) (18,418) - (18,418)
Issue of bonus shares for 2019 18,418 - - - - - - (18,418) - - -
Additional Tier 1 coupon paid during the year - - - - - - - (39,610) (39,610) - (39,610)
Reclassification of net change in fair value of equity instru- - - - - 2,221 - - (2,221) - - -
ments upon de-recognition
Provision for credit impairment (BM1149) - - - - - - 14,193 (14,193) - - -
Transfers (Note 16 & 19) - - 5,197 - - 18,182 - (23,379) - - -
Balance as at 31 December 2020 637,285 46,852 79,272 2,566 (8,927) 54,546 14,193 35,777 861,564 519,481 1,381,045
5
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Total Equity
1,001,101
87,421
98,948
89,366
4,948
1,392,491
(1,945)
1,828
259,741
(30,899)
(29,950)
(587)
(60)
-
STATEMENT OF CASH FLOWS
Perpetual 31 December 31 December 31 December 31 December

Tier 1 Capital
Securities
259,740
-
-
519,481
-
-
259,741
-
-
-
-
-
2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
OPERATING ACTIVITIES
105,267 61,548 Profit before tax 23,696 40,528
Adjustments for:
Total
Shareholders’
Equity
741,361
87,421
98,948
89,366
4,948
873,010
(1,945)
1,828
-
(30,899)
(29,950)
(587)
(60)
-
6,571 7,717 Depreciation (note 10) 2,971 2,530
48,949 60,088 Loan impairment charges and other credit risk provisions, net (note 31) 23,134 18,845
2,374 179 Net losses on investments held at fair value through profit or loss (FVTPL) 69 914
(note 29)
(5) - (Profit)/Loss on sale of fixed assets - (2)
(3,213) (3,735) Income from Islamic investment activities (note 28.a) (1,438) (1,237)
Retained
earnings
100,995
89,366
-
89,366
100,034
-
-
-
(30,899)
(29,950)
(587)
(1,774)
-
(27,117)
(45,925) (48,408) Interest on investments (note 26) (18,637) (17,681)
6,364 6,382 Interest accrued on subordinated loans (note 27) 2,457 2,450
ņņņņņņ ņņņņņņ ņņņņņņ ņņņņņņ
120,382 83,771 Cash from operating activities before changes in operating assets 32,252 46,347
Impairment
reserve
-
-
-
-
-
-
-
-
-
-
-
-
and liabilities
15,805 (569) Due from banks and other money market placements (219) 6,085
(576,283) (192,823) Loans, advances and financing (74,237) (221,869)
(9,309) (7,925) Investment in held for trading securities (3,051) (3,584)
Subordinated
loans reserve
18,182
-
-
36,364
-
-
-
-
-
-
-
18,182
(100,501) 22,881 Other assets 8,809 (38,693)
(543,852) (177,826) Due to banks and other money market borrowings (68,463) (209,383)
724,551 348,722 Customer deposits 134,258 278,952
31,987 (18,647) Other liabilities (7,179) 12,315
(337,220) 57,584 Cash from operating activities 22,170 (129,830)
Fair value
reserve
(5,517)
(1,945)
-
-
(5,748)
(1,945)
-
-
-
-
-
1,774
(60)
- (3,364) (10,989) Income tax paid (4,231) (1,295)
(340,584) 46,595 Net cash (used in) / from operating activities, net of tax 17,939 (131,125)
őőőőőő őőőőőő őőőőőő őőőőőő
General
reserve
2,566
-
-
2,566
-
-
-
-
-
-
-
-
INVESTING ACTIVITIES
(155,265) (54,496) Purchase of investments, net (20,981) (59,777)
31,571 922 Proceeds from sale/redemption of investments 355 12,155
(55,169) (23,016) Acquisition of property, equipment and fixtures (8,861) (21,240)
Legal
reserve
63,312
-
-
74,075
-
1,828
-
-
-
-
-
8,935
3,816 3,488 Income from Islamic investment activities 1,343 1,469

45,925 48,408 Interest received on investments 18,637 17,681
STATEMENT OF CHANGES IN EQUITY (CONTINUED)

(129,122) (24,694) Net cash used in investing activities (9,507) (49,712)
Share
premium
46,849
-
-
4,948
51,797
-
-
-
-
-
-
-
-

FINANCING ACTIVITIES

(30,899) (18,418) Dividends paid (7,091) (11,896)
(6,364) (6,382) Interest paid on subordinated loans (2,457) (2,450)
Share
capital
514,974
98,948
-
613,922
-
-
-
-
-
-
-
-
FOR THE YEAR ENDED 31 DECEMBER 2020 (USD’000)
98,948 - Issue of rights shares - 38,095

4,948 - Share premium received - 1,905
1,829 - Rights issues expense - 704
259,740 - Issue of perpetual Tier 1 capital securities - 100,000
Reclassification of fair value of debt instruments from FVOCI
(29,951) (39,608) Interest paid on perpetual Tier 1 capital securities (15,249) (11,531)
(587) - Issue expenses of perpetual Tier 1 capital securities - (226)
297,664 (64,408) Net cash from/ (used in) financing activities (24,797) 114,601
Additional Tier 1 coupon paid during the year
(172,042) (42,507) NET CHANGE IN CASH AND CASH EQUIVALENTS (16,365) (66,236)
Issue of perpetual Tier 1 capital securities
Total comprehensive income for the year
Issue expenses - Additional Tier 1 capital
895,351 723,309 CASH AND CASH EQUIVALENT AT BEGINNING OF THE YEAR 278,474 344,710
Other comprehensive loss for the year

723,309 680,802 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 262,109 278,474
instruments upon de-recognition
Balance as at 31 December 2019

Rights issue expenses (Note 22)

Balance as at 1 January 2019
REPRESENTING:
231,356 525,013 Cash and balances with Central Bank (other than capital deposit) (note 6) 202,130 89,072
Share premium received
to investment securities
Dividends paid for 2018
Transfers (Note 16 & 19)
533,353 204,769 Due from banks and other money market placements with OM of 90 days (note 7) 78,836 205,341
Issue of rights shares
857,210 966,280 Investments securities with original maturity (OM) of 90 days (note 9.2) 372,018 330,026
Profit for the year
(898,610) (1,015,260) Due to banks and other money market borrowings with OM of 90 days (note 13) (390,875) (345,965)
723,309 680,802 262,109 278,474

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NOTES TO FINANCIAL STATEMENTS NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019 FOR THE YEAR ENDED 31 DECEMBER 2020 (CONTINUED)
1 LEGAL STATUS AND PRINCIPAL ACTIVITIES 2. BASIS OF PREPARATION (CONTINUED)

Sohar International Bank SAOG (“the Bank”) was established in the Sultanate of Oman on 4 March 2007 as a public joint stock A2.4 Use of estimates and judgments (continued)
company and is primarily engaged in commercial, investment and Islamic banking through a network of thirty commercial banking
branches and eight Islamic banking branches within the Sultanate of Oman. The Bank operates under commercial, investment and The estimates and underlying assumptions are reviewed on a regular basis. Revisions to accounting estimates are recognised in the
an Islamic banking licence issued by the Central Bank of Oman (CBO) and is covered by its deposit insurance scheme. The Bank period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the
started commercial operations from 9 April 2007. The registered address of the Bank is PO Box 44, Hai Al Mina, Postal Code 114, revision affects both current and future periods. Estimates considered by the Bank to have a significant risk of material adjustment
Muscat, Sultanate of Oman. The Bank has its primary listing on the Muscat Securities Market. in subsequent periods are discussed in note 5
With effect from 30 April 2013, the Bank obtained a license to operate an Islamic Banking Window (“Sohar Islamic”). Sohar Islamic 3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS
offers a full range of Islamic banking services and products. The principal activities of the window include accepting Shari'ah (IFRS)
compliant customer deposits, providing Shari'ah compliant financing based on Murabaha, Mudaraba, Musharaka, Ijarah, Istisna'a,
Salam and providing commercial banking services, investment and other activities permitted under Islamic Banking Regulatory 3.1 Standards, amendments and interpretations effective in 2020 and relevant for the Bank’s operations
Framework (IBRF).
For the year ended 31 December 2020, the Bank has adopted all of the new and revised standards and interpretations issued
The Bank employed 873 employees as of 31 December 2020 (31 December 2019: 871). by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee
(IFRIC) of the IASB that are relevant to its operations and effective for periods beginning on 1 January 2020.
2. BASIS OF PREPARATION
New and amended IFRS applied with no material effect on the financial statements
2.1 Statement of compliance
The following new and revised IFRSs, which became effective for annual periods beginning on or after 1 January 2020, have been
The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued adopted in these financial statements.
by International Accounting Standards Board (IASB) the relevant requirements of the Commercial Companies Law and disclosure
requirements of the Capital Market Authority of the Sultanate of Oman and the applicable regulations of the Central Bank of
New and revised IFRS Effective for annual periods
Oman (“CBO”).
beginning on or after
In accordance with the Royal Decree 69/2012 regarding the amendment in the Banking Law 2000, CBO has issued circular no. Definition of a Business - Amendments to IFRS 3 Business Combinations 1 January 2020
IB - 1 under which a complete Islamic Banking Regulatory Framework (IBRF) has been promulgated. The framework identifies the
permissible form of trade-related modes of financing including purchase of goods by banks from their customers and immediate The amendments clarify that to be considered a business, an integrated set of activities and
resale to them at appropriate profit in price on deferred payment basis. The purchases and sales arising under these arrangements assets must include, at a minimum, an input and a substantive process that together significantly
are not reflected in these financial statements as such, but are restricted to the amount of facility actually utilised and the contribute to the ability to create output. IASB also clarify that a business can exist without
appropriate portion of profit thereon. including all of the inputs and processes needed to create outputs. That is, the inputs and
processes applied to those inputs must have ‘the ability to contribute to the creation of outputs’
The Bank also prepares a separate set of financial statements for its Islamic Banking Window (IBW) in accordance with the rather than ‘the ability to create outputs’.
requirements of Section 1.2 of Title 3 of the Islamic Banking Regulatory Framework (“IBRF”) issued by the CBO. The separate set of
Amendments to References to the Conceptual Framework in IFRS Standards 1 January 2020
financial statements of its IBW are prepared in accordance with Financial Accounting Standards ("FAS") issued by Accounting and
Auditing Organization for Islamic Financial Institutions ("AAOIFI"), the Shari'ah Rules and Principles as determined by the Shari'ah Amendments to References to the Conceptual Framework in IFRS Standards related IFRS 2,
Supervisory Board of the Islamic Window (the “SSB”) and other applicable requirements of CBO. The IBWs financial statements IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22,
are then converted into International Financial Reporting Standards (IFRS) compliant financial statements and included in these and SIC-32 to update those pronouncements with regard to references to and quotes from the
financial statements. All inter branch balances and transactions have been eliminated. framework or to indicate where they refer to a different version of the Conceptual Framework.
IFRS 7 Financial Instruments: Disclosures and IFRS 9 - Financial Instruments 1 January 2020
2.2 Basis of measurement
Amendments regarding pre-replacement issues in the context of the IBOR reform
The financial statements have been prepared under the historical cost convention except for the following:
Amendments to IAS 1 and IAS 8 Definition of material
y Derivative financial instruments are measured at fair value;
y Financial instruments classified as fair value through profit or loss (FVTPL) are measured at fair value; The amendments make the definition of material in IAS 1 easier to understand and are not
y Financial assets at fair value through other comprehensive income. intended to alter the underlying concept of materiality in IFRS Standards. The concept of
'obscuring' material information with immaterial information has been included as part of the
The statement of financial position is presented in descending order of liquidity as this presentation is more appropriate to the new definition.
Bank’s operations. The threshold for materiality influencing users has been changed from 'could influence' to 'could
reasonably be expected to influence'. The definition of material in IAS 8 has been replaced by a
2.3 Functional and presentation currency
reference to the definition of material in IAS 1. In addition, the IASB amended other Standards
These financial statements are presented in Rial Omani, which is the Bank’s functional currency and also in US Dollars, for the and the Conceptual Framework that contain a definition of 'material' or refer to the term
convenience of readers. The US Dollar amounts, which are presented in these financial statements have been translated from the ‘material’ to ensure consistency.
Rial Omani amounts at an exchange rate of US Dollar 1 = RO 0.385 and RO 1 = 1000 baizas. All financial information presented in Amendment to IFRS 16 'Leases' 1 June 2020
Rial Omani and US Dollars has been rounded to the nearest thousands, unless otherwise indicated.
To provide lessees with an exemption from assessing whether a COVID-19-related rent
2.4 Use of estimates and judgements concession is a lease modification.
In preparation of the Bank’s financial statements, management requires to make certain estimates and assumptions that affect The application of above revised standards has not had impact on the amount reported for the current and prior periods but may
the reported amount of financial assets and liabilities and the resultant allowances for impairment and fair values. In particular, affect the accounting for future transactions or arrangements.
considerable judgment by management is required in the estimation of the amount and timing of future cash flows when
determining the level of allowances required for impaired loans and receivables as well as allowances for impairment provision for
unquoted investment securities. Estimates and judgments are continually evaluated and are based on historical experience and
other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results
may differ from these estimates.

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FOR THE YEAR ENDED 31 DECEMBER 2020 (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2020 (CONTINUED)
3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS 3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS
(IFRS) (CONTINUED) (IFRS) (CONTINUED)
3.2 New and amended IFRSs in issue but not yet effective and not early adopted 3.3 Interest Rate Benchmark Reforms (continued)
The Company has not yet applied the following new and revised IFRSs that have been issued but are not yet effective: In response to the announcements, The Bank has set up an IBOR transition programme which comprises the following work
streams: Risk management, Finance, Treasury, Legal and IT. The programme is under the governance of the ALCO Committee,
Effective for annual periods
chaired by the Chief Executive Officer who reports to the Board. The aim of the programme is to understand where IBOR exposures
New and revised IFRS beginning on or after
are within the business and prepare and deliver on an action plan to enable a smooth transition to alternative benchmark rates by
IFRS 17 Insurance Contracts 1 January 2023 the end of 2021. None of the Bank’s current IBOR linked contracts include adequate and robust fall back provisions for a cessation
of the referenced benchmark interest rate. Different working groups in the industry are working on fall back language for different
Available for optional instruments and different IBORs, which the Bank is monitoring closely and will look to implement these when appropriate.
Amendments to IFRS 10 and IAS 28 – Sale or Contribution of Assets between an Investor and its adoption/ effective date
Associate or Joint Venture deferred indefinitely For the Bank’s derivatives, the International Swaps and Derivatives Association’s (ISDA) fall back clauses were made available at
1 January 2023. Early the end of 2019 and the Bank will begin discussion with its correspondent banks with the aim to implement this language into its
Amendments to IAS 1 – Classification of Liabilities as Current or Non-current application is permitted ISDA agreements in early 2021 for derivatives in both the banking and trading book.
Amendments to IFRS 3 – Reference to the Conceptual Framework 1 January 2022 For the Bank’s floating rate debt, the Bank will start discussions with respective counterparties to amend the EONIA bank loan
so that the reference benchmark interest rate will change to €STR given EONIA will cease to exist in January 2022. The Bank
January 1, 2022. Early aims to finalise this amendment in the second half of 2021. For the USD LIBOR issued bond, the Bank will begin a dialogue with
Amendments to IAS 16 – Property, Plant and Equipment—Proceeds before Intended Use application permitted bondholders in 2021 to propose amendments to the fall back provisions to move from USD LIBOR to the SOFR.
January 1, 2022. Early
In respect of floating rate customer advances and deposits, the Bank’s response is focused on treating customers fairly and
Amendments to IAS 37 – Onerous Contracts—Cost of Fulfilling a Contract application permitted
considers several aspects of transition including the reduction of clients’ exposures to legacy IBOR contracts by amending or
Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and replacing existing contracts to include robust fall back provisions or replace IBOR with relevant alternative benchmark interest
IFRS 16) January 1, 2021 rates. A critical aspect of this response is also the development of new products linked to relevant alternative benchmark interest
rates. The Bank will develop a detailed communication plan with a focus on communicating with customers in a way that is clear,
Annual Improvements to IFRS Standards 2018–2020 January 1, 2022. Early
fair and not misleading.
application permitted
y IFRS 1 First-time Adoption of International Financial Reporting Standards: The amendment
Implementation of this plan will commence in 2021, and will include explanation of what will happen to contracts that mature
provides additional relief to a subsidiary which becomes a first-time adopter later than its
beyond the end of 2021 and the effect of IBOR replacement on the customer. Communications will be undertaken in good time
parent to account for cumulative translation differences.
to ensure that all customers have time to consider the options available before the end of 2021. Initial communications will focus
y IFRS 9 Financial Instruments: The amendment clarifies that in applying the ‘10 per cent’ test on raising awareness and engagement will increase with detailed discussions with all clients taking place well in advance of the
to assess whether to derecognise a financial liability. end of 2021. Our response also includes a rigorous training programme to ensure that relevant client-facing staff have adequate
knowledge and competence to understand the implications of IBORs ending and can respond to customers appropriately.
y IFRS 16 Leases: The amendment removes the illustration of the reimbursement of leasehold
improvements. The Bank will continue to apply the amendments to IFRS 9/IAS 39 until the uncertainty arising from the interest rate benchmark
reforms with respect to the timing and the amount of the underlying cash flows that the Bank is exposed ends. The Bank has
y IAS 41 Agriculture: The amendment removes the requirement in IAS 41 for entities to exclude assumed that this uncertainty will not end until the Bank’s contracts that reference IBORs are amended to specify the date the
cash flows for taxation when measuring fair value. interest rate benchmark will be replaced and the cash flows of the alternative benchmark rate and the relevant spread adjustment.
This will, in part, be dependent on the introduction of fall back clauses which have yet to be added to the Bank’s contracts and the
The Directors anticipates that these new standards, interpretations and amendments will be adopted in the Company’s financial negotiation with lenders and bondholders.
statements as and when they are applicable and adoption of these new standards, interpretations and amendments as highlighted
in previous paragraphs, may have no material impact on the financial statements of the Company in the period of initial application. 4. SIGNIFICANT ACCOUNTING POLICIES
3.3 Interest Rate Benchmark Reforms The accounting policies set out below have been applied consistently by the Bank to all periods presented in these financial
statements.
IASB issued amendments to IFRS 9, IAS 39 and IFRS 7 in September 2019 through Interest Rate Benchmark Reforms. These
amendments modify specific hedge accounting requirements to allow hedge accounting to continue for affected hedges during 4.1 Foreign currency transactions
the period of uncertainty before the hedged items or hedging instruments affected by the current interest rate benchmarks are
amended as a result of the on-going interest rate benchmark reforms. The amendments are relevant to the Bank, provided that the Transactions in foreign currencies are translated into functional currency at the spot exchange rate at the date of the transaction.
Bank hedges and applies hedge accounting to its benchmark interest rate exposure. The application of the amendments does not Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated into the functional currency
impact the Bank’s accounting as currently the Bank is not exposed to any hedge accounting relationships. at the spot exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised
cost in the functional currency at the beginning of the period, adjusted for the effective interest and payments during the period,
The Bank had significant volumes of derivative and non-derivative financial instruments, mostly within its Banking Book, that are and the amortised cost in the foreign currency translated at the spot exchange rate at the end of the period. The non-monetary
not included in hedge accounting relationships. Given hedge accounting is not applied, there is no accounting relief. The fair value assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated into the functional currency
of these financial assets and liabilities reflects the uncertainties arising from the interest rate benchmark reforms. at the spot exchange rate at the date the fair value was determined. Foreign currency differences arising on retranslation are
recognised in the statement of comprehensive income, except for non-monetary financial assets, such as equities classified as
The Bank is closely monitoring the market and the output from the various industry working groups managing the transition to new fair value through other comprehensive income, which are included in other comprehensive income. Non-monetary assets and
benchmark interest rates. This includes announcements made by LIBOR regulators (including the Financial Conduct Authority liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of
(FCA) and the US Commodity Futures Trading Commission) regarding the transition away from LIBOR (including GBP LIBOR, the transaction.
USD LIBOR and JPY LIBOR) to Sterling Overnight Index Average Rate (SONIA), the Secured Overnight Financing Rate (SOFR),
and the Tokyo Overnight Average Rate (TONA) respectively and announcements on the transition from EONIA to Euro Short
Term Rate (€STR). The FCA has made clear that, at the end of 2021, it will no longer seek to persuade, or compel, banks to submit
to LIBOR. Furthermore, EONIA will cease to be published from 3 January 2022.

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4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.2 Revenue and expense recognition 4.3 Financial instruments
4.2.a Interest income and expense 4.3.a Date of recognition and initial measurement
Interest income and expense is recorded using the effective interest rate (EIR) method for all financial instruments measured at The Bank initially recognises loans and advances, deposits, debt securities issued and subordinated liabilities on the date on which
amortised cost and financial instruments designated at FVTPL. Interest income on interest bearing financial assets measured at they originated. All other financial instruments (including regular-way purchases and sales of financial assets) are recognised on
FVOCI are recorded by using the EIR method. The calculation takes into account all contractual terms of the financial instrument the trade date, which is the date on which the Bank becomes a party to the contractual provisions of the instrument.
and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but
not future credit losses. A financial asset or financial liability is measured initially at fair value plus, for an item not at FVTPL, transaction costs that are
directly attributable to its acquisition or issue. When the fair value of financial instruments at initial recognition differs from the
The EIR (and therefore, the amortised cost of the asset) is calculated by taking into account any discount or premium on acquisition, transaction price, the Bank accounts for the Day 1 profit or loss, as described below.
fees and costs that are an integral part of the EIR. The Bank recognises interest income using a rate of return that represents the
best estimate of a constant rate of return over the expected life of the loan. Hence, it recognises the effect of potentially different 4.3.b Day 1 profit or loss
interest rates charged at various stages, and other characteristics of the product life cycle (including prepayments, penalty interest
and charges). When the transaction price of the instrument differs from the fair value at origination and the fair value is based on a valuation
technique using only inputs observable in market transactions, the Bank recognises the difference between the transaction
Interest income which is doubtful of recovery is included in impairment allowance and excluded from income until it is received in cash. price and fair value in net trading income. In those cases where fair value is based on models for which some of the inputs are not
observable, the difference between the transaction price and the fair value is deferred and is only recognised in profit or loss when
When a financial asset becomes credit-impaired (as set out in Note 4.3.f) and is, therefore, regarded as ‘Stage 3’, the Bank calculates the inputs become observable, or when the instrument is derecognised.
interest income by applying the effective interest rate to the net amortised cost of the financial asset.
4.3.c Measurement categories of financial assets and liabilities
4.2.b Fair value gains and losses
The Bank classifies all of its financial assets based on the business model for managing the assets and the asset’s contractual terms,
Fair value changes on derivatives held for risk management purposes and FVOCI are presented in other comprehensive income. measured at either:
Net income from financial assets measured at FVTPL, including all realised and unrealised fair value changes, interest, dividend y Amortised cost, as explained in note 4.3.c (i);
and foreign exchange differences are presented in the income statement for the year. y FVOCI, as explained in notes 4.3.c (iv) and 4.3.c (v); or
y FVTPL, as explained in note 4.3.c (vii)
4.2.c Dividend income
Financial liabilities, other than loan commitments and financial guarantees, are measured at amortised cost or at FVTPL when they
Dividend income is recognised when the right to receive dividend is established. are held for trading and derivative instruments at the fair value designation.
4.2.d Fees and commission The Bank classifies and measures its derivative and trading portfolio at FVTPL. The Bank may designate financial instruments at
FVTPL, if so doing eliminates or significantly reduces measurement or recognition inconsistencies.
The Bank earns fee and commission income from a diverse range of services it provides to its customers. Fee income, which is not
an integral part of the effective interest rate of a financial instrument, is accounted for based on the basis of performance obligation (i) Due from banks and other money market placements, loans, advances and financing and, financial investments at
satisfaction criteria. Fee income is measured by the Bank based on the consideration specified in a contract with a customer and amortised cost
excludes amounts collected on behalf of third parties. The Bank recognises revenue when it transfers control over a product or
service to a customer. The Bank only measures due from banks and other money market placements, loans, advances and financing and other financial
investments at amortised cost if both of the following conditions are met:
Fees and commission income and expenses that are integral to the effective interest rate on a financial asset or liability are included
in the measurement of the effective interest rate. y The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual
cash flows;
Other fees and commission income including account or loan servicing fees, advisory fee, investment management fees and sales y The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
commission are recognised as the related services are performed. Loan syndication fees and placement fees are recognised when and interest (SPPI) on the principal amount outstanding.
the loan has been arranged where either the Bank retained any package of the Loan or retained the package at equivalent risk.
Loan commitment fees for loans that are likely to be drawn down and other credit related fees are deferred (together with any The details of these conditions are outlined below.
incremental costs) and recognised as an adjustment to the EIR on the loan. When it is unlikely that a loan will be drawn down, the
loan commitment fees are recognised over the commitment period on a straight line basis. On initial recognition of an equity investment that is not held for trading, the Bank may irrevocably elect to present subsequent
changes in fair value in OCI. This election is made on an investment-by-investment basis. All other financial assets are classified
4.2.e Provisions and measured at FVTPL.
A provision is recognised if, as a result of a past event, the Bank has a present legal or constructive obligation that can be estimated In addition, on initial recognition, the Bank may irrevocably designate a financial asset that otherwise meets the requirements to
reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are equivalent be measured at amortised cost or FVOCI as FVTPL if doing so eliminates or significantly reduces an accounting mismatch that
to the amortised value of the future liabilities which is determined by discounting the expected future cash flows at a pre-tax rate would otherwise arise.
that reflects current market assessments of the time value of money and the risk specific to the liability.
y Business model assessment
4.2.f Offsetting of income and expense
The Bank makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best
Income and expenses are presented on a net basis only when permitted by the IFRS, or for gains and losses arising from a group of reflects the way the business is managed and information is provided to management. The information considered includes:
similar transactions such as those within the Bank’s trading activity.
y The stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether
4.2.g Temporary significant influence management’s strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching
the duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through
The Bank is exempt from applying the equity method when significant influence over an associate is intended to be temporary. The the sale of the assets;
temporary significant influence infers that there is an evidence that an associate is acquired with the intention to reduce its stake y How the performance of the portfolio is evaluated and reported to the Bank’s management;
that it no more has a significant influence on the investee company by soliciting investors to inject fresh capital to the investee
company. The investment is classified as available for sale in the financial statements.
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4 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.3 Financial instruments (continued) 4.3 Financial instruments (continued)
4.3.c. Measurement categories of financial assets and liabilities (continued) 4.3.c Measurement categories of financial assets and liabilities (continued)
y The risks that affect the performance of the business model (and the financial assets held within that business model) and how The Bank enters into derivative transactions with various counterparties. These include interest rate swaps, futures, cross-currency
those risks are managed; swaps, forward foreign exchange contracts and options on interest rates, foreign currencies. Derivatives are recorded at fair value
and carried as assets when their fair value is positive and as liabilities when their fair value is negative. The notional amount and fair
y How managers of the business are compensated – e.g. whether compensation is based on the fair value of the assets managed value of such derivatives are disclosed separately in Note B22. Changes in the fair value of derivatives are included in net trading
or the contractual cash flows collected; and income unless hedge accounting is applied. Hedge documentation, effectiveness assessment, and discontinuation accounting
disclosures are provided in Note A4.3.n.
y The frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales
activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Embedded derivatives:
Bank’s stated objective for managing the financial assets is achieved and how cash flows are realised.
Derivatives may be embedded in another contractual arrangement (a host contract). The Bank accounts for an embedded
The business model assessment is based on reasonably expected scenarios without taking 'worst case' or 'stress case’ scenarios into derivative separately from the host contract when:
account. If cash flows after initial recognition are realised in a way that is different from the Bank's original expectations, the Bank
does not change the classification of the remaining financial assets held in that business model, but incorporates such information y The host contract is not an asset in the scope of IFRS 9;
when assessing newly originated or newly purchased financial assets going forward. y The host contract is not itself carried at FVTPL;
y The terms of the embedded derivative would meet the definition of a derivative if they were contained in a separate contract;
Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at y The economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and
FVTPL because they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell risks of the host contract.
financial assets.
Separated embedded derivatives are measured at fair value, with all changes in fair value recognised in profit or loss unless they
y Assessment whether contractual cash flows are solely payments of principal and interest (The ‘SPPI’ test) form part of a qualifying cash flow or net investment hedging relationship. Separated embedded derivatives are presented in the
statement of financial position together with the host contract.
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is
defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding (iii) Debt instruments at FVOCI
during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as
profit margin. The Bank classifies debt instruments measured at FVOCI when both of the following conditions are met:
In assessing whether the contractual cash flows are solely payments of principal and interest, the Bank considers the contractual y The instrument is held within a business model, the objective of which is achieved by both collecting contractual cash flows and
terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the selling financial assets; and
timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, the Bank considers: y The contractual terms of the financial asset meet the SPPI test.
(i) Due from banks and other money market placements, loans, advances and financing and, financial investments at These instruments largely comprise assets that had previously been classified as financial investments available for sale under IAS 39.
amortised cost
For debt securities measured at FVOCI, gains and losses are recognised in OCI, except for the following, which are recognised in
y Contingent events that would change the amount and timing of cash flows; profit or loss in the same manner as for financial assets measured at amortised cost:
y Leverage features;
y Prepayment and extension terms; y Interest revenue using the effective interest method;
y Terms that limit the Bank’s claim to cash flows from specified assets (e.g. non-recourse asset arrangements); and features that y Expected credit loss (ECL) and reversals; and
modify consideration of the time value of money e.g. periodical reset of interest rates. yForeign exchange gains and losses.
The Bank holds a portfolio of long-term fixed rate loans for which the Bank has the option to revise the interest rate at periodic reset When debt securities measured at FVOCI are derecognised, the cumulative gain or loss previously recognised in OCI is reclassified
dates. These reset rights are limited to the market rate at the time of revision. The borrowers have an option to either accept the from equity to profit or loss.
revised rate or redeem the loan at par without penalty. The Bank has determined that the contractual cash flows of these loans are
(iv) Equity instruments at FVOCI
solely payments of principal and interest because the option varies the interest rate in a way that is consideration for the time value
of money, credit risk, other basic lending risks and costs associated with the principal amount outstanding.
Upon initial recognition, the Bank occasionally elects to irrevocably classify some of its equity investments as equity instruments
Contractual terms that introduce a more than de minimise exposure to risks or volatility in the contractual cash flows that are at FVOCI when they meet the definition of Equity under IAS 32 Financial Instruments: Presentation and are not held for trading.
unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely payments of principal and Such classification is determined on an instrument by instrument basis.
interest on the amount outstanding. In such cases, the financial asset is required to be measured at FVTPL.
Gains and losses on these equity instruments are never recycled to profit. Dividends are recognised in profit or loss as other
(ii) Derivatives recorded at fair value through profit or loss operating income when the right of the payment has been established, except when the Bank benefits from such proceeds as a
recovery of part of the cost of the instrument, in which case, such gains are recorded in OCI. Equity instruments at FVOCI are not
A derivative is a financial instrument or other contract with all three of the following characteristics: subject to an impairment assessment.
y Its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign (v) Debt issued and other borrowed funds
exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided that, in the case of a non-financial
variable, it is not specific to a party to the contract (i.e., the 'underlying'); After initial measurement, debt issued and other borrowed funds are subsequently measured at amortised cost. Amortised cost
y It requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts is calculated by taking into account any discount or premium on issued funds, and costs that are an integral part of the EIR. A
expected to have a similar response to changes in market factors; compound financial instrument which contains both a liability and an equity component is separated at the issue date.
y It is settled at a future date.

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4.3.c Measurement categories of financial assets and liabilities (continued) 4.3.d Derecognition (coninued)
(vi) Financial assets and financial liabilities at fair value through profit or loss When the Bank has transferred its rights to receive cash flows from an asset or has entered into a pass–through arrangement,
and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset,
Financial assets and financial liabilities in this category are those that are not held for trading and have been either designated the asset is recognised to the extent of the Bank’s continuing involvement in the asset. In that case, the Bank also recognises an
by management upon initial recognition or are mandatorily required to be measured at fair value under IFRS 9. Management associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations
only designates an instrument at FVTPL upon initial recognition when one of the following criteria is met. Such designation is that the Bank has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at
determined on an instrument by instrument basis: the lower of the original carrying amount of the asset and the maximum amount of consideration that the Bank could be required
to repay.
y The designation eliminates, or significantly reduces, the inconsistent treatment that would otherwise arise from measuring
the assets or liabilities or recognising gains or losses on them on a different basis; or For de-recognition due to substantial modification, refer note 4.3.p.
y The liabilities are part of a group of financial liabilities or financial assets, or both which are managed and their performance
evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or (ii) Financial liabilities
y The liabilities containing one or more embedded derivatives, unless they do not significantly modify the cash flows that would
otherwise be required by the contract, or it is clear with little or no analysis when a similar instrument is first considered that A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing
separation of the embedded derivative(s) is prohibited. financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of
(vii) Financial guarantees, letters of credit and undrawn loan commitments a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised
in profit or loss.
The Bank issues financial guarantees, letters of credit and loan commitments.
4.3.e Offsetting of financial assets and financial liabilities
Financial guarantees are initially recognised in the financial statements at fair value, being the premium received. Subsequent
to initial recognition, the Bank’s liability under each guarantee is measured at the higher of the amount initially recognised less Financial assets and financial liabilities are only offset and the net amount reported in the statement of financial position when
cumulative amortisation recognised in the statement of comprehensive income and an Expected Credit Loss (ECL) provision as there is a legally enforceable right to set off the recognised amounts and the Bank intends to either settle on a net basis or to realise
set out in Note 4.3.f. the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the
accounting standards or for gains and losses arising from a group of similar transactions.
The premium received is recognised in the statement of comprehensive income in Net fees and commission income on a straight
line basis over the life of the guarantee. 4.3. f Impairment of financial assets
Undrawn loan commitments and letters of credits are commitments under which, over the duration of the commitment, the Bank The Bank recognises loss allowances for ECL on the following financial instruments that are not measured at FVTPL:
is required to provide a loan with pre-specified terms to the customer.
y Financial assets that are debt instruments;
The nominal contractual value of financial guarantees, letters of credit and undrawn loan commitments, where the loan agreed to y Financial guarantee contracts issued;
be provided is on market terms, are not recorded in the statement of financial position. y Loan commitments issued.
(viii) Financial liabilities No impairment loss is recognised on equity investments. The Bank measures loss allowances at an amount equal to lifetime ECL,
except for other financial instruments on which credit risk has not increased significantly since their initial recognition which they
IFRS 9 largely retains the existing requirements of IAS 39 for the classification of financial liabilities. However, although under IAS
are measured as 12 month ECL.
39 all fair value changes of liabilities designated under the fair value option were recognised in profit or loss, under IFRS 9 fair value
changes are generally presented as follows: 12 month ECL are the portion of ECL that result from default events on a financial instrument that are possible within the 12 months
after the reporting date.
y The amount of change in the fair value that is attributable to changes in the credit risk of the liability is presented in OCI; and
y The remaining amount of change in the fair value is presented in profit or loss. (i) Measurement of ECL
The amount presented separately in OCI related to changes in own credit risk of a designated financial liability at FVTPL are not ECL is a probability-weighted estimate of credit losses. They are measured as follows:
recycled to profit or loss, even when the liability is derecognised and the amounts are paid. Instead, own credit gains and losses
should be reclassified to retained earnings within equity upon de-recognition of the relevant liability. y Financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e. the difference
between the cash flows due to the entity in accordance with the contract and the cash flows that the Bank expects to receive);
4.3.d Derecognition y Financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the
present value of estimated future cash flows;
(i) Financial assets y Undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to the
Bank if the commitment is drawn down and the cash flows that the Bank expects to receive;
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:
y Financial guarantee contracts: the expected payments to reimburse the holder less any amounts that the Bank expects to
y The rights to receive cash flows from the asset have expired; or recover.
y The Bank has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a ‘pass–through’ arrangement; and either:
y The Bank has transferred substantially all the risks and rewards of the asset; or
y The Bank has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of
the asset.

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4.3. f Impairment of financial assets (continued) 4.3.f Impairment of financial assets (continued)
(ii) Overview of the ECL principles (iii) The calculation of ECL
The Bank has been recording the allowance for expected credit losses for all loans and other debt financial assets not held at The Bank calculates ECL based on three probability-weighted scenarios to measure the expected cash shortfalls, discounted at
FVTPL, together with loan commitments and financial guarantee contracts, in this section all referred to as ‘financial instruments’. an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with
Equity instruments are not subject to impairment under IFRS 9. the contract and the cash flows that the entity expects to receive.
The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit losses or The mechanics of the ECL calculations are outlined below and the key elements are as follows:
LTECL), unless there has been no significant increase in credit risk since origination, in which case, the allowance is based on the 12
months expected credit loss (12mECL). y PD - The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen
at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio.
The 12mECL is the portion of LTECL that represent the ECL that result from default events on a financial instrument that are
possible within the 12 months after the reporting date. y EAD - The Exposure at Default is an estimate of the exposure at a future default date, taking into account expected changes
in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or
Both LTECL and 12mECL are calculated on either an individual basis or a collective basis, depending on the nature of the underlying otherwise, expected drawdowns on committed facilities, and accrued interest from missed payments.
portfolio of financial instruments.
y LGD - The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on
The Bank has established a policy to perform an assessment, at the end of each reporting period, of whether a financial instrument’s the difference between the contractual cash flows due and those that the Bank would expect to receive, including from the
credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring over the realisation of any collateral. It is usually expressed as a percentage of the EAD.
remaining life of the financial instrument.
(iv) Presentation of allowance for ECL in the statement of financial position
Based on the above process, the Bank groups its loans into Stage 1, Stage 2, Stage 3 and Purchased or Originated and Credit
Impaired (POCI), as described below: Based on the above process, the Bank groups its loans into Stage 1, Stage 2, Stage 3 and Purchased or Originated and Credit
Impaired (POCI), as described below:
Stage 1
When financing is first recognised, the Bank recognises an allowance based on 12 month ECL. Stage 1 financing exposure also Loss allowances for ECL are presented in the statement of financial position as follows:
includes facilities where the credit risk has improved and the financing exposure has been reclassified from Stage 2.
y Financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets;
y Loan commitments and financial guarantee contracts: generally, as a provision;
Stage 2
y Where a financial instrument includes both a drawn and an undrawn component, and the Bank cannot identify the ECL on the
When a financing exposure has shown a significant increase in credit risk since origination, the Bank records an allowance for the
loan commitment component separately from those on the drawn component: the Bank presents a combined loss allowance
LTECL. Stage 2 financing exposures also include facilities, where the credit risk has improved and the financing exposure has been
for both components. The combined amount is presented as a deduction from the gross carrying amount of the drawn
reclassified from Stage 3.
component. Any excess of the loss allowance over the gross amount of the drawn component is presented as a provision;
Stage 3 y Debt instruments measured at FVOCI: no loss allowance is recognised in the statement of financial position because the
Financing exposure considered credit-impaired. The Bank records an allowance for the LTECL. carrying amount of these assets is their fair value. However, the loss allowance is disclosed and is recognised in the fair value
reserve.
At initial recognition of a financial asset, the Bank recognises a loss allowance equal to 12 month expected credit losses. After initial
recognition, the three stages under the proposals would be applied as follows: (v) Debt instruments measured at fair value through OCI
POCI is a restructured financial exposure which results in a net present value of the future cash flows from the restructured The ECL for debt instruments measured at FVOCI do not reduce the carrying amount of these financial assets in the statement
arrangement exceeding the original carrying value by greater than 30%. of financial position, which remains at fair value. Instead, an amount equal to the allowance that would arise if the assets were
measured at amortised cost is recognised in OCI as an accumulated impairment amount, with a corresponding charge to profit or
Stage 1 loss. The accumulated loss recognised in OCI is recycled to the profit and loss upon de-recognition of the assets.
Credit risk has not increased significantly since initial recognition – recognise 12-month expected credit losses.
(vi) Purchased or originated credit impaired financial assets (POCI)
Stage 2 For POCI financial assets, the Bank only recognises the cumulative changes in LTECL since initial recognition is in the loss
Credit risk has increased significantly since initial recognition – recognise lifetime expected credit losses (this is recognising a
allowance.
provision earlier than under IAS 39 Financial assets: Recognition and Measurement) with revenue being calculated based on the
gross amount of the asset. (vii) Credit cards and other revolving facilities
Stage 3 The Bank’s product offering includes a variety of corporate and retail overdraft and credit cards facilities, in which the Bank has
There is objective evidence of impairment as at the reporting date to recognise lifetime expected credit losses, with revenue being the right to cancel and/or reduce the facilities with one day notice. The Bank does not limit its exposure to credit losses to the
based on the net amount of the asset (i.e. based on the impaired amount of the asset). contractual notice period, but instead calculates ECL over a period that reflects the Bank’s expectations of the customer behaviour,
its likelihood of default and the Bank’s future risk mitigation procedures, which could include reducing or cancelling the facilities.
The ongoing assessment of whether a significant increase in credit risk has occurred for revolving facilities is similar to other lending
products. This is based on shifts in the customer’s internal credit grade, but greater emphasis is also given to qualitative factors
such as changes in usage.
The interest rate used to discount the ECL for credit cards is based on the average effective interest rate that is expected to be
charged over the expected period of exposure to the facilities. This estimation takes into account that many facilities are repaid in
full each month and are consequently charged no interest.

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4.3.f Impairment of financial assets (continued) 4.3.h Credit-impaired financial assets (continued)
(viii) Forward looking information A loan that has been renegotiated due to a deterioration in the borrower’s condition is usually considered to be credit-impaired
unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other
In its ECL models, the Bank relies on a broad range of forward looking information as economic inputs, such as: indicators of impairment. In addition, a retail loan that is overdue for 90 days or more is considered impaired.
y Gross domestic product; In making an assessment of whether an investment in sovereign debt is credit-impaired, the Bank considers the following factors:
y Savings and investment;
y The market’s assessment of creditworthiness as reflected in the bond yields;
y Inflation;
y The rating agencies’ assessments of creditworthiness;
y Trade statistics;
y The country’s ability to access the capital markets for new debt issuance;
y Demographics;
y The probability of debt being restructured, resulting in holders suffering losses through voluntary or mandatory debt
y Revenue and expenditure;
forgiveness;
y Public debt;
y The international support mechanisms in place to provide the necessary support as ‘lender of last resort’ to that country, as
y Real estate;
well as the intention, reflected in public statements, of governments and agencies to use those mechanisms. This includes an
y Composite indicators;
assessment of the depth of those mechanisms and, irrespective of the political intent, whether there is the capacity to fulfil the
y Oil prices and production.
required criteria.
The inputs and models used for calculating ECLs may not always capture all characteristics of the market at the date of the
financial statements. To reflect this, qualitative adjustments are made as temporary adjustments to ECL when such differences are 4.3.i Amortised cost measurement
considered by management to be significant. 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 principal repayments, plus or minus the cumulative amortisation using the effective interest rate of any difference between
(ix) Collateral valuation the initial amount recognised and the maturity amount, minus any reduction for impairment.
To mitigate its credit risks on financial assets the Bank seeks to use collateral where possible. The collateral comes in various forms 4.3.j Fair value measurement
such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets and credit
enhancements such as netting agreements. Collateral, unless repossessed, is not recorded on the Bank’s statement of financial A number of the Bank’s accounting policies and disclosures require the determination of fair value, for both financial and non-
position. However, the fair value of collateral affects the calculation of ECL. It is generally assessed, at a minimum, at inception and financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on a number
re-assessed periodically based on the type of asset, for example, cash or securities relating to margining requirements, is valued of accounting policies and methods. Where applicable, information about the assumptions made in determining fair values is
daily. disclosed in the notes specific to that asset or liability. Fair value is the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on
To the extent possible, the Bank uses active market data for valuing financial assets held as collateral. Non-financial collateral, such the presumption that the transaction to sell the asset or transfer the liability takes place either:
as real estate, is valued by certified third party valuers.
• In the principal market for the asset or liability; or
(x) Write-offs • In the absence of a principal market, in the most advantageous market for the asset or liability.
Loans and debt securities are written off (either partially or in full) when there is no realistic prospect of recovery. This is generally The principal or the most advantageous market must be accessible to the Bank. The fair value of an asset or a liability is measured
the case when the Bank determines that the borrower does not have assets or sources of income that could generate sufficient using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants
cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to act in their economic best interest.
enforcement activities in order to comply with the Bank’s procedures for recovery of amounts due.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits
by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and
4.3.g Restructured financial assets
best use.
If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial The Bank uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure
difficulties of the borrower, then an assessment is made of whether the financial asset should be derecognized and ECL are fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
measured as follows:
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value
y If the expected restructuring will not result in derecognition of the existing asset, then the expected cash flows arising from the hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
modified financial asset are included in calculating the cash shortfalls from the existing asset;
y Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
y If the expected restructuring will result in derecognition of the existing asset, then the expected amortised fair value of the new
y Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or
asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This amount is included in
indirectly observable;
calculating the cash shortfalls from the existing financial asset that are discounted from the expected date of derecognition to
y Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
the reporting date using the original effective interest rate of the existing financial asset.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Bank determines whether transfers
4.3.h Credit-impaired financial assets have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to
the fair value measurement as a whole) at the end of each reporting period.
At each reporting date, the Bank assesses whether financial assets carried at amortised cost and debt financial assets carried at
FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the At each reporting date, the Bank analyses the movements in the values of assets and liabilities which are required to be re-
estimated future cash flows of the financial asset have occurred. measured or re-assessed as per the Bank’s accounting policies. For this analysis, the Bank verifies the major inputs applied in the
latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.
Evidence that a financial asset is credit-impaired includes the following observable data:
The Bank also compares the changes in the fair value of each asset and liability with relevant external sources to determine whether
y Significant financial difficulty of the borrower or issuer; the change is reasonable.
y A breach of contract such as a default or past due event;
y The restructuring of a loan or advance by the bank on terms that the Bank would not consider otherwise; For the purpose of fair value disclosures, the Bank has determined classes of assets and liabilities on the basis of the nature,
y It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
y The disappearance of an active market for a security because of financial difficulties.
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4.3.k Cash and cash equivalents 4.3.o Reclassifications

Cash and cash equivalents consist of cash in hand, unrestricted balances held with central banks and highly liquid financial assets The Bank does not reclassify its financial assets subsequent to their initial recognition, except in the period after the Bank changes
with original maturities of up to three months, which are subject to insignificant risk of changes in their fair value, and are used by its business model for managing financial assets. Financial liabilities are never reclassified. The Bank did not reclassify any of its
the Bank in management of its short term commitments. Cash and cash equivalents are carried at amortised cost in the statement financial assets or liabilities in 2020.
of financial position.
4.3.p Modifications of financial assets and liabilities
4.3.l Repurchase and resale agreements
Financial assets
Securities sold with a commitment to repurchase (repos) at a specified future date are recognised in the statement of financial
position and are measured in accordance with accounting policies for trading securities or investment securities. The counterparty If the terms of a financial asset are modified, the Bank evaluates whether the cash flows of the modified asset are substantially
liability for amounts received under these agreements is included in ‘due to banks and other money market borrowings’. The different. If the cash flows are substantially different, the original financial asset is derecognised and a new financial asset is
difference between sale and repurchase price is treated as interest expense and accrued over the life of the repo agreement. recognised at fair value. If the cash flows are not substantially different, then the modification does not result in derecognition of
the financial asset. In this case, the bank recalculates the gross carrying amount of the financial asset and recognises the amount
Securities purchased with a corresponding commitment to resell at a specified future date (reverse repos) are not recognised arising from adjusting the gross carrying amount as a modification gain or loss in the statement of comprehensive income. If
in the statement of financial position and the amounts paid under these agreements are included in ‘due from banks and other such a modification is carried out because of financial difficulties of the borrower, then the gain or loss is presented together with
money market placements’. The difference between purchase and resale price is treated as interest income and accrued over the impairment losses. In other cases, it is presented as interest income.
life of the reverse repo agreement.
If the terms of a financial asset were modified because of financial difficulties of the borrower and the asset was not derecognised,
4.3.m Acceptances then impairment of the asset was measured using the pre-modification interest rate.
Acceptances are disclosed on the statement of financial position under other assets with corresponding liability disclosed under Financial liabilities
other liabilities. Therefore, there is no off-balance sheet commitment for acceptances.
The Bank derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially
4.3.n Derivatives held for risk management purposes different. In this case, a new financial liability based on the modified terms is recognised at either amortised cost or fair value. The
difference between the carrying amount of the financial liability derecognised and the new financial liability with modified terms is
Derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as trading assets or recognised in the statement of comprehensive income.
trading liabilities. Derivatives held for risk management purposes are measured at fair value in the statement of financial position.
The treatment of changes in their fair value depends on their classification into the following categories: 4.4 Property, equipment and fixtures
(i) Fair value hedge Items of property, equipment and fixtures are measured at historical cost less accumulated depreciation and impairment losses.
Historical cost includes expenditure that is directly attributable to the acquisition of the asset and preparing the asset for its
When a derivative is designated as a hedge of the change in fair value of a recognised asset or liability or a firm commitment, intended use. Depreciation is provided on a straight-line basis over the estimated useful lives of property, equipment and fixtures,
changes in the fair value of the derivative are recognised immediately in statement of comprehensive income together with except freehold land. The estimated useful lives for the current year are as follows:
changes in the fair value of the hedged item that are attributable to the hedged risk.
Asset Years
If the derivative expires or is sold, terminated, or exercised, no longer meets the criteria for fair value hedge accounting, or the
designation is revoked, hedge accounting is discontinued. Any adjustment up to that point, to a hedged item for which the Motor vehicles 5
effective interest method is used, is amortised to profit or loss as part of the recalculated effective interest rate of the item over its
Furniture and fixtures 6-7
remaining life.
Office equipment 6-7
(ii) Cash flow hedge
Production software 10
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk
Land and capital work in progress are not depreciated, but tested for impairment. The assets’ residual values, useful lives and
associated with a recognised asset or a liability or a highly probable forecast transaction that could affect profit or loss, the effective
depreciation methods are reviewed and adjusted if appropriate at each reporting date.
portion of changes in the fair value of the derivative is recognised in other comprehensive income in hedging reserve. The amount
recognised in other comprehensive income is reclassified to profit or loss as a reclassification adjustment in the same period as An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
the hedged cash flows affect profit or loss, and in the same line item in the statement of comprehensive income. Any ineffective estimated recoverable amount.
portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within
If the hedging derivative expires or is sold, terminated, or exercised, or the hedge no longer meets the criteria for cash flow hedge ‘other operating income’ in the statement of comprehensive income.
accounting, or the hedge designation is revoked, then the hedge accounting is discontinued prospectively. In a discontinued
hedge of a forecast transaction the cumulative amount recognised in other comprehensive income from the period when the Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
hedge was effective is reclassified from the equity to statement of comprehensive income as a reclassification adjustment when probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured
the forecast transaction occurs and affects profit or loss. If the forecast transaction is no longer expected to occur, then the balance reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the profit or
in other comprehensive income is reclassified immediately to profit or loss as a reclassification adjustment. loss during the financial period in which they are incurred.
(iii) Other non-trading derivative 4.5 Investment properties

When a derivative is not held for trading, and is not designated in a qualifying hedge relationship, all changes in its fair value are Investment properties comprise plots of land received by the Bank as grant from the Government of Sultanate of Oman during
recognised immediately in statement of comprehensive income. the year 2008. These are currently held for an undetermined business use and not occupied by the Bank. These are carried at the
average valuation of the two professional valuators carried out during 2008. Subsequent to initial measurement these properties
are carried at cost less accumulated impairments, if any.

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4.6 Deposits, debt securities issued and subordinated liabilities 4.10 Employee benefits
All money market and customer deposits are initially measured at fair value plus transaction cost and subsequently carried at 4.10.a Terminal benefits
amortised cost. Deposits, debt securities issued and subordinated liabilities are measured at their amortised cost using the
effective interest method. End of service benefits are accrued in accordance with the terms of employment of the Bank's employees at the reporting date,
having regard to the requirements of the Oman Labour Law 2003, as amended.
The Bank classifies capital instruments as financial liabilities or equity instruments in accordance with the substance of the
contractual terms of the instrument. Contributions to a defined contribution retirement plan and occupational hazard insurance for Omani employees in accordance
with the Omani Social Insurances Law of 1991 are recognised as an expense in the statement of comprehensive income as incurred.
4.7 Taxation
4.10.b Short term benefits
Taxation is provided in accordance with Omani fiscal regulations. Income tax comprises current and deferred tax. Income tax
expense is recognised in the statement of comprehensive income except to the extent that it relates to items recognised directly Short term benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
in equity or other comprehensive income.
A provision is recognised for the amount expected to be paid if the Bank has a present legal or constructive obligation to pay this
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the amount as a result of past service provided by the employee and the obligation can be estimated reliably.
reporting date, and any adjustment to tax payable in respect of previous years.
4.11 Earnings per share
Deferred tax assets/liabilities are calculated using the liability method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is The Bank presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the
measured at the tax rates that are expected to be applied to the temporary difference when they reverse, based on the laws that profit or loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding
have been enacted or substantively enacted by the reporting date. during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and weighted
average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which notes or similar instruments.
the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised. 4.12 Dividend on ordinary shares
4.8 Leases Dividends on ordinary shares are recognised as a liability and deducted from equity when they are approved by the shareholders.
Interim dividends are deducted from equity when they are paid.
Operating lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over
the lease term. Dividends for the year that are approved after the reporting date are disclosed as an event subsequent to balance sheet date.
IFRS 16 results in accounting for most leases by a lessee within the scope of the standard in a manner similar to that in which finance 4.13 Segment reporting
leases were accounted for under IAS 17 ‘Leases’. Lessees recognise a ‘right of use’ asset and a corresponding financial liability
on the statement of financial position. The right of use asset is amortised over the length of the lease, and the financial liability An operating segment is the component of the Bank that engages in business activities from which it may earn revenues and incur
is measured at amortised cost. Lessor accounting remains substantially the same as under IAS 17. The Bank applied the IFRS 16 expenses, including revenue and expenses that relate to transactions with any of the Bank’s other components, whose operating
standard using a modified retrospective approach and therefore comparatives are not restated. results are reviewed regularly by the Bank’s CEO (being the chief operating decision maker) to make decisions about resources
allocated to each segment and assess its performance, and for which discrete financial information is available.
The Bank initially measures the right-of-use asset at cost; and the lease liability at the present value of the future lease payments.
The amount is discounted using the interest rate implicit in the lease if this can be readily determined; otherwise, the incremental 4.14 Directors’ remuneration and sitting fees
borrowing rate. The commencement date is the date on which a lessor makes an underlying asset available for use. After initial
recognition, the Bank measures the right-of-use asset at cost less accumulated amortization and accumulated impairment losses. The Directors’ remuneration is governed by the Commercial Companies Law regulations issued by the Capital Market Authority
and the Articles of Association of the Company.
After initial recognition, the Bank measures the lease liability by (a) increasing the carrying amount to reflect interest on the lease
liability; (b) reducing the carrying amount to reflect the lease payments made; and (c) remeasuring the carrying amount to reflect The Annual General Meeting determines and approves the remuneration and the sitting fees for the Board of Directors and its sub-
any reassessment or lease modifications, or to reflect revised in-substance fixed lease payments. Interest on the lease liability is committees provided such fees, in accordance with Article 106 of the Commercial Companies Law of Oman of 1974 as amended,
the amount that produces a constant periodic rate of the interest on the remaining balance of the lease liability. The periodic rate shall not exceed 5% of the annual net profit after deduction of the legal reserve and the optional reserve and the distribution of
of interest is the rate used to discount the lease payments to calculate the lease liability. dividends to the shareholders provided that such fees does not exceed RO 200,000. The sitting fee for each Director does not
exceed RO 10,000 in any one year.
4.9 Financial guarantees
4.15 Perpetual Tier I Capital Securities
Financial guarantees are contracts that require the issuer to make specified payments to reimburse the beneficiary for a loss
incurred because the debtor fails to make payments when due, in accordance with the terms of the debt. Such guarantees are The Bank classifies Perpetual Tier I Capital Securities as financial liabilities or equity instruments in accordance with the substance
given to banks, financial institutions or other entities on behalf of the customers. of the contractual terms of the Tier I Capital Securities. The Bank’s Perpetual Tier I Capital Securities are not redeemable by holders
and bear an
Financial guarantees are initially recognised in the financial statements at fair value on the date the guarantee was issued.
Subsequent to initial recognition, the Bank’s liabilities under such guarantees are measured at the higher of initial measurement, entitlement to distribution that is non-cumulative and at the discretion of the Board of Directors. Accordingly, they are presented
less amortisation calculated to recognise in the statement of comprehensive income the fee income earned on the straight line as component of total equity.
basis over the life of the guarantee and the best estimate of the expenditure required to settle any financial obligation arising
at the reporting date. These estimates are determined based on experience of similar transactions and history of past losses,
supplemented by the judgment of management. Any increase in the liability relating to guarantees is taken to the statement of
comprehensive income. For ECL assessment on financial guarantees ref note 4.3f.

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5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS 5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect 5.6 Determination of Lease term
the application of accounting policies and reported amounts of assets, liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the In determining the lease term, the Bank considers all facts and circumstances. Extension options (or periods after termination
circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The Bank considers
not readily apparent from other sources. The resulting accounting estimates will, by definition, seldom equal the related actual the nature and enforceability of extension clause in the lease agreement, the value of leasehold improvements, penalties on
results. termination, costs and business disruption required to replace the leased premises as factors to determine the lease term. Lease
agreements for premises occupied by the Bank may contain an extension option, where the Bank has not considered extension
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in options after analysing above factors.
the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods
if the revision affects both current and future periods. The Bank’s significant accounting estimates are on: Lease term is reassessed if an option is actually exercised (or not exercised) or the Bank becomes obliged to exercise (or not
exercise) it. The assessment is only revised if a significant event or a significant change in circumstances occurs which affects this
5.1 Inputs, assumptions and techniques used for ECL calculation – IFRS 9 Methodology assessment and that is within the control of the Bank. During the financial year, the Bank has not revised its assessment of lease
term as no significant events or changes occurred.
The measurement of impairment losses both under IFRS 9 and IAS 39 across all categories of financial assets requires judgement,
in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment 5.7 Impact of COVID-19
losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in
which can result in different Levels of allowances. The Bank’s ECL calculations are outputs of complex models with a number of Certain judgments were involved in determining the ECL impact of COVID-19 deferrals as detailed in note 38.
underlying assumptions regarding the choice of variable inputs and their interdependencies. Elements of the ECL models that are
considered accounting judgements and estimates include:
6 CASH AND BALANCES WITH CENTRAL BANK
y The Bank’s internal credit grading model, which assigns PD to the individual grades;
y The Bank’s criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets should 31 December 31 December 31 December 31 December
be measured on a LTECL basis and the qualitative assessment; 2019 2020 2020 2019
y The segmentation of financial assets when their ECL is assessed on a collective basis; USD’000 USD’000 RO’000 RO’000
y Development of ECL models, including the various formulas and the choice of inputs; 70,044 75,779 Cash 29,175 26,967
y Determination of associations between macroeconomic scenarios and economic inputs, such as unemployment levels and
1,312 1,317 Capital deposit with CBO 507 505
collateral values, and the effect on PD, EAD and LGD;
y Selection of forward looking macroeconomic scenarios and their probability weightings, to derive the economic inputs into the 161,299 449,216 Balance with CBO 172,948 62,100
ECL models.
232,655 526,312 202,630 89,572
5.2 Fair value of derivatives and other financial instruments
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is (i) The Capital deposit with CBO cannot be withdrawn without CBO approval.
determined by using valuation techniques. The Bank uses its judgement to select a variety of methods and makes assumptions
(ii) During the year average minimum balance to be kept with CBO as statutory reserves is RO 86.694 million
that are mainly based on market conditions existing at the end of each reporting period. The Bank uses expected cash flow analysis
(2019: RO 76.89 million).
for certain FVOCI that are not traded in active markets.
5.3 Fair value estimation of unquoted securities

7 DUE FROM BANKS AND OTHER MONEY MARKET PLACEMENTS
In cases where the underlying assets are fair valued such as private equity funds, management uses net assets value. Management
believes that net assets values of these investments are representative of their fair values as the majority of the underlying assets 31 December 31 December 31 December 31 December
are fair valued and the reported net assets of those entities takes into account the updated fair values changes. 2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
5.4 Fee and commission income Local currency:
12,990 976 Money market placements 376 5,001
The recognition of fee and commission income depends on the purpose for which fees are assessed and the basis of accounting
for any associated financial instrument. Management applies certain assumptions and judgements to determine the fees that are 12,990 976 376 5,001
an integral part of the effective interest rate of a financial instrument, fees that are earned as services are provided, and fees that
are earned on the execution of a significant act.
Foreign currency:
5.5 Taxation 465,044 84,080 Money market placements 32,371 179,042
6,605 7,060 Lending to banks 2,718 2,543
Uncertainties exist with respect to the interpretation of tax regulations and the amount and timing of future taxable income. Given
32,381 119,873 Demand balances 46,151 12,467
the wide range of business relationships and nature of existing contractual agreements, differences arising between the actual
results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income
504,030 211,013 81,240 194,052
and expense already recorded. The Bank establishes provisions, based on reasonable estimates, for possible consequences
of finalisation of tax assessments of the Bank. The amount of such provisions is based on various factors, such as experience of
517,020 211,989 81,616 199,053
previous tax assessments and differing interpretations of tax regulations by the taxable entity and the responsible tax authority.
Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available (2,119) (83) Expected credit loss allowance (32) (816)
against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax
assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning 514,901 211,906 81,584 198,237
strategies.

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7. DUE FROM BANKS AND OTHER MONEY MARKET PLACEMENTS (CONTINUED) 8 LOANS, ADVANCES AND FINANCING, NET
The analysis of changes in the gross carrying amount and corresponding ECL allowance on due from banks and other money
market placements is as follows: 2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
31 December 31 December 4,333,712 4,404,777 Corporate 1,695,839 1,668,479
Gross carrying amount 2020 2019
RO’000 RO’000 2,340,275 2,431,875 Retail 936,272 901,006
Stage 1 Stage 2 Stage 3 Total Total

6,673,987 6,836,652 Gross loans, advances and financing 2,632,111 2,569,485
As at 1 January 198,129 924 - 199,053 121,845
New assets originated or purchased 39,807 - - 39,807 84,831
(258,878) (276,475) Expected credit loss allowance (106,443) (99,668)
Assets derecognised or matured (156,320) (924) - (157,244) (7,623)
(40,686) (57,587) Contractual interest not recognised (22,171) (15,664)
As at 31 December 81,616 - - 81,616 199,053

(299,564) (334,062) (128,614) (115,332)
6,374,423 6,502,590 Net loans, advances and financing 2,503,497 2,454,153

31 December 31 December
Gross carrying amount 2020 2019
USD’000 USD’000 Gross loans, advances and financing include RO 264.549 million (31 December 2019: RO 216.59 million) under Islamic mode of
Stage 1 Stage 2 Stage 3 Total Total financing through Sohar Islamic financing activities.
As at 1 January 514,621 2,399 - 517,020 316,481 Loans, advances and financing comprise:
New assets originated or purchased 103,395 - - 103,395 220,340
Assets derecognised or matured (406,027) (2,399) - (408,426) (19,801) 31 December 31 December 31 December 31 December
2019 2020 2020 2019
As at 31 December 211,989 - - 211,989 517,020 USD’000 USD’000 RO’000 RO’000
6,015,829 6,240,704 Loans 2,403,050 2,316,094
276,379 257,335 Overdrafts 99,074 106,406
31 December 31 December 244,426 214,096 Loans against trust receipts 82,427 94,104
ECL 2020 2019
137,353 124,517 Bills discounted 47,560 52,881
RO’000 RO’000
6,673,987 6,836,652 Gross loans, advances and financing 2,632,111 2,569,485
As at 1 January 787 29 - 816 442
Net (release)/charge for the year (note 31) (755) (29) - (784) 374
(258,878) (276,475) Expected credit loss allowance (106,443) (99,668)
As at 31 December 32 - - 32 816 (40,686) (57,587) Contractual interest not recognised (22,171) (15,664)
(299,564) (334,062) (128,614) (115,332)
6,374,423 6,502,590 Net loans, advances and financing 2,503,497 2,454,153

ECL 2020 2019
USD’000 USD’000
As at 1 January 2,044 75 - 2,119 1,148
Net (release)/charge for the year (C6) (1,961) (75) - (2,036) 971
As at 31 December 83 - - 83 2,119

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8 LOANS, ADVANCES AND FINANCING, NET (CONTINUED) 8 LOANS, ADVANCES AND FINANCING, NET (CONTINUED)
The analysis of changes in the gross carrying amount and corresponding ECL allowance on loans, advances and financing is as follows:
Gross carrying amount Stage 1 Stage 2 Stage 3 Total
USD’000 USD’000 USD’000 USD’000
Gross carrying amount Stage 1 Stage 2 Stage 3 Total As at 1 January 2020 5,434,016 917,963 322,008 6,673,987
RO’000 RO’000 RO’000 RO’000
New assets originated or purchased 1,346,445 123,000 39,348 1,508,793
As at 1 January 2020 2,092,096 353,416 123,973 2,569,485
Assets derecognised or repaid (1,136,641) (136,167) (26,255) (1,299,063)
New assets originated or purchased 518,382 47,355 15,149 580,886
Loans written off - (678) (535) (1,213)
Assets derecognised or repaid (437,607) (52,425) (10,108) (500,140)
Loans brought back from memorandum portfolio - - (46,540) (46,540)
Loans written off - (261) (206) (467)
Loans brought back from memoranda portfolio - - 688 688
Loans transferred to memoranda portfolio - - (17,918) (17,918)
Transfers to Stage 1 121,405 (119,135) (2,270) -
Transfers to Stage 2 (207,205) 209,599 (2,394) -
Transfers to Stage 1 46,741 (45,867) (874) -
Transfers to Stage 3 (23,639) (100,327) 123,966 -
Transfers to Stage 2 (79,774) 80,696 (922) -
Transfers to Stage 3 (9,101) (38,626) 47,727 - At 31 December 2020 5,534,381 894,255 408,016 6,836,652
At 31 December 2020 2,130,737 344,288 157,086 2,632,111
ECL Stage 1 Stage 2 Stage 3 Total

USD’000 USD’000 USD’000 USD’000
ECL Stage 1 Stage 2 Stage 3 Total As at 1 January 2020 (Note A6 i) 28,081 108,429 122,368 258,878
RO’000 RO’000 RO’000 RO’000
Expected credit losses recognised 3,782 38,701 69,803 112,286
As at 1 January 2020 10,811 41,745 47,112 99,668
Recoveries from expected credit losses (22,412) (22,769) (2,434) (47,615)
Expected credit losses recognised 1,456 14,900 26,874 43,230
Recoveries from expected credit losses (8,629) (8,766) (937) (18,332)
Loans written off - (261) (206) (467)
Transfers to Stage 3 (343) (13,031) 13,374 -
At 31 December 2020 13,312 108,205 154,958 276,475
At 31 December 2020 5,125 41,659 59,659 106,443

USD’000 USD’000 USD’000 USD’000
RO’000 RO’000 RO’000 RO’000 As at 1 January 2019 4,742,210 1,137,470 199,956 6,079,636
As at 1 January 2019 1,825,751 437,926 76,983 2,340,660 New assets originated or purchased 2,135,309 440,234 47,304 2,622,847
New assets originated or purchased 822,094 169,490 18,212 1,009,796 Assets derecognized or repaid (1,507,636) (469,790) (51,070) (2,028,496)
Assets derecognised or repaid (580,440) (180,869) (19,662) (780,971) Transfers to Stage 1 323,964 (319,681) (4,283) -
Transfers to Stage 1 124,726 (123,077) (1,649) - Transfers to Stage 2 (184,699) 189,143 (4,444) -
Transfers to Stage 2 (71,109) 72,820 (1,711) - Transfers to Stage 3 (75,132) (59,413) 134,545 -
At 31 December 2019 5,434,016 917,963 322,008 6,673,987
At 31 December 2019 2,092,096 353,416 123,973 2,569,485

Stage 1 Stage 2 Stage 3 Total USD’000 USD’000 USD’000 USD’000
ECL
RO’000 RO’000 RO’000 RO’000 As at 1 January 2019 32,974 87,348 85,779 206,101
As at 1 January 2019 12,695 33,629 33,025 79,349 Expected credit losses recognised 7,865 54,533 30,600 92,998
Expected credit losses recognised 3,028 20,995 11,781 35,804 Recoveries from expected credit losses (25,600) (15,704) (727) (42,031)
Recoveries from expected credit losses (9,856) (6,046) (280) (16,182) Loans brought back from memorandum accounts - - 1,810 1,810
Loans brought back from memorandum portfolio - - 697 697 Transfers to Stage 1 16,327 (14,951) (1,376) -
Transfers to Stage 2 (2,371) 4,351 (1,980) -
Transfers to Stage 2 (913) 1,675 (762) -
At 31 December 2019 28,081 108,429 122,368 258,878
At 31 December 2019 10,811 41,745 47,112 99,668

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8 LOANS, ADVANCES AND FINANCING, NET (CONTINUED) 9 INVESTMENT SECURITIES

The analysis of the changes in contractual interest not recognized is as follows:
2019 2020 2020 2019
31 December 31 December 31 December 31 December USD’000 USD’000 RO’000 RO’000
2019 2020 2020 2019 Equity Investments:
USD’000 USD’000 RO’000 RO’000
16,512 16,075 Held at FVOCI 6,189 6,357
Contractual interest not recognized
24,366 40,686 Balance at beginning of year 15,664 9,381 16,512 16,075 Total Equity Investments 6,189 6,357
20,675 26,205 Not recognised during the year 10,089 7,960
(4,355) (9,304) Written back due to recovery (3,582) (1,677) Debt Investments:
263,034 249,727 Held at FVTPL 96,145 101,268
40,686 57,587 Balance at end of the year 22,171 15,664 857,210 982,138 Held at FVOCI 378,123 330,026
(73) (2,286) Less : Expected credit loss allowance (880) (28)
All loans and advances require payment of interest, some at fixed rates and others at rates that reprice prior to maturity. Interest
reserve account is maintained to comply with rules, regulations and guidelines issued by CBO on loans, advances and financing 857,137 979,852 FVOCI debt investments (net) 377,243 329,998
that are impaired. As of 31 December 2020, loans and advances on which interest was not being accrued or where interest was
reserved amounted to RO 157.086 million. (31 December 2019: RO 123.973 million). 523,013 577,055 Held at amortised cost 222,166 201,360
(3,917) (1,623) Less : Expected credit loss allowance (625) (1,508)
Concentration of gross loans and advances by economic sector::
519,096 575,432 Held at amortised cost (net) 221,541 199,852
2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000 1,639,267 1,805,011 Total Debt Investments 694,929 631,118
2,340,281 2,431,873 Personal 936,271 901,008

1,655,779 1,821,086 Total Investment securities 701,118 637,475
991,834 979,919 Construction 377,269 381,856
870,779 751,117 Wholesale and retail 289,180 335,250
9.1 Held at FVTPL
1,003,345 1,118,790 Services 430,734 386,288
230,309 204,673 Financial institutions 78,799 88,669 31 December 31 December 31 December 31 December
157,545 153,992 Transport and communication 59,287 60,655 2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
611,758 714,397 Manufacturing 275,043 235,527
Quoted equity investments -– Oman
33,016 49,106 International trade 18,906 12,711
163,922 197,784 Mining and quarrying 76,147 63,110 1,299 - Service sector - 500
215,416 208,826 Electricity, gas and water 80,398 82,935 Unquoted equity investments - Oman
50,104 22,488 Non – resident 8,658 19,290 6,494 6,494 Service sector 2,500 2,500
5,678 3,687 Other 1,419 2,186 Quoted debt investments – Foreign

3,363 304 Service sector 117 1,295
6,673,987 6,836,652 2,632,111 2,569,485 Quoted debt investments – Oman
230,826 237,940 Government development bonds 91,607 88,868
21,052 4,989 Sukuk trust certificates – secured 1,921 8,105
263,034 249,727 Total FVTPL investments 96,145 101,268
y As at 31 December 2020, unquoted securities include an investment of RO 2.50 million in the Oman Development Fund
SAOC (“Fund”). The Fund was incorporated on 7 May 2014 under license no. 1196427 with the Bank being the founder
shareholder. The purpose of the Fund is to identify mid-segment industrial and manufacturing sectors that leverage Oman’s
unique advantages such as its infrastructure, tax treaties, geography and natural mineral resources for potential investment
opportunities. The Bank currently holds a 12.66% stake in the Fund (31 December 2019: 12.66%). The Bank has an Investment
Management Agreement with the Fund.

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9 INVESTMENT SECURITIES (CONTINUED) 9 INVESTMENT SECURITIES (CONTINUED)

9.2 Held at FVOCI 9.2 Held at FVOCI (continued)
Carrying / Carrying /
The analysis of changes in the ECL allowance on debt investments classified as FVOCI is as follows:
fair value Cost fair value Cost
31 December 31 December 31 December 31 December 31 December
2020 2020 2019 2019 Stage 1 Stage2 Stage3 Total 2018
RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
Quoted equity investments – Oman Balance as at 1 January 2019 28 - - 28 23
Service Sector 6,189 7,669 6,357 8,535 Expected credit losses recognised (14) 866 - 852 5
Unquoted equity investments – Oman
At 31 December 2020 14 866 - 880 28
Service sector - 34 - 34
Total equity investments 6,189 7,703 6,357 8,569 y Treasury bills include investments in USD Treasury bills of RO 342.03 million (31 December 2019: RO 330.57 million) assigned
as collaterals against the bank’s borrowings of RO 329.03 million (31 December 2019: RO 354.20 million).
Quoted debt investments – Oman
y In 2020, the Bank received dividends of RO 0.46 million from its FVOCI equities (2019: RO 1.37), recorded as other operating
Real estate 6,105 7,854 - -
income.
Less : Expected credit loss allowance (866) - - -
9.3 Held at amortised cost
5,239 7,854 - -
Quoted debt investments – Foreign 31 December 31 December 31 December 31 December
Treasury bills 372,018 372,025 330,026 330,572 2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
Less : Expected credit loss allowance (14) - (28) -
372,004 372,025 329,998 330,572 453,410 516,935 Government Development Bonds 199,020 174,563
69,603 60,120 Service sector 23,146 26,797
Total debt investments 377,243 379,879 329,998 330,572
523,013 577,055 222,166 201,360
Total investments held at FVOCI 383,432 387,582 336,355 339,141 (3,917) (1,623) Expected credit loss allowance (625) (1,508)
519,096 575,432 Total 221,541 199,852

Carrying / Carrying /
fair value Cost fair value Cost
31 December 31 December 31 December 31 December The analysis of changes in the fair value and the corresponding ECL allowance on debt investments classified as held at amortised
2020 2020 2019 2019 cost is as follows:
USD’000 USD’000 USD’000 USD’000
Quoted equity investments – Oman Gross carrying amount Stage 1 Stage 2 Stage 3 Total
Service Sector 16,075 19,919 16,512 22,169 RO’000 RO’000 RO’000 RO’000
Unquoted equity investments – Oman Balance as at 1 January 2020 173,329 28,031 - 201,360
Service sector - 88 - 88 New assets originated or purchased 20,806 - 20,806

Transfer to stage 1 25,294 (25,294) - -
16,075 20,008 16,512 22,257
At 31 December 2020 219,429 2,737 - 222,166
Real estate 15,857 20,400 - -
Less : Expected credit loss allowance (2,249) - - - Stage 1 Stage 2 Stage 3 Total
ECL RO’000 RO’000 RO’000 RO’000
13,608 20,400 - - Balance as at 1 January 2019 618 890 - 1,508

Quoted debt investments – Foreign Expected credit losses recognised/(released) (51) (832) - (883)
Treasury bills 966,280 966,299 857,210 858,629
At 31 December 2020 567 58 - 625
Less : Expected credit loss allowance (36) - (73) -
966,244 966,299 857,137 858,629
Total debt investments 979,852 986,699 857,137 858,629
Total investments held at FVOCI 995,927 1,006,706 873,649 880,886

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9 INVESTMENT SECURITIES (CONTINUED) 10 PROPERTY, EQUIPMENT AND FIXTURES
9.3 Held at amortised cost (continued) Furniture Capital

Freehold Computer and Office Motor work –in-
Stage 1 Stage 2 Stage 3 Total land software fixtures equipment vehicles progress Total
Gross carrying amount RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
RO’000 RO’000 RO’000 RO’000
Cost:
Balance as at 1 January 2019 118,100 24,047 - 142,147
1 January 2020 20,509 18,741 7,332 7,995 945 4,271 59,793
New assets originated or purchased 55,229 3,984 - 59,213
Additions - 2,252 4,024 1,056 - 1,528 8,860
At 31 December 2019 173,329 28,031 - 201,360 Transfers/disposals - - - - - - -
As at 31 December 2020 20,509 20,993 11,356 9,051 945 5,799 68,653
ECL Stage 1 Stage 2 Stage 3 Total Accumulated depreciation:

RO’000 RO’000 RO’000 RO’000
1 January 2020 - 9,928 4,772 5,889 815 - 21,404
Balance as at 1 January 2019 319 677 - 996
Depreciation - 1,480 847 587 57 - 2,971
Expected credit losses recognised 299 213 - 512
As at 31 December 2020 - 11,408 5,619 6,476 872 - 24,375
At 31 December 2019 618 890 - 1,508
Net book value as at
31 December 2020 (RO’000) 20,509 9,585 5,737 2,575 73 5,799 44,278
Stage 1 Stage 2 Stage 3 Total
USD’000 USD’000 USD’000 USD’000 31 December 2020 (USD’000) 53,270 24,896 14,901 6,688 190 15,063 115,008
New assets originated or purchased 54,042 - - 54,042
Transfer to stage 1 65,699 (65,699) - - Capital
Freehold Computer Furniture Office Motor work –in-
At 31 December 2020 569,946 7,109 - 577,055 land software and fixtures equipment vehicles progress Total
RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
Cost:
Stage 1 Stage 2 Stage 3 Total 1 January 2019 4,100 17,223 5,466 7,043 929 3,789 38,550
USD’000 USD’000 USD’000 USD’000 Additions 16,409 539 575 867 16 2,843 21,249
Balance as at 1 January 2020 1,605 2,312 - 3,917 Transfers/ disposals - 979 1,291 85 - (2,361) (6)
Expected credit losses recognised (133) (2,161) - (2,294)

As at 31 December 2019 20,509 18,741 7,332 7,995 945 4,271 59,793
At 31 December 2020 1,472 151 - 1,623 Accumulated depreciation:

1 January 2019 - 8,521 4,256 5,347 750 - 18,874
Depreciation - 1,407 516 542 65 - 2,530
USD’000 USD’000 USD’000 USD’000 As at 31 December 2019 - 9,928 4,772 5,889 815 - 21,404
New assets originated or purchased 143,452 10,348 - 153,800 Net book value as at
31 December 2019 (RO’000) 20,509 8,813 2,560 2,106 130 4,271 38,389
At 31 December 2019 450,205 72,808 - 523,013
31 December 2019 (USD’000) 53,270 22,891 6,649 5,470 338 11,094 99,712

i) Included in capital work in progress are costs incurred towards a new head office project.
USD’000 USD’000 USD’000 USD’000
Balance as at 1 January 2019 828 1,759 - 2,587 11 INVESTMENT PROPERTIES
Expected credit losses recognised 777 553 - 1,330
Investment properties represent two plots of land received by the Bank as a grant from the Government of Sultanate of Oman
At 31 December 2019 1,605 2,312 - 3,917 during the year 2008. The Bank has recorded the land based on the average valuation carried out during 2008 by two professional
valuators and subsequently measured at cost less accumulated impairment. The plots of land are currently held vacant. The fair
value of these properties as at 31 December 2020 is RO 3.0 million (31 December 2019: RO 3.0 million).
As at 31 December 2020 and 2019, the fair values of the properties are based on valuations performed by an accredited independent
valuer. The valuation was conducted on an open market basis.

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12 OTHER ASSETS 14. CUSTOMER DEPOSITS
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December

2019 2020 2020 2019 2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000 USD’000 USD’000 RO’000 RO’000
167,223 116,073 Acceptances (i) 44,688 64,381 2,447,629 2,912,927 Term deposits 1,121,477 942,337
5,506 4,647 Prepayments 1,789 2,120 2,233,023 1,862,390 Demand deposits 717,020 859,714
195 2,590 Receivables 997 75 735,561 848,242 Saving deposits 326,573 283,191
15,865 6,530 Positive fair value of derivatives (note 36) 2,514 6,108 31,345 172,714 Margin deposits 66,495 12,068
9,940 15,319 Right-to-use assets 5,898 3,827
5,447,558 5,796,273 2,231,565 2,097,310
20,437 49,594 Others 19,094 7,868
219,166 194,753 74,980 84,379

31 December 2020 31 December 2019
Conventional Islamic Conventional Islamic
(i) Disclosure on ECL on acceptances (note 15).
banking banking Total banking banking Total
RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
13 DUE TO BANKS AND OTHER MONEY MARKET BORROWINGS
Term deposits 985,749 135,728 1,121,477 833,134 109,203 942,337
31 December 31 December 31 December 31 December Demand deposits 626,189 90,831 717,020 797,715 61,999 859,714
2019 2020 2020 2019 Saving deposits 283,695 42,878 326,573 254,009 29,182 283,191
USD’000 USD’000 RO’000 RO’000
Margin accounts 64,357 2,138 66,495 6,942 5,126 12,068
Local currency:
19,870 150,005 Money market borrowings 57,752 7,650
14,930 15,743 Demand balances 6,061 5,748 Total 1,959,990 271,575 2,231,565 1,891,800 205,510 2,097,310
34,800 165,748 63,813 13,398

Conventional Islamic Conventional Islamic
Foreign currency:
banking banking Total banking banking Total
1,623,322 1,354,851 Money market borrowings 521,618 624,979 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000
251,647 350,987 Syndicated borrowings 135,130 96,884 Term deposits 2,560,387 352,540 2,912,927 2,163,985 283,644 2,447,629
Demand deposits 1,626,465 235,925 1,862,390 2,071,987 161,036 2,233,023
1,874,969 1,705,838 656,748 721,863 Saving deposits 736,870 111,372 848,242 659,764 75,797 735,561
Margin accounts 167,161 5,553 172,714 18,031 13,314 31,345
1,909,769 1,871,586 720,561 735,261
Total 5,090,883 705,390 5,796,273 4,913,767 533,791 5,447,558

Foreign currency borrowings include bank borrowings amounting to RO 329.03 million (2019: RO 354.20 million) with underlying
collateral in the form of USD Treasury bills of RO 342.03 million (2019: RO 330.57 million).
Applicable financial covenants for the syndicated borrowings include the requirement for a minimum tangible net worth of the
Bank and a minimum capital adequacy ratio to be maintained by the Bank.

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15. OTHER LIABILITIES 15 OTHER LIABILITIES (CONTINUED)
31 December 31 December 31 December 31 December Stage 1 Stage 2 Stage 3 Total

Outstanding exposure
2019 2020 2020 2019 RO’000 RO’000 RO’000 RO’000
USD’000 USD’000 RO’000 RO’000
Balance as at 1 January 2019 659,775 104,841 1,642 766,258
167,223 116,073 Acceptances 44,688 64,381
New assets originated or purchased 350,042 9,512 (54) 359,500
14,132 10,031 Staff entitlements 3,862 5,441
Assets derecognised or repaid (281,455) (38,293) (594) (320,342)
25,135 23,081 Income tax payable 8,886 9,677
1,060 5,018 Negative fair value of derivatives (note 36) 1,932 408
1,613 2,241 Deferred tax liabilities 863 621
Transfers to Stage 3 (167) (230) 397 -
37,619 62,247 Other accruals and provisions 23,965 14,483
Amounts written off (6) - 6 -
7,587 5,122 Expected credit loss allowance on loan 1,972 2.921
Commitments, financial guarantees & acceptances
At 31 December 2019 750,257 53,821 1,338 805,416
6,732 13,221 Lease liability on right of use assets 5,090 2,592
261,101 237,034 Total 91,258 100,524

Staff entitlements: RO’000 RO’000 RO’000 RO’000
Balance as at 1 January 2019 2,654 1,948 10 4,612
1,582 1,218 End of service benefits 469 609
New assets originated or purchased 548 (194) 10 364
12,550 8,813 Other liabilities 3,393 4,832
Assets derecognised or repaid (1,450) (604) (1) (2,055)
14,132 10,031 3,862 5,441 Transfers to Stage 1 71 (71) - -
Transfers to Stage 2 (5) 5 - -
Movement in the end of service benefits liability
1,416 1,582 At 1 January 609 545
389 441 Expenses recognised in the profit or loss 170 150 At 31 December 2019 1,817 1,063 41 2,921
(223) (805) End of service benefits paid (310) (86)
1,582 1,218 469 609 Stage 1 Stage 2 Stage 3 Total

Outstanding exposure
USD’000 USD’000 USD’000 USD’000
(i) The analysis of changes in the gross carrying amount and corresponding ECL allowance on loan commitments, financial Balance as at 1 January 2020 1,948,719 139,795 3,476 2,091,990
guarantees and acceptances is as follows: New assets originated or purchased 1,396,037 20,184 180 1,416,400
Assets derecognised or repaid (1,085,548) (78,086) (4,460) (1,168,094)
Outstanding exposure Stage 1 Stage 2 Stage 3 Total Transfers to Stage 1 10,070 (9,906) (164) -
RO’000 RO’000 RO’000 RO’000
Balance as at 1 January 2020 750,257 53,821 1,338 805,416
New assets originated or purchased 537,474 7,771 69 545,314
Assets derecognised or repaid (417,936) (30,063) (1,717) (449,716) At 31 December 2020 2,243,559 88,925 7,812 2,340,296
Transfers to Stage 3 (123) (3,351) 3,474 - ECL Stage 1 Stage 2 Stage 3 Total
USD’000 USD’000 USD’000 USD’000
At 31 December 2020 863,770 34,236 3,008 901,014 Balance as at 1 January 2020 4,719 2,762 106 7,587
New assets originated or purchased 11,306 187 749 12,242
Assets derecognised or repaid (12,304) (2,403) - (14,707)
ECL Stage 1 Stage 2 Stage 3 Total Transfers to Stage 1 31 (31) - -
RO’000 RO’000 RO’000 RO’000
Expected credit losses recognised 4,352 73 288 4,713
Recoveries from expected credit losses (4,737) (925) - (5,662) At 31 December 2020 3,632 583 907 5,122
Transfers to Stage 1 12 (12) - -
At 31 December 2020 1,398 225 349 1,972

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15 OTHER LIABILITIES (CONTINUED) 18 SHARE CAPITAL AND SHARE PREMIUM (CONTINUED)

As of 31 December 2020, the following shareholders held 10% or more of the Bank’s capital, either individually or together with
Outstanding exposure Stage 1 Stage 2 Stage 3 Total
related parties:
USD’000 USD’000 USD’000 USD’000
Balance as at 1 January 2019 1,713,701 272,314 4,266 1,990,281 Number of shares % Holding
New assets originated or purchased 909,200 24,706 (140) 933,766 Oman Investment & Finance Co. SAOG 374,161,440 15.37
Assets derecognised or repaid (731,052) (99,462) (1,543) (832,057) The Royal Court of Affairs 354,684,105 14.57
Transfers to Stage 1 70,665 (70,545) (120) - 18.1 Proposed dividend

The Board of Directors do not recommend a dividend for the 2020 year, preferring a prudent approach in response to current
Transfers to Stage 3 (434) (597) 1,031 -
economic events and the importance of maintaining a strong capital base which will allow the Bank to continue supporting its
Amounts written off (16) - 16 - customers through these challenging times. (2019: cash dividend of 3% of the share capital (3 baizas per share) amounting to RO
7,090,800 and bonus shares of 3% of share capital, (3 shares for every 100 shares held) amounting to RO 7,090,800).
At 31 December 2019 1,948,719 139,795 3,476 2,091,990
19. LEGAL RESERVE
In accordance with the Commercial Companies Law of Oman of 1974, an annual appropriation of 10% of the profit for the year is
ECL Stage 1 Stage 2 Stage 3 Total required to be made to legal reserve until such time that the accumulated reserve is equal to at least one third of the Bank’s issued
USD’000 USD’000 USD’000 USD’000 share capital.
New assets originated or purchased 1,424 (504) 26 946 20. GENERAL RESERVE
Assets derecognised or repaid (3,766) (1,569) (3) (5,338) General reserve of RO 988,000 (31 December 2019: RO 988,000) was created to cover the losses incurred by Sohar Islamic window
Transfers to Stage 1 184 (184) - - for the year 2013 and 2014. It commenced reporting profits from 2015 and accordingly; no further transfer was made post 2014.
21. FAIR VALUE RESERVE
The fair value reserve includes the cumulative net change in the fair value of the investment securities held as FVOCI net of
At 31 December 2019 4,719 2,762 106 7,587 applicable income tax until the investment is derecognised, sold or impaired.
22. IMPAIRMENT RESERVE

16. SUBORDINATED LOANS
As per the CBO circular BM 1149, in the year of adoption, if IFRS9 based provision for impairment is lower than the provision for the
The Bank had raised unsecured subordinated loans of RO 35 million during the year 2016 with a maturity of 7 years. These
impairment as per regulatory guidelines, the excess, shall be transferred as appropriation from profit for the year to a regulatory
instruments are unlisted, non-transferable, non-negotiable and non-convertible with no early call option and carries a fixed rate of
reserve “Impairment reserve” under shareholder’s equity. In subsequent years, if IFRS9 based provision for impairment is lower
interest. The principal amount of the subordinated loans is repayable on maturity in 2023 while interest is payable semi-annually.
than provision for impairment as regulatory guidelines, the excess shall be transferred as appropriation from profit for the year to
The Bank is required to create a subordinated loan reserve equal to 20% of the issue value annually during the last five years of
the Impairment reserve.
the term of the subordinated loans. This reserve is created at the end of each financial year from retained earnings. Accordingly,
during the year 2020 a reserve of RO 7.0 million (2019: RO 7.0 million) was created. The outstanding of this subordinated loan with The regulatory impairment reserve cannot be used by the bank for capital adequacy calculation or for declaration of any dividends.
accrued interest as of 31 December 2020 stands at RO 35.392 million (2019: RO 35.392 million). Utilization of the impairment reserve created above would require prior approval of the Central Bank of Oman.
According to the Regulations of CBO, the amount of subordinated loans as reduced by subordinated loan reserve is considered as As of December 2020, the Bank created a reserve of RO 5.464 million net of tax (note 34) for the difference that existed on 31
Tier II capital for capital adequacy purposes. December 2020 (31 December 2019: NIL).
17. CERTIFICATES OF DEPOSIT 23. PERPETUAL TIER 1 CAPITAL SECURITIES

The outstanding balance as of 31 December 2020 of RO 509 thousand (2019: RO 509 thousand) relates to Certificates of Deposit The Bank issued its first Perpetual Tier 1 Capital Securities amounting to RO 100 million on 25 September 2017. These securities
that were issued in 2016 with a maturity of five years. These are unsecured, denominated in Rial Omani and carry a fixed interest bear interest on their nominal amount from the issue date to the first call date at a fixed annual rate of 7.75% with interest rate reset
rate. at five year intervals. Interest will be payable semi-annually in arrears and treated as a deduction from equity.
18. SHARE CAPITAL AND SHARE PREMIUM On 14 March 2019, the Bank issued its second Perpetual Tier 1 Capital Securities amounting to RO 100 million. These securities
bear interest on their nominal amount from the issue date to the first call date at a fixed annual rate of 7.50% with interest rate reset
The authorised share capital of the Bank is 4,000,000,000 shares (31 December 2019: 4,000,000,000). The issued shares of the at five year intervals. Interest will be payable semi-annually in arrears and treated as a deduction from equity.
Bank are 2,434,506,735 shares (31 December 2019: 2,363,598,772 shares). The paid up share capital of the Bank is RO 245.355
million (31 December 2019: RO 236.360 million). Both the securities constitute direct, unconditional, subordinated and unsecured obligations of the Bank and are classified as
equity in accordance with IAS 32: Financial Instruments – Classification. They do not have a fixed or final maturity date. The Bank
During the year ended 31 December 2020, the Bank distributed 70,907,963 bonus shares equal to 3% of the issued shares as at 31 may at its discretion and after prior consent from the relevant regulatory authority, exercise its option to redeem the securities
December 2019, resulting in increase in share capital by RO 7.091 million. No bonus shares were issued in the comparative period in full (not in part) on the first Call Date, i.e. the 5th anniversary of the Issue Date, and on every fifth anniversary thereafter, again
last year. subject to the prior consent of the regulatory authorities. The Bank at its sole discretion may elect not to distribute interest. This
is not considered as an event of default. If the Bank does not pay interest, on a scheduled interest payment date (for whatever
During the year the Bank has reclassified an amount of RO 1.904 million from Share Premium to Share Capital. reason), it cannot make any other distribution or payment on or with respect to its ordinary shares or any of its other Common
Equity Tier 1 instruments or securities, ranking junior to or pari-passu with the Perpetual Tier 1 Capital Securities unless and until it
has paid one interest payment in full on the securities.
The terms of the Perpetual Tier 1 Capital Securities issuance allow the Bank to write-down (in whole or in part) any amounts due to
the holders of the securities under certain circumstances.
RO 15.250 million was paid as coupon during 2020 (2019: 11.530 million) and is recognised in the statement of changes in equity.

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24. NET ASSETS PER SHARE 25. CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)
The calculation of net assets per share is based on net assets of RO 331.70 million as at 31 December 2020 (31 December 2019: RO 25.c Litigation
336.11 million) attributable to ordinary shareholders of 2,434,506,735 ordinary shares (31 December 2019: 2,363,598,772 ordinary
shares), being the number of shares outstanding as at 31 December 2020. Litigation is a common occurrence in the Banking industry due to the nature of the business it undertakes. The Bank has formal
controls and policies for managing legal claims. Once professional advice has been obtained and the amount of loss reasonably
25. CONTINGENT LIABILITIES AND COMMITMENTS estimated, the Bank makes provision for such loss within its financial statements. No provision (2019: None) has been made as at 31
December 2020, as professional advice indicates that it is unlikely that any significant loss will arise.
25.a Contingent liabilities
26. INTEREST INCOME
Standby letters of credit and guarantees commit the Bank to make payments on behalf of customers, contingent upon the failure
of the customer to perform under the terms of a specified contract.
2019 2020 2020 2019
31 December 31 December 31 December 31 December USD’000 USD’000 RO’000 RO’000
2019 2020 2020 2019 329,148 329,846 Loans and advances to customers 126,991 126,722
USD’000 USD’000 RO’000 RO’000
5,932 3,530 Due from banks and other money market placements 1,359 2,284
788,057 570,609 Guarantees 219,684 303,402
45,925 48,408 Investments 18,637 17,681
231,969 523,022 Documentary letters of credit 201,364 89,308
381,005 381,784 146,987 146,687

1,020,026 1,093,631 421,048 392,710
27. INTEREST EXPENSE

2019 2020 2020 2019 31 December 31 December 31 December 31 December
USD’000 USD’000 RO’000 RO’000 2019 2020 2020 2019
615,686 279,616 Construction 107,652 237,039 USD’000 USD’000 RO’000 RO’000
137,919 57,725 Financial institution 22,224 53,099 131,475 149,140 Customer deposits 57,419 50,618
96,322 393,086 International trade 151,338 37,084 6,364 6,382 Subordinated loans 2,457 2,450
65,055 135,558 Services 52,190 25,046 60,852 39,325 Due to banks and other money market borrowings 15,140 23,428
52,979 26,545 Manufacturing 10,220 20,397

198,691 194,847 75,016 76,496
10,042 138,634 Government 53,374 3,866
13,867 45,161 Transport and communication 17,387 5,339
28. NET INCOME EARNED FROM ISLAMIC FINANCING AND INVESTING ACTIVITIES
421 - Mining and quarrying - 162
18,491 9,977 Electricity, gas and water 3,841 7,119 28.a Gross income earned from Islamic financing and investing activities
9,244 7,329 Others 2,822 3,559
1,020,026 1,093,631 421,048 392,710 2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
28,086 32,927 Financing to customers 12,677 10,813
25.b Commitments
919 273 Due from banks and other money market placements 105 354
Credit related commitments include commitments to extend credit, standby letters of credit and guarantees that are designed 3,213 3,735 Investments 1,438 1,237
to meet the requirements of the Bank’s customers. Commitments to extend credit represent contractual commitments to make
loans and revolving credits. Commitments generally have fixed expiry dates or other termination clauses and require the payment 32,218 36,935 14,220 12,404
of a fee. Since commitments may expire without being drawn upon, the total contracted amounts do not necessarily represent
future cash obligations.
28.b Profit paid to depositors / money market borrowings
2019 2020 2020 2019 31 December 31 December 31 December 31 December
USD’000 USD’000 RO’000 RO’000 2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
2,706 7,340 Capital commitments 2,826 1,042
15,701 21,218 Profit paid to depositors 8,169 6,045
904,740 1,130,592 Credit related commitments 435,278 348,325
1,312 914 Profit paid to banks and other money market borrowings 352 505
907,446 1,137,932 438,104 349,367
17,013 22,132 8,521 6,550
15,205 14,803 Net income from Islamic financing and investing activities 5,699 5,854

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29. OTHER OPERATING INCOME 32. INCOME TAX (CONTINUED)
31 December 31 December 31 December 31 December 32.b. Reconciliation

2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000 31 December 31 December 31 December 31 December
49,928 33,179 Fees and commission 12,774 19,222 2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
22,002 2,977 Net gains from foreign exchange dealings 1,146 8,471
105,267 61,548 Profit before tax for the year 23,696 40,528
5 - Profit on sale of fixed assets - 2
4,761 1,205 Dividend income 464 1,833 15,789 9,234 Income tax @ 15% 3,555 6,079
(2,374) (179) Losses from FVTPL investments (69) (914) Tax impact of:
296 254 - non-deductible expenses/losses 98 114
74,322 37,182 14,315 28,614
(184) (158) - tax exempt income (61) (71)
- 236 -Prior period tax 91 -
30. OTHER OPERATING EXPENSES
15,901 9,566 Income tax expense 3,683 6,122
2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000 32.c. Tax assessment
28,447 28,941 Operating and administration costs 11,142 10,952
Tax assessments of the Bank for the years 2007 to 2015 have been completed and for the year 2016 to 2019 have not yet been
8,286 9,145 Occupancy cost 3,521 3,190 agreed with the Secretariat General for Taxation at the Ministry of Finance. The Bank is of the opinion that additional taxes, if any,
379 405 Directors remuneration 156 146 related to the open tax years would not be significant to the financial position of the Bank as at 31 December 2020.
114 109 Directors sitting fees 42 44
32.d. Movement of current tax provision
122 143 Shari'ah supervisory board remuneration and sitting fees 55 47

37,348 38,743 14,916 14,379
2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
31. LOAN IMPAIRMENT CHARGES AND OTHER CREDIT RISK PROVISIONS, NET 12,956 25,135 Balance as at the beginning of the year 9,677 4,988
15,543 8,935 Charge during the year 3,440 5,984
31 December 31 December 31 December 31 December (3,364) (10,989) Paid during the year (4,231) (1,295)
2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
25,135 23,081 Balance as at the end of the year 8,886 9,677
Impairment charges provided/(released) on:
50,967 64,670 Loans, advance and financing 24,898 19,622
32.e. Movement of deferred tax asset/(liability)
(4,392) (2,465) Loan commitments and financial guarantees (949) (1,691)
971 (2,036) Due from banks and other money market placements (784) 374
1,330 (2,294) Debt securities at amortised cost (883) 512 2019 2020 2020 2019
13 2,213 Debt securities at FVOCI 852 5 USD’000 USD’000 RO’000 RO’000
60 - Loans written off - 23 (1,255) (1,613) Balance as at the beginning of the year (621) (483)
(358) (628) Created during the year (242) (138)
Loan impairment charges and other credit risk provisions under
48,949 60,088 23,134 18,845
IFRS 9, net (1,613) (2,241) Balance as at the end of the year (863) (621)
32. INCOME TAX Deferred tax liability pertains to temporary tax difference on property, Plant and equipment.
32.a. Recognised in the statement of comprehensive income

2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
Tax expenses
15,543 8,561 - Current tax 3,296 5,984
- 374 - Prior period tax 144 -
358 631 - Deferred tax expense 243 138
15,901 9,566 Total income tax expenses 3,683 6,122
The Bank is liable for income tax for the year in accordance with the income tax laws of the Sultanate of Oman at the rate of 15%
on its taxable profits.

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33. BASIC AND DILUTED EARNINGS PER SHARE 34. FINANCIAL INSTRUMENTS
Basic earnings per share are calculated by dividing net profit for the year by the weighted average number of shares outstanding The following table compares the provision held as per IFRS 9 versus CBO circular BM 977
during the year.
31 December 2020
2019 2020 2020 2019 Gross Net IFRS9 CBO
USD’000 USD’000 RO’000 RO’000 Classification: carrying CBO IFRS9 carrying Reserve Reserve
89,366 51,982 Profit for the year 20,013 34,406 amount Provision Provisions Difference amount interest interest
CBO IFRS 9 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
(29,950) (39,610) Less: Additional Tier 1 Coupon (15,250) (11,531)
(1) (2) (3) (4)=(2)-(3) (5)=(1)-(3)
(587) - Less: issue expenses – Additional Tier 1 capital - (226) Standard Stage 1 2,107,397 26,867 4,966 21,901 2,102,431 - -
Stage 2 86,447 1,164 4,911 (3,747) 81,536 - -
Profit for the year attributable to equity holders of the Bank after Stage 3 - - - - - - -
coupon and issuance cost on Additional
58,829 12,372 Tier 1 capital securities 4,763 22,649 Sub Total 2,193,844 27,798 9,877 18,154 2,183,967 - -
Weighted average number of shares outstanding during the year Special mention Stage 1 23,340 304 159 145 23,181 - -
2,220,547 2,434,507 (in thousands) 2,434,507 2,220,547 Stage 2 257,841 6,410 36,748 (30,338) 221,093 - -
Stage 3 - - - - - - -
2.65 0.51 Basic earnings per share for the year (cents / baisas) 1.956 10.200
Sub Total 281,181 6,714 36,907 (30,193) 244,274 - -
Sub standard Stage 1 - - - - - -

Stage 2 - - - - - - -
Stage 3 8,414 2,133 2,662 (529) 5,752 103 103
Sub Total 8,414 2,133 2,662 (529) 5,752 103 103
Doubtful Stage 1 - - - - - - -
Stage 2 - - - - - - -
Stage 3 37,231 10,983 13,174 (2,191) 24,057 852 852
Sub Total 37,231 10,983 13,174 (2,191) 24,057 852 852
Loss Stage 1 - - - - - - -
Stage 2 - - - - - - -
Stage 3 111,441 68,506 65,994 2,512 45,447 21,216 21,216
Sub Total 111,441 68,506 65,994 2,512 45,447 21,216 21,216
Gross Loans, advances

and financing
Stage 1 2,130,737 27,171 5,125 22,046 2,125,612 - -
Stage 2 344,288 7,574 41,659 (34,085) 302,629 - -
Stage 3 157,086 81,622 81,830 (208) 75,256 22,171 22,171
Sub Total 2,632,111 116,367 128,614 (12,247) 2,503,497 22,171 22,171
Stage 1 1,543,020 13 2,011 (1,998) 1,541,009 - -

*Due from banks, Stage 2 43,080 - 1,149 (1,149) 41,931 - -
Investment securities, Stage 3 3,008 - 349 (349) 2,659 - -
Loan commitments & Financial
guarantees
Sub Total 1,589,108 13 3,509 (3,496) 1,585,599 - -
Stage 1 3,673,757 27,184 7,136 20,048 3,666,621 - -

Stage 2 387,368 7,574 42,808 (35,234) 344,560 - -
Stage 3 160,094 81,622 82,179 (557) 77,915 22,171 22,171
Total 4,221,219 116,380 132,123 (15,743) 4,089,096 22,171 22,171
*Other items not covered under CBO circular BM 977 and related instructions.

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34. FINANCIAL INSTRUMENTS (CONTINUED)
31 December 2019 34. FINANCIAL INSTRUMENTS (CONTINUED)
Gross Net IFRS9 CBO 31 December 2020

Classification : carrying CBO IFRS9 carrying Reserve Reserve
amount Provision Provisions Difference amount interest interest Gross Net IFRS9 CBO
CBO IFRS 9 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 Classification: carrying CBO IFRS9 carrying Reserve Reserve
(1) (2) (3) (4)=(2)-(3) (5)=(1)-(3) amount Provision Provisions Difference amount interest interest
CBO IFRS 9 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000
Standard Stage 1 2,048,238 26,718 9,402 17,316 2,038,836 - -
(1) (2) (3) (4)=(2)-(3) (5)=(1)-(3)
Stage 2 96,916 1,269 7,158 (5,889) 89,758 - - Standard Stage 1 5,473,758 69,784 12,899 56,885 5,460,859 - -
Stage 3 219 2 78 (76) 141 - - Stage 2 224,538 3,023 12,756 (9,733) 211,782 - -
Stage 3 - - - - - - -
Sub Total 2,145,373 27,989 16,638 11,351 2,128,735 - -
Sub Total 5,698,296 72,807 25,655 47,152 5,672,641 - -
Special mention Stage 1 39,108 460 1,400 (940) 37,708 - -
Special mention Stage 1 60,623 790 413 377 60,210 - -
Stage 2 260,068 7,305 34,511 (27,206) 225,557 - -
Stage 2 669,717 16,649 95,449 (78,800) 574,268 - -
Stage 3 9 - 2 (2) 7 - - Stage 3 - - - - - - -
Sub Total 299,185 7,765 35,913 (28,148) 263,272 - - Sub Total 730,340 17,439 95,862 (78,423) 634,478 - -
Sub standard Stage 1 4 - - - 4 - - Sub standard Stage 1 - - - - - - -

Stage 2 12 - 2 (2) 10 - - Stage 2 - - - - - - -
Stage 3 35,321 8,568 9,727 (1,159) 25,594 1,164 1,164 Stage 3 21,855 5,540 6,914 (1,374) 14,941 268 268
Sub Total 35,337 8,568 9,729 (1,161) 25,608 1,164 1,164 Sub Total 21,855 5,540 6,914 (1,374) 14,941 268 268
Doubtful Stage 1 448 - 5 (5) 443 - - Doubtful Stage 1 - - - - - - -

Stage 2 24 - 3 (3) 21 - - Stage 2 - - - - - - -
Stage 3 27,148 11,230 9,105 2,125 18,043 531 531 Stage 3 96,704 28,527 34,218 (5,691) 62,486 2,213 2,213
Sub Total 96,704 28,527 34,218 (5,691) 62,486 2,213 2,213

Sub Total 27,620 11,230 9,113 2,117 18,507 531 531
Loss Stage 1 369 - 4 (4) 365 - - Loss Stage 1 - - - - - - -

Stage 2 - - - - - - -
Stage 2 325 - 71 (71) 254 - -
Stage 3 289,457 177,938 171,413 6,525 118,044 55,106 55,106
Stage 3 61,276 37,668 43,864 (6,196) 17,412 13,969 13,969
Sub Total 289,457 177,938 171,413 6,525 118,044 55,106 55,106
Sub Total 61,970 37,668 43,939 (6,271) 18,031 13,969 13,969
Gross Loans, advances and financing
and financing Stage 1 5,534,381 70,574 13,312 57,262 5,521,069 - -
Stage 1 2,088,167 27,178 10,811 16,367 2,077,356 - - Stage 2 894,255 19,672 108,205 (88,533) 786,050 - -
Stage 2 357,345 8,574 41,745 (33,171) 315,600 - - Stage 3 408,016 212,005 212,545 (540) 195,471 57,587 57,587
Stage 3 123,973 57,468 62,776 (5,308) 61,197 15,664 15,664 6,836,652 302,251 334,062 (31,811) 6,502,590 57,587 57,587
Sub Total
Sub Total 2,569,485 93,220 115,332 (22,112) 2,454,153 15,664 15,664 Stage 1 4,007,844 34 5,223 (5,189) 4,002,621 - -
Stage 1 1,424,740 12 3,250 (3,238) 1,421,490 - - *Due from banks, Stage 2 111,896 - 2,984 (2,984) 108,912 - -
*Due from banks, Stage 2 109,776 - 1,982 (1,982) 107,794 - - Investment securities, Stage 3 7,813 - 906 (906) 6,907 - -
Investment securities, Stage 3 1,339 - 41 (41) 1,298 - - Loan commitments & Financial
guarantees
guarantees
Sub Total 4,127,553 34 9,113 (9,079) 4,118,440 - -
Sub Total 1,535,855 12 5,273 (5,261) 1,530,582 - -
Stage 1 9,542,225 70,608 18,535 52,073 9,523,690 - -
Total Stage 1 3,512,907 27,190 14,061 13,129 3,498,846 - - Stage 2 1,006,151 19,672 111,189 (91,517) 894,962 - -
Stage 2 467,121 8,574 43,727 (33,153) 423,394 - - Stage 3 415,829 212,005 213,451 (1,446) 202,378 57,587 57,587
Stage 3 125,312 57,468 62,817 (5,349) 62,495 15,664 15,664
Total 10,964,205 302,285 343,175 (40,890) 10,621,030 57,587 57,587
Total 4,105,340 93,232 120,605 (27,373) 3,984,735 15,664 15,664
*Other items not covered under CBO circular BM 977 and related instructions

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34. FINANCIAL INSTRUMENTS (CONTINUED) 34. FINANCIAL INSTRUMENTS (CONTINUED)
31 December 2019
December 2020 As per CBO As per IFRS 9 Difference
RO’000 RO’000 RO’000
Gross Net IFRS9 CBO
Impairment loss charged to statement of comprehensive income 41,268 23,134 (18,134)
Classification : carrying CBO IFRS9 carrying Reserve Reserve
amount Provision Provisions Difference amount interest interest Provisions 138,551 132,123 (6,428)
CBO IFRS 9 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Gross NPL ratio (percentage)* 5.97 5.97 -
(1) (2) (3) (4)=(2)-(3) (5)=(1)-(3)
Net NPL ratio (percentage)* 2.13 3.01 0.88
Standard Stage 1 5,320,099 69,397 24,421 44,976 5,295,678 - -
Stage 2 251,730 3,296 18,592 (15,296) 233,138 - - *NPL ratios are calculated on the basis of funded non-performing loans and advances.
Stage 3 569 5 203 (198) 366 - -
The reconciliation of expected credit loss allowance for all financial assets is as below:
Sub Total 5,572,398 72,698 43,216 29,482 5,529,182 - -
CBO IFRS 9
Special mention Stage 1 101,579 1,195 3,636 (2,441) 97,943 - - Gross loans advances and financing 116,367 106,443
Stage 2 675,501 18,974 89,639 (70,665) 585,862 - - Due from Banks 13 32
Stage 3 23 - 5 (5) 18 - -
Investment securities(amortised cost) - 625
Sub Total 777,103 20,169 93,280 (73,111) 683,823 - - Investment securities (FVOCI) - 880
Loan commitments and financial guarantees - 1,972
Sub standard Stage 1 10 - - - 10 - -
Stage 2 31 - 5 (5) 26 - -
Total ECL 116,380 109,952
Stage 3 91,743 22,255 25,265 (3,010) 66,478 3,023 3,023
Contractual interest not recognised 22,171 22,171
Sub Total 91,784 22,255 25,270 (3,015) 66,514 3,023 3,023
Total ECL and Contractual interest not recognised 138,551 132,123
Doubtful Stage 1 1,164 - 13 (13) 1,151 - -
Stage 2 62 - 8 (8) 54 - -
Stage 3 70,514 29,169 23,649 5,520 46,865 725 725 The analysis of changes in the ECL allowance on due from banks and other money market placements, loans, advances and
financing (excluding contractual interest not recognised), investments and loan commitments and financial guarantees is as
Sub Total 71,740 29,169 23,670 5,499 48,070 725 725 follows:
Loss Stage 1 958 - 10 (10) 948 - -

Stage 2 844 - 184 (184) 660 - - RO’000 RO’000 RO’000 RO’000
Stage 3 159,158 97,839 113,932 (16,093) 45,226 36,283 36,283
As at 1 January 2020 14,061 43,727 47,153 104,941
Sub Total 160,960 97,839 114,126 (16,287) 46,834 36,283 36,283 Expected credit losses recognised 5,765 14,972 26,877 47,614
Recoveries from expected credit losses (14,106) (9,722) (652) (24,480)
and financing Loans written off - (261) (206) (467)
Stage 1 5,423,810 70,592 28,080 42,512 5,395,730 - - Loans transferred to memorandum - - (17,918) (17,918)
Stage 2 928,169 22,270 108,428 (86,158) 819,740 - - Loans brought back from memorandum portfolio - - 265 265
Stage 3 322,008 149,268 163,054 (13,786) 158,953 40,686 40,686 Transfers to Stage 1 3,013 (2,668) (346) -
Sub Total 6,673,987 242,130 299,562 (57,432) 6,374,423 40,686 40,686 Transfers to Stage 2 (1,464) 1,796 (334) -
Stage 1 3,700,623 31 8,442 (8,411) 3,692,181 - -
*Due from banks, Stage 2 285,132 - 5,148 (5,148) 279,984 - -
At 31 December 2020 7,136 42,808 60,008 109,952
Investment securities, Stage 3 3,478 - 106 (106) 3,372 - -
guarantees
Sub Total 3,989,233 31 13,696 (13,665) 3,975,537 - -
Total Stage 1 9,124,433 70,623 36,522 34,101 9,087,911 - -

Stage 2 1,213,300 22,270 113,578 (91,308) 1,099,722 - -
Stage 3 325,485 149,268 163,160 (13,892) 162,325 40,686 40,686
Total 10,663,218 242,161 313,260 (71,099) 10,349,958 40,686 40,686
In accordance with CBO requirements, where the aggregate provision on portfolio & specific basis computed as per CBO norms
is higher than the impairment allowance computed under IFRS9, the difference, net of impact of taxation, will be transferred to an
impairment reserve as an appropriation from the retained earnings. The Bank generally transfers this amount annually at year end.

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34. FINANCIAL INSTRUMENTS (CONTINUED) 34. FINANCIAL INSTRUMENTS (CONTINUED)

The analysis of changes in the ECL allowance on due from banks and other money market placements, loans, advances and 31 December 2019
financing (excluding contractual interest not recognised), investments and loan commitments and financial guarantees is as
follows:
Gross Net IFRS9 CBO
Classification: carrying CBO IFRS9 carrying Reserve Reserve
Stage 1 Stage 2 Stage 3 Total amount Provision Provisions Difference amount interest interest
USD’000 USD’000 USD’000 USD’000 CBO IFRS 9 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
As at 1 January 2020 36,522 113,578 122,474 272,574 (1) (2) (3) (4)=(2)-(3) (5)=(1)-(3)
Expected credit losses recognised 14,974 38,888 69,810 123,672 Stage 1 63,495 410 175 235 63,320 - -
Classified as performing Stage 2 165,690 7,849 24,182 (16,333) 141,508 - -
Recoveries from expected credit losses (36,639) (25,252) (1,694) (63,585)
Stage 3 - - - - - - -
Subtotal 229,185 8,259 24,357 (16,098) 204,828 - -
Loans transferred to memorandum - - (46,540) (46,540) Classified as non-performing Stage 1 - - - - - - -
Loans brought back from memorandum portfolio - - 688 688 Stage 2 - - - - - - -
Transfers to Stage 1 7,826 (6,931) (898) - Stage 3 - - - - - - -
Transfers to Stage 2 (3,803) 4,665 (867) - Subtotal - - - - - - -
Total Stage 1 63,495 410 175 235 63,320 - -
Stage 2 165,690 7,849 24,182 (16,333) 141,508 - -
At 31 December 2020 18,535 111,189 155,864 285,588 Stage 3 - - - - - - -
Total 229,185 8,259 24,357 (16,098) 204,828 - -
Loans with renegotiated terms are defined as loans that have been restructured due to deterioration in the borrower’s financial 31 December 2020
position, for which the Bank has made concessions by agreeing to terms and conditions that are more favourable for the
borrower than the Bank had provided initially and that it would not otherwise consider. A loan continues to be presented as part Gross Net IFRS9 CBO
of loans with renegotiated terms until maturity, early repayment or write-off. Classification: carrying CBO IFRS9 carrying Reserve Reserve
amount Provision Provisions Difference amount interest interest
31 December 2019 CBO IFRS 9 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000
(1) (2) (3) (4)=(2)-(3) (5)=(1)-(3)
Gross Net IFRS9 CBO Stage 1 181,208 1,174 608 566 180,600 - -
Classification: carrying CBO IFRS9 carrying Reserve Reserve Classified as performing Stage 2 512,182 18,725 81,161 (62,436) 431,021 - -
amount Provision Provisions Difference amount interest interest Stage 3 - - - - - - -
CBO IFRS 9 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
Subtotal 693,390 19,899 81,769 (61,870) 611,621 - -
(1) (2) (3) (4)=(2)-(3) (5)=(1)-(3)
Classified as non-performing Stage 1 - - - - - - -
Stage 1 69,765 452 234 218 69,531 - - Stage 2 - - - - - - -
Classified as performing Stage 2 197,190 7,209 31,247 (24,038) 165,943 - - Stage 3 - - - - - - -
Stage 3 - - - - - - - Subtotal - - - - - - -
Subtotal 266,955 7,661 31,481 (23,820) 235,474 - - Total Stage 1 181,208 1,174 608 566 180,600 - -
Classified as non-performing Stage 1 - - - - - - - Stage 2 512,182 18,725 81,161 (62,436) 431,021 - -
Stage 2 - - - - - - - Stage 3 - - - - - - -
Stage 3 - - - - - - - Total 693,390 19,899 81,769 (61,870) 611,621 - -
Subtotal - - - - - - -
31 December 2019
Total Stage 1 69,765 452 234 218 69,531 - -
Stage 2 197,190 7,209 31,247 (23,820) 165,943 - -
Gross Net IFRS9 CBO
Stage 3 - - - - - - - Classification: carrying CBO IFRS9 carrying Reserve Reserve
Total 266,955 7,661 31,481 (23,820) 235,474 - - amount Provision Provisions Difference amount interest interest
CBO IFRS 9 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000
(1) (2) (3) (4)=(2)-(3) (5)=(1)-(3)
Stage 1 164,922 1,065 455 610 164,467 - -
Classified as performing Stage 2 430,364 20,387 62,810 (42,423) 367,554 - -
Stage 3 - - - - - - -
Subtotal 595,286 21,452 63,265 (41,813) 532,021 - -
Classified as non-performing Stage 1 - - - - - - -
Stage 2 - - - - - - -
Stage 3 - - - - - - -
Subtotal - - - - - - -
Total Stage 1 164,922 1,065 455 610 164,467 - -
Stage 2 430,364 20,387 62,810 (42,423) 367,554 - -
Stage 3 - - - - - - -
Total 595,286 21,452 63,265 (41,813) 532,021 - -

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35. RELATED PARTY TRANSACTIONS 35. RELATED PARTY TRANSACTIONS (CONTINUED)

In the ordinary course of business the Bank enters into transactions with certain of its directors, shareholders, senior management, The aggregate amount of balances and the income and expenses generated with shareholders holding 10% or more of the Banks’
Shari'ah supervisory board, Shari'ah reviewer and companies in which they have a significant interest. These transactions are shares are as follows:
conducted on an arm’s length basis and are approved by the Bank’s management and Board of Directors.
The aggregate amount of balances and the income and expenses generated with such related parties are as follows: 2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
31 December 31 December 31 December 31 December 21,958 16,870 Loans, advances and financing at the end of year 6,495 8,454
2019 2020 2020 2019
21,956 15,691 Loans disbursed during the year 6,041 8,453
USD’000 USD’000 RO’000 RO’000
- - Loans repaid during the year - -
Directors & Senior Management
6,912 6,431 Loans, advances and financing at the end of year 2,476 2,661
5,197 374 Deposits at the end of the year 144 2,001
1,397 1,777 Loans disbursed during the year 684 538
3 371 Deposits received during the year 143 1
(945) (927) Loans repaid during the year (357) (364)
(1,026) - Deposits matured/paid during the year - (395)
3,603 4,091 Deposits at the end of the year 1,575 1,387

613 1.296 Interest income during the year 499 236
1,595 3,875 Deposits received during the year 1,492 614
221 184 Interest expense during the year 71 85
(1,678) (3,795) Deposits matured/paid during the year (1,461) (646)
As at 31 December 2020, no loans to related parties are classified under stage 3 (31 December 2019: Nil).
265 270 Interest income during the year 104 102
36. FAIR VALUE OF FINANCIAL INSTRUMENTS
36 29 Interest expense during the year 11 14
494 514 Directors’ sitting fees and remuneration 198 190 Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
122 143 Shari'ah Supervisory Board members 55 47 participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the
asset or transfer the liability takes place either:
Other related parties i) In the accessible principal market for the asset or liability; or
95,395 179,545 Loans, advances and financing at the end of year 69,125 36,727
ii) In the absence of a principal market, in the most advantageous accessible market for the asset or liability.
44,525 124,026 Loans disbursed during the year 47,750 17,142
(16,800) (22,932) Loans repaid during the year (8,829) (6,468) The Bank uses the following hierarchy for determining and disclosing the fair value of financial instruments:
Level 1: quoted prices in active markets for the same instrument without modification or repacking;
18,193 46,730 Deposits at the end of the year 17,991 7,004
17,114 33,488 Deposits received during the year 12,893 6,589
Level 2: quoted prices in active markets for similar assets and liabilities or other valuation techniques for which all significant
inputs are based on observable market data; and
(7,569) (10,829) Deposits matured/paid during the year (4,169) (2,914)
Level 3: valuation techniques for which any significant input is not based on observable market data.
8,330 8,309 Interest income during the year 3,199 3,207
The Bank considers that the fair value of financial instruments was not significantly different to their carrying value (including
143 564 Interest expense during the year 217 55 accrued interest) at each of those dates. The table below sets out the classification and fair value of each class of financial assets
and liabilities including accrued interest.
Key management compensation
Key management comprises of 7 (2019:7) senior management executives. The Bank considers these members to be key
management personnel for the purpose of IAS 24 Related Party Disclosures.
In the ordinary course of business, the Bank conducts transactions with certain of its key management personnel and companies
in which they have a significant interest. The balances in respect of these related parties as at the reporting date are as follows:
112 686 Loans as at end of the year 264 43

987 758 Deposits as at the end of the year 292 380
5 34 Interest Income (during the period) 13 2
21 5 Interest expense (during the period) 2 8
5,499 4,049 Salaries and other short term benefits 1,559 2,117
62 109 Post-employment benefits 42 24

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36 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) 36 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Amortised Total carrying Amortised Total carrying

At 31 December 2020 cost FVOCI FVTPL /fair value As at 31 December 2020 cost FVOCI FVTPL /fair value
RO’000 RO’000 RO’000 RO’000 USD’000 USD’000 USD’000 USD’000
Assets Assets
Cash and balances with Central Bank 202,630 - - 202,630 Cash and balances with Central Bank 526,312 - - 526,312
Due from banks and other money market placements 81,584 - - 81,584 Due from banks and other money market placements 211,906 - - 211,906
Loans, advances and financing 2,503,497 - - 2,503,497 Loans, advances and financing 6,502,590 - - 6,502,590
Investments 221,541 383,432 96,145 701,118 Investments 575,432 995,927 249,727 1,821,086
Other assets (excluding prepayments) 73,191 - - 73,191 Other assets (excluding prepayments) 190,106 - - 190,106
Total 3,082,443 383,432 96,145 3,562,020 Total 8,006,346 995,927 249,727 9,252,000
Liabilities Liabilities
Due to banks and other money market borrowings 720,561 - - 720,561 Due to banks and other money market borrowings 1,871,586 - - 1,871,586
Customer deposits 2,231,565 - - 2,231,565 Customer deposits 5,796,273 - - 5,796,273
Other liabilities (excluding other accruals & provisions) 67,293 - - 67,293 Other liabilities (excluding other accruals & provisions) 174,787 - - 174,787
Subordinated loans 35,392 - - 35,392 Subordinated loans 91,927 - - 91,927
Certificates of deposit 509 - - 509 Certificates of deposit 1,322 - - 1,322
Total 3,055,320 - - 3,055,320 Total 7,935,895 - - 7,935,895
Amortised Total carrying/ Amortised Total carrying/

At 31 December 2019 cost FVOCI FVTPL fair value As at 31 December 2019 cost FVOCI FVTPL fair value
RO’000 RO’000 RO’000 RO’000 USD’000 USD’000 USD’000 USD’000
Assets Assets
Cash and balances with Central Bank 89,572 - - 89,572 Cash and balances with Central Bank 232,655 - - 232,655
Due from banks and other money market placements 198,237 - - 198,237 Due from banks and other money market placements 514,901 - - 514,901
Loans, advances and financing 2,454,153 - - 2,454,153 Loans, advances and financing 6,374,423 - - 6,374,423
Investments 199,852 336,355 101,268 637,475 Investments 519,096 873,649 263,034 1,655,779
Other assets (excluding prepayments) 82,259 - - 82,259 Other assets (excluding prepayments) 213,660 - - 213,660
Total 3,024,073 336,355 101,268 3,461,696 Total 7,854,735 873,649 263,034 8,991,418
Due to banks and other money market borrowings 735,261 - - 735,261 Due to banks and other money market borrowings 1,909,769
Customer deposits 2,097,310 - - 2,097,310 Customer deposits 5,447,558
Other liabilities (excluding other accruals & provisions) 86,041 - - 86,041 Other liabilities (excluding other accruals & provisions) 223,483
Subordinated loans 35,392 - - 35,392 Subordinated loans 91,927
Certificates of deposit 509 - - 509 Certificates of deposit 1,322
Total 2,954,513 - - 2,954,513 Total 7,674,059

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36 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) 36 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Estimation of fair values Level 3 investments are investments in shares of an unquoted company, the shares of which are thinly traded. The management
values the investment using net asset value of the investee based on the investee’s financial statements, plus an applicable
The following summarises the major methods and assumptions used in estimating the fair value of assets and liabilities. premium. Management considers the carrying value of the investment to approximate its fair value as a significant portfolio of the
underlying investments of the investee company (a major turnkey project) is currently in the construction phase. Therefore, the
Loans and advances carrying value is representative of fair value of the investments.
Fair value is calculated based on discounted expected future principal and interest cash flows. Loan repayments are assumed to
occur at contractual repayment dates, where applicable. For loans that do not have fixed repayment dates or that are subject to Positive fair Negative fair
Investment value of value of
prepayment risk, repayments are estimated based on experience in previous periods when interest rates were at levels similar to As at 31 December 2020
securities derivatives derivatives Total
current levels, adjusted for any differences in interest rate outlook. Expected future cash flows are estimated considering credit risk USD’000 USD’000 USD’000 USD’000
and any indication of impairment. Expected future cash flows for homogeneous categories of loans are estimated on a portfolio
Level 1 16,075 16,075
basis and discounted at current rates offered for similar loans to new borrowers with similar credit profiles. The estimated fair values
of loans reflect changes in credit status since the loans were made and changes in interest rates in the case of fixed rate loans. Level 2 1,223,085 6,530 (5,018) 1,224,597
Level 3 6,494 - - 6,494
Investments carried at amortised cost and derivatives
1,245,654 6,530 (5,018) 1,247,166
Fair value is based on quoted market prices at the reporting date without any deduction for transaction costs. If a quoted market
price is not available, fair value is estimated based on discounted cash flow and other valuation techniques.
Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the Positive fair Negative fair
discount rate is a market related rate for a similar instrument at the reporting date. Investment value of value of
As at 31 December 2019
securities derivatives derivatives Total
Bank and customer deposits USD’000 USD’000 USD’000 USD’000
Level 1 16,512 - - 16,512
For demand deposits and deposits with no defined maturities, fair value is taken to be the amount payable on demand at the
Level 2 1,113,677 15,866 (1,060) 1,128,483
reporting date. The estimated fair value of fixed-maturity deposits, including certificates of deposit, is based on discounted cash
flows using rates currently offered for deposits of similar remaining maturities. The value of long-term relationships with depositors Level 3 6,494 - - 6,494
is not taken into account in estimating fair values.
1,136,683 15,866 (1,060) 1,151,489
Other on-balance sheet financial instruments
The fair values of all other on-balance sheet financial instruments are considered to approximate their book values.
37 DERIVATIVES
Off-balance sheet financial instruments
In the ordinary course of business the Bank enters into various types of transactions that involve derivative financial instruments.
No fair value adjustment is made with respect to credit-related off-balance sheet financial instruments, which include commitments A derivative financial instrument is a financial contract between two parties where payments are dependent upon movements in
to extend credit, standby letters of credit and guarantees, as the related future income streams materially reflect contractual fees price in one or more underlying financial instruments, reference rate or index. These derivatives are stated at fair value. The fair
and commissions actually charged at the reporting date for agreements of similar credit standing and maturity. value of a derivative is the equivalent of the unrealised gain or loss from marking to market the derivative using prevailing market
rates or internal pricing models. Unrealised gains or losses are included in the statement of comprehensive income. The derivative
Foreign exchange contracts are valued based on market prices. The market value adjustments in respect of foreign exchange
financial instruments used by the Bank are described below:
contracts are included in the book values of other assets and other liabilities.
Financial instruments measured at fair value at the end of the reporting year: 37.1 Derivative product types
Forwards and futures are contractual agreements to either buy or sell a specified currency, commodity or financial instrument at
Positive fair Negative fair a specific price and date in the future.
Investment value of value of
securities derivatives derivatives Total Swaps are contractual agreements between two parties to exchange interest or foreign currency differentials based on a specific
RO’000 RO’000 RO’000 RO’000
notional amount. For interest rate swaps, counter parties generally exchange fixed and floating rate interest payments based on a
Level 1 6,189 - - 6,189 notional value in a single currency.
Level 2 470,888 2,514 (1,932) 471,470
Options are contractual agreements that convey the right, but not the obligation, to either buy or sell a specific amount of a
Level 3 2,500 - - 2,500
commodity, foreign currency or financial instrument at a fixed price, either at a fixed future date or at any time within a specified
period.
479,577 2,514 (1,932) 480,159
37.2 Derivatives held or issued for hedging purposes
Positive fair Negative fair As part of its asset and liability management the Bank uses derivatives for hedging purposes in order to reduce its exposure to
31 December 2019
Investment value of value of currency and interest rate risks. This is achieved by hedging specific financial instruments and forecasted transactions as well as
securities derivatives derivatives Total strategic hedging against overall statement of financial position exposures.
RO’000 RO’000 RO’000 RO’000
Level 1 6,357 - - 6,357 The Bank uses forward foreign exchange contracts, to hedge against specifically identified currency risks and to comply with the
Level 2 428,766 6,108 (408) 434,466
net open position limit as specified by CBO.
Level 3 2,500 - - 2,500 Strategic hedging is carried out for interest rate risk by monitoring the re-pricing of financial assets and liabilities and entering into
interest rate swaps to hedge a proportion of the interest rate exposure. As strategic hedging does not qualify for special hedge
437,623 6,108 (408) 443,323 accounting, the related derivatives are accounted for as trading instruments.

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37 DERIVATIVES (CONTINUED) 38 FINANCIAL RISK MANAGEMENT (CONTINUED)
37.2 Derivatives held or issued for hedging purposes (continued) The risk management policies focus on identification, measurement, monitoring and mitigation of risk, irrespective of its manner
of manifestation. In this process, the Bank recognises that the dynamics of markets may necessitate decisions that may deviate on
The table below sets out the positive and negative fair values of derivative financial instruments, together with their notional occasions from the principles of Credit Risk Management (CRM). For such requirements, minimal and requisite level of flexibilities
amounts, analysed by term to maturity. The notional amounts, which provide an indication of the volumes of the transactions are defined within the Risk Management policies, along with suitable and adequate safeguards/controls.
outstanding at the end of the period, do not necessarily reflect the amounts of future cash flows involved. These notional amounts,
therefore, are neither indicative of the Bank’s exposure to credit risk, which is generally limited to the positive fair value of the The Bank’s Audit Committee is responsible for monitoring compliance with the Bank’s risk management policies and procedures,
derivatives, nor to market risk. and for reviewing the adequacy of the risk management framework in relation to the risks faced by the Bank. The Audit Committee
is assisted in these functions by Internal Audit department. Internal Audit department undertakes both regular and ad-hoc reviews
Notional amounts by term to maturity of risk management controls and procedures, the results of which are reported to the Audit Committee.
Positive Negative Notional Within 3 - 12 More than There are sub-committees at management level for managing risks. The Asset and Liability Committee (ALCO) manages the risks
At 31 December 2020 fair value fair value amount 3 months months 1 year in the balance sheet arising out of liquidity management, interest rates management as well as tenor of exposures taken by the
RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 Bank. ALCO provides management with guidance on managing these risks. Risk appetite is articulated through various limits,
Forward foreign exchange purchase contracts 52 216 877,111 480,625 187,188 209,298 ratios and caps. Operational Risk is managed under the guidance of Operational Risk Committee (ORCO) at the management
level. A separate ALCO has also been established to monitor the performance of the assets of Sohar Islamic. Expected Credit Loss
Forward foreign exchange sales contracts 2,462 1,716 876,653 482,648 188,914 205,091 Provisioning Committee (ECLPC) manages the governance requirements of IFRS-9 standard, to monitor and approve the Bank’s
credit risk provisions and the underlying drivers The Bank’s Management Risk Committee (MRC) oversees the risk management
functions across the Bank.
Notional amounts by term to maturity
38.1 Credit risk
Positive Negative Notional Within 3 - 12 More than
As at 31 December 2019 fair value fair value amount 3 months months 1 year Credit risk is the risk of financial loss to the Bank if counterparty to a financial instrument fails to meet its contractual obligations.
RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 Credit risk represents the probability of default by any counterparty in repayment of principal obligations and/or servicing interest
Forward foreign exchange purchase contracts 27 380 726,706 339,573 54,163 332,969 obligations in accordance with the set redemption schedule or terms of contract.
Forward foreign exchange sales contracts 6,081 28 686,984 333,797 34,650 318,537 Management of credit risk
The Board of Directors manage Credit Risk through the Board Risk Committee which is responsible for the overall risk framework
of the Bank covering both conventional and Islamic banking. The Bank has a Chief Risk Officer who heads the Risk Management
Notional amounts by term to maturity department with a reporting line to the Board Risk Committee. Credit risk management includes:
Positive Negative Notional Within 3 - 12 More than
As at 31 December 2020 fair value fair value amount 3 months months 1 year y Setting up a strong risk culture within the bank through risk limits and boundaries, within the regulatory guidelines, for risk
USD’000 USD’000 USD’000 USD’000 USD’000 USD’000
origination to be within the approved risk appetite of the Bank;
y Robust lending policy and governed delegation of authorities for both conventional and Islamic banking division;
Forward foreign exchange purchase contracts 135 561 2,278,210 1,248,376 486,203 543,631
y Time tested and a credit appraisal process which includes independent credit risk review of individual corporate credit
proposals duly adhering the bank’s lending policy and through a Board approved retail products policy and template
Forward foreign exchange sales contracts 6,395 4,457 2,277,021 1,253,631 490,686 532,704 lending. Exceptions are reviewed by Credit Risk function;
y Robust Portfolio monitoring and periodic client level review through an independent loan review group (LRG), reporting to
Chief Risk Officer;
Notional amounts by term to maturity y Limiting concentrations of exposure to counterparties, geographic locations and industries (for loans and advances), and
Positive Negative Notional Within 3 - 12 More than by issuer, market liquidity and country (for investment securities) to promote best practice throughout the Bank in the
As at 31 December 2019 fair value fair value amount 3 months months 1 year management of credit risk.
USD’000 USD’000 USD’000 USD’000 USD’000 USD’000
The Bank employs a range of policies and practices to mitigate credit risk. The Bank follows a risk mitigation practice of identifying
Forward foreign exchange purchase contracts 70 987 1,887,548 882,008 140,683 864,855 business cash flows as the primary driver for the advances extended. These cash flows are then tested for sustainability over the
tenor of the credit facility and a suitable mechanism is put in place to capture the same into the client account with the Bank. To
Forward foreign exchange sales contracts 15,795 73 1,784,374 867,005 90,000 827,369 cover unforeseen risk, which dries up the cash flows, additional tangible securities are taken such as real estate or equity shares.
The Bank implements guidelines on the acceptability of specific classes of collateral credit risk mitigation. The principal types of
38 FINANCIAL RISK MANAGEMENT collaterals for loans and advances are:
The primary objective of risk management is to safeguard the Bank’s capital and its financial resources from various risks. The Bank y Legal mortgages over properties;
has exposure to the following risks from its use of financial instruments: y Charges of assets under murabaha agreements;
y Ownership/title of assets under Ijarah financing;
y Credit risk y Charges over business assets such as premises inventory and accounts receivable; and
y Liquidity risk y Charges over financial instruments such as debt securities and equities.
y Market risk
All loans and advances of the Bank are regularly monitored to ensure compliance with the stipulated repayment terms. Those loans
y Operational risk
and advances are classified into one of the 5 risk classification categories: Standard, Special Mention, Substandard, Doubtful and
The Board of Directors has overall responsibility for the establishment and oversight of the Bank’s risk management framework. Loss – as required by CBO regulations and guidelines. Further, as mandated by IFRS 9, the loans and advances are also classified
Such responsibility is discharged by the Board through a Board Risk Committee (BRC), constituted by the Board which is into stage 1, stage 2, stage 3 and POCI based on the internal credit ratings/significant increase in credit risk criteria/requirements
responsible for developing and monitoring the Bank’s risk management policies. BRC submits periodic reports to the Board, of CBO circular BM 1149. The responsibility for identifying problem accounts and classifying them rests with business line function
appraising it on various aspects of risk and changes in the risk profile of the Bank. and a separate unit manages problem accounts.

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38 FINANCIAL RISK MANAGEMENT (CONTINUED) 38 FINANCIAL RISK MANAGEMENT (CONTINUED)
38.1 Credit risk (continued) 38.1 Credit risk (continued)
38.1.a Coronavirus (COVID-19) and Expected credit loss (ECL) 38.1.a Coronavirus (COVID-19) and Expected credit loss (ECL) (continued)
The World Health Organization officially declared COVID-19 as a global pandemic on 11 March 2020. From the latter half of Q1-2020, The Bank’s retail portfolio largely comprises of nationals employed in government sector and hence this segment is expected
the economic environment and business landscape of the Bank have witnessed rapid changes as a result of the unprecedented to largely remain insulated from job cuts and salary reductions. Retail lending to private sector employees which forms a small
outbreak of Coronavirus pandemic coupled with the significant depression in the global crude oil prices. Tightening of market proportion of banks total retail portfolio is expected to witness some impact in the short to medium term due to the pandemic
conditions, lockdowns, restrictions on trade and movement of people have caused significant disruptions to businesses and and hence could lead to potential credit issues. The Bank is fully committed to help its customers through this turbulent period as
economic activities globally and across industries & sectors. directed by the CBO. The Bank continued to support its customers and partners through well-executed business continuity plans,
in addition to adopting health and safety measures announced by the Supreme Committee entrusted with finding mechanisms
Government measures for dealing with developments resulting from the COVID-19 pandemic. The Bank continually reviews its precautionary and
administrative measures in response to changes on the ground.
Governments and regulatory authorities across the globe have implemented several measures to contain the impact of the spread
of the virus. In line with this, the Central Bank of Oman (CBO), also instituted a host of measures to protect the stability of country’s Post-model adjustments and management overlays
economy. These measures include deferral of loan instalments for the affected borrowers (particularly the corporates and SMEs),
deferment and waiver of interest/profit for affected Omani nationals employed in private sector, waiver of point of sale (POS) The Bank’s models have been constructed and calibrated using historical trends and correlations as well as forward looking
charges, lowering of regulatory capital ratios and increasing the lending ratio etc (refer CBO circular no. BSD/CB/2020/001for economic scenarios. The severity of the current macro-economic projections and the added complexity caused by the various
details). These measures have been extended until 31 March 2021. support schemes and regulatory guidance across the main regions in which the Bank operates could not be reliably modelled
for the time being. As a consequence, the existing models may generate results that are either overly conservative or overly
Assessing impact of COVID-19 on the Bank optimistic depending on the specific portfolio/segment. As a result, post-model adjustments are needed. Given model changes
take a significant amount of time to develop and test and the data limitation issues noted above, the Bank expects that post-model
The assessment of Significant Increase in Credit risk (SICR) and the measurement of ECLs are based on reasonable and adjustments will be applied for the foreseeable future.
supportable information that is available without undue cost or effort. In assessing forecast conditions, consideration is given both
to the effects of COVID-19 and the significant government support measures being undertaken. Relief measures, such as payment As on the reporting date the collective provision held by the Bank through management overlays is RO 3.6 million (2.7% of total
holidays, do not automatically lead to loans being measured on the basis of lifetime losses and considerable judgment is needed by impairment) based on latest available PD term structure and macro-economic forecasts. The Bank will continue to reassess and
management to measure ECLs at this time. When it is not possible to reflect such information in the models, post-model overlays appropriately adjust such overlays, both specific and collective, on a regular basis throughout the affected period.
or adjustments are considered. This is also broadly consistent with guidelines issued by other regulators including those issued by
the CBO. Additional IFRS 9 guidelines issued by the CBO include the following: Given the ever evolving nature of the current health and economic crisis, the Banks management is of the view that the forward
looking macro-economic data and the PD term structures published by the economists and rating agencies during 2020 is yet to
y CBO’s measures related to deferment of loan repayment by a borrower may not on its own trigger the counting of 30 DPD reasonably reflect the impact of the economic disruption caused by Covid-19 and also to fully factor in the financial intervention
or more backstop used to determine SICR or the 90 days past due backstop used to determine default. However, banks by the relevant state authorities. Hence, based on regulatory and IASB’s guidance, as a measure of prudence, wherever necessary,
shall continue to assess the obligor’s likelihood of payment of amount due after the deferment period, and in case of SICR the bank has considered post model adjustments and management judgment overlays, while computing its ECL with an intention
or credit impairment and if the same is not of a temporary nature, accordingly fairly recognize such risk; to collectively cover: customer, industry, sector specific evolving credit risk and appetite, impact of recent external ratings and
y The deferment of repayment by borrowers may indicate short term liquidity or cash flow problems and hence the deferment resultant change in the PD term structures, impact of Covid-19 & depressed oil prices available in latest forward looking information
of loan repayment may not be a sole deciding factor for SICR or impairment until and unless banks and FLC’s might have and mitigating impacts of government support measures to the extent possible.
experienced other supportable evidence on having deterioration in the credit quality of the obligor;
y Similarly, any covenant breach having particular relevance to Covid-19 e.g. delay in submission of audited financial accounts In determining above, the management has considered an oil price of $47/bbl (31 December 2019: $69/bbl).
or any other breach, may be considered differently than normal breaches related to consistent borrower specific risk factors
Following are the scenario weightage considered by the Bank:
leading to borrower’s default. This sort of breach may not necessarily and automatically trigger SICR resulting in moving
accounts to Stage-2; Scenario weightings of 40%, 30%, 30% for Base, Downside and Upside scenarios; Sensitivity of ECL to future economic conditions.
y Banks must develop estimates based on the best available supportable information about past events, current conditions
and forecasts of economic conditions. In assessing forecast conditions consideration should be given both to the effects of The following table shows a comparison of the Bank's allowances for credit losses on non-impaired financial assets (Stages 1 and
Covid-19 coupled with oil prices & significant CBO policy measures being undertaken; 2) under IFRS 9 as at December 31, 2020 based on the probability weightings of three scenarios with allowances for credit losses
y Nevertheless, any changes made to ECL estimate the impact of Covid-19 distress will be subject to very high levels of resulting from simulations of each scenario weighted at 100%.
uncertainty as reasonable and supportable forward-looking information may not be currently available to substantiate
those changes. As such, the macro-economic forecasts applied by the banks in their IFRS 9/ECL models couldn’t be At 31 December 2020
recalibrated upfront with pre-mature effects of Covid-19 and CBO support measures, besides the individual and collective
ECL Impact on ECL
LGD’s may get impacted due to Covid-19 effect on market prices of collateral and guarantees. However, Banks are expected Sensitivity of impairment estimates
RO’000’s RO’000’s
to use post model adjustments and management overlays by applying multiple macroeconomic scenarios with careful
ECL on non-impaired loans under IFRS9 49,944 -
application of probability weights to each of such scenarios while computing ECL on portfolio basis as prudence.
Simulations
The exercise of the deferment option by a customer, in its own, is not considered by the Bank as triggering SICR. However, as Upside case - %100 weighted 35,273 14,671
part of the Bank’s credit evaluation process especially given the current economic situation due to after effects of lockdown, the Base case - %100 weighted 45,381 4,563
Bank obtained further information from the customer to understand their financial position and ability to repay the amount and in
Downside scenario - 100% weighted 57,916 (7,972)
case where indicators of significant deterioration were noted, the customers’ credit ratings and accordingly exposure staging were
adjusted, where applicable. Accounting for modification loss
The ECL Committee of the Bank is primarily responsible for overseeing the Bank’s adequacy on ECL. It closely monitors the In case of Corporate customers, the group plan to add the simple interest accrued during the deferral period to the principal
impact of COVID-19 by an ongoing review of the portfolio including a review of all individually significant exposures in the directly outstanding and either extend the original maturity period of the loan or increase the instalments at the end of the DP. The Group
impacted industries and sectors. SME customers are evaluated based on the stability of the business owner and business and any has determined that the modifications due to deferment of instalment and waiver of profit allowed in line with CBO relaxation
short term cash flow mismatches are supported by the Bank. measures did not result in de-recognition of financial assets. The impact of day one modification loss was not considered material
for the period.

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38.1 Credit risk (Continued) 38.1 Credit risk (continued)

38.1.a Coronavirus (COVID-19) and Expected credit loss (ECL) (continued) 38.1.b Exposure to credit risk (continued)
The following table contains an analysis of the deferred amount of principal outstanding and accrued interest/profit pertinent
to loans and advances and Islamic financing receivables of the customers, who have been provided with such benefits, and the Lifetime ECL
related ECL: not credit Lifetime ECL
31 December 2019
12 Month ECL impaired credit impaired Total
RO’000 RO’000 RO’000 RO’000
31 December 2020 Stage 1 Stage 2 Stage 3 Total
RO’000 RO’000 RO’000 RO’000 Loans and advances to customers - corporate banking
Loans and advances and Islamic financing receivables and acceptances 760,939 229,727 2,351 993,017 Performing loans (Grades 1-5) 1,138,272 98,327 1,035 1,237,634
Total ECL on exposure to customers benefiting from payment deferrals of which 3,405 26,543 799 30,747 Performing loans (Grades 6) 106,781 80,315 40 187,136
Deferred amount (Principal) 35,155 14,412 105 49,672 Performing loans (Grades 7) - 154,772 - 154,772
Deferred amount (Interest / Profit) 25,948 10,070 35 36,053
Non-performing loans (Grades 8-10) - 165 88,772 88,937
Deferred amount 61,103 24,882 140 85,725
Allowance for impairment (ECL) 269 3,307 46 3,622 Gross loans and advances to customers - corporate banking 1,245,053 333,579 89,847 1,668,479
Carrying amount 60,834 21,175 93 82,103

Loans and advances to customers – retail banking
Impact on the Capital Adequacy Performing loans (Grades 1-7) 850,219 24,132 6,875 881,226
Besides, the Bank has also applied in its capital adequacy calculations the “Prudential filter” under interim adjustment arrangement Non-performing loans (Grades 8-10) - 587 19,193 19,780
for Stage-1 and Stage-2 ECL. The impact of above filter on the Bank's regulatory capital is 2 bps.
Gross loans and advances to customers - retail banking 850,219 24,719 26,068 901,006
Although above measures are not exhaustive and may not fully counteract the impact of COVID-19 in the short run, they will
mitigate the long-term negative impact of the pandemic. In response to this crisis, the Bank continues to monitor and respond
Total gross loans and advances to customers 2,232,103 221,467 115,915 2,569,485
to all liquidity and funding requirements. As at the reporting date the liquidity, funding and capital position of the Bank remains
strong and is well placed to absorb the impact of the current disruption.
Credit related contingent items
38.1.b Exposure to credit risk Performing loans (Grades 1-5) 631,147 5,667 - 636,814
The following table sets out information about the credit quality of financial assets measured at amortised cost. Unless specifically Performing loans (Grades 6) 119,631 20,538 - 140,169
indicated, for financial assets, the amounts in the table represent gross carrying amounts. Performing loans (Grades 7) 32 27,409 20 27,461
Lifetime ECL Non-performing loans (Grades 8-10) - 100 872 972
not credit Lifetime ECL
31 December 2020
12 Month ECL impaired credit impaired Total Total gross contingent items to customers 750,810 53,714 892 805,416
RO’000 RO’000 RO’000 RO’000
Loans and advances to customers - corporate banking Due from banks and money market placements 198,129 924 - 199,053
Performing loans (Grades 1-5) 1,139,405 60,552 - 1,199,957
Performing loans (Grades 6) 103,496 100,605 - 204,101 Investment securities 503,355 28,031 - 531,386
Performing loans (Grades 7) 7,605 155,863 - 163,467
Non-performing loans (Grades 8-10) - - 128,314 128,314
Gross loans and advances to customers - corporate banking 1,250,506 317,019 128,314 1,695,839
Loans and advances to customers – retail banking

Performing loans (Grades 1-7) 880,231 27,269 - 907,500
Gross loans and advances to customers - retail banking 880,231 27,269 28,772 936,272
Total gross loans and advances to customers 2,130,737 344,288 157,086 2,632,111
Credit related contingent items

Performing loans (Grades 1-5) 659,376 1,112 - 660,488
Total gross contingent items to customers 869,923 28,084 3,007 901,014
Due from banks and money market placements 81,616 - - 81,616
Investment securities 606,478 - - 606,478

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38.1.b Exposure to credit risk (continued) 38.1.b Exposure to credit risk (continued)
Lifetime ECL Lifetime ECL

not credit Lifetime ECL not credit Lifetime ECL
12 Month ECL impaired credit impaired Total 12 Month ECL impaired credit impaired Total
USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000
Loans and advances to customers - corporate banking Loans and advances to customers - corporate banking
Performing loans (Grades 1-5) 2,959,494 157,278 - 3,116,771 Performing loans (Grades 1-5) 2,956,551 255,395 2,688 3,214,634
Performing loans (Grades 6) 268,821 261,312 - 530,132 Performing loans (Grades 6) 277,353 208,610 104 486,067
Performing loans (Grades 7) 19,753 404,839 - 424,590 Performing loans (Grades 7) - 402,005 - 402,005
Non-performing loans (Grades 8-10) - - 333,283 333,283 Non-performing loans (Grades 8-10) - 429 230,577 231,006
Gross loans and advances to customers - corporate banking 3,248,068 823,426 333,283 4,404,777 Gross loans and advances to customers - corporate banking 3,233,904 866,439 233,369 4,333,712
Loans and advances to customers – retail banking Loans and advances to customers – retail banking
Performing loans (Grades 1-7) 2,286,314 70,829 - 2,357,143 Performing loans (Grades 1-7) 2,208,360 62,681 17,857 2,288,898
Non-performing loans (Grades 8-10) - - 74,732 74,732 Non-performing loans (Grades 8-10) - 1,525 49,852 51,377
Gross loans and advances to customers - retail bankings 2,286,314 70,829 74,732 2,431,875 Gross loans and advances to customers - retail banking 2,208,360 64,206 67,709 2,340,275
Total gross loans and advances to customers 5,534,382 894,255 408,016 6,836,652 Total gross loans and advances to customers 5,797,669 575,240 301,078 6,673,987
Credit related contingent items Credit related contingent items

Performing loans (Grades 1-5) 1,712,665 2,888 - 1,715,553 Performing loans (Grades 1-5) 1,639,344 14,719 - 1,654,063
Performing loans (Grades 6) 541,771 24,452 - 567,522 Performing loans (Grades 6) 310,730 53,345 - 364,075
Performing loans (Grades 7) 5,104 44,306 - 49,410 Performing loans (Grades 7) 83 71,192 52 71,327
Non-performing loans (Grades 8-10) - - 7,810 7,810 Non-performing loans (Grades 8-10) - 260 2,265 2,525
Total gross contingent items to customers 2,259,540 72,945 7,810 2,340,296 Total gross contingent items to customers 1,950,157 139,516 2,317 2,091,990
Due from banks and money market placements 211,990 - - 211,990 Due from banks and money market placements 514,621 2,399 - 517,020
Investment securities 1,575,268 - - 1,575,268 Investment securities 1,307,416 72,808 - 1,380,224

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2
Maximum exposure to credit risk before collateral held or other credit enhancements for all on-balance sheet assets are based on Generating the term structure of Probability of Default (PD)
net carrying amounts as reported in the statement of financial position.
The Bank employs statistical models to analyse the data collected and generate estimates of PD of exposures and how these
The maximum credit risk exposures relating to off-balance sheet items calculated as per Basel II guidelines are provided in note are expected to change as a result of the passage of time. This analysis includes the identification and calibration of relationships
38.1. The amounts represented in note 38.1 represent a worst case scenario of credit risk exposure as of 31 December 2019 and between changes in default rates and changes in key macro-economic factors, across various geographies in which the Bank has
2018, without taking into account of any collateral held or other credit enhancements attached. exposures.
Impairment assessment The Bank's internal credit rating grades along with the respective PDs are as below:
Definition of default and cure

Internal rating grades Internal rating grade description PD range (%)
The Bank considers a financial instrument defaulted and therefore Stage 3 (credit-impaired) for ECL calculations in all cases
when the borrower becomes 90 days past due on its contractual payments. The Bank considers treasury and interbank balances 1 Investment grade
defaulted and takes immediate action when the required intraday payments are not settled by the close of business as outlined in
2 Investment grade
the individual agreements.
3 Investment grade
As a part of a qualitative assessment of whether a customer is in default, the Bank also considers a variety of instances (in line with 0.010%-6.464%
CBO circular BM 1149) that may indicate unlikeliness to pay. When such events occur, the Bank carefully considers whether the 4 Investment grade
event should result in treating the customer as defaulted and therefore assessed as Stage 3 for ECL calculations or whether Stage
5 Investment grade
2 is appropriate. Such events include:
6 Investment grade
- Internal rating of the borrower indicating default or near-default and/or substantial downgrade of rating;
- Borrower is subject to litigation by third parties that may have a significant impact on his financial position; 7 Sub-investment grade 16.582%
- A material decrease in the underlying collateral value; 100%
8 - 10 Non-performing
- A material covenant breach not waived by the Bank;
- Unexplained delay in commencement of commercial operation;
Economic variable assumptions
- Unreliable or delay in submission of financial statements The debtor (or any legal entity within the debtor’s group) filing
for bankruptcy application/protection. The Bank obtains the data used from third party sources (Moodys World Bank and other public and private sources) for Bank’s
macro-economic /ECL models and determines weights attributable to multiple scenarios. A correlation analysis has been
It is the Bank’s policy to consider a financial instrument as ‘cured’ and therefore re-classified out of Stage 3 when none of the
performed among historical default rate of the portfolio with the macro-economic factors to identify the factors to be considered
default criteria have been present for at least twelve consecutive months which is six months for accounts classified as Stage 2. The
to compute the macro-economic impact. The macro-economic factors that are having good correlation with the historical
decision whether to classify an asset as Stage 2 or Stage 1 once cured depends on the updated credit grade, at the time of the cure,
movements of default rate are further put to regression analysis to identify the appropriate combination of macro-economic
and whether this indicates there has been a significant increase in credit risk compared to initial recognition.
factors to be considered. Several macroeconomic variables (MEVs) were explored to decide on the best set of independent
variables in order to explain the historical credit losses. These included Real GDP, Real GDP growth rate, Oil price, Unemployment,
Incorporation of forward-looking information
etc. The final ones to be selected were:
The Bank incorporates forward-looking information into both its assessment of whether the credit risk of an instrument has
a) Real GDP (% change)
increased significantly since its initial recognition and its measurement of ECL. Based on consideration of a variety of external
b) Lag4_Europe Brent Spot Price FOB
actual and forecast information, the Bank formulates a fundamental view of the future direction of relevant economic variables as
c) Gross domestic saving/GDP
well as a reasonable range of possible scenarios.
These economic variables and their associated impact on the PD, EAD and LGD vary by financial instrument. Expert judgment
Given the nature of the bank’s exposures and availability of historical statistically reliable information, the Bank derives the point-
has also been applied in this process. Forecasts of these economic variables (the “base economic scenario”) are collected from
in-time (PIT) probability of default (PD) using the through-the-cycle (TTC) PD data computed from historical bank default data
statistical database of Moodys. World Bank and other public and private sources to provide the best estimate view of the economy .
for each rating category. The Bank follows Roll rate estimation to calculate the through the cycle PDs and the PD term structure for
calculating lifetime PiT PDs. Macroeconomic models are to adjust PDs to reflect the impact of the macroeconomic variables, thus As with any economic forecasts, the projections and likelihoods of occurrence are subject to a high degree of inherent uncertainty
making them forward looking. Bank has adopted Vasicek framework to transform long term unconditional PD or through the cycle and therefore the actual outcomes may be significantly different to those projected. The Bank considers these forecasts to
PD estimates into conditional PiT PDs. represent its best estimate of the possible outcomes and has analysed the non-linearities and asymmetries within the Bank’s
different portfolios to establish that the chosen scenarios are appropriately representative of the range of possible scenarios.
The Bank’s internal rating and PD estimation process
Other forward-looking considerations not otherwise incorporated within the above scenarios, such as the impact of any regulatory,
The Bank’s independent Credit Risk Department operates its internal rating models. The Bank runs separate models for its
legislative or political changes, have also been considered, but are not deemed to have a material impact and therefore no
key portfolios in which its customers are rated from 1 to 10 using internal grades. The models incorporate both qualitative and
adjustment has been made to the ECL for such factors. This is reviewed and monitored for appropriateness on a quarterly basis.
quantitative information and, in addition to information specific to the borrower, utilise supplemental external information that
could affect the borrower’s behaviour. Where practical, they also build on information from Good Rating Agency. These information Treasury, trading and interbank relationships
sources are first used to determine the PDs within the Bank’s Basel III framework. The internal credit grades are assigned based on The Bank’s treasury, trading and interbank relationships and counterparties comprise financial services institutions, banks, broker-
these Based III grades. dealers, exchanges and clearing-houses. For these relationships, the Bank’s credit risk department analyses publicly available
information such as financial information and other external data, e.g., the rating of Moody’s or equivalent, and assigns the internal
PDs are then adjusted for IFRS 9 ECL calculations to incorporate forward looking information and the IFRS 9 Stage classification
rating.
of the exposure. This is repeated for each economic scenario as appropriate.

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Economic variable assumptions (continued) Loss given default (continued)

Corporate and small business lending The Bank estimates regulatory and IFRS 9 LGD on a different basis. Under IFRS 9, LGD rates are estimated for the Stage 1, Stage 2,
For corporate and investment banking loans, the borrowers are assessed by the business teams duly complemented by an Stage 3 and POCI IFRS 9 segment of each asset class. The inputs for these LGD rates are estimated and, where possible, calibrated
independent review by Credit Risk Management Team. The credit risk assessment is based on a robust credit scoring model that through back testing against recent recoveries. These are repeated for each economic scenario as appropriate. For wholesale
takes into account various historical, current and forward-looking information such as: banking portfolio, bank currently follows FIRB stipulations.
- Historical financial information together with forecasts and budgets prepared by the client. This financial information Significant Increase in Credit Risk
includes realised and expected results, solvency ratios, liquidity ratios and any other relevant ratios to measure the client’s
financial performance. Some of these indicators are captured in covenants with the clients and are, therefore, measured The Bank continuously monitors all assets subject to ECL. In order to determine whether an instrument or a portfolio of instruments
with greater attention; is subject to 12mECL or Life Time ECL, the Bank assesses whether there has been a significant increase in credit risk since initial
- Any publicly available information on the clients from external parties. This includes external rating grades issued by rating recognition.
agencies, independent analyst reports, publicly traded bond or CDS prices or press releases and articles.
- Any macro-economic or geopolitical information, e.g., GDP growth relevant for the specific industry and geographical The Bank also applies a secondary qualitative method for triggering a significant increase in credit risk for an asset, such as moving
segments where the client operates; a customer/facility to the watch list, or the account becoming forborne. In certain cases, the Bank may also consider that events set
- Any other objectively supportable information on the quality and abilities of the client’s management relevant for out below are a significant increase in credit risk as opposed to a default. Regardless of the change in credit grades, if contractual
the company’s performance. payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial recognition.
- The complexity and granularity of the rating techniques varies based on the exposure of the Bank and the complexity and
size of the customer. Some of the less complex small business loans are rated within the Bank’s models for retail products. a. Inadequate or unreliable financial or other information such as unavailability of audited financial statements and non-
cooperation by borrower in matters pertaining to documentation.
Consumer lending and retail mortgages b. Borrower is subject to litigation by third parties that may have a significant impact on his financial position.
Consumer lending comprises unsecured personal loans, credit cards and overdrafts. These products along with retail mortgages c. Frequent changes in key senior management personnel without acceptable successors or professional management.
and some of the less complex small business lending are rated by an automated scorecard tool primarily driven by days past due. d. Intra Group transfer of funds without underlying transactions.
Other key inputs into the models are: e. Deferment/delay in the date for commencement of commercial operations by more than one year except in Government
projects or delays are due to Government approvals.
- Consumer lending products: use of limits and volatility thereof, GDP growth, unemployment rates, changes in personal f. Modifications of terms resulting in concessions granted to the borrower (after examining the cash flows of the borrower/
income/salary levels based on records of current accounts, personal indebtedness and expected interest repricing; financial position/ability to repay) including extension of moratorium, deferment of payment, waiver of covenants etc. This
- Retail mortgages: GDP growth, unemployment rates, changes in personal income/salary levels based on records of current requirement shall be in conformity to the restructuring guidelines issued by CBO from time to time.
accounts, personal indebtedness and expected interest repricing. g. A fall of 25% or more in the turnover or in the EBIT as compared to the previous year except in the case of change in business
model/one of material events.
Exposure at default h. A fall in Debt Service coverage ratio to below 1 except in cases which have acceptable external credit support.
i. 2 notch downgrade in Master Rating Scale (MRS) of the bank along with associated downgrade in PD except for accounts
The exposure at default (EAD) represents the gross carrying amount of the financial instruments subject to the impairment
rated as 1 at origination for which a 3 notch downgrade in sub investment grades.
calculation, addressing both the client’s ability to increase its exposure while approaching default and potential early repayments
j. Erosion in net worth by more than 20% compared to previous year coupled with increase in leverage by 1.5 times.
too.
Model risk management:
To calculate the EAD for a Stage 1 loan, the Bank assesses the possible default events within 12 months for the calculation of the
12mECL. However, if a Stage 1 loan that is expected to default in the 12 months from the balance sheet date and is also expected to The Bank has utilised models in many of its financial and business activities from underwriting a credit facility to reporting expected
cure and subsequently default again, then all linked default events are taken into account. For Stage 2, Stage 3 and POCI financial loss under the IFRS9 accounting standards.
assets, the exposure at default is considered for events over the lifetime of the instruments.
To manage the model risks, the bank has implemented the IFRS 9 Governance Framework (the Framework). The Framework is a
The Bank determines EADs by modelling the range of possible exposure outcomes at various points in time, corresponding the bank wide policy and is applicable to all models of the bank. According to the Framework, all internally or externally (vendor based)
multiple scenarios. The IFRS 9 PDs are then assigned to each economic scenario based on the outcome of Bank’s models. developed risk quantification models that directly affect the financial reporting on Expected Loss (EL) and Lifetime Expected Loss
(LEL) require independent review/validation.
Loss given default
The Framework establishes a systematic approach to manage the development, validation, approval, implementation and on-
LGD is the share of an asset that is lost when a borrower default. The recovery rate is defined as 1 minus the LGD, the share of an going use of the models. It sets out an effective management structure with clearly defined roles and responsibilities, policies
asset that is recovered when a borrower default. Loss given default is facility-specific because such losses are generally understood and controls for managing model risk. The Framework is reviewed on a regular basis to ensure it meets regulatory standards and
to be influenced by key transaction characteristics such as the presence of collateral and the degree of subordination, if any. international practices. Any major change to the Framework must be approved by the Board of Directors or the BRC.
The Bank segments its retail lending products into smaller homogeneous portfolios, based on key characteristics that are relevant
to the estimation of future cash flows. This comprehensive loan portfolio segmentation strategy enabled the bank to quickly
identify the underlying behaviors that drive credit risk.This comprehensive loan portfolio segmentation strategy enabled the
bank to quickly identify the underlying behaviors that drive credit risk.The applied data is based on historically collected loss
data and involves a wider set of transaction characteristics (e.g., product type, wider range of collateral types) as well as borrower
characteristics.
Further recent data and forward-looking economic scenarios are used in order to determine the IFRS 9 LGD rate for each group
of financial instruments. When assessing forward-looking information, the expectation is based on multiple scenarios. Examples
of key inputs involve changes in, collateral values including property prices for mortgages, commodity prices, payment status or
other factors that are indicative of losses in the Bank.

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38.1.c Credit rating analysis 38.1.d Collateral securities

The table below presents an analysis of debt securities, treasury bills and other eligible bills by rating agency designation, based on The Bank holds collateral against loans, advances and financing to customers in the form of mortgage interests over property,
Moody’s ratings or equivalent. other registered securities, assets and guarantees. Estimates of fair value are based on the value of the collateral assessed at the
time of borrowing and updated once in three years, except when a loan is individually assessed as impaired. In appropriate cases,
31 December 31 December 31 December 31 December two valuation reports are also collected for validation. The shares of MSM listed companies which are taken as securities are valued
2019 2020 2020 2019 on a monthly basis, unless it is a highly volatile stock whereby the valuation is done on more frequent basis.
USD’000 USD’000 RO’000 RO’000
An estimate of the fair value of collateral and other security enhancements held against loans, advances and financing is shown
36,135 42,883 Ba1 16,510 13,912
below:
21,052 - Baa2 - 8,105
- 14,319 Baa3 5,513 - 31 December 31 December 31 December 31 December
- 13,608 Caa2 5,239 - 2019 2020 2020 2019
USD’000 USD’000 RO’000 RO’000
43,340 14,270 Unrated bonds 5,494 16,686
Against past due but not impaired
1,539,343 1,724,818 Sovereign securities 664,055 592,647
697,488 292,301 Property 112,536 268,533
1,639,870 1,809,898 Total 696,811 631,350 1,766 78,551 Equity 30,242 680
105,932 186,797 Commercial mortgage 71,917 40,784
The following table shows the gross placements held with counterparties at the reporting date: 7,065 11,878 Vehicles 4,573 2,720
670 3,974 Fixed deposits 1,530 258
2019 2020 2020 2019 812,921 573,501 Total 220,798 312,975
USD’000 USD’000 RO’000 RO’000
22,327 85,467 Aaa1 to Aaa3 32,905 8,596 Against past due and impaired
10,792 48,205 A1 to A3 18,559 4,155 55,699 66,125 Property 25,458 21,444
208,875 9,881 Baa1 to Baa3 3,804 80,417 102,138 90,473 Commercial mortgage 34,832 39,323
1,327 1,187 Ba1 to Ba3 457 511 2,574 4,429 Vehicles 1,705 991
273,699 67,249 B1 to Caa 25,891 105,374
160,411 161,027 Total 61,995 61,758
517,020 211,989 Total 81,616 199,053
Against neither past due nor impaired

The Bank performs an independent assessment based on quantitative and qualitative factors in cases where a Bank is unrated.
2,073,325 1,965,623 Property 756,765 798,230
758,958 909,896 Commercial mortgage 350,310 292,199
197,618 578,761 Fixed deposits 222,823 76,083
81,075 27,164 Equity 10,458 31,214
44,465 85,488 Vehicles 32,913 17,119
3,155,441 3,566,932 Total 1,373,269 1,214,845
4,128,773 4,301,460 Total collateral held 1,656,062 1,589,578
38.1.e Settlement risk

Settlement risk is the risk of loss due to the failure of a party to honour its obligations to deliver cash, securities or other assets as
contractually agreed on the day of settlement.
In foreign exchange trades, though there is fulfilment of both the legs of the transaction on the settlement date as is common
practice between trading partners (free settlement), there will be risk on account of different time zones. In these cases, the
settlement risk is mitigated through the execution of bilateral payment netting agreements.
38.1.f Concentrations
Concentrations of credit risk arise when a number of counterparties are engaged in similar business activities or activities in the
same geographic region or have similar economic features that would cause their ability to meet contractual obligations to be
affected similarly by changes in economic, political or other conditions. Concentrations of credit risk indicate the relative sensitivity
of the Bank’s performance to developments affecting a particular industry or geographic location.

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38.1.f Concentrations (continued) 38.1.f Concentrations (continued)

The Bank manages its credit risk exposure through diversification of lending activities to avoid undue concentrations of risks with Concentration by location for loans and advances is measured based on the location of the entity holding the asset, which has a
individuals or group of customers in specific locations or businesses. It also obtains appropriate security. Concentration of the high correlation with the location of the borrower. Concentration by location for investment securities is measured based on the
gross credit exposure is given below: location of the issuer of the security. The Bank seeks to manage its credit risk exposure through diversification of lending activities
to avoid undue concentrations of risk with banks or customers in a specific currency. It also obtains security when appropriate.
38.2 Liquidity risk
Due from Due from
banks and banks and
Liquidity risk is the risk that the Bank will encounter difficulty in meeting its obligations that are settled by delivering cash or another
Loans, other money Loans, other money
advances and market Debt advances and market Debt
financial asset.
financing placements securities financing placements securities
RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 Management of liquidity risk
Concentration by sector The Bank’s approach to managing liquidity is to ensure that it always has sufficient liquidity to meet its liabilities when due, under
Corporate 1,695,839 - 62,436 1,668,479 - 38,447 both normal and stressed conditions without incurring unacceptable losses or risking damage to the Bank’s reputation. The Bank
Personal 936,272 - - 901,006 - - has a robust Liquidity Contingency Plan to facilitate management of liquidity under stressed conditions.
Sovereign - - 634,375 - - 592,903 Liquidity risk is managed by the Bank through closely monitoring the liquidity gap against fixed limits.
Banks - 81,616 - - 199,053 -
Liquidity is provided by Treasury, which receives information from other business units regarding the liquidity profile of their
2,632,111 81,616 696,811 2,569,485 199,053 631,350 financial assets and liabilities and details of other projected cash flows arising from projected future business. Treasury maintains
a portfolio of short-term liquid assets, largely made up of short-term liquid investment securities, loans and advances to banks
and other inter-bank facilities, to ensure that sufficient liquidity is maintained within the Bank. In this process due care is taken to
Concentration by location ensure the Bank complies with all the Central Bank regulations.
Middle East 2,632,111 30,533 354,763 2,567,021 86,316 295,549
The Bank conducts stress testing on liquidity based on assumptions approved by ALCO and CBO’s guidelines. All liquidity policies
Europe - 34,308 - 924 93,351 -
and procedures are subject to review and approval by ALCO.
North America - 8,221 342,048 - 2,162 330,026
Asia - 8,554 - 1,540 17,224 5,775 38.2.a Exposure to liquidity risk
The lending ratio, which is the ratio of total loans and advances to customer deposits and capital, is monitored on a daily basis in
2,632,111 81,616 696,811 2,569,485 199,053 631,350 line with regulatory guidelines. Internally the lending ratio is set at a more conservative level than required by regulation. The Bank
also manages its liquidity risk by monthly monitoring the liquid ratio, i.e. net liquid assets to total assets. For this purpose net liquid
assets include cash and cash equivalents and investment grade debt securities for which there is an active and liquid market. Last
year, the Bank has taken a number of initiatives to increase customer deposits progressively.
Due from Due from Details of the reported lending and liquid ratio were as follows:
banks and banks and
Loans, other money Loans, other money 31 December 2020 31 December 2019
advances and market Debt advances and market Debt
financing placements securities financing placements securities Lending ratio Liquid ratio Lending ratio Liquid ratio
USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Average for the year 75.09% 15.85% 78.7% 14.2%
Concentration by sector Maximum for the year 77.03% 18.06% 80.3% 17.3%
Corporate 4,404,777 - 162,171 4,333,712 - 99,862 Minimum for the year 73.16% 12.80% 77.7% 12.3%
Personal 2,431,875 - - 2,340,275 - -
The Bank also monitors the liquidity through Liquidity Coverage ratio (LCR) and Net Stable Funding Ratio (NSFR). Current levels
Sovereign - - 1,647,727 - - 1,540,008
of these ratios are given below
Banks - 211,989 - - 517,020 -
6,836,652 211,989 1,809,898 6,673,987 517,020 1,639,870
LCR (as of December) 134.02% 147.2%
LCR (average for the quarter) 146.11% 155.5%
Concentration by location
NSFR ( as of December) 113.18% 107.4%
Middle Eastw 6,836,652 79,307 921,462 6,667,587 224,197 767,660
Leverage ratio (as of December) 14.3% 14.5%
Europe - 89,112 - 2,400 242,469 -
North America - 21,353 888,436 - 5,616 857,210
Asia - 22,217 - 4,000 44,738 15,000
6,836,652 211,989 1,809,898 6,673,987 517,020 1,639,870
Refer to B3 for an analysis by economic sector.

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38.2 Liquidity risk (continued) 38.2 Liquidity risk (continued)
38.2.a Exposure to liquidity risk (continued) 38.2.a Exposure to liquidity risk (continued)
The Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) is calculated in accordance with Basel III framework
Carrying Gross nominal Within 3 3 - 12 Over
and guidelines adopted by CBO vide circular BM 1127 and BM 1147. The complete disclosures required under these circulars are amount outflow months months 1 year
available on the Investor Relations page of the Bank’s website. USD’000 USD’000 USD’000 USD’000 USD’000
The table below summarises the maturity profile of the Bank’s liabilities as on the reporting date based on contractual repayment 31 December 2020
arrangements. The contractual maturities of liabilities have been determined on the basis of the remaining period at the statement Non-derivative liabilities
of financial position date to the contractual maturity date and do not take account of the effective maturities as indicated by the Due to banks and other money market borrowings 1,871,587 1,889,743 611,140 398,735 879,868
Bank’s deposit retention history and the availability of liquid funds.
Customer deposits 5,796,273 6,071,041 3,102,966 1,694,188 1,273,887
Other liabilities 237,035 237,034 237,034 - -
amount outflow months months 1 year Subordinated loans 91,927 107,504 906 5,457 101,140
RO’000 RO’000 RO’000 RO’000 RO’000 Certificates of deposit 1,322 1,345 16 1,330 -
31 December 2020
Non-derivative liabilities Total 7,998,144 8,306,667 3,952,062 2,099,710 2,254,895
Due to banks and other money market borrowings 720,561 727,551 235,289 153,513 338,749
Customer deposits 2,231,565 2,337,350 1,194,642 652,262 490,446
amount outflow months months 1 year
Subordinated loans 35,392 41,389 349 2,101 38,939 USD’000 USD’000 USD’000 USD’000 USD’000
Certificates of deposit 509 518 6 512 - 31 December 2019
Non-derivative liabilities
Total 3,079,285 3,198,066 1,521,544 808,388 868,134
Due to banks and other money market borrowings 1,909,769 1,964,660 645,670 787,182 531,808
Customer deposits 5,447,558 5,498,681 3,116,187 1,114,273 1,268,221
amount outflow months months 1 year Subordinated loans 91,927 113,886 909 5,473 107,504
RO’000 RO’000 RO’000 RO’000 RO’000 Certificates of deposit 1,322 1,408 16 47 1,345
31 December 2019
Non-derivative liabilities Total 7,711,677 7,839,736 4,023,883 1,906,975 1,908,878
Due to banks and other money market borrowings 735,261 756,394 248,583 303,065 204,746
Customer deposits 2,097,310 2,116,992 1,199,732 428,995 488,265 The Bank prepares a liquidity gap report to monitor the Bank’s short term liquidity position on its Rial denominated assets and
liabilities in a time horizon spanning one month. The gap is adjusted for availability of instruments for repo or refinance and also for
un-availed committed lines of credit, if any. This statement is reported to the ALCO monthly.
Subordinated loans 35,392 43,846 350 2,107 41,389
Certificates of deposit 509 542 6 18 518
Total 2,968,996 3,018,298 1,549,195 734,185 734,918

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38.3 Market risk 38.3 Market risk (continued)

Market risk is the exposure to loss resulting from the changes in the interest rates, foreign currency exchange rates, equity prices 38.3.a Exposure to interest rate risk – non trading portfolios (continued)
and commodity prices. The objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return to risk. The Bank’s interest rate sensitivity position based on contractual re-pricing arrangements at 31 December 2020 was as follows:
Measurement of market risk Effective Within Four months Non-sesitive

annual three to twelve Over to interest
The Bank is mainly engaged in spot transactions, forwards and currency swaps. Positions are mainly customer driven, which further interest months months one year rate Total
reduces complexity. Accordingly, the Bank measures and controls its risk by using a limit framework. As and when the Bank enters rate % RO’000 RO’000 RO’000 RO’000 RO’000
into more complex derivatives, it has sophisticated models and techniques to measure market risk, supported by suitable controls. 31 December 2020
Assets
Management of market risks
Cash and balances with Central Banks 0.01 500 - 507 201,623 202,630
The Bank separates its exposure to market risk between trading and non-trading portfolios. Trading portfolios include all positions Due from banks and other money market 1.06 36,998 71 17 44,498 81,584
arising from market making and proprietary position taking, together with financial assets and liabilities that are managed on a fair placements
value basis. Loans, advances and financing, net 5.41 1,131,722 276,996 1,079,906 14,873 2,503,497
All foreign exchange risk within the Bank is transferred by Treasury to the trading book. Accordingly, the foreign exchange position Investment securities 3.07 433,856 31,712 204,789 30,761 701,118
is treated as a part of the Bank’s trading portfolio for risk management purposes. Foreign exchange risk is monitored and reported Property, equipment and fixtures - - - - 44,278 44,278
by Middle Office. The risk is managed through the Market Risk Management Policy by implementing a limit framework and Other assets - - - - 2,900 2,900
reporting tools like Currency Position Report, Risk Analysis of Currency Position, Breach Analysis Report, and Dealer Limit Breach
Investment properties - - - - 74,980 74,980
report.
Overall authority for market risk is vested in ALCO. The risk management function is responsible for development of detailed risk Total assets 1,603,076 308,779 1,285,219 413,913 3,610,987
management policies (subject to approval by ALCO and BRC). The Market Risk Policy is periodically reviewed to keep it up to date
with the market developments.
Liabilities and equity
38.3.a Exposure to interest rate risk – non trading portfolios Due to banks and other money market
2.38 524,027 23,146 167,327 6,061 720,561
borrowings
Interest rate risk arises from the possibility that changes in interest rates will affect future profitability or the fair values of financial
Customer deposits 2.99 825,034 521,620 142,152 742,759 2,231,565
instruments. The Bank is exposed to interest rate risk as a result of mismatches of interest rate and re-pricing tenure of rate sensitive
assets and liabilities. Other liabilities - - - - 91,258 91,258
Subordinated loans 7.00 - - 35,392 - 35,392
The effective interest rate (effective yield) of a monetary financial instrument is the rate used in a present value calculation which
Certificates of deposit 4.75 - 509 - - 509
results in the carrying amount of the instrument. The rate is a historical rate for a fixed rate instrument carried at amortised cost and
a current rate for a floating rate instrument or an instrument carried at fair value. Total Equity - - - - 531,702 531,702
The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the future cash flows or fair Total liabilities and equity 1,349,061 545,275 344,871 1,371,780 3,610,987
values of financial instrument because of a change in market interest rates. Interest rate risk is managed principally through
monitoring interest rate gaps. ALCO monitors compliance with these limits and is assisted by Risk Management in its day-to-day Gap 254,015 (236,496) 940,348 (957,867) -
monitoring activities. A summary of the Bank’s interest rate gap position on non-trading portfolios is provided in this note. As per
Basel-II guidelines and communicated by CBO the Bank also assesses interest rate risk by assessing the impact on earnings and Cumulative gap 254,015 17,519 957,867 - -
economic values of an interest rate shock of 200 bps and takes appropriate measures to reduce the impact. Additionally the Bank
also assesses the impact on earnings of an interest rate shock of 50 and 100 bps.

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38.3 Market risk (continued) 38.3 Market risk (continued)
38.3.a Exposure to interest rate risk – non trading portfolios (continued) 38.3.a Exposure to interest rate risk – non trading portfolios (continued)
Effective Within Four months Non- Effective Within Four months Non-sesitive
annual three to twelve Over sensitive to annual three to twelve Over to interest
interest months months one year interest rate Total interest months months one year rate Total
rate % RO’000 RO’000 RO’000 RO’000 RO’000 rate % USD’000 USD’000 USD’000 USD’000 USD’000
Assets Assets
Cash and balances with Central Banks 0.01 500 - 505 88,567 89,572 Cash and balances with Central Banks 0.01 1,299 - 1,317 523,696 526,312
Due from banks and other money market 3.26 186,005 - 49 12,183 198,237 Due from banks and other money market 1.06 96,099 184 44 115,579 211,906
placements placements
Loans, advances and financing, net 5.52 933,675 504,602 996,525 19,351 2,454,153 Loans, advances and financing, net 5.41 2,939,539 719,469 2,804,951 38,631 6,502,590
Investment securities 3.48 388,249 64,742 151,834 32,650 637,475 Investments 3.07 1,126,899 82,369 531,919 79,899 1,821,086
Property, equipment and fixtures - - - - 38,389 38,389 Property, equipment and fixtures - - - - 115,008 115,008
Investment properties - - - - 2,900 2,900 Investment properties - - - - 7,532 7,532
Other assets - - - - 84,379 84,379 Other assets - - - - 194,753 194,753
Total assets 1,508,429 569,344 1,148,913 278,419 3,505,105 Total assets 4,163,836 802,022 3,338,231 1,075,098 9,379,187
Liabilities and equity Liabilities and equity

Due to banks and other money market Due to banks and other money market
3.23 455,046 274,469 - 5,746 735,261 2.38 1,361,109 60,119 434,616 15,742 1,871,586
borrowings borrowings
Customer deposits 2.53 458,000 405,664 327,045 906,601 2,097,310 Customer deposits 2.99 2,142,945 1,354,857 369,226 1,929,245 5,796,273
Other liabilities - - - - 100,524 100,524 Other liabilities - - - - 237,034 237,034
Subordinated loans 7.00 - - 35,000 392 35,392 Subordinated loans 7.00 - - 91,927 - 91,927
Certificates of deposit 4.75 - - 509 - 509 Certificates of deposit 4.75 - 1,322 - - 1,322
Total Equity - - - - 536,109 536,109 Total Equity - - - - 1,381,045 1,381,045
Total liabilities and equity 913,046 680,133 362,554 1,549,372 3,505,105 Total liabilities and equity 3,504,054 1,416,298 895,769 3,563,066 9,379,187
Gap 595,383 (110,789) 786,359 (1,270,953) - Gap 659,782 (614,276) 2,442,462 (2,487,968) -
Cumulative gap 595,383 484,594 1,270,953 - - Cumulative gap 659,782 45,506 2,487,968 - -

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38.3 Market risk (continued) 38.3 Market risk (continued)
38.3.a Exposure to interest rate risk – non trading portfolios (continued) 38.3.a Exposure to interest rate risk – non trading portfolios (continued)
Effective Within Four months Non- Interest rate risk also influences the present value of the Bank’s asset and liabilities. Economic value perspective considers the
annual three to twelve Over sensitive to present value of the Bank’s assets and liabilities and assesses the potential longer term impact of interest rates on the Bank. This
interest months months one year interest rate Total perspective focuses on how the economic value of the Bank’s assets and liabilities change with movements in interest rates and it
rate % USD’000 USD’000 USD’000 USD’000 USD’000 reflects the impact of fluctuation in the interest rates on the economic value of the institution.
31 December 2019
The Basel-II Accord recommended that banks should assess the impact of interest rate risk by applying a 200 bps interest rate
Assets sensitivity and accordingly the impact of 200 bps interest rate shock on the Bank’s earnings and capital is provided below:
Cash and balances with Central Banks 0.01 1,299 - 1,312 230,044 232,655
Due from banks and other money market 3.26 483,130 - 127 31,644 514,901 31 December 31 December 31 December 31 December
placements 2019 2020 2020 2019
Loans, advances and financing, net 5.52 2,425,131 1,310,654 2,588,377 50,261 6,374,423 USD’000 USD’000 RO’000 RO’000
Investments 3.48 1,008,439 168,161 394,374 84,805 1,655,779 197,519 201,740 Net interest income (including Islamic financing) 77,670 76,045
Property, equipment and fixtures - - - - 99,712 99,712 1,493,714 1,467,182 Total Regulatory Capital (note 39.1) 564,865 575,080
Investment properties - - - - 7,532 7,532
Other assets - - - - 219,166 219,166 Based on 50 bps interest rate shock
13,391 727 Impact of 50 bps interest rate shock 280 5,156
Total assets 3,917,999 1,478,815 2,984,190 723,164 9,104,168 6.78% 0.39% Impact as % to net interest income 0.39% 6.78%
0.90% 0.05% Impact as % to capital 0.05% 0.90%

Based on 100 bps interest rate shock
Due to banks and other money market
3.23 1,181,938 712,906 - 14,925 1,909,769 26,782 1,455 Impact of 100 bps interest rate shock 560 10,311
borrowings
Customer deposits 2.53 1,189,610 1,053,673 849,468 2,354,807 5,447,558 13.56% 0.78% Impact as % to net interest income 0.78% 13.56%
Other liabilities - - - - 261,101 261,101 1.79% 0.10% Impact as % to capital 0.10% 1.79%
Subordinated loans 7.00 - - 90,909 1,018 91,927
Certificates of deposit 4.75 - - 1,322 - 1,322 Based on 200 bps interest rate shock
Total Equity - - - - 1,392,491 1,392,491 53,564 2,909 Impact of 200 bps interest rate shock 1,120 20,622
27.12% 1.56% Impact as % to net interest income 1.56% 27.12%
Total liabilities and equity 2,371,548 1,766,579 941,699 4,024,342 9,104,168
3.59% 0.20% Impact as % to capital 0.20% 3.59%
Gap 1,546,451 (287,764) 2,042,491 (3,301,178) - 38.3.b Exposure to other market risks
Cumulative gap 1,546,451 1,258,687 3,301,178 - - Investment value risk is the risk of reduction in the market value of the Bank’s portfolio as a result of diminution in the market value
of individual investments. The responsibility for management of investment value risk rests with the Investment division under the
supervision and guidance of the Management Investment Committee and Board Executive Committee of the Bank. The Bank’s
Interest rate risk is managed by taking views on interest rate movements for the year and realigning the portfolios and covenants
investments are governed by an investment policy approved by the Board of Directors. The ratings and prices of the instruments
of lending, so as to be proactive and minimise adverse effects. The benchmark presently available in Oman is the 28-day CBO CD
are monitored on a regular basis and necessary actions are taken to reduce exposure if needed. The portfolio is revalued at market
rate. The trend of the weighted average interest on loans and cost of deposits for the year is provided below:
price to ensure that unrealised losses, if any, on account of reduction in the market value of the investments remains within
acceptable parameters.
2020 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Lending rate 5.48% 5.51% 5.48% 5.48% 5.39% 5.38% 5.44% 5.48% 5.48% 5.48% 5.49% - Security as per country Changes in fair value +/- 5%
Deposit rate 2.09% 1.98% 1.94% 1.92% 1.93% 1.95% 1.97% 1.94% 1.92% 1.95% 1.95% - 31 December 31 December
2020 2019
RO’000 RO’000
2019 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Organisation for Economic Co-operation (OECD) Countries - 58
Lending rate 5.36% 5.34% 5.35% 5.37% 5.39% 5.42% 5.43% 5.44% 5.46% 5.46% 5.48% 5.46% Oman 435 469
Other Gulf Co-operation Council (GCC) countries 5 5
Deposit rate 1.88% 1.89% 1.89% 1.90% 1.93% 1.94% 1.95% 1.95% 1.99% 2.02% 2.03% 2.01%
The management of interest rate risk is one of the critical components of market risk management in banks. Interest rate risk Security as per country Changes in fair value +/- 5%
primarily arises on account of mismatch of the Bank’s repricing assets with its repricing liabilities that fund the assets. There 31 December 31 December
are basically two approaches to management of interest rate risk in banks, namely “Earnings Approach” and “Economic Value 2020 2019
Approach”. The interest rate risk is assessed based on the impact of interest rate shock on the Bank’s earnings and capital. USD’000 USD’000
Organisation for Economic Co-operation (OECD) Countries - 151
The focus of earnings approach understands the impact of interest rate changes (shock) of assets and liabilities on the Net Interest
Oman 1,130 1,218
Income of the Bank. It measures the extent of capability of the Bank to absorb decline in net interest income caused by interest
rate changes. Other Gulf Co-operation Council (GCC) countries 13 13

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38.3 Market risk (continued) 38.4 Operational risk (continued)
38.3.b Exposure to other market risks (continued) The Bank has an effective Fraud Risk Management policy and framework. The Policy sets out the Governance framework for
implementing Enterprise wide Fraud Risk Management environment and culture. It covers the requirements for effective
Currency risk identification, assessment, measurement, monitoring and managing the fraud risk across the Bank with a high level requirement
for prevention, detection and reporting of frauds.
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Board
The objective of the Policy is to comply with various aspects of Fraud Risk Management stipulated by Central Bank of Oman (CBO)
has set limits on the total open position and open position per currency. The open position limits include overnight and intraday in Circular BM1153 dated 25 December 2017.
open position. Open positions are monitored on a daily basis and hedging strategies used to ensure positions are maintained within
established limits. The Bank had the following net open positions denominated in foreign currencies: Business Continuity
31 December 2020 31 December 2019 Business Continuity Management (BCM) testing of Sohar international for 2020 was successfully completed within defined
scope, nevertheless the Bank will ensure a continual improvement to whole bank operations. Our BCPs and DRPs are reviewed
Net Net and tested at least annually. Any areas for improvement that are identified are tracked to ensure appropriate resolution and our
(liabilities)/ (liabilities)/
plans and infrastructure updated as appropriate. Capacity and resource requirements are also reviewed periodically.
Assets Liabilities assets Assets Liabilities assets
FCY’ 000 FCY’ 000 FCY’ 000 FCY’ 000 FCY’ 000 FCY’ 000 Sohar International has established a Business Continuity Management (BCM) Program designed to minimize service disruption
US Dollar 3,449,801 3,877,921 (428,120) 2,897,867 3,331,452 (433,585) and the potential impact on the Bank, our customers and our staff. This includes a BCM Policy that is approved by our Board
together with written Business Continuity and Disaster Recovery plans and procedures that are subject to period independent
Euro 140,196 140,192 4 141,728 141,724 4
review. Although the specific details of our BCM arrangements are confidential for security reasons, Sohar International maintains
UAE Dirhams 48,068 56,539 (8,471) 44,345 54,213 (9,868) Business Continuity Plans (BCPs) that address risk scenarios and events of varying scope including, but not exclusively, loss of
Japanese Yen 2,396 3,136 (740) 4,867 2,818 2,049 services or infrastructure, denial of access, cyber-attack, pandemics and regional crises.
Swiss Franc 5,261 5,217 44 4,069 4,051 18 Sohar International BCPs are focused on maintaining critical processes, including treasury, capital & liquidity and payment services,
Pound Sterling 1,338 1,290 48 4,202 4,202 - providing customers with uninterrupted access to their funds and maintaining effective communications with our customers, staff
and other stakeholders.
Indian Rupee 16,525 86 16,439 6,522 86 6,436
BCM testing of Sohar International for 2020 was successfully completed within defined scope, nevertheless the Bank will ensure
The Bank’s open foreign currency positions are a result of fluctuations in the prevailing foreign currency exchange rates on its a continual improvement to whole bank operations. Our BCPs and DRPs are reviewed and tested at least annually. Any areas
financial position and cash flows. The Board sets limits on the level of exposure by currency and in aggregate for both overnight for improvement that are identified are tracked to ensure appropriate resolution and our plans and infrastructure updated as
and intra-day positions, which are monitored daily. appropriate.
38.4 Operational risk During COVID-19 pandemic, Sohar International gives prime importance to the health and safety of all its staff & customers. That
was achieved by ensuring a safe banking experience is provided to the customers whereby all the banks digital capabilities were
Operational risk is defined as the risk of direct or indirect loss resulting from inadequate or failed internal processes, people, highlighted in campaigns to motivate the customers to extraordinary use of alternate channels for their banking requirements.
technology, infrastructure or from external events and excludes credit, market and liquidity risks.
Throughout 2020 and during the pandemic, it was witnessed that Sohar International Business Continuity moved into its full gear.
The Bank’s objective is to manage operational risk to avoid/reduce financial losses to the Bank by the establishment of the necessary The regular testing of the program proved to be very effective. Similar to all other activities in the Bank, the Business Continuity
controls, systems and procedures. The Bank recognises that an over-controlled environment will affect the Bank’s business and Program continues to be improved in line with the international best practices which include the review of Business Continuity
earnings, besides adding to costs. Therefore, the Bank aims to effectively manage operational risk through control optimisation and Disaster Recovery plans at least annually. Such regular reviews enables the Bank to address areas on improvements by putting
and well established systems, methods and governance framework. into motion the appropriate plans, necessary infrastructure and resources requirements to ensure a high level of maturity while
remediating the consequences of COVID-19 pandemic in line with BCM guidelines.
The primary responsibility for development and implementation of controls to address operational risk is assigned to senior
management within each business unit. This responsibility is supported by the development of overall Bank standards in 39. CAPITAL MANAGEMENT
the following areas:
39.1 Regulatory capital
y Clear reporting lines;
The Bank’s lead regulator, the CBO, sets and monitors the capital requirements for the Bank as a whole. In implementing current
y Proper delegation of powers;
capital requirements CBO requires the Bank to maintain a prescribed ratio of total capital to total risk-weighted assets. The Bank
y Appropriate segregation of duties and authorisation of transactions through a maker checker system and authorisation
calculates capital requirements for market risk and operational risk based upon the model prescribed by the CBO as follows:
matrix;
y Ownership reconciliation and monitoring of accounts; y Claims against sovereign entities in the respective national currencies – Nil;
y Documentation of controls and processes; y Claims against sovereign entities in other currencies – 100% risk weighting is applied as prescribed by the CBO;
y Compliance with regulatory and other legal requirements; y Retail and Corporate loans – In the absence of credit rating model 100% risk weighting is applied;
y Periodic assessment of the operational risks faced and evaluating the adequacy of controls and procedures to address y Off balance sheet items – As per credit conversion factors and risk weighting prescribed by the CBO.
the risks identified;
The Bank’s regulatory capital is analysed into two tiers:
y Reporting of operational losses and incidents triggering operational losses and remedial action;
y Development of contingency plans; y Tier 1 capital includes ordinary share capital, share premium, perpetual Tier 1 capital securities classified as innovative
y Training, skill up gradation and professional development; Tier 1 securities, retained earnings, translation reserve and minority interests after deductions for goodwill and intangible
y Ethical and business standards; and assets, and other regulatory adjustments relating to items that are included in equity but are treated differently for capital
y Risk mitigation through insurance, wherever desirable. adequacy purposes.
y Tier 2 capital includes qualifying subordinated liabilities, collective impairment allowances and unrealised losses on equity
Compliance with Bank standards for both conventional and Islamic banking divisions is supported by a programme of periodic reviews instruments classified as available for sale investments.
undertaken by Internal Audit. The results of Internal Audit reviews are discussed with the management of the business unit to which Various limits are applied to elements of the capital base. The amount of innovative tier 1 securities cannot exceed 15 per cent
they relate, with summaries submitted to the Audit Committee and management. The Bank has a comprehensive Operational Risk of total tier 1 capital; qualifying tier 2 capital cannot exceed tier 1 capital; and qualifying term subordinated loan capital may not
Management Framework, Operational Risk Management Policy, Risk and Control Self-Assessment (RCSA) procedures, Operational exceed 50 per cent of tier 1 capital. There are also restrictions on the amount of collective impairment allowances that may be
Risk Loss Event Reporting Framework, Maintenance of Operational Risk Loss Data Base and RCSA Framework. The Bank operates included as part of tier 2 capital. Other deductions from capital include the carrying amounts of investments in subsidiaries that are
an in-house RCSA model and conducts Risk and Control Self-Assessment for all major business activities like Corporate Banking, not included in the regulatory consolidation, investments in the capital of banks and certain other regulatory items.
Retail Banking, Treasury, Card operations, Deposits, HR, E-banking, Administration, Branch operations, Compliance, Legal, IT, Credit
Administration, Payment unit etc. The Bank has identified Key Risk Indicators (KRI) of operational risk in major activities of the Bank
and set threshold limits that are monitored monthly to assess and manage the level of risk.
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39. CAPITAL MANAGEMENT 40. SEGMENTAL INFORMATION
39.1 Regulatory capital (continued) Segmental information is presented for the Bank’s operating segments. For management purposes the Bank is organised into the
following operating segments:
Banking operations are categorised as either trading book or banking book, and risk-weighted assets are determined according to
specified requirements that seek to reflect the varying levels of risk attached to assets and off-balance sheet exposures. The Bank’s Retail banking:
policy is to maintain a strong capital base to maintain investor, creditor and market confidence and to sustain future development
of the business. The impact of the level of capital on shareholders’ return is also recognised and the Bank recognises the need y Including loans to and deposits from retail customers, credit card and fund transfer facilities.
to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and security
afforded by a sound capital position. Wholesale banking:
The international standard for measuring capital adequacy is the risk asset ratio, which relates capital to balance sheet assets and y Corporates including loans to and deposits from large and mid-sector corporates, small & medium enterprises and
off balance sheet exposures weighted according to broad categories of risk. trade finance customers.
y Government and project finance syndication including loans to and deposits from government and financial institutions,
The risk asset ratio calculated in accordance with the capital adequacy guidelines of the Bank for International Settlement is as project finance and syndicated loans.
follows: y Investments including proprietary investments, correspondent and investment banking.
y Treasury including money market instruments, derivatives and foreign exchange products.
2019 2020 2020 2019 Head office
USD’000 USD’000 RO’000 RO’000
CET 1 capital y Includes balance sheet, income and expense related items that are not directly related to the Bank’s operating segments
613,922 637,285 Ordinary share capital 245,355 236,360
Islamic banking
51,797 46,852 Share premium 18,038 19,942
74,075 79,272 Legal reserve 30,520 28,519 y Including Islamic financing activities, current accounts, unrestricted investment accounts and other products and services
to corporate and individual customers under Shari'ah principles.
2,566 2,566 General reserve 988 988
36,364 54,546 Subordinated loan reserve 21,000 14,000 The CEO monitors the operating results of business units separately for the purpose of making decisions about resource allocation
81,616 35,777 Retained earnings * 13,774 31,422 and performance assessment.
(5,748) (8,927) Fair value losses (3,437) (2,213) Transfer pricing between operating segments is on an arm’s length basis in a manner similar to transactions with third parties.
854,592 847,371 Total CET 1 capital 326,238 329,018 No revenue from transactions with a single external counterparty or customer amounted to 10% or more of the Bank’s total revenue
in 2020 or 2019.
Additional Tier 1 capital
519,481 519,481 Perpetual Tier 1 Capital Securities 200,000 200,000
1,374,073 1,366,852 Total Tier 1 capital 526,238 529,018
Tier 2 capital
65,096 63,966 Impairment allowance on portfolio basis 24,627 25,062
54,545 36,364 Subordinated loan 14,000 21,000
119,641 100,330 Total Tier 2 capital 38,627 46,062
1,493,714 1,467,182 Total regulatory capital 564,865 575,080
Risk weighted assets

7,454,971 7,203,112 Credit and market risks 2,773,198 2,870,164
466,880 498,410 Operational risk 191,888 179,749
7,921,851 7,701,522 Total risk weighted assets 2,965,086 3,049,913
Capital adequacy ratio

18.86% 19.05% Total regulatory capital expressed as a percentage of total risk 19.05% 18.86%
weighted assets
17.35% 17.75% Total tier I capital expressed as a percentage of total risk weighted 17.75% 17.35%
assets
10.79% 11.00% Total CET 1 capital expressed as a percentage of total risk weighted 11.00% 10.79%
assets
* Retained earnings for the year 2019 is stated after deducting cash dividend of RO 7,090,800, as disclosed in note 18.1.
The capital adequacy ratio is calculated in accordance with Basel II & Basel III requirements as adopted by CBO. Disclosures
required under Basel III and circular BM-1114 dated 17 November 2013 issued by CBO are available on the Investor Relations page
of the Bank’s website.

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40. SEGMENTAL INFORMATION (CONTINUED) 40 SEGMENTAL INFORMATION (CONTINUED)
Retail Wholesale Retail Wholesale

31 December 2020 banking banking Head Office Islamic banking Total 31 December 2019 banking banking Head Office Islamic banking Total
RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
Income Statement Income Statement
Interest income 42,745 104,242 - - 146,987 Interest income 40,860 105,827 - - 146,687
Interest expense (22,204) (52,812) - - (75,016) Interest expense (21,227) (55,269) - - (76,496)
Net interest income 20,541 51,430 - - 71,971 Net interest income 19,633 50,558 - - 70,191
Net income from Islamic financing and investing Net income from Islamic financing and investing
- - - 5,699 5,699 - - - 5,854 5,854
activities activities
Other operating income 5,576 7,787 - 952 14,315 Other operating income 5,651 21,853 2 1,108 28,614
Total Operating income 26,117 59,217 - 6,651 91,985 Total Operating income 25,284 72,411 2 6,962 104,659
Total Operating expenses (20,411) (19,153) - (5,591) (45,155) Total Operating expenses (22,966) (17,530) - (4,790) (45,286)
Net Operating Income 5,706 40,634 - 1,060 46,830 Net Operating Income 2,318 54,881 2 2,172 59,373
Impairment on FVOCI investments - 883 - (852) 31 Impairment on FVOCI investments - (508) - 6 (502)
Loan impairment charges and other credit risk Loan impairment charges and other credit risk
(277) (23,252) - 364 (23,165) (847) (17,092) - (404) (18,343)
provisions, net provisions, net
Segment profit/(loss) 5,429 17,695 - 572 23,696 Segment profit / (loss) 1,471 37,281 2 1,774 40,528
Income tax expense (885) (2,712) - (86) (3,683) Income tax expense (228) (5,628) - (266) (6,122)
Profit / (loss) for the year 4,544 14,983 - 486 20,013 Profit / (loss) for the year 1,243 31,653 2 1,508 34,406
Balance sheet Balance sheet

Assets Assets
Cash and balances with Central Bank - 184,191 - 18,439 202,630 Cash and balances with Central Bank - 77,582 - 11,990 89,572
Due from banks and other money market - 69,555 - 12,029 81,584 Due from banks and other money market - 192,953 - 5,284 198,237
placements placements
Loans, advances and financing, net 791,305 1,450,551 - 261,641 2,503,497 Loans, advances and financing, net 776,669 1,464,088 - 213,396 2,454,153
Investment securities - 679,144 - 21,974 701,118 Investment securities - 614,052 - 23,423 637,475
Property, equipment and fixtures - - 43,407 871 44,278 Property, equipment and fixtures - - 37,293 1,096 38,389
Investment properties - - 2,900 - 2,900 Investment properties - - 2,900 - 2,900
Other assets - - 74,256 724 74,980 Other assets - 70,166 12,137 2,076 84,379
TOTAL ASSETS 791,305 2,383,441 120,563 315,678 3,610,987 TOTAL ASSETS 776,669 2,418,841 52,330 257,265 3,505,105
Due to banks and other money market borrowings - 710,935 - 9,626 720,561 Due to banks and other money market borrowings - 719,673 - 15,588 735,261
Customer deposits 447,823 1,512,167 - 271,575 2,231,565 Customer deposits 404,795 1,487,005 - 205,510 2,097,310
Other liabilities - - 89,335 1,923 91,258 Other liabilities - 64,781 33,566 2,177 100,524
Subordinated loans - - 35,392 - 35,392 Subordinated loans - - 35,392 - 35,392
Certificates of deposit - 509 - - 509 Certificates of deposit - 509 - - 509
TOTAL LIABILITIES 447,823 2,223,611 124,727 283,124 3,079,285 TOTAL LIABILITIES 404,795 2,271,968 68,958 223,275 2,968,996
TOTAL EQUITY - - 499,148 32,554 531,702 TOTAL EQUITY - - 502,119 33,990 536,109
447,823 2,223,611 623,875 315,678 3,610,987 404,795 2,271,968 571,077 257,265 3,505,105

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40 SEGMENTAL INFORMATION (CONTINUED) 40 SEGMENTAL INFORMATION (CONTINUED)
Retail Wholesale Retail Wholesale

31 December 2020 banking banking Head Office Islamic banking Total 31 December 2019 banking banking Head Office Islamic banking Total
USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000
Income Statement Income Statement
Interest income 111,026 270,758 - - 381,784 Interest income 106,130 274,875 - - 381,005
Interest expense (57,673) (137,174) - - (194,847) Interest expense (55,135) (143,556) - - (198,691)
Net interest income 53,353 133,584 - - 186,937 Net interest income 50,995 131,319 - - 182,314
Net income from Islamic financing and investing Net income from Islamic financing and investing
- - - 14,803 14,803 - - - 15,205 15,205
activities activities
Other operating income 14,483 20,226 - 2,473 37,182 Other operating income 14,678 56,761 5 2,878 74,322
Total Operating income 67,836 153,810 - 17,276 238,922 Total Operating income 65,673 188,080 5 18,083 271,841
Total Operating expenses (53,016) (49,748) - (14,522) (117,286) Total Operating expenses (59,652) (45,532) - (12,441) (117,625)
Net Operating Income 14,820 104,062 - 2,754 121,636 Net Operating Income 6,021 142,548 5 5,642 154,216
Impairment on available for sale investments - 2,294 - (2,213) 81 Impairment on available for sale investments - (1,320) - 16 (1,304)
Loan impairment charges and other credit risk Loan impairment charges and other credit risk
(719) (60,395) - 945 (60,169) (2,200) (44,395) - (1,050) (47,645)
provisions, net provisions, net
Segment profit 14,101 45,961 - 1,486 61,548 Segment profit 3,821 96,833 5 4,608 105,267
Income tax expense (2,299) (7,044) - (223) (9,566) Income tax expense (592) (14,618) - (691) (15,901)
Profit for the year 11,802 38,917 - 1,263 51,982 Profit for the year 3,229 82,215 5 3,917 89,366
Balance sheet
Balance sheet Assets
Assets Cash and balances with Central Bank - 201,512 - 31,143 232,655
Cash and balances with Central Bank - 478,418 - 47,894 526,312 Due from banks and other money market - 501,176 - 13,725 514,901
placements
Due from banks and other money market - 180,662 - 31,244 211,906
Loans, advances and financing, net 2,017,322 3,802,826 - 554,275 6,374,423
placements
Loans, advances and financing, net 2,055,338 3,767,665 - 679,587 6,502,590 Investments - 1,594,940 - 60,839 1,655,779
Investments - 1,764,011 - 57,075 1,821,086 Property, equipment and fixtures - - 96,865 2,847 99,712
Property, equipment and fixtures - - 112,746 2,262 115,008 Investment properties - - 7,532 - 7,532
Investment properties - - 7,532 - 7,532 Other assets - 182,249 31,525 5,392 219,166
Other assets - - 192,871 1,882 194,753

TOTAL ASSETS 2,017,322 6,282,703 135,922 668,221 9,104,168
TOTAL ASSETS 2,055,338 6,190,756 313,149 819,944 9,379,187

Liabilities
Due to banks and other money market borrowings - 1,869,281 - 40,488 1,909,769
Liabilities
Customer deposits 1,051,416 3,862,350 - 533,792 5,447,558
Due to banks and other money market borrowings - 1,846,583 - 25,003 1,871,586
Other liabilities - 168,262 87,184 5,655 261,101
Customer deposits 1,163,177 3,927,706 - 705,390 5,796,273
Subordinated loans - - 91,927 - 91,927
Other liabilities - - 232,039 4,995 237,034
Certificates of deposit - 1,322 - - 1,322
Subordinated loans - - 91,927 - 91,927
Certificates of deposit - 1,322 - - 1,322 TOTAL LIABILITIES 1,051,416 5,901,215 179,111 579,935 7,711,677
TOTAL EQUITY - - 1,304,205 88,286 1,392,491
TOTAL LIABILITIES 1,163,177 5,775,611 323,966 735,388 7,998,142
TOTAL EQUITY - - 1,296,489 84,556 1,381,045 1,051,416 5,901,215 1,483,316 668,221 9,104,168
1,163,177 5,775,611 1,620,455 819,944 9,379,187

41 COMPARATIVE FIGURES
Certain comparative figures for 2019 have been reclassified in order to conform to the presentation for the current period. Such
reclassifications do not affect previously reported net profit or shareholders’ equity.

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REGULATORY
DISCLOSURES
SOHAR INTERNATIONAL
Taking a closer look
at enriching steps

REGULATORY DISCLOSURES UNDER BASEL II & BASEL III FRAMEWORK
1. INTRODUCTION
The following disclosures are being made in accordance with the revised capital adequacy rules under the Basel II & Basel III
framework issued by the Central Bank of Oman (CBO) through circular number BM 1009 dated 13 September 2006 and BM 1114
dated 17 November 2013. These disclosures aim to provide market participants material qualitative and quantitative information
about Sohar International Bank’s risk exposures, risk management strategies and processes of capital adequacy.
2. SUBSIDIARIES AND SIGNIFICANT INVESTMENTS

Sohar International Bank is not part of any group either as a member or as the top corporate entity in the group.
3. CAPITAL STRUCTURE
The authorised share capital of the Bank is 4,000,000,000 shares of RO 0.100 each. The issued and paid up share capital of the Bank
is 2,434,506,735 shares of RO 0.100 each amounting to RO 245.355 million.
The Bank issued its first Perpetual Tier 1 Capital Securities amounting to RO 100 million on 25 September 2017. These securities bear
interest on their nominal amount from the issue date to the first call date at a fixed annual rate of 7.75%. Thereafter the interest rate will
reset at five year intervals. Interest will be payable semi-annually in arrears and treated as a deduction from equity.
On 14 March 2019, the Bank issued its second issuance of Perpetual Tier 1 Capital Securities amounting to RO 100 million. These
securities bear interest on their nominal amount from the issue date to the first call date at a fixed annual rate of 7.50% with interest
rate reset at five year intervals. Interest will be payable semi-annually in arrears and treated as a deduction from equity.
Both the securities constitute direct, unconditional, subordinated and unsecured obligations of the Bank and are classified as equity
in accordance with IAS 32: Financial Instruments – Classification. They do not have a fixed or final maturity date. The Bank may at
its discretion and after prior consent from the relevant regulatory authority, exercise its option to redeem the securities in full (not
in part) on the first Call Date, i.e the fifth anniversary of the Issue Date, and on every fifth anniversary thereafter, again subject to the
prior consent of the regulatory authorities. The Bank at its sole discretion may elect not to distribute interest. This is not considered
as an event of default. If the Bank does not pay interest, on a scheduled interest payment date (for whatever reason), it cannot make
any other distribution or payment on or with respect to its ordinary shares or any of its other Common Equity Tier 1 instruments or
securities, ranking junior to or pari passu with the Perpetual Tier 1 Capital Securities unless and until it has paid one interest payment
in full on the securities. The terms of the Perpetual Tier 1 Capital Securities issuance allow the Bank to write-down (in whole or in part)
any amounts due to the holders of the securities under certain circumstances.
RO 15.250 million was paid as coupon during 2020 (2019: 11.530 million) and is recognized in the statement of changes in equity.
The Bank has a diverse shareholder profile providing the Bank the necessary opportunity to raise additional capital upon necessity.
The Bank also carries unsecured subordinated loans of RO 35 million raised in 2016 with a maturity of 7 years. These instruments
are unlisted, non-transferable, non-negotiable and non-convertible with no early call option and with a fixed rate of interest. The
principal amount of the subordinated loans is repayable on maturity in 2023 with interest payable semi-annually. The Bank is
required to create a subordinated loan reserve equal to 20% of the issue value annually during the last five years of the term of the
subordinated loans. According to the Regulations of CBO, the amount of subordinated loans as reduced by subordinated loan
reserve is considered as Tier II capital for capital adequacy purposes.
Capital structure RO ‘000

Tier 1 capital
Paid-up share capital 245,355
Share premium 18,038
Legal reserve 30,520
General reserve 988
Subordinated loans reserve 21,000
Retained earnings 13,774
Other capital instruments 200,000
Other amounts deducted from Tier 1 capital including goodwill, deferred tax and investments (3,437)
Total amount of Tier 1 capital 526,238

Total amount of Tier 2 capital 38,627
Total eligible capital 564,865
őőőőőő

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REGULATORY DISCLOSURES UNDER BASEL II & BASEL III FRAMEWORK REGULATORY DISCLOSURES UNDER BASEL II & BASEL III FRAMEWORK
AS AT 31 DECEMBER 2020 AS AT 31 DECEMBER 2020
4. CAPITAL ADEQUACY 5. RISK EXPOSURE AND ASSESSMENT

The Bank has adopted the standardized approach for credit risk and basic indicator approach for operational risk and standardized 5.1 Management of risk in Sohar International Bank - approach and policy
duration approach for market risk under the Basel II regulations, as prescribed by the CBO for all banks operating in Oman with
effect from 1 January 2007. The Bank’s activities expose it to a variety of financial risks. Taking risk is core to the financial business, and the operational risks are
The Bank’s capital adequacy ratio, calculated according to guidelines set by the Bank of International Settlements (BIS) as an inevitable consequence of being in business. The Bank’s aim is therefore to achieve an appropriate balance between risk and
adopted by CBO was 19.05%. While the international requirement as per BIS is 8%, the CBO’s regulations stipulate that local banks return and minimize potential adverse effects on the Bank’s financial performance.
maintain a minimum capital adequacy ratio of 11% and an additional 2.5% towards capital conservation buffer. For the purposes
of supporting the banks to tide over the Covid 19 crisis, CBO introduced policy measures allowing the banks to lower the capital The risks in the Bank are managed through a “Three Lines of Defense model”, with all Businesses acting as the front line by owning
conservation buffer by 50% from 2.5% to 1.25%. the respective risks and managing them. The second line of defense is shared by Risk and Compliance functions. While Risk
provides “Functional Leadership” to the businesses by educating and training them on the policies, processes and controls set
The Banks strategy is to maintain adequate capital to allow the Bank to operate under adverse market conditions and which can
by Risk and also identifying risks, measuring and reporting to the management. Compliance ensures application of all the policies
absorb unforeseen losses.
and processes conform with the current regulatory guidelines and applicable laws of Oman. Internal Audit acts as the third line of
The Bank has an Internal Capital Adequacy Assessment Process (ICAAP) through which senior management assesses the Bank’s defense through reviews and exercising oversight of the first two lines of defense. The review findings act as a risk reporting tool for
capital against its risk profile. Asset Liability Committee (ALCO) is the forum in which the capital adequacy is assessed, based on the Board and as inputs for upgrading of processes and plugging gaps in controls by Risk. Thus an “Integrated Risk Management”
the next quarter’s business forecast and the risk profile envisaged. CBO, vide circular BM 1114 dated November 17, 2013, has issued practice is followed by Sohar International Bank.
guidelines on Regulatory Capital under Basel III and on composition of Capital disclosure requirements.
As per the above guidelines, until 31 March 2018, the minimum Total Capital Adequacy Ratio was 12% of Risk Weighted Assets The Risk department prepares a comprehensive risk profile of the Bank on a monthly basis covering credit risk, market risk and
(RWA).Effective 1 April 2018, as per circular BSO/2018/1, CBO has advised to maintain a total capital adequacy ratio of 11% together operational risk. In addition to standalone risk, risk at the portfolio level, risk movement across the portfolio etc. are tracked. The risk
with minimum CET 1 and Tier 1 ratios at 7% and 9% respectively. Tier 2 capital will be restricted to 2% as against 3% earlier. profile indicates the state of various risks and risk recommendations for mitigation and control of risk. The report is placed before
In addition to the minimum Total Capital Adequacy Ratio, a Capital Conservation Buffer (CCB) of 2.5% of RWA is also stipulated the top management every month and quarterly to the Board Risk Committee.
by CBO. The CCB of 2.5% of RWA was to be achieved in four equal annual installments of 0.625% each beginning from January 1,
2014. However CBO vide circular BSD/2014/BASELIII/ALL BANKS/1485 deferred the implementation of last three instalments The Bank’s philosophy is to undertake risks which are well understood and within the laid down risk appetite of the Bank.
till December 31, 2016. Thus as of December 31, 2019, regulatory minimum capital buffer to be applied is 2.5% and the total
capital requirement is 13.50%. However, in 2020 for the purposes of supporting the banks to tide over the Covid 19 crisis, CBO 5.2 Credit risk management
introduced policy measures allowing the banks to lower the capital conservation buffer by 50% from 2.5% to 1.25% and total capital
requirement stands revised to 12.25%. Credit risk is the risk that counterparty will fail to meet their contractual obligations to the Bank as they become due. Credit risk
arises primarily from loans and other credit products available to the customers and from the liquid and investment assets held
As per the above guidelines, CBO may require banks to have a Counter Cyclical Buffer (CCyB) up to a maximum of 2.5% of RWA. by our treasury division. Credit risk is managed at three stages - at the origination stage, approval stage and at the transaction/
The timelines for achieving the CCyB of 2.5%, if required, will be the same as that of CCB. Additional Capital buffer such as Capital portfolio monitoring stage.
Conservation Buffer, Counter Cyclical Buffer and enhanced Capital surcharge for D-SIB(s) will continue to be comprised of CET 1
and will be held above the regulatory minimum capital requirement. The Bank has a robust wholesale Lending Policy in place, which has laid down policies and framework relating to credit risk
management, for all the three stages stated above.
Total and Tier 1 Capital Ratio, Risk Weighted Assets RO ’000
Gross Risk For retail loans products the Board has approved policies for various retail lending products based on approval parameters. All the
Balances Net Balances Weighted commercial and corporate credit originations have to go through a borrower rating system obtained from Moody’s (credit lens)
S. No. Details (Book Value) (Book Value)* Assets and only those with acceptable ratings are progressed further for approval of credit. The Bank has a credit approval delegation
1 On-balance sheet items 3,666,311 3,607,072 2,493,867 matrix in place approved by the board of directors, which is risk sensitized and backed by strong governance.
2 Off - balance sheet items 177,064 170,975 146,703
In compliance with guidelines issued by the CBO, on the implementation of Basel II recommendations, in the case of credit risk,
- Derivatives 22,954 22,954 21,679 the Bank follows standardised approach with risk weights as recommended by the CBO.
4 Total for Credit Risk 3,866,329 3,801,001 2,662,249 The core banking software of the Bank has the capability to carry out asset classification on a daily basis. In accordance with
5 Risk Weighted Asset for Market Risk - 110,950 this, specific provisioning is made as per the guidelines of the CBO. Non-specific standard asset provisioning is made as per the
6 Risk Weighted Asset for Operations Risk - 191,888 guidelines of the CBO.
The Bank’s disclosure policy was approved by the Board of Directors on 15 November 2009 and these disclosures have been
7 Total Risk Weighted Assets 3,801,001 2,965,087
prepared in accordance with the same.
8 Tier 1 Capital 526,238 5.3 Credit risk measurement

9 Tier 2 Capital 38,627 The Bank measures credit risk in terms of asset quality using two primary measures- the provisioning ratio and the non-performing
10 Tier 3 Capital - loans ratio. The provisioning ratio is the annual charge for provisions as a percentage of total loans. The non-performing loans ratio
is the ratio of nonperforming loans as a percentage of total loans. Further, the risk movement is tracked through portfolio analysis
11 Total Regulatory Capital 564,865 with focus on concentrations. These are detailed out in the following tables.
11.1 Capital requirement for credit risk 359,404 The Bank strictly adheres to the extant regulatory guidelines of assigning risk weights to its credit exposures based on counterparties
11.2 Capital requirement for market risk 14,978
involved and risk weights for non-funded exposures after application of credit conversion factors. It has adopted standardized
approach in computing capital adequacy. Lending directly to the Government or investment in sovereign instruments alone will be
11.3 Capital requirement for operational risk 25,905
considered to be sovereign exposures and all others as corporate and risk weights as applicable will be assigned.
12 Total required capital 400,287 Definitions of past due and impaired
13 Tier 1 Ratio 17.75% The classification of credit exposures is considered by the Bank for identifying impaired credit facilities, as per CBO circular number
14 Total Capital Ratio 19.05% BM 977 dated 25 September 2004.
* Net of provisions reserve interest and eligible collaterals
The capital adequacy ratio is calculated in accordance with the Basel II & Basel III norms as adopted by CBO. Disclosures required under Basel III
and circular BM-1114 dated 17 November 2013 issued by Central Bank of Oman are available at investor relations section of the banks website.
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5. RISK EXPOSURE AND ASSESSMENT (CONTINUED) 5. RISK EXPOSURE AND ASSESSMENT (CONTINUED)
5.4 Total gross credit risk exposures, plus average gross exposure over the period broken down by major types of 5.6 Industry or counter party type distribution of total gross exposures, broken down by major types of Credit
credit exposure exposure
RO ’000 RO ’000
S. No. Type of credit exposure Average gross exposure Total gross exposure Bills Off-balance
purchased/ Loans against sheet
2020 2019 2020 2019 S. No. Economic sector Overdraft Loans discounted trust receipts Total exposure
1 Overdrafts 102,740 117,163 99,074 106,406 1 Import & export trade 3,590 9,167 930 5,219 18,906 151,338
2 Personal loans 918,639 831,722 936,271 901,006 2 Wholesale & 27,316 237,161 637 24,065 289,180 -
3 Loans against trust receipts 88,266 100,916 82,427 94,104 retail trade
4 Other loans 1,440,934 1,351,879 1,466,779 1,415,088 3 Mining & quarrying 1,882 72,246 176 1,843 76,147 -
5 Bills purchased /discounted 50,221 53,395 47,560 52,881 4 Construction 34,692 280,650 34,552 27,375 377,269 107,652
5 Manufacturing 8,547 252,485 193 13,818 275,043 10,220
Total 2,600,800 2,455,075 2,632,111 2,569,485 6 Electricity, gas and 1,345 75,963 2,214 876 80,398 3,841
water
7 Transport and 315 58,972 - - 59,287 17,387
5.5 Geographic distribution of total gross exposures, broken down in significant areas by major type of credit communication
exposure 8 Financial institutions - 78,799 - - 78,799 22,224
9 Services 14,906 401,372 5,226 9,230 430,734 52,190
RO ’000
10 Personal loans 6,129 930,142 - - 936,271 -
Other GCC
S. No. Type of credit exposure Oman countries Others Total 11 Agriculture and allied - - - - - -
activities
1 Overdrafts 99,074 - - 99,074
12 Government - - - - - 53,374
2 Personal loans 936,271 - - 936,271
13 Non-Resident lending - 6,094 2,564 - 8,658 -
3 Loans against trust receipts 82,427 - - 82,427
14 All others 351 - 1,068 - 1,419 2,822
4 Other loans 1,460,685 6,094 - 1,466,779
5 Bills purchased/discounted 47,560 - - 47,560 Total 99,074 2,403,050 47,560 82,427 2,632,111 421,048
6 Any other - - - -
Total 2,626,017 6,094 - 2,632,111

5.7 Residual contractual maturity breakdown of the whole portfolio, broken down by major types of credit
exposures
RO ’000
Bills Off-balance
purchased/ Loans against sheet
S. No. Time band Overdraft Loans discounted trust receipts Total exposure
1 Up to 1 month 99,074 202,767 47,560 82,427 431,828 50,973
2 1 - 3 months - 84,885 - - 84,885 30,421
3 3 - 6 months - 75,594 - - 75,594 70,298
4 6 - 9 months - 70,301 - - 70,301 60,614
5 9 - 12 months - 52,212 - - 52,212 44,624
6 1 - 3 years - 405,646 - - 405,646 94,982
7 3 - 5 years - 441,359 - - 441,359 11,349
8 Over 5 years - 1,070,287 - - 1,070,287 57,786
Total 99,074 2,403,050 47,560 82,427 2,632,111 421,048

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5.8 Total Loans breakdown by major industry or counter party type 5.10 Movements of gross loans
RO ’000 RO ’000
Provisions held Non-
Performing loans Performing
Provisions
loans
Of which made
NPLs as per Performing Stage 1 and Reserve during S. No. Details Stage 1 Stage 2 Stage 3 Total
S. No. Economic sector Gross loans IFRS 9 loans Stage 2 Stage 3 interest the year 1 Opening balance 2,092,096 353,416 123,973 2,569,485
1 Import trade 18,906 128 18,778 715 54 1 205 2 Migration/changes (+/-) (437,607) (52,425) (10,108) (500,140)
2 Wholesale & 289,180 27,081 262,099 6,164 8,596 3,028 5,490 3 New loans 518,382 47,355 15,149 580,886
retail trade
4 Recovery of loans - - - -
3 Mining & quarrying 76,147 7,479 68,668 610 1,686 733 971
5 Net Movement in memoranda accounts - - (17,653) (17,653)
4 Construction 377,269 63,818 313,451 9,242 19,815 10,573 9,645
6 Loans written off - (261) (206 (467)
5 Manufacturing 275,043 11,339 263,704 11,375 4,590 828 3,198
6 Electricity, gas and 80,398 2,882 77,516 141 2,443 379 46 7 Closing balance 2,172,871 348,085 111,155 2,632,111
water
8 Provisions held 5,125 41,659 59,659 106,443
7 Transport and 59,287 409 58,878 645 90 50 -
communication 9 Reserve interest - - 22,171 22,171
8 Financial institutions 78,799 - 78,799 42 - - (34)
6. CREDIT RISK: DISCLOSURES FOR PORTFOLIOS SUBJECT TO THE STANDARDIZED APPROACH
9 Services 430,734 10,112 420,622 14,383 3,655 2,322 3,360
10 Personal loans 936,271 28,623 907,648 3,450 16,281 3,968 1,612 6.1 Qualitative disclosures: For portfolios under standardised approach
11 Non-Resident 8,658 5,215 3,443 11 2,449 289 478
lending The Bank is following standardised approach in assessing regulatory capital for credit risk. For sovereign risk i.e. claims on the
Sultanate of Oman or the Central Bank of Oman in Rial Omani or foreign currency, zero risk weight is applied, whereas for other
12 All others 1,419 - 1,419 6 - - (73)
sovereign risk and central banks’ exposures, the exposure will be risk weighted appropriately within a range of 0% to 100% based
on the rating awarded by Eligible Credit Assessment Institution (ECAI) approved by CBO like, Moody’s Standard & Poor, Fitch and
Total 2,632,111 157,086 2,475,025 46,784 59,659 22,171 24,898
Capital Intelligence. For exposures on banks, the risk weight applied depends on the rating of the banks, subject to the respective
country rating. In the absence of external ratings for most of the corporate, the Bank treats them as unrated and applies 100% risk
5.9 Amount of impaired loans broken down by significant geographic areas including with the amounts of weight on their funded exposures. On the off-balance sheet exposures, the relevant credit conversion factors are applied and
specific and general allowances related to each geographical area aggregated to banks or the corporate, as the case may be, and then the risk weight is applied as stated above. Unavailed or yet to
be disbursed exposures are taken under commitments and risk weights assigned as permitted by the CBO guidelines.
RO ’000
6.2 Quantitative disclosures
Provisions held
Of which The Bank is following a uniform approach of considering all corporates as unrated and applying 100% risk weights.
NPLs as per Stage 1 and Reserve Total
S. No. Countries Gross loans IFRS 9 Stage 2 Stage 3 interest provisions 7. CREDIT RISK MITIGATION: DISCLOSURE FOR STANDARDISED APPROACH
1 Oman 2,626,017 155,319 46,784 58,696 21,882 127,360
The Bank does not make use of netting whether on or off-balance sheet. The Bank’s credit policy specifies the acceptable types of
2 Other GCC countries 6,094 1,767 - 963 289 1,252 collateral, source of valuation and frequency of revaluation as once in three years for mortgaged properties and shares are valued
3 Others - - - - - - on monthly basis unless where there is a high volatility situation where the shares shall be valued at shorter intervals. The main
types of acceptable collaterals are cash deposits, equity shares listed in the Muscat Securities Market and mortgages. The main
Total 2,632,111 157,086 46,784 59,659 22,171 128,614 type of guarantors are individuals and corporates. The Bank is taking only the cash deposits and equity shares for the purpose of
credit risk mitigation under comprehensive approach.
RO ’000
Gross credit Eligible financial
Exposure before Collateral (after
CCF, CRM and Provisions Application of Haircuts) Eligible guarantees
1 Claims on Sovereigns 893,672 - -
2 Claims on Banks 76,287 - -
3 Claims on Corporates 968,770 (59,239) -
4 Retail 1,549,354 - -
5 Other Exposures 144,301 - -
Total 3,632,384 (59,239) -

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5
8. MARKET RISK 10. OPERATIONAL RISK

Market risk is inherent in the financial instruments associated in the Bank’s business and/or activities including loans, deposits, Operational risk is defined as the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and
securities, short term borrowings, long term debt, trading account assets and liabilities and derivatives. Market risk is the exposure systems or from external events. Operational risk arises due to variety of causes associated with the Bank’s processes, personnel,
to loss resulting from the changes in the interest rates, foreign currency exchange rates, equity prices and commodity prices. technology and infrastructure and from external events and to include risks other than credit, market and liquidity risks.
Market risk management deals with the impact of change in market variables on the earnings and economic value of the Bank.
The Bank’s objective is to manage operational risk to avoid/reduce financial losses to the Bank by establishment of necessary
Market risk is relevant to banking book and trading book but its measurement and management might differ in each book controls, systems and procedures. The Bank recognises that over controlled environment will affect The Bank’s business
and earnings, besides adding to costs. Therefore, the Bank aims at effective management of operational risk through control
8.1 Market risk in trading book optimisation and well established systems, methods and governance framework. The Bank has laid down the necessary policies,
guidelines and framework to manage operational risk incidents and losses.
Market risk incorporates a range of risks, but the principal elements are interest rate risk and foreign exchange risk.
The primary responsibility for development and implementation of controls to address operational risk is assigned to senior
Interest rate risk primarily arises on the mismatching of the Bank’s assets with its funding. Mismatches or gaps in the amount of management within each business unit. This responsibility is supported by the development of overall Bank’s standards in the
rate sensitive assets, liabilities and off balance sheet instruments can generate interest rate risk, the impact of which is a function
following areas for management of operational risk:
of interest rate changes and the maturity profile of assets and liabilities. This risk is managed by the Bank through the use of
appropriate tools (like rate sensitive gap analysis, pricing methods of floating rate or interest re-set at periodical intervals) and y Clear reporting lines;
financial instruments, including derivatives. y Proper delegation of powers;
y appropriate segregation of duties and authorisation of transactions through a maker checker system and authorisation matrix;
Foreign exchange risk is the risk of financial loss caused due to change in value of assets/liabilities, denominated in foreign
y Ownership reconciliation and monitoring of accounts;
currencies, resulting from changes/adverse movement in the financial markets. Foreign currency risk arises as a result of activity
y Documentation of controls and processes;
undertaken by the Bank when raising and investing funds in currencies other than Omani Riyals and in assuming open positions
y Compliance with regulatory and other legal requirements;
in foreign currencies. Currency risk is managed primarily through net open position limit management and by the use of currency
y Periodic assessment of the operational risks faced and evaluating the adequacy of controls and procedures to address the risks
swaps and forward foreign exchange contracts. The risk is also managed, where appropriate, by foreign exchange currency liabilities
identified;
being matched with assets denominated in the same foreign currency. The Bank through tools like open position limits monitors
y Reporting of operational losses and incidents triggering operational losses and remedial action;
and controls the foreign exchange risk. The Bank has implemented reporting tools like currency position report, risk analysis of
y Development of contingency plans;
currency position, breach analysis report, dealer limit breach report to monitor and manage foreign exchange currency risk.
y Training, skill up gradation and professional development;
In compliance with guidelines issued by the CBO on the implementation of Basel II recommendations, the Bank follows the y Ethical and business standards; and
established approaches and techniques as per the guidelines to manage market risk and standardized duration approach in y Risk mitigation through insurance, wherever desirable.
assessing capital requirements to cover market risk.
Compliance with Bank’s standards is supported by a programme of periodic reviews undertaken by Internal Audit department.
The Assets and Liability Committee (ALCO) conducts periodical meetings to discuss the mismatches in assets and liabilities and The findings of internal audit are discussed with the business unit heads and summary observations of audit are placed to Audit
assesses the interest rate risk, foreign exchange risk and liquidity risk that the Bank is exposed to, so as to take steps to manage Committee and Senior Management of the Bank for corrective action.
such risks. With the guidance of ALCO, the Bank’s treasury manages interest rate and foreign exchange risks, adhering to the
policy guidelines, which stipulate appropriate limits. The capital charge for the applicable foreign exchange risk is RO8.876 million. The Bank has documented processes and controls relating to the material activities of the Bank. The process document included
process map with a SOX format, detailing the work flow, controls and the responsibilities of the persons involved in the process.
8.2 Interest rate risk in banking book
The Bank has put in place Board of Directors approved Operational Risk Management Policy, Risk Control Self-Assessment (RCSA)
The Asset and Liability Committee (ALCO) manages the Bank’s interest rate risk exposure. The Bank is exposed to interest rate and Loss Data Management procedures. Bank has implemented Operational Risk Loss Event reporting framework to monitor
risk as a result of mismatches in re-pricing of assets and liabilities. The Bank manages the interest risk by pricing through floating operational risk. Bank has developed in-house models for RCSA and has conducted RCSA for significant business lines. Bank
rates of interest, interest re-set clause for fixed interest loans and pricing the assets and liabilities on the same index instrument as maintains internal loss data base duly categorising them under Basel-II designated business lines and event types to study the loss
far as possible.The statement on interest rate sensitivity of assets and liabilities has been prepared in accordance with guidelines trends and for preparing towards higher approaches for Operational Risk Management. Thus Bank manages the operational risks
provided in circular BM 955 dated 7 May 2003. The interest rate risk is assessed through interest rate gap analysis as given in through the process of well laid down policies, models, tools, procedures and governance system, which is periodically reviewed
Annexure I. The Bank assesses the interest rate impact (both earnings perspective and economic value perspective) as per Basel- and improved. Bank has a top level Management Risk Committee which closely monitors and manages operational risk of the
II guidelines communicated by CBO by applying interest rate shock of 200 bps and takes measures to reduce the impact. The Bank.
impact of 200 bps shock on net interest income and on capital is shown in Annexure-2. Bank also assesses impact on earnings of
interest rate shock of 50 and 100 bps. The Bank has put in place a Board approved Fraud Risk Management policy and framework. The Policy sets out the Governance
framework for implementing Enterprise wide Fraud Risk Management environment and culture. It covers the requirements
Further, the bank is taking care of interest rate risk associated with prepayment of loans and foreclosure of term deposits by for effective identification, assessment, measurement, monitoring and managing the fraud risk across the Bank with high level
incorporating penalty clauses especially for large corporate loans. Liabilities which do not have specific maturity are strictly requirements for prevention, detection and reporting of frauds.
classified as guided by CBO guidelines in the SAL statement and accordingly the interest change impact is worked out.
The objective of the Policy is to comply with various aspects of Fraud Risk Management stipulated by Central Bank of Oman (CBO)
9. LIQUIDITY RISK in Circular BM1153 dated 25 December 2017.
The Bank’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions without incurring unacceptable losses or risking damage to the
Bank’s reputation.
Central treasury receives information from other business units regarding the liquidity profile of their financial assets and liabilities
and details of other projected cash flows arising from projected future business. Central treasury then maintains a portfolio of
short-term liquid assets, largely made up of short-term liquid investment securities, loans and advances to banks and other inter-
bank facilities, to ensure that sufficient liquidity is maintained within the Bank as a whole. The liquidity requirements of business
units are met through short-term loans from central treasury to cover any short-term fluctuations and longer term funding to
address any structural liquidity requirements. The Bank has also laid down a comprehensive liquidity contingency plan for effective
management of liquidity. In this process due care is taken to ensure that the Bank complies with all the CBO regulations.
All liquidity policies and procedures are subject to review and approved by ALCO. Computation of liquidity gap on maturity of
assets and liabilities is provided in Annexure3. The computation has been prepared in accordance with guidelines provided in
Circular BM 955 dated 7 May 2003.
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59
RO ’000
Total
29,175
173,455
81,616
199,053
701,118
100,642
91,731
15,151 2,282,689
75,219
47,178
835
29,367
605,174
369,920 4,218,199
BUSINESS CONTINUITY
Non
Sensitive
29,175
172,955
44,498
12,183
30,761
-
47,178
835
29,367
-
Business Continuity Management (BCM) testing of Sohar international for 2020 was successfully completed within
defined scope, nevertheless the Bank will ensure a continual improvement to whole bank operations. Our BCPs and
Over
20 years
-
-
-
60,731
-
-
-
-
-
60,731
DRPs are reviewed and tested at least annually. Any areas for improvement that are identified are tracked to ensure
appropriate resolution and our plans and infrastructure updated as appropriate. Capacity and resource requirements
are also reviewed periodically.
15-20
years
-
-
-
5,058
-
-
-
-
-
5,058
Sohar International has established a Business Continuity Management (BCM) Program designed to minimize
service disruption and the potential impact on the Bank, our customers and our staff. This includes a BCM Policy that
is approved by our Board together with written Business Continuity and Disaster Recovery plans and procedures that
are subject to period independent review. Although the specific details of our BCM arrangements are confidential
10-15
years
-
-
-
39,718
-
-
-
-
-
39,718
for security reasons, Sohar international maintains Business Continuity Plans (BCPs) that address risk scenarios and
events of varying scope including, but not exclusively, loss of services or infrastructure, denial of access, cyber-attack,
pandemics and regional crises.
7-10
years
-
-
116,355
-
108,896
-
-
-
-
-
225,251
Sohar International BCPs are focused on maintaining critical processes, including treasury, capital & liquidity
and payment services, providing customers with uninterrupted access to their funds and maintaining effective
communications with our customers, staff and other stakeholders.
5-7
years
-
-
24,792
-
78,172
69,797
-
-
-
-
172,761
Exposure to interest rate risk – Annexure 2
2020
4-5
years
-
-
18,774
-
113,948
-
-
-
-
-
132,722
RO’000
Net interest income 77,670
Capital 564,865
3-4
years
-
-
20,109
-
270,202
5,422
-
-
-
-
295,733
2-3
years
-
-
23,871
-
209,394
-
-
-
-
-
233,265
Impact of 50 bps interest rate shock 280
Impact as % to net interest income 0.39%
Impact as % to capital 0.05%
1-2
years
-
-
17
49
888
-
138,749
-
-
-
-
31,570
171,224
Impact of 100 bps interest rate shock 560
6-12
months
-
-
65
2,122
-
128,08
-
-
-
-
65,450
195,718
STATEMENT ON SENSITIVITY OF ASSETS AND LIABILITIES (SAL)
3 -6
months
-
-
31,712
7,437
-
144,532
-
-
-
-
73,150
256,837
sImpact of 200 bps interest rate shock 1,120
1-3
months
-
-
2,624
2,495
264,089
58,964
-
359,478
-
-
-
-
121,664
806,819
Up to 1
month
-
500
34,406
184,326
169,767
32,119
91,731
610,579
-
-
-
-
313,340
1,252,442
Non-Performing Loans
Balance due from HO/
Bills of Exchange and
Loans and Advances

Deposits with CBO
Balances due from

(Assets and OBS)
Promissory Notes
Affiliate Branches
Accured Interest
Cash on Hand
Other Assets
Other Banks
Fixed Assets
Investments
Overdrafts
Inflows
Swaps
Total
Annexure 1
No.
1
2
7
8
9
10
11
12
13
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STATEMENT ON SENSITIVITY OF ASSETS AND LIABILITIES (SAL) CONTINUED RO ’000

Annexure 1 (continued)
Up to 1 1-3 3 -6 6-12 1-2 2-3 3-4 4-5 5-7 7-10 10-15 15-20 Over Non
No. Liabilities and OBS month months months months years years years years years years years years 20 years Sensitive Total
1 Current Deposits - - - - - - - - - - - - - 725,174 725,174
2 Saving Deposits 302,972 - - - - - - - - - - - - 15,447 318,419
3 Time Deposits 321,507 136,198 220,277 301,343 25,601 55,751 13,637 47,163 - - - - - - 1,121,477
4 Other Deposits 64,357 - - - - - - - - - - - - 2,138 66,495
Branches due to HO/

5 - - - - - - - - - - - - - - -
Affliates
Balances due to other
6 71,128 317,769 23,146 - 167,327 - - - - - - - - 6,060 579,370
Banks
7 Certificate of Deposits - - - 509 - - - - - - - - - - 509
8 Other Borrowings - 135,130 - - - - - - - - - - - - 135,130
9 Interest Payable - - - - - - - - - - - - - 18 18
10 Capital - - - - - - - - - - - - - 263,393 263,393
11 Reserves - - - - - - - - - - - - - 96,359 96,359
12 Retained Earnings - - - - - - - - - - - - - (1,247) (1,247)
13 Sub-ordinated Debts - - - - - 35,392 - - - - - - - - 35,392
14 Swaps 313,906 122,203 74,245 65,956 31,840 - - - - - - - - - 608,150
15 Other Liabilities - - - - - - - - - - - - -
46,552 46,552
Others (Current Year's
16 - - - - - - - - - - - - - 20,013 20,013
Profit/Loss)
Perpetual Tier 1 Capital
17 - - 200,000 - - - - - - - - - - - 200,000
Securities
Total 1,073,871 711,300 517,668 367,808 224,768 91,143 13,637 47,163 - - - - - 1,173,907 1,073,871
Gap 178,571 95,519 (260,831) (172,090) (53,544) 142,122 282,096 85,559 172,761 225,251 39,718 5,058 60,731 (803,987) (3,066)
Cumulative Gap 178,571 274,090 13,259 (158,831) (212,375) (70,253) 211,843 297,402 470,163 695,414 735,132 740,190 800,921 (3,066) 178,571

STATEMENT ON MATURITY OF ASSETS AND LIABILITIES (MAL) RO ’000

Annexure 3
Up to 1 1-3 3 -6 6-9 9-12 1-3 3-5 Over
No. Inflows (Assets and OBS) month months months months months years years 20 years Total
1 Cash on Hand 29,175 - - - - - - - 29,175

2 Deposits with CBO 51,099 18,065 20,459 16,390 12,821 26,241 8,153 20,227 173,455
3 Balances due from HO/Affiliates and Branches - - - - - - - - -
4 Balances due from Other Banks 79,058 160 160 160 1,599 479 - - 81,616
5 Investments 171,514 265,836 33,459 - - 33,546 52,899 143,864 701,118
6 Bills of Exchange and Promissory Notes 32,119 58,964 7,437 2,073 49 - - - 100,642
7 Overdrafts 4,587 4,587 4,587 4,587 4,587 22,933 22,933 22,930 91,731
8 Loans and Advances 172,313 84,436 74,987 69,029 50,515 400,755 431,520 999,134 2,282,689
9 Non-Performing Loans - - - - 18,805 - - 56,415 75,219
10 Fixed Assets - - - - - - - 47,178 47,178
11 Accrued Interest 835 - - - - - - - 835
12 Other Assets 29,367 - - - - - - - 29,367
13 Spot and Forward Purchases 82,007 4,897 9,082 12,062 65,558 187,531 - - 361,137
14 Swaps 313,340 121,664 73,150 65,450 - 31,570 - - 605,174
15 Options - - - - - - - - -
16 Committed Lines of Credit 90,425 - - - - - - - 90,425
17 Letters of Credit/Gurantees/Acceptances 20 7,674 25,735 30,046 7,209 1,154 - 906 72,744
18 Unutilized portion of Overdraft and Loans & Advances 968 3,318 1,366 572 644 1,110 912 7,316 16,206
19 Undrawn Exposure (Syn Loans) 1,892 - - 862 - 16,089 31,782 36,001 86,626
a
Soha
Sohar
Total 1,058,719 569,601 250,422 201,231 161,787 721,408 548,199 1,333,971 4,845,337
6
116
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2020
RO ’000
Total
725,174
318,419
1,121,477
66,495
-
585,430
509
135,130
18
46,552
357,909
608,150
-
72,744
90,425
16,206
200,000 200,000
-
263,393
96,359
(1,247)
35,392
20,013
86,626
908,219 4,845,174
BASEL III COMMON DISCLOSURE TEMPLATE TO BE USED DURING THE TRANSITION OF REGULATORY
163
0.000
2,112,181 2,458,001 2,742,509 3,798,684 3,936,955 4,845,174
425,752
Over
5 years
181,292
79,576
67,803
1,029
-
-
-
-
-
-
-
-
-
-
-
1
-
263,393
96,359
(1,247)
-
20,013
-
ADJUSTMENTS (31 DECEMBER 2020)
RO ’000
Common Equity Tier 1 capital: instruments and reserves
(10.81)
409,928
78,039 (233,438) (378,028) (500,749) (835,516) (425,589)
3-5
years
-
79,614
58,580
55
-
-
-
-
-
-
-
-
-
-
-
22
-
-
-
-
-
-
-
-
138,271
1 Directly issued qualifying common share capital (and equivalent for non-joint stock companies) plus related stock 263,393
surplus
2 Retained earnings 13,774
(21.99)
(122,721) (334,767)
1-3
years
-
79,614
209,914
57,740
-
329,410
-
38,609
-
-
182,875
31,840
-
247
90,425
109
-
-
-
-
-
35,392
-
-
284,508 1,056,175
3 Accumulated other comprehensive income (and other reserves) 52,508
4 Directly issued capital subject to phase out from CET1 (only applicable to non-joint stock companies) -
Public sector capital injections grandfathered until 1 January 2018 -
(18.26)
9-12
months
72,518
15,923
127,514
195
-
-
-
-
-
-
65,450
-
-
402
-
2,506
-
-
-
-
-
-
-
-
5 Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET1) -
6 Common Equity Tier 1 capital before regulatory adjustments 329,675
(15.38)
(311,478) (144,589)
6-9
months
72,518
15,923
172,682
259
-
-
509
-
-
-
12,301
65,956
-
3,123
-
2,549
-
-
-
-
-
-
-
-
345,820
Common Equity Tier 1 capital: regulatory adjustments
7 Prudential valuation adjustments 3,437
8 Goodwill (net of related tax liability) -
9 Other intangibles other than mortgage-servicing rights (net of related tax liability) -
(11.05)
3 -6
months
108,776
15,923
206,298
937
-
23,147
-
96,521
-
-
9,462
74,245
-
23,620
-
2,971
-
-
-
-
-
-
-
-
561,900
10 Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of -
related tax liability)
11 Cash-flow hedge reserve -
5.03
(52,932)
1-3
months
145,035
15,923
131,373
2,326
-
155,685
-
-
-
3,597
4,857
122,203
-
36,270
-
5,264
-
-
-
-
-
-
-
-
622,533
927,748 1,550,281
12 Shortfall of provisions to expected losses -
13 Securitisation gain on sale (as set out in paragraph 14.9 of CP-1) -
14 Gains and losses due to changes in own credit risk on fair valued liabilities. -
130,971
130,971
14.12
Up to 1
month
145,035
15,923
147,313
3,954
-
77,188
-
-
18
42,955
82,964
313,906
-
9,082
-
2,784
-
-
-
-
-
-
-
86,626
927,748
15 Defined-benefit pension fund net assets -
16 Investments in own shares (if not already netted off paid-in capital on reported balance sheet) -
17 Reciprocal cross-holdings in common equity -
18 Investments in the capital of banking, financial, insurance and takaful entities that are outside the scope of -
regulatory consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued
share capital (amount above 10% threshold)
19 Significant investments in the common stock of banking, financial, insurance and takaful entities that are outside -
the scope of regulatory consolidation, net of eligible short positions (amount above 10% threshold)
20 Mortgage Servicing rights (amount above 10% threshold) -
21 Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability) -
STATEMENT ON MATURITY OF ASSETS AND LIABILITIES (MAL) CONTINUED
22 Amount exceeding the 15% threshold -

23 of which: significant investments in the common stock of financials -
24 of which: mortgage servicing rights -
25 of which: deferred tax assets arising from temporary differences -
26 "National specific regulatory adjustments -
REGULATORY ADJUSTMENTS APPLIED TO COMMON EQUITY TIER 1 IN RESPECT OF AMOUNTS SUBJECT
Unutilized portion of Overdraft and Loans and Advances
TO PRE-BASEL III TREATMENT"

Of which: [INSERT NAME OF ADJUSTMENT] -
Cumulative Gap as a % of Cumulative Liabilities

Letters of Credit/Guarantees/Acceptances

Balances due to HO/Affiliates/Branches
27 Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to cover -
deductions
Others (Current Year's Profit/Loss)
28 Total regulatory adjustments to Common equity Tier 1 3,437

Perpetual Tier 1 Capital Securities
Outflows (Liabilities and OBS)
Undrawn Exposure (Syn Loans)
29 Common Equity Tier 1 capital (CET1) 326,238

Balances due to Other Banks
Committed Lines of Credit

Spot and Forward Sales
Cumulative Liabilities
Certificate of Deposits
Sub-ordinated Debts
Annexure 3 (continued)
Convertible Bonds
Retained Earnings
Other Borrowings
Current Deposits
Cumulative Gap
Interest Payable
Saving Deposits
Other Liabilities
Other Deposits
Time Deposits
Reserves
Options
Capital
Swaps
Total
Gap
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

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BASEL III COMMON DISCLOSURE TEMPLATE TO BE USED DURING THE TRANSITION OF REGULATORY BASEL III COMMON DISCLOSURE TEMPLATE TO BE USED DURING THE TRANSITION OF REGULATORY
ADJUSTMENTS (31 DECEMBER 2020) (CONTINUED) ADJUSTMENTS (31 DECEMBER 2020) (CONTINUED)
RO ’000
Additional Tier 1 capital: instruments RO ’000
30 Directly issued qualifying Additional Tier 1 instruments plus related stock surplus 200,000 Tier 2 capital: regulatory adjustments
31 of which: classified as equity under applicable accounting standards 5 200,000 52 Investments in own Tier 2 instruments -
32 of which: classified as liabilities under applicable accounting standards 6 - 53 Reciprocal cross-holdings in Tier 2 instruments -
33 Directly issued capital instruments subject to phase out from Additional Tier 1 - 54 Investments in the capital of banking, financial, insurance and takaful entities that are outside the scope of reg- -
ulatory consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued
34 Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsidiaries and held by third - common share capital of the entity (amount above the 10% threshold)
parties (amount allowed in group AT1)
55 Significant investments in the capital banking, financial, insurance and takaful entities that are outside the scope of -
35 of which: instruments issued by subsidiaries subject to phase out - regulatory consolidation (net of eligible short positions)
36 Additional Tier 1 capital before regulatory adjustments 200,000 56 "National specific regulatory adjustments -
REGULATORY ADJUSTMENTS APPLIED TO TIER 2 IN RESPECT OF AMOUNTS SUBJECT TO PRE-BASEL III
TREATMENT"
Additional Tier 1 capital: regulatory adjustments
Of which: [INSERT NAME OF ADJUSTMENT]
37 Investments in own Additional Tier 1 instruments -
38 Reciprocal cross-holdings in Additional Tier 1 instruments -
57 Total regulatory adjustments to Tier 2 capital -
common share capital of the entity (amount above 10% threshold)
40 Significant investments in the capital of banking, financial, insurance and takaful entities that are outside the scope - 58 Tier 2 capital (T2) 38,656
of regulatory consolidation (net of eligible short positions)
41 "National specific regulatory adjustments -
REGULATORY ADJUSTMENTS APPLIED TO ADDITIONAL TIER 1 IN RESPECT OF AMOUNTS SUBJECT TO 59 Total capital (TC = T1 + T2) 564,865
PRE-BASEL III TREATMENT"
Of which: [INSERT NAME OF ADJUSTMENT] - Risk weighted Assets
Of which: [INSERT NAME OF ADJUSTMENT] - RISK WEIGHTED ASSETS IN RESPECT OF AMOUNTS SUBJECT TO PRE-BASEL III TREATMENT -
Of which: [INSERT NAME OF ADJUSTMENT] - Of which: [INSERT NAME OF ADJUSTMENT]
42 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions - Of which: [INSERT NAME OF ADJUSTMENT]
43 Total regulatory adjustments to Additional Tier 1 capital - Of which: [INSERT NAME OF ADJUSTMENT]
44 Additional Tier 1 capital (AT1) 200,000 60 Total risk weighted assets (60a+60b+60c) 2,965,086
60a Of which: Credit risk weighted assets 2,662,248
45 Tier 1 capital (T1 = CET1 + AT1) 526,238 60b Of which: Market risk weighted assets 110,950
60c Of which: Operational risk weighted assets 191,888
Tier 2 capital: instruments and provision
46 Directly issued qualifying Tier 2 instruments plus related stock surplus Capital Ratios
47 Directly issued capital instruments subject to phase out from Tier 2 14,000 61 Common Equity Tier 1 (as a percentage of risk weighted assets) 11.00
48 Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by - 62 Tier 1 (as a percentage of risk weighted assets) 17.75
third parties (amount allowed in group Tier 2)
63 Total capital (as a percentage of risk weighted assets) 19.05
49 of which: instruments issued by subsidiaries subject to phase out -
64 Institution specific buffer requirement (minimum CET1 requirement plus capital conservation buffer plus coun- 8.25%
50 Provisions 24,627 tercyclical buffer requirements plus G-SIB/D-SIB buffer requirement expressed as a percentage of risk weighted
51 Tier 2 capital before regulatory adjustments 38,627 assets)
65 of which: capital conservation buffer requirement 1.25%
66 of which: bank specific countercyclical buffer requirement
67 of which: D-SIB/G-SIB buffer requirement
68 Common Equity Tier 1 available to meet buffers (as a percentage of risk weighted assets 2.74

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BASEL III COMMON DISCLOSURE TEMPLATE TO BE USED DURING THE TRANSITION OF REGULATORY RECONCILIATION TEMPLATE AS AT DECEMBER 2020
ADJUSTMENTS (31 DECEMBER 2020) (CONTINUED)
Step 1 : RO ‘000
RO ’000 Balance sheet as in
published financial Under regulatory
National minima (if different from Basel III)
statements scope of consolidation
69 National Common Equity Tier 1 minimum ratio (if different from Basel 3 minimum) 8.250
As at 31 December 2020 As at 31 December 2020
70 National Tier 1 minimum ratio (if different from Basel 3 minimum) 10.250
Assets
71 National total capital minimum ratio (if different from Basel 3 minimum) 12.250
Cash and balances with Central Bank of Oman 202,630 219,947
Certificates of deposit - -
Amounts below the thresholds for deduction (before risk weighting)
Due from banks 81,584 64,228
72 Non-significant investments in the capital of other financials -
Loans and advances 2,503,497 2,503,497
73 Significant investments in the common stock of financials -
Investments in securities 701,118 701,118
74 Mortgage servicing rights (net of related tax liability) -
Loans and advances to banks - -
75 Deferred tax assets arising from temporary differences (net of related tax liability) -
Property and equipment 47,178 47,178
Deferred tax assets - -
Applicable caps on the inclusion of provisions in Tier 2
Other assets 74,980 75,019
76 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardised approach 24,627
Total assets 3,610,987 3,610,987
(prior to application of cap)
77 Cap on inclusion of provisions in Tier 2 under standardised approach 33,278 Liabilities
78 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach - Due to banks 720,561 720,561
(prior to application of cap) Customer deposits 2,231,565 2,231,565
79 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach - Certificates of deposit 509 509
Current and deferred tax liabilities - -
Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2018 and 1 Jan 2022) Other liabilities 91,258 91,258
80 Current cap on CET1 instruments subject to phase out arrangements - Subordinated Debts 35,392 35,392
81 Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities) - Compulsory Convertible bonds - -
82 Current cap on AT1 instruments subject to phase out arrangements - Total liabilities 3,079,285 3,079,285
83 Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities) - Shareholders' Equity
84 Current cap on T2 instruments subject to phase out arrangements - Paid-up share capital 245,355 245,355
85 Amount excluded from T2 due to cap (excess over cap after redemptions and maturities) - Share premium 18,038 18,038
Legal reserve 30,520 30,520
General reserve 988 988
Retained earnings 13,774 13,774
Cumulative changes in fair value of investments (3,437) (3,437)
Subordinated debt reserve 21,000 21,000
Impairment reserve 5,464 5,464
Special Reserve - -
Perpetual Tier 1 Capital Securities 200,000 200,000
Total shareholders' equity 531,702 531,702
Total liability and shareholders’ funds 3,610,987 3,610,987

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RECONCILIATION TEMPLATE AS AT DECEMBER 2020 (CONTINUED) RECONCILIATION TEMPLATE AS AT DECEMBER 2020 (CONTINUED)
Step 2 : RO ‘000 Step 2 (continued): RO ‘000

Balance sheet as in Balance sheet as in
published financial Under regulatory scope published financial Under regulatory scope
statements of consolidation Reference statements of consolidation Reference
As at 31 December 2020 As at 31 December 2020 As at 31 December 2020 As at 31 December 2020
Assets Capital & Liabilities
Cash and balances with CBO 202,630 219,947 Paid-up Capital 263,393 263,393
Balance with banks and money at call and short notice 81,584 64,228 Of which:
Investments: 701,118 701,118 Amount eligible for CET1 263,393 263,393
Of which Held to Maturity 221,541 221,541 Amount eligible for AT1 200,000 200,000
Out of investments in Held to Reserves & Surplus 68,309 68,309
Maturity:
Out of which
Investments in subsidiaries NA NA
Retained earnings* 13,774 13,774 b
Investments in Associates and NA NA
Other Reserves 57,972 57,972
Joint Ventures
Cumulative changes in fair value of investments (3,437) (3,437)
Of which Available for Sale 383,432 383,432
Out of which:
Out of investments in Available for Sale: NA NA
Investments in Subsidiaries Losses from fair value of investments - a
Investments in Associates and NA NA Gains from fair value of investments -
Joint Ventures Haircut of 55% on Gains -
Held for Trading 96,145 96,145 Total Capital 331,702 331,702
Loans and advances 2,503,497 2,503,497 Deposits: 2,231,565 2,231,565
Of which: Of which:
Loans and advances to domestic - - Deposits from banks - -
banks
Customer deposits 1,959,990 1,959,990
Loans and advances to non-resident - -
banks Deposits of Islamic Banking window 271,575 271,575
Loans and advances to domestic 2,133,677 2,133,677 Other deposits (please specify) - -
customers Borrowings 721,070 721,070
Loans and advances to non-resident - Of which: From CBO - -
customers for domestic operations
From banks 720,561 720,561
Loans and advances to non-resident 8,447 8,447
customers for operations abroad From other institutions & 509 509
agencies
Loans and advances to SMEs 96,824 96,824
Borrowings in the form of bonds, Debentures and Sukuks - -
Financing from Islamic banking window 264,549 264,549
Others (Subordinated debt) 35,392 35,392
Fixed assets 47,178 47,178
Other liabilities & provisions** 91,258 91,258
Other assets 74,980 75,019 Of which:
Of which:
Out of which: DTLs related to Investments -
Goodwill and intangible assets
Out of which: Out of which: DTAs related to Investments -
Goodwill - - Out of which: DTLs related to Fixed Assets -
Other intangibles (excluding MSRs) - - DTLs related to goodwill - -
Deferred tax assets - - DTLs related to intangible assets - -
Goodwill on consolidation - - TOTAL 3,410,987 3,410,987
Debit balance in Profit & Loss - -

account
Total Assets 3,610,987 3,610,987

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RECONCILIATION TEMPLATE AS AT DECEMBER 2020 (CONTINUED) MAIN FEATURES TEMPLATE OF CAPITAL INSTRUMENTS AS AT DECEMBER 2020
Step 3: RO ‘000
SOHAR SOHAR SOHAR SOHAR
Common Equity Tier 1 capital: instruments and reserves 1 Issuer INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL
Source based on reference Unique identifier (eg CUSIP, ISIN or ISIN
numbers/letters of the 2 Bloomberg identifier for private placement) OM0000003398
balance sheet under
3 Governing law(s) of the instrument Banking Law of Banking Law Banking Law Banking Law
Component of regulatory the regulatory scope of
Regulatory treatment Oman of Oman / of Oman / of Oman /
capital reported by bank consolidation from step 2
Commercial Commercial Commercial
1 Directly issued 263,393 Companies Law Companies Law Companies Law
qualifying common share (and equivalent for non- joint stock
4 Transitional Basel III rules NA NA NA NA
companies) capital plus related stock surplus
5 Post-transitional Basel III rules Tier 2 Common Equity Additional Tier 1 Additional Tier 1
2 Retained earnings 13,774 b
Tier 1
6 Eligible at solo/group/group & solo Solo Solo Solo Solo
4 Directly issued capital subject to phase out from -
7 Instrument type (types to be specified by Subordinated Equity Shares Prepetual Capital Prepetual Capital
CET1 (only applicable to non-joint stock companies)
each jurisdiction) Debt Securities Securities
5 Common share capital issued by subsidiaries and held by third -
8 "Amount recognised in regulatory capital RO 35.0 RO 245.355 RO 100 Million RO 100 Million
parties (amount allowed in group CET1)
(Currency in mil, as of most recent reporting date) Million
6 Common Equity Tier 1 329,675
9 Par value of instrument RO 35,000,000/= RO 245.355 RO 100 Million RO 100 Million
capital before regulatory adjustments
Million
7 Prudential valuation adjustments -
10 Accounting classification Liability - Shareholder's Shareholder's Shareholder's
8 Goodwill (net of related tax liability) - amortised cost Equity Equity Equity
9 Losses from fair value of investments (3,437) a 11 Original date of issuance Started issuance 03-Jan-07 25-Sep-17 14-Mar-19
10 DTA related to Investments - from 25th May
2016
12 Perpetual or dated Dated Perpetual Perpetual Perpetual
13 Original maturity date 7 years from date NA NA NA
of allotment
First maturity on
25th Jul 2023
14 Issuer call subject to prior supervisory NO NA Yes Yes
approval
15 Optional call date, contingent call dates and Not callable NA First call date i.e First call date i.e
redemption amount 5th anniversary 5th anniversary
from the date of from the date of
issue, at bank's issue, at bank's
sole discretion or sole discretion or
if directed to do so if directed to do so
by the CBO at an by the CBO at an
early redemption early redemption
amount amount
16 Subsequent call dates, if applicable Not callable NA Every fifth Every fifth
anniversary anniversary
thereafter after the thereafter after the
first call date first call date

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MAIN FEATURES TEMPLATE OF CAPITAL INSTRUMENTS AS AT DECEMBER 2020 (CONTINUED) BASEL III LEVERAGE RATIO FRAMEWORK AND DISCLOSURE REQUIREMENTS - REPORTS FOR QUARTER
ENDED 31 DECEMBER 2020
SOHAR SOHAR SOHAR SOHAR
Coupons/dividends INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL RO'000
17 Fixed or floating dividend/coupon Fixed NA Floating coupon Floating coupon Table 1: Summary comparison of accounting assets vs leverage ratio exposure measure
18 Coupon rate and any related index 7.00% p.a. NA 7.75% & every 5 7.50% & every 5 (Please refer to paragraph 52 of Basel III leverage ratio framework and disclosure requirements of BCBS issued in January 2014)
year reset year reset
Current Previous
19 Existence of a dividend stopper No NO NO NO Item Quarter Quarter
20 "Fully discretionary, partially discretionary Mandatory Fully discretionary Fully discretionary, Fully discretionary, 1 Total consolidated assets as per published financial statements 3,610,987 3,681,424
or mandatory" payable out of payable out of
distributable items distributable items 2 Adjustment for investments in banking, financial, insurance or commercial entities that are - -
consolidated for accounting purposes but outside the scope of regulatory consolidation
21 Existence of step up or other incentive to redeem No NO NO NO
3 Adjustment for fiduciary assets recognised on the balance sheet pursuant to the operative - -
22 Noncumulative or cumulative Noncumulative Noncumulative Noncumulative Noncumulative accounting framework but excluded from the leverage ratio exposure measure
23 Convertible or non-convertible Nonconvertible Non-convertible Non-convertible Non-convertible 4 Adjustments for derivative financial instruments (2,710) (3,069)
24 If convertible, conversion trigger (s) NA NA NA NA 5 Adjustment for securities financing transactions (i.e., repos and similar secured lending) - -
25 If convertible, fully or partially NA NA NA NA 6 Adjustment for off-balance sheet items (i.e., conversion to credit equivalent amounts of 90,932 122,989
26 If convertible, conversion rate NA NA NA NA off-balance sheet exposures)
27 If convertible, mandatory or optional conversion NA NA NA NA 7 Other adjustments 1,609 1,753
28 If convertible, specify instrument type NA NA NA NA 8 Leverage ratio exposure 3,700,818 3,803,097
convertible into
29 If convertible, specify issuer of instrument NA NA NA NA
Table 2: Leverage ratio common disclosure template
it converts into
(Please refer to paragraph 53 of Basel III leverage ratio framework and disclosure requirements of BCBS issued in January 2014)
30 Write-down feature No NO NO NO
Current Previous
31 If write-down, write-down trigger(s) NA NA NA NA
Item Quarter Quarter
32 If write-down, full or partial NA NA NA NA
1 On-balance sheet items (excluding derivatives and SFTs, but including collateral) 3,241,693 3,320,379
33 If write-down, permanent or temporary NA NA NA NA
2 (Asset amounts deducted in determining Basel III Tier 1 capital) (3,437) (3,698)
34 If temporary write-down, description of NA NA NA NA
3 Total on-balance sheet exposures (excluding derivatives and SFTs) (sum of lines 1 and 2) 3,238,256 3,316,681
write-up mechanism
Derivative Exposures
35 Position in subordination hierarchy in "Subordinated to Subordinated to Subordinated to Subordinated to
liquidation (specify instrument type immediately all Senior liabilities. the Compulsorily the Compulsorily the Compulsorily 4 Replacement cost associated with all derivatives transactions (i.e., net of eligible cash variation - -
senior to instrument) Currently, Convertible bonds Convertible bonds Convertible bonds margin)
subordinated to issued by the Bank issued by the Bank issued by the Bank 5 Add-on amounts for PFE associated with all derivatives transactions - -
fixed deposits" & subordinated & subordinated
loans loans 6 Gross-up for derivatives collateral provided where deducted from the balance sheet assets - -
pursuant to the operative accounting framework
36 Non-compliant transitioned features NO NO NO NO
7 (Deductions of receivables assets for cash variation margin provided in derivatives transactions) - -
37 If yes, specify non-compliant features NA NA NA NA
8 (Exempted CCP leg of client-cleared trade exposures) - -
9 Adjusted effective notional amount of written credit derivatives - -
10 (Adjusted effective notional offsets and add-on deductions for written credit derivatives) - -
11 Total derivative exposures (sum of lines 4 to 10) - -
Securities financing transaction exposures
12 Gross SFT assets (with no recognition of netting), after adjusting for sale accounting transactions 372,004 364,113
13 (Netted amounts of cash payables and cash receivables of gross SFT assets) (374) (686)
14 CCR exposure for SFT assets
15 Agent transaction exposures
16 Total securities financing transaction exposures (sum of lines 12 to 15) 371,630 363,427
Other Off-balance sheet exposures
17 Off-balance sheet exposure at gross notional amount 1,753,270 1,529,018
18 (Adjustments for conversion to credit equivalent amounts) (1,662,338) (1,406,029)
19 Off-balance sheet items (sum of lines 17 and 18) 90,932 122,989
Capital and total exposures
20 Tier 1 capital 526,238 511,427
21 Total exposures (sum of lines 3, 11, 16 and 19) 3,700,818 3,803,097
Leverage Ratio
22 Basel III leverage ratio (%) 14.2 13.4

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LCR COMMON DISCLOSURE TEMPLATE FOR THE PERIOD ENDING: DEC 2020 (CONSOLIDATED) NSFR DISCLOSURES (CONSOLIDATED) QUARTER ENDED: DEC 2020
RO ’000 RO ’000
Total Total Unweighted value by residual maturity
Unweighted Weighted ASF Item
Value (average) Value (average) No <6 6 months ≥ 1yr Weighted
High Quality Liquid Assets maturity months to < 1yr value
1 Total High Quality Liquid Assets (HQLA) 487,205 1 Capital: 564,894 0 0 - 564,894
2 Regulatory capital 526,238 526,238
Cash Outflows
3 Other capital instruments 38,656 38,627
2 Retail deposits and deposits from small business customers, of which: 356,910 33,090 Retail deposits and deposits from small business
4 308,899 2,719 31,725 0 420,939
3 Stable deposits 38,420 1,241 customers
5 Stable deposits 33,985 528 5,053 38,770
4 Less stable deposits 318,490 31,849
6 Less stable deposits 274,914 2,191 26,672 382,169
5 Unsecured wholesale funding, of which: 878,653 428,367 7 Wholesale funding: 0 675,318 421,925 0 587,786
6 Operational deposits (all counterparties) and deposits in networks of cooperative banks - - 8 Operational deposits
7 Non-operational deposits (all counterparties) 878,653 428,367 9 Other wholesale funding 675,318 421,925 587,786
10 Liabilities with matching interdependent assets
8 Unsecured debt - -
11 Other liabilities: - - - 706,873 707,123
9 Secured wholesale funding - 12 NSFR derivative liabilities
10 Additional requirements, of which 98,781 9,424 13 All other liabilities and equity not
- - - 706,873 707,123
11 Outflows related to derivative exposures and other collateral requirements - - included in above categories
14 Total ASF 2,280,713
12 Outflows related to loss of funding on debt products - -
13 Credit and liquidity facilities 98,781 9,424 RSF Item
14 Other contractual funding obligations 18,433 18,433 15 Total NSFR high-quality liquid assets (HQLA) 15,726
16 Deposits held at other financial
15 Other contingent funding obligations 860,255 43,013 46,150 23,075
institutions for operational purposes
16 TOTAL CASH OUTFLOWS 532,326 17 Performing loans and securities: 27,827 14,196 287,927 300,285 361,135
Cash Inflows 18 Performing loans to financial institutions secured
by Level 1 HQLA
17 Secured lending (e.g. reverse repos) - -
19 Performing loans to financial institutions secured 19,087 9,543
18 Inflows from fully performing exposures 313,840 198,190 by non- Level 1 HQLA and unsecured performing
19 Other cash inflows 128,408 683 loans to financial institutions
20 Performing loans to non-financial 14,085 10,001 264,272 140,678
20 TOTAL CASH INFLOWS 442,248 198,873
corporate clients,loans to retail and small
Total Adjusted business customers, and loans to
Value sovereigns, central banks and PSEs, of which
21 TOTAL HQLA 487,205 21 -With a risk weight of less than or equal to 35% 12,137 7,889
under the Basel II Standardized approach for
22 TOTAL NET CASH OUTFLOWS 333,453.55 credit risk
23 LIQUIDITY COVERAGE RATIO (%) 146.11 22 Performing residential mortgages, of which: - 4,195 4,569 288,148 191,344
23 With a risk weight of less than or equal to 35% 4,195 4,569 288,148 191,344
under the Basel II Standardized Approach for
credit risk
24 Securities that are not in default and 13,742 11,681
do not qualify as HQLA, including
exchange-traded equities
25 Assets with matching interdependent liabilities
26 Other Assets: 1,140 - - 1,826,340 1,566,409
27 Physical traded commodities, including gold
28 Assets posted as initial margin for
derivative contracts and contributions to default
funds of CCPs
29 NSFR derivative assets
30 NSFR derivative liabilities before
deduction of variation margin posted
31 All other assets not included in the above 2,735 881,769 71,873 48,820
categories
32 Off-balance sheet items 4,531 762,794 77,015 42,204
33 TOTAL RSF 2,015,166
34 NET STABLE FUNDING RATIO (%) 113.18

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SOHAR
ISLAMIC
Banking elevated with
principles towards wider horizons

SOHAR ISLAMIC
Left to Right
SHARI’AH Sh. Azzan Nasser Al Amri

Member
Dr. Mudassir Hussain Siddiqui
Deputy Chairman
SUPERVISORY BOARD Sh. Al Muatasim Said Al Maawali Sh. Fahad Mohammed Al Khalili
Chairman Member

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SHARIAH SUPERVISORY BOARD REPORT 2020 SHARIAH SUPERVISORY BOARD REPORT 2020

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LIST OF FATWAS 2020 LIST OF FATWAS 2020
6) Ujrah fees are not percentage based and not linked to the outstanding amount on the
Shari'ah Supervisory Board card but a fixed amount for each card.
Sohar Islamic 7) In case of late payment or outstanding amount is not fully paid within the grace period,
a Late Payment charge of 1% per annum will be charged on the overdue amount. Such charge
In The Name of Allah, most Gracious, most Merciful. will be paid to any charitable organization as approved by the Bank Shari’a Board.
Peace and Blessings Be Upon His Messenger. Cards limits and fees are as per Product Document and Tariff Book.
The Shari'ah Supervisory Board confirms that the product of Credit Cards is compatible with the
The Shari'ah Board was presented with the "credit cards" product which is based on Qardh Hasan
standards of Shari'ah issued by the Accounting and Auditing Organization for Islamic Financial
contract, as detailed below:
Institutions (AAOIFII), “Standard No. 19 in Qardh” and in accordance with the Islamic Banking
1) Credit Card is based on the concept of Qardh Hasan where the Card Holder is borrower and regulatory framework issued by the Central Bank of Oman.
the Bank is the financier.
2) The following cards will be introduced:
yGold Credit Card Shari'ah Supervisory Board Members
yPlatinum Credit Card
ySignature Credit Card
yCorporate Credit Card
3) Each card will have its own credit limit and eligibility criteria as per Bank Credit Policy.
Dr. Hussain Hamed Hasan Dr. Muddassir Siddiqi Azzan Nasir Al Aamri
4) Bank will offer some services associated with these cards for which Card Holder will pay a
Chairman Deputy Chairman Member
fixed monthly Ujrah fees. The Bank at its sole discretion can rebate such fee.
5) Such services offered by the card include:
a) Purchase of Goods and services (excluding conventional interest-based financial services,
manufacturing/ distributing/ operating/ selling of alcohol, pork, tobacco, any kind of military
weaponry/ machines/equipment, adult entertainment including pornographic productions,
music, cinemas or gambling);
b) Utility bills such as water, electricity and telephone;
c) Cash withdrawals up to 90% of card limit;
d) Living expenses such as travel and accommodation;
e) Secure online shopping;
f) The Cards are designed to also offer the clients certain Shari'ah compliant services, for
example:
Purchase protection and extended warranties;
yTravel takaful insurance and different shopping privileges; and
yConcierge services and airport lounges access.
g) For Corporate Credit Card: payment of Government-related expenses and duties.

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85
The Shari'ah Supervisory Board confirms that “Double Your Salary” campaign is compatible
Shari'ah Supervisory Board withthe Shari'ah Law. Allah knows Best.
Sohar Islamic
In The Name of Allah, most Gracious, most Merciful.
Peace and Blessings Be Upon His Messenger. Shari'ah Supervisory Board Members
The Shari'ah Board was presented with the "Double your Salary” as detailed below:
Sohar Islamic would like to run this campaign to attract new salaried customers. This will help
business in different means:
1. Acquire more salaried customers who are highly secured. Dr. Hussain Hamed Hasan Dr. Muddassir Siddiqi Azzan Nasir Al Aamri

2. Increase our Saving Accounts and therefore reduce cost of funds.
3. Cross sell other products to these new customers.
The campaign will run for three-months. At the end of campaign, we run a draw to select winners
based on below table.
No. of Winners Prize Prize Max

1 Double salary RO. 3,000
3 25% of salary RO. 3,000
These prizes will be paid from shareholders’ funds and will not impact Mudaraba pool profitability.
Draw Eligibility Criteria:

Any customer transfers his salary during the campaign will be eligible to enter the draw. Number of
salaries transferred per new customer during the campaign period will be considered as well. Each
time salary gets credited will be counted as one chance. Customer who already have an account
or credit facility from Sohar Islamic without salary transfer then manage transfer their salary during
the campaign, will enter the draw. Campaign will be limited to Saving Accounts only and will not
include Current Accounts.
Data will be taken from IT for all salary transactions of the new customers during the campaign.
Winners are required to keep their salary relationship with the bank for at least 6 months before
they are allowed to obtain “No Objection Certificate” to move their relationship to another bank.

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8
10. Buyers Protection: providing cover for theft, accidental damage or non-delivery of
Shari'ah Supervisory Board eligible purchases for 365 days from date of purchase
Sohar Islamic The Shari'ah Supervisory Board confirms that Sohar Islamic First segment with its features and
benefits is compliant with the Shari'ah Law. Allah knows Best
In The Name of Allah, most Gracious, most Merciful.
Peace and Blessings Be Upon His Messenger.
It was proposed to the Shari'ah Board to launch a segment of "Sohar Islamic First" customers who Shari'ah Supervisory Board Members
meet any of the conditions and criteria listed below, as detailed below:
Eligibility Criteria:
1. Deposits: Average monthly balance of RO 10,000 (or equivalent in foreign currency
in saving account.
2. Salary: Minimum salary of RO. 1,000 for Government sector employees and RO. 1,800 for Azzan Nasir Al Aamri Dr. Muddassir Siddiqi Al Mutasim Said Al Maawali
Private sector employees assigned to Sohar Islamic Saving Account. Chairman Deputy Chairman Member
Features and Benefits:

Customers in this segment will enjoy the following features and benefits:
y

Higher expected profit rate on saving account than mass segment
yWaived annual fees on Visa Signature credit card for the first year.
yVisa Signature credit card benefits:
1. Complimentary access to over 1000 airport lounges globally.
2. Travel (Takāful) Insurance: a cover for 90 days for all travels for card holder and family.
3. DragonPass 'Dine & Fly' airport dining program in over 200 airport restaurant offers
globally.
4. 12% discount in more than 985,000 hotels and vocational rentals worldwide with Agoda.
5. 8% off bookings on hotels.com
6. Fraudulent Card Misuse Protection.
7. Visa Luxury Hotel Collection (VLHC) over 900 intriguing and prestigious properties.
8. YQ Meet and Assist: discount of up to 30% off retail rates at over 450 destinations globally.
9. Extended Warranty: It doubles the repair period offered by the original manufacturer’s
warranty for up to 1 year, protecting you against the cost of repair and replacement.

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Shari'ah Supervisory Board Shari'ah Supervisory Board

Sohar Islamic Sohar Islamic
In The Name of Allah, most Gracious, most Merciful. In The Name of Allah, most Gracious, most Merciful.
Peace and Blessings Be Upon His Messenger. Peace and Blessings Be Upon His Messenger.
The Shari'ah Board was presented with the "Saving Plan" product which is based on Wakalah The Shari'ah Board was presented with the "Student Account" product which is based on
contract, as detailed below: Mudharaba contract, as detailed below:
y
Saving Plan is based on the concept of Unrestricted Wakalah where the Saving Plan Holder y
Student Account is based on the concept of Unrestricted Mudharaba where the Student
“Muakkil” provides capital and the Bank “Wakeel” makes investment. Account Holder is the Rab-ul-Mal and the Bank is the Mudharib.
y
Wakeel and Muwakkil pre-agree on the investment amount, tenure anticipated profit rate y
Bank as Mudharib may invest or disinvest, at its sole discretion, the deposit or funds
and Wakalah fees. maintained by Student Account, in any of the Businesses of the Bank as it deems fit.
y
Wakalah funds shall be invested in Wakeels’ businesses and activities that are in The deposits maintained by Customers in Student Account shall be part of the
compliance with the rules and principles of the Islamic Shari’ah, as approved by the General Mudharaba Pool.
Shari’ah Supervisory Board of the Wakeel. y
The net profit on the Common Mudharaba Pool shall be distributed amongst Bank
yBank as Wakeel may invest or disinvest, at its sole discretion, the deposit or funds (Mudharib) and Student Account Holders on the basis of the integrated weightage points
maintained by Saving Plan, in any of the Businesses of the Bank as it deems fit. which represent the aggregate of points allocated to each deposit taking into consideration
yBank will assign a profit rate for each tenure slab. Profit is calculated based on the its tenure, amount of the deposit and profit payment frequency.
Anticipated Profit Rate declared separately for each tenure slab at the start/beginning y
Bank shall, in its capacity as Mudharib (investment manager), be entitled to receive up to 70%
of the period through the Bank website and branch noticeboards. of the Mudharaba profit from Common Mudharaba Pool profit, or such other percentage as
yIf Wakalah actual profit exceeds the anticipated profit rate, the Muwakkil shall grant such may be more specifically prescribed through a notice before the commencement of each
excess amount to the Wakeel as incentive. investment period.
y
All losses arising under Wakalah shall be for the account of the Muwakkil unless such y
The Bank will calculate profit monthly using monthly average balance of the Student
losses are due to Wakeel’s negligence, breach, default or misconduct. Account, at the applicable weightages declared monthly by the Bank. The profit amount
shall be added to the Student Account. Payment of profit will be monthly.
y
Saving Plan can be opened for a minimum tenure of 6 months’ subject to a maximum of
10 years with minimum monthly contribution of RO. 50/- Student Account Benefits:
The Shari'ah Supervisory Board confirms that Saving Plan product is Shari’a compliant and in This account offers the following benefits:
accordance with the Islamic Banking regulatory framework issued by the Central Bank of Oman. 1. Uniquely designed debit card
2. Tap & Pay with NFC feature
Shari'ah Supervisory Board Members 3. Free cash withdrawal from any bank ATM in Oman
4. Zero minimum balance fees
5. Zero Debit card annual fees
6. Discounts at a network of merchants

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LIST OF FATWAS 2020
The Shari'ah Supervisory Board confirms that the product of the savings plan is compatible with
the standards of Shari'ah issued by the Accounting and Auditing Organization for Islamic Financial
Institutions (AAOIFII), “Standard No. 13 in Mudaraba” and in accordance with the Islamic Banking
regulatory framework issued by the Central Bank of Oman.
Shari'ah Supervisory Board Members

FINANCIAL
STATEMENTS
SOHAR ISLAMIC
Directing business to success

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9
STATEMENT OF FINANCIAL POSITION
2020 2019
RO’000 RO’000
Note
ASSETS
Cash and balances with Central Bank of Oman B1 18,439 11,990
Due from banks and financial institutions B2 12,028 5,284
Murabaha receivables B3.a 15,512 13,366
Ijarah muntahia bittamleek B3.b 85,484 71,097
Istisna followed by Ijarah muntahia bittamleek B3.c 91,233 85,253
Diminishing Musharka B3.d 64,291 42,269
Investment securities B4 22,840 23,423
Property, equipment and fixture B5 871 1,095
Other assets B6 5,845 3,534
TOTAL ASSETS 316,543 257,311
LIABILITIES
Wakala deposits B7.a 187,179 158,838
Due to Bank B7.b 9,625 15,588
Current and other accounts B8 41,514 17,485
Other liabilities B9 1,922 2,223
TOTAL LIABILITIES 240,240 194,134
EQUITY OF INVESTMENT ACCOUNT HOLDERS B10 42,883 29,187

EQUITY
Assigned capital B11.a 30,000 30,000
Legal reserve B11.b 134 134
General reserve B11.c 988 988
Investments fair value reserve (1,056) -
Impairment reserve B11.d 472 602
Retained earnings 2,882 2,266
TOTAL OWNERS’ EQUITY 33,420 33,990
TOTAL LIABILITIES, EQUITY OF INVESTMENT ACCOUNT HOLDERS AND OWNERS’ EQUITY 316,543 257,311
CONTINGENT LIABILITIES B12.a 31,985 34,542

COMMITMENTS B12.b 6,934 4,093
These financial statements were approved and authorised for issue by the Board of Directors on 28 January 2021 and signed on
:their behalf by
____________________________ ____________________________
Chairman Board member
The accompanying notes A1 to D8 form part of these financial statements.

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STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF OWNERS’ EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020 FOR THE YEAR ENDED 31 DECEMBER 2020
Investments
Allocated Legal General Impairment Retained
fair value
Note capital reserve reserve reserve earnings
reserve Total
31 December 31 December RO’000 RO’000 RO’000 RO’000 RO’000
RO’000 RO’000
2020 2019
RO’000 RO’000 Balance as at 1 January 2020 30,000 134 988 602 - 2,266 33,990
Note Capital allocated during the year - - - - - -
Income from jointly financed financing activities and receivables C1 3,951 3,125
Transfer to Impairment reserve
Return on unrestricted investment account holders C3 (842) (771) - - - (130) - 130 -
during the year
Fair value losses - - - - (1,056) - (1,056)
Share of income (as Mudarib and Rabalmal) 3,109 2,354
Income from self-financed financing activities C1 8,727 7,688 Profit for the year - - - - - 486 486
Income from self-financed investing activities C2 1,543 1,591
Balance as at 31 December 2020 30,000 134 988 472 (1,056) 2,882 33,420
INCOME FROM FINANCING, INVESTMENTS AND RECEIVABLES 13,379 11,633
Return on due to under Wakala contracts C3 (7,679) (5,779)

Investments
Allocated Legal General Impairment Retained
fair value
NET REVENUE FROM FINANCING AND INVESTING ACTIVITIES 5,700 5,854 Note capital reserve reserve reserve earnings
reserve Total
RO’000 RO’000 RO’000 RO’000 RO’000
Foreign exchange gain – net 449 236 RO’000 RO’000
Other income C4 503 872 Balance as at 1 January 2019 25,000 134 988 - - 1,360 27,482
Capital allocated during the year B11.a 5,000 - - - - - 5,000
TOTAL REVENUES 6,652 6,962
Transfer to Impairment reserve
- - - 602 - (602) -
during the year
Staff costs (2,565) (2,256) Profit for the year - - - - - 1,508 1,508
Other operating expenses C5 (2,753) (2,237)
Depreciation B5 (274) (297) Balance as at 31 December 2019 30,000 134 988 602 - 2,266 33,990
TOTAL EXPENSES (5,592) (4,790)
OPERATING PROFIT BEFORE IMPAIRMENT AND INCOME TAX ALLOCATION 1,060 2,172
Expected credit loss on investment securities B4 (853) (9)

Expected credit loss on due from banks and financial institutions B2 - 15
Expected credit loss on financing advances and other receivables B3 492 (336)
Expected credit loss on financing advance commitments and financial guarantees B9 (127) (68)
PROFIT FOR THE YEAR BEFORE TAX 572 1,774

TAX ALLOCATED FROM HEAD OFFICE (86) (266)
PROFIT AND TOTAL COMPREHENSIVE INCOME FOR THE YEAR 486 1,508
The accompanying notes A1 to D8 form part of these financial statements. The accompanying notes A1 to D8 form part of these financial statements.
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NOTES TO FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS
A1 INCORPORATION, LEGAL STATUS AND PRINCIPAL ACTIVITIES
31 December 31 December Sohar International Bank SAOG (the Head office) (previously Bank Sohar SAOG) under an Islamic Banking License issued by
2020 2019 the Central Bank of Oman (CBO) on 30 April 2013, carries out Islamic banking operations and other financial trading activities
RO’000 RO’000 in accordance with Islamic Shari'ah rules and regulations under the name of “Sohar Islamic” (the Window). The Bank’s Shari'ah
CASH FLOWS FROM OPERATING ACTIVITIES Supervisory Board is entrusted to ensure the Window's adherence to Shari'ah rules and principles in its transactions and activities.
Profit before taxation 572 1,774 As required under clauses 3.5.1.2 and 3.5.1.3 of Title 1,’Licensing Requirements’ of Islamic Banking Regulatory Framework (IBRF)
Adjustments for: issued by CBO, the head office assigned RO 30 million (refer note B11a) to the Window as assigned capital.
Depreciation 274 297 The Window has not operated as a separate legal entity. The separate financial statements of the Window has been prepared to
Net expected credit loss on financing assets 488 398 comply with the requirement of Articles 1.5.1.2 to 1.5.1.4 of Title 2 ‘General Obligations and Governance’ of IBRF issued by CBO.
Income on investments (1,438) (1,237)
The Window offers a full range of Islamic banking services and products. The principal activities of the Window include accepting
Shari'ah compliant customer deposits, providing Shari'ah compliant financing and undertaking investment activities and providing
Operating profit & loss before changes in operating assets and liabilities (104) 1,232
commercial banking services and other investment activities permitted under IBRF.
Changes in operating assets and liabilities The Window employed 86 employees as of 31 December 2020 (31 December 2019: 81) the window has 8 branches within Sultanate
Due from banks and Wakala placement - (28) of Oman.
Murabaha receivables (2,106) (40)
A2 BASIS OF PREPARATION
Ijarah muntahia bittamleek (14,483) (13,919)
Istisna followed by Ijarah muntahia bittamleek (5,953) (11,412) A2.1 Statement of compliance
Diminishing Musharka (21,628) (7,145)
The financial statements for the Window are prepared in accordance with the Financial Accounting Standards (FAS) issued by
Wakala deposits 28,342 42,978 the Accounting and Auditing Organisation for Islamic Financial Institutions (“AAOIFI”) as approved by CBO, the Islamic Shari'ah
Current and other accounts 24,029 (1,683) rules and principles as determined by the Shari'ah Supervisory Board of the Window and Islamic Banking Regulatory Framework
Due to banks and wakala borrowings (4,814) issued by CBO. In accordance with the requirement of AAOIFI, for matters not covered by FAS, the Window uses standards issued
by the International Accounting Standards Board (IASB) and the interpretations released by the International Financial Reporting
Other assets (2,311) (1,577)
Interpretations Committee and will be replaced later by FAS when an applicable FAS is issued.
Other liabilities (387) 499
These financial statements pertain to the Window’s operations only and do not include financial results of the Bank. Statement
Net cash from operating activities 583 8,905 of changes in restricted investment amount, statement of sources of funds in zakah and statement of sources and uses of funds
in Qard Fund have not been presented as these are not applicable/relevant to Window’s operations. Complete set of financial
CASH FLOWS FROM INVESTING ACTIVITIES statements of the Bank is presented separately.
Acquisition of fixed assets (51) (266) A2.2 Basis of measurement
Income received on Investments 1,447 1,469
The financial statements have been prepared under the historical cost basis except for derivative financial instruments and
Investments Matured 1,636 - investments which have been measured at fair value. These financial statements are presented in Rial Omani, which is the Window’s
Acquisition of Investments (2,968) (2,691) functional currency. All financial information presented in Rial Omani has been rounded off to the nearest thousands.
Net cash used in investing activities 64 (1,488) A2.3 Use of Judgments and estimates
In preparation of the Window financial statements, management requires to make certain estimates and assumptions that affect
CASH FLOWS FROM FINANCING ACTIVITIES
the reported amount of financial assets and liabilities and the resultant allowances for impairment and fair values. In particular,
Changes in Un Restricted Investment Account Holders(URIA) 13,696 (11,797) considerable judgment by management is required in the estimation of the amount and timing of future cash flows when
Capital allocated during the year - 5,000 determining the level of allowances required for impaired financing and receivables as well as allowances for impairment provision
for unquoted investment securities. Estimates and judgments are continually evaluated and are based on historical experience
Net cash (used in) / from financing activities 13,696 (6,797) and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates.
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 14,343 620 The estimates and underlying assumptions are reviewed on a regular basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the
CASH AND CASH EQUIVALENT AT BEGINNING OF THE YEAR 6,499 5,879
revision affects both current and future periods. Estimates considered by the Bank to have a significant risk of material adjustment
CASH AND CASH EQUIVALENTS AT 31 DECEMBER 20,842 6,499
in subsequent periods are discussed in notes A4.
A2.4 New standards, interpretations and amendments

REPRESENTING:
Cash and balances with Central Bank 18,439 11,990 The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Window’s
financial statements are disclosed below. The Window intends to adopt these new and amended standards and interpretations, if
Due from banks and financial institutions with OM of 90 days 12,028 5,285
applicable, when they become effective.
Due to Bank with original maturity (OM) of 90 days (9,625) (10,776)
A2.5 FAS 31 Investment Agency (Al-Wakala Bi Al-lstithmar)
20,842 6,499
AAOIFI has issued FAS 31 Investment Agency (Al-Wakala Bi Al-lstithmar) in 2018. The objective of this standard is to establish
the principles of accounting and financial reporting for the investment agency (Al-Wakala Bi Al- Istithmar) instruments and the
related assets and obligations from both the principal (investor) and the agent perspectives. This standard shall be effective for the
financial periods beginning on or after 1 January 2020 with early adoption permitted.
The accompanying notes A1 to D8 form part of these financial statements. The Window is adopted the standard and there is no material impact of this standard.

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A2 BASIS OF PREPARATION (CONTINUED) A3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A2.6 FAS 35 Risk Reserves A3.3 Financing assets

AAOIFI has issued FAS 35 “Risk Reserves” in 2018. This standard along with FAS 30 ‘Impairment, Credit losses and onerous Financing assets comprise Shari'ah compliant financing provided by the Window with fixed or determinable payments. These
commitments’ supersede the earlier FAS 11 “Provisions and reserves”. include financing provided through Murabaha, Mudaraba, Musharaka, Musawama, Ijarah, Istisna and other modes of Islamic
financing. Financing assets are stated at their amortised cost less expected credit loss allowance (if any).
The objective of this standard is to establish the principles of accounting and financial reporting for risk reserves established to
mitigate various risks faced by stakeholders, mainly the profit and loss taking investors, of Islamic financial institutions (IFIs/ the Murabaha
institutions). This standard shall be effective for the financial periods beginning on or after 1 January 2021 with early adoption
permitted only if the Bank early adopts FAS 30 “Impairment, Credit losses and onerous commitments”. Murabaha receivables are sales on deferred terms. The Window arranges a Murabaha transaction by buying a commodity (which
represents the object of the Murabaha) and selling it to the Murabeh (a beneficiary) at a margin of profit over cost. The sales price
The Window is currently evaluating the impact of this standard but does not foresee any material impact. (cost plus the profit margin) is repaid in instalments by the Murabeh over the agreed period. Murabaha receivables are stated net
of deferred profits and expected credit loss allowance (if any). Any promise made by potential Murabeh is considered obligatory.
A2.7 FAS 30 Impairment, Credit losses and onerous commitments
AAOIFI has issued FAS 28 Murabaha and Other Deferred Payment Sales in 2017. FAS 28 supersedes the earlier FAS No. 2
In November 2017, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) issued Financial "Murabaha and Murabaha to the Purchase Orderer" and FAS No. 20 "Deferred Payment Sale". The objective of this standard
Accounting Standard (FAS) 30 - Impairment, credit losses and onerous commitments, the standard supersedes the earlier FAS 11 is to prescribe the appropriate accounting and reporting principles for recognition, measurement and disclosures in relation to
“Provisions and Reserves” effective from the financial periods beginning on or after 1 January 2020, with early adoption permitted. Murabaha and other deferred payment sales transactions for the sellers and buyers, for such transactions.
However, during the year 2017, the CBO had issued a circular BM 1149 dated 13 April 2017 governing implementation of IFRS 9 Mudaraba
Financial Instruments (IFRS 9) for all the banks, which also apply to Islamic banks/windows subject to any specific instructions by
the Central Bank for Islamic Banking entities on IFRS 9 if, as and when instructions are issued. Mudaraba is stated at the fair value of consideration given less any expected credit loss allowance.
Window adopted IFRS 9 on 1 January 2018 and did not restate the comparative information in accordance with relevant Mudaraba is a form of partnership between work and capital in which the Window contributes capital. Mudaraba capital provided
requirements of IFRS 9. by the Window at inception in kind (if other than cash) is measured at the fair value of the assets. If the valuation of assets results in
difference between fair value and book value, such difference is recognised as profit or loss to the Window.
The Window is currently evaluating the impact of this standard but does not foresee any material impact.
In case mudaraba capital is lost or damaged prior to the inception of work without misconduct or negligence on the part of Mudarib,
A2.8 FAS 32 “Ijarah” then such losses are deducted from Mudaraba capital and are treated as loss to the Window. In case of termination or liquidation,
unpaid portion by Mudarib is recognised as receivable due from Mudarib.
FAS 32 (which supersedes earlier FAS 8) on Ijarah improves the existing treatments in line with the global best practices. It set
out principles for the classification, recognition, measurement, presentation and disclosures of Ijarah transactions including their Musharaka
different forms entered into by the Islamic financial institutions in the capacity of both the lessor and lessee. This standard brings
Musharaka contracts represents a partnership between the Window and a customer whereby each party contributes to the capital
a fundamental shift in the accounting approach for Ijarah transactions, particularly, in the hand of the lessee in contrast to the
in equal or varying proportions to establish a new project or share in an existing one, and whereby each of the parties becomes
earlier approach of the off-balance sheet accounting for Ijarah. It is effective for period starting 1 January 2021 with early adoption
an owner of the capital on a permanent or declining basis and shall share profits or losses. These are stated at the fair value of
permitted.
consideration given less any amounts written off and provision for expected credit loss allowance, if any. In Diminishing Musharaka
The Window is currently evaluating the impact of this standard but does not foresee any material impact. based transactions, Window enters into a Musharaka based on Shirkat-ul-milk for financing an agreed share of fixed asset (e.g.
house, land, plant or machinery) with its customers and enters into period profit payment agreement for the utilisation of Window’s
A2.9 FAS 33 “Investments in Sukuk, Shares and Similar Instruments” Musharaka share by the customer.
FAS 33 (which supersedes earlier FAS 25) sets out the improved principles for classification, recognition, measurement, presentation Ijarah muntahia bittamleek
and disclosure of investment in Sukuk, shares and other similar instruments of investments made by Islamic financial institutions
These are initially recorded at cost including initial direct costs. Ijarah muntahia bittamleek is a lease whereby the legal title of the
(IFIs/the institutions), in line with Shari’ah principles. It defines the key types of instruments of Shari’ah compliant investments
leased asset passes to the lessee at the end of the ijarah (lease term), provided that all ijarah installments are settled.
and defines the primary accounting treatments commensurate to the characteristics and business model of the institution under
which the investments are made, managed and held. This standard shall be effective from the financial periods beginning on Depreciation is charged on Ijarah muntahia bittamleek assets at rates calculated to write off the cost of each asset over its lease
1 January 2021. term.
The Window is currently evaluating the impact of this standard but does not foresee any material impact. Ijarah income receivables represent outstanding rentals at the end of the year less any expected credit loss allowance. The ijarah
income receivable is classified under other asset.
A3 SIGNIFICANT ACCOUNTING POLICIES
Istisna followed by Ijarah muntahia bittamleek
The significant accounting policies adopted in the preparation of the financial statements are set out below:
Istisna followed by Ijarah muntahia bittamleek is construction finance product in which property is developed under istisna`
A3.1 Cash and cash equivalents contract between customer and the Bank. Banks develops the property and then after completion of construction the property is
leased to customer under Ijarah muntahia bittamleek contract. During construction customer pays the advance rentals.
Cash and cash equivalents comprise cash on hand and balances with Central Bank and placements with banks and financial
institutions that mature within three months, less borrowings with banks and financial institutions accounts that mature within Salam
three months and restricted balances.
In a Salam contract a buyer pays in advance for a specified quantity and quality of a commodity, deliverable on a specific date, at
A3.2 Foreign currency transactions an agreed spot price. Salam is particularly applicable to seasonal agricultural purchases and can be used as a means of financing
production. The price is paid at the time of the contract but the delivery would take place at a future date which enables an
Transactions in foreign currencies are translated into functional currency at the spot exchange rate at the date of the transaction. entrepreneur to sell his output to the Window at a price determined in advance. However, at the time of sale all specifications,
Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated into the functional currency at quality and quantity of the commodity must be determined to avoid any ambiguity which could become a cause of dispute.
the spot exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the Furthermore, date and time of delivery must also be agreed upon but can be changed with mutual consent of the parties. Salam
functional currency at the beginning of the period, adjusted for the effective profit and payments during the period, and the amortised contracts are recognised on the date at which they are originated and are carried at their cost less expected credit loss allowance,
cost in the foreign currency translated at the spot exchange rate at the end of the period. Non-monetary assets and liabilities that are if any.
measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

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A3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A3.3 Financing assets (continued) A3.4 Financial instruments – initial recognition (continued)
Diminishing Musharakah A3.4.d Measurement categories of financial assets and liabilities (continued)
In Diminishing Musharakah financing, the Bank enters into Musharakah based on Shirkat-ul-milk for financing an agreed share The details of these conditions are outlined below.
of fixed asset (e.g. house, land, plant or machinery) with its customers and enters into period profit payment agreement for the
utilisation of the Bank’s Musharakah share by the customer. y Business model assessment
A3.4 Financial instruments – initial recognition The Window determines its business model at the level that best reflects how it manages groups of financial assets to achieve
its business objective. The Bank's business model is not assessed on an instrument-by-instrument basis, but at a higher level of
A3.4.a Date of recognition aggregated portfolios and is based on observable factors such as:
Financial assets and liabilities, with the exception of financing assets to customers and balances due to customers, are initially y How the performance of the business model and the financial assets held within that business model are evaluated and
recognised on the trade date, i.e., the date that the Bank becomes a party to the contractual provisions of the instrument. This reported to the entity's key management personnel;
includes regular way trades: purchases or sales of financial assets that require delivery of assets within the time frame generally y The risks that affect the performance of the business model (and the financial assets held within that business model) and, in
established by regulation or convention in the market place. Financings and advances to customers are recognised when funds particular, the way those risks are managed;
are transferred to the customers’ accounts. The Bank recognises balances due to customers when funds are transferred to the y How managers of the business are compensated (for example, whether the compensation is based on the fair value of the
Bank. assets managed or on the contractual cash flows collected); and
y The expected frequency, value and timing of sales are also important aspects of the Bank’s assessment.
A3.4.b Initial measurement of financial instruments
The business model assessment is based on reasonably expected scenarios without taking 'worst case' or 'stress case’ scenarios into
The classification of financial instruments at initial recognition depends on their contractual terms and the business model for account. If cash flows after initial recognition are realised in a way that is different from the Bank's original expectations, the Bank
managing the instruments. Financial instruments are initially measured at their fair value (except in the case of financial assets does not change the classification of the remaining financial assets held in that business model, but incorporates such information
and financial liabilities recorded at FVPL, transaction costs are added to, or subtracted from, this amount. Trade receivables are when assessing newly originated or newly purchased financial assets going forward.
measured at the transaction price. When the fair value of financial instruments at initial recognition differs from the transaction
price, the Bank accounts for the Day 1 profit or loss, as described below. y The SPPI test
A3.4.c Day 1 profit or loss As a second step of its classification process the Bank assesses the contractual terms of financial assets to identify whether they
meet the SPPI test. ‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial recognition and
When the transaction price of the instrument differs from the fair value at origination and the fair value is based on a valuation may change over the life of the financial asset (for example, if there are repayments of principal or amortisation of the premium/
technique using only inputs observable in market transactions, the Bank recognises the difference between the transaction discount).
price and fair value in net trading income. In those cases where fair value is based on models for which some of the inputs are not
observable, the difference between the transaction price and the fair value is deferred and is only recognised in profit or loss when The most significant elements of profit within a lending arrangement are typically the consideration for the time value of money
the inputs become observable, or when the instrument is derecognised. and credit risk. To make the SPPI assessment, the Bank applies judgement and considers relevant factors such as the currency in
which the financial asset is denominated, and the period for which the profit rate is set.
A3.4.d Measurement categories of financial assets and liabilities
In contrast, contractual terms that introduce a more than the minimum exposure to risks or volatility in the contractual cash flows
The Bank classifies all of its financial assets based on the business model for managing the assets and the asset’s contractual terms, that are unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely payments of principal
measured at either: and profit on the amount outstanding. In such cases, the financial asset is required to be measured at FVTPL.
y Amortised cost; (ii) Derivatives recorded at fair value through profit or loss
y FVOCI, fair value through other comprehensive income; or
y FVTPL, fair value through profit and loss. A derivative is a financial instrument or other contract with all three of the following characteristics:
The Bank classifies and measures its derivative and trading portfolio at FVTPL. The Bank may designate financial instruments at y Its value changes in response to the change in a specified profit rate, financial instrument price, commodity price, foreign
FVTPL, if so doing eliminates or significantly reduces measurement or recognition inconsistencies. exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided that, in the case of a non-financial
variable, it is not specific to a party to the contract (i.e., the 'underlying');
(i) Due from banks, Financings and advances to customers, financial investments at amortised cost y It requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts
expected to have a similar response to changes in market factors;
Due from bank and Financings and advances to customers, included non–derivative financial assets with fixed or determinable y It is settled at a future date.
payments that were not quoted in an active market, other than those:
The Bank enters into derivative transactions with various counterparties. These include profit rate swaps, futures, cross-currency
y That the Bank intended to sell immediately or in the near term; swaps, forward foreign exchange contracts and options on profit rates, foreign currencies. Derivatives are recorded at fair value
y That the Bank, upon initial recognition, designated as at FVTPL or as available-for-sale; or and carried as assets when their fair value is positive and as liabilities when their fair value is negative. The notional amount and
y For which the Bank may not recover substantially all of its initial investment, other than because of credit deterioration, which fair value of such derivatives are disclosed separately in notes. Changes in the fair value of derivatives are included in net trading
were designated as available-for-sale. income unless hedge accounting is applied. Hedge accounting disclosures are provided in notes.
The Window only measures due from banks, Financings and advances to customers and other financial investments at amortised (iii) Embedded derivatives
cost if both of the following conditions are met:
An embedded derivative is a component of a hybrid instrument that also includes a non-derivative host contract with the effect
y The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. An embedded derivative
flows; and causes some or all of the cash flows that otherwise would be required by the contract to be modified according to a specified profit
y The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or
profit (SPPI) on the principal amount outstanding. other variable, provided that, in the case of a non-financial variable, it is not specific to a party to the contract.
With the introduction of IFRS 9, the Bank continues to accounts in this way for derivatives embedded in financial liabilities and
non-financial host contracts. Financial assets are, however, classified based on the business model and SPPI assessments as
outlined in notes.
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A3.4 Financial instruments – initial recognition (continued) A3.4 Financial instruments – initial recognition (continued)
A3.4.d Measurement categories of financial assets and liabilities (continued) A3.4.d Measurement categories of financial assets and liabilities (continued)
(iv) Financial assets or financial liabilities held for trading (viii) Financial guarantees, letters of credit and undrawn Financing commitments
The Bank classifies financial assets or financial liabilities as held for trading when they have been purchased or issued primarily for The Bank issues financial guarantees, letters of credit and Financing commitments.
short-term profit making through trading activities or form part of a portfolio of financial instruments that are managed together,
for which there is evidence of a recent pattern of short-term profit taking. Held-for-trading assets and liabilities are recorded and Financial guarantees are initially recognised in the financial statements (within Provisions) at fair value, being the premium
measured in the statement of financial position at fair value. Changes in fair value are recognised in net trading income. Profit and received. Subsequent to initial recognition, the Bank’s liability under each guarantee is measured at the higher of the amount
dividend income or expense is recorded in net trading income according to the terms of the contract, or when the right to payment initially recognised less cumulative amortisation recognised in the income statement, and under IFRS 9 – an ECL provision as set
has been established. out in notes. The premium received is recognised in the income statement in Net fees and commission income on a straight-line
basis over the life of the guarantee.
Included in this classification are debt securities, equities, short positions and customer Financings that have been acquired
principally for the purpose of selling or repurchasing in the near term. Undrawn Financing commitments and letters of credits are commitments under which, over the duration of the commitment, the
Bank is required to provide a Financing with pre-specified terms to the customer.
(v) Debt instruments at FVOCI
The nominal contractual value of financial guarantees, letters of credit and undrawn Financing commitments, where the Financing
The Bank applies the new category under IFRS 9 of debt instruments measured at FVOCI when both of the following conditions agreed to be provided is on market terms, are not recorded on in the statement of financial position.
are met:
The nominal values of these instruments together with the corresponding ECLs are disclosed in notes. The Bank occasionally
y The instrument is held within a business model, the objective of which is achieved by both collecting contractual cash flows and issues Financing commitments at below market profit rates drawdown. Such commitments are subsequently measured at the
selling financial assets; and higher of the amount of the ECL allowance and the amount initially recognised less, when appropriate, the cumulative amount of
y The contractual terms of the financial asset meet the SPPI test. income recognised.
These instruments largely comprise assets that had previously been classified as financial investments available for sale under A3.4.e Derecognition
IAS 39. FVOCI debt instruments are subsequently measured at fair value with gains and losses arising due to changes in fair value
recognised in OCI. Profit income and foreign exchange gains and losses are recognised in profit or loss in the same manner as for (i) Financial assets
financial assets measured at amortised cost as explained in notes. The ECL calculation for Debt instruments at FVOCI is explained
in notes where the Bank holds more than one investment in the same security, they are deemed to be disposed of on a first–in A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:
first–out basis. On derecognition, cumulative gains or losses previously recognised in OCI are reclassified from OCI to profit or loss.
y The rights to receive cash flows from the asset have expired; or
(vi) Equity instruments at FVOCI y The Bank has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a ‘pass–through’ arrangement; and either:
Upon initial recognition, the Bank occasionally elects to irrevocably classify some of its equity investments as equity instruments
at FVOCI when they meet the definition of Equity under IAS 32 Financial Instruments: Presentation and are not held for trading. yThe Bank has transferred substantially all the risks and rewards of the asset; or
Such classification is determined on an instrument by instrument basis. y
The Bank has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control
of the asset.
Gains and losses on these equity instruments are never recycled to profit. Dividends are recognised in profit or loss as other
operating income when the right of the payment has been established, except when the Bank benefits from such proceeds as a When the Bank has transferred its rights to receive cash flows from an asset or has entered into a pass–through arrangement,
recovery of part of the cost of the instrument, in which case, such gains are recorded in OCI. Equity instruments at FVOCI are not and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset,
subject to an impairment assessment. the asset is recognised to the extent of the Bank’s continuing involvement in the asset. In that case, the Bank also recognises an
associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations
(vii) Financial assets and financial liabilities at fair value through profit or loss that the Bank has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at
the lower of the original carrying amount of the asset and the maximum amount of consideration that the Bank could be required
Financial assets and financial liabilities in this category are those that are not held for trading and have been either designated by to repay.
management upon initial recognition or are mandatorily required to be measured at fair value under IFRS 9. Management only
designates an instrument at FVPL upon initial recognition when one of the following criteria is met. Such designation is determined (ii) Financial liabilities
on an instrument by instrument basis:
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing
y The designation eliminates, or significantly reduces, the inconsistent treatment that would otherwise arise from measuring the financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are
assets or liabilities or recognising gains or losses on them on a different basis; substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of
y The liabilities are part of a group of financial liabilities, which are managed and their performance evaluated on a fair value basis, a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised
in accordance with a documented risk management or investment strategy; or in profit or loss.
y The liabilities containing one or more embedded derivatives, unless they do not significantly modify the cash flows that would
otherwise be required by the contract, or it is clear with little or no analysis when a similar instrument is first considered that A3.4.f Offsetting of financial assets and financial liabilities
separation of the embedded derivative(s) is prohibited.
Financial assets and financial liabilities are only offset and the net amount reported in the statement of financial position when
Financial assets and financial liabilities at FVTPL are recorded in the statement of financial position at fair value. Changes in there is a legally enforceable right to set off the recognised amounts and the Bank intends to either settle on a net basis or to realise
fair value are recorded in profit and loss with the exception of movements in fair value of liabilities designated at FVTPL due to the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the
changes in the Bank’s own credit risk. Such changes in fair value are recorded in the Own credit reserve through OCI and do not accounting standards or for gains and losses arising from a group of similar transactions.
get recycled to the profit or loss. Profit earned or incurred on instruments designated at FVTPL is accrued in profit income or profit
expense, respectively, using effective rate of return method, taking into account any discount/premium and qualifying transaction
costs being an integral part of instrument. Profit earned on assets mandatorily required to be measured at FVTPL is recorded
using contractual profit rate. Dividend income from equity instruments measured at FVTPL is recorded in profit or loss as other
operating income when the right to the payment has been established.

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A3.4.g Impairment of financial assets A3.4.g Impairment of financial assets (continued)

(i) Overview of the ECL principles (ii) The calculation of ECLs (continued)
The Bank has been recording the allowance for expected credit losses for all Financings and other debt financial assets not held y Stage 2: When a Financing has shown a significant increase in credit risk since origination, the Bank records an allowance for
at FVPL, together with Financing commitments and financial guarantee contracts, in this section all referred to as ‘financial the LTECLs. The mechanics are similar to those explained above, including the use of multiple scenarios, but PDs and LGDs are
instruments’. Equity instruments are not subject to impairment under IFRS 9. estimated over the lifetime of the instrument. The expected cash shortfalls are discounted by an approximation to the original
effective rate of return method;
The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or y Stage 3: For Financings considered credit-impaired, the Bank recognises the lifetime expected credit losses for these
LTECL), unless there has been no significant increase in credit risk since origination, in which case, the allowance is based on the Financings. The method is similar to that for Stage 2 assets, with the PD set at 100%;
12 months’ expected credit loss (12mECL). The Bank’s policies for determining if there has been a significant increase in credit risk. y POCI: POCI assets are financial assets that are credit impaired on initial recognition. The Bank only recognises the cumulative
changes in lifetime ECLs since initial recognition, based on a probability-weighting of the four scenarios, discounted by the
The 12m ECL is the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are
credit adjusted effective rate of return method;
possible within the 12 months after the reporting date. Both LTECLs and 12mECLs are calculated on either an individual basis or a
y Financing commitments and letters of credit: When estimating LTECLs for undrawn Financing commitments, the Bank
collective basis, depending on the nature of the underlying portfolio of financial instruments.
estimates the expected portion of the Financing commitment that will be drawn down over its expected life. The ECL is then
The Window has established a policy to perform an assessment, at the end of each reporting period, of whether a financial based on the present value of the expected shortfalls in cash flows if the Financing is drawn down, based on a probability-
instrument’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring weighting of the four scenarios. The expected cash shortfalls are discounted at an approximation to the expected effective rate
over the remaining life of the financial instrument. of return method on the Financing;
y Credit cards and revolving facilities that include both a Financing and an undrawn commitment, ECLs are calculated and
Based on the above process, the Bank groups its Financings into Stage 1, Stage 2, Stage 3 and POCI, as described below: presented together with the Financing. For Financing commitments and letters of credit, the ECL is recognised within
Provisions;
y Stage 1: When Financings are first recognised, the Bank recognises an allowance based on 12 month ECLs. Stage 1 Financings y Financial guarantee contracts: The Bank’s liability under each guarantee is measured at the higher of the amount initially
also include facilities where the credit risk has improved and the Financing has been reclassified from Stage 2; recognised less cumulative amortisation recognised in the income statement, and the ECL provision. For this purpose, the
y Stage 2: When a Financing has shown a significant increase in credit risk since origination, the Bank records an allowance for the Bank estimates ECLs based on the present value of the expected payments to reimburse the holder for a credit loss that it
LTECLs. Stage 2 Financings also include facilities, where the credit risk has improved and the Financing has been reclassified incurs. The shortfalls are discounted by the risk-adjusted profit rate relevant to the exposure. The calculation is made using a
from Stage 3; probability-weighting of the four scenarios. The ECLs related to financial guarantee contracts are recognised within Provisions.
y Stage 3: Financings considered credit-impaired . The bank records an allowance for the LTECLs.
(iii) Debt instruments measured at fair value through OCI
For financial assets for which the Bank has no reasonable expectations of recovering either the entire outstanding amount, or a
proportion thereof, the gross carrying amount of the financial asset is reduced. This is considered a (partial) derecognition of the The ECLs for debt instruments measured at FVOCI do not reduce the carrying amount of these financial assets in the statement
financial asset. of financial position, which remains at fair value. Instead, an amount equal to the allowance that would arise if the assets were
measured at amortised cost is recognised in OCI as an accumulated impairment amount, with a corresponding charge to profit or
(ii) The calculation of ECLs loss. The accumulated loss recognised in OCI is recycled to the profit and loss upon derecognition of the assets.
The Bank calculates ECLs based on a three probability-weighted scenarios to measure the expected cash shortfalls, discounted at (iv) Purchased or originated credit impaired financial assets (POCI)
an approximation to the effective rate of return method. A cash shortfall is the difference between the cash flows that are due to an
entity in accordance with the contract and the cash flows that the entity expects to receive. For POCI financial assets, the Bank only recognises the cumulative changes in LTECL since initial recognition in the loss allowances.
The mechanics of the ECL calculations are outlined below and the key elements are, as follows: (vi) Forward looking information
y PD - The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen In its ECL models, the Bank relies on a broad range of forward looking information as economic inputs, such as:
at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio;
y EAD - The Exposure at Default is an estimate of the exposure at a future default date, taking into account expected changes y Gross domestic product;
in the exposure after the reporting date, including repayments of principal and profit, whether scheduled by contract or y Savings and investment;
otherwise, expected drawdowns on committed facilities, and accrued profit from missed payments.; y Inflation;
y LGD - The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on y Trade statistics;
the difference between the contractual cash flows due and those that the Bank would expect to receive, including from the y Demographics;
realisation of any collateral. It is usually expressed as a percentage of the EAD. y Revenue and expenditure;
y Public debt;
When estimating the ECLs, the Bank considers four scenarios (a base case, an upside, a mild downside (‘downside 1’) and a more y Real estate;
extreme downside (‘downside 2’)). Each of these is associated with different PDs, EADs and LGDs. When relevant, the assessment y Composite indicators;
of multiple scenarios also incorporates how defaulted Financings are expected to be recovered, including the probability that the y Oil prices and production.
Financings will cure and the value of collateral or the amount that might be received for selling the asset.
The inputs and models used for calculating ECLs may not always capture all characteristics of the market at the date of the
Impairment losses and releases are accounted for and disclosed separately from modification losses or gains that are accounted financial statements. To reflect this, qualitative adjustments or overlays are occasionally made as temporary adjustments when
for as an adjustment of the financial asset’s gross carrying value. such differences are significantly material.
The mechanics of the ECL method are summarised below: (vii) Collateral valuation
y Stage 1: The 12m ECL is calculated as the portion of LTECLs that represent the ECLs that result from default events on a financial To mitigate its credit risks on financial assets, the Bank seeks to use collateral, where possible. The collateral comes in various forms,
instrument that are possible within the 12 months after the reporting date. The Bank calculates the 12mECL allowance based such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets and credit
on the expectation of a default occurring in the 12 months following the reporting date. These expected 12-month default enhancements such as netting agreements. Collateral, unless repossessed, is not recorded on the Bank’s statement of financial
probabilities are applied to a forecast EAD and multiplied by the expected LGD and discounted by an approximation to the position. However, the fair value of collateral affects the calculation of ECLs. It is generally assessed, at a minimum, at inception and
original effective rate of return method. This calculation is made for each of the four scenarios, as explained above; re-assessed periodically based on the type of asset, for example, cash or securities relating to margining requirements, is valued
daily.
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A3.4.g Impairment of financial assets (continued) A3.4.g Impairment of financial assets (continued)
(ii) Collateral valuation (continued) (x) Assets carried at amortised cost (continued)
To the extent possible, the Bank uses active market data for valuing financial assets held as collateral. Other financial assets which If there is objective evidence that an impairment loss on Financings and receivables or held to maturity investments carried at
do not have readily determinable market values are valued using models. Non-financial collateral, such as real estate, is valued by amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and
certified third party valuers. the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the
financial asset’s original effective profit rate. The carrying amount of the asset is reduced through the use of an allowance account
(viii) Write-offs and the amount of the loss is recognised in the statement of comprehensive income. If a Financing or held to maturity investment
has a variable profit rate, the discount rate for measuring any impairment loss is the current effective profit rate determined under
Financial assets are written off either partially or in their entirety only when the Bank has stopped pursuing the recovery. If the
the contract.
amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the
allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit loss expense. The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that
may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.
(ix) Forborne and modified Financings
Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the
The Bank sometimes makes concessions or modifications to the original terms of Financings as a response to the borrower’s
contractual cash flows of the assets in the group and historical loss experience for assets with credit risk characteristics similar to
financial difficulties, rather than taking possession or to otherwise enforce collection of collateral. The Bank considers a Financing
those in the group.
forborne when such concessions or modifications are provided as a result of the borrower’s present or expected financial difficulties
and the Bank would not have agreed to them if the borrower had been financially healthy. Indicators of financial difficulties include The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Bank to reduce any
defaults on covenants or significant concerns raised by the Credit Risk Department. Forbearance may involve extending the differences between loss estimates and actual loss experience.
payment arrangements and the agreement of new Financing conditions. Once the terms have been renegotiated, any impairment
is measured using the original effective rate of return method as calculated before the modification of terms. It is the Bank’s policy When a Financing is uncollectible, it is written off against the related allowance for Financing impairment. Such Financings are
to monitor forborne Financings to help ensure that future payments continue to be likely to occur. written off after all the necessary procedures have been completed and the amount of the loss has been determined.
Derecognition decisions and classification between Stage 2 and Stage 3 are determined on a case-by-case basis. If these If in a subsequent period, the amount of impairment loss decreases and decrease can be related objectively to an event occurring
procedures identify a loss in relation to a Financing, it is disclosed and managed as an impaired Stage 3 forborne asset until it is after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the allowance account.
collected or written off. From 1 January 2018, when the Financing has been renegotiated or modified but not derecognised, the The amount of the reversal is recognised in the statement of comprehensive income. Also refer to note B3 for Financings, advances
Bank also reassesses whether there has been a significant increase in credit risk. The Bank also considers whether the assets should and financing.
be classified as Stage 3. Once an asset has been classified as forborne, it will remain forborne for a minimum 12-month probation
period. In order for the Financing to be reclassified out of the forborne category, the customer has to meet all of the following (xi) Assets classified as available for sale
criteria:
The Bank assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of
y All of its facilities has to be considered performing; financial assets is impaired. For debt securities, the Bank uses the criteria referred to at (x) above. In the case of equity investments
y Regular payments of more than an insignificant amount of principal or profit have been made during at least half of classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is evidence that
the probation period; the assets are impaired. If any such evidence exists for available for sale financial assets, the cumulative loss – measured as the
y The customer does not have any contract that is more than 30 days past due. difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously
recognised in profit or loss - is removed from equity and recognised in the profit or loss. Impairment losses on equity instruments
The Window assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets recognised in the profit or loss are not reversed through statement of profit or loss.
is impaired. A financial asset or a group of financial assets is impaired and an impairment loss is incurred if, and only if, there is
objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss A3.4.h Amortised cost measurement
event) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial
assets that can be reliably estimated. Objective evidence that a financial asset or group of assets is impaired includes observable The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial
data that comes to the attention of the Bank about the following loss events as well as considering the guidelines issued by the recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective profit rate of any difference
Central Bank of Oman: between the initial amount recognised and the maturity amount, minus any reduction for impairment.
y Significant financial difficulty of the issuer or obligor; A3.4.i Fair value measurement
y A breach of contract, such as a default or delinquency in profit or principal payments;
y The Bank granting to the borrower, for economic or legal reasons relating to the borrower’s financial difficulty, a concession that A number of the Bank’s accounting policies and disclosures require the determination of fair value, for both financial and non-
the lender would not otherwise consider; financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on a number
y It becoming probable that the borrower will enter bankruptcy or other financial reorganisation; of accounting policies and methods. Where applicable, information about the assumptions made in determining fair values is
y The disappearance of an active market for that financial asset because of financial difficulties; or disclosed in the notes specific to that asset or liability. Fair value is the price that would be received to sell an asset or paid to transfer
y Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on
assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial the presumption that the transaction to sell the asset or transfer the liability takes place either:
assets in the group, including adverse changes in the payment status of borrowers in the group, or national or local economic y In the principal market for the asset or liability; or
conditions that correlate with defaults on the assets in the group. y In the absence of a principal market, in the most advantageous market for the asset or liability.
(x) Assets carried at amortised cost The principal or the most advantageous market must be accessible to the Bank. The fair value of an asset or a liability is measured
The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individually using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act
significant, and individually or collectively for financial assets that are not individually significant. If the Bank determines that no in their economic best profit.
objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits
in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and
are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a best use.
collective assessment of impairment.
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A3.4.i Fair value measurement (continued) A3.4.l Derivatives held for risk management purposes (continued)
The Bank uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure (ii) Cash flow hedge (continued)
fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
If the hedging derivative expires or is sold, terminated, or exercised, or the hedge no longer meets the criteria for cash flow hedge
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value accounting, or the hedge designation is revoked, then the hedge accounting is discontinued prospectively. In a discontinued
hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: hedge of a forecast transaction the cumulative amount recognised in other comprehensive income from the period when the
hedge was effective is reclassified from the equity to statement of comprehensive income as a reclassification adjustment when
y Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities; the forecast transaction occurs and affects profit or loss. If the forecast transaction is no longer expected to occur, then the balance
y Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly in other comprehensive income is reclassified immediately to profit or loss as a reclassification adjustment.
or indirectly observable;
y Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. (iii) Other non-trading derivative
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Bank determines whether transfers When a derivative is not held for trading, and is not designated in a qualifying hedge relationship, all changes in its fair value are
have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to recognised immediately in statement of comprehensive income.
the fair value measurement as a whole) at the end of each reporting period.
A3.5 Property, equipment and fixtures
At each reporting date, the Bank analyses the movements in the values of assets and liabilities which are required to be re-
measured or re-assessed as per the Bank’s accounting policies. For this analysis, the Bank verifies the major inputs applied in the Items of property, equipment and fixtures are measured at historical cost less accumulated depreciation and impairment losses.
latest valuation by agreeing the information in the Valuation computation to contracts and other relevant documents. Historical cost includes expenditure that is directly attributable to the acquisition of the asset. Depreciation is provided on a
straight-line basis over the estimated useful lives of property, equipment and fixtures, except freehold land. The estimated useful
The Bank also compares the changes in the fair value of each asset and liability with relevant external sources to determine whether lives for the current period are as follows:
the change is reasonable.
For the purpose of fair value disclosures, the Bank has determined classes of assets and liabilities on the basis of the nature, Years
characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. Motor vehicles 5
A3.4.j Cash and cash equivalents Furniture and fixtures 6-7
Cash and cash equivalents consist of cash in hand, unrestricted balances held with central banks and highly liquid financial assets Office equipment 6-7
with original maturities of up to three months, which are subject to insignificant risk of changes in their fair value, and are used by Computer software 10
the Bank in management of its short term commitments. Cash and cash equivalents are carried at amortised cost in the statement
of financial position. The assets’ residual values, useful lives and depreciation methods are reviewed and adjusted if appropriate at each reporting date.
A3.4.k Acceptances An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount.
Acceptances are disclosed on the statement of financial position under other assets with corresponding liability disclosed under
other liabilities. Therefore, there is no off-balance sheet commitment for acceptances. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within
‘other operating income’ in the income statement.
A3.4.l Derivatives held for risk management purposes
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
Derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as trading assets or probable that future economic benefits associated with the item will flow to the Window and the cost of the item can be measured
trading liabilities. Derivatives held for risk management purposes are measured at fair value in the statement of financial position. reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income
The treatment of changes in their fair value depends on their classification into the following categories: statement during the financial period in which they are incurred.
(i) Fair value hedge A3.6 Taxation

When a derivative is designated as a hedge of the change in fair value of a recognised asset or liability or a firm commitment, The tax return of the Bank is filed at head office level and the Window is not required to file a separate return on the activities of
changes in the fair value of the derivative are recognised immediately in statement of comprehensive income together with the Islamic Banking operations. During the year head office has started to allocate tax at flat rate of 15% of the Window’s profit.
changes in the fair value of the hedged item that are attributable to the hedged risk. Deferred tax assets and liabilities are recognised only at head office level.
If the derivative expires or is sold, terminated, or exercised, no longer meets the criteria for fair value hedge accounting, or the A3.7 Leases
designation is revoked, hedge accounting is discontinued. Any adjustment up to that point, to a hedged item for which the effective
profit method is used, is amortised to profit or loss as part of the recalculated effective profit rate of the item over its remaining life. Operating lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over
the lease term.
(ii) Cash flow hedge
IFRS 16 results in accounting for most leases by a lessee within the scope of the standard in a manner similar to that in which finance
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk leases were accounted for under IAS 17 ‘Leases’. Lessees recognise a ‘right of use’ asset and a corresponding financial liability
associated with a recognised asset or a liability or a highly probable forecast transaction that could affect profit or loss, the effective on the statement of financial position. The right of use asset is amortised over the length of the lease, and the financial liability is
portion of changes in the fair value of the derivative is recognised in other comprehensive income in hedging reserve. The amount measured at amortised cost. Lessor accounting remains substantially the same as under IAS 17. The Window applied the IFRS 16
recognised in other comprehensive income is reclassified to profit or loss as a reclassification adjustment in the same period as standard using a modified retrospective approach and therefore comparatives are not restated.
the hedged cash flows affect profit or loss, and in the same line item in the statement of comprehensive income. Any ineffective
portion of changes in the fair value of the derivative is recognised immediately in profit or loss.

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A3.7 Leases (continued) A3.12 Revenue recognition (continued)

The Window initially measures the right-of-use asset at cost; and the lease liability at the present value of the future lease payments. (iii) Musharaka
The amount is discounted using the profit rate implicit in the lease if this can be readily determined; otherwise, the incremental
borrowing rate. The commencement date is the date on which a lessor makes an underlying asset available for use. After initial Income on musharaka is recognised when the right to receive payment is established or on distribution. In case of losses in
recognition, the Window measures the right-of-use asset at cost less accumulated amortization and accumulated impairment musharaka, the Window's share of loss is recognised to the extent that such losses are being deducted from its share of the
losses. musharaka capital.
After initial recognition, the Window measures the lease liability by (a) increasing the carrying amount to reflect profit on the lease (iv) Diminishing Musharakah
liability; (b) reducing the carrying amount to reflect the lease payments made; and (c) remeasuring the carrying amount to reflect
Profit on Diminishing Musharakah financings is recognised on an accrual basis.
any reassessment or lease modifications, or to reflect revised in-substance fixed lease payments. Profit on the lease liability is the
amount that produces a constant periodic rate of the profit on the remaining balance of the lease liability. The periodic rate of profit (v) Profit on sukuks
is the rate used to discount the lease payments to calculate the lease liability.
Profit on Sukuks is recognized on an accrual basis. Where Sukuks are purchased at a premium or discount and are classified at
A3.8 Employee benefits amortised cost, those premiums/discounts are amortised over the remaining maturity, using the effective profit rate method.
(i) End of service benefits (vi) Ijarah
End of service indemnity for Omani employees are contributed in accordance with the terms of the Social Securities Law of 1991. Ijarah rental income is recognised over the term of the lease on accrual basis and is stated net of depreciation and impairment.
Income related to non performing ijarah muntahia bittamleek accounts and ijarah installments that are above 90 days is excluded
Provision for end of service indemnity for non-Omani employees has been made in accordance with the terms of the Oman Labour
from the statement of income.
Law 2003 and its amendments and is based on current remuneration rates and cumulative years of service at the statement
of financial position date. Employees’ entitlements to annual leave and leave passage are recognised when they accrue to the (vii) Istisna followed by Ijarah muntahia bittamleek
employees up to the reporting date. These accruals are included in current liabilities, while that relating to end of service benefits
is disclosed as a non-current liability. Income for Istisna followed by Ijarah muntahia bittamleek is booked on receipt of the rentals.
Contributions to a defined contribution retirement plan for Omani employees in accordance with the Omani Social Insurance Law (viii) Fees and commission income
of 1991 are recognised as an expense in the statement of comprehensive income as incurred.
Fees and commission income that are integral to the effective profit rate of a financial asset carried at amortised cost are included in
(ii) Short term benefits the measurement of the effective profit rate of the financial asset. Other fees and commission income, including account servicing
fees, sales commission, management, arrangement and syndication fees, are recognised as the related services are performed.
Short term benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
(ix) Window's share of income from equity of investment accountholders (as Rabalmal and Mudarib)
A provision is recognised for the amount expected to be paid if the Window has a present legal or constructive obligation to pay
this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Income is allocated proportionately between equity of investment accountholders and shareholders on the basis of their
respective investment in the pool before allocation of the Mudarib fees. The Window’s share as a Mudarib for managing the equity
A3.9 Current and other accounts of investment accountholders is accrued based on the terms and conditions of the related Mudaraba agreements.
Balances in current deposits and other accounts are recognised when received by the Window. The transactions are measured as (x) Salam
the amount received by the Window at the time of contracting. At the end of the reporting period, these accounts are measured
at amortised cost. Income from salam is determined by using the percentage of completion method.
A3.10 Equity of unrestricted investment account holders (xi) Dividend income
The Window charges a management fee (Mudarib fee) to the unrestricted investment account holders. Of the total income from Dividend income is recognised when the right to receive the dividend is established.
investments of funds, the income attributable to the unrestricted investment account holders is allocated to them after setting
aside provisions, reserves (profit equalisation reserve and investment risk reserve), if any, and deducting the Window’s share of (xii) Profit on amounts due from banks and financial institutions
income as a Mudarib. The allocation of income is determined by the management of the Window within the allowed profit sharing Profit on amounts due from banks and financial institutions is recognised on a time apportioned basis over the period of the
limits as per the terms and conditions of the unrestricted investment accounts contract based on the principal amounts outstanding and the profit agreed with clients.
A3.11 Due to and due from banks and Wakala Deposits A3.13 Expense recognition
Due to and due from banks and financial institutions and customers comprise of Wakala payables and receivables. Wakala payables Return on equity of investment accountholders is calculated based on the income generated from joint investment accounts after
and receivables are initially recognised at cost, being the fair value of consideration exchanged. Subsequently, they are carried at deducting the expenses related to investment pool i.e. "Mudarib expenses". Mudarib expenses include all expenses incurred by
amortised cost less amounts repaid. the Window, but excluding staff costs and other administrative expenses. The Window's "Mudarib profit" is deducted from the
investors' share of income before distributing such income.
A3.12 Revenue recognition
(i) Murabaha A3.14 Earnings or expenditures prohibited by Shari'ah
Profit on Murabaha is recognised on an accrual basis. Profit on Murabaha transactions for the period from the date of disbursement The Window records these amounts in a separate account in the other payables and is not included in the Window’s revenues;
to the date of culmination of Murabaha. these amounts are distributed to charities according to the Shari'ah Supervisory Board directions.
(ii) Mudaraba A3.15 Contingent liabilities
Income on Mudaraba financing is recognised when the right to receive payment is established or on distribution by the Mudarib. Contingent liabilities include guarantees, letter of credit, the Window’s obligations with respect to unilateral promise to buy/sell
Losses on the other hand are charged to the income statement on declaration by the Mudarib. currencies and others. Contingent liabilities are not recognized in the statement of financial position but are disclosed in the notes
to the financial statements, unless they are remote.

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A3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
A3.16 Shari'ah supervisory board A4.1 Impairment losses on Financings and advances (continued)
The Window's business activities are subject to the supervision of a Shari'ah supervisory board consisting of members appointed y The Bank’s internal credit grading model, which assigns PDs to the individual grades;
by the general assembly of shareholders. y The Bank’s criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets should
be measured on a LTECL basis and the qualitative assessment;
A3.17 Offsetting y The segmentation of financial assets when their ECL is assessed on a collective basis;
y Development of ECL models, including the various formulas and the choice of inputs;
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, y Determination of associations between macroeconomic scenarios and economic inputs, such as unemployment levels and
the Bank has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and settle the collateral values, and the effect on PDs, EADs and LGDs; and
liability simultaneously. The legally enforceable rights must not be contingent on future events and must be enforceable in the y Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive the economic inputs into
normal course of business and in the event of default, insolvency or bankruptcy of the Window and the counterparty. the ECL models.
A3.18 Zakah A4.2 Fee and commission income
In accordance with the article of association Zakah is payable by individual shareholders of the Window and Zakah on unrestricted The recognition of fee and commission income depends on the purpose for which fees are assessed and the basis of accounting
investment and other accounts is the responsibility of investment accountholders. for any associated financial instrument. Management applies certain assumptions and judgements to determine the fees that are
an integral part of the effective interest rate of a financial instrument, fees that are earned as services are provided, and fees that
A3.19 Provisions
are earned on the execution of a significant act.
A provision is recognised if, as a result of a past event, the Window has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are A4.3 Determination of Lease term
equivalent to the amortised value of the future liabilities which is determined by discounting the expected future cash flows at a In determining the lease term, the Window considers all facts and circumstances. Extension options (or periods after termination
pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the liability. options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The Bank considers
the nature and enforceability of extension clause in the lease agreement, the value of leasehold improvements, penalties on
A3.20Joint and self-financed
termination, costs and business disruption required to replace the leased premises as factors to determine the lease term. Lease
Assets that are jointly financed by the Window and the equity of investment accountholders are disclosed as "jointly financed" in agreements for premises occupied by the Window may contain an extension option, where the Bank has not considered extension
the financial statements and assets that are financed solely by the Window are classified under "self-financed". options after analysing above factors.
A3.21 Profit equalisation reserve Lease term is reassessed if an option is actually exercised (or not exercised) or the Bank becomes obliged to exercise (or not
exercise) it. The assessment is only revised if a significant event or a significant change in circumstances occurs which affects this
Profit equalisation reserve, this is the amount appropriated out of Mudaraba income before allocating the Window’s share assessment and that is within the control of the Bank. During the financial year, the Window has not revised its assessment of lease
as investment manager (Mudarib), in order to maintain a certain level of return on investment for unrestricted investment term as no significant events or changes occurred.
accountholders and increase owners’ equity.
B1 CASH AND BALANCES WITH CENTRAL BANK OF OMAN
A3.22 Investment risk reserve
Investment risk reserve is the amount appropriated out of profit share of the unrestricted investment accountholders after 2020 2019
allocating the Mudarib share, in order to cushion the effects of the risk of future investment losses. The terms and conditions RO’000 RO’000
whereby investment risk reserve can be set aside and utilised are determined and approved by the Shari'ah Supervisory Board of Balances with CBO:
the Window.
- current account 10,436 4,760
A4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS - cash reserve 5,306 5,306
Cash 2,697 1,924
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and reported amounts of assets, liabilities, income and expenses. The estimates and
18,439 11,990
associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. The resulting accounting estimates will, by definition, seldom equal the related actual The cash reserve with the Central Bank of Oman cannot be withdrawn without its approval.
results.
B2 DUE FROM BANKS AND FINANCIAL INSTITUTIONS
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods 31 December 31 December
if the revision affects both current and future periods. The Bank’s significant accounting estimates are on: 2020 2019
RO’000 RO’000
A4.1 Impairment losses on Financings and advances Wakalah placements with banks from local banks 10,001 5,000
The measurement of impairment losses under IFRS 9 across all categories of financial assets requires judgement, in particular, Demand accounts 2,027 285
the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and
the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can 12,028 5,285
result in different levels of allowances. The Bank’s ECL calculations are outputs of complex models with a number of underlying Expected credit loss allowance - (1)
assumptions regarding the choice of variable inputs and their interdependencies. Elements of the ECL models that are considered
accounting judgements and estimates include: 12,028 5,284

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B2 DUE FROM BANKS AND FINANCIAL INSTITUTIONS (CONTINUED) B3 FINANCING ADVANCES AND OTHER RECEIVABLES
The analysis of changes in the gross carrying amount and corresponding ECL allowance on due from banks and financial institutions 31 December 2020
is as follows:
Self-financed Jointly financed Total
RO’000 RO’000 RO’000
Gross carrying amount RO’000 RO’000 RO’000 RO’000 Book value
Murabaha receivables 15,717 - 15,717
As at 1 January 2020 5,285 - - 5,285
Ijarah muntahia bittamleek 20,391 66,547 86,938
Net change in assets 6,743 - - 6,743
Istisna followed by Ijarah muntahia bittamleek 66,371 25,130 91,501
Diminishing Musharka 65,272 - 65,272
At 31 December 2020 12,028 - - 12,028
167,751 91,677 259,428

Stage 1 Stage 2 Stage 3 Total Expected credit loss allowance (1,575) (1,168) (2,743)
ECL RO’000 RO’000 RO’000 RO’000 Contractual profit not recognised (37) (128) (165)
As at 1 January 2020 1 - - 1
166,139 90,381 256,520
Net charge for the year (1) - - (1)
31 December 2019
At 31 December 2020 - - - -
RO’000 RO’000 RO’000
There have been no significant changes in due from banks and financial institutions gross balances, which have contributed to Book value
significant changes to the ECL over the year. Murabaha receivables 13,607 - 13,607
Ijarah muntahia bittamleek 15,617 56,773 72,390
Gross carrying amount Istisna followed by Ijarah muntahia bittamleek 66,066 19,474 85,540
RO’000 RO’000 RO’000 RO’000
As at 1 January 2019 9,845 - - 9,845 Diminishing Musharka 42,211 1,430 43,641
Net change in assets (4,561) - - (4,561)
137,501 77,677 215,178
At 31 December 2019 5,284 - - 5,284 Expected credit loss allowance (2,006) (1,102) (3,108)
Contractual profit not recognised (23) (62) (85)
135,472 76,513 211,985

ECL
RO’000 RO’000 RO’000 RO’000
As at 1 January 2019 15 - - 15
Net charge for the year (14) - - (14)
At 31 December 2019 1 - - 1
There have been no significant changes in due from banks and financial institutions gross balances, which have contributed to
significant changes to the ECL over the year.

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B3 FINANCING ADVANCES AND OTHER RECEIVABLES (CONTINUED) B3 FINANCING ADVANCES AND OTHER RECEIVABLES (CONTINUED)
Additional disclosures on Non-performing financing coverage as per CBO circular BM 1149 is given below: Additional disclosures on Non-performing financing coverage as per CBO circular BM 1149 is given below:
As per CBO As per IFRS 9 Difference As per CBO As per IFRS 9 Difference
December 2020 December 2019
RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
Impairment loss charged to statement of comprehensive income 632 488 (144) Impairment loss charged to statement of comprehensive income 1,000 398 602
Provisions 4,204 3,732 (472) Provisions 3,572 3,245 327
Gross NPL ratio (percentage)* 0.85 0.85 - Gross NPL ratio (percentage)* 0.79 0.56 0.23
*NPL ratios are calculated on the basis of funded non-performing financing and advances. *NPL ratios are calculated on the basis of funded non-performing financing and advances.
The below table provides a comparison of provision held as per IFRS 9 and required as per CBO norms: The below table provides a comparison of provision held as per IFRS 9 and required as per CBO norms:
Classification: Difference Classification: Difference

Gross between Net CBO Gross between CBO
IFRS 9 carrying CBO IFRS9 CBO and carrying Reserve IFRS 9 carrying CBO IFRS9 CBO and Net carrying Reserve
classification amount Provision Provisions IFRS 9 amount profit classification amount Provision Provisions IFRS 9 amount profit
CBO RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 CBO RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
1 2 3 4 5 (6)=(4)-(5) (7)=(3)-(5) 8 1 2 3 4 5 (6)=(4)-(5) (7)=(3)-(5) 8
Stage 1 220,017 2,457 311 2,146 219,706 - Stage 1 189,807 2,128 489 1,639 189,318 -
Standard Stage 2 36,875 365 1,118 (753) 35,757 - Standard Stage 2 4,962 52 80 (28) 4,882 -
Stage 3 - - - - - - Stage 3 104 0 26 (26) 78 -
Subtotal 256,892 2,822 1,429 1,393 255,463 - Subtotal 194,873 2,180 595 1585 194,278 -
Stage 1 108 1 - 1 108 - Stage 1 16,966 170 1,334 (1,164) 15,632 -
Special mention Stage 2 224 3 11 (8) 213 - Special mention Stage 2 1,635 17 28 (11) 1,607 -
Stage 3 - - - - - - Stage 3 6 - 1 (1) 5 -
Subtotal 332 4 11 (7) 321 - Subtotal 18,607 187 1,363 (1,176) 17,244 -
Stage 1 - - - - - - Stage 1 - - - - - -
Substandard Stage 2 - - - - - - Substandard Stage 2 - - - - - -
Stage 3 404 101 81 20 323 9 Stage 3 518 134 113 21 405 8
Subtotal 404 101 81 20 323 9 Subtotal 518 134 113 21 405 8
Stage 1 - - - - - - Stage 1 - - - - - -
Doubtful Stage 2 - - - - - - Doubtful Stage 2 - - - - - -
Stage 3 601 162 177 (15) 424 17 Stage 3 160 41 27 14 133 5
Subtotal 601 162 177 (15) 424 17 Subtotal 160 41 27 14 133 5
Stage 1 - - - - - - Stage 1 - - - - - -
Loss Stage 2 - - - - - - Loss Stage 2 - - - - - -
Stage 3 1,199 1,115 1,210 (95) (11) 139 Stage 3 1,020 1,030 1,095 (65) (75) 72
Subtotal 1,199 1,115 1,210 (95) (11) 139 Subtotal 1,020 1,030 1,095 (65) (75) 72
Stage 1 220,125 2,458 311 2,147 219,814 - Stage 1 206,773 2,298 1,823 475 204,950 -
Gross Financing, Advance, Stage 2 37,099 368 1,129 (761) 35,970 - Gross Financing, Advance, Stage 2 6,597 69 108 (39) 6,489 -
Stage 3 2,204 1,378 1,468 (90) 736 165 Stage 3 1,808 1,205 1,262 (57) 547 85
Total 259,428 4,204 2,908 1,296 256,520 165 Total 215,178 3,572 3,193 379 211,986 85
Due from banks, Investment Stage 1 67,723 - 123 (123) 67,600 - Due from banks, Investment Stage 1 67,391 - 136 (136) 67,255 -
securities and financial Stage 2 6,971 - 866 (866) 6,105 - securities and financial Stage 2 - - - - - -
guarantees Stage 3 - - - - - - guarantees Stage 3 6 - 1 (1) 5 -
Subtotal 74,694 - 989 (989) 73,705 - Subtotal 67,397 - 137 (137) 67,260 -
Stage 1 287,848 2,458 434 2,024 287,414 - Stage 1 274,164 2,298 1,959 339 272,205 -
Total Stage 2 44,070 368 1,995 (1,627) 42,075 - Total Stage 2 6,597 69 108 (39) 6,489 -
Stage 3 2,204 1,378 1,468 (90) 736 165 Stage 3 1,814 1,205 1,263 (58) 552 85
Total 334,122 4,204 3,897 307 330,225 165 Total 282,575 3,572 3,330 242 279,246 85

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Stage 1 Stage 2 Stage 3 Total B3.a Murabaha receivables

Gross carrying amount
RO’000 RO’000 RO’000 RO’000
As at 1 January 2020 206,773 6,597 1,808 215,178 31 December 2020
New assets originated or purchased 54,587 1,596 - 56,183 Self-financed Jointly financed Total
Assets derecognized or repaid-net (11,230) (607) (96) (11,933) RO’000 RO’000 RO’000
Book value 17,764 - 17,764
Deferred profit (2,047) - (2,047)
Net book value 15,717 - 15,717
Expected credit loss allowance (186) - (186)
As at 31 December 2020 220,125 37,099 2,204 259,428
Contractual profit not recognized (19) - (19)
Stage 1 Stage 2 Stage 3 Total 15,512 - 15,512

RO’000 RO’000 RO’000 RO’000
As at 1 January 2019 159,436 21,440 1,592 182,468
31 December 2019
Assets derecognized or repaid-net (11,884) (819) (78) (12,781) Self-financed Jointly financed Total
RO’000 RO’000 RO’000
Book value 15,630 - 15,630
Transfers to Stage 2 (4,101) 4,101 - -
Deferred profit (2,023) - (2,023)
Net book value 13,607 - 13,607
As at 31 December 2019 206,773 6,597 1,808 215,178
Expected credit loss allowance (226) - (226)
13,366 - 13,366
ECL
RO’000 RO’000 RO’000 RO’000
ECL allowance as at 1 January 2020 1,823 108 1,177 3,108 Unamortized Deferred profit
Expected credit losses recognised 73 147 190 410
Recoveries from expected credit losses (432) (141) (202) (775)
2020 2019
Transfers to Stage 1 3 (3) - - RO’000 RO’000
Transfers to Stage 2 (1,076) 1,080 (4) - Deferred profit at the beginning of the year 2,023 1,924
Transfers to Stage 3 (80) (62) 142 - Profit deferred during the year on sales 1,736 1,358
Murabaha sales revenue during the year (C-1) (1,712) (1,259)
As at 31 December 2020 311 1,129 1,303 2,743
Deferred profit at the end of the year 2,047 2,023

ECL B3.b Ijarah muntahia bittamleek
RO’000 RO’000 RO’000 RO’000
ECL allowance as at 1 January 2019 460 1,240 1,075 2,775
31 December 2020
Expected credit losses recognised 68 11 7 86
Recoveries from expected credit losses 128 170 (51) 247 Self-financed Jointly financed Total
RO’000 RO’000 RO’000
Transfers to Stage 1 1,337 (1,337) - -
Cost 25,212 78,560 103,772
Accumulated Depreciation/Amortization (4,821) (12,013) (16,834)
Net book value 20,391 66,547 86,938
As at 31 December 2019 1,823 108 1,177 3,108
Expected credit loss allowance (199) (1,122) (1,321)
Contractual profit not recognized (8) (125) (133)
20,184 65,300 85,484

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B3.b Ijarah muntahia bittamleek (continued) B3.d Diminishing Musharka (continued)
Self-financed Jointly financed Total Self-financed Jointly financed Total

RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
Cost 24,755 66,652 91,407 Book value 42,211 1,430 43,641
Accumulated Depreciation/Amortization (9,138) (9,879) (19,017) Expected credit loss allowance (1,360) (12) (1,372)
Contractual profit not recognized
Net book value 15,617 56,773 72,390
40,851 1,418 42,269
Expected credit loss allowance (159) (1,066) (1,225)
B4 INVESTMENT SECURITIES
15,452 55,645 71,097
2020 2019
B3.c Istisna followed by Ijarah muntahia bittamleek RO’000 RO’000
Carrying amount at amortized cost 16,776 15,372
31 December 2020 Expected credit loss allowance (41) (54)
RO’000 RO’000 RO’000 Held at amortized cost 16,735 15,318
Book value 66,371 25,130 91,501
Carrying amount at FVOCI 8,027 8,105
Expected credit loss allowance (212) (46) (258)
Fair value loss (1,056) -
Expected credit loss allowance (866) -
66,152 25,081 91,233
Held at amortized cost 6,105 8,105
Total Investment securities 22,840 23,423

31 December 2019
RO’000 RO’000 RO’000 The Sukuk certificates are for a period of 6 years and carry profit rate of 4.4% - 6.5% per annum.
Book value 66,066 19,474 85,540 Movement in expected credit loss allowance is as given below:
Expected credit loss allowance (261) (24) (285)
Contractual profit not recognized (2) - (2) Stage 1 Stage 2 Stage 3 Total
RO’000 RO’000 RO’000 RO’000
65,803 19,450 85,253 Balance at beginning of the year 54 - - 54
Expected credit losses recognised - 866 - 866
B3.d Diminishing Musharka Recoveries from expected credit losses (13) - - (13)
31 December 2020 At 31 December 2020 41 866 - 907

RO’000 RO’000 RO’000
Book value 65,272 - 65,272
Expected credit loss allowance (978) - (978) Stage 1 Stage 2 Stage 3 Total
RO’000 RO’000 RO’000 RO’000
Balance at beginning of the year 45 - - 45
64,291 - 64,291 Net change for the period 9 - - 9
At 31 December 2019 54 - - 54

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B5 PROPERTY, EQUIPMENT AND FIXTURE B7.a WAKALA DEPOSITS
Computer Furniture Office Motor Capital work 31 December 31 December

software and fixtures equipment vehicle in-progress Total 2020 2019
RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
Cost: Local currency:
As at 1 January 2020 1,251 857 614 140 - 2,862 -corporates & retail 178,625 148,299
Additions 11 9 31 - - 51 Foreign Currency:
Disposals/transfers - - - - - - -corporates & retail 8,554 10,539
As at 31 December 2020 1,262 866 645 140 - 2,913 187,179 158,838
Accumulated depreciation: Wakala deposits include various facilities with a fixed profit rate ranging from 1.3% – 6%. The maturity of the Wakala payables ranges
As at 1 January 2020 (705) (494) (462) (107) - (1,768) from 1 week to 85 months.
Charge for the year (119) (94) (48) (13) - (274)
Disposals/transfers - - - - - - B7.b DUE TO BANKS
As at 31 December 2020 (824) (588) (510) (120) - (2,042) 31 December 31 December

2020 2019
Net book value at RO’000 RO’000
31 December 2020 438 278 135 20 - 871 Local currency:
-Banks - 5,000
Foreign Currency:
Computer Furniture Office Motor Capital work
software and fixtures equipment vehicle in-progress Total -Banks 9,625 10,588
RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
9,625 15,588
Cost:
At 1 January 2019 1,117 686 536 124 101 2,564 B8 CURRENT AND OTHER ACCOUNTS
Additions 134 167 49 16 (101) 265
Disposals / transfers - 4 29 - - 33 31 December 31 December
2020 2019
As at 31 December 2019 1,251 857 614 140 - 2,862
RO’000 RO’000
Accounts by nature:
Accumulated depreciation : - current 39,376 12,359
At 1 January 2019 (583) (396) (361) (98) - (1,438) - margin 2,138 5,126
Charge for the year (121) (94) (73) (9) - (297)
Disposals / transfers - (4) (28) - - (32) 41,514 17,485
As at 31 December 2019 (704) (494) (462) (107) - (1,767)

B9 OTHER LIABILITIES
Net book value at
31 December 2019 547 363 152 33 - 1,095 31 December 31 December
2020 2019
B6 OTHER ASSETS RO’000 RO’000
Profit/fee payable 57 55
31 December 31 December Staff entitlements 200 438
2020 2019 Payable to takaful company 161 186
RO’000 RO’000 Expected credit loss allowance on financing advance commitments and financial guarantees 82 82
Profit receivable 4,096 1,187 Other accruals and provisions 1,168 1,300
Rental receivable 1,025 224 Instrument payables 254 162
Right to use assets 636 849
Others 88 1,274 1,922 2,223
5,845 3,534

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B9 OTHER LIABILITIES (CONTINUED) B10 EQUITY OF INVESTMENT ACCOUNT HOLDERS

The analysis of changes in the gross carrying amount and corresponding ECL allowance on financing advance commitments and 31 December 31 December
financial guarantees is as follows: 2020 2019
RO’000 RO’000
Stage 1 Stage 2 Stage 3 Total Saving accounts 42,878 29,182
RO’000 RO’000 RO’000 RO’000 Fixed Term accounts 5 5
Balance as at 1 January 2020 38,629 - 6 38,635
42,883 29,187
Assets derecognised or repaid (17,840) - (6) (17,846)
Unrestricted investment account holder accounts are monies invested by customers under Mudaraba to form a pool of funds.
Transfers to Stage 1 - - - -
Investment accountholder’s funds are commingled with the Banks’s funds for investment, no priority is granted to any party for the
purpose of investments and distribution of profits.
Amounts written off - - - - Term deposits are deposits which can be withdrawn with no loss of capital subject to certain conditions.
At 31 December 2020 38,920 - - 38,920 The share, as Mudarib, in the profits of equity of investment accountholders is up to a maximum of 70% (2019: 70%) as per the
terms of investment account holder agreements.
Stage 1 Stage 2 Stage 3 Total During the year, the Window has not charged any administrative expense to the pool.
Gross carrying amount RO’000 RO’000 RO’000 RO’000
Product Participation factor Average rate earned
Balance as at 1 January 2019 33,346 - - 33,346
New assets originated or purchased 22,414 - - 22,414 Saving-RO 30 1.348%
Assets derecognised or repaid (17,125) - - (17,125) Saving-AED 15 0.668%
Transfers to Stage 1 - - - - Saving-USD 15 0.674%
Transfers to Stage 2 - - - - Saving-GBP 15 0.00%
Transfers to Stage 3 (6) - 6 - Term 3 Month 60 0.00%
Amounts written off - - - - Term 6 Month 60 0.00%
Term 12 Months 60 2.697%
At 31 December 2019 38,629 - 6 38,635 B11 OWNERS’ EQUITY
B11.a Assigned Capital

ECL amount Stage 1 Stage 2 Stage 3 Total
In 2020, Assigned Capital was RO 30 million (2019: RO 30 million).
RO’000 RO’000 RO’000 RO’000
Balance as at 1 January 2020 81 - 1 82 B11.b Legal reserve
Expected credit losses recognised 45 - - 45
Recoveries from expected credit losses (44) - (1) (45) As per Article 78 of Commercial Companies Law of Oman of 1974 ‘an additional amount within 2% of the nominal value of share
Transfers to Stage 1 - - - - may be collected for each share as issue fees. If the shares are issued at a value higher than the nominal value, the excess amount,
Transfers to Stage 2 - - - - after deducting issue expenses, shall be added either to the legal reserve or a special reserve to be established as provided under
Transfers to Stage 3 - - - - Article 106 of the Law’. Accordingly, the Window has transferred the net excess amount of the issue proceeds collected by the
Amounts written off - - - - Bank during Window’s inception to the legal reserve.
At 31 December 2020 82 - - 82 B11.c General reserve

General Reserve of RO 988,000 (31 December 2019: RO 988,000) was transferred by Head office to cover the losses incurred
for the year 2013 and 2014. The Window commenced report profits from 2015 and accordingly: no further transfer was made post
ECL amount Stage 1 Stage 2 Stage 3 Total 2014.
RO’000 RO’000 RO’000 RO’000
Balance as at 1 January 2019 13 - - 13 B11.d Impairment reserve
Expected credit losses recognised 7 - - 7
Recoveries from expected credit losses 62 - - 62 CBO circular BM 1149 requires the Window to create a reserve for the difference between provisions under CBO norms and IFRS 9
Transfers to Stage 1 - - - - provisions, if CBO provisions are higher than IFRS 9 provisions. The provisions required under IFRS 9 are higher than the provisions
Transfers to Stage 2 - - - - computed under CBO norms as of 31 December 2020, accordingly impairment reserve has been created.
Transfers to Stage 3 (1) - 1 -
Amounts written off - - - -
At 31 December 2019 81 - 1 82

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B12 CONTINGENT LIABILITIES AND COMMITMENTS B14 DERIVATIVES
B12.a Contingent liabilities In the ordinary course of business, the Window enters into various types of transactions that involve derivative financial instruments.
A derivative financial instrument is a financial contract between two parties where payments are dependent upon movements in
Standby letters of credit and guarantees commit the Bank to make payments on behalf of customers’ contingent upon the failure price in one or more underlying financial instrument, reference rate or index. These derivatives are stated at fair value. The fair value
of the customer to perform under the terms of the contract. of a derivative is the equivalent of the unrealised gain or loss from marking to market the derivative using prevailing market rates or
internal pricing models. Unrealised gains or losses are included in the statement of comprehensive income. The derivative financial
31 December 31 December instruments used by the Window are described below:
2020 2019
RO’000 RO’000 B14.a Derivative product types
Guarantees 20,814 5,478
Currency forward (Wa’ad), is a unilateral agreement between parties to buy one currency against selling another currency at an
Letter of credit 11,171 29,064
agreed price for settlement at forward/future value date. The exchange rate used for the transaction is called the forward exchange
31,985 34,542 rate.
It is done to hedge from exchange rate volatility risk and to manage liquidity efficiently by allowing window to place/invest excess
B12.b Commitments liquidity with offshore banks or to take funds from offshore banks in case of liquidity shortage.
Credit related commitments include commitments to extend credit, standby letters of credit and guarantees, which are designed As part of its asset and liability management the Window uses derivatives for hedging purposes in order to reduce its exposure
to meet the requirements of the Bank’s customers. Commitments to extend credit represent contractual commitments to make to currency and profit rate risks. This is achieved by hedging specific financial instruments and forecasted transactions as well as
financing and advances. Commitments generally have fixed expiry dates or other termination clauses and require the payment of strategic hedging against overall statement of financial position exposures.
a fee. Since commitments may expire without being drawn upon, the total contract amounts do not necessarily represent future
cash obligations. Notional Notional amounts by term to maturity
As at 31 December 2020 amount Within 3 months 3 - 12 months 1 - 5 years
2020 2019 RO’000 RO’000 RO’000 RO’000
RO’000 RO’000
Forward foreign exchange purchase contracts 13,040 3,237 1,964 7,839
Credit-related commitments 6,934 4,093
Forward foreign exchange sales contracts 12,862 3,237 1,925 7,700
B13 RELATED PARTIES
In the ordinary course of business, the Window conducts transactions with certain of its Directors, shareholders, senior
management, head office, Shari'ah Supervisory Board (SSB), Shari'ah reviewer and companies in which they have a significant
Notional Notional amounts by term to maturity
profit. These transactions are conducted on an arm’s length basis and are approved by the Window’s management and Board of
Directors As at 31 December 2019 amount Within 3 months 3 - 12 months 1 - 5 years
RO’000 RO’000 RO’000 RO’000
The aggregate amount of balances and the income and expenses generated with such related parties are as follows:
Forward foreign exchange purchase contracts 103,183 73,985 19,395 9,803
2020 2019 Forward foreign exchange sales contracts 103,183 73,985 19,395 9,803
RO’000 RO’000
Financing and advances (balance at end of year) 963 10
Main counterparty to forward contracts is the head office.
Financing and advances disbursed during the year - -
Financing and advances repaid during the year - - C1 INCOME FROM FINANCING ACTIVITIES
Deposits (balance at end of year) 405 281 31 December 31 December

Deposits received during the year (217) 58 2020 2019
RO’000 RO’000
Deposits matured/paid during the year 344 (36)
Murabaha 1,712 1,259
Profit on financing and advances (during the year) 55 - Ijarah muntahia bittamleek 4,389 3,946
Profit expense (during the year) (10) (7) Istisna followed by Ijarah muntahia bittamleek 4,864 4,495
Diminishing Musharaka 1,704 1,113
Wakala working Capital 9 -
Senior management compensation
Salaries and other short-term benefits 55 118 12,678 10,813
Directors’ sitting fees and remuneration

Income from jointly financed assets 3,951 3,125
Shari’ah Supervisory Board’s sitting fees and remuneration 55 47 Income from self-financed assets 8,727 7,688
12,678 10,813
Transaction with head office
Profit paid on Wakala borrowings - 325
Fee on committed line 245 162

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C2 INCOME FROM INVESTING ACTIVITIES D FINANCIAL RISK MANAGEMENT
31 December 31 December D1 Credit risk

2020 2019
RO’000 RO’000 D1.1 Credit risk in financing products
Income from inter-bank placements with Islamic banks 105 354
Credit risk originates from the financing of receivables and leases (including but not limited to, Murabaha, Diminishing Musharaka,
Income from investment in debt-type instruments 1,438 1,237
Istisna and Ijarah) and financing of working capital (including but not limited to Salam). Windows acts as financier, supplier, Rabb-
1,543 1,591 ul-Mal and contributor of capital in Musharaka agreement. Window exposes itself with the risk of counterparty’s failure to meet
their obligations in terms of receiving deferred payment and making or taking delivery of an asset.
C3 PROFIT PAID Exposure limits are based on the aggregate exposure to counterparty and any connected entities. Corporate contracts/facilities
are reviewed on an annual basis by unforeseen risk, which dries up the cash flows guidelines on the acceptability of specific classes
31 December 31 December of collateral credit risk.
2020 2019
RO’000 RO’000 The principal types of collaterals for financings and advances are:
On Mudaraba deposit 842 771
y Charges of assets under Murabaha agreements;
On Wakala deposit-
y Ownership/title of assets under Ijarah and Istisna financing;
-Customers 7,327 5,274
y Ownership/title under Istisna arrangement.
-Banks 352 505
7,679 5,779 D1.2 Management of credit risk
8,521 6,550 All financings and advances of the Window are regularly monitored to ensure compliance with the stipulated repayment terms.
Those financings and advances are classified into one of the 5 risk classification categories: Standard, Special Mention, Substandard,
Doubtful and Loss – as stipulated by Central Bank of Oman regulations and guidelines. The responsibility for identifying problem
C4 OTHER INCOME (NET) accounts and classifying them rests with the business line.
31 December 31 December The credit exposure of the Window as on the reporting date is as follows:
2020 2019
RO’000 RO’000 Istisna
Fee and commission – net 503 805 followed by Wakala
Loss on sale of fixed assets - 7 Ijarah Ijarah placements
Murabaha muntahia muntahia Diminishing & balance Debt type
Loss on held for trading investment securities - realized - 60 receivables bittamleek bittamleek Musharka with banks securities Total
31 December 2020 RO'000 RO'000 RO'000 RO'000 RO'000 RO'000 RO'000
503 872 Stage 1 15,095 79,731 85,770 39,527 12,028 16,776 248,927
Stage 2 343 5,682 5,505 25,569 - 6,971 44,070
Stage 3 279 1,525 226 176 - - 2,206
C5 OTHER OPERATING EXPENSES
Total 15,717 86,938 91,501 65,272 12,028 23,747 295,203
2020 2019
RO’000 RO’000 Istisna
Operating and administration costs 2,363 1,833 followed by Wakala
Ijarah Ijarah placements
Establishment costs 335 357 Murabaha muntahia muntahia Diminishing & balance Debt type
SSB remuneration and sitting fees 55 47 receivables bittamleek bittamleek Musharka with banks securities Total
2,753 2,237 Stage 1 12,987 67,473 83,630 42,683 5,284 23,423 235,480
Stage 2 328 3,495 1,816 958 - - 6,597
Stage 3 292 1,422 94 - - - 1,808
Total 13,607 72,390 85,540 43,641 5,284 23,423 243,885
Maximum exposure to credit risk before collateral held or other credit enhancements for all on-balance sheet assets are based on
net carrying amounts as reported in the statement of financial position.
The maximum credit risk exposures relating to off-balance sheet items calculated as per Basel II guidelines are provided in note
D5. The amounts represented in the note D5 represent a worst case scenario of credit risk exposure as of 31 December 2020,
without taking into account any collateral held or other credit enhancements attached.

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D FINANCIAL RISK MANAGEMENT (CONTINUED) D FINANCIAL RISK MANAGEMENT (CONTINUED)
D1 Credit risk (continued) D1 Credit risk (continued)
D1.3 Credit rating analysis D1.3 Credit rating analysis (continued)

The table below presents an analysis of debt securities, treasury bills, placements and other eligible bills by rating agency
Istisna
designation at 31 December 2020, based on Moody’s ratings or equivalent. followed by Wakala
Ijarah Ijarah placements
31 December 31 December Murabaha muntahia muntahia Diminishing & balance Debt type
2020 2019 receivables bittamleek bittamleek Musharka with banks securities Total
RO’000 RO’000 31 December 2019 RO'000 RO'000 RO'000 RO'000 RO'000 RO'000 RO'000
Aaa to Aa3 327 - Stage 1 (12 month ECL)
A1 to A3 - 284 Investment grade 12,987 67,473 83,630 42,863 5,284 23,423 235,480
Baa1 to Baa3 1,700 5,000 Sub-investment grade - - - - - - -
Ba1 to Ba3 10,000 -
B1 to B3 - 8,105 Carrying amount 12,987 67,473 83,630 42,863 5,284 23,423 235,480
Caa1 to Caa3 6,971 -
Sovereign 16,776 15,318
Stage 2 (Lifetime ECL but not
35,774 28,707 credit-impaired)
Investment grade - - - - - - -
The Window performs an independent assessment based on quantitative and qualitative factors in cases where a counterparty is Sub-investment grade 328 3,495 1,816 958 - - 6,597
unrated. Carrying amount 328 3,495 1,816 958 - - 6,597
The Window's internal credit rating grades along with the respective PDs are as below:
Stage 3 (Lifetime ECL and
Internal rating grades Internal rating grade description PD range (%) credit-impaired)
Non-performing 292 1,422 94 - - - 1,808
1–6 Investment grade 0.010%-6.464%
13,607 72,390 85,540 43,821 5,284 23,423 243,885
7 Sub-investment grade 16.582%
8 - 10 Non-performing 100% D1.4 Write-off policy
The table below shows the credit quality by class of financial asset, based on internal credit ratings: The Window writes off a financing and advances/security balance (and any related allowances for impairment losses) when the
Window determines that the financing and advances/security is uncollectible. This determination is reached after considering
Istisna information such as the occurrence of significant changes in the borrower/issuer’s financial position such that the borrower/issuer
followed by Wakala can no longer repay the obligation, or that proceeds from the collateral will not be sufficient to pay back the entire exposure. For
Ijarah Ijarah placements smaller balance standardized financings, charge off decisions generally are based on a product specific past due status.
Murabaha muntahia muntahia Diminishing & balance Debt type
receivables bittamleek bittamleek Musharka with banks securities Total The assets, or title to the asset, will be maintained in the Window’s custody or with a custodian approved by the Window. Necessary
measures are taken to ensure that the assets are maintained in useable condition.
Stage 1 (12 month ECL)
Investment grade 15,096 79,642 85,770 39,507 12,028 16,776 248,819 The release of collateral without full repayment of all related financial obligations requires authorization. Substitution of collateral.
Sub-investment grade - 89 - 19 - - 108 permitted if the new collateral would further minimize the Window’s risk exposure keeping in mind the regulatory requirements.
Carrying amount 15,096 79,731 85,770 39,526 12,028 16,776 248,927 When collateral is released to the customer, the Credit Administration Department obtains and maintains in its records
acknowledgement of receipt from the customer or its authorized representative.
Stage 2 (Lifetime ECL but not An estimate of the fair value of collateral and other security enhancements held against financings and advances is shown below:
credit-impaired)
Investment grade 315 5,526 5,464 25,569 - 6,971 43,845
Sub-investment grade 28 156 40 - - - 224 31 December 31 December
2020 2019
Carrying amount 343 5,682 5,504 25,569 - 6,971 44,069 RO’000 RO’000
Property 419,975 399,538
Vehicle 20,251 -
Stage 3 (Lifetime ECL and
credit-impaired) 440,226 399,538
Non-performing 279 1,525 226 176 - - 2,206
15,718 86,938 91,500 65,271 - - 295,202

Settlement risk is the risk of loss due to the failure of a party to honor its obligations to deliver cash, investments or other assets as
contractually agreed on the day of settlement.
In foreign exchange trades, though there is fulfilment of both the legs of the transaction on the settlement date as is common
practice between trading partners (free settlement), there will be risk on account of different time zones. In these cases, the
settlement risk is mitigated through the execution of bilateral payment netting agreements.

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D1 Credit risk (continued) D1 Credit risk (continued)
D1.5 Concentrations D1.6 Impact of Coronavirus (COVID-19)

Concentrations of credit risk arise when a number of counterparties are engaged in similar business activities or activities in the The World Health Organization officially declared COVID-19 as a global pandemic on 11 March 2020. From the latter half of Q1-2020,
same geographic region or have similar economic features that would cause their ability to meet contractual obligations to be the economic environment and business landscape of the Bank have witnessed rapid changes as a result of the unprecedented
affected similarly by changes in economic, political or other conditions. Concentrations of credit risk indicate the relative sensitivity outbreak of Coronavirus pandemic coupled with the significant depression in the global crude oil prices. Tightening of market
of the Window’s performance to developments affecting a particular industry or geographic location. conditions, lockdowns, restrictions on trade and movement of people have caused significant disruptions to businesses and
economic activities globally and across industries & sectors. Further details of impact of COVID-19 on banks are given in note 38 of
In order to avoid excessive concentrations of risk, the Window’s policies and procedures include specific guidelines to focus on
consolidated financial statement of Sohar International Bank.
maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly:
The following table shows a comparison of the Bank's allowances for credit losses on non-impaired financial assets (Stages 1 and
y Regulatory Caps – exposure limits to a person (including juristic person) and his connected parties has been set at 15% of the
2) under IFRS 9 as at December 31, 2020 based on the probability weightings of three scenarios with allowances for credit losses
Bank’s Net worth;
resulting from simulations of each scenario weighted at 100%.
y Net worth is the aggregate amount of assets less liabilities, which shall include assets and liabilities both within and outside the
Sultanate;
y Exposure to senior member in the management of the Window and any related parties shall not exceed 10% of the amount of ECL Impact on ECL
At 31 December 2020
RO'000 RO'000
the net worth of the Bank and aggregate of all such exposures shall not exceed 35% of the amount of the net worth.
Sensitivity of impairment estimates
Limits are not applicable to exposures fully secured by cash or cash equivalent (not subject to withdrawal from the Window) or ECL on non-impaired financing under IFRS9 2,429 -
are secured by guarantee of the financial institutions within or outside Sultanate of Oman or the Government of the Sultanate of Simulations
Oman. Upside case - %100 weighted 2,092 337
Base case - %100 weighted 2,371 58
Istisna Downside scenario - %100 weighted 2,964 (535)
followed by
Ijarah The following table contains an analysis of the deferred amount of principal outstanding and accrued profit pertinent to Islamic
muntahia Diminishing Due from Investment financing and related receivables of the customers, who have been provided with such benefits, and the related ECL:
Murabaha Ijarah bittamleek Musharka banks securities
As at 31 December 2020 RO'000 RO'000 RO'000 RO'000 RO'000 RO'000
Concentration by sector
RO’000 RO’000 RO’000 RO’000
Corporate 3,803 18,483 65,575 46,597 - 6,105
Deferred amount 7,110 4,111 30 11,251
Personal 11,710 67,001 25,659 17,694 - -
ECL on deferred amount 21 104 7 133
Sovereign - - - - - 16,735
Banks - - - - 12,028 - Carrying amount 7,089 4,007 23 11,118
15,513 85,484 91,233 64,291 12,028 22,840
Impact on the Capital Adequacy
Concentration by location Besides, the bank has also applied in its capital adequacy calculations the “Prudential filter” under interim adjustment arrangement
Middle East 15,513 85,484 91,233 64,291 10,311 22,840 for Stage-1 and Stage-2 ECL. The impact of above filter on the bank's regulatory capital is 41 bps.
Europe - - - - 64 -
Asia - - - - 1,653 - D2 Liquidity risk
Total 15,513 85,484 91,233 64,291 12,028 22,840 Liquidity risk is the risk that the Window will encounter difficulty in meeting its obligations associated with its financial liabilities that
are settled by delivering cash or another financial asset.
Istisna D2.1 Management of liquidity risk

followed by
Ijarah The Window’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
muntahia Diminishing Due from Investment liabilities when due, under both normal and stressed conditions without incurring unacceptable losses or risking damage to the
Murabaha Ijarah bittamleek Musharka banks securities Window’s reputation.
As at 31 December 2018 RO'000 RO'000 RO'000 RO'000 RO'000 RO'000
Concentration by sector Window’s central treasury receives information from other business units regarding the liquidity profile of their financial assets
Corporate 819 14,438 65,484 30,308 - 8,105 and liabilities and details of other projected cash flows arising from projected future business. Central treasury then maintains
Personal 12,547 56,659 19,769 11,961 - - a portfolio of short-term liquid assets, largely made up of short-term liquid investment securities, financing and advances and
Sovereign - - - - - 15,318 advances to banks and other inter-bank facilities, to ensure that sufficient liquidity is maintained within the Bank as a whole. The
Banks - - - - 5,284 - liquidity requirements of business units are met through short-term financing and advances from central treasury to cover any
short-term fluctuations and longer-term funding to address any structural liquidity requirements. The Window has also laid down
13,366 71,097 85,253 42,269 5,284 23,423 a comprehensive liquidity contingency plan for effective management of liquidity. In this process due care is taken to ensure that
the Window complies with all the CBO regulations.
Concentration by location All liquidity policies and procedures are subject to review and approved by Asset Liabilities Committee (ALCO). Computation of
Middle East 13,365 71,097 85,253 42,269 5,103 23,423 liquidity gap on maturity of assets and liabilities is provided. The computation has been prepared in accordance with guidelines
Europe - - - - 181 - provided by the regulator.
Asia - - - - - -
Total 13,366 71,097 85,253 42,269 5,284 23,423

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D2 Liquidity risk (continued) D2 Liquidity risk (continued)
D2.1 Management of liquidity risk (continued) D2.2 Exposure to liquidity risk (continued)
The lending ratio, which is the ratio of the total financings and advances to customer deposits and capital, is monitored on a Four One to More
daily basis in line with the regulatory guidelines. Internally the lending ratio is set at a more conservative basis than required by Carrying Within months to three than three
regulation. The Window also manages its liquidity risk on regular basis and by monitoring the liquid ratio which is a ratio of net liquid amount three months 12 months years years Total
assets to total assets on a monthly basis. For this purpose net liquid assets are considered as including cash and cash equivalents RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
and investment grade debt investments for which there is an active and liquid market. As at 31 December 2019
Wakala deposits 174,426 22,290 70,673 31,831 54,674 179,468
Customer deposit and other accounts 17,485 - - - 17,485 17,485
Details of the reported lending and liquid ratio as at 31 December 2020 were as follows: Other liabilities 2,223 - - - 2,223 2,223
194,134 22,290 70,673 31,831 74,382 199,176

31 December 2020
Lending ratio Liquid ratio
Average for the year 86.39% 15.32% Equity of Investment account holders 29,187 - - - 29,187 29,187
Maximum for the year 87.65% 17.63%
Minimum for the year 85.20% 12.34% 223,321 22,290 70,673 31,831 103,569 228,363
31 December 2019 The Window prepares a liquidity gap report to monitor the Window’s short term liquidity position on the Rial denominated assets
Lending ratio Liquid ratio
and liabilities in a time horizon spanning one month. The gap is adjusted for availability of instruments for repo or refinance and
also for unavailed committed lines of credit, if any. This statement of short term liquidity is to be reported to the ALCO every month.
Average for the year 85.52% 28%
Maximum for the year 86.08% 36% In addition to the above measures of liquidity, the window also monitors the Liquidity Coverage Ratio (LCR) and Net Stable
Minimum for the year 84.13% 21% Funding Ratio as per the regulator in line with Basel-III standards.
Bank also monitors the liquidity through Liquidity Coverage ratio (LCR) and Net Stable Funding Ratio (NSFR). Current levels of D3 Market risk
these ratios are given below:
Market risk is the exposure to loss resulting from the changes in the profit rates, foreign currency exchange rates, equity prices and
commodity prices. The objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimizing the return to risk.
LCR NSFR LCR NSFR
147.94% 128.63% 151.29% 102.86% D3.1 Market risk in financing products
The table below summarizes the maturity profile of the Window’s liabilities as on the reporting date based on contractual repayment Financing contracts mainly comprise ‘Murabaha receivables’ and ‘Ijara Muntahia Bittamleek’. Following are the financing related
arrangements. The contractual maturities of assets and liabilities have been determined on the basis of the remaining period at market risk:
the statement of financial position date to the contractual maturity date and do not take account of the effective maturities as
(i) Murabaha receivables
indicated by the Window’s deposit retention history and the availability of liquid funds.
In the case of an asset in possession for a Murabaha transaction and an asset acquired specifically for resale to a customer in a
D2.2 Exposure to liquidity risk non-binding Murabaha to the purchase ordered (MPO) transaction, the asset would be treated as inventory of the Window and is
subject to price risk.
Within Four One to More
Carrying three months to three than three
(ii) Ijara Muntahia Bittamleek (IMB)
amount months 12 months years years Total In the case of Non-binding Promise to lease an asset acquired and held for the purpose of either operating Ijarah or IMB. The asset
RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 would be treated as asset owned by the Window and is subject to price risk from its acquisition date until its disposal.
Wakala deposits 187,179 22,211 56,264 87,575 31,689 197,739 D3.2 Measurement of market risk
Due to Bank 9,625 9,625 9,625 The Window is mainly engaged in Currency forward (Wa’ad). Since the positions are taken mainly for customer transactions, the
Customer deposit and other accounts 41,514 41,584 34,724 33 16,626 92,967 complexity is further reduced. In view of above, the Window measures and controls the risk by using a limit framework. As and
Other liabilities 1,922 1,922 - - - 1,922 when the Window enters into more complex derivatives, it will have more sophisticated models and techniques to measure market
risk, supported by a suitable mechanism.
240,240 75,342 90,988 87,608 48,315 302,253
D3.3 Management of market risks
Equity of Investment account holders 42,883 3,476 5,219 8,690 25,498 42,883 The Window separates its exposure to market risk between trading and non-trading portfolios. Trading portfolios include all
positions arising from market making and proprietary position taking, together with financial assets and liabilities that are managed
283,123 78,818 96,207 96,298 73,813 345,136 on a fair value basis.
All foreign exchange risk within the Window is transferred by Central Treasury to the trading book. Accordingly, the foreign
exchange position is treated as a part of the Window’s trading portfolio for risk management purposes. Foreign currency risk is
monitored and managed by the Window by establishment of Middle Office to monitor the market risk, and the risk is managed by
putting in place Policy, and implementing limit framework, reporting tools like Currency Position Report, Risk Analysis of Currency
Position, Breach Analysis Report, and Dealer Limit Breach report.
Overall authority for market risk is vested in ALCO. The risk management function is responsible for development of detailed risk
management policies (subject to approval by ALCO and Risk Management Committee of the Board). The Policy is periodically
reviewed to keep it up to date with the market developments.

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D3 Market risk (continued) D3 Market risk (continued)
D3.4 Exposure to profit rate risk D3.5 Exposure to profit rate risk – non trading portfolios
Profit rate risk is the potential impact of the mismatch between the rate of return on assets and the expected rate of funding due The Window’s profit sensitivity position based on contractual re-pricing arrangements at 31 December 2020 was as follows:
to the sources of finance. Senior management identifies the sources of profit rate risk exposures based upon the current as well
as forecasted balance sheet structure of Window. The profit rate risk in the Window may arise due to the following transactions: Non-
Effective Within three Four months Over one sensitive to
y Murabaha transactions; annual months to 12 months year profit rate Total
y Wakala transactions; Profit Rate % RO’000 RO’000 RO’000 RO’000 RO’000
y Isitisna followed by Ijara Muntahia Bittamleek; As at 31 December 2020
y Ijara Muntahia Bittamleek;
Assets
y Sukuk; and
Cash and balances with Central Bank - - - 18,439 18,439
Window’s management believes that the Window is not exposed to material profit rate risk as the re-pricing of assets, liabilities Due from banks and financial institutions 1.7 11,653 - - 375 12,028
and equity of investment accountholders occur at similar intervals. The profit distribution to equity of investment accountholders
Murabaha receivables 5.90 - - - 15,512 15,512
is based on profit sharing agreements. Therefore, Window is not subject to any significant profit rate risk.
Ijarah muntahia bittamleek 5.37 66,484 17,258 1,742 - 85,484
(i) Sources of Profit Rate Risk Istisna followed by Ijarah muntahia bittamleek 5.53 84,266 6,558 409 - 91,233
Diminishing Musharka 5.73 45,232 18,827 232 - 64,291
The different profit rate risks faced by the Window can be classified broadly into the following categories:
Investment securities 6.51 - - - 22,840 22,840
y Re-pricing risk which arises from timing differences in the maturity (for fixed rate) and re-pricing (for floating rate) of assets, Fixed assets - - - 871 871
liabilities and off balance sheet positions. As profit rates vary, these re-pricing mismatches expose Window’s income and
Other assets - - - 5,845 5,845
underlying economic value to unanticipated fluctuations;
y Yield curve risk which arises when unanticipated shifts of the yield curve have adverse effects on Window’s income and/or
Total assets 207,635 42,643 2,383 63,882 316,543
underlying economic value;
y Basis risk which arises from imperfect correlation in the adjustment in the rate earned on products priced and the rate paid on Liabilities and equity
different instruments with otherwise similar re-pricing characteristics. When profit rates change, these differences can give rise
Wakala deposits 3.9 3,704 28,492 103,527 51,456 187,179
to unexpected changes in the cash flows and earnings spread between assets, liabilities, and off balance sheet instruments of
similar maturities or re-pricing frequencies; and Customer current accounts 1.93 9,626 - - - 9,626
y Displaced Commercial Risk refers to the market pressure to pay returns that exceeds the rate that has been earned on the Due to Banks - - - 41,514 41,514
assets financed by the liabilities, when the return on assets is under performing as compared to competitor’s rates. Other liabilities - - - 1,922 1,922
(ii) Profit rate risk strategy Total liabilities 13,330 28,492 103,527 94,892 240,241
Profit rate risk arises from the possibility that changes in profit rates will affect future profitability or the fair values of financial
Equity of Investment account holders 2.27 42,883 - - - 42,883
instruments. The window is exposed to profit rate risk as a result of mismatches or gaps in the amounts of assets and liabilities and
off-balance sheet instruments that mature or re-price in a given period. The window manages this risk through risk management Total liabilities and equity of Unrestricted
Investment Account (URIA) 56,213 28,492 103,527 94,892 283,123
strategies.
The effective profit rate (effective yield) of a monetary financial instrument is the rate that, when used in a present value calculation, Total profit rate sensitivity gap 151,422 14,151 (78,304) (53,850) -
results in the carrying amount of the instrument. The rate is a historical rate for a fixed rate instrument carried at amortized cost and
a current rate for a floating rate instrument or an instrument carried at fair value. Cumulative profit rate sensitivity gap 151,423 165,573 87,269 33,419 -
(iii) Profit rate risk measurement tools
Window monitors Re-pricing gap analysis which measures the arithmetic difference between the profit-sensitive assets and
liabilities of book in absolute terms.
(iv) Profit rate risk monitoring and reporting
Window has implemented information systems for monitoring, controlling and reporting profit rate risk. Reports are provided on a
timely basis to Executive Committee and the Board of Directors of the head office.
The Risk and Compliance Unit monitors these limits regularly. They reviews the results of gap limits and exceptions, if any, and
recommends corrective action to be taken which is approved by ALCO or Executive Committee, according to authority parameters
approved by the Board.

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D3 Market risk (continued) D3 Market risk (continued)
D3.5 Exposure to profit rate risk – non-trading portfolios (continued) D 3.6 Currency risk
Non-
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Board
Effective Within three Four months sensitive to has set limits on the overall open position and for open position for each currency. The open position limits include overnight open
annual months to 12 months Over one year profit rate Total position and intraday open position. Open positions are monitored on a daily basis and hedging strategies used to ensure positions
Profit Rate % RO’000 RO’000 RO’000 RO’000 RO’000 are maintained within established limits. The Window had the following net exposures denominated in foreign currencies:
31 December 2020
Assets
Assets Liabilities & URIA Net assets
Cash and balances with Central Bank - - - 11,990 11,990
Rial Omani 238,209 187,866 50,343
Due from banks and financial institutions 3.1 5,284 - - - 5,284
United States Dollar 75,832 48,242 27,590
Murabaha receivables 5.73 - - - 13,366 13,366
Euro 121 2,242 2,121
Ijarah muntahia bittamleek 5.25 70,134 963 - - 71,097
UAE Dirhams - - -
Istisna followed by Ijarah muntahia bittamleek 5.71 73,525 11,728 - - 85,253
Pound Sterling 7 - 7
Diminishing Musharka 5.46 40,731 1,538 - - 42,269
Japanese Yen 2,374 1,890 484
Investment securities 5.6 - - - 23,423 23,423
Fixed assets - - - 1,095 1,095
Other assets - - - 3,534 3,534 31 December2019
Assets Liabilities & URIA Net assets
Total assets 189,674 14,229 - 53,408 257,311
Rial Omani 183,046 138,027 45,019
United States Dollar 73,844 55,936 17,908
Euro 30 166 136
Wakala deposits 3.8 12,694 72,319 33,522 55,891 174,426
UAE Dirhams 390 4 386
Customer current accounts - - - 17,485 17,485
Pound Sterling - - -
Other liabilities - - - 2,223 2,223
The Window takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial
Total liabilities 12,694 72,319 33,522 75,599 194,134 position and cash flows. The Board sets limits on the level of exposure by currency and in aggregate for both overnight and intra-
day positions, which are monitored daily.
Equity of Investment account holders 1.27 29,187 - - - 29,187
Changes in the non-parity foreign currency prices as at 31 December 2020 and 2019 on net assets are considered negligible.
Total liabilities and equity of Unrestricted
41,881 72,319 33,522 75,599 223,321
Investment Account (URIA) D4 Displaced commercial risk
Total profit rate sensitivity gap 147,793 (58,090) (33,522) (22,191) - Displaced commercial risk (“DCR”) refers to the magnitude of risks that are transferred to shareholders in order to cushion the
Investment Account Holder (“IAH”) from bearing some or all of the risks to which they are contractually exposed in Mudaraba
Cumulative profit rate sensitivity gap 147,793 89,703 56,181 33,990 - contracts.
Under a Mudaraba (profit sharing and loss-bearing) contract, unrestricted IAH are exposed to aggregate impact of risks arising
from the assets in which their funds are invested, but this is managed by Sohar Islamic Window through DCR.
This risk-sharing is achieved by constituting and using various reserves such as PER, and by adjusting the Sohar Islamic Window's
profit share in order to smooth the returns payable to the IAH from exposure to the volatility of aggregate returns arising from
banking risks, and thereby to enable payment of returns that are competitive in the marketplace.
Sohar Islamic Window manages its displaced commercial risk as outlined in its Profit Distribution Policy. The Window foregoes
its fee in case displaced commercial risk arises. The Window manages profit rates with other Islamic Windows and full-fledged
Islamic/Conventional Banks operating in Oman.
D5 Capital management
D5.1 Regulatory capital

The Window’s lead regulator, Central Bank of Oman, sets and monitors capital requirements for the Window as a whole. In
implementing current capital requirements Central Bank of Oman requires the Window to maintain a prescribed ratio of total
capital to total risk-weighted assets. The Window calculates capital requirements for market risk and operational risk based upon
the model prescribed by Central Bank of Oman as follows:
y Sovereign entities – Nil for Oman;

y Window’s – Risk weighting based upon ratings by external credit assessment institutions as approved by CBO;
y Retail and Corporate financings - As per credit conversion factors and risk weightage prescribed by CBO;
y Off balance sheet items – As per credit conversion factors and risk weightage prescribed by CBO.

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D5 Capital management (continued) D6 Segmental information
D5.1 Regulatory capital (continued) The activities of the Window are performed as one unit. Reporting to management is made by business unit. The Window operates
solely in the Sultanate of Oman and as such no geographical segment information is presented.
The Window’s regulatory capital is analysed into three tiers:
D7 Other disclosures
y Tier 1 capital, which includes allocated capital and reserves, retained earnings and intangible assets, and other regulatory
adjustments relating to items that are included in equity but are treated differently for capital adequacy purposes. Following are the disclosures required under Islamic Banking Regulatory Framework:
y Tier 2 capital, which includes qualifying collective impairment allowances. y There has been no comingling of the funds;
y As of 31 December 2020, and amount of RO 580 thousands is payable to head office;
Various limits are applied to elements of the capital base. The amount of innovative tier 1 investments cannot exceed 15 percent y During the year head office has allocated RO 1,962 thousands (2019: RO 1,395 thousands) cost for shared services;
of total tier 1 capital; qualifying tier 2 capital cannot exceed tier 1 capital; and qualifying term subordinated financing and advances y There has been no amount transferred to Charity fund during the year.
capital may not exceed 50 percent of tier 1 capital. There are also restrictions on the amount of collective impairment allowances,
PER and IRR that may be included as part of tier 2 capital. Other deductions from capital include the carrying amounts of
investments in subsidiaries that are not included in the regulatory consolidation, investments in the capital of Windows and certain Proposed remuneration and sitting fee of SSB board is as follows:
other regulatory items.
RO
Window’s operations are categorized as either trading book or banking book, and risk-weighted assets are determined according
Name Remuneration Sitting Fee Total
to specified requirements that seek to reflect the varying levels of risk attached to assets and off-balance sheet exposures. There
is no availability of data for previous three years as required under basic indicator approach for computation of capital charge for Dr. Hussain Hamed Hassan 7,700 - 7,700
operational risk. The Window’s policy is to maintain a strong capital base. Dr. Mudassir Siddiqui 11,550 1,540 13,090
Sheikh Azzan bin Nasir Farfoor Al Amri 15,400 1,540 16,940
The international standard for measuring capital adequacy is the risk asset ratio, which relates capital to balance sheet assets and Sheikh Fahad Mohamed Hilal Al Khalili 7,700 1,540 9,240
off balance sheet exposures weighted according to broad categories of risk. Sheikh Al Muatasim Said Al Maawali 3,850 770 4,620
The risk asset ratio calculated in accordance with the capital adequacy guidelines of the Window for International Settlement is 46,200 5,390 51,590
as follows:
* Dr. Hussein Hammad resigned from Shari'ah Supervisory Board his last day was on 15th June 2020. Paid remuneration for the
31 December 31 December period until 15th Jun 2020.
2020 2019
RO’000 RO’000 ** Sheikh Al Muatasim Al Maawali was appointed on the 15th June 2020 as a Shari'ah Supervisory Board Member.
Tier 1 capital
Assigned capital 30,000 30,000 D8 Comparative figures
Legal reserve 134 134
General reserve 988 988 Certain comparative figures for 2019 have been reclassified in order to conform to the presentation for the current period. Such
Retained earnings 2,882 2,266 reclassifications do not affect previously reported net profit or shareholders’ equity.
Fair value losses (1,056) -
Total 32,948 33,388
Tier 2 capital
Impairment allowance on portfolio basis 1,498 1,510
Total regulatory capital 34,446 34,898
Risk weighted assets

Window credit and market risk 264,059 211,118
Operational risk 12,056 10,684
Total risk weighted assets 276,115 221,802
Capital adequacy ratio

Total regulatory capital expressed as a percentage of total risk weighted assets 12.48% 15.73%
Total tier 1 capital expressed as a percentage of total risk weighted assets 11.93% 15.05%
The capital adequacy ratio given above is calculated in accordance with the Basel II norms as adopted by Central Bank of Oman
and IBRF.

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REGULATORY
DISCLOSURES
SOHAR ISLAMIC
Propelling business
with a firm approach

REGULATORY DISCLOSURES UNDER BASEL II & BASEL III FRAMEWORK & IBRF
1. INTRODUCTION
Sohar International Bank SAOG (the head office) under an Islamic Banking License issued by the Central Bank of Oman (CBO)
on 30 April 2013, carries out Islamic banking operations and other financial trading activities in accordance with Islamic Shari'ah
rules and regulations under the name of “Sohar Islamic” (the Window). A separate set of financial statements is included in the
consolidated financial statements of the Bank.
The following disclosures are being made in accordance with the Islamic Banking Regulatory Framework (IBRF) issued by Central
Bank of Oman (CBO). These disclosures aim to provide market participants material qualitative and quantitative information
about Sohar Islamic Window risk exposures, risk management strategies and processes of capital adequacy. The Window has not
operated as a separate legal entity.
There is no restriction on transfer of funds between the Window and the Bank. However, as per the guidelines contained in Islamic
Banking Regulatory Framework (IBRF), Window is not permitted to place funds with the Bank.
2. CAPITAL STRUCTURE & UN RESTRICTED INVESTMENT ACCOUNT HOLDER

As required under clauses 3.5.1.2 and 3.5.1.3 of Title 1,’Licensing Requirements’ of Islamic Banking Regulatory Framework (IBRF)
issued by CBO, the head office assigned RO 30 million to the Window as assigned capital.
As per IBRF windows has to keep minimum RO 10 million as assigned capital.
31 December
2020
RO’000
Tier 1 capital
Assigned capital 30,000
Legal reserve 134
General reserve 988
Retained earnings 2,882
Fair value loss (1,056)
Total 32,948
Tier 2 capital
Impairment allowance on portfolio basis 1,498
Total 34,446
Total regulatory capital 34,446
Equity of Investment account holder 42,883
Window has not maintained any Profit Equalization and Investment risk reserve.
3. CAPITAL ADEQUACY
The Window’s capital adequacy ratio is calculated according to guidelines set by the CBO guidelines. It stipulates that the license
should maintain a minimum capital adequacy ratio of 11%.
The Window’s lead regulator, Central Bank of Oman, sets and monitors capital requirements for the Window as a whole.
As required under clauses 3.5.1.2 and 3.5.1.3 of Title 1, ’Licensing Requirements’ of Islamic Banking Regulatory Framework (IBRF)
issued by CBO, the head office has allocated RO 30 million to the Window as assigned capital.
The Bank has an Internal Capital Adequacy Assessment Process (ICAAP) through which senior management assesses the Bank’s
capital against its risk profile. Asset Liability Committee (ALCO) is the forum in which the capital adequacy is assessed, based on
the business forecast and the risk profile envisaged.

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REGULATORY DISCLOSURES UNDER BASEL II & BASEL III FRAMEWORK & IBRF REGULATORY DISCLOSURES UNDER BASEL II & BASEL III FRAMEWORK & IBRF
3. CAPITAL ADEQUACY (CONTINUED) 3. CAPITAL ADEQUACY (CONTINUED)
Total and Tier 1 Capital Ratio, Risk Weighted Assets RO ’000 The net exposure after risk mitigation subject to Standardized approach is as follows:
Gross Net Risk
Balances Balances Weighted RO’ 000
S. No. Details (Book Value) (Book Value)* Assets RWAs -
1 On-balance sheet items 318,029 316,543 232,732 Standardized
Exposure Approach
2 Off-balance sheet items 35,814 35,814 26,027
Sovereign - carrying 0% 32,442 -
3 Derivatives - - -
Banks
4 Total for Credit Risk 352,357 258,759 carrying 20% 10,000 2,000
5 Risk Weighted Asset for Market Risk - 5,300 carrying 50% 2,027 1,014
6 Risk Weighted Asset for Operations Risk 12,056 Corporate
Carrying 75% 11,137 8,353
7 Total Risk Weighted Assets 352,357 276,115
Carrying 100% 6,714 6,714
Retail - carrying 100% 33,361 33,361
8 Tier 1 Capital 32,948
Claims secured by residential property- carrying 35% 59,009 20,653
9 Tier 2 Capital 1,498
Claims secured by residential property- carrying 100% 33,473 33,473
10 Tier 3 Capital -
Claims secured by commercial property -carrying 100% 119,284 119,284
Non-Performing loans carrying 100% 727 727
11 Total Regulatory Capital 34,446
Other Assets - carrying 0% 2,697 -
11.1 Capital requirement for credit risk 28,463 Other Assets - carrying 100% 7,153 7,153
11.2 Capital requirement for market risk 583
Total On Balance Sheet 318,029 232,737
11.3 Capital requirement for operational risk 1,326
Off-balance Sheet Items

12 Total required capital 30,372
carrying 50% 7,442 3,698
13 Tier 1 Ratio 11.93% carrying 100% 28,372 22,329
14 Total Capital Ratio 12.48%
Total Off-balance Sheet Items 35,814 26,027
* Net of provisions
Disclosure of Capital Requirements according to different risk categories for each Shari’ah compliant financing contract. Total Banking Book 353,838 258,759
RO’ 000 4. DISCLOSURE FOR INVESTMENT ACCOUNT HOLDERS (IAH)

Risk weighted Capital
Assets Requirements Investment account holder (depositors) engage in funding of window activities on a profit and loss-bearing basis as Rabb al-Mal
Murabaha receivables 14,776 1,625 (investor) under a Mudaraba contract. The underlying Mudaraba contract that governs the relationship between the account
holders and the Licensee.
Ijarah muntahia bittamleek 60,360 6,640
Istisna followed by Ijarah muntahia bittamleek 77,653 8,542 Window has only Unrestricted Investment account holders.
4.1 Unrestricted Investment Account holder
Placements with banks 3,014 331
Investments 5,931 652 Equity of Investment account holder under Mudaraba, Mudaraba is a form of partnership in which two or more persons establish a
Others 7,153 787 business (Shirkat ul Aqd) for sharing in the profits, in an agreed proportion and one or more of the partner(s) contribute with their
efforts while the other partner(s) provide the financial resources. The former is/are called “Mudarib” and the latter “Rabbul Maal”.
Off Balance sheet 26,027 2,863
258,759 28,463 4.2 Rules and Structure of Mudaraba and Shari’ah essentials
Of above Risk weighted assets funded by the URIA 33,098 3,641
1. Mudaraba means an arrangement in which a person participates with his money (called Rabbul Maal) and another with his
Assets funded by the URIA are treated at par for all other assets for calculation of capital adequacy. efforts (called Mudarib) for sharing in profit from investment of these funds in an agreed manner.
2. A Mudarib may be a natural person, a group of persons, or a legal entity and a corporate body.
3. Rabbul Maal shall provide his investment in money or species, other than receivables, at a mutually agreed valuation. Such
investment shall be placed under the absolute disposal of the Mudarib.
4. The conduct of business of Mudaraba shall be carried out exclusively by the Mudarib within the framework of mandate
given in the Mudaraba agreement.
5. The profit shall be divided in strict proportion agreed at the time of contract and no party shall be entitled to a predetermined
amount of return or remuneration.
6. Financial losses of the Mudaraba shall be borne solely by the Rabbul Maal, unless it is proved that the Mudarib has been
guilty of fraud, negligence or willful misconduct or has acted in contravention of the mandate.
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4 DISCLOSURE FOR INVESTMENT ACCOUNT HOLDERS (IAH) (CONTINUED) 4 DISCLOSURE FOR INVESTMENT ACCOUNT HOLDERS (IAH) (CONTINUED)
4.3 Profit Distribution Mechanism between Shareholders & Depositors of Sohar Islamic under the Common Pool 4.4 Quantitative Disclosures (continued)
This profit distribution mechanism sets out the Shari'ah-compliant mechanism for distribution of the Net Profit Shareholders Close of the year the amount of unrestricted investment account holder with respective category was:
Funds and Depositors Funds, combined together in the Common Pool will be called Joint Mudaraba capital (“Joint Mudaraba
Capital”). Amount % of total
Net profit will be calculated in accordance with the following formula: Product RO‘000 URIA
N=G-(E+D+P) Saving-OMR 42,783 99.77%
Where:
Saving-AED - 0.00%
‘N’ means Net Profit
‘G’ means Gross Profit Saving-USD 81 0.19%
‘E’ means direct expenses in relation to the Activities (“Direct Expenses”) Saving-GBP 14 0.03%
‘D’ means depreciation of the investment assets (“Investment Assets”) in the Common Pool Term 12 Months 5 0.01%
‘P’ means Provisions for bad and doubtful accounts
TOTAL 42,883 100%
During the year no expense and provision has been allocated to the pool.
Term deposits are deposits can be withdrawn with no loss of capital subject to certain conditions.
Unrestricted investment account holder accounts are monies invested by customers under Mudaraba to form a pool of funds.
Return on Assets & URIA:
Investment accountholder’s funds are commingled with the Windows’s funds for investment, no priority is granted to any party for
the purpose of investments and distribution of profits.
RO’ 000
Net Profit will be allocated to the pool participants based on the weighted average balances. 2020 2019 2018 2017 2016
Income on Mudaraba Assets 3,951 3,125 2,252 1,992 1,630
Participation factor, Weights or profit sharing ratios are pre decided by the management of the window and are intimated to the
investors before start of the month. Weighted average balance is calculated at the end of the period by multiplying the participation Income distributed to URIA 842 771 744 392 400
factor with average balance for the period.
Return on Average Modarba Assets 4.31% 4.02% 4.16% 4.40% 4.49%
4.3.1 Modarba fee Return on Average URIA 1.96% 2.64% 1.82% 1.14% 1.31%
Modarba fee will be deducted from allocated profit as per the pre-agreed ratio as approved by SSB which will be advised to
customers through website or by posting in branches. Currently it is being fixed as: Assets allocated to common pool are:
Window- 45% Depositors - 55% RO’ 000
During the year there was no change in ratios from SSB of the window. The window can create reserves as allowed by Shari'ah and Gross Net
exposure ECL Exposure
CBO for smoothing of returns to investors and risk management purposes. Two types of reserves allowed are Profit Equalization
reserve (PER) and Investment Risk reserve (IRR). Window is not maintaining any reserves. Ijarah muntahia bittamleek 66,547 1,247 65,300
Diminishing Musharka - - -
4.3.2 Assignment of a portion of shareholders’ profit to depositors Istisna followed by Ijarah muntahia bittamleek 25,130 49 25,081
If required, the Window may decide to allocate some portion from their own profit to a specific deposit category(s). This could be
either due to increase in the rate of profit announced by other Islamic Financial Institutions/competitors or to encourage a specific Total 91,677 1,296 90,381
category of depositors.
Ratio of Equity of unrestricted Investment account holder to jointly finance assets.
No Profit Equalisation reserve and investment risk reserve has been created during the year and no allocation has been made from
shareholders. As of reporting date assets allocated to the pool has been financed 46.78% by Equity of unrestricted Investment accounts holder.
Window has not charged any administrative expense to the pool. Window has earned gross return of 7.86% on average equity in pool assets during the year.
4.4 Quantitative Disclosures The Window does not have restriction on Investment in URIA pool except if any imposed by the CBO and limits set in window’s
policy.
During the year profit calculated is distributed among the participation factor declared before each profit calculation period.
During the year participation factor range applied and range of range of rate earned are as below: The Window does not have any Restricted Investment Accounts.
Product Participation factor Average rate earned 5. RISK EXPOSURE AND ASSESSMENT
Saving-OMR 30 1.35%
5.1 Management of risk in Sohar Islamic - approach and policy
Saving-AED 15 0.67%
Saving-USD 15 0.67% The risk management philosophy of Window is to identify, capture, monitor and manage the various dimensions of risk with the
objective of protecting asset values and income streams such that the profit of head office (and others to whom Sohar Islamic owes
Saving-GBP 15 0.00%
a liability) are safeguarded, while maximizing the returns intended to optimize head office return and maintaining its risk exposure
Term 6 Month 60 0.00% within self-imposed parameters.
Term 12 Months 60 2.70%
Sohar Islamic is offering to Corporate and SME customers in Phase One of its operations, products like Term Financing, Working
Capital Financing, Short-term Financing, Corporate Deposits, Trade Finance, Cash Management Services and Treasury products.
Based on assessment of respective credit risk, security of short-term assets, plant, machinery and real estate is taken to strengthen
the quality of its exposure. Sohar Islamic is guided by CBO regulatory requirements to single maximum exposure and has further
controls over exposure to senior management staff members or related parties.

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Sohar Islamic approves credit based on the delegation of authorities by the Board of Directors to various approving authorties 5.4 Total gross credit risk exposures, plus average gross exposure over the period broken down by major types of
In Consumer Finance, policy is guided by the objectives of granting finance on sound and collectible basis, investing funds for credit exposure
the benefit of shareholders and protection of depositors and to serve the legitimate needs of communities in line with Shari'ah’
guidelines as approved by the Shari'ah’ Supervisory Board. 31 December 2020
Risk Management process is guided by risk diversification and avoidance of concentration of risk. Further, Business Risk Review Average gross Total gross
is the mainstay of internal control of financing portfolio. Periodic Asset Quality Reviews, Shari'ah’ Reviews, Process Reviews, exposure exposure
Administrative and Documentation Reviews and Compliance Reviews are performed for both business and senior management. S. No. Type of credit exposure RO’000 %
1 Murabaha receivables 14,662 15,717 5.55%
Currently, Consumer Finance products are limited to Vehicle and House Financing only. Financing and advances are approved
through Approval Matrix defining specific limits for designated officials and the Executive Credit Committee. 2 Ijarah muntahia bittamleek 79,664 86,938 30.70%
3 Istisna followed by Ijarah muntahia bittamleek 88,521 91,501 32.31%
The Board of Directors of the parent Bank has the power to approve all policy issues relating to credit and risk. It has constituted the 4 Diminishing Musharka 54,457 65,272 23.05%
Credit Approval Committee (CAC) and granted the highest credit approving authority in the Bank up to the maximum regulatory
limits. 5 Debt-type investments 23,313 23,747 8.39%
5.2 Strategies, Processes and Internal Controls Total 260,435 283,176 100%
Comprehensive Risk Management Policy Framework is approved by the Board of parent bank. These are also supported by
Percentage of financing for each category of counterparty to gross financing.
appropriate limit structures. These policies provide an enterprise-wide integrated risk management framework in the Bank, which
are also applicable to Sohar Islamic. Limit imposed on type of assets are as per CBO requirements and bank policies.
31 December 2020
Sohar Islamic is exposed to various types of risk, such as market, credit, profit rate, liquidity and operational, all of which require RO’000 %
comprehensive controls and ongoing oversight. The risk management framework summarizes the spirit behind Basel II, which Corporate 136,997 52.81%
includes management oversight and control, risk culture and ownership, risk recognition and assessment, control activities and
Retail 122,431 47.19%
segregation of duties, adequate information and communication channels, monitoring risk management activities and correcting
deficiencies.
Total 259,428 100.00%
5.3 Credit risk
Sohar Islamic manages its credit risk exposure by evaluating each new product/activity with respect to the credit risk introduced 5.4.1 Geographic distribution of gross exposures, broken down in significant areas by major type of credit
by it. Limit structures are monitored to avoid concentration of risks for counterparty, sector and geography. exposure
Other GCC
Istisna
Oman countries Total
followed Wakala
S. No. Type of credit exposure RO ’000 RO ’000 RO ’000
Ijarah by Ijarah placements
Murabaha muntahia muntahia Diminishing & balance Debt type 1 Murabaha receivables 15,717 - 15,717
receivables bittamleek bittamleek Musharka with banks securities Total 2 Ijarah muntahia bittamleek 85,975 963 86,938
As at 31 December 2020 RO'000 RO'000 RO'000 RO'000 RO'000 RO'000 RO'000
3 Istisna followed by Ijarah muntahia bittamleek 91,501 - 91,501
Neither past due not 15,045 81,494 75,644 47,081 12,028 23,747 255,040
impaired 4 Diminishing Musharka 65,272 - 65,272
past due but not impaired 404 3,919 15,631 18,015 - - 37,969 5 Debt-type investments 23,747 - 23,747
past due and impaired 268 1,525 226 176 - - 2,195
Total 282,213 963 283,176
Total 15,717 86,938 91,501 65,272 12,028 23,747 295,204
5.4.2 Industry or counterparty type distribution of gross exposures, broken down by major types of Credit exposure
Definitions of past due and impaired
Istisna
The classification of credit exposures is considered by the Window for identifying impaired credit facilities, as per CBO circular followed
number BM 977 dated 25 September 2004 Ijarah by Ijarah Off-balance
Murabaha muntahia muntahia Diminishing Debt-type sheet
receivables bittamleek bittamleek Musharka investments Total exposure
S. No. Economic sector RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000
1 Import trade 1,926 - - 367 - 2,294 3,281
2 Construction - 7,888 55,474 30,626 6,971 100,959 24,076
3 Manufacturing - - 9,399 - - 9,399 2,569
4 Service 2,005 10,924 921 16,583 - 30,433 2,059
5 Personal financing 11,786 67,163 25,707 17,695 - 122,351 -
6 Government - - - - 16,776 16,776 -
7 Non resident - 963 - - - 963 -
Total 15,717 86,938 91,501 65,272 23,747 283,176 31,985

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5.4 Total gross credit risk exposures, plus average gross exposure over the period broken down by major types of 5.4 Total gross credit risk exposures, plus average gross exposure over the period broken down by major types of
credit exposure (continued) credit exposure (continued)
5.4.3 Residual contractual maturity breakdown of the whole portfolio, broken down by major types of gross credit 5.4.6 Credit risk: Disclosures for portfolios subject to the standardised approach
exposures
5.4.6.1 Qualitative disclosures: For portfolios under standardized approach
Istisna The window is following standardised approach in assessing regulatory capital for credit risk. For sovereign risk, zero risk weight
followed
is applied, as permitted under this approach, whereas for exposures on banks, the risk weight applied depends on the rating of
Ijarah by Ijarah Off-balance
Murabaha muntahia muntahia Diminishing Debt-type sheet the banks by Eligible Credit Assessment Institution (ECAI) approved by CBO like, Moody’s Standard & Poor, Fitch and Capital
receivables bittamleek bittamleek Musharka investments Total exposure Intelligence, subject to the respective country rating. In the absence of external ratings for most of the corporate, the Bank treats
S. No. Time band RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 RO ’000 them as unrated and applies 100% risk weight on their funded exposures. On the off-balance sheet exposures, the relevant credit
1 upto 1 month 319 285 96 97 - 797 84 conversion factors are applied and aggregated to banks or the corporate, as the case may be, and then the risk weight is applied
as stated above. Unavailed or yet to be disbursed exposures are taken under commitments and risk weights assigned as permitted
2 1 - 3 months 601 895 193 314 - 2,003 4,175
by the IBRF.
3 3 - 6 months 1,586 829 504 398 - 3,317 1,466
4 6 - 9 months 2,437 913 692 547 - 4,589 3,779 5.4.6.2 Quantitative disclosures
5 9 - 12 months 888 1,513 1,178 2,810 - 6,388 326
Credit rating analysis
6 1 - 3 years 5,293 9,628 10,980 7,004 6,971 39,876 17,592
7 3 - 5 years 2,503 9,929 13,496 7,782 16,776 50,487 4,129 The table below presents an analysis of debt securities, treasury bills, gross placements and other eligible bills by rating agency
designation at 31 December 2020, based on Moody’s ratings or equivalent.
8 Over 5 years 2,090 62,946 64,362 46,320 - 175,718 433
Total 15,717 86,938 91,501 65,272 23,747 283,176 31,985 31 December

2020
RO ’000
5. 4.4 Amount of impaired financing and advances and, if available, past due financing and advances provided Aaa to Aa3 327
separately broken down by significant geographic areas including, if practical, the amounts of specific and Baa1 to Baa3 1,700
general allowances related to each geographical area. Ba1 to Ba3 10,000
Caa1 to Caa3 6,971
RO ’000
Sovereign 16,776
Gross exposures Provisions held
Advances Total 35,774
Provision written off
Gross Reserve made during during the
S. No. Countries financing Stage 3 Stage 1 & 2 Stage 3 Profit the year year The Window performs an independent assessment based on quantitative and qualitative factors in cases where a counterparty is
1 Oman 258,465 1,131 1,369 341 54 365 - unrated.
2 Other GCC 963 1,073 71 962 111 - -
The Window is following a uniform approach of considering all corporates as unrated and applying 100% risk weights.
Total 259,428 2,204 1,440 1,303 165 365 - 5.4.6.3 Credit risk mitigation: Disclosure for standardized approach
The Window does not make use of netting whether on or off-balance sheet.
5. 4.5 Movements of gross financing and advances
5.5 Profit rate risk in banking book
RO ’000
Details Stage 1 Stage 2 Stage 3 Total Profit rate risk is the potential impact of the mismatch between the rate of return on assets and the expected rate of funding due
to the sources of finance. Senior management identifies the sources of profit rate risk exposures based upon the current as well
Opening Balance 206,773 6,597 1,808 215,178
as forecasted balance sheet structure of Window. The profit rate risk in the Window may arise due to the following transactions:
Migration / changes (+ / -) (32,501) 31,854 647 -
New Financing 55,697 414 - 56,111 y Murabaha transactions;
y Wakala transactions;
Recovery of Financing 9,844 1,766 251 11,861
y Ijara Muntahia Bittamleek;
Financing written off - - - - y Diminishing Musharka;
Closing Balance 220,125 37,099 2,204 259,428 y Sukuk; and
Total ECL 311 1,129 1,303 2,743 y Investments.
Reserve Interest 165 165 Window management believe that the Window is not exposed to material profit rate risk as a result of mismatches of profit rate re-
pricing of assets, liabilities and equity of investment account holders as the re-pricing of assets, liabilities and equity of investment
account holders occur at similar intervals. The profit distribution to equity of investment account holders is based on profit sharing
agreements. Therefore, Window is not subject to any significant profit rate risk.

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5.5 Profit rate risk in banking book (continued) 5.5 Profit rate risk in banking book (continued)
5.5.1 Sources of Profit Rate Risk 5.5.5 Exposure to profit rate risk – non-trading portfolios
The different profit rate risks faced by the Window can be classified broadly into the following categories: The Window’s profit sensitivity position based on contractual re-pricing arrangements at 31 December 2020 was as follows:
y Re-pricing risk which arises from timing differences in the maturity (for fixed rate) and re-pricing (for floating rate) of assets, Effective Within Four Non-
liabilities and off balance sheet positions. As profit rates vary, these re-pricing mismatches expose Window’s income and annual three months to Over one sensitive to
underlying economic value to unanticipated fluctuations; Profit Rate months 12 months year profit rate Total
% RO’000 RO’000 RO’000 RO’000 RO’000
y Yield curve risk which arises when unanticipated shifts of the yield curve have adverse effects on Window’s income and/or
underlying economic value;
Assets
y Basis risk which arises from imperfect correlation in the adjustment in the rate earned on products priced and the rate paid on Cash and balances with central bank - - - 18,439 18,439
different instruments with otherwise similar re-pricing characteristics. When profit rates change, these differences can give rise
Due from banks and financial institutions 1.7 11,653 - - 375 12,028
to unexpected changes in the cash flows and earnings spread between assets, liabilities, and off balance sheet instruments of
similar maturities or re-pricing frequencies; and Murabaha receivables 5.90 - - - 15,512 15,512
Ijarah muntahia bittamleek 5.37 66,484 17,258 1,742 - 85,484
y Displaced Commercial Risk refers to the market pressure to pay returns that exceeds the rate that has been earned on the
Istisna followed by Ijarah muntahia bittamleek 5.53 84,266 6,558 409 - 91,233
assets financed by the liabilities, when the return on assets is under performing as compared to competitor’s rates.
Diminishing Musharka 5.73 45,232 18,827 232 - 64,291
5.5.2 Profit rate risk strategy Investment securities 6.51 - - - 22,840 22,840
Fixed assets - - - 871 871
Profit rate risk arises from the possibility that changes in profit rates will affect future profitability or the fair values of financial
instruments. The window is exposed to profit rate risk as a result of mismatches or gaps in the amounts of assets and liabilities and Other assets - - - 5,845 5,845
off-balance sheet instruments that mature or re-price in a given period. The window manages this risk through risk management
strategies. Total assets 207,635 42,643 2,383 63,882 316,543
The effective profit rate (effective yield) of a monetary financial instrument is the rate that, when used in a present value calculation, Liabilities and equity
results in the carrying amount of the instrument. The rate is a historical rate for a fixed rate instrument carried at amortised cost and
Wakala deposits 3.9 3,704 28,492 103,527 51,456 187,179
a current rate for a floating rate instrument or an instrument carried at fair value.
Due to Banks 1.93 9,626 - - - 9,626
5.5.3 Profit rate risk measurement tools Customer current accounts - - - 41,514 41,514
Window uses the following tools for profit rate risk measurement in its book: Other liabilities - - - 1,922 1,922
y Re-pricing gap analysis which measures the arithmetic difference between the profit-sensitive assets and liabilities of Window Total liabilities 13,329 28,492 103,527 94,892 240,240
book in absolute terms; and
y Basis Point Value (“BPV”) analysis which is the sensitivity measure for all profit rate priced products and positions. The BPV is
the change in net present value of a position arising from a 1 basis point shift in the yield curve. This quantifies the sensitivity of Equity of Investment Account Holders 2.27 42,883 - - - 42,883
the position or portfolio to changes in profit rates.
Total liabilities and equity of
5.5.4 Profit rate risk monitoring and reporting Unrestricted Investment Account
(URIA) 56,213 28,492 103,527 94,892 283,123
Window has implemented information systems for monitoring, controlling and reporting profit rate risk. Reports are provided on a
timely basis to Executive Committee and the Board of Directors of the head office. Total profit rate sensitivity gap 151,422 14,151 (78,304) (53,850)
Cumulative profit rate sensitivity gap 151,423 165,573 87,269 33,419
5.6 Liquidity risk

The Window’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions without incurring unacceptable losses or risking damage to the
Sohar International Bank’s reputation.
Central treasury receives information from other business units regarding the liquidity profile of their financial assets and liabilities
and details of other projected cash flows arising from projected future business. Central treasury then maintains a portfolio of
short-term liquid assets, largely made up of short-term liquid investment securities, financing and advances to banks and other
inter-bank facilities, to ensure that sufficient liquidity is maintained within the Bank as a whole. The liquidity requirements of
business units are met through short-term financing and advances from central treasury to cover any short-term fluctuations
and longer term funding to address any structural liquidity requirements. The Bank has also laid down a comprehensive liquidity
contingency plan for effective management of liquidity. In this process due care is taken to ensure that the Window complies with
all the CBO regulations.
All liquidity policies and procedures are subject to review and approved by Asset Liabilities Committee (ALCO). Computation of
liquidity gap on maturity of assets and liabilities is provided. The computation has been prepared in accordance with guidelines
provided in Circular BM 955 dated 7 May 2003.
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5.6 Liquidity risk 5.6 Liquidity risk (continued)
5.6.1 Exposure to liquidity risk 5.6.2 Liquidity Coverage Ratio and Net Stable Funding Ratio
The lending ratio, which is the ratio of the total financings and advances to customer deposits and capital, is monitored on a The Window also monitors the liquidity through Liquidity Coverage ratio (LCR) and Net Stable Funding Ratio (NSFR). Current
daily basis in line with the regulatory guidelines. Internally the lending ratio is set at a more conservative basis than required by levels of these ratios are given below:
regulation. The Window also manages its liquidity risk on regular basis and by monitoring the liquid ratio which is a ratio of net liquid
assets to total assets on a monthly basis. For this purpose, net liquid assets are considered as including cash and cash equivalents Liquidity Coverage ratio:
and investment grade debt securities for which there is an active and liquid market.
RO ’000
Details of the reported lending and liquid ratio as at 31 December 2020 were as follows: Total Total
Unweighted Weighted
31 December 2020 Value (average) Value (average)
Lending ratio Liquid ratio High Quality Liquid Assets
Average for the year 86.39% 15.32% 1 Total High Quality Liquid Assets (HQLA) 35,098
Maximum for the year 87.65% 17.63% Cash Outflows
Minimum for the year 85.20% 12.34% 2 Retail deposits and deposits from small business customers, of which: 59,766 5,790
3 Stable deposits 3,736 187
The table below summarizes the maturity profile of the Window’s liabilities as on the reporting date based on contractual repayment
arrangements. The contractual maturities of assets and liabilities have been determined on the basis of the remaining period at 4 Less stable deposits 56,030 5,603
the statement of financial position date to the contractual maturity date and do not take account of the effective maturities as 5 Unsecured wholesale funding, of which: 71,289 34,291
indicated by the Window’s deposit retention history and the availability of liquid funds. 6 Operational deposits (all counterparties) and deposits in networks of cooperative banks - -
7 Non-operational deposits (all counterparties) 71,289 34,291
Within Four
Carrying three months to One to More than 8 Unsecured debt
amount months 12 months three years three years Total 9 Secured wholesale funding -
RO’000 RO’000 RO’000 RO’000 RO’000 RO’000
10 Additional requirements, of which 923 57
11 Outflows related to derivative exposures and other collateral requirements - -
Wakala deposits 187,179 22,211 56,264 87,575 31,689 197,739
12 Outflows related to loss of funding on debt products - -
Due to Bank 9,625 9,625 - - - 9,625
13 Credit and liquidity facilities 923 57
Customer deposit and other accounts 41,514 41,584 34,724 33 16,626 92,967
14 Other contractual funding obligations 2,163 2,163
Other liabilities 1,922 1,922 - - - 1,922
15 Other contingent funding obligations 31,985 1,599
Total liabilities 240,240 75,342 90,988 87,608 48,315 302,253 16 TOTAL CASH OUTFLOWS 43,900
Cash Inflows
Equity of Investment account holders 42,883 3,476 5,219 8,690 25,498 42,883 17 Secured lending (e.g. reverse repos) - -
18 Inflows from fully performing exposures 22,583 19,433
283,123 78,818 96,207 96,298 73,813 345,136
19 Other cash inflows 52,769 742
20 TOTAL CASH INFLOWS 75,352 20,175
Total Adjusted
The Window prepares a liquidity gap report to monitor the Window’s short term liquidity position on the Rial denominated assets Value
and liabilities in a time horizon spanning one month. The gap is adjusted for availability of instruments for repo or refinance and
also for unavailed committed lines of credit, if any. This statement of short term liquidity is to be reported to the ALCO every month. 21 TOTAL HQLA 35,098
22 TOTAL NET CASH OUTFLOWS 23,725
Windows exposure to profit rate risk has been further elaborated in Annexure 1 and 2. 23 LIQUIDITY COVERAGE RATIO (%) 147.94

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5.6 Liquidity risk (continued) 5.7 Market risk
5.6.2 Liquidity Coverage Ratio and Net Stable Funding Ratio Market risk is the exposure to loss resulting from the changes in the profit rates, foreign currency exchange rates and commodity
prices. The objective of market risk management is to manage and control market risk exposures within acceptable parameters,
Net Stable Funding ratio: while optimising the return to risk.
RO ’000 Market risk is relevant to banking book and trading book but its measurement and management might differ in each book.
Unweighted value by residual maturity
Sohar Islamic proactively measures and monitors the market risk in its portfolio using appropriate measurement techniques such
No <6 6 months ≥ 1yr Weighted as limits on its foreign exchange open positions.
maturity months to < 1yr value
1 Capital: 34,446 - - - 34,446 5.7.1 Market risk in trading book
2 Regulatory capital 32,948 32,948
3 Other capital instruments 1,498 1,498 Market risk incorporates a range of risks, but the principal elements are Profit rate risk and foreign exchange risk.
Retail deposits and deposits from small business
4 109,404 - 11,452 - 108,771 Treasury business is conducted within approved market risk limits. It is Treasurer’s responsibility to ensure that an appropriate
customers
5 Stable deposits market risk limits structure is available at all times to govern the business.
6 Less stable deposits 109,404 11,452 108,771
Limits are set for:
7 Wholesale funding: 16,323 - 26,581 - 21,452
8 Operational deposits y Foreign exchange risk;
9 Other wholesale funding 16,323 26,581 21,452 y Rate of return risk;
10 Liabilities with matching interdependent assets y Approved dealing products:
11 Other liabilities: 105,708 105,708 y Approved dealing currencies:
12 NSFR derivative liabilities y Maximum tenor.
13 All other liabilities and equity not
105,708 105,708
included in above categories The Assets and Liability Committee (ALCO) conducts periodical meetings to discuss the mismatches in assets and liabilities and
14 Total ASF (Available stable funding) 160,173 270,377 assesses the profit rate risk, foreign exchange risk and liquidity risk that Sohar Islamic is exposed to, so as to take steps to manage
such risks. With the guidance of ALCO, the Window’s treasury manages profit rate and foreign exchange risks, adhering to the
RSF Item policy guidelines, which stipulate appropriate limits.
15 Total NSFR high-quality liquid assets (HQLA)
16 Deposits held at other financial The capital charge for the applicable market risk is furnished below:
institutions for operational purposes
17 Performing loans and securities: - 12,028 9,303 231,089 204,987 RO ’000
18 Performing loans to financial institutions secured -
Profit rate position risk -
by Level 1 HQLA
19 Performing loans to financial institutions secured - Equity position risk -
by non- Level 1 HQLA and unsecured performing Foreign exchange risk 1,118
loans to financial institutions
20 Performing loans to non-financial 12,028 9,303 8,561 Commodity risk -
corporate clients,loans to retail and small
business customers, and loans to 5.7.2 Currency risk
sovereigns, central banks and PSEs, of which
21 -With a risk weight of less than or equal to 35% - Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Board
under the Basel II Standardized approach for has set limits on the overall open position and for open position for each currency. The open position limits include overnight open
credit risk position and intraday open position. Open positions are monitored on a daily basis and hedging strategies used to ensure positions
22 Performing residential mortgages, of which: - - - 231,089 196,425 are maintained within established limits.
23 With a risk weight of less than or equal to 35% 231,089 196,425
under the Basel II Standardized Approach for 5.8 Operational risk
credit risk
24 Securities that are not in default and do not quali- - - Operational risk is defined as the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and
fy as HQLA, including systems or from external events. Operational risk arises due to variety of causes associated with the Window’s processes, personnel,
exchange-traded equities technology and infrastructure and from external events and to include risks other than credit, market and liquidity risks.
25 Assets with matching interdependent liabilities -
26 Other Assets: - - 4,111 1,503 3,558 Window has adopted same policies and procedures to mitigate the consolidated operational risk as those of the head office.
27 Physical traded commodities, Advantages of head office processes and infrastructure are obtained in compliance with IBRF. Sohar Islamic Operational Risk
including gold Policies s are also similar to that of the head office as follow:
28 Assets posted as initial margin for derivative
contracts and contributions to default funds of y Operational Risk Policies & framework;
CCPs y Operational Risk Minimum Standards ;
29 NSFR derivative assets y Internal Control Framework in line with COSO standards;
30 NSFR derivative liabilities before y Fraud Risk Management Policy & Framework in line with Central Bank of Oman regulations;
deduction of variation margin posted
y Business Continuity Management Policies & Framework;
31 All other assets not included in the above 4,111 1,503 3,558
categories y Business Continuity Plans, Disaster recovery and Crises Management plans.
32 Off-balance sheet items 923 31,985 1,645
In addition to the above, Window has a dedicated Shari'ah’ compliance officer responsible to ensure compliance with IBRF,
33 TOTAL RSF 210,190
Shari'ah’ guidelines and other applicable laws and regulations.
34 NET STABLE FUNDING RATIO (%) 128.63

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5.9 Business Continuity 5.11 Contract Specific Risk

Sohar Islamic has established a Business Continuity Management (BCM) Program designed to minimize service disruption and the In each type of Islamic Financing asset is exposed to a varying mix of credit and market risk and accordingly capital is required to
potential impact on the Window, our customers and our staff. This includes a BCM Policy that is approved by our Board together be allocated for such risk exposures.
with written Business Continuity and Disaster Recovery plans (DRPs) and procedures that are subject to period independent
review. Although the specific details of our BCM arrangements are confidential for security reasons, Sohar Islamic maintains As of reporting date financing assets only carries credit risk and accordingly capital is allocated as per the required regulations by
Business Continuity Plans (BCPs) that address risk scenarios and events of varying scope including, but not exclusively, loss of CBO. The current product mix does not change the nature of risk according to the stage of contract.
services or infrastructure, denial of access, cyber-attack, pandemics and regional crises.
Disclosure of Capital Requirements according to different risk categories for each Shari’ah-compliant financing contract.
Sohar Islamic BCPs are focused on maintaining critical processes, including treasury, capital & liquidity and payment services,
providing customers with uninterrupted access to their funds and maintaining effective communications with our customers, staff RO’ 000
and other stakeholders. Risk weighted Capital
Assets Requirements
BCM testing of Sohar Islamic for 2020 was successfully completed within defined scope, nevertheless the Window will ensure
Murabaha receivables 14,776 1,625
a continual improvement to whole bank operations. Our BCPs and DRPs are reviewed and tested at least annually. Any areas
for improvement that are identified are tracked to ensure appropriate resolution and our plans and infrastructure updated as Ijarah muntahia bittamleek 60,360 6,640
appropriate Istisna followed by Ijarah muntahia bittamleek 77,653 8,542
Sohar Islamic and in line with Sohar International principles for the containment of COVID-19 pandemic, gives prime importance
to the health and safety of all its staff & customers. That was achieved by ensuring a safe banking experience is provided to the Placements with banks 3,014 331
customers whereby all the banks digital capabilities were highlighted in campaigns to motivate the customers to extraordinary use Investments 5,931 652
of alternate channels for their banking requirements. Others 7,153 787
Throughout 2020 and during the pandemic, it was witnessed that Sohar Islamic Business Continuity moved into its full gear. The Off Balance sheet 26,027 2,863
regular testing of the program proved to be very effective. Similar to all other activities in the window, the Business Continuity 258,759 28,463
Program continues to be improved in line with the international best practices which include the review of Business Continuity
and Disaster Recovery plans at least annually. Such regular reviews enable the bank to address areas on improvements by putting 6. SHARI’AH GOVERNANCE
into motion the appropriate plans, necessary infrastructure and resources requirements to ensure a high level of maturity while
remediating the consequences of COVID-19 pandemic in line with BCM guidelines. A Shari'ah governance framework has been implemented in the Window whose main objective of is to ensure Shari'ah compliance
at all the times. The key elements of Shari'ah governance framework of the Window are as follows:
It is worth to mention also that the emergency response plan to tackle the pandemic was followed at all touch points of the
organization. The bank has been full prepared to function remotely increasing its capabilities to provide seamless banking for its i. Shari'ah Supervisory Board (SSB);
valuable customers with high level of quality and safety measures. ii. Internal Reviewer who has the overall responsibility to undertake and monitor Shari'ah Compliance, Shari'ah Audit and
training functions in accordance with IBRF.
5.10 Displaced Commercial Risk
Compliance with Shari'ah (as manifested by the guidelines and Fatwa issued by the SSB) and as stipulated in IBRF is mandatory and
Displaced commercial risk (“DCR”) refers to the magnitude of risks that are transferred to shareholders in order to cushion the is being done through review and approval of the contracts, agreements, policies, procedures, products, reports (profit distribution
Investment Account Holder (“IAH”) from bearing some or all of the risks to which they are contractually exposed in Mudaraba calculations), etc.
contracts.
The Window ensures that the operations of the Islamic Banking Window are conducted in Shari'ah compliance and controlled
Under a Mudaraba (profit sharing and loss-bearing) contract, unrestricted IAH are exposed to aggregate impact of risks arising manner by following policies and procedures:
from the assets in which their funds are invested, but this is managed by Sohar Islamic Window through DCR.
a) An appropriate Shari'ah governance framework in compliance with IBRF, AAOIFI governance standards and guidelines
This risk-sharing is achieved by constituting and using various reserves such as PER, and by adjusting the Sohar Islamic Window's and directives issued by SSB is maintained;
profit share in order to smooth the returns payable to the IAH from exposure to the volatility of aggregate returns arising from b) Key duties and functions are segregated. An independent executive is designated with the responsibility for Shari'ah
banking risks, and thereby to enable payment of returns that are competitive in the marketplace. compliance and audit;
c) Policies and procedures manuals and documentation in relation to our products, operations, compliance, trainings, and
Sohar Islamic Window manages its displaced commercial risk as outlined in its Profit Distribution Policy. The Window foregoes internal controls are maintained and available to relevant staff;
its fee in case displaced commercial risk arises. The Window manages profit rates with other Islamic Windows and full-fledged d) Shari'ah audit reports are submitted to the SSB in line with the agreed annual plan;
Islamic/Conventional Banks operating in Oman. e) Islamic Banking Window assets are kept separate and distinct from conventional assets;
f) Window can not place funds with the conventional banks including Sohar International Bank;
The Window has not created any reserves so no analysis is presented for the same. g) The Window management ensures that staff for certain key functions reporting to their respective department heads with
dotted line reporting to the Chief of the Window.;
h) The Window has dedicated staff for business functions, such as consumer, corporate, treasury, etc. and the staff reports to
the Chief Islamic Banking Officer.;
i) The core banking system adopted by The Window is capable of recognizing the unique nature of Islamic Banking contracts,
transactions and processes.
Shari'ah audits are conducted on quarterly basis in accordance with IBRF and submitted to SSB for its review and guidance. SSB
has issued its annual report for 2019 on Shari'ah compliance of the window and did not report any violations and did not direct any
amount to Charity Account.
Internal Shari'ah Reviewer oversees the Shari'ah training plans and schedule for the Licensee. During the year 2020 training
programs were conducted for the staff.
SSB has maintains no business relationship with the Bank.

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6. SHARI’AH GOVERNANCE (CONTINUED) 7. CORPORATE SOCIAL RESPONSIBILITY
6.1 Profile of the Shari’ah Supervisory Board Sohar Islamic conducts customer awareness program on Islamic banking and also supports social Shari'ah compliant activities.
Sheikh Azzan Nasir Farfoor Al Amri (Chairman) 8. OTHER DISCLOSURES
Holding bachelor’s degree in Islamic Studies and with a specialization in Judiciary, Sheikh Azzan bin Nasir Farfoor Al Amri has been Following are the disclosures required under Islamic Banking Regulatory Framework:
working as the secretary to the Grand Mufti of the Sultanate of Oman in the Fatwa Section since 2001. He is also well versed in
Shari’ah Law, having done numerous courses in relevant fields and participated in many related workshops and conferences. y There has been no comingling of the funds;
y As of 31 December 2020, and amount of OMR 580 is payable to head office;
Dr. Muddassir Siddiqui (Deputy Chairman) y There has been no amount transferred to Charity fund during the year.
Dr. Mudassir Siddiqui is an internationally renowned expert of Islamic Studies and Western laws. He did his PhD in law from Chicago
Kent College of Law, USA; Master of Law from Harvard Law School, USA; and Islamic Studies from, Islamic University of al-Madina
al-Munawwarah, Kingdom of Saudi Arabia. He is a member of the AAOIFI Shari'ah Standards Committee; the Fiqh Council of
North America; and a Research Fellow at the International Shari’ah Research Academy for Islamic Finance in Malaysia. He has
more than 30 years of experience in providing Shari’ah and Law consultancy, Islamic banking documentation, research, lectures
and arbitration for more than 40 worldwide organizations, universities and research centres.
Sheikh Al-Mu’tasim Said Al Maawali (Member)

Al-Mu’tasim Said Al-Maawali is a religious supervisor working for The Omani Studies Centre at Sultan Qaboos University. He
holds an MA degree in Islamic Studies from the University of Birmingham, 2016. Al-Mu’tasim authored a seven-volume series in
Islamic Jurisprudence called al-Mu‘tamad, including the sixth volume in Islamic Financial Transactions, and the seventh in Islamic
Banking. In 2016, he published his English book Articles on Ibāī Studies. In February 2017, he published his translation of the first
volume ‘The Reliable Jurisprudence of Prayer’ from Arabic into English. In 2019, he also translated ‘Christians in Oman’ from
English into Arabic. Al-Mu’tasim presented some academic papers at some international conferences in Islamic Studies, including
TIMES 2017 at Birmingham University and BRISMES 2018 at King’s College London, and BRISMES 2019 at the University of Leeds.
Sheikh Fahad Mohamed Hilal Al Khalili (Member)

Sheikh Fahad graduated from the Florida Atlantic University USA after which he joined the Central Bank of Oman (CBO), where
he was part of Treasury and Investment Division. Thereafter, Sheikh Fahad joined Al Madina Investment where he quickly became
the Deputy General Manager of Investment Banking. His key responsibilities included portfolio management, promotion of
Greenfield ventures and handling high net worth individuals. Recently, Fahad founded Bayan Investment House, which is focused
on building long term relationships by provided investment banking and advisory services.
6.2 Remuneration to SSB
RO
As at 31 December 2020 Remuneration Sitting Fee Total
Dr. Hussain Hamed Hassan 7,700 - 7,700
Dr. Mudassir Siddiqui 11,550 1,540 13,090
Sheikh Azzan bin Nasir Farfoor Al Amri 15,400 1,540 16,940
Sheikh Fahad Mohamed Hilal Al Khalili 7,700 1,540 9,240
Sheikh Al Muatasim Said Al Maawali 3,850 770 4,620
46,200 5,390 51,590
Shari’ah Supervisory Board’s meetings and attendance
Table : Attendance & Remuneration – Shari'ah Board

Members Name 20 Jul 2020 20 Jul 2020 14 Oct 2020 28 Jan 2021 Attended
Dr. Hussain Hamed Hassan* -
Dr. Mudassir Siddiqui 9 9 9 9 4
Sheikh Azzan bin Nasser Al Amri 9 9 9 9 4
Sheikh Fahad Mohamed Al Khalili 9 9 9 9 4
Sheikh Al Muatasim Said Al Maawali** 9 9 2
* Dr. Hussein Hammad resigned from Shari'ah Supervisory Board his last day was on 15th June 2020. Paid remuneration for the
period until 15th June 2020.
** Sheikh Al Muatasim Al Maawali was appointed on the 15th June 2020 as a Shari'ah Supervisory Board Member.
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STATEMENT ON SENSITIVITY OF ASSETS AND LIABILITIES (SAL) RO ’000
Annexure 1
Inflows Up to 1 1-3 3 -6 6-12 1-2 2-3 3-4 4-5 5-7 7-10 10-15 15-20 Over Non
No. Total
(Assets and OBS) month months months months years years years years years years years years 20 years Sensitive
1 Cash on Hand - - - - - - - - - - - - - 2,697 2,697
2 Deposits with CBO - - - - - - - - - - - - - 15,742 15,742
3 Balances due from HO/ - - - - - - - - - - - - - - -
Affiliates/Branches
4 Balances due from 11,653 - - - - - - - - - - - - 375 12,028

Other Banks
5 Investments - - - - - 6,008 11,044 3,020 2,767 - - - - - 22,840
6 Bills of Exchange and - - - - - - - - - - - - - - -
Promissory Notes
7 Overdrafts - - - - - - - - - - - - - - -
8 Loans and Advances 140,039 57,329 9,107 33,537 218 - - - 21 119 120 404 889 15,335 257,118
9 Non-Performing Loans - - - - - - - - 842 - - - - 842
10 Fixed Assets - - - - - - - - - - - - - 871 871
11 Net Inter-branch - - - - - - - - - - - - - - -
Transactions
12 Accured Interest - - - - - - - - - - - - - - -
13 Other Assets - - - - - - - - - - - - - 5,845 5,845
14 Spot and Forward - - - - - - - - - - - - - - -
Purchases
15 Reverse Repos - - - - - - - - - - - - - - -
16 FRAs - - - - - - - - - - - - - - -
17 Swaps - - - - - - - - - - - - - - -
18 Futures - - - - - - - - - - - - - - -
19 Options - - - - - - - - - - - - - - -
20 Others (Specify) - - - - - - - - - - - - - - -
-
Total 151,692 57,329 9,107 33,537 218 6,008 11,044 3,020 3,630 119 120 404 889 40,865 317,983
STATEMENT ON SENSITIVITY OF ASSETS AND LIABILITIES (SAL) RO ’000
Annexure 1 (continue)
Outflows Up to 1 1-3 3 -6 6-12 1-2 2-3 3-4 4-5 5-7 7-10 10-15 15-20 Over Non
No. Total
(Liabilities and OBS) month months months months years years years years years years years years 20 years Sensitive
1 Current Deposits - - - - - - - - - - - - - 98,949 98,949
2 Saving Deposits 34,760 - - - - - - - - - - - - - 34,760
3 Time Deposits 2,592 1,117 8,244 20,248 78,548 9,775 4,968 10,2636 - - - - - - 135,728
4 Other Deposits - - - - - - - - - - - - - 2,138 2,138
5 Balances due to HO/ 9,625 - - - - - - - - - - - - - 9,625
Affiliates/ Branches
6 Balances due to other 1 - - - - - - - - - - - - - 1
Banks
7 Certificate of Deposits - - - - - - - - - - - - - - -
8 Other Borrowings - - - - - - - - - - - - - - -
9 Net Inter-branch - - - - - - - - - - - - - - -
Transactions
10 Bills Payable - - - - - - - - - - - - - - -
11 Interest Payable - - - - - - - - - - - - - - -
12 Provisons (others) - - - - - - - - - - - - - - -
13 Spot and Forward Sales - - - - - - - - - - - - - - -
14 Capital - - - - - - - - - - - - - 30,000 30,000
15 Reserves - - - - - - - - - - - - - 1,978 1,978
16 Retained Earnings - - - - - - - - - - - - - 2,882 2,882
17 Subordinated Debts - - - - - - - - - - - - - - -
18 Others (Current Year's - - - - - - - - - - - - - - -
Profit/Loss)
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19 Repos - - - - - - - - - - - - - - -
20 FRAs - - - - - - - - - - - - - - -
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21 Futures - - - - - - - - - - - - - - -
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22 Swaps - - - - - - - - - - - - - - -
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23 Options - - - - - - - - - - - - - - -
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24 Convertible Bonds - - - - - - - - - - - - - - -
25 Other Liabilities - - - - - - - - - - - - - 1,922 1,922
nal 2020
2020
Total 46,978 1,117 8,244 20,248 78,548 9,775 4,968 10,236 - - - - - 137,869 317,983
Gap 104,714 56,212 863 13,289 (78,330) (3,767) 6,076 (7,216) 3,630 119 120 404 889 (97,004) 0
2
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Cumulative Gap 104,714 160,926 161,789 175,078 96,748 92,981 99,058 91,842 95,472 95,591 95,711 96,115 97,004 0
272
Capital
Net Profit Income
Impact as % to Net loss

Impact as % to CAPITAL
Impact as % to Net profit

Impact as % to Net profit
Impact of 50 bps profit rate shock

Based on 50 bps Profit rate shock

Exposure to profit rate risk – Annexure 2
8.71
52.61
2,998.55
4.35
26.30
1,499.28
2.18
13.15
749.64
34,446
5,700
RO ’000
2020
31 December
Annexure 3
Up to 1 1-3 3 -6 6-9 9-12 1-3 3-5 Over
No. Inflows (Assets and OBS) Total
month months months months months years years 20 years
1 Cash on Hand 2,697 - - - - - - - 2,697
2 Deposits with CBO 8,508 664 730 385 843 2,772 645 1,245 15,742
3 Balances due from HO/Affiliates/Branches - - - - - - - - -
4 Balances due from Other Banks 12,028 - - - - - - - 12,028
5 Investments 2,035 2,035 2,035 - - - 14,007 2,728 22,840
6 Bills of Exchange and Promissory Notes - - - - - - - - -
7 Overdrafts - - - - - - - - -
8 Loans and Advances 742 1,996 3,308 4,580 5,912 32,846 33,661 174,073 257,118
9 Non-Performing Loans - - - - 211 - - 632 842
10 Fixed Assets - - - - - - - 871 871
11 Net Inter-branch Transactions - - - - - - - - -
12 Accrued Interest - - - - - - - -
13 Other Assets 5,845 - - - - - - - 5,845
14 Spot and Forward Purchases 41,282 - - - 38,115 9,803 - - 89,200
15 Swaps - - - - - - - - -
16 Options - - - - - - - - -
17 Reverse Repos - - - - - - - - -
18 Committed Lines of Credit 50,000 - - - - - - - 50,000
19 Letters of Credit/Gurantees/Acceptances 1 426 1,428 1,668 400 67 - 50 4,040
20 Unutilized portion of Overdraft and Loans & Advances 923 3,264 1,282 487 561 394 - 23 6,934
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21 Undrawn Exposure (Syn Loans) - - - - - - - - -

Sohar
- - - - - - - - -
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Total 124,061 8,385 8,783 7,120 46,042 45,832 48,313 179,622 468,157
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Annexure 3 (continue)
Up to 1 1-3 3 -6 6-9 9-12 1-3 3-5 Over
No. Outflows (Liabilities and OBS) Total
month months months months months years years 20 years
1 Current Deposits 19,790 19,790 14,842 9,895 9,895 - - 24,737 98,949
2 Saving Deposits 1,738 1,738 1,738 1,738 1,738 8,690 8,690 8,690 34,760
3 Time Deposits 2,447 1,008 8,208 1,419 16,979 83,690 13,195 8,782 135,728
4 Other Deposits 114 1,891 71 5 16 33 8 - 2,138
5 Balances due to HO/Affiliates/Branches 9,625 - - - - - - - 9,625

6 Balances due to Other Banks 1 - - - - - - - 1
7 Certificate of Deposits - - - - - - - - -
8 Other Borrowings - - - - - - - - -
9 Net Inter-branch Transactions - - - - - - - - -
10 Bills Payable - - - - - - - - -
11 Interest Payable - - - - - - - -
12 Prov. other than for Loan Losses and Dep. in Invts. - - - - - - - - -
13 Other Liabilities 1,922 - - - - - - - 1,992
14 Spot and Forward Sales 41,282 - - - 38,500 9,625 - - 89,407
15 Swaps - - - - - - - - -
16 Options - - - - - - - - -
17 Repos - - - - - - - - -
18 Letters of Credit/Guarantees/Acceptances 504 2,014 1,310 174 22 16 - - 4,040
19 Committed Lines of Credit - - - - - 50,000 - - 50,000
20 Unutilized portion of Overdraft and Loans and Advances 2,011 3,719 653 231 188 109 22 1 6,394
21 Others (Specify) - - - - - - - - -
22 Capital - - - - - - - 30,000 30,000
23 Reserves - - - - - - - 1,978 1,978
24 Retained Earnings - - - - - - - 2,882 2,882
25 Subordinated Debts - - - - - - - - -
26 Others (Current Year's Profit/Loss) - - - - - - - - -
27 Undrawn Exposure (Syn Loans) - - - - - - - - -
28 Convertible Bonds - - - - - - - - -
Total 79,434 30,160 26,822 13,462 67,338 152,163 21,915 77,070 468,364
Cumulative Liabilities 79,434 109,594 136,416 14,878 217,216 369,379 391,294 468,364
Gap 44,627 (21,775) (18,039) (6,342) (21,296) (106,331) 26,398 102,552
Cumulative Gap 44,627 22,852 4,814 (1,528) (22,825) (129,156) (102,758) (206)
Cumulative Gap as a percentage of Cumulative Liabilities 56.18 20.85 3.53 (1.02) (10.51) (34.97) (26.26) (0.04)
Assets
Step 1 :
Liabilities
Total assets
Other assets
Due to banks
Legal reserve
Total liabilities
Other liabilities
Share premium
Due from banks
General reserve
Retained earnings
Customer deposits
Deferred tax assets
Shareholders' Equity
Impairment reserve
Subordinated Debts
Paid-up share capital

Certificates of deposit
Total shareholders' equity

Financing and advances
Investments in securities
Property and equipment
Subordinated debt reserve

Loans and advances to banks
Compulsory Convertible bonds

Current and deferred tax liabilities
Total liability and shareholders’ funds

Cash and balances with Central Bank of Oman
Cumulative changes in fair value of investments

RECONCILIATION TEMPLATE AS AT DECEMBER 2020
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Sohar
(1,056)
2,882
472
988
134
30,000
1,922
-
271,575
9,626
5,845
-
871
-
22,840
256,520
12,028
-
18,439
2020
statements
33,420
-
283,123
316,543
As at 31 December
published financial
Balance sheet as in
316,543
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RO ‘000
33,420
(1,056)
2,882
472
988
134
-
-
-
-
1,922
-
271,575
9,626
5,845
-
871
-
22,840
256,520
12,028
-
18,439
2020
As at 31 December
scope of consolidation
-
30,000
283,123
316,543
Under regulatory
316,543
27
275
75
RECONCILIATION TEMPLATE AS AT DECEMBER 2020 (CONTINUED) RECONCILIATION TEMPLATE AS AT DECEMBER 2020 (CONTINUED)
Step 2 : RO ‘000 Step 2 (continued): RO ‘000

Balance sheet as in Balance sheet as in
published financial Under regulatory scope published financial Under regulatory scope
statements of consolidation Reference statements of consolidation Reference
As at 31 December As at 31 December As at 31 December As at 31 December
2020 2020 2020 2020
Assets Capital & Liabilities
Cash and balances with CBO 18,439 18,439 Paid-up Capital 30,000 30,000
Balance with banks and money at call and short notice 12,028 12,028 Of which:
Investments : 22,840 22,840 Amount eligible for CET1 30,000 30,000
Of which Held to Maturity 16,735 16,735 Amount eligible for AT1 - -
Out of investments in held to maturity: Reserves & Surplus 1,122 1,122
Investments in subsidiaries NA NA Out of which
Investments in associates and joint ventures NA NA Retained earnings 2,882 2,882
Of which available for sale NA NA Other Reserves 472 472
Out of investments in available for sale: NA NA Cumulative changes in fair value of investments - -
investments in subsidiaries
Out of which :
Investments in associates and joint ventures NA NA
Losses from fair value of investments (1,056) (1,056) a
Held for trading 5,239 5,239
Gains from fair value of investments NA NA
Loans and advances 256,520 256,520
Haircut of 55% on Gains NA NA
Of which:
Total Capital 33,420 33,420
Loans and advances to domestic banks - -
Deposits : 271,575 271,575
Loans and advances to non-resident banks -
Of which:
Loans and advances to domestic customers 234,228 234,228
Deposits from banks - -
Loans and advances to non-resident customers for domestic -
operations Customer deposits 84,397 84,397
Loans and advances to non-resident customers for operations 11,146 11,146 Deposits of Islamic Banking window
abroad Other deposits(please specify) Wakala deposits 187,178 187,178
Loans and advances to SMEs 11,146 11,146 Borrowings 9,626 9,626
Financing from Islamic banking window - - Of which: From CBO - -
Fixed assets 871 871 From banks 9,626 9,626
Other assets 5,845 5,845 From other institutions & - -
of which: agencies
Goodwill and intangible assets Borrowings in the form of bonds, debentures and Sukuks - -
Out of which:
Others (subordinated debt) - -
Goodwill - -
Other liabilities & provisions 1,922 1,922
Other intangibles (excluding MSRs) - - Of which:
Deferred tax assets - - Out of which: DTAs related to investments
Goodwill on consolidation - - Out of which: DTLs related to investments b
Debit balance in Profit & Loss account - - Out of which: DTLs related to fixed assets -
Total Assets 316,543 316,543 DTLs related to goodwill - -
DTLs related to intangible assets - -
TOTAL 316,543 316,543

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RECONCILIATION TEMPLATE AS AT DECEMBER 2020 (CONTINUED) BASEL III COMMON DISCLOSURE TEMPLATE TO BE USED DURING THE TRANSITION OF REGULATORY
ADJUSTMENTS
Step 3: RO ‘000 RO ’000

Common Equity Tier 1 capital: instruments and reserves Common Equity Tier 1 capital: instruments and reserves
1 Directly issued qualifying common share capital (and equivalent for non-joint stock companies) plus related stock 30,000
Source based on reference surplus
numbers/letters of the 2 Retained earnings 2,882
balance sheet under 3 Accumulated other comprehensive income (and other reserves) 1,122
Component of regulatory the regulatory scope of
capital reported by Bank consolidation from step 2 4 Directly issued capital subject to phase out from CET1 (only applicable to non-joint stock companies) -
1 Directly issued 30,000 Public sector capital injections grandfathered until 1 January 2018 -
qualifying common share (and equivalent for non-joint stock 5 Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET1) -
companies) capital plus related stock surplus
6 Common Equity Tier 1 capital before regulatory adjustments 34,004
2 Retained earnings 2,882
Common Equity Tier 1 capital: regulatory adjustments
4 Directly issued capital subject to phase out from -
CET1 (only applicable to non-joint stock companies) 7 Prudential valuation adjustments -
5 Common share capital issued by subsidiaries and held by third - 8 Goodwill (net of related tax liability) -
parties (amount allowed in group CET1) 9 Other intangibles other than mortgage-servicing rights (net of related tax liability) 1,056
6 Common Equity Tier 1 34,004 10 Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of -
capital before regulatory adjustments related tax liability)
7 Prudential valuation - 11 Cash-flow hedge reserve -
adjustments 12 Shortfall of provisions to expected losses -
8 Goodwill (net of related tax liability) - 13 Securitisation gain on sale (as set out in paragraph 14.9 of CP-1) -
9 Losses from fair value of investments (1,056) a 14 Gains and losses due to changes in own credit risk on fair valued liabilities. -
10 DTL related to investments - b 15 Defined-benefit pension fund net assets -
11 Common Equity Tier 1 32,948 16 Investments in own shares (if not already netted off paid-in capital on reported balance sheet) -
capital (CET1)
17 Reciprocal cross-holdings in common equity -
share capital (amount above 10% threshold)
19 Significant investments in the common stock of banking, financial, insurance and takaful entities that are outside -
the scope of regulatory consolidation, net of eligible short positions (amount above 10% threshold)
20 Mortgage Servicing rights (amount above 10% threshold) -
21 Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability) -
22 Amount exceeding the 15% threshold -
23 Of which: significant investments in the common stock of financials -
24 Of which: mortgage servicing rights -
25 Of which: deferred tax assets arising from temporary differences -
26 National specific regulatory adjustments -
REGULATORY ADJUSTMENTS APPLIED TO COMMON EQUITY TIER 1 IN RESPECT OF AMOUNTS SUBJECT
TO PRE-BASEL III TREATMENT
27 Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to cover -
deductions
28 Total regulatory adjustments to Common equity Tier 1 1,056

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BASEL III COMMON DISCLOSURE TEMPLATE TO BE USED DURING THE TRANSITION OF REGULATORY BASEL III COMMON DISCLOSURE TEMPLATE TO BE USED DURING THE TRANSITION OF REGULATORY
ADJUSTMENTS (CONTINUED) ADJUSTMENTS (CONTINUED)
RO ’000 RO ’000
Additional Tier 1 capital: instruments Tier 2 capital: regulatory adjustments
30 Directly issued qualifying Additional Tier 1 instruments plus related stock surplus - 52 Investments in own Tier 2 instruments -
5
31 Of which: classified as equity under applicable accounting standards - 53 Reciprocal cross-holdings in Tier 2 instruments -
32 Of which: classified as liabilities under applicable accounting standards 6 - 54 Investments in the capital of banking, financial, insurance and Takaful entities that are outside the scope of -
33 Directly issued capital instruments subject to phase out from Additional Tier 1 - regulatory consolidation, net of eligible short positions, where the Bank does not own more than 10% of the issued
common share capital of the entity (amount above the 10% threshold)
34 Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsidiaries and held by third -
55 Significant investments in the capital banking, financial, insurance and takaful entities that are outside the scope of -
parties (amount allowed in group AT1)
regulatory consolidation (net of eligible short positions)
35 Of which: instruments issued by subsidiaries subject to phase out -
56 National specific regulatory adjustments -
36 Additional Tier 1 capital before regulatory adjustments - REGULATORY ADJUSTMENTS APPLIED TO TIER 2 IN RESPECT OF AMOUNTS SUBJECT TO PRE-BASEL III
TREATMENT
Additional Tier 1 capital: regulatory adjustments
37 Investments in own Additional Tier 1 instruments -
38 Reciprocal cross-holdings in Additional Tier 1 instruments -
57 Total regulatory adjustments to Tier 2 capital -
39 Investments in the capital of banking, financial, insurance and Takaful entities that are outside the scope of -
regulatory consolidation, net of eligible short positions, where the Bank does not own more than 10% of the issued
common share capital of the entity (amount above 10% threshold) 58 Tier 2 capital (T2) 1,498
40 Significant investments in the capital of banking, financial, insurance and takaful entities that are outside the scope -
of regulatory consolidation (net of eligible short positions)
41 National specific regulatory adjustments - 59 Total capital (TC = T1 + T2) 34,446
REGULATORY ADJUSTMENTS APPLIED TO ADDITIONAL TIER 1 IN RESPECT OF AMOUNTS SUBJECT TO
PRE-BASEL III TREATMENT
Risk Weighted Assets
RISK WEIGHTED ASSETS IN RESPECT OF AMOUNTS SUBJECT TO PRE-BASEL III TREATMENT -
42 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions -
43 Total regulatory adjustments to Additional Tier 1 capital -
60 Total risk weighted assets (60a+60b+60c) 276,115

44 Additional Tier 1 capital (AT1) -
60a Of which: Credit risk weighted assets 258,759
60b Of which: Market risk weighted assets 5,300
45 Tier 1 capital (T1 = CET1 + AT1) 32,948
60c Of which: Operational risk weighted assets 12,056
Tier 2 capital: instruments and provisions

Capital Ratios
46 Directly issued qualifying Tier 2 instruments plus related stock surplus -
61 Common Equity Tier 1 (as a percentage of risk weighted assets) 11.93
47 Directly issued capital instruments subject to phase out from Tier 2 -
62 Tier 1 (as a percentage of risk weighted assets) 11.93
48 Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by -
63 Total capital (as a percentage of risk weighted assets) 12.48
third parties (amount allowed in group Tier 2)
49 Of which: instruments issued by subsidiaries subject to phase out - 64 Institution specific buffer requirement (minimum CET1 requirement plus capital conservation buffer plus coun-
tercyclical buffer requirements plus G-SIB/D-SIB buffer requirement expressed as a percentage of risk weighted
50 Provisions 1,498 assets)
51 Tier 2 capital before regulatory adjustments 1,498 65 Of which: capital conservation buffer requirement
66 Of which: bank specific countercyclical buffer requirement
67 Of which: D-SIB/G-SIB buffer requirement
68 Common Equity Tier 1 available to meet buffers (as a percentage of risk weighted assets

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BASEL III COMMON DISCLOSURE TEMPLATE TO BE USED DURING THE TRANSITION OF REGULATORY
ADJUSTMENTS (CONTINUED)
RO ’000
National minima (if different from Basel III)
69 National Common Equity Tier 1 minimum ratio (if different from Basel III minimum) 7.00%
70 National Tier 1 minimum ratio (if different from Basel III minimum) 9.00%
71 National total capital minimum ratio (if different from Basel III minimum) 11.00%
Amounts below the thresholds for deduction (before risk weighting)

72 Non-significant investments in the capital of other financials -
73 Significant investments in the common stock of financials -
74 Mortgage servicing rights (net of related tax liability) -
75 Deferred tax assets arising from temporary differences (net of related tax liability) -
Applicable caps on the inclusion of provisions in Tier 2

76 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardized approach (prior to -
application of cap)
77 Cap on inclusion of provisions in Tier 2 under standardized approach -
78 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to -
application of cap)
79 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach -
Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2018 and 1 Jan 2022)
80 Current cap on CET1 instruments subject to phase out arrangements -
81 Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities) -
82 Current cap on AT1 instruments subject to phase out arrangements -
83 Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities) -
84 Current cap on T2 instruments subject to phase out arrangements -
85 Amount excluded from T2 due to cap (excess over cap after redemptions and maturities) -

CONTACTS
Making you closer

CO N TAC T D E TA I L S BRANCH NETWORK
HEAD OFFICE
S O H A R I N T E R N AT I O N A L
Business Location: Water front, Tel: +968 2473 0000
Shatti Al-Qurum Area Fax: +968 2473 0010
PO Box: 44 Hai Al Mina, PC:114 E – Mail: customerservice@soharinternational.com
Shatti Al-Qurum Azaiba Branch Jalan Bani Bu Ali Branch Nizwa Branch Seeb Branch Wattaya Branch
Sultanate of Oman Website: www.soharinternational.com
(Water front) Branch P.O. Box 4019 P.O. Box 90 P.O. Box 227 P.O. Box 869 P.O. Box 4148
P.O. Box: 44
PC 112 Azaiba PC 416 Jalan PC 611 Nizwa PC 111 Seeb Airport PC 112 Ruwi
PC:114, Hai Al Mina
Tel: +968 24091550/552 Tel: +968 24491226 Tel: +968 25554488 Tel: +968 25412675 Tel: +968 24422771 Tel: +968 24572284
Fax: +968 2473 0010 Fax: +968 24494649 Fax: +968 25553742 Fax: +968 25412677 Fax: +968 24422050 Fax: +968 24571125
WHOLESALE BANKING G LO BA L M A R K E T
Vikas Gupta Saeed Ali Al Hinai Al Amerat Branch Bahla Branch Khaboura Branch Quriyat Branch Shinas Branch
Head of Corporate Banking EVP & Head - Global Market P.O. Box 243 P.O. Box 8 P.O. Box 580, P.O. Box 229 P.O. Box 458
Tel: +968 24662111 Tel: +968 24730239 PC 119 Amerat PC 612 Bahla PC 326 Khaboura PC 120 Quriyat PC 324 Shinas
Fax:+968 24662110 Fax: +968 24730280
Tel: +968 24878565 Tel: +968 25419466 Tel: +968 26802242 Tel: +968 24845090 Tel: +968 26748282
E – Mail: vikas.gupta@soharinternational.com E – Mail: Saeed.alhina@soharinternational.com
Fax: +968 24878535 Fax: +968 25419410 Fax: +968 26802448 Fax: +968 24845093 Fax: +968 26748520
Jeanan S. Sultan
R E TA I L B A N K I N G Al Khoud Branch Barka Branch Khasab Branch Rustaq Branch Sinaw Branch
EVP & Head - Government Banking
Tel: +968 24662140 Ahmed Rashid Al Salmi P.O. Box 463 P.O. Box528 P.O. Box 229 P.O. Box 220 P.O. Box 72
Fax: +968 24730010 EVP & Head - Retail Support PC 132 Al Khoud PC 320 Barka PC 811 Khasab PC 329 Rustaq PC 418 Sinaw
E – Mail: Jeanan.sultan@soharinternational.com Tel: +968 24730373 Tel: +968 24541025 Tel: +968 26883583 Tel: +968 26732565 Tel: +968 26875031 Tel: +968 25525277
E – Mail: Ahmed.alsalmi@soharinternational.com
Fax: +968 24189940 Fax: +968 26883592 Fax: +968 26732569 Fax: +968 26875028 Fax: +968 25524030
Abdul Hafeedh Othman Al Balushi
EVP & Head - Small & Medium Enterprises
W E A LT H M A N A G E M E N T Al Khuwair Branch Buraimi Branch Mabellah Branch Ruwi Branch Sohar Branch
Tel: +968 24730183
Fax: +968 2452 7116 Aziz Mohamed Al Jahdhami P.O. Box 122 P.O. Box 70 P.O. Box 2104 P.O. Box 104 P.O. Box 831
E – Mail: Abdulh.albalushi@soharinternational.com EVP & Head - Wealth Management PC 103 Khuwair PC 512 Buraimi PC 132 Mabellah PC 131 Ruwi PC 311 Sohar
Tel: +968 24730003 Tel: +968 24480216 Tel: +968 25650502 Tel: +968 24463118 Tel: +968 24833887 Tel: +968 26846957
Sriram Subramanian E – Mail: Aziz.aljahdhami@soharinternational.com Fax: +968 24480354 Fax: +968 25650542 Fax: +968 24463121 Fax: +968 24834348 Fax: +968 26843952
Sr. VP & Head - Transaction Banking
Tel: +968 24730183
SOHAR ISLAMIC Al Qurum Branch Ibra Branch MBD Branch Saham Branch Sur Branch
Fax: +968 24730361
E – Mail: Sriram.subramanian@soharinternational.com Salim Khamis Al Maskry P.O. Box 44 P.O. Box 505 P.O. Box 44 P.O. Box 212 P.O. Box 269
Sr. EVP & Head - Retail Islamic Banking PC 114 Al Qurum PC 400 Ibra PC 114- Hai Al Mina PC 319 Saham PC 411 Sur
Marc Zogheib Tel: +968 24037303 Tel: +968 24565727 Tel: +968 25571414 Tel: +968 24730077 Tel: +968 26854972 Tel: +968 25545199
Sr. VP & Head - Financial Institutions Fax: +968 24730276 Fax: +968 24563292 Fax: +968 25572234 Fax: +968 24730240 Fax: +968 26854874 Fax: +968 25545084
Tel: +968 24 761970 E – Mail: Salim.almaskry@soharinternational.com
Fax: +968 2476 1741
Avenues Mall Branch Ibri Branch Musannah Branch Salalah Branch Suwaiq Branch
E – Mail: Marc.zogheib@soharinternational.com Mohammad Taher Al Lawati
P.O. Box 2360 P.O. Box 487 P.O. Box 371 P.O. Box 1577 P.O. Box 13
Sr. EVP & Head - Corporate Islamic Banking
Gigi Tharian Varghese Tel: +968 24662150 PC 113 Al Azaiba PC 511 Ibri PC 312 Al Musannah PC 211 Salalah PC 315 Al Suwaiq
Sr. VP & Head – Investment Banking Fax: +968 24730276 Tel: +968 24614417 Tel: +968 25688642 Tel: +968 26971192 Tel: +968 23295239 Tel: +968 26860019
Tel: +968 24730366 E – Mail: Mohammed.allawati@soharinternational.com Fax: +968 25647903 Fax: +968 25688681 Fax: +968 26971194 Fax: +968 23297932 Fax: +968 26860012
Fax: +968 24761741
E – Mail: Gigi.varghese@soharinternational.com
Srinivasa Rao Edupalli

Sr. VP & Head - Project Finance SOHAR ISLAMIC
Tel: +968 24662115
Fax: +968 24662125
E – Mail: Srinivasa.edupalli@soharinternational.com Al Khoudh Branch Firq Branch Ghubrah Branch Saada Branch
P.O. Box 3209 P.O. Box 1579 P.O. Box 186 P.O. Box 140
PC 111 Al Khoudh PC 611 Nizwa PC 130 Ghubrah PC 215 Salalah
Tel: +968 24189949 Tel: +968 25447789 Tel: +968 24614417 Tel: +968 23227399
Fax: +968 24189940 Fax: +968 25441186 Fax: +968 24614233 Fax: +968 23227378
Barka Branch Ghala Branch Mabellah Branch Sohar Branch

P.O. Box 295 P.O. Box, 205 P.O. Box 1325 P.O. Box 1264
PC 320 Barka PC 114 – Hai Al Mina PC 122 Mabellah PC 311 Sohar
Tel: +968 26883188 Tel: +968 24617063 Tel: +968 24463771 Tel: +968 26642203
Fax: +968 26883203 Fax: +968 24507279 Fax: +968 24267216 Fax: +968 26640110

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AT M LO C AT I O N AT M LO C AT I O N
S O H A R I N T E R N AT I O N A L SOHAR ISLAMIC
ONSITE OFFSITE ONSITE OFFSITE
REGION BRANCH NAME REGION ATM'S REGION BRANCH NAME REGION ATM's
North Batinah Khaboura North Batinah Saham North Batinah Sohar North Batinah Sohar (Falaj Qabail)
Suwaiq Sohar-Waqibah (Al-Maha Petrol Station)
Saham Sohar (Safeer Mall) South Batinah Barka Dhofar Salalah
Sohar Sohar (Orpic)
Sohar (Aluminium) Dakheliya Firq Muscat Hail (Shell Petrol Station)
South Batinah Mussanah
Azaiba (Shell Petrol Station)
Barka South Batinah Barka (Dragon Mart)
Dhofar Saada Qurum (Water Front)
Rustaq Souq Nakhal
Buraimi Buraimi Dakheliya Nizwa (Industrial Area)

Muscat Al Khoudh
Izki (Al Rabia Shopping Centre)
Al Mabellah
Nizwa
Dhahira Ibri (Shell Petrol Station) Ghala
Dhahira Ibri Al Ghubra

Dhofar Salalah (Al Maha Petrol Station)
Dhofar Salalah Al Baleed Resort
Salalah (Al Maha Petrol Station)
Musandam Khasab
Muscat Atheba (Al Meera Hypermarket)
Muscat Al-Khoudh Al-Hail-North (Shell Petrol Station)
Al-Mabellah China Mall
A’Seeb Mabellah Souq
Al Amirat Mabellah Industry (Shell Petrol Station)
Avenues Mall Mabellah (Al Maha Petrol Station)
Aziaba Knowledge Oasis Muscat
Al Khuwair Mawalih makert
MBD Ministry of Defense (Moaskar Mortafa’a)
Ruwi Muscat International Airport
Wattaya Oman Exhibition & Convention Center
Al Qurum Almouj
Shatti Qurum Marmul Travels
Ruwi
South Sharqiya Jalan Bani Bu Ali China Market-North
Sur Darsait (Shell petrol station)
North Sharqiya Ibra WaterFront
Sinaw Mawaleh
North Sharqiyah Ibra (Asifala)
South Sharqiyah Sur

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P.O. Box 44, Postal Code. 114, Hai Al Mina
Sultanate of Oman Tel: + 968 24730000
soharinternational.com
290 Sohar International 2020

Sohar International Annual Report - 2020 - EN

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SHARP

ANNUAL REPORT 2020

Late His Majesty His Majesty

• Do the right thing

6 Sohar International 2020 Sohar International 2020 7

8 Sohar International 2020 Sohar International 2020 9

SOHAR ISLAMIC 178

BOARD OF DIRECTORS 12 Shari’ah Supervisory Board 180

Management Discussion and Analysis 41 REGULATORY DISCLOSURES - SOHAR ISLAMIC 248

Business Continuity Management statement 47 Auditors’ Report on Regulatory Disclosures

Statement of Financial Position 55 CONTACTS 284

Statement of Changes in Equity 57

Statement of Cash Flows 61

Notes to the Financial Statement 62

12 Sohar International 2020 Sohar International 2020 13

Mr. Bipin Dharamsey Nensey

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18 Sohar International 2020 Sohar International 2020 19

y Maintain the highest standards of corporate governance and regulatory compliance.

2.1 Composition and classiﬁcation of the Board

Table 1: Composition and classiﬁcation of the Board

Name of Director Category Represents

Mr. Salim Mohammed Al Mashaikhy Non-Executive Independent

Mr. Said Ahmed Safrar Non-Executive Independent

Engr. Ahmed Hamed Al Subhi Non-Executive Non- Independent

Mr. Tareq Al Mugheiry Non-Executive Independent

Mr Bipin Dharamsey Nensey Non-Executive Independent

20 Sohar International 2020 Sohar

2.2 Proﬁle of Directors 2.2 Proﬁle of Directors (continued)

22 Sohar International 2020 Sohar

6 Mr. Tareq Mohamed Al Mugheiry 6,300

Mr. Said Ahmed Safrar 9 9 9 9 9 9 9

No of Mr. Mohammed Al Ardhi 4 1 - -

ENRC 1 Mr. Ahmed Al Subhi - 4 - 3

Sheikh Azzan bin Nasser Al Amri 9 9 9 9 4 4,000 40,000

Sheikh Al-Mu’tasim Said Al Maawali (Member from June 2020)

26 Sohar International 2020 Sohar

Mr. Ahmed Al Musalmi Craig Barrington Bell

28 Sohar International 2020 Sohar

April 30 0.084 0.082 0.083 5569.26

Name of Shareholder Percentage of Shareholding

Royal Court Affairs 14.56903

Seventh Moon Investment LLC 9.02803

Neptune National Investment company LLC 7.81079

Western Sea Investments LLC 7.60147

MARS Development and Investment LLC. 6.37899

Oman Investment Authority /1 5.23736

30 Sohar International 2020 Sohar

10. AUDITOR’S PROFILE

11. RIGHTS OF SHAREHOLDERS

12. RELATED PARTY TRANSACTIONS, DEALINGS AND POLICY

32 Sohar International 2020 Sohar International 2020 33

34 Sohar International 2020 Sohar International 2020 35

MIDDLE ROW (Left to Right) MIDDLE ROW (Left to Right)

FIRST ROW (Left to Right) FIRST ROW (Left to Right)

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