IIRA assigns fiduciary ratings to ABC Islamic Bank (E.C)

The national scale ratings are largely shielded from sovereign risk elements, whereas international ratings also take into account the global positioning of the Kingdom of Bahrain.

Outlook on ratings is 'Stable'. The fiduciary score has been assessed to be in the range of (75-80), and points to strong fiduciary capacity and a well developed governance structure, wherein rights of various stakeholders are well defined and protected. The fiduciary score is an aggregation of scores assigned to its three sub-sections, namely Corporate and Shariah Governance, and Asset Manager Quality.

The fiduciary rating system caters specifically to Islamic banks. In addition to being a manifestation of the bank's practices as a modarib and its ability to perform as an asset manager, it also assesses the bank's ability to pay debt like obligations, as reflected in the credit ratings of the institution.

As a wholly owned subsidiary, the bank's governance framework was viewed in context of best practices followed by the parent bank, in terms of constitution of the parent's board, its governance related disclosures and the pass through of the parent bank's systems and procedures to the subsidiary. ABC Islamic Bank (E.C) follows sound principles of risk planning and has in place comprehensive systems to manage and monitor risks.

Shariah compliance is a dedicated function within the bank and all transactions are verified for being in accordance with Shariah. The Shariah supervisory board comprises eminent members and exercises independent judgment in matters pertaining to Shariah.

The bank's asset quality was strained during the period 2008-2009, as the global economic crisis also impacted the GCC markets, where the bank has its primary exposures. Since then however there has been no fresh incidence of non-performance. Moreover, ABC Islamic Bank (E.C) enjoys strong backing of the parent bank, which has the ability and a demonstrated track record of supporting the subsidiary when needed.