Capital Management and Allocation
In accordance with the CBK guidelines (CBK circular No.2/RB,RBA/336/2014), the Kuwaiti banks must maintain a minimum capital adequacy ratio of 13%. Tier 1 capital comprising Common Equity Tier 1 (CET1) and Additional Tier 1 (AT1) capital. CET1 comprising paid up share capital, share premium and reserves including property revaluation reserve and fair valuation reserve less treasury shares and Tier 2 comprising allowed portion of general provisions (1.25% of the risk weighted assets) and subordinated Tier 2 bonds. Gulf Bank (the "Bank") has been identified as a Domestic Systemically Important bank (D-SIB) and is required to hold additional Common Equity Tier 1 capital (CET1) of 1% (2017: 1%).
The table below details the regulatory capital for the Bank as at 31 December 2018 and 31 December 2017:
The Bank’s capital management policy is to ensure and maintain an adequate capital base to support the development and growth of the business. Current and future capital requirements are determined on the basis of loan growth expectations for each business group, expected growth in other balance sheet items, off-balance-sheet facilities and trading (i.e. market risk) activities, and the Bank’s future dividend policy.
The Bank seeks to maintain a prudent balance between the different components of its capital, particularly the relative mix of Tier 1 and Tier 2 capital.
The following table below details the risk-weighted exposures, regulatory capital requirements and regulatory capital ratios for the Bank as at 31 December 2018 and 31 December 2017:
Regulatory Capital requirement at 13%
The regulatory capital allocation disclosed above is calculated at 14% (including 1% for DSIBs).The total risk-weighted exposure as at 31 December 2018 is KD 4,465.7 million (2017: KD 4,226.2 million), requiring a regulatory capital at 14% (2017: 14%), of KD 625.2 million (2017: KD 591.7 million).
The Bank’s regulatory capital as at 31 December 2018 is KD 782.9 million (2017: KD 752.1 million), translating to a capital adequacy ratio of 17.5% (2017: 17.8%).