Instructions No. 5 of 2018 Regarding the Application of the Net Stable Funding Ratio

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Guide to Calculating the Net Stable Funding Ratio Net Stable Funding Ratio (NSFR)

Introduction: The second quantitative liquidity standard is the Net Stable Funding Ratio, which ensures that the bank maintains a minimum level of stable funding for its on-balance sheet assets during a full year, and provides emergency liquidity to help fund some off-balance sheet obligations. This standard aims to limit excessive reliance on wholesale (short-term) borrowing funding.

Net Stable Funding is defined as: the ratio of Available Stable Funding (ASF) to Required Stable Funding (RSF), where this ratio must not be less than 100% at any time.

Therefore, the Net Stable Funding Ratio is calculated as follows:

Net Stable Funding Ratio = Total Available Stable Funding / Total Required Stable Funding ≥ 100%

This guide consists of four chapters plus the Net Stable Funding Ratio calculation form, as follows: Chapter One: Definitions. Chapter Two: Available Stable Funding. Chapter Three: Required Stable Funding. Chapter Four: General Disclosure Requirements. Appendix: Net Stable Funding Ratio Calculation Form.

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Chapter One: Definitions

The following terms must be understood wherever they appear in these guidelines for the purpose of the Net Stable Funding Ratio standard as follows:

-1 Qualified Bilateral Netting Agreement: A bilateral netting agreement for derivative transactions is qualified if the following conditions are met: a. The bilateral netting agreement is legally enforceable. b. The agreement states that the bank has the right to receive the net positive market value of the covered transactions in the agreement, or that the bank has an obligation to pay the net negative market value, which represents the net sum of the market values of all transactions with the counterparty, in the event of the counterparty's default, insolvency, or other similar circumstances. c. The agreement covers all legal aspects, including rights and obligations in the event of default, financial distress, insolvency, or similar circumstances, as well as the competent courts and applicable law. d. The netting agreement does not allow the counterparty (non-defaulting) to pay limited amounts or that no amount is paid to the (defaulting) party. e. The bank has clear and implemented procedures to monitor such agreements to ensure compliance by the parties to the agreement. And the covered transactions under this agreement are managed on a net position basis. f. The transactions are fully documented and support netting.

-2 Wholesale Deposits: Means deposit accounts held by a wholesale client for the primary purpose of obtaining specific operational services from the bank through a third party or intermediary.

-3 Secured Funding: Any liability or general obligation of the bank arising from covered securities transactions including a mortgage on real estate or a pledge or lien on a specific asset owned by the bank, giving the counterparty priority in the asset in the event of insolvency, financial distress, or liquidation or implementation of restructuring.

-4 Encumbered Assets: Means assets that have apparent or implicit legal, regulatory, tax, accounting, or contractual restrictions affecting the bank's ability to liquidate the asset by selling or transferring ownership. This includes collateral for covered securities or covered bonds or encumbered assets in securities financing transactions.

-5 Reverse Repurchase Agreements: These refer to an agreement to purchase securities that will be sold at a higher price on a specified future date.

-6 Collateral Swaps: Through which a liquid asset is lent to a party in exchange for receiving a less liquid asset as collateral.

Chapter Two: Available Stable Funding (ASF)

First: Definition of Available Stable Funding:

.1 Available Stable Funding includes the percentage of capital and liabilities that are expected to represent funding sources relied upon by the bank for a period of at least one year. Capital and liability sources are classified into one of five categories (listed below before any supervisory deductions or haircuts), and then each category is multiplied by "Available Stable Funding (ASF)" weighting factors. The remaining maturity of these sources and the probability of their withdrawal are taken into account.

.2 The bank must, in determining the maturity of liabilities and equity instruments that include a call option, assume that the call will occur at the earliest possible time, especially when the withdrawal of liabilities is expected before the legal maturity date. For long-term liabilities, the portion of cash flows that fall in the time period of 6 months, 1 year, or more is treated as having a remaining maturity of 6 months or more, or 1 year or more, respectively.

.3 Derivatives on the liability side are calculated based on the replacement cost of derivative contracts (based on market value) if the contract value is negative. The net replacement cost is calculated if there is a qualified bilateral netting agreement. The posted collateral, including variation margin (Margin Variation) for derivative contracts, is deducted from the negative replacement cost amount regardless of the asset type.

Second: Categories of Capital and Liability Sources

-1 Capital and liability sources given a weighting factor of 100% include the following: a. The total amount of regulatory capital before applying deductions (such as goodwill, deferred tax assets, and other deductions) for regulatory capital purposes. Instruments of subordinated debt with a remaining maturity of less than one year are excluded. b. The total amount of capital instruments that do not fall under item (a) and have a remaining maturity of one year or more, except for instruments that have (explicitly or implicitly) a call option feature which in turn reduces the expected maturity to less than one year. c. The sum of secured and unsecured borrowings and liabilities (including time deposits) with a remaining maturity of one year or more. Cash flows with a remaining maturity of less than one year resulting from liabilities with a final maturity of more than one year are not eligible under this category (100%).

-2 Liabilities given a weighting factor of 95%: a. This category includes stable deposits for retail and small institutional customers, whether current (demand) or savings, or time deposits with a remaining maturity (or notice period for withdrawal) of less than one year. b. Stable deposits refer to the amount of deposits insured up to the deposit insurance limit (treated as fully insured) by the deposit insurance institution, and the following apply: • The depositor has other ongoing transactions with the bank and is willing to withdraw the deposits as a whole, or • The deposits are in current accounts. All other deposits that do not meet these criteria are treated as less stable deposits.

-3 Liabilities given a weighting factor of 90%: This category includes less stable deposits for retail and small institutional customers, according to the liquidity definition and up to a maximum amount of $1 million or its equivalent in other currencies, whether current (demand) or savings, or time deposits with remaining maturities (or notice periods for withdrawal) of less than one year.

-4 Liabilities given a weighting factor of 80%: These are less stable deposits for retail and small institutional customers that exceed $1 million USD or its equivalent in other currencies, whether current (demand) or savings, or time deposits with remaining maturities (or notice periods for withdrawal) of less than one year.

-5 Liabilities given a weighting factor of 50% include the following: a. Secured and unsecured funding with a remaining maturity of less than one year provided by non-financial institutions. b. Operational deposits. c. Funding with remaining maturities of less than one year provided by government entities, public sector institutions, and development banks. d. Other secured and unsecured funding (deposits, loans, etc.) not included in items (a) to (c) above and having remaining maturities between six months and less than one year, including funding from licensed banks and financial institutions.

-6 Liabilities given a weighting factor of 0% include the following: a. All categories of liabilities not included in the above categories, including funding with remaining maturities of less than six months provided by licensed banks or financial institutions. b. Other liabilities with no specific maturity dates. This includes open positions and positions with open maturity dates. Excluded from these liabilities with no specific maturity dates are the following: • Deferred taxes on the liability side, which must be treated according to the earliest time these liabilities are due. • Minority interests, which must be treated according to the maturity of the instrument, which is usually permanent.

For these excluded liabilities, an Available Stable Funding factor of 100% is applied if the actual maturity is one year or more, and 50% if the actual maturity is between six months and less than one year. c. Derivatives on the liability side and the calculation method outlined in items (2 and 3) in the definition of Available Stable Funding, excluding netting of derivatives on the asset side according to the calculation method outlined in items (1 and 2) in Chapter Three, if derivatives on the liability side are greater than derivatives on the asset side for Net Stable Funding Ratio purposes. d. Trade Date Payables resulting from the purchase of financial instruments, foreign currencies, and commodities which: (1) are expected to be settled within the usual settlement cycle or the usual period for the swap transaction or type of transaction, or (2) have not been successfully settled but are expected to be settled.

Table (1): Summary of Capital and Liability Source Categories and Associated Weighting Factors

Category Description	Weighting Factor (%)
• Regulatory Capital (except subordinated debt instruments with remaining maturities of less than one year).
• Capital instruments not included in the above item and liabilities (secured and unsecured) with actual remaining maturities of one year or more.
• Deferred taxes on the liability side with an actual remaining maturity of one year or more.
• Minority interests with an actual remaining maturity of one year or more.	100
• Stable deposits for retail and small institutional customers, whether demand or savings, or time deposits with remaining maturities or notice periods for withdrawal of less than one year.	95
• Less stable deposits for retail and small institutional customers, whether current or savings or time deposits with remaining maturities (or notice periods for withdrawal) of less than one year.	90
• Less stable deposits for retail and small institutional customers exceeding $1 million USD or its equivalent in other currencies, whether current (demand) or savings, or time deposits with remaining maturities (or notice periods for withdrawal) of less than one year.	80
• Secured and unsecured funding with remaining maturities of less than one year provided by non-financial institutions.
• Operational deposits.
• Funding with remaining maturities of less than one year provided by government entities, public sector institutions, and development banks.
• Other secured and unsecured funding not included in the above categories and having remaining maturities between six months and less than one year, including funding from licensed banks and financial institutions.
• Deferred taxes on the liability side with an actual remaining maturity between six months and less than one year.
• Minority interests with an actual remaining maturity between six months and less than one year.	50
• All categories of liabilities and capital not included in the above categories, including other liabilities with no specific maturity date.
• Derivatives on the liability side, excluding netting of derivatives on the asset side if derivatives on the liability side for stable funding purposes are greater than derivatives on the asset side.
• Trade Date Payables resulting from the purchase of financial instruments, foreign currencies, and commodities.	0

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Chapter Three Required Stable Funding (RSF)

First: Definition of Required Stable Funding:

-1 Required Stable Funding (the denominator) represents on-balance sheet assets and off-balance sheet exposures that are expected to be funded over a period of at least one year, and determining this amount depends on the liquidity characteristics and remaining maturities of the assets and off-balance sheet exposures. Required Stable Funding is calculated by classifying on-balance sheet and off-balance sheet assets, each associated with a "Required Stable Funding (RSF)" factor, where assets with higher liquidity levels receive lower weighting factors, while less liquid assets receive higher weighting factors, requiring more stable funding.

-2 The definitions for the Net Stable Funding Ratio correspond to the Liquidity Coverage Ratio standard issued by the Central Bank, unless otherwise stated.

-3 The factors used to calculate Required Stable Funding aim to estimate the amount required to fund a specific asset due to the renewal of its maturity or the inability to liquidate the asset or use it as collateral in secured borrowing transactions within one year without incurring high costs. For the purpose of this ratio, it is expected that there will be stable funding sources to support these assets.

-4 The appropriate Required Stable Funding factor is used based on the remaining maturity of the asset or its liquidation value. When determining the maturity of the instrument, it is assumed that the investor will use any available options to extend the maturity. In particular, when expecting the extension of asset maturity, the bank must assume this occurs for the purpose of calculating the Net Stable Funding Ratio and include these assets in the appropriate Required Funding category. As for amortizing loans, the portion due within one year must be treated within the less than one year maturity category.

-5 To determine Required Stable Funding, the bank must (a) include financial instruments, foreign currencies, and commodities for which a purchase order has been executed, and (b) exclude financial instruments, foreign currencies, and commodities for which a sale order has been executed, even if these transactions have not been recorded in the bank's balance sheet using the settlement date accounting method (Model Accounting Date-Settlement), taking into account (a) that the effect of these transactions has not been recorded in derivatives or secured lending transactions in the bank's balance sheet, and (b) that the effect of these transactions will be recorded in the balance sheet when they are settled.

Second: Encumbered Assets:

-1 The appropriate Required Stable Funding factor is applied to encumbered assets as follows: a. For encumbered assets for one year or more, a Required Stable Funding factor of 100% is applied. b. For encumbered assets for a period between six months and less than one year, the following applies: • A weighting factor of 50% if these assets are subject to a Required Stable Funding factor of 50% or less if they were not encumbered. • If the assets are subject to a Required Stable Funding factor greater than 50% if they were not encumbered, the same Required Stable Funding factor is applied. c. If the assets are encumbered for less than six months, the same Required Stable Funding factor is applied that is applied to similar unencumbered assets.

Third: Secured Financing Transactions:

-1 For secured financing transactions, including securities financing transactions, the following applies: a. Securities lent or borrowed in transactions such as reverse repurchase agreements (Repo/Reverse Repo) or collateral swaps are included in the balance sheet if the bank retains beneficial ownership; otherwise, they are not included in the Required Stable Funding categories. b. If the bank has encumbered assets in repurchase agreements (Repo) or other securities financing transactions while retaining ownership of these securities, these assets are included in the bank's balance sheet and these securities are included in the appropriate Required Stable Funding category.

-2 If securities financing transactions are with a single counterparty, the net of these transactions is used when calculating the Net Stable Funding Ratio if the following netting conditions are met: a. The transactions have the same final settlement date. b. The right to net the amount owed to the counterparty with the amount owed to the same counterparty is legally enforceable in the normal course of business and in the following cases: (a) Default, (b) Insolvency, and (c) Bankruptcy. c. Net settlement or reciprocal settlement occurs at the same time, and settlement is through the same payment and settlement system that allows netting of settlement amounts into a single amount.

Fourth: Calculation of Derivatives on the Asset Side:

-1 Derivatives on the asset side are calculated based on the replacement cost of derivative contracts (specified based on market value) if the contract value is positive. In the event of a qualified bilateral netting agreement, the replacement cost for the covered derivative exposures in the contract is the net replacement cost.

-2 When calculating derivatives on the asset side for the Net Stable Funding Ratio standard, received collateral for derivatives is not used to offset positive replacement costs, regardless of whether netting is permitted under the accounting framework or risk framework. This is except for the case of receiving collateral as cash variation margin and meeting all the conditions mentioned below. Only liabilities related to: (a) Received cash variation margin that does not meet the aforementioned conditions, or (b) Received initial cash margin are used to offset derivatives on the asset side, and an Available Stable Funding factor of 0% is applied.

-3 The bank may use the cash portion of the received variation margin (Margin Variation) to reduce the replacement cost only if the following conditions are met: a. The cash received from the counterparty in the transactions netted by a qualified licensed counterparty is not segregated from the cash portion of the variation margin. b. Margin calls and adjustments are based on daily market price assessments. c. The margin covers the entire derivative exposure at market value. d. The margin and derivative transactions with related parties are covered by a master netting agreement between the counterparties.

Fifth: Required Funding Categories:

-1 Assets given a required weighting factor of 0% include the following: a. Cash and metal reserves available immediately to meet obligations. b. Central Bank reserves (including required reserves and excess reserves). c. Claims on licensed banks with remaining maturities of less than six months. d. Trade Date Receivables resulting from the sale of financial instruments, foreign currencies, and commodities (1) expected to be settled within the usual settlement cycle or the usual period for the swap transaction or type of transaction, or (2) that have not been successfully settled but are expected to be settled.

-2 Assets given a required weighting factor of 5% include the following: a. This category includes high-quality Level 1 liquid assets that are unencumbered, according to their definition in the Liquidity Coverage Ratio standard, except for assets given a Required Stable Funding factor of 0% as mentioned above, including the following: • Tradable securities representing claims on or secured by governments, licensed banks, public sector institutions, development banks, the Bank for International Settlements, the International Monetary Fund, the European Central Bank, or the European Commission, given a risk weight of 0% according to the standardized approach for calculating credit risk.

-3 Assets given a required weighting factor of 10%: This category includes unsecured loans and deposits provided to financial institutions with remaining maturities of less than six months if the loans are secured by high-quality Level 1 liquid assets as stated in the Liquidity Coverage Ratio guidelines (Item 2/2.1 of Chapter Three) and the bank has the ability to rehypothecate the received collateral throughout the loan period.

-4 Assets given a required weighting factor of 15% include the following: a. High-quality Level 2/A category unencumbered liquid assets as stated in the Liquidity Coverage Ratio guidelines (Item 2/2.2.1 of Chapter Three), including the following: • Tradable securities representing claims on or secured by governments, licensed banks, public sector institutions, or development banks, given a risk weight of 20% according to the standardized approach for calculating credit risk. • Debt instruments (including commercial paper) and covered bonds issued by entities with a long-term credit rating of AA- or higher. b. Other unsecured loans and deposits provided to financial institutions with remaining maturities of less than six months and not included in item (3) above.

-5 Assets given a required weighting factor of 50% include the following: a. High-quality Level 2/B category unencumbered liquid assets as stated in the Liquidity Coverage Ratio guidelines (Item 2/2.2.2 of Chapter Three), including the following: • Debt instruments (including commercial paper) and covered bonds issued by entities with a long-term credit rating of A+ or BBB- or higher. • Equity shares issued by entities other than financial institutions or their subsidiaries, traded within the official market scope. b. High-quality liquid assets encumbered for a period between six months and less than one year. c. Loans and deposits provided to financial institutions and licensed banks with maturities between six months and less than one year. d. Deposits for other financial institutions (authorized to accept deposits) for operational purposes as stated in the Liquidity Coverage Ratio guidelines (Item 1.3.2 of Chapter Four) and which apply an Available Stable Funding factor of 50%. e. All other assets, except high-quality liquid assets not included in the previous categories, with maturities of less than one year, including loans to non-financial institutions, loans to retail and small institutional customers, and loans to government entities and public sector institutions.

-6 Assets given a required weighting factor of 65% include the following: a. Eligible qualifying mortgages that are unencumbered and have remaining maturities of one year or more, and are subject to a risk weight of 35% or less according to the standardized approach for calculating credit risk. b. Other unsecured loans and deposits not included in the previous categories, except loans and deposits provided to financial institutions with remaining maturities of one year or more, and subject to a risk weight of 35% or less according to the standardized approach for calculating credit risk.

-7 Assets given a required weighting factor of 85% include the following: a. Cash, securities, and other assets provided as initial margin (Margin Initial) for derivative contracts and cash or other assets provided to contribute to the default fund (Fund Default) of a licensed counterparty (Central Counterparty). If the securities or other assets provided as initial margin have a higher Required Stable Funding factor, the higher factor is applied. b. Other regular loans (not overdue for more than 90 days) that are unencumbered and not subject to a risk weight of 35% or less according to the standardized approach for calculating credit risk, and have maturities of one year or more, except loans and deposits provided to financial institutions. c. Unencumbered securities with maturities of one year or more and shares traded within the official market scope, in the event that the issuing entities are not in default and these instruments do not qualify as high-quality liquid assets according to the Liquidity Coverage Ratio. d. Physical commodities traded, including gold.

-8 Assets given a required weighting factor of 100% include the following: a. All encumbered assets for a period of one year or more. b. Derivatives on the asset side calculated according to Chapter Three, excluding netting with derivatives on the liability side calculated according to items (2 and 3) of Chapter Two, if derivatives on the asset side are greater than derivatives on the liability side for the Net Stable Funding Ratio standard. c. All other assets not included in the previous categories, including non-regular loans (net of provisions), loans and deposits provided to financial institutions with a maturity of one year or more, shares not traded within the official market scope, fixed assets, and deductions from regulatory capital and assets of subsidiary insurance companies and distressed securities. d. Derivatives on the liability side (the negative amount of replacement cost) calculated according to item (2) of Chapter Two before deducting variation margin.

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Table (2): Summary of Asset Categories and Associated Weighting Factors

Category Description	Weighting Factor (%)
• Cash and metal reserves.
• Reserves held with the Central Bank.
• Claims on licensed banks with remaining maturities of less than six months.
• Trade Date Receivables resulting from the sale of financial instruments, foreign currencies, and commodities.	0
• High-quality Level 1 liquid assets unencumbered, except cash and metal reserves and Central Bank reserves.
• Unsecured loans and deposits provided to financial institutions with remaining maturities of less than six months if the loans are secured by high-quality Level 1 liquid assets and the bank has the ability to rehypothecate the received collateral throughout the loan period.	5
• High-quality Level 2/A category unencumbered liquid assets.
• All other encumbered loans and unsecured deposits provided to financial institutions with remaining maturities of less than six months and not included in the previous categories.	10
• High-quality Level 2/B category unencumbered liquid assets.
• High-quality liquid assets encumbered for a period between six months and less than one year.
• All loans and deposits provided to financial institutions and licensed banks with maturities between six months and less than one year.
• Deposits for other financial institutions for operational purposes...	15
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