Central Bank of Lebanon Decision No. 13032 Amending Decision No. 6574 on Financial Statements

Circular No. 518

To Banks, Financial Institutions, and Supervisory Commissioners

Decision No. 13032 dated 19/3/2019

We kindly enclose a copy of Central Bank Decision No. 13032 amending the Basic Decision No. 6574 dated 24/4/1997 concerning the preparation of the Balance Sheet and Income Statement for publication, attached to Basic Circular No. 33.

Beirut, March 19, 2019

Governor of the Central Bank of Lebanon

Riad T. Safre

Central Bank Decision No. 13032

Amending Basic Decision No. 6574 dated 24/4/1997

The Governor of the Central Bank of Lebanon,

Pursuant to the Monetary and Loan Law, specifically Articles 146 and 179 thereof,

And pursuant to Basic Decision No. 6574 dated 24/4/1997 and its amendments concerning the preparation of the Balance Sheet and Income Statement for publication,

And pursuant to the decision of the Central Council of the Central Bank of Lebanon taken in its meeting held on 13/3/2019

Decides as follows:

Article One: The text of Article One of Basic Decision No. 6574 dated 24/4/1997 is repealed and replaced by the following text:

"All banks and financial institutions operating in Lebanon are required to prepare the Balance Sheet and Income Statement for publication according to the two models attached to this decision, in accordance with International Financial Reporting Standards (IFRS) and their accompanying notes, starting from the fiscal year 2018.

Banks licensed to offer their shares to the public or for trading in organized financial markets must publish the aforementioned financial statements quarterly in the Stock Exchange bulletin and in two widely circulated local newspapers, within a period not exceeding the end of the month following each statement.

As for other banks and all other financial institutions, they must publish the aforementioned financial statements on an annual basis within the period stipulated by law."

Article Two: The text of Article Two of Basic Decision No. 6574 dated 24/4/1997 is repealed and replaced by the following text:

"Banks and financial institutions must provide the Statistics and Research Department at the Central Bank of Lebanon with the 'Income Statement' for Lebanese branches prepared according to model (-1PL) and the consolidated 'Income Statement' prepared according to model (-9PL) attached to this decision, within a deadline not exceeding the end of June of each year.

Banks must send the statements mentioned in this article via the Special Project for Electronic Transmission of Statistical Reports (eSTR) within the SEBIL system.

Financial institutions must send the aforementioned statements on a magnetic disk."

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Article Three: The text of Article Four of Basic Decision No. 6574 dated 24/4/1997 is repealed and replaced by the following text:

"When publishing the financial statements prepared for publication, banks and financial institutions must clearly and explicitly indicate the media (internet, newspapers, economic magazines, reports...) that enable users of the published financial statements to access:

1. All financial statements for the reported period which, together with the Balance Sheet and Income Statement prepared for publication, constitute the complete set of financial data that a user is required to access according to International Accounting Standard No. 1 (Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows, notes including significant accounting policies...).

2. Disclosures and detailed information required for each of the Balance Sheet and Income Statement prepared for publication and all other financial statements mentioned above, in accordance with International Accounting Standard No. 1 and other International Financial Reporting Standards.

3. Any other disclosures or information that may be required by provisions issued by the Central Bank of Lebanon and the Banking Control Commission."

Article Four: The text of the "Balance Sheet prepared for publication" and the "Income Statement prepared for publication" and their accompanying notes attached to Basic Decision No. 6574 dated 24/4/1997 is repealed and replaced by the new texts attached to this decision.

Article Five: The text of the "Income Statement" for model (-1BPL) attached to Basic Decision No. 6574 dated 24/4/1997 is repealed.

Article Six: This decision shall be enforced upon its issuance.

Article Seven: This decision shall be published in the Official Gazette.

Beirut, March 19, 2019

Governor of the Central Bank of Lebanon

Riad T. Safre

Balance Sheet Prepared for Publication (*) In accordance with International Financial Reporting Standards (IFRS)

(On an individual or consolidated basis, where applicable)

(Values in millions of L.L.)

• I Assets

Notes As of ..../../.. As of ..../../..

1 Cash and Issuing Institutions 2 Deposits with Banks and Financial Institutions 3 Head Office, Parent Institution, Sister, Subsidiary and Associate Banks and Financial Institutions

• Loans to Banks and Financial Institutions and Repurchase Agreements 4 Financial Assets Pledged as Collateral 5 Financial Derivative Instruments 6 Equity Instruments at Fair Value Through Profit or Loss (FVTPL) 7 Debt Instruments and Other Financial Assets at Fair Value Through Profit or Loss (FVTPL) Of which: Net Loans and Advances Classified at Fair Value Through Profit or Loss (FVTPL) 8 Equity Instruments at Fair Value Through Other Comprehensive Income (FVOCI) 9 Debt Instruments and Other Financial Assets at Fair Value Through Other Comprehensive Income (FVOCI) 10 Net Loans and Advances to Customers at Amortized Cost Net Loans and Advances to Related Parties at Amortized Cost Debtors under Acceptances 11 Debt Instruments at Amortized Cost 12 Shares and Participations in Subsidiary and Associate Companies 13 Assets Acquired in Settlement of Debts 14 Tangible Fixed Assets 15 Intangible Fixed Assets 16 Non-Current Assets Held for Sale 17 Other Assets 18 Goodwill 19 Total Assets

(*) Banks and financial institutions must indicate the media that enable users of the published financial statements to access the required disclosures and detailed information in accordance with International Financial Reporting Standards (Annual and Periodic Reports, Head Offices, Branches, and Units of the Bank or Financial Institution in Lebanon and Abroad, Internet sites, ...).

Balance Sheet Prepared for Publication (*) In accordance with International Financial Reporting Standards (IFRS)

(On an individual or consolidated basis, where applicable)

(Values in millions of L.L.)

• II Liabilities and Shareholders' Equity

Notes As of ..../../.. As of ..../../..

1 Issuing Institutions 2 Banks and Financial Institutions and Repurchase Agreements 3 Head Office, Parent Institution, Sister, Subsidiary and Associate Banks and Financial Institutions

4 Financial Derivative Instruments 5 Financial Liabilities at Fair Value Through Profit or Loss Of which: Deposits at Fair Value Through Profit or Loss 6 Customer Deposits and Accounts Payable at Amortized Cost Deposits and Accounts of Related Parties at Amortized Cost 7 Liabilities in the form of Banknotes or Financial Instruments 8 Commitments under Acceptances 9 Other Liabilities 10 Provisions for Risks and Charges 11 Subordinated Debts and Similar Items 12 Non-Current Liabilities Held for Sale 13 Total Liabilities Shareholders' Equity - Group Share

• Capital - Ordinary Shares 11
• Capital - Preference Shares and Similar Items 11
• Share Premium - Ordinary
• Share Premium - Preference
• Cash Advances Allocated to Capital
• Non-Distributable Reserves
• Distributable Free Reserves
• Repurchased Capital Instruments
• Retained Earnings Distributable
• Revaluation Surplus on Real Estate (**) 12
• Reserve for Real Estate, Participations, and Partnership Shares Acquired in Settlement of Suspended or Doubtful Debts per Article 154 of the Monetary and Loan Law 13 Changes in Fair Value of Financial Instruments Classified at Fair Value Through Other Comprehensive Income (OCI)
• Changes in Fair Value of Hedging Derivatives for Cash Flow Hedges
• Foreign Exchange Translation Differences 14 Results of the Financial Period (±) 15 Minority Interests 16 Expense and Income Accounts (in case of interim period status) 17 Total Shareholders' Equity / Head Office 18 Total Liabilities and Shareholders' Equity / Head Office

(*) Banks and financial institutions must indicate the media that enable users of the published financial statements to access the required disclosures and detailed information in accordance with International Financial Reporting Standards (Annual and Periodic Reports, Head Offices, Branches, and Units of the Bank or Financial Institution in Lebanon and Abroad, Internet sites, ...).

(**) Banks and financial institutions operating in Lebanon must include the following disclosures:

• The value of revaluation differences of real estate assets (land and buildings) owned by the bank or financial institution in full, and real estate assets owned in full by real estate companies in which the bank or financial institution participates.
• The value of differences resulting from the revaluation of real estate in accordance with Article 50 of the Lebanese Income Tax Law.

Balance Sheet Prepared for Publication (*) In accordance with International Financial Reporting Standards (IFRS)

(On an individual or consolidated basis, where applicable)

(Values in millions of L.L.)

Notes As of ..../../.. As of ..../../..

III - Off-Balance Sheet

1 Financing Commitments

• Commitments Given to Banks and Financial Institutions
• Commitments Received from Banks and Financial Institutions
• Commitments to Customers 2 Guarantee Commitments
• Suretyship, Sufficiency, and Other Guarantees Given to Banks and Financial Institutions Of which: Credit Derivative Instruments
• Suretyship, Sufficiency, and Other Guarantees Received from Banks and Financial Institutions Of which: Credit Derivative Instruments
• Suretyship, Sufficiency, and Guarantees Given to Customers
• Suretyship, Sufficiency, and Guarantees Received from Customers 3 Commitments on Securities
• Securities for Purchase Of which: Values Sold with Right of Repurchase or Redemption
• Securities for Delivery Of which: Values Purchased with Right of Resale or Redemption 4 Foreign Currency Operations
• Foreign Currency for Purchase
• Foreign Currency for Delivery 5 Commitments on Financial Instruments with Maturity < 1 Year 6 Other Commitments 7 Claims Resulting from Legal Disputes 8 Credit Accounts
• Subject to Specific Instructions
• Subject to Prudent Allocation 9 Assets of Asset Management Accounts 10 Collective Investment Bodies 11 Financial Instruments and Products Linked to Indices and Financial Derivatives 12 Bad Customer Debts Transferred Out of Balance Sheet

(*) Banks and financial institutions must indicate the media that enable users of the published financial statements to access the required disclosures and detailed information in accordance with International Financial Reporting Standards (Annual and Periodic Reports, Head Offices, Branches, and Units of the Bank or Financial Institution in Lebanon and Abroad, Internet sites, ...).

Income Statement Prepared for Publication (*) In accordance with International Financial Reporting Standards (IFRS)

(On an individual or consolidated basis, where applicable)

(Values in millions of L.L.)

Subtotals Notes As of ..../../.. As of ..../../..

1 Interest Income and Similar Income 2 Interest Expense and Similar Charges - 3 Net Interest Income a 4 Fee and Commission Income 3 Fee and Commission Expense - 5 Net Fee and Commission Income b 6 Net Profit/Loss from Financial Instruments Classified at Fair Value Through Profit or Loss ± c 4 Of which: Net Unrealized Profit/Loss Of which: Net Interest Income/Expense 7 Net Profit/Loss from Financial Investments ± d 5 8 Other Operating Income + e 6 9 Total Operating Income = a+b+c+d+e

10 Expected Credit Loss Allowance (for Allowance for Expected Credit Loss) ± f 7 11 Impairment Loss on Other Financial Investments (Subsidiary and Associate Companies) g 8 12 Other Provisions h 9

13 Net Operating Income = i+f+g+h 1 14 Staff Expenses and Related 10 15 Administrative Expenses and Other Operating Charges - 11 16 Depreciation Provisions and Impairment of Tangible Fixed Assets (including Assets Acquired in Settlement of Debt) 12 - 17 Amortization of Intangible Fixed Assets - 18 Impairment Provisions for Goodwill - 13 19 Total Operating Charges - j 20 Operating Profit - k=i+j 21 Our Share in Results of Associated Institutions per Net Rights 22 Net Profit or (Loss) from Sale of Other Non-Financial Assets ± m 14 23 Results Before Tax ± n=k+l+m 24 Income Tax s 25 Net Result After Tax from Ordinary Activities - t=n+s 26 Net Result After Tax from Discontinued or Liquidated Activities ± w 15 27 Net Results ± x=t+w 28 Net Results - Minority Share ± 29 Net Results - Group Share 30 Earnings Per Ordinary Share (EPS) 16 31 Diluted Earnings Per Ordinary Share (EPS Diluted) 17

(*) Banks and financial institutions must indicate the media that enable users of the published financial statements to access the required disclosures and detailed information in accordance with International Financial Reporting Standards (Annual and Periodic Reports, Head Offices, Branches, and Units of the Bank or Financial Institution in Lebanon and Abroad, Internet sites, ...).

Notes on the Balance Sheet for Publication In accordance with International Financial Reporting Standards (IFRS)

I- Assets: Financial assets are reported after deducting the Expected Credit Loss allowance on financial assets subject to IFRS 9 (where applicable).

No. Notes Explanation 1 This item includes Cash and Accounts with the Central Bank of Lebanon and other issuing institutions. 2 This item includes the total of Demand and Time Deposits with Banks and Financial Institutions. 3 This item includes Lending operations to Banks and Financial Institutions, Repurchase (Repo) and Reverse Repo operations, and Finance Lease operations conducted with them, as well as Conditional Loans granted to them. 4 Financial assets pledged as collateral are reported regardless of their accounting classification. 5 This item includes the positive fair value of Financial Derivatives, including those designated for Risk Hedging, regardless of their accounting classification. 6 This item includes Equity Instruments classified at Fair Value Through Profit or Loss (FVTPL) according to International Financial Reporting Standard No. 9. 7 This item includes Debt Instruments and other Financial Assets, including Loans to Customers and Related Parties, classified at Fair Value Through Profit or Loss (FVTPL) according to International Financial Reporting Standard No. 9. 8 This item includes Equity Instruments classified at Fair Value Through Other Comprehensive Income (FVOCI) according to International Financial Reporting Standard No. 9. 9 This item includes Debt Instruments and other Financial Assets classified at Fair Value Through Other Comprehensive Income (FVOCI) according to International Financial Reporting Standard No. 9. 10 This item includes Loans and Advances to Customers classified at Amortized Cost according to International Financial Reporting Standard No. 9, and Receivable Accounts resulting from Factoring operations and Finance Lease operations conducted with customers. Also recorded in this item are Receivable Accounts related to Reinsurance operations and Facilities granted to reinsured parties. 11 This item includes Debt Instruments classified at Amortized Cost according to International Financial Reporting Standard No. 9. 12 This item includes Participations in Subsidiary and Associate Companies according to International Accounting Standards No. 27 and No. 28. In the Consolidated Balance Sheet, participations in Associate Companies are recorded in this item using the Equity Method. 13 This item includes Assets Acquired in Settlement of Debts under Article 154 of the Monetary and Loan Law, as well as revaluation differences of these assets, if any. 14 This item includes Tangible Fixed Assets defined in International Accounting Standard No. 16, including the Bank's Real Estate Assets (Land and Buildings) owned by it and approved revaluation differences of real estate by the Central Bank of Lebanon, as well as revaluation differences of real estate in accordance with Article 50 of the Income Tax Law. 15 This item includes Intangible Fixed Assets defined in International Accounting Standard No. 38, excluding Goodwill. 16 This item includes Non-Current Assets Held for Sale according to International Financial Reporting Standard No. 5 (IFRS 5) based on materiality. 17 This item includes Gold and other precious metals, as well as assets whose value is not significant, in addition to other assets. This item also includes Settlement Accounts, including accounts for settling or collecting the value of financial securities and Receivable Accounts related to Current Taxes and Deferred Taxes defined in International Accounting Standard No. 12. 18 The value of Goodwill falling within the scope of consolidation according to International Financial Reporting Standard No. 3 (IFRS 3) is recorded in this item, subject to Impairment Tests according to International Accounting Standard No. 36.

Notes on the Balance Sheet for Publication In accordance with International Financial Reporting Standards (IFRS)

II- Liabilities and Shareholders' Equity:

No. Notes Explanation 1 This item includes Payable Accounts with the Central Bank of Lebanon and other issuing institutions. 2 This item includes Payable Accounts with Banks and Financial Institutions, excluding Liabilities in the form of Banknotes or Financial Instruments and Conditional Debts. It also includes Repurchase Agreements (REPO) with Banks and Financial Institutions, and Payable Accounts with Regional and International Bodies and Multilateral Development Banks. 3 This item includes the negative fair value of Financial Derivatives, including those accepted for risk hedging. 4 This item includes Financial Liabilities for Trading and other Financial Liabilities, including Composite Deposit Accounts or those linked to Financial Derivatives, registered at Fair Value Through Profit or Loss. 5 This item includes Payable Accounts at Amortized Cost related to operations with Creditor Customers other than Banks and Financial Institutions, excluding Composite Deposit Accounts and those linked to Financial Derivatives which are registered at Fair Value Through Profit or Loss. 6 This item includes Liabilities in the form of Banknotes or Financial Instruments, excluding Conditional Debts. 7 This item includes Payable Accounts related to Current and Deferred Taxes defined in International Accounting Standard No. 12. It also includes Settlement Accounts and Payable Accounts for the benefit of third parties, including employees, not included in other liability items, if any. 8 This item includes Provisions formed according to International Accounting Standard No. 37 and Expected Credit Loss allowances on Off-Balance Sheet Financial Liabilities subject to International Financial Reporting Standard No. 9. It also includes Provisions formed for Employee Benefits. 9 This item includes Bonds or Subordinated Debts with fixed or indefinite maturity, as well as Preference Shares not included in Shareholders' Equity according to International Accounting Standard No. 32. 10 This item includes Liabilities related to Non-Current Assets Held for Sale according to International Financial Reporting Standard No. 5 (IFRS 5) based on materiality. 11 Disclosure is made in any of the items concerned by this note, where applicable, regarding Hybrid Capital Instruments according to International Accounting Standard No. 32, in addition to Financial Instruments subject to International Financial Reporting Standard No. 2 (Share-Based Payment). Capital-related reserves include the Legal Reserve, General Non-Distributable Reserve, etc. Repurchased Capital Financial Instruments are also recorded in this item, deducted from Equity. 12 This item includes revaluation differences of Real Estate Assets (Land and Buildings) owned by the Bank or Financial Institution in full, and revaluation differences of Real Estate Assets owned in full by Real Estate Companies in which the Bank or Financial Institution participates, and revaluation differences of Real Estate Acquired in Settlement of Debts per Article 154 of the Monetary and Loan Law. 13 Represents the change resulting from market factors. 14 This item includes only the Group's share of Profit or Loss of the period. The Minority Share is recorded in the item mentioned in Note No. 15 below. 15 This item includes Minority Interests of Shareholders in the Equity of Units Consolidated with the Head Office.

III - Off-Balance Sheet:

Off-Balance Sheet Financial Commitments and Obligations subject to International Financial Reporting Standard No. 9 are reported at their gross value, i.e., without deducting Expected Credit Loss allowances on these commitments and obligations.

No. Notes Explanation 1 This item includes Contracts with Mandatory Execution (... Futures, Swaps) at their nominal value, while Contracts with Conditional Execution (... Options) are recorded at the nominal value of the Underlying Assets.

Notes on the Income Statement Prepared for Publication In accordance with International Financial Reporting Standards (IFRS)

No. Notes Explanation 1 This item includes Interest Income and Similar Income, including Fees having the nature of Interest, including the following most important elements: • Accrued and Receivable Interest on Depositor Accounts of Banks and Financial Institutions • Accrued and Receivable Interest on Facilities and Loans to Customers classified at Amortized Cost • Accrued and Receivable Interest on Financial Instruments classified at Amortized Cost calculated using the Effective Interest Rate method. • Accrued and Receivable Interest on Fair Value Hedging Instruments for Financial Assets with Fixed Interest Rates related to Bank and Financial Institution Accounts and Loans to Customers and Financial Instruments classified at Amortized Cost. • Amounts re-cycled from Equity to the Result Account related to Cash Flow Hedging Instruments linked to Interest Rates, in case the Interest on the Financial Assets being hedged is recorded in the Interest Income and Similar Income account. • Income whose nature is Interest from Finance Lease operations. • Interest re-calculated on the basis of the Effective Interest Rate on Net Financial Assets that have suffered a credit impairment in their value according to International Financial Reporting Standard No. 9. • Legal taxes due on this income are deducted from the Interest Income recorded in this item. 2 This item includes Interest Expense and Similar Charges, including Fees having the nature of Interest, including the following most important elements: • Accrued and Receivable Interest on Creditor Accounts of Banks and Financial Institutions. • Accrued and Receivable Interest on Creditor Customer Accounts not classified at Fair Value Through Profit or Loss (FVTPL). • Accrued and Receivable Interest on Liabilities in the form of Banknotes or Financial Instruments. • Accrued and Receivable Interest on Conditional Debts. • Amounts re-cycled from Equity to the Result Account related to Cash Flow Hedging Instruments linked to Interest Rates, in case the Interest on the Financial Assets being hedged is recorded in the Interest Expense and Similar Charges account. • Charges having the nature of Interest on Finance Lease operations. 3 This item includes the total of Income against Services Provided to Others, including Fees that do not form part of the Effective Interest Rate and other Income that does not have the nature of Interest. 4 This item includes respectively the elements of Profit and Loss related to Assets and Liabilities classified at Fair Value Through Profit or Loss (FVTPL), including the following most important elements: • Returns and other Income from Shares and other Financial Instruments with volatile Income. • Accrued and Receivable Interest from Financial Securities in the Asset and Financial Liability Portfolio. • Changes in Fair Value (specified without taking into account Accrued Interest) of Assets and Financial Liabilities. Profit and Loss resulting from the liquidation of Financial Assets. • Changes in Fair Value (specified without taking into account Accrued Interest) of Financial Derivatives that do not enter into Fair Value or Cash Flow Hedging operations, as well as results from their liquidation or those resulting from the Ineffective Portion. This item also includes Accrued and Receivable Interest on the aforementioned Derivatives if the Bank does not record them under Interest Income and Similar Income or Interest Expense and Similar Charges accounts. • The Ineffective Portion of the results of Fair Value or Cash Flow Hedging operations or Net Investments in Foreign Operations. • Profit/Loss from Spot and Forward Operations. • Legal taxes due on this income are deducted from the Interest Income recorded in this item. 5 This item includes in particular the following elements of Profit and Loss: • Returns and other Income from Shares and Participations classified at Fair Value Through Other Comprehensive Income (FVOCI).