DMIT Annual Report 2017

N OTES TO THE C ONSOLIDATED F INANCIAL S TATEMENTS Dar Al-Maal Al-Islami Trust 34 The Group also trades in financial instruments where it takes positions in traded and over the counter instruments including derivatives to take advantage of short term market movements in the equity and bond markets and in currency and profit rates. The individual subsidiary’s boards place trading limits on the level of exposure that can be taken in relation to both overnight and intra-day market positions. Foreign exchange and profit rate exposures associated with these derivatives are normally offset by entering into counterbalancing positions, thereby controlling the variability in the net cash amounts required to liquidate market positions. The Group utilises the following derivative instruments for both hedging and non-hedging purposes. (i) Currency forwards represent commitments to purchase foreign and domestic currency, including undelivered spot transactions; (ii) equity futures are contractual obligations to receive or sell shares on a future date at a specified price established in an organised financial market; and (iii) equity options are contractual agreements under which the seller (writer) grants the purchaser (holder) the right, but not the obligation, either to buy (a call option) or sell (a put option) at or by a set date or during a set period, a specific amount of shares at a predetermined price. In consideration for the assumption of the risk, the seller receives a premium from the purchaser. Options may be either exchange-traded or negotiated between the Group and a customer (over the counter). B. Capital management The Group’s objectives when managing capital, which is a broader concept than the ‘equity’ on the face of statement of financial positions, are: (i) To safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; (ii) To maintain a strong capital base to support the development of its business; and (iii) To comply with the capital requirements set by the regulators of the banking markets where the entities within the Group operate. DMI itself does not engage in banking business and is therefore not required to comply with any minimum capital adequacy requirements. The regulatory capital requirement are applicable to Ithmaar Bank BSC(C) which is 100% owned subsidiary of Ithmaar Holding. Ithmaar Bank has complied with capital adequacy requirements as per the guidelines and directives of the Central Bank of Bahrain. Faysal Bank Limited has also complied with its regulatory capital requirement. As at the reporting date other subsidiaries within DMI group do not have any specific regulatory capital requirement. In order to maintain or adjust capital, the Group may adjust the amounts of dividends paid to equity participants, issue new equity or sell assets to reduce cap. The Group monitors capital on the basis of a gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as due to banks and financial institutions less cash and cash equivalents. Total capital is calculated as equity as shown on the face of the consolidated financial statements.