ARAB BANKING CORPORATION (B.S.C.) (incorporated in Bahrain by an Amiri Decree)

Transcription

1 BASE PROSPECTUS ARAB BANKING CORPORATION (B.S.C.) (incorporated in Bahrain by an Amiri Decree) U.S.$2,500,000,000 Euro Medium Term Note Programme Under this U.S.$2,500,000,000 Euro Medium Term Note Programme (the Programme), Arab Banking Corporation (B.S.C.) (ABC) may from time to time issue notes (the Notes) denominated in any currency agreed between ABC and the relevant Dealer (as defined below). Notes may be issued in bearer or registered form (respectively Bearer Notes and Registered Notes). The maximum aggregate nominal amount of all Notes from time to time outstanding under the Programme will not exceed U.S.$2,500,000,000 (or its equivalent in other currencies calculated as described in the Programme Agreement described herein), subject to increase as described herein. The Notes may be issued on a continuing basis to one or more of the Dealers specified under "General Description of the Programme" and any additional Dealer appointed under the Programme from time to time by ABC (each a Dealer and together the Dealers), which appointment may be for a specific issue or on an on-going basis. References in this base prospectus (the Base Prospectus) to the relevant Dealer shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to subscribe such Notes. An investment in Notes issued under the Programme involves certain risks. For a discussion of these risks see "Risk Factors". This Base Prospectus has been approved by the Central Bank of Ireland (the Central Bank of Ireland) as competent authority under the Prospectus Directive (as defined below). The Central Bank of Ireland only approves this Base Prospectus as meeting the requirements imposed under Irish and European Union (EU) law pursuant to the Prospectus Directive. Application has been made to the Irish Stock Exchange plc (the Irish Stock Exchange) for Notes issued under the Programme during the period of 12 months from the date of this Base Prospectus to be admitted to the official list (the Official List) and to trading on its regulated market (the Main Securities Market). Such approval relates only to the Notes which are to be admitted to trading on a regulated market for the purposes of Directive 2004/39/EC (each such regulated market being a MiFID Regulated Market) and/or which are to be offered to the public in any member state of the European Economic Area (each a Member State). References in this Base Prospectus to Notes being listed (and all related references) shall mean that such Notes have been admitted to trading on the Main Securities Market and have been admitted to the Official List or, as the case may be, another MiFID Regulated Market as may be specified in the applicable Final Terms. Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and certain other information which is applicable to each Tranche (as defined under "Terms and Conditions of the Notes") of Notes will be set out in a final terms document (the Final Terms) which will be delivered to the Central Bank of Ireland and, with respect to Notes to be listed on the Irish Stock Exchange, the Irish Stock Exchange. The Programme provides that Notes may be listed or admitted to trading, as the case may be, on such other or further stock exchanges or markets as may be agreed between ABC and the relevant Dealer. ABC may also issue unlisted Notes and/or Notes not admitted to trading on any market. ABC may agree with any Dealer that Notes may be issued in a form or with terms and conditions not contemplated by the terms and conditions of the Notes herein, in which event a supplement to the Base Prospectus, if appropriate, will be made available which will describe the effect of the agreement reached in relation to such Notes. ABC has been assigned a long term issuer default rating of BBB- (stable) from Fitch Ratings Limited (Fitch), a long term bank deposit rating of Ba1 (positive) from Moody's Investors Service Cyprus Ltd. (Moody's), and a foreign currency long term rating of BBB- (stable)] from Standard & Poor's Credit Market Services France S.A.S. (S&P). The Programme has been assigned long-term senior unsecured ratings of BBB- by Fitch and BBB- by S&P. Each of Fitch, Moody's and S&P is established in the European Union and is registered under the Regulation (EC) No. 1060/2009 (as amended) (the CRA Regulation). As such, each of Fitch, Moody's and S&P is included in the list of credit rating agencies published by the European Securities and Markets Authority (ESMA) on its website (at in accordance with the CRA Regulation. Notes issued under the Programme may be rated or unrated by either of the rating agencies referred to above. Where a Tranche of Notes is rated, such rating will be disclosed in the Final Terms and will not necessarily be the same as the rating assigned to the Programme or Notes already issued by the relevant rating agency. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction, revision or withdrawal at any time by the assigning rating agency. Arrangers Bank ABC Citigroup HSBC The date of this Base Prospectus is 8 May 2017.

2 Dealers Bank ABC Deutsche Bank First Abu Dhabi Bank J.P. Morgan NATIXIS Société Générale Corporate & Investment Banking Citigroup Emirates NBD Capital HSBC Mizuho Securities SMBC Nikko Standard Chartered Bank

3 This Base Prospectus comprises a base prospectus for the purposes of Article 5.4 of Directive 2003/71/EC (as amended, including by Directive 2010/73/EU) (the Prospectus Directive), and includes any relevant implementing measure in any Relevant Member State (as defined below). ABC accepts responsibility for the information contained in this Base Prospectus and the Final Terms for each Tranche of Notes issued under the Base Prospectus. To the best of the knowledge of ABC (having taken all reasonable care to ensure that such is the case) the information contained in this Base Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. Copies of Final Terms will be available from the registered office of ABC and the specified office set out below of the Principal Paying Agent (as defined below) save that, if the relevant Notes are neither admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic Area in circumstances where a prospectus is required to be published under the Prospectus Directive, the applicable Final Terms will only be obtainable by a Noteholder (as defined under "Terms and Conditions of the Notes") holding one or more Notes and such Noteholder must produce evidence satisfactory to ABC or, as the case may be, the Principal Paying Agent as to its holding of such Notes and identity. Neither the Dealers nor the Arrangers have independently verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Dealers or the Arrangers as to the accuracy or completeness of the information contained in this Base Prospectus or any other information provided by any Dealer or Arranger or ABC in connection with the Programme. To the fullest extent permitted by law, no Dealer accepts any liability, whether arising in tort or contract or otherwise, which it might otherwise have in respect of this Base Prospectus or any such statement, including in relation to the information contained in this Base Prospectus or any other information provided by ABC in connection with the Programme or the Issue or offering of Notes thereunder. No person is or has been authorised by ABC to give any information or to make any representation not contained in or not consistent with this Base Prospectus or any other information supplied in connection with the Programme or the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by ABC or any of the Dealers. Neither this Base Prospectus nor any other information supplied in connection with the Programme or any Notes (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by ABC or any of the Dealers that any recipient of this Base Prospectus or any other information supplied in connection with the Programme or any Notes should purchase any Notes. Each investor contemplating purchasing any Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of ABC. Neither this Base Prospectus nor any other information supplied in connection with the Programme or the issue of any Notes constitutes an offer or invitation by or on behalf of ABC or any of the Dealers to any person to subscribe for or to purchase any Notes. Neither the delivery of this Base Prospectus nor the offering, sale or delivery of any Notes shall in any circumstances imply that the information contained herein concerning ABC is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Programme is correct as of any time subsequent to the date indicated in the document containing the same. The Dealers expressly do not undertake to review the financial condition or affairs of ABC during the life of the Programme or to advise any investor in the Notes of any information coming to their attention. The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended, (the Securities Act) and the Notes in bearer form are subject to U.S. tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons (see "Subscription and Sale"). This Base Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Base Prospectus and the offer or sale of Notes may be restricted by law in certain jurisdictions. ABC and the Dealers do not represent that this Base Prospectus may be lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by ABC or the Dealers which is intended to permit a public offering of any Notes or distribution of this Base Prospectus in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Base Prospectus nor any advertisement or other offering material may be i

4 distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Base Prospectus or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Base Prospectus and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Base Prospectus and the offer or sale of Notes in the United States, the European Economic Area (including the United Kingdom), Japan, Hong Kong, the People's Republic of China (the PRC), the United Arab Emirates (excluding the Dubai International Financial Centre), the Dubai International Financial Centre, the Kingdom of Saudi Arabia, the Kingdom of Bahrain (Bahrain), the State of Qatar (Qatar) (including the Qatar Financial Centre), the State of Kuwait, the Sultanate of Oman, Singapore and Malaysia (see "Subscription and Sale"). This Base Prospectus has been prepared on a basis that would permit an offer of Notes with a denomination of less than 100,000 (or its equivalent in any other currency) only in circumstances where there is an exemption from the obligation under the Prospectus Directive to publish a prospectus. As a result, any offer of Notes in any Member State (each, a Relevant Member State) must be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of Notes. Accordingly any person making or intending to make an offer of Notes in that Relevant Member State may only do so in circumstances in which no obligation arises for ABC or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer. Neither ABC nor any Dealer have authorised, nor do they authorise, the making of any offer of Notes in circumstances in which an obligation arises for ABC or any Dealer to publish or supplement a prospectus for such offer. The Notes may not be a suitable investment for all investors. Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor may wish to consider, either on its own or with the help of its financial and other professional advisers, whether it: (i) (ii) (iii) (iv) (v) has sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained in this Base Prospectus or any applicable supplement; has access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio; has sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including Notes where the currency for principal or interest payments is different from the potential investor's currency; understands thoroughly the terms of the Notes and is familiar with the behaviour of financial markets; and is able to evaluate possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. Legal investment considerations may restrict certain investments. The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (a) Notes are legal investments for it, (b) Notes can be used as collateral for various types of borrowing and (c) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules. No comment is made or advice given by ABC, the Dealers, or the Agents as defined under "Terms and Conditions of the Notes" in respect of taxation matters relating to any Notes or the legality of the purchase of the Notes by an investor under any applicable law. EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT ITS OWN TAX ADVISER, LEGAL ADVISER AND BUSINESS ADVISER AS TO TAX, LEGAL, BUSINESS AND RELATED MATTERS CONCERNING THE PURCHASE OF ANY NOTES. A COPY OF THIS BASE PROSPECTUS HAS BEEN SUBMITTED AND FILED WITH THE CENTRAL BANK OF BAHRAIN. FILING OF THIS BASE PROSPECTUS WITH THE CENTRAL BANK OF BAHRAIN DOES NOT IMPLY THAT ANY BAHRAINI LEGAL OR REGULATORY REQUIREMENTS HAVE BEEN COMPLIED WITH. THE CENTRAL BANK OF BAHRAIN HAS NOT IN ANY WAY CONSIDERED THE MERITS OF THE SECURITIES TO BE OFFERED FOR INVESTMENT WHETHER IN OR OUTSIDE OF THE KINGDOM OF BAHRAIN. NEITHER THE CENTRAL BANK OF BAHRAIN NOR THE LICENSED EXCHANGE ASSUMES RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THE STATEMENTS AND ii

5 INFORMATION CONTAINED IN THIS BASE PROSPECTUS AND EACH EXPRESSLY DISCLAIMS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS BASE PROSPECTUS. ABC ACCEPTS RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS BASE PROSPECTUS. TO THE BEST OF THE KNOWLEDGE OF ABC (HAVING TAKEN ALL REASONABLE CARE TO ENSURE THAT SUCH IS THE CASE) THE INFORMATION CONTAINED IN THIS BASE PROSPECTUS IS IN ACCORDANCE WITH THE FACTS AND DOES NOT OMIT ANYTHING LIKELY TO AFFECT THE IMPORT OF SUCH INFORMATION. Historical financial statements PRESENTATION OF FINANCIAL AND OTHER INFORMATION The financial statements relating to ABC and its subsidiaries (collectively, the Group) and incorporated by reference in this Base Prospectus are: the audited consolidated financial statements as of and for the year ended 31 December 2016 (the 2016 Financial Statements); and the audited consolidated financial statements as of and for the year ended 31 December 2015 (the 2015 Financial Statements and, together with the 2016 Financial Statements, the Financial Statements). The Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (the IASB) and the relevant provisions of the Bahrain Commercial Companies Law, the Central Bank of Bahrain and Financial Institutions Law, the Central Bank of Bahrain (CBB) Rule Book (Volume 1 and applicable provisions of Volume 6) and CBB directives. ABC s financial year ends on 31 December and references in this Base Prospectus to 2014, 2015 and 2016 are to the 12 month period ending on 31 December in each such year. Unless otherwise stated in this Base Prospectus, all financial information as at and for the year ended 31 December 2014 relating to the Group and included in this Base Prospectus has been extracted from the 2015 Financial Statements, included therein for comparative purposes. Alternative Performance Measures A number of the financial measures presented by ABC in this Base Prospectus are not defined in accordance with IFRS. However, ABC believes that these measures provide useful supplementary information to both investors and ABC's management, as they facilitate the evaluation of company performance. It is to be noted that, since not all companies calculate financial measures in the same manner, these are not always comparable to measures used by other companies. Accordingly, these financial measures should not be seen as a substitute for measures defined according to the IFRS. Unless otherwise stated, the list below presents alternative performance measures, along with their reconciliation to the extent that such information is not defined according to IFRS and not included in ABC's financial statements incorporated by reference into this Base Prospectus: Return on average assets: Profit for the year divided by average assets for the year, with average assets calculated as the sum of assets at the start and end of the relevant period divided by two; Return on average equity: Profit for the year divided by average shareholders equity for the year, with average shareholders equity calculated as the sum of shareholders equity at the start and end of the relevant period divided by two; Cost to income ratio: Total operating expenses divided by total operating income; Capital adequacy ratio: Tier one capital as at year end plus tier two capital as year-end divided by risk weighted assets for the year. The capital adequacy ratio for the year ended 31 December 2014 was calculated in accordance with the Basel II guidelines. The capital adequacy ratio for the years ended 31 December 2015 and 31 December 2016 were calculated in accordance with the Basel III guidelines issued by the CBB; iii

6 Deposits to loans cover: Sum of deposits from customers, deposits from banks and other financial institutions and certificates of deposit divided by net loans; Impaired loans ratio: Impaired loans as a percentage of gross loans; Liquid assets ratio: Sum of liquid funds, trading securities, non-trading securities (excluding securities repoed), securities bought under repurchase agreements and placements divided by total assets; Loan loss coverage ratio: Loan loss provisions as a percentage of impaired loans; Loan loss provision ratio: Loan loss provisions as a percentage of gross loans; and Non-performing loan ratio: Non-performing loans as at year end divided by gross loans as at year end. PRESENTATION OF OTHER INFORMATION Currencies Unless otherwise indicated, in this Base Prospectus, all references to U.S. dollars and U.S.$ are to the lawful currency of the United States. All references to euro and refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty on the Functioning of the European Union, as amended; all references to Renminbi, RMB or CNY are to the lawful currency of the PRC (which, for the purposes of this Base Prospectus, excludes the Hong Kong Special Administrative Region of the PRC, the Macau Special Administrative Region of the PRC and Taiwan). Unless otherwise indicated, the financial information contained in this Base Prospectus has been expressed in U.S. dollars which is also ABC s functional currency and the currency in which the Group prepares its financial statements. No incorporation of website information ABC s website is The information on this website or any other website mentioned in this Base Prospectus or any website directly or indirectly linked to these websites has not been verified and is not incorporated by reference into this Base Prospectus, and investors should not rely on it. Rounding Certain data in this Base Prospectus has been rounded. As a result of such rounding, the totals of data presented in tables in this Base Prospectus may vary slightly from the arithmetic totals of such data. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Some statements in this Base Prospectus may be deemed to be "forward-looking statements". Forward-looking statements include statements concerning ABC's plans, objectives, goals, strategies and future operations and performance and the assumptions underlying these forward-looking statements. When used in this Base Prospectus, the words "anticipates", "estimates", "expects", "believes", "intends", "plans", "aims", "seeks", "may", "will", "should" and any similar expressions generally identify forward-looking statements. These forward-looking statements are contained in the sections entitled "Risk Factors" and "Description of the Group" and other sections of this Base Prospectus. ABC has based these forward-looking statements on the current view of its management with respect to future events and financial performance. Although ABC believes that the expectations, estimates and projections reflected in its forwardlooking statements are reasonable, if one or more of the risks or uncertainties materialise, including those identified below or which ABC has otherwise identified in this Base Prospectus, or if any of ABC's underlying assumptions prove to be incomplete or inaccurate, ABC's actual results of operation may vary from those expected, estimated or predicted. Investors are therefore strongly advised to read the sections "Risk Factors" and "Description of the Group", which include a more detailed description of the factors that might have an impact on ABC's business development and on the industry sector in which ABC operates. Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to, those discussed under "Risk Factors". These forward-looking statements speak only as at the date of this Base Prospectus. Without prejudice to any requirements under applicable laws, ABC expressly disclaims any obligation or undertaking to disseminate after the date iv

7 of this Base Prospectus any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations thereof or any change in events, conditions or circumstances on which any forward-looking statement is based. NOTICE TO KINGDOM OF SAUDI ARABIA RESIDENTS This Base Prospectus may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Offers of Securities Regulations issued by the Capital Market Authority of the Kingdom of Saudi Arabia (the Capital Market Authority). The Capital Market Authority does not make any representations as to the accuracy or completeness of this Base Prospectus, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this Base Prospectus. Prospective purchasers of Notes issued under the Programme should conduct their own due diligence on the accuracy of the information relating to the Notes. If a prospective purchaser does not understand the contents of this Base Prospectus he or she should consult an authorised financial adviser. NOTICE TO BAHRAIN RESIDENTS A copy of this Base Prospectus has been submitted and filed with the CBB. Filing of this Base Prospectus with the CBB does not imply that any Bahraini legal or regulatory requirements have been complied with. The CBB has not in any way considered the merits of the Notes to be offered for investment whether in or outside of Bahrain. Neither the CBB nor the licensed exchange assumes responsibility for the accuracy and completeness of the statements and information contained in this Base Prospectus and each expressly disclaims any liability whatsoever for any loss howsoever arising from reliance upon the whole or any part of the contents of this Base Prospectus. ABC accepts responsibility for the information contained in this Base Prospectus. To the best of the knowledge of ABC (having taken all reasonable care to ensure that such is the case) the information contained in this Base Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. NOTICE TO QATARI RESIDENTS Any Notes to be issued under the Programme will not be offered, sold or delivered at any time, directly or indirectly, in Qatar (including the Qatar Financial Centre) in a manner that would constitute a public offering. This Base Prospectus has not been and will not be reviewed or approved by, or registered with, the Qatar Financial Markets Authority, the Qatar Central Bank, the Qatar Stock Exchange or the Qatar Financial Centre Regulatory Authority. The Notes are not and will not be traded on the Qatar Stock Exchange. The Notes and interests therein will not be offered to investors domiciled or resident in Qatar (including the Qatar Financial Centre) and do not constitute debt financing in Qatar under the Commercial Companies Law No. (11) of 2015 or otherwise under the laws of Qatar. NOTICE TO MALAYSIA RESIDENTS Any Notes to be issued under the Programme may not be offered for subscription or purchase and no invitation to subscribe for or purchase such Notes in Malaysia may be made, directly or indirectly, and this Base Prospectus or any document or other materials in connection therewith may not be distributed in Malaysia other than to persons falling within any one of the categories of persons specified under Schedule 6 or Section 229(1)(b), Schedule 7 or Section 230(1)(b) and Schedule 8 or Section 257(3), read together with Section 9 or Section 257(3) of the Capital Market and Services Act 2007 of Malaysia. The Securities Commission of Malaysia shall not be liable for any non-disclosure on the part of ABC and assumes no responsibility for the correctness of any statements made or opinions or reports expressed in this Base Prospectus. STABILISATION In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the Stabilising Manager(s) (or person(s) acting on behalf of any Stabilising Manager(s)) in the applicable Final Terms may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However stabilisation may not necessarily occur. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in accordance with all applicable laws and rules. v

8 CONTENTS Section Page Risk Factors... 2 Documents Incorporated by Reference Overview of the Programme Form of the Notes Applicable Final Terms Terms and Conditions of the Notes Use of Proceeds Summary Financial Information Selected Statistical Information Description of the Group Taxation Subscription and Sale General Information

9 RISK FACTORS ABC believes that the following factors may affect its ability to fulfil its obligations under Notes issued under the Programme. All of these factors are contingencies which may or may not occur and ABC is not in a position to express a view on the likelihood of any such contingency occurring. Factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme are also described below. ABC believes that the factors described below represent the principal risks inherent in investing in Notes issued under the Programme, but the inability of ABC to pay interest, principal or other amounts on or in connection with any Notes may occur for other reasons which may not be considered significant risks by ABC based on information currently available to it or which it may not currently be able to anticipate. Prospective investors should also read the detailed information set out elsewhere in this Base Prospectus and reach their own views prior to making any investment decision. FACTORS THAT MAY AFFECT ABC'S ABILITY TO FULFIL ITS OBLIGATIONS UNDER OR IN CONNECTION WITH THE NOTES ISSUED UNDER THE PROGRAMME The Group s business, financial condition, results of operations and prospects are affected by global and regional financial markets and economic conditions and any deterioration in economic conditions could materially adversely impact the Group There has been significant volatility and disruption in the global capital and credit markets since the onset of the global financial crisis in late 2007 which reached unprecedented levels in the second half of 2008 and early This volatility and disruption has continued since 2010 as the European sovereign debt crisis and the effects of the economic slowdown in emerging markets generally have materially impacted the global capital and credit markets. At times since then, there has been a material reduction in the availability of financing, both for financial institutions and their customers, compelling many financial institutions to rely on central banks and governments to provide liquidity and, in some cases, additional capital. Governments around the world, including many countries in the Middle East and North Africa region (the MENA region), have taken actions intended to stabilise financial markets and prevent the failure of financial institutions. Despite such measures, international capital and credit markets have continued to experience volatility particularly at times when the European sovereign debt crisis has intensified. The Group s business and results of operations were adversely affected by these conditions and the impact they had in the MENA region and elsewhere. In particular, the Group was severely affected by the performance of parts of its securities portfolio causing it to seek a U.S.$1 billion capital injection from its shareholders by way of a priority rights issue in April Additionally, in 2010, the Group undertook a U.S.$1.1 billion rights issue to further enhance its capital base which was supported by its two principal shareholders as well as by other individual and institutional investors. If comparable market disruptions and levels of volatility recur, the Group may experience reductions in business activity, increased funding costs and funding pressures, decreased asset values, credit losses and impairment charges, and lower profitability and cash flows. The Group s business and financial performance may also be adversely affected by future recovery rates on assets, particularly as the historical assumptions underlying asset recovery rates may prove to be inaccurate. The Group s operations are primarily focused on the Arab world. At 31 December 2016, 39.0 per cent. of the Group's assets were in the Arab world, 27.0 per cent. were in Latin America, 13.0 per cent. were in Europe, 11.0 per cent. were in North America and 10.0 per cent. were in Asia and other regions. Sustained low commodity price levels, particularly hydrocarbons, may have a direct and indirect impact on the Group s business Many economies in the MENA region are dependent on oil and gas and related industries, as well as the prices and production quantities of these commodities, and these sectors, along with other commodities, also make a significant contribution to Brazil s economy. As a consequence of a general economic downturn, global demand for commodities has declined. Specifically, oil prices have been volatile in recent years and, since mid 2014, have declined significantly with the OPEC basket average price falling from a monthly average of USD in June 2014 to USD 52.4 in January If prevailing price levels are sustained, it could have an adverse effect on the Group to the extent that it results in deteriorating economic conditions 2

10 which negatively impact the Group s borrowers and contractual counterparties, and thus potentially increase the quantum of non-performing loans and demand for loans and other products and services provided by the Bank. Additionally, fiscal dependence on hydrocarbons in the MENA region, and in particular the economies of the Gulf Cooperation Council (the GCC) has resulted in deteriorating economic activity and also had a material adverse effect on fiscal budget deficits: which has prompted a multi-pronged approach to fiscal consolidation through significant reductions to government spending and potential structural fiscal adjustments. Nevertheless, sharply rising fiscal deficits in countries with significant hydrocarbon revenue dependence has resulted in growing pressure to modify the fixed rate peg or de-peg their domestic currency from the USD, which has, in the case of certain GCC countries, been in place since the mid-1980s. The Bank cannot provide assurance that a de-peg will not occur in the future or that the existing peg will not be adjusted in a manner that could materially affect the Bank s results and financial condition to the extent that it negatively impacts the Group s borrowers and contractual counterparties, and thus potentially increases the quantum of non-performing loans. The Group s business may be impacted by political and security concerns in the MENA region, as well as ongoing unrest in the region, as a number of the Group's subsidiaries and a significant proportion of its customers are located in the MENA region Many of the Group s customers and a significant part of its business are based in the MENA region. Since the beginning of 2011, there has been political unrest in a range of countries in or proximate to the MENA region, including Syria, Iraq, Egypt, Turkey, Bahrain, Kuwait, Saudi Arabia, Algeria, Libya, Iran, Lebanon, Jordan, Tunisia, Sudan, Somalia, Palestine and Yemen as well as the attempted coup d état in Turkey in July This unrest has ranged from public demonstrations to, in extreme cases, armed conflict (including the multinational conflict with Islamic State (also known as Daesh, ISIS or ISIL)) and civil war, which has led to the collapse of political regimes in Tunisia, Egypt and Libya, civil war in Syria and conflict in Iraq and Yemen. This has given rise to significantly increased political uncertainty across the region. This situation has caused significant disruption to the economies of affected countries and has had a destabilising effect on oil and gas prices. Though the effects of the uncertainty have been varied, it is not possible to predict the occurrence of events or circumstances such as war or hostilities, or the impact of such occurrences. Such occurrences could have a material adverse effect on the political and economic stability of the MENA region and, in particular, could impact the number of businesses interested in doing business in the MENA region and, consequently, could have an adverse effect on the Group's business, results of operations, financial condition and prospects, and thereby affect the Group s ability to perform its obligations in respect of any Notes. Financial market and political uncertainty in the MENA region could decrease the Group s customer deposits or its customers demand for loans or other products offered by the Group and could also impact trade flows with the region which are a key source of business for the Group. Although the Group s exposure to Bahrain is limited, the Group is organised and conducts certain operations in Bahrain and its shares are traded on the Bahrain Bourse and political or economic prospects or instability in Bahrain or the wider MENA region could adversely affect the Group s ownership and organisational structure, its ability to operate its business in the MENA region and the trading of its shares on the Bahrain Bourse. In addition, the Group s principal shareholders are located in Libya and Kuwait and it has subsidiaries in Algeria, Egypt, Jordan and Tunisia, each of which has been affected by political unrest since As the first country to undergo the "Arab Spring" uprising in 2011, Tunisia has undergone significant political change in recent years. However, it has taken significant steps towards regaining stability, such as by approving a new constitution at the start of Algeria is one of the countries in the region that remained relatively stable during the "Arab Spring" uprising. The government has maintained stability largely through public sector expenditure and minimal political reforms. The country is relatively stable; however, in recent years it has experienced a continuous period of social and domestic instability and is under continuous threat of terrorist attacks in certain areas of the country. Such risks may have a negative impact on the Bank's operations in the country as it may discourage tourism and foreign investment. Egypt remains characterised by instability and significant political and social unrest. As Egypt moves away from the military rule which replaced President Mohammed Morsi, the current Egyptian government is likely to continue to face socio-economic and political challenges and risks of instability which often accompany political transition. These challenges together with the incidents of social and political unrest and violence in Egypt may have a negative impact on the Group's operations in the country. In common with other countries in the region, Jordan has experienced occasional terrorist attacks in recent years, including, most recently, in June 2016, when five employees of the National Intelligence Agency, including three intelligence officers, were killed in a terrorist attack in a Palestinian refugee camp near Amman. The government of 3

11 Jordan has since designated sections of the northern and north-eastern border with Syria as closed military zones. Despite government efforts to maintain prevailing levels of domestic order and stability, there can be no assurance that extremists or terrorist groups will not continue or escalate such violent activity in Jordan. Terrorist incidents have in the past, and may in the future, affect tourism and the general economy in Jordan and, as a result, negatively impact the Group s operations in the country. The Group s Brazilian subsidiary is subject to a range of risks associated with the banking industry in Brazil As at 31 December 2016 the Group owned 61.0 per cent. of the shares of Banco ABC Brasil, S.A. (ABC Brasil) and ABC Brasil s results are included in the Financial Statements. For the year ended 31 December 2016, ABC Brasil accounted for 40.0 per cent. of the Group s net interest income and 42.9 per cent. of its total operating income. Among other factors, ABC Brasil s results of operations are affected by: economic conditions in Brazil which have been characterised by frequent and occasionally extensive intervention by the Brazilian government and unstable economic cycles; frequent and significant changes in the level of interest rates and currency exchange rates over which ABC Brasil has no control; frequent regulatory changes affecting, for example, minimum capital requirements, compulsory deposit requirements, lending limits and other credit restrictions, limits or other restrictions on fees and accounting and statistical requirements; and an increasingly competitive environment driven by industry consolidation and other competitive pressures. As a result of these factors, it is difficult for the Group to predict ABC s future results of operations and the Group s results of operations could be adversely impacted by any changes which materially adversely affect ABC Brasil. The Group s business may be impacted by the potential implications of Brexit ABC International Bank plc, the Group s wholly owned subsidiary in the United Kingdom (the UK) may be materially affected by the UK electorate resolving to leave the EU at a referendum that took place on 23 June The UK Government invoked article 50 of the Lisbon Treaty relating to withdrawal on 29 March Under article 50, the Treaty on the European Union and the Treaty on the Functioning of the European Union cease to apply in the relevant state from the date of entry into force of a withdrawal agreement, or, failing that, two years after the notification of intention to withdraw, although this period may be extended in certain circumstances. During this period and beyond, the impact on the United Kingdom and European economies could be significant and could, among other outcomes, result in increased volatility and illiquidity, potentially lower economic growth, and may also lead to weakening in consumer, corporate and financial confidence. The longer term process to implement the political, economic and legal framework between the UK and the EU is likely to lead to continuing uncertainty and periods of exacerbated volatility in both the UK and in wider European markets. In particular, the decision made in the British referendum may lead to a call for similar referendums in other European jurisdictions which may also cause increased economic volatility in wider European and global markets. Consequently, UK trade and key economic fundamentals, such as the housing market, may be significantly affected; as a result the Group s UK subsidiary may be adversely impacted, which may in turn adversely affect the Group s future business, financial condition and results of operations. The Group is exposed to the credit risk of borrowers and anticipated future growth in, or deterioration in the quality of, the Group s financing portfolio could result in an increase in its credit risk profile Risks arising from adverse changes in the credit quality and recoverability of loans, securities and amounts due from counterparties are inherent in a wide range of the Group s businesses, principally in its financing and investment activities. In particular, the Group is exposed to the risk that borrowers may not make payments in respect of their financing according to their contractual terms and that the collateral (if any) securing the payment of such financing may be insufficient. The Group regularly reviews and analyses its financing portfolio and credit risks, and the Group s provision for losses on its financing portfolio is based on, among other things, its analysis of current and historical delinquency rates, financing management and the valuation of the underlying assets, as well as numerous other management assumptions. However, these internal analyses and assumptions may give rise to inaccurate predictions of credit performance, particularly in the current volatile economic climate. See The Group s risk management policies and procedures may not be effective in all circumstances and may leave it exposed to unidentified or unanticipated risks. At 31 December 2016, the Group s customer loans and advances (its customer loan portfolio) amounted to U.S.$15,254 million. At 31 December 2015 and 31 December 2014, the Group s customer loan portfolio amounted to U.S.$14,549 4

12 million and U.S.$15,411 million, respectively. In 2016, the Group s provision charge in respect of its customer loan portfolio amounted to U.S.$92 million, or 0.6 per cent. of its gross loans and advances to customers at 31 December 2016 and, in 2015, the Group s provision charge in respect of its customer loan portfolio amounted to U.S.$70.0 million, or 0.5 per cent. of its gross loans and advances to customers at 31 December The Group s strategy focuses on growth with a view to becoming MENA s leading international bank. See Description of the Group Strategy. As the Group expands its customer loan portfolio, this will increase its credit exposure and management will need to continually monitor the credit quality of the customer loan portfolio. See Description of the Group Risk management Credit risk, note 24 to the 2016 Financial Statements and The Group s risk management policies and procedures may not be effective in all circumstances and may leave it exposed to unidentified or unanticipated risks. Credit losses could also arise from a deterioration in the credit quality of specific borrowers and counterparties of the Group, or from a general deterioration in local or global economic conditions, or from systemic risks within these financial systems, which could affect the recoverability and value of the Group s assets and require an increase in its provisions for the impairment of loans, securities and other credit exposures. Any failure by the Group to maintain the quality of its assets through effective risk management policies could lead to higher loan loss provisioning and result in higher levels of defaults and write-offs, which in turn, could have a material adverse effect on the Group s business, financial condition, results of operations and prospects. In common with many other banks in the MENA region, the Group has significant concentrations in both loans and inter-bank placements The Group s 20 largest customer loans and advances outstanding as at 31 December 2016 constituted 15.3 per cent. of its customer loan portfolio outstanding at that date. In addition, the Group s 20 largest placements with banks and other financial institutions outstanding at 31 December 2016 constituted 77.1per cent. of its total placements with banks and other financial institutions at that date. As a result, a material weakening in the credit quality of, or a default by, any one or more of the Group s counterparties to which it has large credit exposure could result in the Group making significant additional loan loss provisions and experiencing reduced interest income. The Group has significant credit-related contingent liabilities and commitments that may lead to potential losses As part of its normal banking business, the Group issues guarantees and letters of credit which are accounted for off the Group s balance sheet until such time as they are funded or cancelled. The Group also makes commitments to lend which are similarly accounted. Although these commitments are contingent, they nonetheless subject the Group to both credit and liquidity risks. As at 31 December 2016, the Group had U.S.$8,590 million in such contingent liabilities and commitments outstanding, equal to 36.9 per cent. of its combined customer loan portfolio and contingent liabilities. Although the Group anticipates that only a portion of its obligations in respect of these commitments will be triggered and funds itself accordingly, the Group may need to make payments in respect of a greater portion of such commitments, particularly in cases where there has been a general deterioration in market conditions. This could result in the Group needing to obtain additional funding, potentially at relatively short notice, which may have an adverse effect on its financial condition and results of operations. The Group is exposed to reputational risks related to its operations and industry All financial institutions depend on the trust and confidence of their customers to succeed in their business. The Group is exposed to the risk that litigation, misconduct, operational failures, negative publicity and press speculation, whether or not valid, will harm its reputation. The Group s reputation may also be adversely affected by the conduct of third parties over whom it has no control, including entities to which it has advanced financing or in which it has invested. For example, if one of the Group s financing customers becomes associated with financial scandals or widely publicised improper behaviour, the Group s own reputation may be affected. In common with other banks, the Group is also exposed to adverse publicity relating to the financial services industry as a whole. Financial scandals unrelated to the Group or questionable ethical conduct by a competitor may taint the reputation of the industry and affect the perception of investors, public opinion and the attitude of regulators. Any damage to the Group s reputation could cause existing customers to withdraw their business and lead potential customers to be reluctant to do business with the Group. Any of these developments could have an adverse effect on the Group s business, results of operations, financial condition and prospects. 5