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  • LR-A.1 LR-A.1 Purpose

    • LR-A.1.1

      The Licensing Requirements Module sets out the BMA's approach to licensing conventional bank licensees.

    • LR-A.1.2

      The Module builds on the legal requirements contained in Decree Law No. (23) of 1973 (the BMA Law 1973). The Module is issued under legal powers granted to the BMA under the BMA Law 1973, notably Articles 56 to 69.

    • Licensing Requirement

      • LR-A.1.3

        Persons wishing to undertake regulated banking services are required to be licensed by the BMA as a conventional bank licensee. Regulated banking services consist of two determinant activities undertaken in combination — deposit-taking and providing credit. In addition, various supplementary regulated activities may also be undertaken. These activities are defined in Rule LR-1.3.1.

      • LR-A.1.4

        In other words, persons wishing to undertake deposit taking must also undertake the activity of providing credit. In addition, they may undertake any of the other activities falling within the definition of regulated banking services. Deposit taking may not be undertaken on its own, without the activity of providing credit also being undertaken. Persons wishing to provide credit without undertaking deposit taking may qualify as a finance company, a category of specialised licensee (see separate regulations regarding these: they will fall under Volume 5 of the BMA Rulebook, when issued in 2007).

    • License Categories

      • LR-A.1.5

        Conventional bank licensees are divided into two sub-categories: conventional retail bank licensees and conventional wholesale bank licensees. Certain specific regulatory requirements may differ between these two sub-categories, where appropriate to address their different risk profiles.

      • LR-A.1.6

        Conventional retail bank licensees may undertake transactions in any currency, with both Bahraini residents and non-residents. To qualify as a conventional retail bank licensee, the activity of providing credit must account for a significant portion of the institution's business (defined, broadly, as accounting for over 20% of an institution's assets).

      • LR-A.1.7

        Conventional wholesale bank licensees may also undertake transactions without restriction, when dealing with the Government of Bahrain and its agencies; BMA bank licensees; and non-residents. However, they may only undertake transactions denominated in Bahraini Dinar and/or with a resident of the Kingdom of Bahrain, if these are wholesale in nature. Wholesale transactions are defined in terms of transaction size (broadly, BD 7 million or more for a credit or deposit transaction, and US$ 250,000 or more for an investment transaction).

      • LR-A.1.8

        Collectively, licensed providers of regulated banking services are called conventional bank licensees. Bahrain-incorporated conventional bank licensees are called Bahraini conventional bank licensees. Conventional bank licensees that are incorporated in an overseas jurisdiction and operate via a branch presence in the Kingdom of Bahrain are called overseas conventional bank licensees. The same naming convention applies to the two sub-categories of conventional bank license: thus, Bahraini conventional retail bank licensees and Bahraini conventional wholesale bank licensees are those incorporated in Bahrain, whilst overseas conventional retail bank licensees and overseas conventional wholesale bank licensees are those incorporated in an overseas jurisdiction and operating in Bahrain via a branch presence.

    • Islamic transactions

      • LR-A.1.9

        Conventional bank licensees may not hold themselves out as an Islamic bank. They may nonetheless enter into Shari'a compliant transactions, subject to certain restrictions. Thus, conventional bank licensees may only undertake transactions that are based on Shari'a compliant contracts, when dealing with governments, public sector entities and other licensed financial institutions. Shari'a compliant contracts may not be undertaken with resident corporates or individuals. (See Paragraphs LR-1.2.27 to LR-1.2.30.)

    • Licensing Conditions

      • LR-A.1.10

        Conventional bank licensees are subject to 8 licensing conditions, mostly specified at a high level in Module LR, and further expanded in underlying subject Modules (such as Module CA). These licensing conditions are broadly equivalent to the standards applied in other Volumes of the BMA Rulebook, to other license categories, and are consistent with international good practice, such as relevant Basel Committee standards.

    • Retaining Licensed Status

      • LR-A.1.11

        The requirements contained in Chapter LR-2 represent the minimum conditions that have to be met in each case, both at the point of licensing and on an on-going basis thereafter, in order for licensed status to be retained.

    • Information Requirements and Processes

      • LR-A.1.12

        Chapter LR-3 specifies the processes and information requirements that have to be followed for applicants seeking a conventional bank license, as well as existing licensees seeking to vary the scope of their license, by adding new regulated activities. It also covers the voluntary surrender of a license, or its cancellation by the BMA.

    • Representative Offices and Ancillary Services Providers

      • LR-A.1.13

        Representative offices of overseas conventional bank licensees are not covered in Volume 1 (Conventional Banks) of the Rulebook. Requirements covering Representative Offices (for all financial services firms) will instead be included in Volume 5, to be issued in 2007.

      • LR-A.1.14

        Until such time as Volume 5 (Specialised Activities) of the BMA Rulebook is issued, representative offices of overseas conventional bank licensees remain subject to the requirements contained in the BMA's "Standard Conditions and Licensing Criteria" applicable to representative offices of foreign banks, and relevant existing Circulars.

      • LR-A.1.15

        Providers of ancillary services to the financial sector are not covered in Volume 1 (Conventional Banks) of the Rulebook. Requirements covering ancillary services providers will instead be included in Volume 5, to be issued in 2007.

      • LR-A.1.16

        Until such time as Volume 5 (Specialised Activities) of the BMA Rulebook is issued, ancillary services providers remain subject to the requirements contained in the BMA's "Standard Conditions and Licensing Criteria" applicable to providers of ancillary services to the financial sector, and relevant existing Circulars.

    • Updating the BMA Rulebook

      • LR-A.1.17

        Unless the context suggests otherwise, references elsewhere in Volume 1 to Full Commercial Bank(s) should be taken as referring to conventional retail bank licensees, and references to Offshore Banking Units and Investment Bank Licensees should be taken as referring to conventional wholesale bank licensees. References to the previous bank license categories that applied prior to 1 July 2006 will be gradually updated over time, across the rest of Volume 1.