BC-A.1.4

This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) on business conduct by conventional bank licensees, and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 (CBB Law). The directive in this Module is applicable to all conventional bank licensees.

BC-A.1.5

For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.

BC-A.3.4

Prior to the Rulebook, the CBB had issued various circulars representing regulations covering different aspects of Business and Market Conduct. The contents of this Module are effective from the date depicted in the original circulars listed below or from the dates indicated in Paragraph BC-A.3.3 above:

BC-1.1.1

The purpose of the content of this Section is to set out requirements pertaining to the promotion of financial services and products offered in/from Bahrain by conventional retail bank licensees. For the purposes of this Section, promotions mean all types of promotional campaigns, competitions, merchant discount schemes/loyalty programmes or other schemes of similar nature offered to customers or prospective customers by means of incentives etc.

BC-1.1.2

Conventional retail bank licensees must ensure that all the following requirements are met with regards to promotion of products or services:

BC-1.1.3

Licensees using character-limited media (e.g. social media platforms such as Instagram, Facebook etc.) as a means of promoting complex features of financial products or services should provide a reference or link to more comprehensive information available elsewhere.

BC-1.1.4

Conventional retail bank licensees must ensure that the following requirements are met with regards to raffles/lotteries:

BC-1.1.5

The requirements of Paragraph BC-1.1.4 do not apply to promotions or giveaways generally offered and selected through draws to customers on an ad hoc basis (at no cost to the customer, implicit or otherwise). In such cases, there is no direct link between the acquisition of the products or services by the customers and the periodic raffle draw/lotteries.

BC-1.1.6

While there is to be no formal restriction on the types of incentive which may be used by institutions, care should be taken to ensure that promotional schemes do not negatively affect the integrity, reputation, good image and standing of Bahrain and/or its financial sector, and do not detrimentally affect Bahrain's economy.

BC-1.1.7

Bearing in mind the reputation of, and the requirement to develop, the financial sector in Bahrain, as well as the need to act at all times in the best interests of the customer, banks need to take adequate care to ensure that promotional schemes do not unreasonably divert the attention of the public from other important considerations in choosing a bank or a banking/financial product.

BC-1.1.8

All documentation concerning promotional schemes should be in Arabic and English and, if relevant, any other language necessary for customers to fully understand and appreciate their terms and conditions. Such terms and conditions, including any related advertising, need to be clear, concise, truthful, unambiguous and complete so as to enable customers to make a fully informed decision.

BC-1.1.9

Customers to whom promotional schemes are directed should enjoy equal opportunity in terms of access to, and treatment within, such schemes.

BC-1.1.10

No costs (including funding costs), charges or levies associated with promotional schemes should be concealed from prospective customers.

BC-1.1.11

All material related to promotional schemes, particularly where raffles/lotteries etc. are concerned, must be maintained for a minimum period of 5 years (see Paragraph OM-7.3.4).

BC-1.1.12

Any raffles/lotteries etc. held as part of promotional schemes should be independently monitored (e.g. by the institution's external auditor) and adequate systems put in place to ensure fair play and impartiality.

BC-1.1.13

An appropriate system must also exist for informing participants of the results of a raffle/lottery without delay. Institutions must note that raffles/lotteries etc. may be subject to rules and requirements (including prior authorisation/approval) laid down by the Ministry of Industry and Commerce.

BC-1.1.14

Banks may use small 'gifts' as an inducement to members of the public to use banks' services, provided such gifts are offered on a general basis and have a low monetary value.

BC-1.1.15

Due note should be taken of the overriding provisions of Bahrain (and any other relevant) law in relation to institutions' duties to customers to the extent (if any) that promotional schemes might impact on such duties.

BC-1.2.5

Conventional retail bank licensees must ensure that each digital advertisement through the internet/social media (e.g. Twitter, Instagram, WhatsApp, Facebook, web page, etc.) complies with the requirements in this Section.

BC-1.2.6

Where a licensee publishes customer feedback/review on the internet/social media, it must display both positive and negative feedback/review.

BC-2.7.2

No broker, including management, employees and other persons acting on their behalf, shall offer or give inducements to dealing room personnel of a bank. No gifts or favours whatsoever shall be so given unless the broker is satisfied that the person responsible for dealing operations in the bank concerned has been informed of the nature of the gift or favour.

BC-2.7.3

Employees of banks shall not solicit inducements from brokers, nor shall they receive unsolicited gifts or favours from brokers without informing the person responsible for dealing operations in the bank concerned of the nature of such gifts or favours.

BC-2.7.4

The making or arranging of bets between brokers and bank dealers is totally unacceptable.

BC-2.7.5

It shall be the responsibility of management in both banks and brokers to ensure that entertainment offered in the course of business does not exceed reasonable limits and does not infringe standards of propriety and decency.

BC-2.9.1

A broker will, in response to an enquiry from any bank, make known the currencies which it elects to quote and to make a service in.

BC-2.9.2

Each broker shall provide, on request by a bank taking a service, general market information on all currencies handled (whether for the time being active or not) by that broker.

BC-2.9.3

Brokers shall comply with the minimum scales of brokerage charges (see Section BC-4.6) agreed in consultation with the Bankers' Society Council from time to time, or laid down by the CBB.
In cases where there is no established minimum scale of brokerage charges, no deals shall be transacted until a rate has been agreed. Rates of brokerage in these cases should be agreed in advance, and only by Directors or senior managers on each side, and in no event by the dealers themselves.

BC-2.9.4

Put-through deals may be net of brokerage.

BC-2.9.5

Brokerage should be expressed in US dollars.

BC-2.10.1

Brokers shall comply with the minimum scales of brokerage charges (see Section BC-4.6) agreed in consultation with the Bankers' Society Council from time to time, or laid down by the CBB. In cases where there is no established minimum scale of brokerage charges, no deals shall be transacted until a rate has been agreed. Rates of brokerage in these cases should be agreed in advance, and only by Directors or senior managers on each side, and in no event by the dealers themselves.

BC-2.10.2

Calculation of brokerage on all currency deposits shall be worked out on a 360-day year, or a 365-day year, according to normally accepted market practice. For example, Sterling and Kuwaiti Dinars are on a 365-day year basis, and US dollars and Saudi Riyals are on a 360-day year basis.

BC-2.10.3

In a forward-forward deposit (e.g. one month against six months) the brokerage to be charged shall be on the actual intervening period (i.e. in the above example - five months).

BC-2.10.4

Put-through deals may be net of brokerage.

BC-4.2.3

Dinar Certificates of Deposit may be issued only by retail bank licensees and must be payable at their offices in Bahrain.

BC-4.2.4

Retail bank licensees may issue Certificates of Deposit to both resident and non-resident customers and to other banks inside and outside Bahrain.

BC-4.2.5

Retail bank licensees may not issue Certificates of Deposit until they receive the necessary funds.

BC-4.2.6

Certificates of Deposit may be issued for any amount subject only to a minimum denomination of BD 30,000.

BC-4.2.7

Certificates of Deposit may be issued for any maturity between 183 days (6 months) and 5 years.

BC-4.2.8

The interest rates on Certificates of Deposit may be freely agreed between banks and their counterparties at the time of issue.

BC-4.2.9

Interest may be payable by agreement at a fixed or floating rate. In the case of a floating interest rate, the formula for revising the rate must be specified at the time of issue.

BC-4.2.10

Interest may be payable at maturity or on earlier dates specified at the time of issue.

BC-4.2.11

As an alternative to paying interest, Certificates of Deposit may be issued (like Treasury bills) at a discount to their face value (the repayment amount).

BC-4.2.12

Interest and discounted values should be calculated on the basis of a 360 day year.

BC-4.2.13

In view of their negotiability, Certificates of Deposit may be freely traded between banks, and between banks and customers. Issuing banks are permitted to re-purchase their own Certificates.

BC-4.2.14

Although it is not obligatory, holders of Certificates of Deposit are advised to keep these certificates with a bank for safe custody and to handle them with care at all times.

BC-4.2.15

Outstanding Certificates of Deposit are subject to reserve requirements in accordance with the provisions set out under Section BR-4.1.

BC-4.2.16

Banks must not describe deposit receipts, confirmations and other non-negotiable documents relating to ordinary deposits as 'Certificates of Deposit' and must not include such liabilities among Certificates of Deposit in their monthly statistical reports (also see Module BR).

BC-4.2.17

In their statistical reports (also see Module BR), banks should always classify their outstanding Certificates of Deposit according to the type of customer (e.g. resident etc.) to whom they were first issued.

BC-4.3.4

For the purpose of this Section, the following definitions apply:

BC-4.3.3

A retail bank must make available, at their premises, information leaflets containing information on the key products and services in respect of all credit agreements including:

BC-4.3.5

Where a retail customer has a credit agreement with a retail bank, retail banks must:

BC-4.3.6

Marketing of customer credit agreements, advertising and sales promoting credit agreements, irrespective of the media used (SMS, Internet, printed material, telephone solicitation) must be clear and understandable, must be true and not misleading and meet the basic customer information requirements as defined in this Module. Retail banks are also asked to take special care to ensure that the content of any advertising material does not mislead or deceive the public in any way.

BC-4.3.7

The use of "small print" to make potentially important information less visible is not compatible with good business conduct, and should be avoided.

BC-4.3.8

Retail banks must make:

BC-4.3.9

The following public disclosures must be made by conspicuous notice for all types of credit agreements:

BC-4.3.10

In addition to the requirements under Paragraph BC-4.3.9, retail banks must publicly disclose by conspicuous notice for instalment financing facilities:

BC-4.3.11

The APR is a standard measure that allows customers to compare total charges for instalment financing facilities on a like-for-like basis. The APR allows the customer to compare the total charge for credit over differing periods (e.g. – two versus three years) or offered by different retail banks with differing payment profiles and taking into account the payment of any other fees payable as a condition of the contract, such as administration fees or insurance premiums.

BC-4.3.12

Any advertising through any media means of instalment financing facilities, offered by the retail banks must specify only the APR (including all fees and charges) and no other rates, i.e. nominal, base, flat or rates by any other names.

BC-4.3.13

For the purposes of Paragraph BC-4.3.10, the disclosures can be provided as one APR or a range of APRs for retail banks that provide instalment financing to different segments and products. A retail bank may have different customer segments with different risk profiles, for whom the APR offered on the same product may vary. However, the disclosures must comply with the scenarios outlined in Subparagraph BC-4.3.10(a).

BC-4.3.14

In addition to the requirements under Paragraph BC-4.3.9, retail banks must publicly disclose by conspicuous notice for Credit Agreements other than instalment financing facilities:

BC-4.3.15

For credit agreements other than instalment financing facilities, any advertising through any media means must specify only the annual interest rate and other fees and charges.

BC-4.3.16

For credit agreements other than instalment financing facilities, banks are prohibited from using the term APR in any advertising.

BC-4.3.17

Retail banks must make clear to potential customers, prior to entering into a credit agreement, all relevant key terms of the agreement in the credit agreement application and 'key terms disclosure' document, in order for them to clearly understand the characteristics of the services and products on offer. Retail banks must also comply with the disclosure requirements under the "Code of Best Practice on Consumer Credit and Charging" (see Appendix CM-2).

BC-4.3.18

The above "key terms disclosure" document must be summarised in plain English and Arabic. This document must be signed and dated by the customer(s) in duplicate as having been read and understood, prior to signing a credit agreement. One copy should be retained by the customer and the other must be retained by the retail bank in their customer file.

BC-4.3.19

For credit agreements where a retailer extends credit to purchase goods or services by operating in agreement with retail banks, all conditions of the credit agreement must be disclosed in the credit agreement application and 'key terms disclosure' document, including when interest will begin to accrue, along with information on any indirect charges.

BC-4.3.20

Credit agreements, referred to in Paragraph BC-4.3.19, must be finalised with an employee of the retail bank, whether located at the premises of the retailer or at the premises of the retail bank providing the credit. Interest must in no event be charged before the disbursement of funds.

BC-4.3.21

Retail banks must inform the customers on the nature of their contractual relationship with the retail outlet and the customers' rights arising as a result of this relationship.

BC-4.3.22

In addition to the initial disclosure of key terms noted in Paragraphs BC-4.3.17 to BC-4.3.21, the "key terms disclosure" document must at the time of signing the credit agreement, amongst other things, make clear:

BC-4.3.23

Retail banks are free to design the layout and wording to be used in their 'key terms disclosure' document, as they see fit, providing they contain the information specified in Paragraph BC-4.3.22. The CBB will monitor compliance with the spirit as well as the letter of the requirements in this Chapter.

BC-4.3.24

Retail banks must, at the time of signing the credit agreement, give the clients information on the payment schedule of the credit agreement, including the breakdown of principal, interest and other charges per month for the whole life of the facility. Information must be given, free of charge, at least on a semi-annual basis, unless the period of debt servicing is shorter or where there exists a prior agreement on a more frequent basis.

BC-4.3.25

In addition to the requirements under Paragraph BC-4.3.24, when credit is granted through credit cards or overdraft facilities, monthly statements must be provided and include information on minimum payment.

BC-4.3.25A

Retail bank licensees must, when billing their customers, reflect the card transactions without rounding off the amounts in Fils. Retail bank licensees must collaborate with acquirers and Visa/MasterCard network schemes to ensure that there is no rounding off in any transaction irrespective of the currency of the transaction.

BC-4.3.26

Retail banks must disclose to the customer in advance, either collectively or individually, all relevant changes or variations to a credit agreement. The circumstances in which a customer must be provided with variation disclosures are:

BC-4.3.27

Any increase of the interest rate or the amount of any fee or charge payable under a credit agreement, must be disclosed publicly, by conspicuous notice, at least thirty calendar days prior to the date the change takes effect by:

BC-4.3.28

Any deferral of interest or principal announced by the retail bank must also take account of the APR methodology as shown in Paragraphs BC-4.3.31 to BC-4.3.33, and the new APR must be given to the client or made public in advertisements.

BC-4.3.29

The retail bank must provide a reply to any request for disclosure within fifteen business days of receiving the request.

BC-4.3.30

Disclosures requested by the customer may include but are not limited to any or all of the following information about a credit agreement:

BC-4.3.31

The APR must be calculated using the following methodology:

BC-4.3.32

The meaning of letters and symbols used in the above formula are:

BC-4.3.33

For the purpose of this Chapter, the 'relevant date' is the earliest identifiable date on which the borrower is able to acquire anything which is the subject of the agreement (e.g. delivery of goods), or otherwise the 'relevant date' is the date on which the credit agreement is made.

BC-4.20.3

Conventional retail bank licensees must treat customer accounts as dormant accounts in the following cases:

BC-4.20.4

For the purpose of Paragraph BC-4.20.3 (b), savings certificates with no expected withdrawals and deposit should not be considered as “dormant” unless the licensee has become aware of non-traceability of the customer and there is evidence for the same.

BC-4.20.5

Conventional retail bank licensees must not treat a customer account as dormant if any one or more of the following criteria are met:

BC-4.20.6

Notwithstanding the requirement under BC-4.20.5, conventional retail bank licensees must notify the customer by mail, e-mail or other communication channel, when any of his accounts becomes inactive.

BC-4.20.7

Conventional retail bank licensees must ensure that no withdrawal or transfer or inward clearing cheque is permitted from dormant accounts unless the activation procedures set out in this section are complied with.

BC-4.20.8

Conventional retail bank licensees must comply with the following additional requirements in transactions relating to dormant accounts:

BC-4.20.9

Conventional retail bank licensees must ensure that the terms and conditions of deposit agreements include provisions relevant to Subparagraphs BC-4.20.8 (a) and (d) above.

BC-4.20.10

To activate a dormant account, conventional retail bank licensees must ensure the following:

BC-4.20.11

In case of requests for activation of a dormant account through electronic channels using digital signature, the conventional retail bank licensee must check the authenticity of the request and related information, for example, through telephone or video calls, email or other measures to satisfy itself about the authenticity.

BC-4.20.12

Conventional retail bank licensees must treat the following balances that remain unpaid due to operational or other reasons as unclaimed balances:

BC-4.20.13

For purposes of Subparagraph BC-4.20.12 (d), listed companies must follow the guidelines stipulated in Bahrain Bourse Resolution of year 2020, mandating the transfer of unclaimed cash dividends into the Unclaimed Cash Dividends Fund account maintained by Bahrain Clear.

BC-4.20.14

Conventional retail bank licensees must make attempts to periodically contact the relevant customers or the rightful parties to return the unclaimed balances through different communication means. The licensee must maintain documentary evidence of such attempts.

BC-4.20.15

Conventional retail bank licensees must report the particulars of dormant accounts and unclaimed balances in the relevant section of the Prudential Information Return ('Form PIR').

BC-4.20.16

Conventional retail bank licensees must not transfer any of the balances in dormant accounts or unclaimed balances to their income statements.

BC-4.21.2

Conventional retail bank licensees using insurance cover as risk mitigant for its loans to individuals must comply with the following requirements:

BC-4.21.3

If licensees decide to restructure the loan but cannot obtain insurance coverage due to the customer's age or due to a ‘retiree’ status, they must inform the customer in writing about the unavailability of insurance for the extended loan period. In such cases, the licensee must not demand full repayment of loan by the customer due to the customer’s age.

BC-4.21.4

Licensees’ credit policy must specify, at a minimum, the following:

BC-4.21.5

Licensees’ credit policy must also specify its approach with regard to lending and the corresponding insurance coverage implications for customers who fall within higher age groups (to be defined by the licensee) and those who have retired from employment or will retire during the tenor of the loan.

BC-4.21.6

For the purposes of BC-4.21.5, extension of loans to individuals who are beyond the retirement age should take into account, in addition to other factors, the increases in life expectancy in Bahrain and the general trend in loss ratios. For this purpose, licensees should agree with their insurer the terms, conditions and procedures in order to meet the needs of individuals above the insurable age of the group loan portfolio and consider measures to be taken in the case of exceptional scenarios such as a customer in the higher age group needing to restructure a facility.

BC-4.21.7

Licensees using group insurance cover must perform a due diligence of the insurance provider at periodic intervals to ensure optimum benefits are obtained for their customers. The due diligence must also involve assessment of various insurance plans and loss ratios.

BC-4.21.8

If the insurance provider is a related party of the licensee, the insurance cost must not be higher than the market quotes for similar insurance cover.

BC-5.1.2

On each occasion that a retail bank becomes aware of a dishonoured cheque of one of its customers, that bank will send a written warning to the relevant customer informing him/her of the existence of the dishonoured cheque, requesting him/her to immediately make good the insufficiency in his current account in order to clear the cheque. This written warning will also inform the customer of the provisions of this system with regard to dishonoured cheques and abusers of cheques.

BC-5.1.3

On the first working day of each calendar month, each retail bank must provide to the CBB a list of the names, supported with I.D. numbers (CPR or CR numbers (as applicable) for Bahrain residents, Passport or CR-equivalent numbers (as applicable) for non-Bahrain residents) of those customers to whom one (or more) written warning(s) has been sent in accordance with Paragraph BC-5.1.2 above during the immediately preceding calendar month. This list should specify the number of written warnings relating to dishonoured cheques for each customer of the relevant retail bank for the month in question and shall be in the form set out in Appendix BC-1. Retail banks will be responsible for ensuring the accuracy of all details on their respective lists.

BC-5.1.4

Using the lists referred to in Paragraph BC-5.1.3 above, the CBB will prepare a further list (the 'Control List') of those customers to whom two or more written warnings were sent by any one or more retail bank licensees at any time within a maximum period of three consecutive calendar months. The Control List, which will be in the form set out in Appendix BC-2, will specify the name and I.D. numbers of each such customer, the total number of dishonoured cheques for that customer included in the lists referred to in Paragraph BC-5.1.3 above, the name of the relevant bank(s) on whose list(s) the customer's name has been included, and other relevant details for banks' information and checking in accordance with Paragraph BC-5.1.5 below. Any customer to whom more than two written warnings relating to dishonoured cheques were sent by any one or more retail bank licensees at any time within a maximum period of three consecutive calendar months will be automatically deemed an abuser of cheques for the purposes of Paragraph BC-5.1.7 below.

BC-5.1.5

On the second working day of each calendar month, the CBB will circulate a draft copy of the Control List to all retail bank licensees. Banks will be requested to check the accuracy of the Control List by reference to the information they have sent to the CBB in accordance with Paragraph BC-5.1.3 above, and to notify the CBB within a maximum period of one week of receiving the list of any inaccuracies on the Control List. The Control List, as amended if appropriate, will be circulated to retail bank licensees by the CBB on the second working day after it receives all responses from concerned banks. Retail bank licensees will be required to monitor the customers on this Control List to establish whether any one or more of them issued another dishonoured cheque in the instant calendar month. Any bank becoming aware of a dishonoured cheque of one or more of its customers on the Control List during this month should notify the CBB of this fact, using the relevant section in Appendix BC-1, on the first working day of each calendar month.

BC-5.1.6

If the CBB does not receive any notification as contemplated in Paragraph BC-5.1.5 above for a particular customer on the Control List, that customer's name shall be withdrawn from the next issue of the Control List. However, the CBB will monitor the names of customers appearing on the Control List during the three consecutive calendar months falling immediately after the calendar month in which a customer's name is taken off the Control List. If any such customer's name is again reported to the CBB pursuant to Paragraph BC-5.1.3 above at any time during this three-month period,

BC-5.1.7

If the CBB does receive notification as contemplated in Paragraph BC-5.1.5 above for a particular customer on the Control List, or if a customer is deemed to be an abuser of cheques within Paragraph BC-5.1.4 or Paragraph BC-5.1.6 above, such customer (herein referred to as an 'abuser of cheques') will be penalised as follows. Using Appendix BC-3, on the second working day of the calendar month following the receipt of the information referred to above, the CBB will circulate a draft list to all retail bank licensees. Banks will be requested to check the accuracy of this list by reference to the information they have sent to the CBB in accordance with Paragraph BC-5.1.5 above, and to notify the CBB within a maximum period of one week of receiving the list of any inaccuracies on that list. The list, as amended if appropriate, will be circulated to retail bank licensees by the CBB on the second working day after it receives all responses from banks, and will direct the bank(s) which has/have reported an abuser of cheques to withdraw all cheque books held by that abuser of cheques, and to close such person's current account(s) by transferring any balances therein to saving and/or any other accounts held with that/those bank(s). Furthermore, that bank(s) must not provide current account facilities to that abuser of cheques for the twelve calendar month period immediately following the date of issue of the relevant list. All other banks should, within a maximum period of one month after the issue of the relevant list, also withdraw current account facilities from that abuser of cheques for the same twelve calendar month period. Retail bank licensees will be entitled to recover any amounts due to them from abusers of cheques as a result of compliance with this system by availing of their set-off rights under Bahrain Law.

BC-5.1.8

On Appendix BC-4, the CBB will notify retail bank licensees of those abusers of cheques in respect of whom the twelve calendar month period referred to in Paragraph BC-5.1.7 above has ended, and to whom banks may reinstate/offer current account facilities at their discretion.

BC-5.1.9

Nothing in this Directive shall prejudice the rights of banks against customers otherwise existing under Bahrain Law and/or under any particular bank/customer agreement. Furthermore, retail bank licensees will be entitled to the same immunity from prosecution as the CBB for any harm suffered, or alleged to be suffered, by customers as a result of banks complying with the Rules in this Chapter.

BC-5.1.10

The Rules may be amended, in whole or in part, from time to time by the CBB. In addition, the CBB may, at its discretion and as it so deems appropriate, issue specific directions to all or any retail bank licensees regarding abusers of cheques or any particular abuser of cheques.

BC-6.1.3

[This Paragraph was deleted in October 2019].

BC-6.1.4

[This Paragraph was deleted in October 2019].

BC-6.1.5

[This Paragraph was deleted in October 2019].

BC-6.1.6

[This Paragraph was deleted in October 2019].

BC-6.1.7

[This Paragraph was deleted in October 2019].

BC-6.1.8

[This Paragraph was deleted in October 2019].

BC-6.1.9

[This Paragraph was deleted in October 2019].

BC-6.1.10

[This Paragraph was deleted in October 2019].

BC-6.1.11

[This Paragraph was deleted in October 2019].

BC-7.1.4

Only retail bank licensees will be permitted to act as participating banks for the System. Participating banks must each receive the prior general written approval of the CBB in order to take part in the System. The CBB will notify the licensed exchange of the identity of participating banks for the System. The CBB's approval may be withdrawn at its discretion.

BC-7.1.5

SRO members who are not retail banks will not be permitted to act as lenders or financiers for the System.

BC-7.2.6

Only licensed SRO members who meet the requirements to participate in the System and are authorised as such by the licensed exhange and the CBB will be permitted to act as brokers for the System.

BC-7.2.7

Only standard-form documents (application forms and agreements) will be used for the System. Standard-form agreements, drafted and approved in advance by the licensed exchange, will be entered into between the participating bank and the investor (in respect of financing), and between the participating bank and the investor and the SRO member (in respect of trading) and, as relevant, these agreements shall (amongst other things) confirm that:

BC-7.2.8

For ease of transfer and sale of the securities in the event that a margin is called by the participating bank but not met by the investor, the securities will be registered in the participating bank's name (for the account of the investor) and held by a custodian.

BC-7.2.9

Under Paragraph BC-7.2.8 above; (a) the securities should not be considered as part of the bank's own assets for the purposes of determining ownership/control under Bahrain law, and (b) if the investor has discharged his obligations to the participating bank under the System and the securities have not been sold, the securities shall be transferred into the legal ownership of the investor.

BC-7.2.10

For equities listed on any licensed exchange, an investor shall have the right to borrow a loan the value of which shall not exceed 50% of the total value of the funds being invested (i.e. 1:1). The CBB and the licensed exchange shall coordinate in making any change to the margin percentages set for the System.

BC-7.2.11

The margin call top-up shall be 30% of the total value of the funds invested by an investor through a margin account with a participating bank. An investor shall settle a margin call on the settlement date (as determined by the BSE) by making a cash payment of such amount to the participating bank. Such cash payment may, at the investor's discretion and in whole or part, come from the sale of the securities bought through the System, or otherwise. Failure to meet such margin call will, however, give the participating bank the right to sell the securities bought through the System.

BC-7.2.12

The participating bank shall charge a rate of interest or impose charges on the financing amount granted to the investor at a rate or on a basis to be determined by the participating bank. In the event that investor's margin account is in credit in excess of the margin applicable thereto, interest or profit shall be paid on the excess at a rate to be determined by the participating bank.

BC-8.1.3

Locally incorporated conventional bank licensees must ensure that their branches and subsidiaries operating in foreign jurisdictions comply, at a minimum, with local conduct of business standards and regulatory requirements (where applicable).

BC-8.1.4

For branches of foreign banks located in Bahrain, these requirements only apply to the business and customers of the Bahrain branch.

BC-8.1.5

The CBB encourages locally incorporated conventional bank licensees to apply — with respect to their overseas branches and subsidiaries — conduct of business standards at least equivalent to those set out in this Module. Where this is not the case, then the CBB will consider any potential risk to the conventional bank licensee that may arise through adverse reputational or other consequences.

BC-8.4.6

For the purpose of Rule BC 8.4.3, an accredited investor includes:

BC-8.4.7

Conventional bank licensees must notify a customer (that is not licensee of the CBB or a licensed financial institution in a foreign country) in writing, that he is being classified as an accredited investor and provide a written warning that he will not benefit from the specific protections afforded to retail investors.

BC-8.4.8

Persons classified as accredited investors under Rule BC-8.4.6 may, however, request treatment as retail customers where the concerned product is a listed security or is retail in nature, in which case conventional bank licensees must agree to treat them as retail customers.

BC-8.4.9

A retail customer, as defined in Rule BC-8.4.10, may voluntarily elect to be treated as an accredited investor. In this instance the conventional bank licensee must obtain a signed declaration to that effect prior to any provision of regulated banking services.

BC-8.4.10

For the purposes of Rule BC-8.4.3 a retail customer means a customer who is not classified as an accredited investor under Rule BC-8.4.6 .

BC-8.4.11

A conventional bank licensee must make a record of the classification established for each customer, including sufficient information to support such classification.

BC-8.5.11

Before a conventional bank licensee communicates any promotional material on a specific product or service to a customer or a potential customer it must ensure that the promotional material at the very least contains the information laid out in Paragraph BC-8.13.1.

BC-8.5.12

Conventional bank licensees must not make use of the name of the CBB in any promotion in such a way that would indicate endorsement or approval of its products or services.

BC-8.5.12A

For greater certainty, notification in promotion material that a bank is licensed by the CBB is not regarded as endorsement or approval by the CBB of any products or services being offered by the bank and does not contravene the requirements of Paragraph BC-8.5.12.

BC-8.5.13

Conventional bank licensees must maintain a record of all promotional materials issued by them or on their behalf.

BC-8.5.14

Conventional bank licensees must not make a real time promotion to retail customers unless the concerned customer has been notified of the fact in advance and has agreed in writing to receive real time promotions.

BC-8.5.15

For the purposes of Paragraph BC-8.5.14, a real time promotion is a promotion made in the course of a personal visit, telephone conversation or other interactive dialogue.

BC-8.5.16

Consent to receive real time promotions could be, for instance, at the time of the initial customer profiling, by means of signing a form clearly indicating such consent.

BC-8.5.17

A representative of the conventional bank licensee must, on making contact for the first time with a customer, and again at any time when asked to do so by the customer:

BC-8.5.18

For the purposes of Rule BC-8.5.17(c), the statement on the business card should make clear the licensing status of the conventional bank licensee; however it should not lead the customer to believe that the product being offered has been approved by the CBB. The suggested wording for the statement of licensing status is as follows: "Licensed as a conventional retail /wholesale bank by the CBB".

BC-8.5.19

In oral communications with a retail customer, whether in person or by telephone, the representative of the conventional bank licensee must:

Records

BC-8.6.1

This Section applies to retail customers only.

BC-8.6.2

Conventional bank licensees must provide their retail customers with their terms of business, setting out the basis on which the regulated banking services are to be conducted (see also Paragraph BC-8.8.13).

BC-8.6.3

The terms of business in relation to providing regulated banking services as defined in Paragraph BC-8.2.1 to a retail customer must take the form of a customer agreement.

BC-8.6.4

The terms of business must include the rights and obligations of parties to the agreement, as well as other terms relevant to the regulated banking services. The terms of business must include, but are not limited to, the items included in Paragraph BC-8.13.2.

BC-8.6.5

An application form in relation to regulated banking services will be deemed to be a customer agreement, provided the form includes the principal terms and conditions of the service, such that the customer is provided sufficient information to allow him to understand the basis on which the service is to be conducted.

BC-8.6.6

The customer agreement must be provided in good time prior to providing the regulated banking service.

BC-8.6.7

For the purposes of Rule BC-8.6.6, ‘good time’ should be taken to mean sufficient time to enable the customer to consider properly the service or financial instrument on offer before he is bound.

BC-8.6.8

Conventional bank licensees must not enter into a customer agreement unless they have taken reasonable care to ensure that their retail customer has had a proper opportunity to consider the terms.

BC-8.6.9

Conventional bank licensees must obtain their retail customer’s consent to the terms of the customer agreement as evidenced by a signature or an equivalent mechanism.

BC-8.6.10

The equivalent mechanism refers to instances where a customer may have signed a mandate letter or other document accompanying the terms of the customer agreement.

BC-8.6.11

The customer agreement must contain the signatures of both parties to the agreement. If the agreement is signed by only the customer (in case it is in the form of an application), copies of the signed agreement must be provided by the conventional bank licensee to the customer.

BC-8.6.12

Conventional bank licensees must keep sufficient records of customer agreements and any documents referred to in the customer agreement as soon as the agreement comes into force, for CBB’s supervision purposes.

BC-8.6.13

Detailed record-keeping requirements are contained in Module GR (General Requirements) and Module FC (Financial Crime).

BC-8.7.1

This Section applies to retail customers only.

BC-8.7.2

Conventional bank licensees must seek information from their retail customers (and potential retail customers about their needs, circumstances and investment objectives (including their risk appetite), relevant to the services to be provided.

BC-8.7.3

For the purposes of Rule BC-8.7.2, the conventional bank licensee, when providing the regulated investment services, should ask the customer or potential customer to provide information regarding his knowledge and experience in the investment field relevant to the specific type of financial instrument or service offered or demanded so as to enable the licensee to assess whether the financial instrument or service is appropriate to the customer. The evaluation of the customer's needs, circumstances and investment objectives (including risk appetite) can be done through a structured questionnaire.

BC-8.7.4

For the purposes of satisfying the requirement under Rule BC-8.7.2, conventional bank licensees must ensure that the information and facts they hold about their customers are accurate, complete and up to date.

BC-8.7.5

Where a conventional bank licensee is managing financial instruments for a customer, it must periodically assess whether the customer’s portfolio or account remains suitable over the lifetime of the customer relationship and advise the customer if it is no longer suitable.

BC-8.7.6

Where a conventional bank licensee has pooled a customer’s assets with those of others, with a view to taking common discretionary management decisions, the conventional bank licensee must take reasonable steps to ensure that the transaction is suitable for the related customers having regard to their stated investment objectives.

BC-8.7.7

Conventional bank licensees must keep a record of each recommendation made to retail customers, and be able to demonstrate to the CBB compliance with this Section.

BC-8.8.1

This Section applies to conventional bank licensees in relation to their dealings with all categories of customers, except when stated otherwise.

BC-8.8.2

A conventional bank licensee must provide (with respect to regulated banking services), comprehensible information to customers or potential customers on:

BC-8.8.3

The purpose of Paragraph BC-8.8.2 is to ensure that customers are reasonably able to understand the nature and risks of the investment service and type of financial instrument that is being offered and, consequently, to take investment decisions on an informed basis. This information may be provided in standard format.

BC-8.8.4

Conventional bank licensees must disclose adequate information to all classes of customers about risks underlying the financial instrument that are not readily apparent and which relate to the regulated banking service being provided.

BC-8.8.5

Without prejudice to the scope of the requirement under Rule BC-8.8.2(c), conventional bank licensees must provide retail customers with appropriate guidance on, and warnings of, relevant risks when providing regulated banking services, in relation to:

BC-8.8.6

In relation to transactions involving warrants or derivatives, conventional bank licensees must provide retail customers with a written statement that includes explanations of their characteristics, in particular their leverage effect, liquidity and price volatility.

BC-8.8.7

To satisfy Rule BC-8.8.6, with respect to warrants, conventional bank licensees should provide retail customers with a statement that includes, at a minimum, the information contained in Paragraph BC-8.13.3.

BC-8.8.8

To satisfy Rule BC-8.8.6, with respect to futures contracts, conventional bank licensees should provide retail customers with a statement that includes, at a minimum, the information contained in Paragraph BC-8.13.4.

BC-8.8.9

To satisfy Rule BC-8.8.6, with respect to option transactions, conventional bank licensees should provide retail customers with a statement that includes, at a minimum, the information contained in Paragraphs BC-8.13.5 and BC-8.13.6.

BC-8.8.10

In relation to a transaction in a financial instrument that is not readily realisable, conventional bank licensees must:

BC-8.8.11

The risk warning given to a retail customer or potential retail customer must be given due prominence in all related materials and must not be concealed or masked in any way by the wording, design or format of the information provided.

BC-8.8.12

Risk warnings provided to a retail customer or potential retail customer about warrants or derivatives must make clear that the instrument can be subject to sudden and sharp falls in value. Where the retail customer may not only lose his entire investment but may also be required to pay more later, he must also be warned about this fact and the possible obligation to provide extra funding.

BC-8.8.13

Conventional bank licensees must disclose in their terms of business the existence or absence of a right to cancel as per the provisions of Paragraph BC-8.6.2.

BC-8.8.14

Conventional bank licensees must pay due regard to the interests of their customers and treat them fairly.

BC-8.8.15

Conventional bank licensees must keep a record of statements issued in compliance with Rule BC-8.8.6, and of other information or recommendations provided to their customers, and be able to demonstrate to the CBB compliance with this Section.

BC-8.9.2

Conventional bank licensees must take all reasonable steps to obtain, when executing orders, the best possible result for customers taking into account price, costs, speed, likelihood of execution and settlement, and any other consideration relevant to the execution of the order (subject to Paragraph BC-8.9.5 below).

BC-8.9.3

Conventional bank licensees must establish and implement effective arrangements for complying with Rule BC-8.9.2 including:

BC-8.9.4

Conventional bank licensees are not required to provide best execution (as defined in Paragraph BC-8.9.5 below) where they have agreed with the customer in writing that they will not provide best execution.

BC-8.9.5

In determining whether a conventional bank licensee has taken reasonable care to provide the best overall price for a customer in accordance with Rules BC-8.9.2 to BC-8.9.4, the CBB will take into account whether an conventional bank licensee has:

BC-8.9.6

Conventional bank licensees may only postpone the execution of a transaction if it is in the best interests of the customer, and the prior consent of the customer has been given, or when circumstances are beyond its control. The conventional bank licensee must maintain a record of all postponements together with the reasons for the postponement.

BC-8.9.7

Factors relevant to whether the postponement of an existing customer order may be in the best interests of the customer include where:

BC-8.9.8

Conventional bank licensees must not enter into a non-market price transaction in any capacity, with or for a customer, if it has reasonable grounds to suspect that the customer is entering into the transaction for an illegal or improper purpose.

BC-8.9.9

For the purposes of Paragraph BC-8.9.8, a non-market price transaction is one where the price paid by the conventional bank licensee, or its customer, differs from the prevailing market price. With respect to transactions in financial instruments traded on a licensed exchange, licensees are reminded that in Bahrain the law prohibits off-market transactions.

BC-8.9.10

For the purposes of Paragraph BC-8.9.8, examples of improper purposes for transactions include:

BC-8.9.11

Rule BC-8.9.8 does not apply to a non-market-price transaction if it is subject to the rules of a recognised investment exchange.

BC-8.9.12

Conventional bank licensees may only aggregate an order for a customer with an order for other customers, or with an order for its own account, where:

BC-8.9.13

If a conventional bank licensee has aggregated orders of customers, it must make a record of the intended basis of allocation and the identity of each customer before the order is effected (subject to the "best execution" provisions of Paragraph BC-8.9.2).

BC-8.9.14

Where an allocation takes place, prices must not be changed. The order must be allocated equally so that no customer or broker is advantaged over any change.

BC-8.9.15

Conventional bank licensees must have written policies on aggregation and allocation which are consistently applied; these must include the policy that will be adopted when only part of the aggregated order has been filled.

BC-8.9.16

Where a conventional bank licensee has aggregated a customer order with an order for other customers or with an order for its own account, and part or all of the aggregated order has been filled, it must:

BC-8.9.17

Conventional bank licensees must not advise any customer to transact with a frequency or in amounts that might result in those transactions being deemed excessive in light of historical volumes, market capitalisation, customer portfolio size and related factors. This Rule does not apply to customers classified as market counterparties.

BC-8.9.18

Conventional bank licensees must not realise a retail customer’s assets, unless it is legally entitled to do so, and has either:

BC-8.9.19

Before conducting a transaction with or for a retail customer, conventional bank licensees must notify the customer of:

BC-8.9.20

Conventional bank licensees must close out a retail customer's open position if that customer has failed to meet a margin call within a maximum of five business days following the date on which the obligation to meet the call accrues, unless:

BC-8.9.21

For the purposes of Rule BC-8.9.20, conventional bank licensees may require the closing of a retail customer’s open position in less than five business days, for their own risk management purposes.

BC-8.9.22

Conventional bank licensees must also follow the requirements of Chapter BC-7 concerning the operation of the margin trading system.

BC-8.9.23

Before a conventional bank licensee executes a programme trade, it must disclose to its customer whether it will be acting as a principal or agent. A conventional bank licensee must not subsequently act in a different capacity from that which is disclosed without the prior consent of the customer.

BC-8.9.24

The term ‘programme trade’ describes a single transaction or series of transactions executed for the purpose of acquiring or disposing of, for a customer, all or part of a portfolio or a large basket of financial instruments.

BC-8.9.25

Conventional bank licensees must ensure that neither they, nor an associate, execute an own account transaction in any financial instrument included in a programme trade, unless they have notified the customer in advance that they may do this, or can otherwise demonstrate that they have provided fair treatment to the customer concerned.

BC-8.9.26

Conventional bank licensees must keep a record of each step they undertake in relation to each transaction to demonstrate to the CBB compliance with Section BC-8.9.

BC-8.10.2

When a conventional bank licensee executes a transaction in a financial instrument for a customer on a specific order, it must establish procedures to keep the customer informed of the essential details of the transaction and essential information regarding the carrying out of his order.

BC-8.10.3

For the purposes of Rule BC-8.10.2, the essential details of the transaction and essential information regarding the carrying out of the order include:

BC-8.10.4

For the purposes of Rule BC-8.10.2, conventional bank licensees must include at the very least in their confirmation notes, the information included in Paragraph BC-8.13.7.

BC-8.10.5

Conventional bank licensees must promptly and at suitable intervals provide their customers with a written statement when they:

BC-8.10.6

Conventional bank licensees must provide a periodic statement:

BC-8.10.7

Periodic statements, issued in accordance with Rule BC-8.10.6, must contain, at the very least, the information contained in Paragraph BC-8.13.8, as at the end of the period covered.

BC-8.10.8

Where a conventional bank licensee undertakes the activity of managing financial instruments on a discretionary basis, the periodic statements, issued in accordance with Rule BC-8.10.6, must also include at the very least the information included in Paragraph BC-8.13.9.

BC-8.10.9

In addition to Rules BC-8.10.7 and BC-8.10.8, where the retail customer may not only lose his entire investment but may also be required to pay more later, conventional bank licensees must also include the additional information included in Paragraph BC-8.13.10.

BC-8.10.10

Conventional bank licensees must immediately record the essential elements of all orders that are received.

BC-8.10.11

For the purposes of Rule BC-8.10.10, essential elements of orders received include the particulars of the customer and order, time, price of execution, and number of instruments.

BC-8.10.12

Conventional bank licensees must record the essential elements of all:

BC-8.10.13

For purposes of Rule BC-8.10.12, conventional bank licensees should include, at the very least, the information provided in Paragraph BC-8.13.9.

BC-8.10.14

Conventional bank licensees must make a copy of any confirmation of a transaction or periodic statement provided to a customer, and retain it for at least five years from the date on which it was provided.

BC-8.11.4

[This paragraph was deleted in October 2011]

BC-8.11.5

[This paragraph was deleted in October 2011]

BC-8.12.4

Conventional bank licensees must establish and maintain adequate policies and procedures, to ensure that:

BC-8.12.5

The written notice in sub-Paragraph BC-8.12.4 (a)(i) must make it explicit that, if an employee is prohibited from undertaking a personal account transaction, he must not, except in the proper course of his employment:

BC-8.12.6

Where a conventional bank licensee has taken reasonable steps to determine that an employee will not be involved to any material extent in, or have access to information about, the conventional bank licensee’s investment business, then the conditions or restrictions on personal account transactions, in Rule BC-8.12.4, need not be applied to that employee.

BC-8.12.7

Conventional bank licensees must establish and maintain procedures and controls so as to ensure that an investment analyst does not undertake a personal account transaction in a financial instrument if the investment analyst is preparing investment research:

BC-8.12.8

Where a conventional bank licensee issues investment research, its conflict of interest policy must specify the types of investment research issued by it. A conventional bank licensee that prepares and publishes investment research must have adequate procedures and controls to ensure:

BC-8.12.9

Conventional bank licensees that publish investment research must take reasonable steps to ensure that the investment research:

BC-8.12.10

A conventional bank licensee must take reasonable steps to ensure that when it publishes investment research, disclosure is made of the following matters:

BC-8.12.11

If a conventional bank licensee acts as a manager or co-manager of an initial public offering or a secondary offering it must take reasonable steps to ensure that it does not publish investment research relating to the financial instrument during the period beginning on the day of publication of the listing particulars or a prospectus relating to the offering of that financial instrument and ending on the 30^th calendar day after the day on which the financial instrument is admitted to trading.

BC-8.12.12

A conventional bank licensee and its associates must not knowingly execute an own account transaction in a financial instrument, which is the subject of investment research, prepared either by the conventional bank licensee or its associate, until the customers for whom the investment research was principally intended have had a reasonable opportunity to act upon it.

BC-8.12.13

The restriction in Rule BC-8.12.11 does not apply if:

BC-8.12.14

Conventional bank licensees must have systems and controls, policies and procedures to ensure that neither they, nor any of their employees, offer, give, solicit or accept any inducement which is likely to conflict significantly with any duty that they owe to their customers.

BC-8.12.15

A conventional bank licensee may only accept goods and services under a soft dollar agreement if:

BC-8.12.16

For the purpose of Sub-Paragraph BC-8.12.15(d), Paragraph BC-8.13.12 sets out the minimum disclosure requirements.

BC-8.12.17

A soft dollar agreement is an agreement in any form under which a conventional bank licensee receives goods or services in return for investment business put through or in the way of another person.

BC-8.12.18

Before a conventional bank licensee enters into a transaction for a customer, either directly or indirectly, with or through the agency of another person, under a soft dollar agreement which the conventional bank licensee has, or knows that another member of its group has, with that other person, it must disclose to its customer:

BC-8.12.19

If a conventional bank licensee has a soft dollar agreement under which the conventional bank licensee deals for a customer, the conventional bank licensee must provide that customer with information as set out in Paragraph BC-8.13.12.

BC-9.3.2

"How and where to complain" must be well publicised to customers and other interested parties, in both English and Arabic languages.

BC-9.3.3

A complaints handling process must be easily accessible to all customers and must be free of charge.

BC-9.3.4

While a conventional bank licensee's website is considered an acceptable mean for dealing with customer complaints, it should not be the only means available to customers as not all customers have access to the internet.

BC-9.3.5

Process information must be readily accessible and must include flexibility in the method of making complaints.

BC-9.3.6

Support for customers in interpreting the complaints procedures must be provided, upon request.

BC-9.3.7

Information and assistance must be available on details of making and resolving a complaint.

BC-9.3.8

Supporting information must be easy to understand and use.

BC-9.3.9

[This Paragraph was deleted in January 2012].

BC-9.3.10

Receipt of complaints must be acknowledged in accordance with Section BC-9.5 "Response to Complaints".

BC-9.3.11

Complaints must be addressed promptly in accordance with their urgency.

BC-9.3.12

Customers must be treated with courtesy.

BC-9.3.13

Customers must be kept informed of the progress of their complaint, in accordance with Section BC-9.5.

BC-9.3.14

If a customer is not satisfied with a conventional bank licensee's response, the conventional bank licensee must advise the customer on how to take the complaint further within the organisation.

BC-9.3.15

In the event that they are unable to resolve a complaint, conventional bank licensees must outline the options that are open to that customer to pursue the matter further, including, where appropriate, referring the matter to the Consumer Protection Unit at the CBB.

BC-9.3.16

Complaints must be addressed in an equitable, objective, unbiased and efficient manner.

BC-9.3.17

General principles for objectivity in the complaints handling process include:

BC-9.5.3

A conventional bank licensee should decide and communicate how it proposes (if at all) to provide the customer with redress. Where appropriate, the conventional bank licensee must explain the options open to the customer and the procedures necessary to obtain the redress.

BC-9.5.4

Where a conventional bank licensee decides that redress in the form of compensation is appropriate, the conventional bank licensee must provide the complainant with fair compensation and must comply with any offer of compensation made by it which the complainant accepts.

BC-9.5.5

Where a conventional bank licensee decides that redress in a form other than compensation is appropriate, it must provide the redress as soon as practicable.

BC-9.5.6

Should the customer that filed a complaint not be satisfied with the response received as per Paragraph BC-9.5.2, he can forward the complaint to the Consumer Protection Unit at the CBB within 30 calendar days from the date of receiving the letter.