PB PB Principles of Business
PB-A PB-A Introduction
PB-A.1 PB-A.1 Purpose
Executive Summary
PB-A.1.1
The Principles of Business are a general statement of the fundamental obligations of all Central Bank of Bahrain ('CBB')
conventional bank licensees andapproved persons . They serve as a basis for other material in Volume 1 (Conventional Banks), and help address specific circumstances not covered elsewhere in the Rulebook.October 07PB-A.1.2
The Principles of Business have the status of Rules and apply alongside other Rules contained in Volume 1 (Conventional Banks). However, these other Rules do not exhaust the fundamental obligations contained in the Principles. Compliance with all other Rules, therefore, does not necessarily guarantee compliance with the Principles of Business.
October 07Legal Basis
PB-A.1.3
This Module contains the CBB's Directive (as amended from time to time) relating to Principles of Business 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 (including theirapproved persons ).Amended: January 2011
October 07PB-A.1.4
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.
October 07PB-A.2 PB-A.2 Module History
PB-A.2.1
This Module was first issued in July 2004 by the BMA as part of the conventional principles volume. All regulations in this volume have been effective since this date. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made; Chapter UG-3 provides further details on Rulebook maintenance and version control.
October 07PB-A.2.2
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 1 was updated in October 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.
October 07PB-A.2.3
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes PB-A.1 10/2007 New Rule PB-A.1.3 introduced, categorising this Module as a Directive. PB-1.1 10/2007 Small expansion of Principle 1 to refer to disclosure of all relevant information to customers, as required by CBB Regulations and Directives. Reordering and expansion of other Principles, although no substantive changes. PB-A.1.3 01/2011 Clarified legal basis. PB-B.1.5 01/2011 Corrected cross reference. October 07PB-B PB-B Scope of Application
PB-B.1 PB-B.1 Scope of Application
PB-B.1.1
The 10 Principles of Business apply to all CBB
conventional bank licensees , in accordance with Paragraph PB-B.1.2. Principles 1-8 also apply to allapproved persons , in accordance with Paragraph PB-B.1.3.October 07PB-B.1.2
Principles 1 to 10 apply to activities carried out by the
conventional bank licensee , including activities carried out through overseas branches (if any). Principles 9 and 10 also take into account any activities of other members of the group of which the conventional bank licensee is a member.October 07PB-B.1.3
Principles 1 to 8 apply to
approved persons in respect of thecontrolled function for which they have been approved.October 07PB-B.1.4
Principles 1 to 8 do not apply to behaviour by an
approved person with respect to any other functions or activities they may undertake. However, behaviour unconnected to theircontrolled function duties may nonetheless be relevant to an assessment of that person's fitness and propriety.October 07PB-B.1.5
The CBB's requirements regarding
approved persons andcontrolled functions are located in Module LR (Licensing Requirements).Amended: January 2011
October 07PB-B.2 PB-B.2 Non-compliance
PB-B.2.1
Breaching a Principle of Business makes the
conventional bank licensee orapproved person concerned liable to enforcement action. In the case of a licensee, this may call into question whether they continue to meet the licensing conditions (see Chapter LR-2). In the case of anapproved person , this may call into question whether they continue to meet the 'fit and proper' requirements for the function for which they have been approved (see Section HC-2.2).October 07PB-B.2.2
Module EN (Enforcement) sets out the CBB's policy and procedures on enforcement action.
October 07PB-1 PB-1 The Principles
PB-1.1 PB-1.1 Principles
Principle 1 — Integrity
PB-1.1.1
Conventional bank licensees andapproved persons must observe high standards of integrity and fair dealing. They must be honest and straightforward in their dealings withcustomers , and provide full disclosure of all relevant information to customers, as required by the CBB's Regulations and Directives.October 07Principle 2 — Conflicts of Interest
PB-1.1.2
Conventional bank licensees andapproved persons must take all reasonable steps to identify, and prevent or manage, conflicts of interest that could harm the interests of acustomer .October 07Principle 3 — Due Skill, Care and Diligence
PB-1.1.3
Conventional bank licensees andapproved persons must act with due skill, care and diligence.October 07Principle 4 — Confidentiality
PB-1.1.4
Conventional bank licensees andapproved persons must observe in full any obligations of confidentiality, including with respect to customer information. This requirement does not over-ride lawful disclosures.October 07Principle 5 — Market Conduct
PB-1.1.5
Conventional bank licensees andapproved persons must observe proper standards of market conduct, and avoid action that would generally be viewed as improper.October 07Principle 6 — Customer Assets
PB-1.1.6
Conventional bank licensees andapproved persons must take reasonable care to safeguard the assets and deposits ofcustomers for which they are responsible.October 07Principle 7 — Customer Interests
PB-1.1.7
Conventional bank licensees andapproved persons must pay due regard to the legitimate interests and information needs of theircustomers and communicate with them in a fair and transparent manner.Conventional bank licensees andapproved persons , when dealing withcustomers who are entitled to rely on their advice or discretionary decisions, must take reasonable care to ensure the suitability of such advice or decisions.October 07Principle 8 — Relations with Regulators/Supervisors
PB-1.1.8
Conventional bank licensees andapproved persons must act in an open and co-operative manner with the CBB and other regulatory/supervisory bodies whose authority they come under. They must take reasonable care to ensure that their activities comply with all applicable laws and regulations.October 07Principle 9 — Adequate Resources
PB-1.1.9
Conventional bank licensees must maintain adequate human, financial and other resources sufficient to run their business in an orderly manner.October 07Principle 10 — Management, Systems & Controls
PB-1.1.10
Conventional bank licensees must take reasonable care to ensure that their affairs are managed effectively and responsibly, with appropriate systems and controls in relation to the size and complexity of their operations.Conventional bank licensees' systems and controls, as far as is reasonably practical, must be sufficient to manage the level of risk inherent in their business and ensure compliance with the CBB Rulebook.October 07