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  • HC-A HC-A Introduction

    • HC-A.1 HC-A.1 Purpose

      • Executive Summary

        • HC-A.1.1

          This Module presents requirements that have to be met by conventional bank licensees with respect to:

          a) The role and composition of their Boards and Board Committees; and
          b) Related high-level controls and policies.
          October 07

        • HC-A.1.2

          In addition, this Module contains requirements for the notification and pre-approval of individuals, undertaking certain designated functions with respect to conventional bank licensees. These functions (called 'controlled functions'), include Directors and members of senior management. The controlled functions regime supplements the CBB's corporate governance requirements by ensuring that key persons involved in the running of conventional bank licensees are fit and proper. Those approved by the CBB to undertake controlled functions are called approved persons.

          October 07

        • HC-A.1.3

          Finally, this Module contains certain notification and approval requirements regarding the use of Special Purpose Vehicles ('SPVs'; see Section HC-1.5).

          October 07

        • HC-A.1.4

          This Module supplements various provisions relating to corporate governance contained in Legislative Decree No. 21 of 2001, with respect to promulgating the Commercial Companies Law ('Commercial Companies Law 2001'). In case of conflict, the Commercial Companies Law shall prevail. The Module also supplements (for companies listed on the Bahrain Stock Exchange), Stock Exchange regulations that are relevant to corporate governance and high-level controls. Compliance with this Module does not guarantee compliance with either the Commercial Companies Law 2001 or the BSE regulations.

          October 07

      • Legal Basis

        • HC-A.1.5

          This Module contains the CBB's Directive relating to high-level controls 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 conventional bank licensees.

          October 07

        • HC-A.1.6

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

          October 07

    • HC-A.2 HC-A.2 Key requirements

      • Corporate governance

        • HC-A.2.1

          The Chairman of the Board should preferably be non-executive and independent. The role of Chairman and Chief Executive may not be exercised by the same person. (See Rule HC-1.3.9.)

          October 07

        • HC-A.2.2

          The Board must approve a code of conduct for itself, senior management and employees, and define the responsibilities of itself and senior management. This should include procedures for dealing with conflicts of interest, and a prohibition on insider trading. (See Paragraphs HC-1.2.9 to HC-1.2.13.)

          October 07

        • HC-A.2.3

          The Board should meet at least four times per year (see Paragraph HC-1.3.4).

          October 07

        • HC-A.2.4

          Boards must have an adequate number of members that are 'independent' and 'non-executive' to serve the interests of minority shareholders and other stakeholders. (See Paragraphs HC-1.3.5 and HC-1.3.6.)

          October 07

        • HC-A.2.5

          The Board should consider the setting up of committees to assist it in fulfilling its responsibilities. The setting up of an Audit Committee is mandatory. (See Paragraphs HC-1.3.11 to HC-1.3.14.)

          October 07

        • HC-A.2.6

          Conventional bank licensees are required to notify the CBB, in writing, of all major changes (regardless of type and/or effect) proposed to the strategy and/or corporate plan of the bank prior to implementation, as well as of any Special Purpose Vehicle they intend to establish as a subsidiary, or with respect to which they intend to act as sponsor or manager (see Section HC-1.5).

          October 07

      • Approved Persons

        • HC-A.2.7

          Conventional bank licensees are required to secure prior CBB approval for those persons wishing to undertake a controlled function. Such persons are assessed against CBB's 'fit and proper' requirements. Conventional bank licensees must also notify the CBB of any changes in their approved persons. (See Chapter HC-2)

          October 07

      • Compliance officer/manager

        • HC-A.2.8

          Conventional bank licensees must appoint a senior member of staff with responsibility for compliance. The Compliance Officer is a controlled function. (See Chapter HC-3.)

          October 07

    • HC-A.3 HC-A.3 Module History

      • Evolution of the Module

        • HC-A.3.1

          This Module was first issued in July 2004, as part of the initial release of Volume 1 of the CBB Rulebook. It was dated July 2004. 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 07

        • HC-A.3.2

          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 07

        • HC-A.3.3

          A list of recent changes made to this Module is shown below:

          Module Ref. Change Date Description of Changes
          HC-1.5 01/04/05 Transparency requirements formalized.
          HC-1.6 01/04/05 Notification requirements formalized.
          HC-1.1, 1.2 & HC-1.4 01/10/05 High-level controls enhanced.
          HC-1.5 01/10/05 New SPV requirements.
          HC-3.1 – HC-3.2 01/10/05 Revised compliance function requirements.
          HC-1.5.3, HC-1.5.5 & HC-4.1 01/01/06 Revised notification requirements for SPVs and dealing staff.
          HC-2, HC-3 and HC-4 01/07/06 Requirements relating to controllers moved to Module GR; Remaining requirements relating to 'fit and proper' re-drafted to ensure consistency with other Rulebook Volumes (without changing the substance of the previous 'fit and proper' requirements); Requirements relating to dealers incorporated into the 'fit and proper' requirements.
          HC-1.2 & HC-1.3 01/10/07 Reordering of Paragraphs to separate Rules from Guidance.
          HC-A.1 10/2007 New Rule HC-A.1.5 introduced, categorising this Module as a Directive.
          HC-1.3.5 04/2008 Mandatory requirement for at least one independent non-executive director
          HC-2.1.16 01/2009 Amendment to notification process for "approved person" status
          HC-1.5.3 01/2009 Requirement to appoint a permanent replacement within 120 days when a controlled function falls vacant.
          HC-2.1.2 10/2009 CBB prior approval requirement for appointment of Deputy MLRO

        • HC-A.3.4

          The contents in this Module are effective from July 2004 or the dates depicted in HC-A.3.3. Section HC-1.3 is effective from October 2007.

          October 07