Back Custom print Link Text Only Rich Text Print

  • LR-A LR-A Introduction

    • LR-A.1 LR-A.1 Purpose

      • Executive Summary

        • LR-A.1.1

          The Licensing Requirements Module sets out the Central Bank of Bahrain's ('CBB's) approach to licensing providers of regulated conventional banking services in the Kingdom of Bahrain.

          October 2007

      • Legal Basis

        • LR-A.1.2

          This Module contains the CBB's Regulations, Resolutions and Directive (as amended from time to time) relating to Licensing Requirements and is issued under the powers available to the CBB under Articles 37 to 42, 44 to 48 and 180 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). It also includes the requirements contained in Resolution No (1) of 2007 (as amended from time to time) with respect to determining fees categories due for licensees and services provided by the CBB. The Module also contains requirements under Regulation No (1) of 2007 pertaining to the CBB's regulated services issued under Article 39 of the CBB Law and those conditions of granting a license for the provision of regulated services as prescribed under Resolution No.(43) of 2011 and issued under the powers available to the CBB under Article 44(c). The Module contains requirements under Resolution No.(16) for the year 2012 including the prohibition of marketing financial services pursuant to Article 42 of the CBB Law. This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015. The Directive and Resolutions in this Module are applicable to all conventional bank licensees (including their approved persons).

          Amended: January 2016
          Amended: January 2013
          Amended: July 2012
          Amended: October 2011
          Amended: January 2011
          Amended: October 2010
          October 2007

        • LR-A.1.2A

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

          Amended: January 2011

        • LR-A.1.3

          Persons wishing to undertake regulated banking services are required to be licensed by the CBB 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.

          October 2007

        • 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 CBB Rulebook, when issued in the future).

          Amended: January 2013
          Amended: April 2011
          October 2007

      • License Categories

        • LR-A.1.5

          Conventional bank licensees are divided into two sub-categories: conventional retail banks and conventional wholesale banks. Certain specific regulatory requirements may differ between these two sub-categories, where appropriate to address their different risk profiles. (See Section LR-1.2.)

          Amended: January 2011
          October 2007

        • LR-A.1.6

          Conventional retail banks may undertake transactions in any currency, with both Bahraini residents and non-residents. To qualify as a conventional retail bank, 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 — See Paragraphs LR-1.2.4–LR-1.2.8).

          October 2007

        • LR-A.1.7

          Conventional wholesale banks may also undertake transactions without restriction, when dealing with the Government of Bahrain and its agencies; CBB 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$ 100,000 or more for an investment transaction — See Paragraphs LR-1.2.9–LR-1.2.26).

          October 2007

        • 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 branches of foreign 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 retail branches of foreign banks and wholesale branches of foreign banks are those incorporated in an overseas jurisdiction and operating in Bahrain via a branch presence.

          Amended: July 2017
          October 2007

        • 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 outlined in Section LR-1.4.

          October 2007

      • 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 CBB Rulebook, to other license categories, and are consistent with international good practice, such as relevant Basel Committee standards.

          October 2007

        • 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.

          October 2007

      • 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 CBB.

          October 2007

      • Representative Offices, Finance Companies and Ancillary Service Providers

        • LR-A.1.13

          Representative offices of conventional banks, and providers of ancillary services in the financial sector are not covered in Volume 1 (Conventional Banks) of the Rulebook. Requirements covering representative offices (for all financial services firms) and providers of ancillary services to the financial sector are included in Volume 5.

          Amended: July 2017
          Amended: July 2012
          October 2007

        • LR-A.1.14

          Representative offices of conventional banks are subject to requirements contained in Volume 5 (Specialised Licensees), common Modules and specific Modules for representative offices. Until such time as all parts of Volume 5 (Specialised Licensees) of the CBB Rulebook is issued, providers of ancillary services to the financial sector remain subject to the requirements contained in the CBB's "Standard Conditions and Licensing Criteria".

          Amended: July 2017
          Amended: July 2012
          October 2007

        • LR-A.1.15

          This paragraph was merged with paragraph LR-A.1.13 above in October 2007]

        • LR-A.1.16

          This paragraph was merged with paragraph LR-A.1.14 above in October 2007]

        • LR-A.1.17

          This paragraph was deleted in October 2007.

    • LR-A.2 LR-A.2 Module History

      • Evolution of Module

        • LR-A.2.1

          This Module (Module LR — "Licensing and Authorisation Requirements") was first issued in July 2004, as part of the initial release of Volume 1 of the CBB Rulebook. It was subsequently reissued in full in July 2006 (and renamed "Licensing Requirements").

          October 2007

        • LR-A.2.2

          The reissued Module was one of several Modules modified to reflect the introduction of the CBB's new integrated license framework. Module LR was amended to reflect the new conventional bank licenses introduced by the framework, and to more closely align its presentation with that found in other CBB Rulebook volumes.

          October 2007

        • LR-A.2.3

          The reissued Module is dated July 2006. 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 2007

        • LR-A.2.3A

          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 2007

        • LR-A.2.4

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

          Module Reference Change Date Description of Changes
          LR-6 01/2005 New guidance on record-keeping.
          Whole Module 07/2006 Whole Module reissued to reflect integrated license framework: new license categories and updated licensing conditions introduced.
          LR-A.1.2 10/2007 New Rule LR-A.1.2 introduced, categorising this Module as a Directive.
          LR-1.4 10/2007 New section added on Shari'a Compliant Transactions
          LR-A.2.8 10/2007 Changes to provision of information requirements as result of CBB Law
          LR-3 10/2007 Revised requirements due to new CBB Law
          LR-4 10/2007 New Chapter LR-4 on application and license fees (incorporating material on fees previously contained in Module GR).
          LR-2.5.10 04/2008 Minimum daily cash reserve balance with the CBB increased from 5% to 7%.
          LR-1.2.16 04/2008 Lower threshold of $100,000 for investment business transactions for wholesale banks
          LR-2.5.10 07/2009 Minimum daily cash reserve balance with the CBB brought back to 5% from 7%.
          LR 10/2010 Various minor amendments to ensure consistency in formatting of CBB Rulebook.
          LR-A.1.2 10/2010 Revised legal basis.
          LR-1A 10/2010 New Chapter on Approved Persons moved from Section HC-1.2 and from Paragraphs in Section HC-1.5.
          LR-3.1.12A 10/2010 Added new paragraph, requiring capital to be injected prior to license being issued.
          LR-3.1.15 10/2010 Additional details pertaining to information required, within 6 months of a license being issued.
          LR-3.1.15A 10/2010 Transition rule added to comply with new requirement under Subparagraph HC-3.1.15(j).
          LR-4.2.13 10/2010 Amendment to guidance.
          LR 01/2011 Various minor amendments to ensure consistency in formatting of CBB Rulebook.
          LR-A.1.2 01/2011 Clarified legal basis.
          LR-3.1.5 and 3.1.5A 01/2011 Clarified the use of letters of guarantee as part of the licensing process.
          LR-4.2.9A 01/2001 Added the requirement for annual fees for SPV's to be in line with the requirements of Resolution No (1) of 2007.
          LR-A.1.4 04/2011 Corrected issue date.
          LR-3.1.3 04/2011 Clarified the appointment of a representative as part of the licensing process.
          LR-3.1.5(l) 04/2011 Deleted reference to Phase 1.
          LR-4.2.9A 04/2011 Clarified the payment of annual license fees for SPVs.
          LR-1.4.6 07/2011 Added Paragraph concerning Shari'a compliant financing contracts for the purchase of land and property.
          LR-2.8.1 07/2011 Updated language to reflect current terminology.
          LR-A.1.2 10/2011 New reference added to reflect the issuance of Resolution No.(43) of 2011.
          LR-3.3 10/2011 Clarified language on cancellation of a license or closure of a branch to be in line with other Volumes of the CBB Rulebook.
          LR-1A.1.23 04/2012 Last sentence of Paragraph deleted as cross reference no longer applies.
          LR-A.1.2 07/2012 Added reference to Regulation No 1 of 2007 pertaining to regulated services.
          LR-A.1.13 and LR-A.1.14 07/2012 Amended Paragraphs to reflect updates for Volume 5
          LR-B.1.3 07/2012 Corrected cross-reference.
          LR-1.2.10 07/2012 Reference to 'other banks' deleted.
          LR-1A.1.20 07/2012 Changed Guidance to Rule.
          LR-1A.2.4 07/2012 Added cross-reference.
          LR-1A.3.3 07/2012 Corrected cross-reference.
          LR-2.8.1 and LR-2.8.2 07/2012 Attributed reference to CBB Law to correct Paragraph.
          LR-3.1.18 07/2012 Corrected cross-reference.
          LR-4.2.9B 07/2012 Added guidance regarding annual fees of SPVs of Bahrain domiciled CIUs.
          LR-A.1.2 01/2013 Updated legal basis.
          LR-A.1.4 01/2013 Updated reference to when Volume 5 will be issued.
          LR-B.1.1 01/2013 Updated prohibition as per issuance of Resolution No.(16) for the year 2012.
          LR-1.1 01/2013 References added to requirements under Resolution No.(16) for the year 2012.
          LR-1.3.18 01/2013 Corrected typo.
          LR-1.3.36 to LR-1.3.39 01/2013 Updated reference to CIU to be aligned with Volume 7.
          LR-1A.1.3 01/2013 Clarified approval requirements for controlled functions for Bahrain operations.
          LR-4.2 07/2013 Amended due date and collection process for annual license fee.
          LR-1A.1 10/2013 Aligned controlled functions with Module TC.
          LR-4.2.9A 10/2013 Clarified annual license fees for newly established SPVs.
          LR-1.2.20 01/2014 Updated to refer to licensed exchange.
          LR-1A.1.3 01/2014 Correction made to clarify which controlled functions are in relation to Bahrain operations.
          LR-1A.1.17 01/2014 Amended requirement for notification for appointment of financial instrument trader and moved requirement to Paragraph BR-5.1.7.
          LR-2.8.1 01/2014 Corrected to refer to proper accounting standards.
          LR-1A.1 04/2014 Amended Rule on notification requirements dealing with approved persons.
          LR-1.4.5 04/2015 Corrected reference in Rule to 'customers'.
          LR-A.1.2 01/2016 Legal basis updated to reflect Resolution No (23) of 2015.
          LR-1.4.4 01/2016 Expanded the scope of Shari'a compliant investments allowed for the bank's own account.
          LR-1A 01/2016 Amended to reflect the issuance of Resolution No. (23) of the year 2015 dealing with approved persons.
          LR-1A.1.20B 04/2016 Clarified approval process for applicants for approved persons.
          LR-1A.1.18C 07/2016 Clarified Guidance on authorised representative for approval of controlled functions.
          LR-3.1.11 10/2016 Added definition of certification
          LR-2.5.2 04/2017 Deleted Paragraph on minimum paid up capital requirement.
          LR-2.5.2A 04/2017 Added new paragraph on minimum paid up capital requirement for locally incorporated retail banks.
          LR-2.5.2B 04/2017 Added new paragraph on minimum paid up capital requirement for locally incorporated wholesale banks.
          LR-2.5.6 04/2017 Amended paragraph to delete the requirement of endowment capital for overseas wholesale banks.
          LR-1A.1.7 07/2017 Amended paragraph.
          LR-2.2.2 07/2017 Amended paragraph.
          LR-3.4 07/2017 Added new Section on Publication of the decision to grant, cancel or amend a license.
          LR 07/2017 Changed the term "Overseas banks" to "branches of foreign banks".
          LR-1A.1.18 04/2018 Amended Paragraph.
          LR-3.1.1 04/2018 Amended Paragraph.
          LR-1.2.20A 10/2018 Added new Paragraph on Providing Trust Services.
          LR-1.2.23 10/2018 Amended Paragraph.
          LR-1.3.1 10/2018 Amended Paragraph adding—Providing Trust Services.
          LR-1.3.4 10/2018 Amended Paragraph.
          LR-1.3.54—LR-1.3.57 10/2018 Added new Sub-section on Providing Trust Services.
          LR-2.5.2A 10/2018 Amended paragraph on minimum total shareholders' equity maintained by retail bank licensees.
          LR-2.5.2B 10/2018 Amended paragraph on minimum total shareholders' equity maintained by wholesale bank licensees.
          LR-1.3.49A 04/2019 Added a new Paragraph on robo-advice.
          LR-3.1.1 07/2019 Amended Paragraph to remove references to hardcopy Form 1 submission to online submission.
          LR-3.2.4 10/2019 Changed from Rule to Guidance.
          LR-3.4.1 10/2019 Changed from Rule to Guidance.
          LR-1A.1.17 & LR-1A.1.18A 07/2020 Amended Paragraphs on online submission of Form 3.
          LR-1.3.1A 10/2020 Added a new Paragraph on compliance with AAOIFI Shari’a Standards.
          LR-1.3.1 07/2021 Amended Paragraph.
          LR-1.3.1B 07/2021 Added a new Paragraph on obtaining approval for services not included in its application.
          LR-1.3.58 – LR-1.3.61 07/2021 Added new Paragraphs on Account Information Service and Payment Initiation Services.
          LR-1.3.1C 01/2022 Added a new Paragraph on submission of information in relation to a bank wishing to undertake regulated banking services which were not included in its application for license.
          LR-2.5.8 10/2022 Amended Paragraph removing the requirement for agreeing a liquidity management policy with the CBB.

        • LR-A.2.5

          [This Paragraph was deleted in October 2007]

          Amended: January 2013