Conventional Wholesale Banks
LR-1.2.9
Conventional wholesale banks are allowed to transact with residents of the Kingdom of Bahrain (irrespective of currency), and in Bahrain Dinar (irrespective of the location of the counterparty), subject to the conditions and exemptions specified in Rules LR-1.2.11, LR-1.2.13, LR-1.2.16 and LR-1.2.18. Foreign currency transactions with non-residents are not subject to these conditions.October 2007LR-1.2.10
The effect of Rule LR-1.2.9 is to limit the on-shore/Bahrain Dinar customer business of
conventional wholesale banks to larger transactions. By definition, their on-shore client base is therefore wholesale in nature (i.e. large corporates and high net-worth individuals).Amended: July 2012
October 2007LR-1.2.11
To qualify as a
conventional wholesale bank , the person concerned must undertake (as a minimum), the activities of deposit-taking and providing credit (as defined in Rules LR-1.3.16 and LR-1.3.18).October 2007LR-1.2.12
The purpose of Rule LR-1.2.11 is to ensure that the core banking activities of deposit taking and providing credit form part of the definition of
conventional wholesale banks . However, unlikeconventional retail banks , there is no requirement that the activity of providing credit must be a significant part of the bank's business, relative to other activities. This is to allowconventional wholesale banks greater flexibility as to the nature of their activities; it also recognises that, because of the wholesale nature of their client base, there is less need to limit the scale of non-credit related risks to which their depositors may be exposed. Rule LR-1.2.11 does not in any way preventconventional wholesale banks from developing the provision of credit as a major activity, should they wish to. The Guidance provided in Paragraph LR-1.2.7 with regards to overseas banks is also applicable to Rule LR-1.2.11.October 2007LR-1.2.13
Conventional wholesale banks may transact with residents of Bahrain and/or in Bahrain Dinar, with respect to the activities (a) to (e) listed in Rule LR-1.3.1, only where the individual transaction is BD 7 million or above (or its foreign currency equivalent).October 2007LR-1.2.14
To comply with Rule LR-1.2.13, the initial amount taken as a deposit must be BD 7 million or above (or its equivalent in foreign currency); however, subsequent additions and withdrawals from that deposit account may be for any amount. The initial amount taken as deposit may be split between different types of accounts (e.g. call, 3-month and 6-month accounts) — providing at least BD 7 million is taken from the customer on the same day and the bank's records can demonstrate this. Where subsequent withdrawals lead to a zero balance on an account (or the aggregate of accounts where more than one was originally opened), then a further BD 7 million must be deposited to re-start the 'wholesale' relationship, before additional deposits for smaller amounts may be made.
October 2007LR-1.2.15
Similarly, with respect to credit-related transactions, the initial facility amount advised must be for BD 7 million or above (or its equivalent); but drawdowns (and repayments) under the facility may be for any amount, as may any subsequent changes to the facility amount. If the facility is fully repaid, then a further BD 7 million transaction must be agreed in order to re-start the 'wholesale' relationship.
October 2007LR-1.2.16
Conventional wholesale banks may transact with residents of Bahrain and/or in Bahrain Dinar, with respect to the activities (f) to (l) listed in Rule LR-1.3.1, only where the individual transaction is US$ 100,000 or above (or its foreign currency equivalent).October 2007
Amended: April 2008LR-1.2.17
With respect to activities (f) and (g) (dealing in
financial instruments as principal / agent), the threshold refers to the individual transaction size. With respect to activities (h) and (i) (managing / safeguardingfinancial instruments ), the threshold refers to the initial investment amount. With respect to activity (j) (operating acollective investment scheme ), the threshold refers to the minimum investment required for participation in the scheme. With respect to activities (k) and (l) (arranging deals in / advising onfinancial instruments ), the threshold refers to the size of the deal arranged or of the investment on which advice is being given.October 2007LR-1.2.18
Note that the threshold with respect to activities (h) and (i) applies to the initial investment amount: where a subsequent distribution to a client or a reduction in the mark to market value of the investment reduces the initial investment amount below US$ 100,000 it is still considered a wholesale transaction. The threshold in Rule LR-1.2.16 applies to a client even if the same client satisfies the BD 7m threshold in Rule LR-1.2.13, with respect to deposit/credit activities. Finally, the initial amount taken as an investment may be split between two or more investment products — providing at least US$ 100,000 is taken from the customer on the same day and the bank's records can demonstrate this.
Amended: April 2008
October 2007LR-1.2.19
Conventional wholesale bank licensees may only undertake activities (m) and (n) listed in Rule LR-1.3.1, on behalf of residents of Bahrain and/or in Bahrain Dinar, where the customer concerned meets either of the thresholds specified in LR-1.2.13 or LR-1.2.16 (in which case, activities (m) and (n) may be undertaken for any amount).October 2007LR-1.2.20
Notwithstanding Rules LR-1.2.13, LR-1.2.16 and LR-1.2.19,
conventional wholesale banks are allowed to transact in Bahrain Dinar (or any other currency) for any amount with the Government of Bahrain, Bahrain public sector entities (as defined in the Guidelines for completion of the Prudential Information Reports), and CBB bank licensees.Conventional wholesale banks may also transact in Bahrain Dinar for any amount, where required to fund their normal operating expenses; or when investing for their own account in securities listed on alicensed exchange .Amended: January 2014
October 2007LR-1.2.20A
Conventional wholesale bank licensees may undertake activity (o) listed in Rule LR-1.3.1, on behalf of residents and/or non-residents of the Kingdom of Bahrain and/or in Bahrain Dinar or foreign currency, where the customer concerned meets either of the thresholds specified in LR-1.2.13 or LR-1.2.16.Added: October 2018LR-1.2.21
Any transactions entered into prior to 1 July 2006 which may be in breach of the conditions specified in Rules LR-1.2.13, LR-1.2.16 and LR-1.2.19 must be notified to the CBB. These transactions will be allowed to mature.
October 2007LR-1.2.22
Since the
conventional wholesale bank regime represents an easing of the restrictions on on-shore business that previously applied to offshore bank licensees (i.e. OBUs and IBLs), there should be few transactions of the type specified in Rule LR-1.2.21 — they are likely to exist only where individual ad-hoc exemptions may have been previously granted by the CBB, and these exemptions went further than those now being applied across the Board to allconventional wholesale bank licensees .October 2007LR-1.2.23
Conventional wholesale banks must seek prior written CBB approval if they wish to undertake transactions of the type specified in Rules LR-1.2.13, LR-1.2.16, LR-1.2.19 and LR-1.2.20A if the transactions are below the thresholds mentioned in LR-1.2.13 or LR-1.2.16.Amended: October 2018
Amended: October 2009
October 2007LR-1.2.24
The approval requirement in Rule LR-1.2.23 only has to be made once, prior to the licensee starting to undertake such transactions. Its purpose is to allow the CBB to monitor the initiation of such business by
conventional wholesale bank licensees , and to check that adequate systems and controls have been in place, so that such transactions are likely to be well managed. In addition, it is to allow, where relevant, for the necessary arrangements to be made to ensure thatconventional wholesale banks comply with the CBB's reserve requirements (which apply to deposit liabilities denominated in Bahraini Dinars — see LR-2.5.10).October 2007
