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  • LR-1.4 LR-1.4 Shari'a Compliant Transactions

    • General Requirements for all Conventional Banks

      • LR-1.4.1

        Conventional bank licensees may not hold themselves out as an Islamic bank. Conventional bank licensees are allowed to enter into activities (c) to (e) listed in Rule LR-1.3.1 under the conditions outlined in the remainder of this section, subject to the thresholds and conditions outlined in Section LR-1.2 (concerning facilities offered to Bahrain residents and facilities in Bahrain Dinar in particular).

        October 2007

      • LR-1.4.2

        Shari'a compliant financing facilities provided by conventional bank licensees are treated as normal risk-weighted assets in the PIR and are not subject to the risk-weighting treatment under Volume 2.

        October 2007

      • LR-1.4.3

        When offering any of the Shari'a compliant activities (c) to (e) listed in Rule LR-1.3.1, conventional bank licensees must have staff trained in Shari'a compliant banking business. The bank must also disclose in the notes to its Annual Report/Financial Statement all quantitative and qualitative disclosures on its Shari'a compliant business as required by AAOIFI accounting and auditing standards.

        October 2007

      • LR-1.4.4

        Conventional bank licensees may invest in Shari'a compliant financial instruments for their own account or make an investment in a Shari'a compliant syndication where the bank's role is limited to provide the funding for such investment and the bank has not participated in the structuring nor the preparation of any documentation in relation to this investment.

        Amended: January 2016
        October 2007

    • Additional requirements for conventional retail banks

      • LR-1.4.5

        Conventional retail bank licensees may provide Shari'a compliant activities (c) to (e) listed in Rule LR-1.3.1 in any amount and in any currency to customers subject to the following conditions:

        (a) Shari'a compliant financing and funding to be undertaken through a special counter or branch as deemed necessary by the bank;
        (b) The bank must maintain separate books for Shari'a compliant banking activities to ensure no co-mingling of conventional and Islamic funds;
        (c) The bank must have a dedicated treasurer or senior trader for Shari'a compliant business and must also have a Shari'a compliance reviewer; and
        (d) The bank must establish a Shari'a Supervisory Board with a minimum of three board members. The board may have global authority for all Shari'a compliant business or may have authority purely for Islamic business booked in Bahrain.
        Amended: April 2015
        April 2011
        October 2007

    • Additional Requirements for the Financing of Land or Property in Bahrain by way of Shari'a Compliant Financing Contracts

      • LR-1.4.6

        Retail bank branches of foreign banks may provide Shari'a compliant financing (activity (e) listed in Rule LR-1.3.1) in any amount and in any currency to customers for the purpose of purchasing land or properties in Bahrain subject to the conditions below:

        (a) The branch must secure the CBB's prior written approval for offering such financing;
        (b) The purpose of ownership of the concerned land or property by the bank must be for the purpose of the subsequent resale to the customer under a Shari'a compliant financing contract;
        (c) The period of legal ownership of the concerned land or property by the branch must be limited only to the financing phase of the Shari'a compliant financing contract; and
        (d) In the case of default by the customer and repossession by the branch, the land or property must be disposed of within one year of the date of the termination of the Shari'a compliant financing contract. Branches may approach the CBB to extend this period for a maximum of one additional year.
        Added: July 2011