Chapter Five Chapter Five Relations with Banking Firms
Article 33
The Agency may carry out the following operations with banking firms:—
A — Open and maintain accounts for banking firms, and accept their deposits, upon the terms and conditions to be from time to time determined by the Agency's Board of Directors.B — Buy, sell, discount and re-discount bills of exchange and promissory notes drawn or issued for bona fide. commercial, industrial or agricultural purposes, bearing two or more valid signatures and maturing within 92 days of the date of their acquisition by the Agency.C — Buy, sell, discount or re-discount government treasury notes that are part of a public issue and maturing within 92 days of the date of their acquisition by the Agency.D — Grant loans, whether in the form of advances or credit facilities, for periods not exceeding 180 days, against securities considered by the Agency's Board of Directors to be adequate.E — Buy, sell and deal in the assets mentioned in Article (30) of this law.F — Bonds issued or guaranteed by the Government within the limits set in Article (46).G — Grant loans, in exceptional circumstances, for the purpose of assisting the borrowing banking firm to overcome a sharp drop in its liquidity or solvency. The terms and conditions pertaining to such loans shall be determined by the Agency's Board of Directors with the approval of the Minister of Finance.Article 34
The Agency shall from time to time set and publish the rates of interest for its transactions to be concluded with banking firms in accordance with Article (33). The Agency may set different rates for different classes of transactions or maturities.
Article 35
(a) The Agency shall from time to time notify banking firms at their respective head offices of the necessity of maintaining a cash reserve against deposits and such other similar liabilities as shall be specified for this purpose. This reserve shall consist of either liquid funds to be maintained by the banking firms or credit balance in their accounts with the Agency, in such percentages as the Agency shall from time to time determine. However, in case the amount of the mandatory cash reserve maintained by any banking firm in its account with the Agency exceeds ten percent, the Agency may in such a case pay interest to such banking firm on the excess.(b) The Agency shall have the right to set different percentages for the liquidity reserve according to the different classes of deposits and other similar liabilities, and shall have the right to determine the method of calculation of such percentages. This reserve or any increase in its percentage shall be imposed only after a reasonable notice period to be announced by the Agency.(c) If the balance of the cash reserves of any banking firm falls short of what it should be under the provisions of this Article, the Agency shall impose upon such banking firm a fine at an annual percentage which shall not exceed by. more than five percentage points the maximum interest rate set by the Agency for its own transactions, in accordance with Article (34), at the time of the deficit. This fine shall be calculated on the amount of the deficit for each day that the deficit persists.Article 36
(a) The Agency may, according to the requirements of the financial and economic activity in the State, specify the purposes for which credit may be granted, as well as the total maximum limits of such credit, the maximum amount that cannot be exceeded without prior approval from the Agency, the maximum period of maturity, the minimum financial security and the minimum cash guarantee, to be required by the banking firm from its customer. The Agency's decisions in this respect shall be sent to the head office of each banking firm.(b) Any banking firm acting in contravention of the Agency's decisions issued within the purview of the preceding paragraph, shall be under obligation to pay to the Agency for each offence a fine to be determined by the Agency's Board of Directors, provided that such fine shall not exceed a thousand dinars for each offence for every day during which the offence persists.Article 37
Every banking firm must maintain assets consisting of commitments payable in the currency of the State of Bahrain and other assets located in the State of Bahrain, within a certain percentage of the deposits and other liabilities payable in Bahrain. The Agency shall from time to time set the minimum limit of such percentages by virtue of instructions it will issue.
Article 38
The Agency shall from time to time issue instructions to set the maximum limit of the operating balances that banking firms are allowed to maintain in foreign currencies or that may be maintained in a given currency or in certain currencies.
Article 39
The Agency shall, within a reasonable time and after agreement with banking firms, set up a Clearing House. The Board of Directors of the Agency shall lay down the regulations and instructions pertaining to the Clearing House.
Article 40
The Agency may participate in any plan approved by the Minister of Finance for insuring the deposits held by banking firms.
