• Chapter Eleven Chapter Eleven Capital and Reserve

    • Article 70

      A — The paid-in capital of any banking firm shall not be less than 500,000 (five hundred thousand) Bahraini dinars for firms organized in the form of corporations under the provisions of the laws of the State of Bahrain.
      B — Every banking firm that did not take the form of a corporation must set aside an amount equal to that mentioned in the preceding paragraph for its operations in Bahrain.

    • Article 71

      The Agency may fix the capital necessary for any banking firm on the basis of a certain percentage of all the liabilities of such firm. In calculating the minimum capital, the regulations to be issued by the Agency regarding the kind and method of calculation of capital and liabilities, must be followed, provided that, in all cases, the capital shall not be less than the minimum prescribed in Article (70).

    • Article 72

      Every banking firm shall have a Reserve Account, and the Agency shall from time to time by regulation determine the amount and form of the reserves. Every banking firm must, before declaring any dividends or transferring any profits to its head office or elsewhere, transfer to the Reserve Account an amount of not less than twenty percent (20%) of its annual net profits after deduction of taxes. Such transfer shall continue until the credit balance of the Reserve Account plus the irreducible capital amount to five percent (5%) of the value of deposits and other similar liabilities.

    • Article 73

      The Reserve Account may not be reduced or diminished. However, the Agency may authorize its reduction for the purpose of increasing the capital, or permit it to be diminished to cover any loss, if this is the only possible way to cover the loss. Agreement must be reached with the Agency on the period within which the deficit in the account has to be made good.

    • Article 74

      In establishing the account pertaining to the capital and the reserves, the banking firm and the auditor must ascertain that the account includes provisions for the following items:

      (a) Depreciation of the assets and provisions for bad and doubtful debts, which must be calculated at least once in every financial year.
      (b) Loss resulting from its operations and cumulated losses, including cumulated depreciation and the bad debts which have not yet been written off.
      (c) Preliminary expenses consisting of expenditure pertaining to the organization, expansion, or purchase of the banking firm or the commercial styles, including commission on capital subscription.
      (d) Any other items to be determined by the Agency by virtue of a regulation.

    • Article 75

      A banking firm may not declare any dividends, nor credit the account of shareholders or pay them any part of the profits, nor make any transfer from profits, if such payment or transfer will result in diminishing the capital or the minimum balance of the Reserve Account.

    • Article 76

      A banking firm shall not, without the approval of the Agency and except upon the terms and conditions the Agency shall determine:

      (a) Grant loans or credit facilities, or give a guarantee or securities, or assume any other financial obligation in favour of any natural or juristic person, in amounts exceeding in the aggregate such percentage of the banking firm's own funds as shall be determined by the Agency.
      (b) Grant loans for the purchase or acquisition of real property or (or any other investment in real estate in excess of a percentage of the institution's deposits and other similar liabilities to be determined by the Agency, or allow the aggregate value of accrued loans for such purposes to exceed such limit.
      (c) Grant loans upon the security of its own shares of capital stock.
      (d) Allow the aggregate value of accrued unsecured loans to exceed the following limits, or grant unsecured loans in excess of such limits:
      1 — The maximum to be set by the general meeting for any member of the Board of Directors, whether such loans are granted to the directors jointly or individually.
      2 — Ten percent of the total of its irreducible Capital and the Reserve Account, for any other firm in which one of its directors has an interest as a director, partner or part-owner or manager of such a firm, or in any other form.
      (e) Allow the value of accrued unsecured loans granted to any of its officials or employees to exceed in the aggregate the annual salary of such official or employee, or grant unsecured loans to such an official or employee in excess of such limit.
      (f) Engage in trade, except so far may be temporarily necessary for the conduct of its business or to recover debts due to it.
      (g) Purchase, acquire or lease real property, except so far as is necessary for the conduct of its business, taking into consideration future needs, and for housing its officials and employees, provided that:
      1 — As regards real property acquired or leased by the banking firm before the coming into force of this Law and for a purpose not included in those mentioned above, the firm shall be granted a grace period of three years to conform to the provisions of this paragraph.
      2 — A banking firm may accept real or other property or assets as a security for its loans, and in case of non-payment, the banking firm may acquire such assets provided that it disposes of them within the period to be fixed by the Agency. Every banking firm which may have, prior to the coming into force of the provisions of this Law, carried out any operations that are inconsistent with the provisions of this Article, must report such operations to the Agency and liquidate all such operations within the period to be fixed by the Agency.