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  • LR-2.5 LR-2.5 Condition 5: Financial Resources

    • Capital Adequacy

      • LR-2.5.1

        Islamic bank licensees must maintain a level of financial resources, as agreed with the BMA, adequate for the level of business proposed. The level of financial resources held must at all times meet the minimum risk-based requirements contained in Module CA (Capital Adequacy), as specified for the category of banking license held.

      • LR-2.5.2

        Islamic bank licensees must maintain a minimum level of paid-up capital of BD 20,000,000 (or its equivalent in foreign currency, where legally permitted and agreed with BMA).

      • LR-2.5.3

        Persons seeking a license as an Islamic bank licensee must submit a 3-year business plan, with financial projections. Their proposed level of paid-up capital must be sufficient to cover expected regulatory capital requirements over that period, based on projected activities.

      • LR-2.5.4

        In practice, applicants seeking an Islamic bank license are likely to be required to hold significantly more capital than the minimum paid-up capital specified in Rule LR-2.5.2.

      • LR-2.5.5

        Overseas banking applicants are required to provide written confirmation from their head office that the head office will provide financial support to the branch sufficient to enable it to meet its obligations as and when they fall due. Overseas banking applicants must also demonstrate that the bank as a whole is adequately resourced for the amount of risks underwritten, and that it and its group meet capital adequacy standards applied by its home supervisor.

      • LR-2.5.6

        For Bahraini Islamic bank licensees, funds placed with the bank by way of call and/or unrestricted investment accounts (or similar) must not exceed 20 times their capital and reserves. For overseas Islamic wholesale bank licensees, endowment capital may be required.

      • LR-2.5.7

        Factors taken into account in setting endowment capital for branches includes the financial strength of the parent company, the quality of its risk management, and the nature and scale of the Bahrain operations of the branch.

    • Liquidity

      • LR-2.5.8

        Islamic bank licensees must maintain sufficient liquid assets to meet their obligations as they fall due in the normal course of their business. Islamic bank licensees must agree a liquidity management policy with the BMA.

      • LR-2.5.9

        The BMA would normally expect the mark-to-market value of assets that could be readily realized at short-notice, to exceed 25% of deposit liabilities at all times. Liquidity arrangements may vary, however, particularly for overseas conventional banks, as agreed with BMA and documented in the liquidity management policy.

    • Reserve Requirements

      • LR-2.5.10

        Islamic bank licensees must maintain a minimum daily cash reserve balance with the BMA, equivalent to 5% of its total non-bank Bahraini Dinar funds, whether placed by way of call or unrestricted investment accounts (or similar), as well as taken through the issuance of Bahraini Dinar denominated Islamic investment certificates.