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  • HC-A HC-A Introduction

    • HC-A.1 HC-A.1 Purpose

      • HC-A.1.1

        This Module presents requirements that have to be met by Islamic bank licensees with respect to:

        (a) the role and composition of their Boards and Board Committees; and
        (b) related high-level controls and policies.

      • HC-A.1.2

        In addition, this Module contains requirements for the notification and pre-approval of individuals, undertaking certain designated functions with respect to Islamic bank licensees. These functions (called "controlled functions"), include Directors and members of senior management. The controlled functions regime supplements the BMA's corporate governance requirements by ensuring that key persons involved in the running of Islamic bank licensees are fit and proper. Those approved by the BMA to undertake controlled functions are called approved persons.

      • HC-A.1.3

        Finally, this Module contains certain notification and approval requirements regarding the use of Special Purpose Vehicles ("SPVs"; see Section HC-1.5).

      • HC-A.1.4

        This Module supplements various provisions relating to corporate governance contained in Legislative Decree No. 21 of 2001, with respect to promulgating the Commercial Companies Law ("Commercial Companies Law 2001"). In case of conflict, the Commercial Companies Law shall prevail. The Module also supplements (for companies listed on the Bahrain Stock Exchange), Stock Exchange regulations that are relevant to corporate governance and high-level controls. Compliance with this Module does not guarantee compliance with either the Commercial Companies Law 2001 or the BSE regulations.

    • HC-A.2 HC-A.2 Key requirements

      • Corporate governance

        • HC-A.2.1

          The Chairman of the Board must be non-executive and independent. The role of Chairman and Chief Executive may not be exercised by the same person. (See Rule HC-1.3.9.)

        • HC-A.2.2

          The Board must approve a code of conduct for itself, senior management and employees, and define the responsibilities of itself and senior management. This should include procedures for dealing with conflicts of interest, and a prohibition on insider trading. (See Paragraphs HC-1.2.9 to HC-1.2.13.)

        • HC-A.2.3

          The Board must meet at least four times per year (see Rule HC-1.3.3).

        • HC-A.2.4

          Boards must have an adequate number of members that are "independent" and "non-executive" to serve the interests of minority shareholders and other stakeholders. (See Paragraphs HC-1.3.5 and HC-1.3.6.)

        • HC-A.2.5

          The Board should consider the setting up of committees to assist it in fulfilling its responsibilities. The setting up of an Audit Committee and a Shari'a Committee is mandatory. (See Paragraphs HC-1.3.10 to HC-1.3.13.)

        • HC-A.2.6

          All licensees must submit their organisational structure as approved by the Board of Directors. All licensees must establish independent functions for Internal Audit and Risk Management.

        • HC-A.2.7

          Islamic bank licensees are required to notify the BMA, in writing, of all major changes (regardless of type and/or effect) proposed to the strategy and/or corporate plan of the bank prior to implementation, as well as of any Special Purpose Vehicle they intend to establish as a subsidiary, or with respect to which they intend to act as sponsor or manager (see Section HC-1.5).

      • Approved Persons

        • HC-A.2.8

          Islamic bank licensees are required to secure prior BMA approval for those persons wishing to undertake a controlled function. Such persons are assessed against BMA's "fit and proper" requirements. Islamic bank licensees must also notify the BMA of any changes in their approved persons. (See Chapter HC-2)

      • Compliance officer/manager

        • HC-A.2.9

          Islamic bank licensees must appoint a senior member of staff with responsibility for compliance. The Compliance Officer is a controlled function. (See Chapter HC-3.1.)

    • HC-A.3 HC-A.3 Module history

      • Evolution of the Module

        • HC-A.3.1

          This Module was first issued in January 2005, as part of the initial release of Volume 2 of the BMA Rulebook. It was dated January 2005. All subsequent changes to this Module are shown with the month and year in which the change was made, at the base of the relevant page and in the Table of Contents. Chapter UG-3 provides further details on Rulebook maintenance and version control.

        • HC-A.3.2

          A list of recent changes made to this Module is shown below:

          Module Ref. Change Date Description of Changes
          HC-1.5 01/07/05 Transparency requirements formalised
          HC-1.6 01/07/05 Notification concerning senior positions/controllers
          HC-1.1, HC-1.2 & HC-1.4 01/10/05 High level controls
          HC-1.5 01/10/05 New SPV requirements
          HC-3.1 – HC-3.2 01/10/05 Revised compliance function requirements
          HC-1.5.3, HC-1.5.5, & HC-4.1 01/01/06 Revised notification requirements for SPVs and dealing staff
          HC-2, HC-3 and HC-4 01/07/06 Requirements relating to controllers moved to Module GR; Remaining requirements relating to 'fit and proper' re-drafted to ensure consistent terminology and procedures with other Rulebook Volumes (without changing the substance of the previous 'fit and proper' requirements); Requirements relating to dealers incorporated into the 'fit and proper' requirements.

      • Superseded Requirements

        • HC-A.3.3

          Prior to the development of this Rulebook, the BMA issued various circulars covering different aspects of corporate governance. These circulars were consolidated into the first version of this Module as shown below:

          Circular Ref. Date of Issue Module Ref.
          (July 2004 version)          		 Circular Subject
          BC/23/99 8 Nov 1999 HC-1 'Enhancing Corporate Governance in Banking Organisations'
          BC/904/95 24 Jul 1995 HC-1.6 Notification to, and approval from the Agency for certain matters
          ODG/329/03 10 Sep 2003 HC-1.6 Corporate Governance Reporting
          BC/11/98 27 Jul 1998 HC-2 Terms and Definitions Applying to the Management of Banks and Financial Institutions
          BC/8/00 24 May 2000 HC-2 Controllers of, and holdings and transfers of significant ownership or controlling interests in, Agency licensees
          BC/13/99 15 Jun 1999 HC-3 Compliance, Risk Management and Internal Controls
          BMA/1287/94 6 Nov 1994 HC-4 Foreign Exchange, Securities and Other Dealers

        • HC-A.3.4

          The contents in this Module are effective from the dates depicted in HC-A.3.2 and HC-A.3.3, from which the requirements are compiled. Section HC-1.3 is effective from January 2007.