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  • GR-5 GR-5 Controllers

    • GR-5.1 GR-5.1 Key Provisions

      • GR-5.1.1

        Condition 3 of BMA's licensing conditions specifies, amongst other things, that Islamic bank licensees must satisfy the BMA that their controllers are suitable and pose no undue risks to the licensee. (See Paragraph LR-2.3.1.)

      • GR-5.1.2

        Applicants for an Islamic bank license must provide details of their controllers, by submitting a duly completed Form 2 (Application for authorisation of controller). (See sub-paragraph LR-3.1.5(a).)

      • GR-5.1.3

        Islamic bank licensees must obtain prior approval from the BMA for any of the following changes to its controllers (as defined in Section GR-5.2):

        (a) a new controller;
        (b) an existing controller increasing its holding from below 20% to above 20%;
        (c) an existing controller increasing its holding from below 33% to above 33%;
        (d) an existing controller increasing its holding from below 50% to above 50%; and
        (e) an existing controller increasing its holding from below 75% to above 75%.

      • GR-5.1.4

        For approval under Paragraph GR-5.1.3 to be granted, the BMA must be satisfied that the proposed increase in control poses no undue risks to the licensee. A duly completed Form 2 (Controllers) must be submitted as part of the request for a change in controllers.

      • GR-5.1.5

        If, as a result of circumstances outside the Islamic bank licensee's knowledge and/or control, one of the changes specified in Paragraph GR-5.1.3 is triggered prior to BMA approval being sought or obtained, the Islamic bank licensee must notify the BMA as soon as it becomes aware of the fact and no later than 7 days.

      • GR-5.1.6

        Islamic bank licensees are encouraged to notify the BMA as soon as they become aware of events that are likely to lead to changes in their controllers. The criteria by which the BMA assesses the suitability of controllers are set out in Section GR-5.3. The BMA aims to respond to requests for approval within 30 calendar days. The BMA may contact references and supervisory bodies in connection with any information provided to support an application for controller. The BMA may also ask for further information, in addition to that provided in Form 2, if required to satisfy itself as to the suitability of the applicant.

      • GR-5.1.7

        Islamic bank licensees must submit, within 3 months of their financial year-end, a report on their controllers. This report must identify all controllers of the licensee, as defined in Section GR-5.2.

    • GR-5.2 GR-5.2 Definition of Controller

      • GR-5.2.1

        A controller of an Islamic bank licensee is a natural or legal person who:

        (a) holds 10% or more of the shares in the licensee ("L"), or is able to exercise (or control the exercise) of more than 10% of the voting power in L; or
        (b) holds 10% or more of the shares in a parent undertaking ("P") of L, or is able to exercise (or control the exercise) of more than 10% of the voting power in P; or
        (c) is able to exercise significant influence over the management of L or P.

      • GR-5.2.2

        For the purposes of Paragraph GR-5.2.1, "person" means the person ("H") or any of the person's associates, where associate includes:

        (a) the spouse, child or stepchild of H;
        (b) an undertaking of which H is a Director;
        (c) a person who is an employee or partner of H;
        (d) if H is a corporate entity, a Director of H, a subsidiary of H, or a Director of any subsidiary undertaking of H.

      • GR-5.2.3

        Associate also includes any other person or undertaking with which the person H has entered into an agreement or arrangement as to the acquisition, holding or disposal of shares or other interests in the Islamic bank licensee, or under which they undertake to act together in exercising their voting power in relation to the Islamic bank licensee.

    • GR-5.3 GR-5.3 Suitability of Controllers

      • GR-5.3.1

        A controller of an Islamic bank licensee must satisfy the BMA of his suitability.

      • GR-5.3.2

        In assessing the suitability of controllers who are natural persons, BMA has regard to their professional and personal conduct, including, but not limited to, the following:

        (a) the propriety of a person's conduct, whether or not such conduct resulted in conviction for a criminal offence, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;
        (b) a conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;
        (c) any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud, misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;
        (d) whether the person has been the subject of any disciplinary proceeding by any government authority, regulatory agency or professional body or association;
        (e) the contravention of any financial services legislation or regulation;
        (f) whether the person has ever been refused a license, authorisation, registration or other authority;
        (g) dismissal or a request to resign from any office or employment;
        (h) disqualification by a court, regulator or other competent body, as a Director or as a manager of a corporation;
        (i) whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners have been declared bankrupt whilst the person was connected with that partnership;
        (j) the extent to which the person has been truthful and open with regulators; and
        (k) whether the person has ever been adjudged bankrupt, entered into any arrangement with creditors in relation to the inability to pay due debts, or failed to satisfy a judgement debt under a court order.

      • GR-5.3.3

        In addition, the following criteria are also taken into consideration:

        (a) the financial resources of the person and the likely stability of their shareholding;
        (b) existing directorships or ownership of more than 20% of the capital or voting rights of any financial institution in the Kingdom of Bahrain or elsewhere, and the potential for conflicts of interest that such directorships or ownership may imply;
        (c) the interests of depositors, creditors and shareholders of the licensee; and
        (d) the interests of Bahrain's banking and financial sector.

      • GR-5.3.4

        In assessing the suitability of corporate controllers, BMA has regard to their financial standing, judicial and regulatory record, and standards of business practice and reputation, including, but not limited to, the following:

        (a) the financial strength of the controller, its parent(s) and other members of its group, its implications for the Islamic bank licensee and the likely stability of the controller's shareholding;
        (b) whether the controller or members of its group have ever entered into any arrangement with creditors in relation to the inability to pay due debts;
        (c) the controller's jurisdiction of incorporation, location of Head Office, group structure and close links, and the implications for the Islamic bank licensee as regards effective supervision of the Islamic bank licensee and potential conflicts of interest;
        (d) the controller's (and other group members') propriety and general standards of business conduct, including the contravention of any laws or regulations, or the institution of disciplinary proceedings by a government authority, regulatory agency or professional body;
        (e) any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud, misfeasance or other misconduct;
        (f) any criminal actions instigated against the controller or other members of its group, whether or not this resulted in an adverse finding; and
        (g) the extent to which the controller or other members of its group have been truthful and open with regulators and supervisors.

      • GR-5.3.5

        In addition, the following criteria are also taken into consideration:

        (a) the interests of investment account holders, depositors, creditors and shareholders of the licensee; and
        (b) the interests of Bahrain's banking and financial sector.

    • GR-5.4 GR-5.4 Approval Process

      • GR-5.4.1

        Following receipt of an approval request under Paragraph GR-5.1.3, the BMA will issue a written notice of objection if it is not satisfied that the person concerned is suitable to become a controller of the Islamic bank licensee. The notice of objection will specify the reasons for the objection and specify the applicant's right of appeal.

      • GR-5.4.2

        Notices of objection have to be approved by an Executive Director of the BMA. The applicant has 30 calendar days from the date of the notice in which to make written representations. The BMA then has 30 calendar days from the date of the representation in which to consider any mitigating evidence submitted and make a final determination. See Module EN (Enforcement).

      • GR-5.4.3

        Where a person has become a controller by virtue of his shareholding in contravention of Paragraph GR-5.1.3, or a notice of objection has been served to him under Paragraph GR-5.4.1 and the period of appeal has expired, the BMA may, by notice in writing served on the person concerned, direct that his shareholding shall, until further notice, be subject to all or any of the following restrictions:

        (a) no voting right shall be exercisable in respect of those shares; and
        (b) except in a liquidation, no payment shall be made of any sum due on the shares from the Islamic bank licensee, whether in respect of capital, dividend or otherwise.