CP-A.1.1

The purpose of this Module is to set out rules and regulations establishing a Deposit Protection Scheme (the 'Scheme') for compensating eligible depositors (as defined under Section CP-2.1) when the banks (referred to under Section CP-2.1) are unable, or likely to be unable, to satisfy claims against them.

CP-A.1.2

The body established to operate and administer the compensation scheme is the Deposit Protection Board (the 'Board'). The Module sets out rules and regulations that would allow the Board to:

CP-A.1.3

The Module also specifies:

Legal Basis

CP-A.2.1

The Deposit Protection Board (the 'Board') should, subject to and in accordance with the terms and conditions of the regulations in this Module, be responsible for the activities set out under Section CP-1.1.

CP-A.2.2

The Board should be convened and ready to carry out its duties in the case of any of the following events identified under Section CP-2.

CP-A.2.3

The Scheme will apply to eligible deposits (as defined in Section CP-2.1) held with the Bahrain offices of retail banks which are licensed by the CBB.

CP-A.2.4

Each eligible depositor should be entitled to receive under the Scheme a maximum of the lesser of:

CP-A.2.5

Notwithstanding the provisions of Section CP-2.2, the amount payable under the Scheme in any one calendar year (the 'current year') should not exceed BD 25,000,000.

CP-A.2.6

Upon the convening of the Board in accordance with Section CP-1.2, the Board will calculate the total amount of compensation to be paid under the Scheme in the case of the relevant bank, as well as the amount of compensation payable under the Scheme to each eligible depositor of such relevant bank.

CP-A.2.7

Upon receipt by the Board of confirmation from the (lead) mandated bank that the actions referred to in Section CP-2.3 have been completed, each eligible depositor should be sent a certificate in duplicate (attached in Appendix CP-1) by the Board informing such eligible depositor of the amount of compensation payable to him/her under the Scheme in respect of his/her eligible deposit(s) with the relevant bank.

CP-A.2.8

The CBB requires all retail bank licensees referring (directly or indirectly) to the protection of deposits in related marketing materials and in general notices featured within banking halls and in account documentation, including Annual Reports, to prominently disclose the statement set out under Section CP-2.4.

CP-A.3.1

This Module was first issued on 1st January 2005 as part of the Islamic principles volume. All regulations in this volume have been effective since this date. All subsequent changes are dated with the month and year at the base of the relevant page and in the Table of Contents. Chapter 3 of Module UG provides further details on Rulebook maintenance and control.

CP-A.3.2

A list of the most recent changes made to this Module are detailed in the table below:

Summary of Changes

Evolution of the Module

Effective Date

CP-1.1.1

The contents of this chapter set out the details of the constitution, authority and administration of the Deposit Protection Board (the 'Board').

CP-1.1.2

The Deposit Protection Board (the 'Board') should, subject to and in accordance with the terms and conditions of this Module, be responsible for:

CP-1.1.3

The Board should consist of the following persons, whose period of membership of the Board (other than in the case of the person referred to in Paragraph CP-1.1.3(e) below) should be for a three year renewable period:

CP-1.1.4

Upon the appointment of the members of the Board (other than the person referred to in Paragraph CP-1.1.3(e) above), the Board shall be formally constituted by a Resolution of the Minister of Finance.

CP-1.2.1

The Board should be convened and ready to carry out its duties in the case of:

CP-1.3.1

The Board should meet as often as is necessary to carry out its duties under the regulation set out in this Module and should take decisions by a simple majority vote of those present at any meeting thereof provided that, in the event of a tie, the Chairman will have the casting vote.

CP-1.3.2

Decisions of the Board will be binding and will not be subject to appeal.

CP-2.1.1

The Scheme will apply to eligible deposits (as defined in Paragraph CP-2.1.5 below) held with the Bahrain offices of retail bank licensees which are licensed by the CBB. These retail banks (excluding the relevant bank as referred to under Section CP-1.2) are herein referred to as the 'contributing banks' which term will, unless otherwise stated herein, include the mandated bank(s) as defined in Section CP 2.3 below.

CP-2.1.2

Without prejudice to Paragraph CP-2.1.1 above, the Board may, at its discretion, exclude (in whole or in part) from compensation under the Scheme, any depositors of a relevant bank in Bahrain who are entitled to claim in a similar scheme established in another jurisdiction, where such scheme covers the deposit liabilities of the Bahrain offices of such relevant bank; and

CP-2.1.3

Without prejudice to Paragraph CP-2.1.1 above, the Board may, at its discretion, exclude (in whole or in part) from the requirement to contribute to the Scheme, any retail bank licensee in Bahrain whose Bahrain offices' deposit liabilities are (in whole or in part) covered by a similar scheme established in another jurisdiction provided that evidence, in form and substance satisfactory to it, of such coverage is provided to the Board.

CP-2.1.4

Subject to the provision of Paragraph CP-2.1.6 below, the Scheme will apply to deposits (each an 'eligible deposit') held with the Bahrain offices of retail bank licensees, in Bahrain Dinars and other currencies, by persons (each an 'eligible depositor') who are either residents or non-residents of Bahrain.

CP-2.1.5

In accordance with the Prime Ministerial Resolution No. (3) of 1993 with respect to the Deposit Protection Scheme, 'deposit' shall mean a current, call, saving and/or fixed deposit in Bahrain Dinars or other currencies, as well as non-bearer Certificates of Deposit denominated in Bahrain Dinars or other currencies issued by the relevant bank.

CP-2.1.6

Without prejudice to the provisions of Paragraph CP-2.1.4 above, the Scheme will not apply to deposits which have, in the opinion of the Board, been illegally gained and/or relate to illicit or illegal matters. The Scheme will also not apply to deposits of:

CP-2.2.1

Each eligible depositor should be entitled to receive under the Scheme a maximum of the lesser of:

irrespective of the number, type, value and currency of eligible deposits held by such eligible depositor with the relevant bank at the time the Scheme is put into operation for such relevant bank.

CP-2.2.2

The amount referred to in Paragraph CP-2.2.1 above may be amended from time to time by the CBB. In calculating the amount payable in each case hereunder, the Board will be entitled to take account of various matters including, but not limited to, any set off rights to which the relevant bank was entitled against an eligible depositor or an eligible deposit at the proposed date for the making of such payment as well as any amounts paid out during the period of administration of the relevant bank by the CBB (if appropriate), and the amount payable hereunder shall be reduced accordingly.

CP-2.2.3

Notwithstanding the provisions of Paragraph CP-2.2.1 above, the amount payable under the Scheme in any one calendar year (the 'current year') should not exceed BD 25,000,000 (regardless of the number of relevant banks in existence in the year), provided that if circumstances so demand (and subject to the prior approval of the Governor of the CBB being obtained) the Board (which term for this Paragraph, will not include the liquidator of a relevant bank) may make available to the Scheme for the current year:

The Board may, from time to time and with the prior approval of the Governor of the CBB, amend the figure of BD 25,000,000 referred to in this Paragraph.

CP-2.2.4

In the event that the amount to be payable under the Scheme to eligible depositors of a relevant bank in accordance with Paragraph CP-2.2.1 above is greater than the maximum sum determined to be available in the Scheme for such relevant bank under Paragraph CP-2.2.3 above, the amounts determined to be payable to such eligible depositors under Paragraph CP-2.2.1 above should be made on a pro rata basis in accordance with a formula to be determined by the Board.

CP-2.2.5

If, in the opinion of the Board, the amount which would be payable to eligible depositors in accordance with Paragraph CP-2.2.4 above would make the Scheme inappropriate (for administrative and/or other reasons) for a relevant bank, the Scheme may not be made available for such relevant bank.

CP-2.2.6

If one or more eligible deposits with the relevant bank are held in the name of more than one person, each such person will be deemed to be a separate eligible depositor for an amount ascertained by dividing the total amount of such eligible deposit(s) by the number of such persons.

CP-2.2.7

An eligible deposit to which two or more persons are entitled as members of a partnership (whether or not in equal shares) should be treated as a single eligible deposit and the partners in such partnership should be treated as one eligible depositor.

CP-2.2.8

If a person establishes, to the satisfaction of the Board, that:

such person should be treated as a different eligible depositor for each such eligible deposit for the purposes of this Module. However, in the event that the beneficial owner of one or more eligible deposits (regardless of in whose name such eligible deposits are held) is the same person, such eligible deposits should, for the purposes of this Module, be treated as being held by one eligible depositor.

CP-2.2.9

No assignment or other transfer of the legal or beneficial ownership of an eligible deposit(s), or any part thereof, should be considered valid if, in the opinion of the Board, the purpose of such assignment or transfer is to enable any person(s) (including an eligible depositor(s)) to gain an advantage in the Scheme which is not intended to be given by the Regulation in this module.

CP-2.3.1

Upon the convening of the Board in accordance with Section CP-1.2 above, the Board will calculate the total amount of compensation to be paid under the Scheme in the case of the relevant bank, as well as the amount of compensation payable under the Scheme to each eligible depositor of such relevant bank. In addition, one or more of the contributing banks will be appointed by the Board to act as the mandated bank(s) (the 'mandated bank(s)') for the purpose of the operation of the Scheme for the relevant bank.

CP-2.3.2

Following the completion of the calculations referred to in Paragraph CP-2.3.1 above, the total amount of compensation due to be paid under the Scheme in the case of the relevant bank should be paid by the mandated bank into a special account to be held by itself. In the event that there is more than one mandated bank, the total amount of compensation due to be paid should be paid by the mandated banks into a special account to be held by one of the mandated banks so designated by the Board (such bank being herein referred to as the 'lead mandated Bank'. In either case, such account should be entitled 'The Central Bank of Bahrain – Deposit Protection Board'.

CP-2.3.3

At the same time as the mandated Bank(s) is/are carrying out the action referred to in Paragraph CP-2.3.2 above, each of the contributing banks (other than the (lead) mandated Bank) should execute in favour of such (lead) mandated bank an indemnity in form and substance to be agreed between the Board and the contributing banks.

CP-2.3.4

The proportion of the total amounts referred to in Paragraph CP-2.3.2 above to be paid by each of the contributing banks should be calculated in accordance with a formula determined by the Board, which formula will take into account the relative size of each such bank's deposit base.

CP-2.3.5

Upon receipt by the Board of confirmation, in form and substance satisfactory to it, from the (lead) mandated bank that the actions referred to in Paragraph CP-2.3.2 and Paragraph CP-2.3.3 above have been completed, each eligible depositor should be sent a certificate in duplicate (in the form, or substantially in the form, of the Schedule attached in Appendix CP-1) by the Board informing such eligible depositor of the amount of compensation payable to him/her under the Scheme in respect of his/her eligible deposit(s) with the relevant bank.

CP-2.3.6

The certificate referred to in Paragraph CP-2.3.5 above should also contain instructions as to the method by which, and time within which, the compensatory amount referred to therein may be collected by the eligible depositor from the (lead) mandated bank. No amounts of compensation should be payable under the scheme after the expiry of the period referred to in such certificate, which period should not be less than 12 months.

CP-2.3.7

When the duplicate copy of the certificate referred to in Paragraph CP-2.3.5 above is signed by an eligible depositor, it should constitute an assignment by such eligible depositor in favour of the (lead) mandated bank, of all rights and benefits in relation to that proportion of any claim which he/she would otherwise have in the liquidation of the relevant bank which is represented by the compensatory amount which he/she has received under the Scheme. Such assignment should be made to the (lead) mandated bank on its own behalf and as agent on behalf of the other contributing banks to the Scheme in the case of the relevant bank. Upon receipt of the signed duplicate copy of the certificate from an eligible depositor, the (lead) mandated bank should pay the amount referred to in the certificate to such eligible depositor.

CP-2.3.8

At the end of such periods as will be determined between the Board and the (lead) mandated bank, each of the contributing banks (other than the mandated bank (s)) should pay to the (lead) mandated bank that portion of its contributory share of the total amount referred to in Paragraph CP-2.3.1 above (such contributory share being determined in accordance with the formula to be determined by the Board pursuant to Paragraph CP-2.3.4 above and being notified to each contributing bank by the Board) which the (lead) mandated bank has paid to eligible depositors under the Scheme in the case of the relevant bank in the immediately preceding period.

CP-2.3.9

The (lead) mandated bank should be entitled to claim as an ordinary creditor, on its own behalf and as agent for and on behalf of the other contributing banks, in the liquidation of the relevant bank for that proportion of the total amounts referred to in Paragraph CP-2.3.1 above which has been paid out to eligible depositors under the Scheme at the end of the period referred to in Paragraph CP-2.3.6 above.

CP-2.3.10

Any amount received by the (lead) mandated bank in the liquidation of the relevant bank should be reimbursed to the contributing banks pro-rata to such contributing banks' contributions to the amounts paid out under the Scheme in the case of the relevant bank.

CP-2.3.11

The liquidator of the relevant bank should, in making any payments to eligible depositors thereof in the liquidation of such relevant bank, take such steps as are necessary to ensure that eligible depositors must not receive any payment in the liquidation of the relevant bank for amounts already paid out under the Scheme to such eligible depositors.

CP-2.4.1

The Central Bank requires all retail bank licensees referring (directly or indirectly) to the protection of deposits in related marketing materials and in general notices featured within banking halls and in account documentation, including Annual Reports, to prominently disclose the following statement:

CP-2.4.2

Retail bank licensees should, in discussions and/or correspondence with new and prospective customers, bring the Deposit Protection Scheme and the protection afforded by it to such customers' notice.

CP-2.5.1

Save as otherwise set out above, nothing in this regulation shall affect the rights of depositors of a relevant bank to claim as creditors in the liquidation of the relevant bank, regardless of the basis on which such claim is made.

CP-2.5.2

The provisions of Article 116 to 120 of the CBB Law relating to secrecy and confidentiality should apply to all matters discussed, decisions reached and records kept by the Board relating to the Scheme.

CP-2.5.3

The Board (which term, for the purpose of this Paragraph, should not include the liquidator of a relevant bank) should be entitled to make subsidiary rules for the proper and regular enforcement of this Module, and should be the final arbiter of any dispute in relation to this Module and/or the Scheme which may occur from time to time.

CP-A.1.1

The purpose of this module is to set out rules and regulations establishing a Deposit Protection Scheme (the 'Scheme') for compensating eligible depositors (as defined under section CP-2.1) when the banks (referred to under section CP-2.1) are unable, or likely to be unable, to satisfy claims against them.

CP-A.1.2

The body established to operate and administer the compensation scheme is the Deposit Protection Board (the 'Board'). The module sets out rules and regulations that would allow the Board to:

CP-A.1.3

The module also specifies:

CP-A.2.1

The Deposit Protection Board (the 'Board') should, subject to and in accordance with the terms and conditions of the regulations in this module, be responsible for the activities set out under section CP-1.1.

CP-A.2.2

The Board should be convened and ready to carry out its duties in the case of any of the following events identified under section CP-1.2.

CP-A.2.3

The Scheme will apply to eligible deposits (as defined in section CP-2.1) held with the Bahrain offices of full commercial banks which are licensed by the Agency.

CP-A.2.4

Each eligible depositor should be entitled to receive under the Scheme a maximum of the lesser of:

CP-A.2.5

Notwithstanding the provisions of section CP-2.2, the amount payable under the Scheme in any one calendar year (the 'current year') should not exceed BD 25,000,000.

CP-A.2.6

Upon the convening of the Board in accordance with section CP-1.2, the Board will calculate the total amount of compensation to be paid under the Scheme in the case of the relevant bank, as well as the amount of compensation payable under the Scheme to each eligible depositor of such relevant bank.

CP-A.2.7

Upon receipt by the Board of confirmation from the (lead) mandated bank that the actions referred to in section CP-2.3 have been completed, each eligible depositor should be sent a certificate in duplicate (attached in Appendix CP 1) by the Board informing such eligible depositor of the amount of compensation payable to him/her under the Scheme in respect of his/her eligible deposit(s) with the relevant bank.

CP-A.2.8

The Agency requires all FCBs referring (directly or indirectly) to the protection of deposits in related marketing materials and in general notices featured within banking halls and in account documentation, including Annual Reports, to prominently disclose the statement set out under section CP-2.4.

CP-A.3.1

This module was first issued on 1st January 2005 as part of the Islamic principles volume. All regulations in this volume have been effective since this date. All subsequent changes are dated with the month and year at the base of the relevant page and in the Table of Contents. Chapter UG-3 of Module UG provides further details on Rulebook maintenance and control.

CP-A.3.2

A list of the most recent changes made to this module are detailed in the table below:

Summary of changes

Evolution of the Module

Effective date

CP-1.1.1

The contents of this chapter set out the details of the constitution, authority and administration of the Deposit Protection Board (the 'Board').

CP-1.1.2

The Deposit Protection Board (the 'Board') should, subject to and in accordance with the terms and conditions of the regulations in this module, be responsible for:

CP-1.1.3

The Board should consist of the following persons, whose period of membership of the Board (other than in the case of the person referred to in paragraph CP-1.1.3(e) below) should be for a three year renewable period:

CP-1.1.4

Upon the appointment of the members of the Board (other than the person referred to in paragraph CP-1.1.3(e) above), the Board shall be formally constituted by a Resolution of the Minister of Finance & National Economy.

CP-1.2.1

The Board should be convened and ready to carry out its duties in the case of:

CP-1.3.1

The Board should meet as often as is necessary to carry out its duties under the regulation set out in this module and should take decisions by a simple majority vote of those present at any meeting thereof provided that, in the event of a tie, the Chairman will have the casting vote.

CP-1.3.2

Decisions of the Board will be binding and will not be subject to appeal.

CP-2.1.1

The Scheme will apply to eligible deposits (as defined in paragraph CP-2.1.5 below) held with the Bahrain offices of full commercial banks which are licensed by the Agency. These full commercial banks (excluding the relevant bank as referred to under section CP-1.2) are herein referred to as the 'contributing banks' which term will, unless otherwise stated herein, include the mandated bank(s) as defined in section CP-2.3 below.

CP-2.1.2

Without prejudice to paragraph CP-2.1.1 above, the Board may, at its discretion, exclude (in whole or in part) from compensation under the Scheme, any depositors of a relevant bank in Bahrain who are entitled to claim in a similar scheme established in another jurisdiction, where such scheme covers the deposit liabilities of the Bahrain offices of such relevant bank; and

CP-2.1.3

Without prejudice to paragraph CP-2.1.1 above, the Board may, at its discretion, exclude (in whole or in part) from the requirement to contribute to the Scheme, any full commercial bank in Bahrain whose Bahrain offices' deposit liabilities are (in whole or in part) covered by a similar scheme established in another jurisdiction provided that evidence, in form and substance satisfactory to it, of such coverage is provided to the Board.

CP-2.1.4

Subject to the provision of paragraph CP-2.1.6 below, the Scheme will apply to deposits (each an 'eligible deposit') held with the Bahrain offices of full commercial banks, in Bahraini Dinars and other currencies, by persons (each an 'eligible depositor') who are either residents or non-residents of Bahrain.

CP-2.1.5

For the purposes of this Regulation, 'deposit' shall mean a current, call, saving and/or fixed deposit or investment account in Bahraini Dinars or other currencies, as well as non-bearer Certificates of Deposit denominated in Bahraini Dinars or other currencies issued by the relevant bank.

CP-2.1.6

Without prejudice to the provisions of paragraph CP-2.1.4 above, the Scheme will not apply to deposits which have, in the opinion of the Board, been illegally gained and/or relate to illicit or illegal matters. The Scheme will also not apply to deposits of:

CP-2.2.1

Each eligible depositor should be entitled to receive under the Scheme a maximum of the lesser of:

irrespective of the number, type, value and currency of eligible deposits held by such eligible depositor with the relevant bank at the time the Scheme is put into operation for such relevant bank.

CP-2.2.2

The amount referred to in paragraph CP-2.2.1 above may be amended from time to time by the Agency. In calculating the amount payable in each case hereunder, the Board will be entitled to take account of various matters including, but not limited to, any set off rights to which the relevant bank was entitled against an eligible depositor or an eligible deposit at the proposed date for the making of such payment as well as any amounts paid out during the period of administration of the relevant bank by the Agency (if appropriate), and the amount payable hereunder shall be reduced accordingly.

CP-2.2.3

Notwithstanding the provisions of paragraph CP-2.2.1 above, the amount payable under the Scheme in any one calendar year (the 'current year') should not exceed BD 25,000,000 (regardless of the number of relevant banks in existence in the year), provided that if circumstances so demand (and subject to the prior approval of the Governor of the Agency being obtained) the Board (which term for this paragraph, will not include the liquidator of a relevant bank) may make available to the Scheme for the current year:

The Board may, from time to time and with the prior approval of the Governor of the Agency, amend the figure of BD 25,000,000 referred to in this paragraph.

CP-2.2.4

In the event that the amount to be payable under the Scheme to eligible depositors of a relevant bank in accordance with paragraph CP-2.2.1 above is greater than the maximum sum determined to be available in the Scheme for such relevant bank under paragraph CP-2.2.3 above, the amounts determined to be payable to such eligible depositors under paragraph CP-2.2.1 above should be made on a pro rata basis in accordance with a formula to be determined by the Board.

CP-2.2.5

If, in the opinion of the Board, the amount which would be payable to eligible depositors in accordance with paragraph CP-2.2.4 above would make the Scheme inappropriate (for administrative and/or other reasons) for a relevant bank, the Scheme may not be made available for such relevant bank.

CP-2.2.6

If one or more eligible deposits with the relevant bank are held in the name of more than one person, each such person will be deemed to be a separate eligible depositor for an amount ascertained by dividing the total amount of such eligible deposit(s) by the number of such persons.

CP-2.2.7

An eligible deposit to which two or more persons are entitled as members of a partnership (whether or not in equal shares) should be treated as a single eligible deposit and the partners in such partnership should be treated as one eligible depositor.

CP-2.2.8

If a person establishes, to the satisfaction of the Board, that:

such person should be treated as a different eligible depositor for each such eligible deposit for the purposes of this Regulation. However, in the event that the beneficial owner of one or more eligible deposits (regardless of in whose name such eligible deposits are held) is the same person, such eligible deposits should, for the purposes of this Regulation, be treated as being held by one eligible depositor.

CP-2.2.9

No assignment or other transfer of the legal or beneficial ownership of an eligible deposit(s), or any part thereof, should be considered valid if, in the opinion of the Board, the purpose of such assignment or transfer is to enable any person(s) (including an eligible depositor(s)) to gain an advantage in the Scheme which is not intended to be given by the Regulation in this module.

CP-2.3.1

Upon the convening of the Board in accordance with section CP-1.2 above, the Board will calculate the total amount of compensation to be paid under the Scheme in the case of the relevant bank, as well as the amount of compensation payable under the Scheme to each eligible depositor of such relevant bank. In addition, one or more of the contributing banks will be appointed by the Board to act as the mandated bank(s) (the 'mandated bank(s)') for the purpose of the operation of the Scheme for the relevant bank.

CP-2.3.2

Following the completion of the calculations referred to in paragraph CP-2.3.1 above, the total amount of compensation due to be paid under the Scheme in the case of the relevant bank should be paid by the mandated bank into a special account to be held by itself. In the event that there is more than one mandated bank, the total amount of compensation due to be paid should be paid by the mandated banks into a special account to be held by one of the mandated banks so designated by the Board (such bank being herein referred to as the 'lead mandated Bank'. In either case, such account should be entitled 'The Bahrain Monetary Agency — Deposit Protection Board'

CP-2.3.3

At the same time as the mandated Bank(s) is/are carrying out the action referred to in paragraph CP-2.3.2 above, each of the contributing banks (other than the (lead) mandated Bank) should execute in favour of such (lead) mandated bank an indemnity in form and substance to be agreed between the Board and the contributing banks.

CP-2.3.4

The proportion of the total amounts referred to in paragraph CP-2.3.2 above to be paid by each of the contributing banks should be calculated in accordance with a formula determined by the Board, which formula will take into account the relative size of each such bank's deposit base.

CP-2.3.5

Upon receipt by the Board of confirmation, in form and substance satisfactory to it, from the (lead) mandated bank that the actions referred to in paragraph CP-2.3.2 and paragraph CP-2.3.3 above have been completed, each eligible depositor should be sent a certificate in duplicate (in the form, or substantially in the form, of the Schedule attached in Appendix CP 1) by the Board informing such eligible depositor of the amount of compensation payable to him/her under the Scheme in respect of his/her eligible deposit(s) with the relevant bank.

CP-2.3.6

The certificate referred to in paragraph CP-2.3.5 above should also contain instructions as to the method by which, and time within which, the compensatory amount referred to therein may be collected by the eligible depositor from the (lead) mandated bank. No amounts of compensation should be payable under the scheme after the expiry of the period referred to in such certificate, which period should not be less than 12 months.

CP-2.3.7

When the duplicate copy of the certificate referred to in paragraph CP-2.3.5 above is signed by an eligible depositor, it should constitute an assignment by such eligible depositor in favour of the (lead) mandated bank, of all rights and benefits in relation to that proportion of any claim which he/she would otherwise have in the liquidation of the relevant bank which is represented by the compensatory amount which he/she has received under the Scheme. Such assignment should be made to the (lead) mandated bank on its own behalf and as agent on behalf of the other contributing banks to the Scheme in the case of the relevant bank. Upon receipt of the signed duplicate copy of the certificate from an eligible depositor, the (lead) mandated bank should pay the amount referred to in the certificate to such eligible depositor.

CP-2.3.8

At the end of such periods as will be determined between the Board and the (lead) mandated bank, each of the contributing banks (other than the mandated bank(s)) should pay to the (lead) mandated bank that portion of its contributory share of the total amount referred to in paragraph CP-2.3.1 above (such contributory share being determined in accordance with the formula to be determined by the Board pursuant to paragraph CP-2.3.4 above and being notified to each contributing bank by the Board) which the (lead) mandated bank has paid to eligible depositors under the Scheme in the case of the relevant bank in the immediately preceding period.

CP-2.3.9

The (lead) mandated bank should be entitled to claim as an ordinary creditor, on its own behalf and as agent for and on behalf of the other contributing banks, in the liquidation of the relevant bank for that proportion of the total amounts referred to in paragraph CP-2.3.1 above which has been paid out to eligible depositors under the Scheme at the end of the period referred to in paragraph CP-2.3.6 above.

CP-2.3.10

Any amount received by the (lead) mandated bank in the liquidation of the relevant bank should be reimbursed to the contributing banks pro-rata to such contributing banks' contributions to the amounts paid out under the Scheme in the case of the relevant bank.

CP-2.3.11

The liquidator of the relevant bank should, in making any payments to eligible depositors thereof in the liquidation of such relevant bank, take such steps as are necessary to ensure that eligible depositors must not receive any payment in the liquidation of the relevant bank for amounts already paid out under the Scheme to such eligible depositors.

CP-2.4.1

The Agency requires all FCBs referring (directly or indirectly) to the protection of deposits in related marketing materials and in general notices featured within banking halls and in account documentation, including Annual Reports, to prominently disclose the following statement:

"Subject to the provisions thereof, deposits held with the Bahrain office of [name of the banking firm] are covered by the Deposit Protection Scheme established by the Bahrain Monetary Agency regulation concerning the establishment of a Deposit Protection Scheme and a Deposit Protection Board".

CP-2.4.2

FCBs should, in discussions and/or correspondence with new and prospective customers, bring the Deposit Protection Scheme and the protection afforded by it to such customers' notice.

CP-2.5.1

Save as otherwise set out above, nothing in this regulation shall affect the rights of depositors of a relevant bank to claim as creditors in the liquidation of the relevant bank, regardless of the basis on which such claim is made.

CP-2.5.2

The provisions of Article 16 of the BMA Law No. (23) of 1973 relating to secrecy and confidentiality should apply to all matters discussed, decisions reached and records kept by the Board relating to the Scheme.

CP-2.5.3

The Board (which term, for the purpose of this paragraph, should not include the liquidator of a relevant bank) should be entitled to make subsidiary rules for the proper and regular enforcement of this Regulation, and should be the final arbiter of any dispute in relation to this Regulation and/or the Scheme which may occur from time to time.

EN-A.1.1

Chapters EN-1 to EN-4 and EN-6 to EN-9 inclusive apply to licensees. Chapters EN-2 to EN-5 and EN-10 apply to the Directors and employees of licensees.

EN-A.2.1

This module sets out the Agency's approach to enforcement, and the mechanisms used by the Agency to address failures by licensees to comply with its regulatory requirements. The purpose of such measures is to encourage a high standard of compliance by the Agency licensees, thus reducing risk to their customers and the rest of the financial system.

EN-A.2.2

This module provides support for all other modules of the Rulebook.

EN-A.3.1

This module was first issued on 1st January 2005 as part of the Islamic principles volume. All regulations in this volume have been effective since this date. All subsequent changes are dated with the month and year at the base of the relevant page and in the Table of Contents. Chapter UG-3 of Module UG provides further details on Rulebook maintenance and control.

EN-A.3.2

A list of the most recent changes made to this module are detailed in the table below:

Summary of changes

Evolution of the Module

Effective date

EN-1.1.1

The Agency favours an open, pragmatic and collaborative relationship with its licensees, within the boundaries set by the law and BMA regulations. Whilst the Agency wishes to avoid a legalistic and confrontational style of supervision, it believes that effective supervision requires effective enforcement of its requirements. Should licensees fail to cooperate, then the Agency will use the means described in this module to achieve compliance.

EN-1.1.2

In the Agency's view, it is generally neither practical nor effective to prescribe in detail the exact regulatory response for each and every potential contravention. There are a large number of potential contraventions. Moreover, individual circumstances are unlikely to be identical in all cases, and may warrant different responses.

EN-1.1.3

In deciding any given regulatory response, the Agency will nonetheless consistently assess the individual circumstance of each contravention against the principles described in this module. The Agency's overall approach is to take into account:

EN-1.1.4

Such an approach reduces the risk of inappropriate enforcement actions, by allowing regulatory measures to be tailored to individual circumstances. By taking into account a licensee's compliance record and attitude, it also creates positive incentives and encourages an open and collaborative approach. By assessing individual cases against the same broad principles, the Agency also aims to achieve an overall consistency in its regulatory actions.

EN-1.1.5

Underlying the Agency's approach outlined in paragraph EN-1.1.3 is the fundamental principle of proportionality. The enforcement measures contained in this module are of varying severity, and will be used accordingly in keeping with the Agency's assessment of the contravention. Thus, the Agency will reserve its most serious enforcement measures — such as cancellation of license or withdrawal of "fit and proper" status — for the most serious contraventions.

EN-1.1.6

In keeping with the proportionality principle, and to the extent consistent with the Agency's enforcement approach in paragraph EN-1.1.3, the Agency will usually opt for the least severe of appropriate enforcement measures. In most cases, the Agency expects to use a Formal Notice before resorting to more severe measures; the need for further measures will then usually be dependent on the response of the licensee or individual concerned.

EN-1.1.7

Where a significant element of judgment is required to assess compliance with a requirement, then the Agency will usually discuss the matter with the licensee or individual concerned, before using one of this module's enforcement mechanisms. This is likely to be the case, for example, with respect to requirements for adequate systems and controls. Conversely, where there are clear-cut contraventions of the BMA's requirements, then the Agency will usually move immediately to one or more of the enforcement mechanisms outlined in this module. This is more likely to occur in cases where quantitative requirements — such as those relating to capital and/or large exposures — are concerned. In most such cases, though, the Agency also expects to continue an active dialogue with the licensee or individual concerned, aimed at remedying the contravention.

EN-1.1.8

Except in the limited circumstances outlined below, the Agency will usually only apply an enforcement measure after the licensee or person concerned has been given a suitable opportunity to make representations. In the case of measures described in chapters EN-8 to EN-10, certain procedures are set out in the 1973 BMA Decree — Law No. (23) of 1973.

EN-1.2.1

To help the Agency achieve the purpose of this module, licensees may not enter into or make a claim under a contract of insurance that is intended to, or has the effect of, indemnifying them from the fines provided for in this module.

EN-1.3.1

The Agency will not as a matter of general policy publicise individual cases when it uses the measures set out in chapters EN-2 to EN-7. However, in such cases the Agency may inform the licensee's external auditors and — in the case of licensees with overseas operations — relevant overseas regulators.

EN-1.3.2

In exceptional circumstances, the Agency may decide to publicise individual cases when the measures set out in chapters EN-2 to EN-7 are used, where there is a strong case that doing so would help achieve the Agency's supervisory objectives. In such instances, the Agency will usually allow the licensee or individual concerned the opportunity to make representations to the Agency before a public statement is issued.

EN-1.3.3

With respect to the financial penalties provided for in chapter EN-6, licensees are required to disclose in their annual reports the amount of any such penalties paid to the Agency, together with a factual description of the reason(s) given by the Agency for the penalty.

EN-1.3.4

Without prejudice to the above policy, the Agency may from time to time publish aggregate information on its use of measures set out in chapters EN-2 to EN-7, without identifying the licensees or individuals concerned, unless their identities have previously been disclosed as provided for in paragraphs EN-1.3.2 or EN-1.3.3.

EN-1.3.5

By their nature, the penalties in chapters EN-8 to EN-10 inclusive are public acts, once applied. The Agency will in these instances generally issue a public statement explaining the circumstances of the case.

EN-2.1.1

Formal Warnings are clearly identified as such and represent the Agency's first level formal enforcement measure. They are intended to clearly set out the Agency's concerns to a licensee or an individual regarding an issue, and should be viewed by the recipient with the appropriate degree of seriousness.

EN-2.1.2

As indicated in section EN-1.1, the Agency will usually discuss concerns prior to resorting to a formal enforcement measure, especially where a significant element of judgment is required in assessing compliance with a regulatory requirement.

EN-2.1.3

Where such discussions fail to resolve matters to the Agency's satisfaction, then it may issue a Formal Warning. Failure to respond adequately to a Formal Warning will lead the Agency to consider more severe enforcement measures. However, more severe measures do not require the prior issuance of a Formal Warning — depending on its assessment of the circumstances, Agency may decide to have immediate recourse to other measures. Similarly, there may be circumstances where Agency issues a Formal Warning without prior discussion with the licensee or person concerned: this would usually be the case where a clear-cut compliance failing has occurred.

EN-2.1.4

When considering whether to issue a Formal Warning, the criteria taken into consideration by the Agency therefore include the following:

EN-2.2.1

Proposals to issue Formal Warnings are carefully considered against the criteria listed in Section EN-2.1. They require approval of a Director or more senior BMA official, and include the statement "This is a Formal Warning as defined in Chapter EN-2 of the BMA Rulebook".

EN-2.2.2

Depending on the issue in question, recipients of a Formal Warning may be required to respond to the contents of the Warning. (In other cases, recipients may also respond should they wish to.) Given its nature, there is no provision for recipients to challenge the issuance of a Warning.

EN-3.1.1

The Agency may issue Directions to licensees or individuals under supervisory powers granted to it by the BMA Decree — Law No. 23 of 1973 ("BMA Law"). These powers are broad in nature, and effectively allow the Agency to issue whatever Directions it reasonably believes are required to achieve its statutory objectives.

EN-3.1.2

The types of Directions that the Agency may issue in practice vary and will depend on the individual circumstances of a case. Generally, however, Directions require a licensee or individual to undertake specific actions in order to address or mitigate certain perceived risks. They may also include restrictions on a licensee's activities until those risks have been addressed — for instance, a ban on the acceptance of new customers.

EN-3.1.3

The Agency is conscious of the powerful nature of a Direction and, in the case of a licensee, the fact that it subordinates the role of its Board and management on a specific issue. The Agency will carefully consider the need for a Direction, and whether alternative measures may not achieve the same end. Where feasible, the Agency will try to achieve the desired outcome through persuasion, rather than recourse to a Direction.

EN-3.1.4

In considering whether to issue a Direction, the criteria taken into consideration by the Agency include the following:

EN-3.2.1

Proposals to issue Directions are carefully considered against the criteria listed in section EN-3.1. They require approval of an Executive Director or more senior official of the Agency, and include the statement "This is a formal Direction as defined in Chapter EN-3 of the BMA Rulebook".

EN-3.2.2

The subject of the Direction will normally be given 10 business days from the Direction's date of issuance in which to make representations to the Agency concerning the actions required. This must be done in writing, and addressed to the issuer of the original notification. Should a representation be made, the Agency will make a final determination, again normally within 10 business days of the date of the representation. Where urgent action is required, the Agency may reduce the period allowed for representations.

EN-3.2.3

In extreme circumstances, where the Agency believes that immediate action is required to prevent real damage to Bahrain's financial markets, its users or to customers of the licensee concerned, it may not be practical to allow a right of representation. In such cases, the Agency must state a justification for the withdrawal of the right to make representations.

EN-4.1.1

As part of its on-going supervision, the Agency may specifically request information or temporary reporting from a licensee or individual. Recipients of such requests are bound to respond to such requests under the terms of their license. Such requests are in effect a type of Direction.

EN-4.1.2

Henceforward, to clearly identify such requests, they will always be made in writing, under signature of a Director or more senior official of the Agency; will include the statement "This is a formal request for information as defined in Chapter EN-4 of the BMA Rulebook"; and will state the deadline by which the information is to be communicated to the Agency.

EN-4.1.3

Failure to respond to such formal requests within the deadline set will be viewed as a significant breach of regulatory requirements and will incur a Formal Warning or other enforcement measure, as decided by the Agency depending on the circumstances of the case.

EN-4.1.4

The deadline set in the request will vary depending on individual circumstances, but will in all cases be reasonable. A recipient may submit a case for an extension to the deadline, providing the request is made before the original deadline has passed. The Agency will respond before the original deadline has passed; if it fails to do so, then the requested extension will apply. Whilst waiting for a reply, the recipient must assume that the original deadline will apply.

EN-4.1.5

The above procedures do not prevent individual Agency supervisors making oral requests for information as part of their day-to-day interaction with licensees. The Agency expects licensees to maintain their cooperative response to such requests; however, in the interests of clarity, the Agency will not view failures to respond to oral requests as a breach of regulatory requirements.

EN-5.1.1

Article 85 of the BMA Decree — Law No. 23 of 1973 ("BMA Law") provides that any Director, manager or official responsible for the direction or management of a licensee, is to be considered removed from office should he be convicted by a court for a crime affecting his honesty; is declared bankrupt by a court; or if a court rules that his legal capacity is totally or partially impaired.

EN-5.1.2

The Agency's standard conditions and licensing criteria, issued pursuant to Article 59 of the BMA Law, require that management and staff of a licensee should be adequately qualified and experienced.

EN-5.1.3

In addition, chapter HC-2 specifies that all persons wishing to hold or holding the position of Director, Chief Executive/General Manager or Manager in a licensee must be assessed by the Agency as "fit and proper" to hold such a position. The chapter specifies various factors that the Agency takes into account when reaching such a decision.

EN-5.1.4

In interpreting the term "manager" for the purposes of Article 85 of the BMA Decree — Law No. 23 of 1973, the Agency uses the definition given in chapter HC-2. The same definition applies when the term "manager" is used in other modules, unless a different definition is explicitly provided for in the module concerned.

EN-5.2.1

The Agency is conscious of the impact that assessing someone as not "fit and proper" may have on an individual. Such assessments are carefully reviewed in the light of all relevant facts. The criteria used in reaching a decision include the following:

EN-5.2.2

In assessing evidence, the Agency applies a lower threshold than is applied in a criminal court of law, reflecting the administrative nature of the sanction. The Agency may also take into account the cumulative effect of factors which, when considered individually, may not in themselves be sufficient to justify an adverse "fit and proper" finding.

EN-5.2.3

The Agency may also take into account the particular function being undertaken in the licensee by the individual concerned, and the size and nature of the licensee itself, particularly when assessing the suitability of a person's experience or qualifications. Thus, the fact that a person was deemed "fit and proper" for a particular position in a particular firm does not necessarily mean he would be suitable in a different position or in a different firm.

EN-5.3.1

All proposals for issuing an adverse "fit and proper" finding are subject to a thorough review by the Agency of all relevant facts, assessed against the criteria outlined in section EN-5.2. In some instances, it may be appropriate for the Agency to request the licensee or person concerned to provide further information, in order to help reach a decision.

EN-5.3.2

All adverse findings have to be approved by an Executive Director of the Agency. A notice of intent is issued to the person concerned, and copied to the Board/senior management of the licensee as appropriate, setting out the circumstances and the basis for the Agency's proposed adverse finding. The person has 30 calendar days from the date of the notice in which to make written representations, addressed to the Executive Director concerned, failing which a final notice is issued by the Agency.

EN-5.3.3

If representations are made, then the Agency has 30 days from the date of the representation in which to consider any mitigating evidence submitted and make a final determination.

EN-6.1.1

The Agency may on a very selective basis impose financial penalties on licensees. Their use is generally limited to situations where major breaches of regulatory requirements have taken place and a licensee has failed to respond in an acceptable manner to the concerns expressed by the Agency. Financial penalties are thus normally preceded by the issuance of a Formal Notice and/or Direction.

EN-6.1.2

The level of financial penalty applied is determined by the nature of the contravention and the amount of additional supervisory attention and resources taken up by a licensee's behaviour. The maximum penalty, however, is capped at BD 20,000. The Agency intends that the impact of a penalty should derive more from its signaling effect than from the actual amount of money involved.

EN-6.1.3

As indicated in section EN-1.3, the Agency requires disclosure by licensees in their annual reports of any financial penalties served on them, together with a factual description of the reasons given by the Agency for applying the penalty. In addition, the Agency may publicise the issuance of a financial penalty notice, where there is a strong case that doing so would help achieve the Agency's supervisory objectives. In such instances, the Agency will usually allow the licensee concerned the opportunity to make representations to the Agency before a public statement is issued.

EN-6.1.4

Examples of the types of compliance failings that may lead to the serving of a financial penalty notice include (but are not limited to):

EN-6.1.5

In assessing whether to serve a financial penalty notice, the Agency takes into account the following criteria:

EN-6.1.6

The imposition of a financial penalty does not preclude the BMA from also using other enforcement measures to remedy the same violation (for instance, a Direction).

EN-6.2.1

In addition to the circumstances set out in section EN-6.1, a financial penalty of up to BD 20,000 may be applied by the Agency in cases where a licensee fails to comply with any of the requirements in module FC.

EN-6.2.2

As with the imposition of financial penalties in response to breaches of other regulatory requirements, the Agency will apply financial penalties with respect to the regulations set out under module FC on a very selective basis only. The same criteria set out in section EN-6.1 will be taken into account by the Agency when considering imposing a financial penalty. Financial penalties applied under this Section are also subject to the same disclosure requirements as described in section EN-6.1.

EN-6.2.3

A failure to comply with the requirements in module FC that warrants a financial penalty would not trigger also a financial penalty under section EN-6.1.

EN-6.2.4

Any financial penalties applied by the Agency as regards the implementation of its regulations set out under module FC, are without prejudice to the criminal sanctions available to the Bahraini courts under the Decree — Law No. 4 of 2001, with respect to the prevention and prohibition of the laundering of money. As with other financial penalties, the imposition of a financial penalty with regards to breaches of the regulation in module FC does not prevent the Agency from also using other enforcement measures to remedy the same violation (for instance, a Direction).

EN-6.3.1

A written financial penalty notice will be addressed to the Chief Executive Officer or General Manager of the licensee concerned. This written notification will describe the contravention concerned, the Agency's evidence supporting a financial penalty, and the factors justifying the level of penalty proposed. Only an Executive Director or more senior member of the Agency's management may sign the notification.

EN-6.3.2

The licensee has 15 business days from the notification's date of issuance to submit any representations it wishes to make to the Agency, in writing and addressed to the issuer of the original notification. If the licensee decides not to submit representations, it has 30 calendar days from the notification's date of issuance in which to pay the penalty.

EN-6.3.3

Should the licensee make representations challenging the proposed penalty, the Agency has 15 business days from the issuance of those representations in which to re-examine the facts of the case and its conclusions. If the Agency confirms application of a penalty, payment is required within 30 calendar days of a final notice being issued. However, the licensee has the right to lodge a further written appeal within those 30 days, addressed to H.E. the Governor. In such cases, H.E. the Governor makes a final determination within 15 business days of the date of the written appeal. If H.E. the Governor confirms application of a penalty, then payment is required within 30 calendar days of H.E. the Governor's written confirmation.

EN-6.3.4

Failure to pay a penalty within the required deadlines will be considered a breach of the Agency's regulatory requirements, and will also result in other measures being considered, as described elsewhere in this Module.

EN-6.4.1

Payment of a financial penalty does not by itself absolve a licensee from remedying the compliance failure concerned. The Agency will expect the licensee to address the contravention within a reasonable timescale, to be agreed on a case-by-case basis. Failure to do so will result in other measures being considered.

EN-7.1.1

Article 82 of the BMA Decree — Law No. 23 of 1973 ("BMA Law") empowers the Agency to order investigations of licensees, in order to help it assess a licensee's compliance with the provisions of the BMA Law. Such investigations may be carried out either by its own officials or auditors appointed for such a purpose by the Agency. Article 83 requires licensees to make available to the Agency's inspectors its books and other records, and to provide all relevant information within the time limits deemed reasonable by the inspectors.

EN-7.1.2

Article 87 of the BMA Law provides for criminal sanctions where false or misleading statements are made to the Agency, or an investigation by the Agency is otherwise obstructed (see section EN-10.3).

EN-7.2.1

The BMA uses its own inspectors to undertake on-site examinations of licensees as an integral part of its regular supervisory efforts. In addition, the BMA may commission special investigations of licensees in order to help it assess their compliance with BMA requirements. Such investigations may be carried out either by the BMA's own officials, by duly qualified experts appointed for the purpose by the BMA ("Appointed Experts"), or a combination of the two.

EN-7.2.2

Failure by licensees to cooperate fully with the BMA's inspectors, or to respond to their examination reports within the time limits specified, will be treated as demonstrating a material lack of cooperation with the Agency which will result in other enforcement measures being considered, as described elsewhere in this module.

EN-7.2.3

The BMA may appoint an individual or a firm as an Appointed Expert. Examples of Appointed Experts are reporting accountants, lawyers and expert witnesses. The appointment of Appointed Experts is not necessarily indicative of a contravention of BMA requirements or suspicion of such a contravention. For instance, an Appointed Expert may be commissioned to provide an expert opinion on a technical matter.

EN-7.2.4

Appointed Experts report in a form and within a scope defined by the BMA, and are solely responsible to the BMA for the work they undertake in relation to the investigation concerned. The report produced by the Appointed Experts is the property of the BMA (but is usually shared by the BMA with the firm concerned). The cost of the Appointed Experts' work must be borne by the licensee concerned.

EN-7.2.5

In selecting an Appointed Expert, the BMA will take into account the level of fees proposed and aim to limit these to the lowest level consistent with an adequate review of the matters at hand, given the qualifications, track record and independence of the persons concerned. Because the cost of such investigations are met by the licensee, the BMA makes only selective use of Appointed Experts, when essential to supplement BMA's other supervisory tools and resources.

EN-7.2.6

The BMA will not, as a matter of general policy, publicise the appointment of Appointed Experts, although it reserves the right to do so where this would help achieve its supervisory objectives. Both the Appointed Experts and the BMA are bound to confidentiality provisions restricting the disclosure of confidential information with regards to any such information obtained in the course of the investigation.

EN-7.2.7

Unless the Agency otherwise permits, Appointed Experts may not be the same firm appointed as external auditors of the bank.

EN-7.2.8

Compliance by Appointed Experts with the contents of this chapter will not, of itself, constitute a breach of any other duty owed by them to a particular bank (i.e. create a conflict of interest).

EN-7.2.9

The Agency may commission reports, which require Appointed Experts to review information from another company within the reporting bank's group even where that other company is not itself subject to any Agency requirements.

EN-7.2.10

Banks must provide all relevant information and assistance to Appointed Experts on demand.

EN-7.2.11

The Agency may appoint one or more of its officials to work on the Appointed Experts' team for a particular bank.

EN-7.3.1

The scope of the required report will be determined and detailed by the Agency in the appointment letter. Commissioned Appointed Experts will normally be required to report on one or more of the following aspects of a bank's business:

EN-7.3.2

Appointed Experts will be required to form an opinion on whether, during the period examined, the bank is in compliance with the relevant provisions of the BMA Law and the Agency's relevant requirements, as well as other requirements of Bahrain Law and, where relevant, industry best practice locally and/or internationally.

EN-7.3.3

The Appointed Experts report must follow the format set out in Appendix EN 1.

EN-7.3.4

Unless otherwise directed by the Agency or unless the circumstances described in section EN-7.3 apply, the report should be discussed with Board of Directors and/or senior management in advance of it being sent to the Agency.

EN-7.3.5

Where the report is qualified by exception, the report must clearly set out the risks which the bank runs by not correcting the weakness, with an indication of the severity of the weakness should it not be corrected. Appointed Experts will be expected to report on the type, nature and extent of any weaknesses found during their work, as well as the implications of a failure to address and resolve such weaknesses.

EN-7.3.6

If the Appointed Experts conclude, after discussing the matter with the bank, that they will give a negative opinion (as opposed to one qualified by exception) or that the issue of the report will be delayed, they must immediately inform the Agency in writing giving an explanation in this regard.

EN-7.3.7

The report must be completed, dated and submitted, together with any comments by Directors or management (including any proposed timeframe within which the bank has committed to resolving any issues highlighted by the report), to the Agency within the timeframe applicable.

EN-7.4.1

Appointed Experts must communicate to the Agency, during the conduct of their duties, any reasonable belief or concern they may have that any of the requirements of the Agency, including the criteria for licensing a bank (see Module LR), are not or have not been fulfilled, or that there has been a material loss or there exists a significant risk of material loss in the concerned bank, or that the interests of customers are at risk because of adverse changes in the financial position or in the management or other resources of a bank. Notwithstanding the above, it is primarily the bank's responsibility to report such matters to the Agency.

EN-7.4.2

The Agency recognises that Appointed Experts cannot be expected to be aware of all circumstances which, had they known of them, would have led them to make a communication to the Agency as outlined above. It is only when Appointed Experts, in carrying out their duties, become aware of such a circumstance that they should make detailed inquiries with the above specific duty in mind.

EN-7.4.3

If Appointed Experts decide to communicate directly with the Agency in the circumstances set out in paragraph EN-7.4.1 above, they may wish to consider whether the matter should be reported at an appropriate senior level in the bank at the same time and whether an appropriate senior representative of the bank should be invited to attend the meeting with the Agency.

EN-8.1.1

Article 93 of the BMA Decree — Law No. 23 of 1973 ("BMA Law") empowers (but does not oblige) the Agency to assume the administration of a licensee in certain circumstances, subject to the approval of the Minister of Finance. These circumstances are where:

EN-8.1.2

Article 94 of the BMA Law provides that where the Agency assumes the administration of a licensee, the licensee concerned may appeal to the Minister of Finance and, subsequently, the courts, in order to challenge its administration by the Agency.

EN-8.1.3

Articles 95 to 99 of the BMA Law set down the operating parameters of an administration.

EN-8.2.1

The Agency views the administration of a licensee as a very powerful sanction, and will generally only pursue this option if less severe measures are unlikely to achieve its supervisory objectives.

EN-8.2.2

Although Article 93 of the BMA Law specifies the circumstances in which the Agency may pursue an administration, it does not oblige the Agency to administer a licensee. Faced with the circumstances described, the Agency may pursue other courses of action, if it considers that these are more likely to achieve the supervisory outcomes sought. Because an administration is likely to send a negative signal to the markets about the status of a licensee, other supervisory actions may in fact be preferable in terms of protecting the interests of those with a claim on the licensee.

EN-8.2.3

The criteria used by the Agency in deciding whether to seek an administration of a licensee include the following:

EN-8.3.1

All proposals for assuming the administration of a licensee are subject to a thorough review by the Agency of all relevant facts, assessed against the criteria outlined in section EN-8.1. After being assessed at Executive Director level, proposals are submitted to H.E. the Governor and subsequently the Minister of Finance and National Economy for their respective approvals.

EN-8.3.2

Once approved by the Minister of Finance and National Economy, a formal notice of administration is issued to the licensee concerned and copies posted in every place of business of the licensee. As soon as practicable thereafter, the notice is also published in the Official Gazette and in local newspapers. The term "in administration" should be clearly marked in all the bank's correspondence and on its website, next to the bank's name.

EN-8.3.3

Article 94 of the BMA Law allows a licensee 10 days following the administration taking effect in which to appeal to the Minister of Finance. If the Minister refuses the appeal, the licensee has a further 10 days from the date of the refusal in which to lodge an appeal at the courts. So as to reduce the potential damage of an administration order being applied and then withdrawn on appeal, where feasible the Agency will give advance notice to a licensee's Board of its intention to seek an administration, and allow the Board the right of appeal prior to an administration notice being formally served.

EN-9.1.1

Article 66 of the BMA Decree — Law No. 23 of 1973 ("BMA Law") empowers the Agency to cancel a license under certain circumstances. These include cases where a licensee has:

EN-9.1.2

Article 66 of the BMA Law also requires the Agency to give the licensee concerned reasonable time to object to any proposed cancellation of its license.

EN-9.2.1

The Agency generally views canceling a license as appropriate only in extreme circumstances, when faced with the gravest of contraventions or when left with no other reasonable means of successfully addressing the regulatory failings in question.

EN-9.2.2

The criteria used by the Agency in assessing whether to seek cancellation of a license include:

EN-9.3.1

All proposals for canceling a license are subject to a thorough review by the Agency of all relevant facts, assessed against the criteria outlined in section EN-9.2. After being assessed at Executive Director level, proposals are submitted to H.E. the Governor for approval.

EN-9.3.2

Once approved within the BMA, a formal notice of cancellation is issued to the licensee concerned. The notice of cancellation will describe the factual circumstances of the contraventions concerned, and the Agency's rationale for the proposed cancellation, as measured against the criteria outlined in section EN-9.2.

EN-9.3.3

The licensee has 30 calendar days from the date of the notice in which to lodge an appeal. The appeal should be addressed to the Board of the BMA, and copied to H.E. the Governor of the BMA.

EN-9.3.4

If an appeal is lodged, the Board of the BMA will make a final ruling within 60 calendar days of its date of issuance.

EN-10.1.1

The BMA Decree — Law No. 23 of 1973 ("BMA Law") provides for a number of criminal sanctions in cases where certain of its provisions are contravened. This section provides a summary of those sanctions most relevant to licensees, their Directors and employees. What follows is not a complete list of all sanctions provided for in the BMA Law, nor is it a substitute for reading the Law and being fully aware of its provisions.

EN-10.1.2

Licensees, their Directors and employees should also be aware of the criminal sanctions provided for under other relevant Bahraini laws, such as the Decree — Law No. 4 of 2001, with respect to the prevention and prohibition of the laundering of money.

EN-10.1.3

In all cases to do with criminal sanctions, the Agency can only refer the matter to the Office of Public Prosecutor. The Agency has no authority to apply such sanctions without recourse to the courts.

EN-10.2.1

Because of their criminal status, and their provision for custodial sentences, the sanctions provided for under the BMA Law are viewed by the Agency as very powerful measures, to be pursued sparingly. In most situations, the Agency will seek to address regulatory failures through administrative sanctions, as outlined in preceding sections, rather than by pursuing the criminal sanctions outlined here.

EN-10.2.2

Where, however, the nature of the offence is such that there is strong evidence of a reckless or intentional breach of the BMA Law relevant to the following Articles, then the Agency will usually refer the matter to the Office of Public Prosecutor.

EN-10.3.1

Article 87 of the BMA Law provides for a term of imprisonment of up to two years, and/or a fine of up to BD 5,000, without prejudice to any other penalty prescribed in any other law, in case of conviction of a Director, manager, official, agent or representative of any licensee who:

EN-10.4.1

Article 88 provides for a term of imprisonment of up to six months, and/or a fine of up to BD 1,000, for any Director, manager or official responsible for the direction or management of a licensee, who deliberately neglects to ensure the implementation of the provisions of the BMA Law.

EN-10.5.1

Article 92 C provides for a term of imprisonment of up to two years, and/or a fine of up to BD 5,000, for any Director, manager, official or employee, who receives or approves the acceptance of deposits although he is aware — or ought to be aware by reason of the nature of his duties — of the insolvency of his bank.