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  • BR-5.2 BR-5.2 Bahraini Islamic Banks

    • BR-5.2.1

      The content of this Section is applicable to all Bahraini Islamic bank licensees licensed by the CBB in the Kingdom of Bahrain.

      Amended: April 2014
      October 2010
      October 07

    • Capital Adequacy

      • BR-5.2.2

        All banks, referred to under Paragraph BR-5.2.1, must give the CBB immediate written notification of any actual breach by such banks of the minimum capital adequacy ratio (CAR) in accordance with Section CA-1.2. Where such notification is given, the bank must also adhere to the additional notification and reporting requirements as set out under Section CA-1.2.

        Amended: January 2015
        October 2010
        April 2008
        October 07

    • Write-off of Credit Facility

      • BR-5.2.3

        All banks, referred to under Paragraph BR-5.2.1, must notify the CBB of any write-off of a credit facility in excess of BD 100,000 (Bahraini Dinars One Hundred Thousand), or its equivalent in foreign currency and must obtain the CBB's prior approval for write-offs concerning certain parties connected to the concerned bank. See Section CM-6.1 for further details.

        Amended: April 2014
        April 2008
        October 07

    • Use of Behavioural Adjustments to Data Provided under Section E of PIRI

      • BR-5.2.4

        Banks may in certain circumstances apply to the CBB to use behavioural adjustments (Estimates) to their contractual data provided under Section E of PIRI Forms (also see Section AU-3.5). Such application must be supported by data for a minimum period of two years and verified by the external auditor.

        October 2010
        October 07

    • Term Borrowing Commitments

      • BR-5.2.5

        All banks must consult with the CBB before they enter into any term borrowing facilities or programs which have any restrictive covenants in relation to the capital or activities of the bank (such as the capital adequacy ratio, capital amount, leveraging, compliance with certain regulatory requirements, etc). For the sake of expediting the CBB's reaction to such consultations, banks must submit the draft term sheet of the facility to the Banking Supervision director at the CBB responsible for the supervision of the concerned bank, before committing themselves to the concerned facility (or renewing it).

        Added: April 2012

    • Facilities Transferred to Qard Hassan

      • BR-5.2.6

        All banks, referred to under Paragraph BR-5.2.1, must obtain the CBB's prior approval of any transfer of any exposures to Qard Hassan in excess of BD100,000 or its equivalent in foreign currency (see Paragraph CM-8.1.19). The prior approval requirement applies to both on-balance sheet and restricted investment account related exposures.

        Added: April 2014

    • Capital Increases, Changes in Strategy and Establishment of Subsidiaries/SPVs

      • BR-5.2.7

        All Bahraini Islamic bank licensees must obtain the CBB's prior written approval for the opening of any new place of business either in the Kingdom of Bahrain or abroad (this would include the establishment or acquisition of a subsidiary, new branches or representative offices). Bahraini Islamic bank licensees should refer to Article 51 of the CBB Law 2006 for full details.

        Added: April 2014

      • BR-5.2.8

        All Bahraini Islamic bank licensees must obtain the CBB's prior written approval for any proposed capital increase in a subsidiary and for any major changes (regardless of type and/or effect) to the bank's strategy or corporate plan prior to implementation (See also Paragraph HC-1.2.6).

        Amended: July 2021
        Added: April 2014

      • BR-5.2.9

        All Bahraini Islamic bank licensees must obtain the CBB's prior specific written approval if they intend to act as originator, sponsor or manager of a special purpose vehicle ('SPV'), or if they intend to participate in the creation of an SPV, or if they intend to acquire a holding of 20% or more of the equity capital of an SPV. All Bahraini Islamic bank licensees must seek prior specific written CBB approval if they are appointed as nominee shareholders of SPVs or hold votes by proxy arrangement in SPVs on behalf of other investors.

        Amended: January 2015
        Added: April 2014

      • BR-5.2.10

        For purposes of Paragraph BR-5.2.9, in order to avoid any delays and/or disruption in implementation of a Bahraini Islamic bank licensee's plans in this context, the CBB should be approached as soon as possible, even at a very preliminary stage.

        Added: January 2015

      • BR-5.2.11

        The CBB requires any Bahraini Islamic bank licensee associated with an SPV to confirm the following points in any request for approval under Paragraph BR-5.2.9:

        (a) The purpose of the SPV;
        (b) The nature of the relationship between the Bahraini Islamic bank licensee and the SPV (i.e. originator, sponsor, manager, investor, controller etc.);
        (c) The proposed consolidation/accounting treatment of the SPV in relation to the Bahraini Islamic bank licensee both for the PIR and the audited financial statements' purposes as agreed with its external auditor;
        (d) The availability of financial and other information relevant to the SPV and access to its business premises and records;
        (e) The Bahraini Islamic bank licensee is not providing any guarantees, warranties or financial/liquidity support of any kind to the SPV or its Rab Al Mal, the Muwakil or investor in the SPV; and
        (f) A copy of the Bahraini Islamic bank licensee's Shari'a Supervisory Board approval of the initial investment or financing structure involving the use of the concerned SPV(s).
        Amended: January 2020
        Added: January 2015

      • BR-5.2.12

        In addition to the points noted in BR-5.2.11, Bahraini Islamic bank licensees which are involved with SPVs in any of the relationships described in Paragraph BR-5.2.9 must:

        (a) Not allow such SPVs to obtain any conventional financing to fund themselves or any transactions that they enter into;
        (b) Not allow the SPVs to give any type of financial guarantee, warranty or indemnity to the Rab Al Mal, the Muwakil or investors in the SPVs or any other counterparty either directly or on behalf of the bank; and
        (c) Ensure that there are no legal or other restrictions on the availability of financial and other information relevant to the SPV and access to its business premises and records.
        (d) Not provide any credit facilities to the SPVs and/or extend any financial/liquidity support and/or guarantees.
        Amended: July 2020
        Amended: April 2020
        Amended: January 2020
        Added: January 2015

      • BR-5.2.13

        For purposes of Paragraph BR-5.2.12, in case of new acquisition or investment after the date of issuance of these rules, when conventional borrowing exists, it should be replaced by Islamic financing as soon as possible and in no case later than 12 months from the date of investment. In case of existing investments before the date of issuance of these rules, where conventional borrowing exists, it should be replaced by Islamic financing as soon as possible and in no case later than 12 months from the date of issuance of these rules. Both cases are extendable subject to SSB approval.

        Added: January 2015

      • BR-5.2.14

        Bahraini Islamic bank licensees which are involved with SPVs in any of the relationships described in Paragraph BR-5.2.9 must not allow such SPVs to give any type of financial guarantee, warranty or indemnity to the Rab Al Maal, the Muwakil or investors in the SPV or any other counterparty, customer or stakeholder either directly or on behalf of the Bahraini Islamic bank licensee.

        Added: January 2015

      • BR-5.2.15

        The Shari'a Supervisory Board of the Bahraini Islamic bank licensee must monitor on an ongoing basis the Shari'a compliance of the SPVs and must oversee the conduct of the annual Shari'a compliance review of transactions, assets, liabilities and other commitments and relationships entered into by all SPVs with which the Bahraini Islamic bank licensee is involved (by way of the relationships described in Paragraph BR-5.2.9). The Shari'a compliance function of the Bahraini Islamic bank licensee must perform such reviews.

        Added: January 2015

      • BR-5.2.16

        Bahraini Islamic bank licensees which are involved with SPVs in any of the relationships described in Paragraph BR-5.2.9 must not transfer non-performing or impaired assets from their own balance sheets to such SPVs or vice versa.

        Added: January 2015

      • BR-5.2.17

        Where the SPV is consolidated into the accounts of a locally incorporated bank, the bank must provide separate accounting information on the SPV to the CBB on a quarterly basis. Furthermore, the annual audited financial statements of all consolidated SPVs must be submitted to the CBB within 3 months of the year end of the concerned SPV.

        Added: January 2015

      • BR-5.2.18

        Where a locally incorporated bank has a controller or majority ownership relationship with an SPV, or acts as sponsor, the bank must obtain the prior written approval of the CBB for any changes to the capital, ownership, management or control of the SPV. All Bahraini Islamic Bank Licensees must also notify the CBB of any material events in relation to the SPV. If necessary, the CBB may require that formal information exchange arrangements are put in place (e.g. a memorandum of understanding) if the SPV is located in a foreign jurisdiction and its activities are not supervised locally.

        Amended: April 2019
        Added: January 2015