HC-A HC-A Introduction[versions up to October 2010]
HC-A.1 HC-A.1 Purpose[versions up to October 2010]
HC-A.1.1 [versions up to October 2010]
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; andb) related high-level controls and policies.October 07HC-A.1.2 [versions up to October 2010]
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. Thecontrolled functions regime supplements the CBB's corporate governance requirements by ensuring that key persons involved in the running ofIslamic bank licensees are fit and proper. Those approved by the CBB to undertakecontrolled functions are calledapproved persons .October 07HC-A.1.3 [versions up to October 2010]
Finally, this Module contains certain notification and approval requirements regarding the use of Special Purpose Vehicles ('SPVs'; see Section HC-1.5).
October 07HC-A.1.4 [versions up to October 2010]
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.
October 07Legal Basis[versions up to October 2010]
HC-A.1.5 [versions up to October 2010]
This Module contains the CBB's Directive relating to the credit risk management of
Islamic bank licensees , and is issued under the powers available to the CBB under Article 38 of the CBB Law. The Directive in this Module is applicable to allIslamic bank licensees .October 07HC-A.1.6 [versions up to October 2010]
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.
October 07HC-A.2 HC-A.2 Key requirements[versions up to October 2010]
Corporate governance[versions up to October 2010]
HC-A.2.1 [versions up to October 2010]
The Chairman of the Board should preferably 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.)
Amended: October 2009
October 2007HC-A.2.2 [versions up to October 2010]
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 oninsider trading . (See Paragraphs HC-1.2.9 to HC-1.2.11.)October 07HC-A.2.3 [versions up to October 2010]
The Board should meet at least four times per year (see Rule HC-1.3.3).
Amended: October 2009
October 2007HC-A.2.4 [versions up to October 2010]
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.)
October 07HC-A.2.5 [versions up to October 2010]
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-1.3.11 to HC-1.3.16.)
October 07HC-A.2.6 [versions up to October 2010]
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.
October 07HC-A.2.7 [versions up to October 2010]
Islamic bank licensees are required to notify the CBB, 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).October 07Approved Persons[versions up to October 2010]
HC-A.2.8 [versions up to October 2010]
Islamic bank licensees are required to secure prior CBB approval for those persons wishing to undertake acontrolled function . Such persons are assessed against CBB's 'fit and proper' requirements. Islamic bank licensees must also notify the CBB of any changes in theirapproved persons . (See Chapter HC-2)October 07Compliance officer/manager[versions up to October 2010]
HC-A.2.9 [versions up to October 2010]
Islamic bank licensees must appoint a senior member of staff with responsibility for compliance. The Compliance Officer is acontrolled function . (See Chapter HC-3.1.)October 07HC-A.3 HC-A.3 Module History[versions up to October 2010]
Evolution of the Module[versions up to October 2010]
HC-A.3.1 [versions up to October 2010]
This Module was first issued in January 2005, as part of the initial release of Volume 2 of the CBB Rulebook. It was dated January 2005. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG 3 provides further details on Rulebook maintenance and version control.
October 07HC-A.3.2 [versions up to October 2010]
When the CBB replaced the BMA in September 2006, the provisions of this Module remained in force. Volume 2 was updated in October 2007 to reflect the switch to the CBB; however, new calendar quarter dates were only issued where the update necessitated changes to actual requirements.
October 07HC-A.3.3 [versions up to October 2010]
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 requirements formalised HC-1.1, 1.2 & 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, 1.5.5 & 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 consistency 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. HC-1.2 & HC-1.3 01/10/07 Reordering of Paragraphs to separate Rules and Guidance HC-A.1 10/2007 New Rule HC-A.1.5 introduced, categorising this Module as a Directive. HC-1.3.5 04/2008 Mandatory requirement for at least one independent non-executive director HC-2.1.16 01/2009 Amendment to notification process for "approved person" status HC-1.5.3 01/2009 Requirement to appoint a permanent replacement within 120 days when a controlled function falls vacant. HC-2.1.2 10/2009 CBB prior approval requirement for appointment of Deputy MLRO.
