BC-A.1.1

This Module contains requirements that have to be met by Islamic bank licensees with regards to their dealings with its stakeholders. The Rules contained in this Module aim to ensure that Islamic bank licensees deal with their stakeholders in a fair and open manner, and address their stakeholders' information needs.

BC-A.1.2

The Rules build upon several of the Principles of Business (see Module PB (Principles of Business)). Principle 1 (Integrity) requires Islamic bank licensees to observe high standards of integrity and fair dealing, and to be honest and straightforward in their dealings with customers. Principle 3 (Due skill, care and diligence) requires Islamic bank licensees to act with due skill, care and diligence when acting on behalf of their customers. Principle 7 (Client Interests) requires Islamic bank licensees to pay due regard to the legitimate interests and information needs of their customers, and to communicate with them in a fair and transparent manner.

BC-A.1.3

This Module also provides support for certain aspects relating to business and market conduct in the Bahrain Commercial Companies Law of 2001 (as amended).

Legal Basis

BC-A.2.1

This Module applies to all Islamic bank licensees unless indicated otherwise.

BC-A.2.2

Bahraini Islamic bank licensees must ensure that their branches and subsidiaries operating in foreign jurisdictions comply, at a minimum, with local conduct of business standards and regulatory requirements (where applicable).

BC-A.2.3

For overseas Islamic bank licensees, these requirements only apply to the business and customers of the Bahrain branch.

BC-A.2.4

The CBB encourages Bahraini Islamic bank licensees to apply—with respect to their overseas branches and subsidiaries—conduct of business standards at least equivalent to those set out in this Module. Where this is not the case, the CBB will consider any potential risk to the Islamic bank licensee that may arise through adverse reputational or other consequences.

BC-A.2.5

This Module covers the following activities by Islamic bank licensees:

BC-A.3.1

This Module was first issued on 1st January 2005 by the BMA as part of the Islamic principles volume. 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.

BC-A.3.2

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.

BC-A.3.3

The most recent changes to this Module are detailed in the table below:

Summary of Changes

Effective Date and Evolution of the Module

BC-B.1.1

Islamic bank licensees are required to develop a Code of Business Conduct that contractually obliges the bank's employees and representatives to carry out their duties and responsibilities in a fair and honest manner. Banks must also refer to Module HC 'High- level Controls' for requirements on code of business conduct.

BC-B.1.2

An Islamic bank licensee must aspire to the highest standards of truthfulness, honesty and fairness in all its statements and dealings, and must treat its customers fairly.

BC-B.1.3

The fundamental requirement with regard to truthfulness, honesty and fairness is that an Islamic bank licensee must not, either deliberately or through negligence, issue information that is potentially misleading to stakeholders or the market, nor must it manipulate prices by using any of the means whereby this may be done. Such means include, but not limited to, making a false market, issuing misleading price-sensitive information and price-fixing in conjunction with other market players. Where applicable, banks must also refer to Volume 6 (Capital Markets)—Prohibition of Market Abuse and Manipulation Module 'MAM'.

BC-B.1.4

An Islamic bank licensee must not, either deliberately or through negligence, issue information that is misleading to stakeholders or the market regarding the Shari'a compliance of its products or services, or of Sukuk issuances with which it is involved.

BC-B.1.5

An Islamic bank licensee must not mislead clients or the market through the withholding of material information.

BC-B.1.6

An Islamic bank licensee must have appropriate procedures whereby whistle-blowers are treated honestly and fairly, with no cover-ups or victimisation. See Section BC-B.1.7. With regard to fairness, an Islamic bank licensee must follow best practice in establishing procedures for handling complaints from clients. See Chapter BC-10.

BC-B.1.7

An Islamic bank licensee should establish a procedure that can be made clear to the public whereby their employees and representatives are contractually obliged to carry out their duties and responsibilities in accordance with a code of business conduct that requires fairness and honesty. To embody this self-binding commitment, an Islamic bank licensee should publish a client's charter that sets out the relevant parts of its code of business conduct as a written promise to guarantee the delivery of honest and fair service to its clients as demanded by Shari'a. An Islamic bank licensee should refer to Paragraphs BC-B.1.8 and BC-B.1.9. This charter will include such matters as procedures for dealing fairly, honestly and efficiently with complaints from customers or investors, and with whistle-blowers and any problems to which they draw attention. Refer to Paragraph HC-3.3.3.

BC-B.1.8

A client's charter is a written commitment made by an Islamic bank licensee in terms of the deliverance of its outputs or services to its customers inclusive of stakeholders. It is an assurance by the Islamic bank licensee that outputs or services rendered will comply with the standards declared as quality standards. Generally, quality standards of outputs or services are standards that will fulfil clients' needs and tastes.

BC-B.1.9

The assurances contained in the charter will ensure the generation of more disciplined, prepared and responsible Islamic bank licensee. Various benefits will be obtained from the establishment of the client's charter.

Benefits to the Public:

Benefits to the Islamic bank licensee:

BC-B.1.10

The Islamic bank licensee must establish a policy with regard to 'whistle-blowing' so as to encourage all employees to report promptly to an appropriate level of management any breach or suspected breach of business conduct principles. The policy must, among other things, clarify:

BC-B.1.11

Islamic bank licensees must apply the requirements of Module PD pertaining to enhancing corporate governance and financial transparency in order to protect customers and facilitate market discipline through better practice in public disclosure.

BC-B.2.1

An Islamic bank licensee must exercise due care and diligence and in the best interests of their stakeholders in all its operations, including the way it structures and offers its products and provides financing, with particular regard to Shari a compliance, and to the thoroughness of research and risk management. See Paragraphs BC-9.12.8 to BC-9.12.13.

BC-B.2.2

Paragraph BC-B.2.1 includes any duty of best execution. In Islamic finance, there are typically two major categories of investors—that is, the shareholders and the investment account holders (IAH). Islamic bank licensees are required to exercise due care and diligence in safeguarding the interests of such investors. Refer to Principle 6 (BC-B.6).

BC-B.2.3

An Islamic bank licensee must have in place appropriate safeguards against occurrences of behaviour that constitutes a lack of due care and diligence amounting to culpable negligence. These safeguards include appropriate staff training. Refer to Principle 3 (BC-B.3).

BC-B.2.4

An Islamic bank licensee offering Shari'a-compliant financing must exercise due diligence in making such financing available to customers, in the interests of both its fund providers and its customers. It is not acceptable business conduct for an Islamic bank licensee to be lax in applying criteria of creditworthiness, or relying only on collateral to mitigate credit losses, especially in cases where the Islamic bank licensee exercising its rights over the collateral would inflict hardship on the debtor.

BC-B.2.5

An Islamic bank licensee should endeavour to take all reasonable steps to assist the debtor.

BC-B.2.5.A

An example of assisting debtors is by restructuring the financing, prior to exercising the Islamic bank licensee's rights over the collateral.

BC-B.2.6

An Islamic bank licensee must balance the interests of its various stakeholders, which may include IAH as well as debtors.

BC-B.2.7

An Islamic bank licensee must exercise due diligence in the placement of IAH s money to fund financing facilities or investments, and in any other activities where a proper evaluation of risks, with the collection and analysis of the information necessary for this purpose, is called for.

BC-B.3.1

An Islamic bank licensee must ensure that it has in place the necessary systems and procedures, and that its employees have the necessary knowledge and skills, to comply with this Module and other CBB requirements in Volume 2 Rulebook.

BC-B.3.2

This principle requires that the board of directors, senior management, staff and representatives (such as agents) of an Islamic bank licensee must be capable of discharging their duties competently. The required capabilities must include having an understanding of the rules and principles of Shari'a that is appropriate to their responsibilities, including Shari'a-compliant characteristics of the financial products and services offered by the Islamic bank licensee.

BC-B.3.3

Capabilities may relate to designing products, to selling and distributing the products, or to the competencies necessary for successfully carrying out the business activities of the Islamic bank licensee, such as risk management, including asset-liability and liquidity management and the placement and management of funds. Lack of the necessary capabilities may result in flawed products, defective contracts and other paperwork, bad credit decisions, poor and costly underwriting decisions, and products that do not meet legal or regulatory requirements. These shortcomings can in turn result in operating losses or underwriting deficits, and products being mis-sold.

BC-B.3.4

An Islamic bank licensee must ensure that the persons entrusted to deal on behalf of the Islamic bank licensee are equipped with an appropriate level of knowledge of the Shari'a-compliant characteristics of the financial products and services offered by the Islamic bank licensee. Having staff with the necessary capabilities is key to avoiding excessive levels of operational risk in banking.

BC-B.3.5

Staff training and development are most important in fostering the required capabilities and must include an emphasis on the Code of Business Conduct that the Islamic bank licensee has developed, which should be consistent with these General Principles. Continuous training and development of awareness of employees at all levels are required in order to arrive at a clear framework of guidance that indicates what is acceptable conduct, as well as the sanctions to be applied to violators of the code.

BC-B.4.1

An Islamic bank licensee must take steps to ensure that it understands the nature and circumstances of its clients, so that it offers those products most suitable for their needs, as well as offering financing only for Shari'a-compliant projects. See Section BC-9.7.

BC-B.4.2

An Islamic bank licensee must ensure that its customers' businesses and the purpose of any financing provided are consistent with the Shari'a.

BC-B.4.3

An Islamic bank licensee must gauge the needs of their clients to ensure that the products or services rendered will reasonably meet those needs, and must ensure that any advice to customers is aimed at the customers' interests and based on adequate standards of research and analysis.

BC-B.4.4

Among the methods that are commonly used to gauge clients' needs are questionnaires and interviews with the clients, a written record being required. Questionnaires must be either completed or signed by the client, and where appropriate a summary of any interview must be signed by the client.

BC-B.4.5

It is the responsibility of the Islamic bank licensee to provide its customers full and timely disclosure of material facts relevant to the proposed transaction, their rights and obligations before signing any documents, to avoid any conflicts in the future.

BC-B.4.6

For example, if a client considering a savings or investment product, or a home purchase product, chooses not to provide all the information requested, the client must be cautioned that the Islamic bank licensee may not be able to give suitable advice without complete information and the client might risk making payments or entering into financial commitments which may not be appropriate to his or her needs or ability to pay. In this context, the principle of due diligence also applies to any such information seeking.

BC-B.5.1

An Islamic bank licensee must provide clear and truthful information both in any public document issued and to its actual and prospective clients, both during the sales process and in subsequent communications and reports. See Sections BC-9.5, BC-9.6, BC-9.8 and BC-9.10.

BC-B.5.2

An Islamic bank licensee must ensure that every advertisement is designed to disclose all relevant information to the subject matter.

BC-B.5.3

This principle is concerned with transparency in dealings with clients and prospective clients. In conjunction with Principle 1 (BC-B.1 Truthfulness, Honesty and Fairness), an Islamic bank licensee is required to provide appropriate and clear information to all clients and prospective clients regarding its products and services and the rights, obligations and risks involved to make informed decisions. This requirement also applies to information to clients and prospective clients concerning the Shari'a compliance of products and services.

BC-B.5.4

An Islamic bank licensee must maintain fair treatment of customers through the lifetime of the customer relationships, and ensure that customers are kept informed of important events.

BC-B.5.5

An example of achieving fairness through transparent business dealing from the Shari'a perspective is in the requirement that for a Murabaha contract to be valid, the seller has to disclose the original cost (including any discounts received) and the profit margin/mark-up.

BC-B.5.6

The use of 'small print' to make potentially important information less visible is not compatible with good business conduct, and must be avoided. Likewise, there should be no 'hidden costs' in financing products, such as commissions or agency fees that are not disclosed to the client.

BC-B.5.7

All commission and similar arrangements must be fully disclosed to the subject clients. In selecting a product for recommendation to a client, the overriding criterion must be the benefits to the client and not the attractiveness of the commission to the Islamic bank licensee or its representative. Refer to (BC-4.2) and (BC-9.8).

BC-B.5.8

When introducing new, enhanced, supplementary or replacement services and/or products with cost or potential liability in the future, Islamic bank licensees must provide customers with full particulars of the change at least thirty calendar days prior to the date the change takes effect, and must obtain prior-written consent from each customer. Such notice is to enable the customer to decide whether to accept the new terms or terminate the agreement.

BC-B.5.9

The use by an Islamic bank licensee or its representatives of 'negative or hard selling' techniques intended to push a client into an agreement without having properly evaluated the benefits and costs is not consistent with good business conduct.

BC-B.5.10

Negative selling occurs when a bank provides unordered services/products to a customer and then bills the customer. Often, the supply is accompanied by a form of notice instructing the customer that if the offer is not rejected within a certain time, the bank will send an invoice or debit an existing account or line of credit.

BC-B.5.11

'Hard selling' has been defined as applying psychological pressure (by appealing to someone's fears, greed or vanity) to persuade the prospect to make a quick purchase decision.

BC-B.5.12

Given the complexity of many financial products, Islamic bank licensees should give their customers a 'cooling off period' so as to have ample time to evaluate the benefits and costs of a product before finally committing themselves. This guidance applies to long term commitments, such as investments and mortgage financing, provided that it is not sensitive to daily fluctuations.

BC-B.5.12A

The only instance where a 'cooling off period' may be waived is when the Islamic bank licensee has received written confirmation from the customer that he/she wishes to waive his/her right to the 'cooling off period'.

BC-B.5.13

The principle of the 'cooling off period' is that the customer enters into a non-binding commitment to enter into a contract which becomes binding (i.e. the contract is concluded) only after a specified period has elapsed and provided the customer has not indicated otherwise.

BC-B.6.1

An Islamic bank licensee must recognise the conflicts of interest between itself and its clients that arise from the type of products it offers, and either avoid them, or disclose and manage them, bearing in mind its fiduciary duties to investment account holders (IAH) as well as shareholders. See Section BC-9.12.

BC-B.6.2

In addressing the issue of conflicts of interest, this principle stresses the importance of Islamic bank licensees doing their best to avoid conflicts of interest, and when they cannot be avoided, the need to ensure that stakeholders are fairly treated. This principle recognises that conflicts of interest should be managed, and that proper management to ensure fair treatment of stakeholders may require disclosure of certain facts or information, internal rules of confidentiality, or other appropriate methods or combinations of methods. Conflicts of interest may arise in fund management which requires proper management so as to achieve honesty and fairness in accordance with Principle 1 (BC-B.1).

BC-B.6.3

In Islamic bank licensees, conflicts of duty may occur since their management is required to act in the best interests of two categories of stakeholders who may have differing interests, such as shareholders and IAH. Hence, conflicts of interest between two categories of stakeholders are translated into conflicts of duty for the board of directors and management of the Islamic bank licensee. In this connection, the fiduciary duties of an Islamic bank licensee to stakeholders, including IAH, are crucial.

BC-B.6.4

Good business practice is linked to good governance, particularly with regard to the proper management of conflicts of interest and of duty. The existence of such conflicts must not be hidden, but Islamic bank licensees must be transparent about them while making clear what mechanisms are in place to manage them properly.

BC-B.6.5

Islamic bank licensees must ensure that their systems of remuneration and compensation do not provide perverse incentives to their management, staff, agents or other representatives that could lead to conflicts of interest.

BC-B.7.1

An Islamic bank licensee must be able to demonstrate that its operations are governed by an effective system of Shari'a governance and that it conducts its business in a socially responsible manner.

BC-B.7.2

An Islamic bank licensee must comply with all applicable legal and regulatory requirements and Shari'a requirements.

BC-B.7.3

An Islamic bank licensee must employ a highly competent head of Shari'a review (Refer to Principle 3, BC-B.3: Capabilities) having a sufficient level of authority to make compliance with all applicable legal, regulatory and Shari'a requirements a key management policy that is applied effectively in practice. Banks must also refer to Module LR (Licensing Requirements), LR-1A for requirements on the appointment of head of Shari'a review and Appendix TC-1 in Module TC (Training and Competency).

BC-C.1.1

Islamic bank licensees must ensure that all regulated financial services are provided without any discrimination based on gender, nationality, origin, language, faith, religion, physical ability or social standing.

Introduction

General Requirements

BC-1.2.1

Islamic retail bank licensees must allow a means for customers to opt-out from receiving promotional or advertisement material through email, SMS, WhatsApp or other communication means should such customers want to opt-out. The opt-out can be in writing or electronically.

BC-1.2.2

The CBB may, at its discretion, require the licensee to withdraw the advertisement or any material thereof, if it believes that the advertisement is not compliant with the requirements of this Module or that it has a negative impact on the financial sector or on the society.

BC-1.2.3

Islamic retail bank licensees must ensure that advertisements:

BC-1.2.4

Islamic retail bank licensees must ensure that advertisements do not:

Digital Advertisements

BC-2.1.1

The Code of Conduct which is prepared in cooperation with the Bankers' Society of Bahrain and the foreign exchange brokers, provide rules in respect of certain kinds of practice which experience has shown may cause difficulty and may jeopardise the good standing of the Bahrain market. Management of banks and money brokers are responsible for ensuring that their institutions are in full compliance with the Code.

BC-2.1.2

Every broker and dealer shall at all times comply with the criteria in respect to market practice, integrity and conduct. Failure to comply with such criteria will be regarded as a serious offence by the CBB, which reserves the right to investigate any complaints brought to its attention. All participants should adhere to the spirit as well as to the letter of the Code.

BC-2.1.3

The Code is shown in full, although many Paragraphs are not strictly relevant for Islamic banks. Treasury staff should refer to the relevant Paragraphs as appropriate.

BC-2.2.1

The use of generally accepted precise terminology should reduce misunderstandings and frustration, and to this end Appendix BC-5 sets out, without claiming to be exhaustive, accepted market terminology and definitions.

BC-2.2.2

For the purpose of this Chapter, the following definitions apply:

BC-2.3.1

Confidentiality is vital for the preservation of a reputable and efficient market. Accordingly, the exchange of confidential information in respect of third parties is forbidden.

BC-2.3.2

The rules which follow are not intended to define exhaustively the obligations of dealers and brokers but set down specific ways in which confidentiality should be safeguarded and operations should be conducted:

BC-2.4.1

The passing and recording of details form an essential part of the transaction and the possibility of errors and misunderstanding is increased by delay and by the passing of details in batches. Brokers should pass details verbally, and principals should be prepared to receive them, normally within a few minutes after deals have been concluded.

BC-2.4.2

When arranging and passing details on forward contracts in foreign exchange, banks and brokers must ensure that the rate applied to the spot end of the transaction bears a close relationship to the spot rate at the time the deal was concluded.

BC-2.5.1

Written confirmation by a broker is the final check on the details of the transaction. The handling of confirmations must take account of the desire of brokers to have a realistic time-limit placed on their liability for differences. There is an obligation on recipients to check such confirmations. Initial confirmations should be sent out by telex without delay, and at the latest by close of business on the same working day. They should be followed up by written confirmation, normally hand-delivered and receipted before close of business on the following working day.

BC-2.5.2

Banks must check all confirmations carefully upon receipt so that discrepancies shall be quickly revealed and differences minimised. Principals shall also make enquiries of brokers about particular confirmations which have not been received within an appropriate time (as above) or about any changes in contract terms.

BC-2.5.3

In the case of deals where a bank pays against telex confirmation, the broker remains liable for differences until receipt of written confirmation is provided by the bank.

BC-2.6.1

The majority of differences payable by brokers arise from errors occurring in payment or repayment instructions. They also arise from a broker, having in good faith indicated a firm rate, being unable to substantiate his quotation.

BC-2.6.2

Any differences deemed payable by a broker to a bank (or by a bank to a broker) should be settled as soon as possible. The parties should provide each other with documents, setting out the exact details of and circumstances surrounding the deal.

BC-2.6.3

It is acknowledged that differences are sometimes paid by 'points'. The management of broking firms should always ensure that this practice is strictly controlled and monitored.

BC-2.6.4

All differences settled by direct payment should be advised in writing by the broker to the Director of Reserve Management, CBB, (copied to the Bank) indicating the amount paid and the other party's name. The CBB reserves the right to ask for further information at its discretion.

BC-2.7.1

The CBB will regard any breaches of the rules stated below regarding gifts, favours, betting and entertainment unacceptable.

Gifts and Favours

Bets

Entertaining

BC-2.8.1

Brokers shall be responsible for ensuring that:

BC-2.8.2

Bankers shall be responsible for ensuring that:

Currencies

Brokerage

Brokerage

BC-2.11.1

As part of its responsibility for supervising the conduct of brokers and dealers in the foreign exchange and currency markets, the CBB may, at its discretion:

BC-2.12.1

Spot transactions and outrights:

For pure outrights it would be advisable to adopt the same system as for swaps; however, implied swap difference is not visible or identical for both parties.

It is possible that payment instructions for counter-currency are already sent out and cannot be cancelled; in that case the paying party should be entitled to the proceeds of the unexpected use of funds by the receiving party.

BC-2.12.2

Deposits:

BC-2.12.3

Swaps:

If starting or maturing date of original swap under Paragraph BC-2.12.1 or Paragraph BC-2.12.2 is substantially different, per currency swap difference has to be recalculated in mutual agreement between the dealers;

BC-3.1.1

In accordance with Article 117 of the CBB Law, banks must not publish or release information to third parties concerning the accounts or activities of their individual customers, unless:

BC-4.1.1

[This paragraph was deleted in April 2018].

BC-4.1.2

[This paragraph was deleted in April 2018].

BC-4.2.1

In order to improve customer awareness and enhance transparency of retail banks charging structures, all retail banks must display in a prominent position, in Arabic and in English, by notice in their banking halls (both head offices and branches), a list of all applicable charges.

BC-4.2.2

Retail banks must also ensure that each customer is in receipt of their current list of charges, by enclosing such a list with account statements and displaying such charges on their websites. The list must specify standard charges and commissions that will be applied by the retail bank to individual services and transactions and to specific areas of business. Such notification must be made in instances where there are changes in the fees or when new fees are introduced.

Credit Agreements

General Rules

Minimum Disclosure Requirements

Public Disclosure Requirements for all Credit agreements

Additional Public Disclosure for Instalment Financing Facilities

Additional Public Disclosure for Credit Agreements other than Instalment Financing Facilities

Disclosure to Customers: Initial Disclosure Requirements of Key Terms

Disclosure to Customers: During the Term of the Credit Agreement

Variation Disclosures Requirements

Early Repayment

Request Disclosure

BC-4.3.1

[This Paragraph was deleted in January 2013].

BC-4.3.2

[This Paragraph was deleted in January 2013].

BC-4.3.3

[This Paragraph was deleted in January 2013].

BC-4.4.1

Retail bank licensees levying fees on their low-balance customer current accounts, are required by the CBB to apply such fees to average balances when these fall below a prescribed level during a specified period.

BC-4.4.2

In order to prevent incidences of returned cheques due to maintenance of low-balance current accounts, the banks may convert some low-balance and/or inactive current accounts to savings accounts.

BC-4.5.1

The purpose of the contents of this Section is to set out the scale of brokerage fees effective for all banks in Bahrain.

BC-4.5.2

The scale of fees is the result of discussion and consultation between The Bankers' Society and the Bahrain Money Brokers.

BC-4.5.3

For the list of brokerage fee, see Appendix BC-6.

BC-4.6.1

[This Paragraph was deleted in October 2016.].

BC-4.6.2

All Islamic retail banks licensed by the CBB are required to notify the CBB before the introduction of any new or expanded customer products and facilities. The CBB will respond to the concerned bank within one week of receipt of the notification if it has any observations on the new product.

BC-4.6.2A

The reference to changes in existing product/service refers to changes that will have an additional financial cost to the customers.

BC-4.6.3

[This Paragraph was deleted in October 2011].

BC-4.7.1

Licensees must ensure that no transfer of legal ownership of financial assets is made until they have sight of documentation (which must be duly copied for their records) from the Ministry of Justice and Islamic Affairs confirming the entitlement of a person or persons to inherit from the deceased. Such documentation must be complied with precisely. Particular care must be taken where minors (children) or other people lacking full legal capacity are named as inheritors.

BC-4.7.2

Without prejudice to Paragraph BC-4.7.1, financial assets may be distributed to the order of an individual provided that individual is named in a mandate, duly certified by the Ministry of Justice and Islamic Affairs, as having the permission to act on behalf of all of the inheritors.

BC-4.8.1

Islamic bank licensees must comply with the Code of Best Practice on Consumer Credit and Charging as attached in Appendix CM-2 throughout the lifetime of their relationship with a customer.

BC-4.8.2

Islamic bank licensees must take responsibility for compliance with the above requirements by all persons carrying out regulated banking services on their behalf. Islamic bank licensees must put in place appropriate measures across all their business operations and distribution channels to ensure compliance with the requirements of the Code of Best Practice on Consumer and Charging where relevant.

BC-4.9.1

All retail banks must provide at no charge, a transaction advice service for its customers (natural persons) through short message services (SMS) on all types of withdrawals/deductions from customer's account and any credit and pre-paid card transaction, including, but not limited to:

BC-4.9.2

This Paragraph was deleted in July 2015.

BC-4.11.1

All retail banks must waive any administrative fees when transferring donated funds from the donor accounts to the accounts of NGOs registered with the Ministry of Social Development (MoSD), provided that a valid funds collection license is presented to the bank by the concerned NGO.

BC-4.11.2

All retail banks must refrain from transferring any funds, collected by way of donations or fund raising, to the account of any society or club where the NGO has not submitted a valid written fund collection license to the bank, as required under Paragraph BC-4.11.1.

BC-4.11.3

Banks must notify the CBB in instances where donated funds have been received and no valid license was submitted. The CBB will then inform the MoSD accordingly.

BC-4.11.4

NGOs, including societies and clubs, registered with the MoSD, and having fund collection licenses, are listed in the NGOs fund collection directory, available on the website of the MoSD.

BC-4.11.5

NGOs registered with the MoSD and holding a fund collection license must present such license to the concerned banks in order for the related administration fee to be waived.

BC-4.11.6

Administration fees will be waived by the banks only for the period of the validity of the funds collection license.

BC-4.12.1

Where a pensioner has been requested to produce a credit report by the Social Insurance Organization (SIO) to establish his/her credit standing, Islamic retail bank licensees must not levy any administrative charges.

BC-4.13.1

Retail banks must comply with the caps on fees and charges for standard services provided to individuals effective from 1st May 2018 as per the table in Appendix BC-8 in Part B of the CBB Rulebook Volume 2.

BC-4.13.2

Fees and charges on withdrawals done through bank counters for amounts below the ATM withdrawal limit must be waived for all of the following customers:

BC-4.14.1

Islamic retail bank licensees may charge companies under formation a fee capped at BD 10 for the issuance of letter of confirmation of capital maintained with the bank regardless of the capital amount deposited and maintained.

BC-4.14.2

Islamic retail bank licensees must not charge any setup fees for opening bank accounts for companies under formation.

BC-4.15.1

Islamic retail bank licensees must comply with the following requirements with regards to charging profit/ fees on credit card statement dues:

BC-4.16.1

Islamic retail bank licensees must not charge profit on credit facilities using a 'monthly flat rate'; they must instead use an effective profit rate based on a reducing balance method.

BC-4.18.1

Islamic bank licensees that act as acquirers or payment gateways for PSPs, must not charge more than 100 fils in line with the Electronic Fund Transfer System (EFTS) requirements to the customers of PSPs for normal fund transfers made electronically.

BC-4.19.1

Islamic bank licensees must exempt the Zakat and Charity Fund (“the Fund”) of the Ministry of Justice, Islamic Affairs and Awqaf from merchant fees for payments made to the Fund.

BC-4.20.1

This section sets out the requirements relating to dormant accounts which represents unrestricted investment accounts, restricted investment accounts, current or call accounts which turn dormant due to inactivity or no claim or renewal request being made and unclaimed balances relating to various negotiable instruments such as manager cheques, amounts remaining unpaid to customers relating to their investments or amounts remaining unclaimed for other reasons such as cash not dispensed from ATMs etc.

BC-4.20.2

Islamic retail bank licensees must establish policies and procedures to deal with dormant accounts and unclaimed balances which must include measures to contact the customer concerned, activation of the accounts where appropriate, return of the moneys to the customer and control measures to prevent frauds and misuse of such accounts.

Dormant Accounts Treatment

Activation of Dormant Accounts

Unclaimed Balances

Reporting

Prohibition of Transfer of Balances

BC-4.21.1

The requirements in this Section apply to Islamic retail bank licensees which seek life or other insurance cover in respect of financing to a borrower. These requirements are effective from 1^st April 2024, i.e. all credit exposures that mature or are repaid/prepaid in full on or after 1^st April 2024 must be subject to the requirements in this Section.

BC-4.21.2

Islamic retail bank licensees using insurance cover as risk mitigant for its financing to individuals must comply with the following requirements:

BC-4.21.3

If licensees decide to restructure the financing but cannot obtain insurance coverage due to the customer's age or due to a ‘retiree’ status, they must inform the customer in writing about the unavailability of insurance for the extended financing period. In such cases, the licensee must not demand full repayment of financing by the customer due to the customer’s age.

BC-4.21.4

Licensees’ credit policy must specify, at a minimum, the following:

BC-4.21.5

Licensees’ credit policy must also specify its approach with regard to financing and the corresponding insurance coverage implications for customers who fall within higher age groups (to be defined by the licensee) and those who have retired from employment or will retire during the tenor of the financing.

BC-4.21.6

For the purposes of BC-4.21.5, extension of financing to individuals who are beyond the retirement age should take into account, in addition to other factors, the increases in life expectancy in Bahrain and the general trend in loss ratios. For this purpose, licensees should agree with their insurer the terms, conditions and procedures in order to meet the needs of individuals above the insurable age of the group financing portfolio and consider measures to be taken in the case of exceptional scenarios such as a customer in the higher age group needing to restructure a facility.

BC-4.21.7

Licensees using group insurance cover must perform a due diligence of the insurance provider at periodic intervals to ensure optimum benefits are obtained for their customers. The due diligence must also involve assessment of various insurance plans and loss ratios.

BC-4.21.8

If the insurance provider is a related party of the licensee, the insurance cost must not be higher than the market quotes for similar insurance cover.

BC-5.1.1

The purpose of the contents of this Section is to set out Rules relating to the system of penalising any person, whether natural or corporate in form, (referred to as a 'customer' in this Chapter) whose cheque is:

Cheques falling within this system are referred to as 'dishonoured cheques'. Due regard must be given by retail banks to the general provisions of Bahrain Law regarding joint accounts, partnership accounts and accounts in the name of corporate entities, as well as to the customer mandate in each case, to determine how such accounts may be dealt with for purposes of the Rules in this Chapter.

Procedures to be Followed

BC-5.2.1

Retail banks which wish to issue cheque guarantee cards for an amount not exceeding BD 200 may do so, subject to informing the Director of Banking Services at the CBB of their intention and the arrangements governing the issue of such cards.

BC-5.2.2

Retail banks, generally, should take steps to extend their administrative supervision and control over current account customers (in particular those who are in repeated breach of normally-accepted behaviour), and to stress to account holders the need for an appropriate level of discipline in the usage of cheques.

BC-5.2.3

Retail banks should exercise greater vigilance over borrowers, especially in the area of consumer finance, where such borrowers maintain their current accounts at a bank or banks other than at the lending bank.

BC-5.2.4

The CBB will monitor the incidence of returned cheques on a monthly basis (as stipulated in Section BC-5.1) in order to determine the extent to which such incidence is being reduced or otherwise.

BC-5.3.1

The CBB will impose penalty charges of BD 7 (seven Bahrain Dinars) on each returned cheque for the reasons of 'Insufficient Funds', 'Refer to Drawer', 'Not Arranged For', 'Present the cheque again', and 'Account Closed'. Individual banks will continue to be informed daily of any charges accruing to their accounts. The respective accounts will be debited on the same day.

BC-5.3.2

[This paragraph was deleted in April 2018].

BC-5A.1.1

When a customer fully repays his/her credit outstanding amount in full or settles in part pursuant to a settlement agreement, the subject retail bank licensee must immediately return all holding of the customer's post-dated cheques taken as collateral or destroy such cheques and inform the customer in writing.

BC-6.1.1

[This Paragraph was deleted in October 2019].

BC-6.1.2

[This Paragraph was deleted in October 2019].

[This Subsection was deleted in October 2019].

BC-6.2.1

[This paragraph was deleted in April 2018].

BC-6.2.2

[This paragraph was deleted in April 2018].

BC-6.2.3

[This paragraph was deleted in April 2018].

BC-6.3.1

[This paragraph was deleted in April 2018].

BC-6.3.2

[This Paragraph was deleted in April 2016.]

BC-6.3.3

[This Paragraph was deleted in April 2016.]

BC-7.1.1

As part of its on-going supervision of Islamic banks, the CBB has set out in Appendix BC-7 details of the type of terms and conditions which it believes Islamic banks should include, as a minimum, in such Mudaraba contracts.

BC-7.1.2

All Mudaraba contracts entered into by an Islamic bank (whether new or renewed contracts) must meet the standards referred to under Paragraph BC-7.1.1.

BC-7.1.3

Banks must have a policy statement as to the policies and procedures in place to safeguard the interest of the PSIA holders. The statement must, as a minimum, cover the following areas:

Banks must agree their Policy Statements with the CBB.

BC-8.1.1

This Chapter applies to all retail banks in Bahrain.

BC-8.1.2

Investors purchasing securities listed on any licensed exchange may pay for them under the Margin Trading System ('The System') by borrowing a portion of the purchase price from a participating bank. The System is subject to relevant provisions of the CBB Law, the Rulebook of the licensed exchange, any rules and regulations issued pursuant to such Law, Rulebook and this Module. The System applies to equities in companies listed on any licensed exchange. Unless restrictions apply under Bahrain law in this regard, the System shall be available to Bahraini or non-Bahraini investors, whether resident or non-resident in Bahrain.

BC-8.1.3

The main objective of introducing the System is to enhance the overall activity on any licensed exchange, allowing investors to leverage their investments, in a controlled manner.

General Criteria

BC-8.2.1

An investor may, through his relationship with any participating bank under the System, invest in securities made up by way of the investor's own initial margin and by way of financing from the relevant participating bank to that investor.

BC-8.2.2

Such financing referred to in Paragraph BC-8.2.1 is subject to the limit on margin percentage given in Paragraph BC-8.2.10.

BC-8.2.3

The amount of the margin facility made to an investor under the System shall be included as an exposure to that customer, and contribute towards the large exposures limit and the consumer finance limit for that person.

BC-8.2.4

The total amount of financing granted by an individual participating bank to all investors under the System shall not, at any time exceed 15% of that participating bank's capital base, such percentage to be reviewed by the CBB at its discretion from time to time.

BC-8.2.5

The CBB will require participating banks to inform the Credit Reference Bureau ('CRB') of all facility limits approved to investors under the System from time to time. Participating banks must check with the CRB on the amount of facility limits outstanding under the System at any time to a particular investor.

SRO Members

Documentation

Owner of the Securities bought Using the System

Margin Percentage

Margin Call Top-up

Margin Charges

BC-9.1.1

[This Paragraph was deleted in July 2015]

BC-9.1.2

[This Paragraph was deleted in July 2015]

Overseas Branches and Subsidiaries [Deleted]

[This heading was deleted in July 2015]

BC-9.2.1

This Chapter applies to all the regulated Islamic banking services listed in Paragraph LR-1.3.1 of all Islamic bank licensees, except where otherwise indicated.

BC-9.2.1A

Where reference is made to investment activities, these refer to regulated Islamic banking services as per Subparagraphs LR-1.3.1 (c to k).

BC-9.2.2

This Module aims to encourage high standards of business conduct, which are broadly applicable to all Islamic bank licensees, all regulated banking services referred to in Paragraph BC-9.2.1, and all types of customers.

BC-9.2.3

This Paragraph was deleted in July 2015.

BC-9.2.4

Islamic bank licensees must maintain adequate records, as required in Chapter OM-7 to demonstrate compliance with the requirements of this Module, in addition to the requirements in the 'Code of Best Practice for Consumer Finance'.

BC-9.2.5

This Paragraph was deleted in July 2015.

BC-9.3.1

[This Paragraph was deleted in July 2015]

BC-9.3.2

[This Paragraph was deleted in July 2015]

BC-9.4.1

[This Paragraph was deleted in July 2015]

BC-9.4.2

[This Paragraph was deleted in July 2015]

BC-9.4.3

[This Paragraph was deleted in July 2015]

BC-9.4.4

[This Paragraph was deleted in July 2015]

BC-9.4.5

[This Paragraph was deleted in July 2015]

Accredited Investors

[This heading was deleted in July 2015]

Retail Customer

[This heading was deleted in July 2015]

Records

[This heading was deleted in July 2015]

BC-9.5.1

The requirements of this section apply to product specific or service specific material and not to general brand awareness promotional material. In addition to the requirements of this Section, licensees should consider Section BC-9.8.

BC-9.5.2

Islamic bank licensees must ensure that all advertising and promotional material for specific products that is sent to any class of customer is fair, clear and not misleading.

BC-9.5.3

With respect to customers, in ensuring that the description of the product or the service in the promotional material is fair, clear and not misleading, the Islamic bank licensee should, among other precautionary measures, ensure that:

BC-9.5.4

In ensuring that the description of the product or the service in the promotional material is fair, the Islamic bank licensee should avoid exaggerating the potential benefits of the products or services being offered in any communication with a customer or potential customer.

BC-9.5.5

In ensuring that the description of the product or the service in relation to promotional material directed at customers is adequate, the Islamic bank licensee should: ensure that the promotional material contains a balanced description of the main characteristics of the product or service it relates to, including the nature of the financial commitment and risks involved.

BC-9.5.5A

In addition, the description must state the name of the person, if the communication relates to a product or service of a person other than the Islamic bank licensee.

BC-9.5.5B

In the case of investment activities, the description should indicate whether or not the financial instruments involved are illiquid, and traded in a recognised exchange or market; the existence or absence of any right of withdrawal or cancellation and, where such a right exists, its duration and the conditions for exercising it, including information on any amount that the customer may be required to pay to exercise that right; and state if the communication relates to a financial instrument or service of a person other than the Islamic bank licensee, the name of the person.

BC-9.5.6

Islamic bank licensees must ensure that the accuracy of all material statements of fact in promotional materials is supported by adequate evidence.

BC-9.5.7

Islamic bank licensees must not, in any form of communication with an individual customer or any class of customer, unreasonably attempt to limit or avoid any duty or liability it may have to that individual customer or class of customer in relation to regulated banking services, unless otherwise agreed in writing by both parties.

BC-9.5.8

An example of an unreasonable attempt to limit liability is where a financial product is given protection or compensation status in its home country and such status is not given by the Bahrain Bank (or branch) to its customers.

BC-9.5.9

Islamic bank licensees that underwrite or market public offerings must ensure that their promotional material complies with the relevant capital markets disclosure standards of the CBB.

BC-9.5.10

Capital markets disclosure standards are currently contained in the Disclosure Standards Regulation of 3 December 2003.

Content of Promotions

Records

Real Time Promotions

Records

Applicability

Terms of Business

Customer Understanding and Acknowledgement

Records

Applicability

Information and Communication

Records

Applicability

Initial Disclosure Requirement

Risks

Disclosure of Information for Investment Activities

Cancellation and Withdrawals

Records

BC-9.9.1

This Paragraph was deleted in July 2015.

Best and Timely Execution

Non-market Price Transactions

Aggregation and Allocation

Excessive Dealing

Right to Realise a Customer's Assets

Margin Requirements

Programme Trading

Records

BC-9.10.1

This Paragraph was deleted in July 2015.

Confirmation of Transactions

Periodic Statements

Records

BC-9.11.1

[This paragraph was deleted in October 2011].

BC-9.11.2

[This paragraph was deleted in October 2011].

BC-9.11.3

[This paragraph was deleted in October 2011].

[Deleted]

BC-9.12.1

Islamic bank licensees must undertake all reasonable steps to identify conflicts of interest between themselves (or any person directly or indirectly linked to them by control) and their customers, which may arise in the course of providing a regulated Islamic banking service.

BC-9.12.2

Where conflicts arise, Islamic bank licensees must:

BC-9.12.3

If an Islamic bank licensee determines that it is unable to manage a conflict of interest or material interest using one of the methods described in Rule BC-9.12.2 it must decline to act for the customer.

Personal Account Transactions

Investment Research

Inducements

BC-9.13.1

For the purpose of Paragraph BC-9.5.11, the minimum information that should be contained in promotional material for specific products includes:

BC-9.13.2

For the purpose of Paragraph BC-9.6.2, the minimum information that should be contained in terms of business includes:

BC-9.13.3

This Paragraph was deleted in July 2015.

BC-9.13.4

This Paragraph was deleted in July 2015.

BC-9.13.5

This Paragraph was deleted in July 2015.

BC-9.13.6

This Paragraph was deleted in July 2015.

BC-9.13.7

For the purpose of Paragraph BC-9.10.4, the minimum information that should be included in a transaction confirmation includes:

BC-9.13.8

For the purpose of Paragraph BC-9.10.7, the minimum information that should be included in a periodic statement includes:

BC-9.13.9

For the purpose of Paragraph BC-9.10.8, the minimum information that should be included in a periodic statement, where the relationship includes portfolio management, includes:

BC-9.13.10

For the purpose of Paragraph BC-9.10.9, the minimum information that should be included in periodic statements, where the relationship includes contingent liability investment transactions, includes:

BC-9.13.11

For the purpose of Paragraph BC-9.12.8, the minimum requirements that should be met where the Islamic bank licensee prepares and publishes investment research include:

BC-9.13.12

For the purpose of Paragraph BC-9.12.17, the minimum requirements that should be met where the Islamic bank licensee has a soft dollar agreement under which it deals with customers include:

BC-10.1.1

All Islamic bank licensees must have appropriate customer complaints handling procedures and systems for effective handling of complaints made by customers by 31^st March 2012.

BC-10.1.2

Customer complaints procedures must be documented appropriately and their customers must be informed of their availability.

BC-10.1.3

All Islamic bank licensees must appoint a customer complaints officer and publicise his/ her contact details at all departments and branches and on the bank's website. The customer complaints officer must be of a senior level at the Islamic bank and must be independent of the parties to the complaint to minimize any potential conflict of interest.

BC-10.1.3A

The position of customer complaints officer may be combined with that of compliance officer.

BC-10.1.4

In the case of an overseas Islamic bank licensee, a local complaints officer must be present and must report all complaints to the head office complaints unit.

BC-10.2.1

In order to make customer complaints handling procedures as transparent and accessible as possible, all Islamic bank licensees must document their customer complaints handling procedures. These include setting out in writing:

BC-10.2.2

Islamic bank licensees must provide a copy of the procedures to all relevant staff, so that they may be able to inform customers. A simple and easy-to-use guide to the procedures must also be made available to all customers, on request, and when they want to make a complaint.

BC-10.2.3

Islamic bank licensees are required to ensure that all financial services related documentation (such as financing documentation) provided to the customer includes a statement informing the customer of the availability of a simple and easy-to-use guide on customer complaints procedures in the event the customer is not satisfied with the services provided.

BC-10.3.1

Adherence to the following principles is required for effective handling of complaints:

Visibility

Accessibility