Islamic Retail Banks
LR-1.2.4
Islamic retail banks are allowed to transact with both residents and non-residents of the Kingdom of Bahrain, and in both Bahrain Dinar and foreign currencies.October 2007LR-1.2.5
To qualify as an
Islamic retail bank , the person concerned must undertake (as a minimum), the activity of accepting Shari'a money placements/deposits, and/or managing Shari'a profit-sharing investment accounts, as well as the activity of offering Shari'a financing contracts (as defined in Rules LR-1.3.16, LR-1.3.17A and B and LR-1.3.18). The activity of offering Shari'a financing contracts must be a significant part of the bank's business, relative to other activities.Amended: July 2012
October 2007LR-1.2.6
When assessing the significance of Shari'a financing contracts, in the context of Rule LR-1.2.5, the CBB would normally expect to see such contracts constitute at least 20% of the total assets of the institution. Other activities and criteria may also be taken into account, if the CBB believes they are of a financing-related nature, and that such activities constitute a significant share of the bank's overall business.
October 2007LR-1.2.7
In the case of new applicants, the above assessment is made based on the financial projections and business plan provided as part of the license application. Where existing licensees cease to satisfy the condition contained in Rule LR-1.2.5, the CBB will initiate discussion with the licensee as to the appropriateness of its license category; this may result in the licensee being required to change its license category.
October 2007LR-1.2.8
The purpose of Rule LR-1.2.5 is to ensure that, besides the activity of accepting Shari'a money placements/deposits, and managing Shari'a profit-sharing investment accounts, that the core banking activity of providing finance also forms part of the definition of
Islamic retail banks , and accounts for a significant share of their business, in keeping with their intermediation function.October 2007
