LR-2.1.1

The legal status of an Islamic bank licensee must be:

LR-2.1.2

Where the Islamic bank licensee is a branch of a foreign bank, in deciding whether to grant a license, the CBB will pay close regard to its activities elsewhere and how these activities are regulated. If the Islamic bank licensee is not regulated elsewhere or in a jurisdiction not substantially compliant with Basel Core Principles or FATF standards, then an application for licensing can only be considered after exhaustive enquiries into the bank's shareholders, management structure and financial position.

LR-2.2.1

Islamic bank licensees with their Registered Office in the Kingdom of Bahrain must maintain their Head Office in the Kingdom. Branches of foreign Islamic bank licensees must maintain a local management presence and premises in the Kingdom appropriate to the nature and scale of their activities.

LR-2.2.2

In assessing the location of an Islamic bank licensee's Head Office, the CBB will take into account the residency of its Directors and senior management. The CBB requires the majority of key decision makers in executive management — including the Chief Executive Officer — to be resident in Bahrain. In the case of branches of foreign bank licensees, the CBB requires the branch to have a substantive presence, demonstrated by a level of staff and other resources sufficient to ensure adequate local scrutiny and control over business booked in the Bahrain branch or subsidiary.

LR-2.3.1

Islamic bank licensees must satisfy the CBB that their controllers are suitable and pose no undue risks to the licensee. Islamic banks must also satisfy the CBB that their group structures do not prevent the effective supervision of the Islamic bank licensee by the CBB and otherwise pose no undue risks to the licensee.

LR-2.3.2

Chapter GR-5 contains the CBB's requirements and definitions regarding controllers.

LR-2.3.3

In summary, controllers are persons who directly or indirectly are significant shareholders in an Islamic bank licensee, or who are otherwise able to exert significant influence on the Islamic bank licensee. The CBB seeks to ensure that controllers pose no significant risks to the licensee. In general terms, controllers are assessed in terms of their financial standing, their judicial and regulatory record, and standards of business and (where relevant) personal probity.

LR-2.3.4

As regards group structures, the CBB seeks to ensure that these do not prevent adequate consolidated supervision being applied to financial entities within the group, and that other group entities do not pose any material financial, reputational or other risks to the licensee.

LR-2.3.5

In all cases, when judging applications from existing groups, the CBB will have regard to the reputation and financial standing of the group as a whole. Where relevant, the CBB will also take into account the extent and quality of supervision applied to overseas members of the group and take into account any information provided by other supervisors in relation to any member of the group.

LR-2.4.1

Those nominated to carry out controlled functions must satisfy CBB's approved persons requirements. This Rule is supported by Article 65 of the CBB Law.

LR-2.4.2

The definition of controlled functions is contained in Paragraph LR-1A.1.2, whilst Section LR-1A.2 sets out CBB's approved persons requirements.

LR-2.4.3

The Islamic bank licensee's staff, taken together, must collectively provide a sufficient range of skills and experience to manage the affairs of the licensee in a sound and prudent manner. Islamic bank licensees must ensure their employees meet any training and competency requirements specified by the CBB.

Capital Adequacy

Liquidity

Reserve Requirements

LR-2.6.1

Islamic bank licensees must maintain systems and controls that are, in the opinion of the CBB, adequate for the scale and complexity of their activities. These systems and controls must meet the minimum requirements contained in Modules HC, CM and OM.

LR-2.6.2

Islamic bank licensees must maintain systems and controls that are, in the opinion of the CBB, adequate to address the risks of financial crime occurring in the licensee. These systems and controls must meet the minimum requirements contained in Module FC, as specified for the Category of license held.

LR-2.6.3

Applicants will be required to demonstrate in their business plan (together with any supporting documentation) what risks their business would be subject to and how they would manage those risks. Applicants may be asked to provide an independent assessment of the appropriateness of their systems and controls to the CBB, as part of the license approval process.

LR-2.7.1

Article 61 of the CBB Law requires that Islamic bank licensees must appoint an external auditor, subject to the CBB's prior approval. The minimum requirements regarding external auditors contained in Module AU (Auditors and Accounting Standards) must be met.

LR-2.7.2

Applicants must submit details of their proposed external auditors to the CBB as part of their license application.

Books and Records

Provision of Information

General Conduct

Additional Conditions