LR-3 LR-3 Information Requirements and Processes
LR-3.1 LR-3.1 Licensing
LR-3.1.1
Applicants for a license must fill in the Application Form 1 (Application for a License) online, available on the CBB website under E-services/online Forms. The applicant must upload scanned copies of supporting documents listed in Paragraph LR-3.1.5, unless otherwise directed by the CBB.
Amended: July 2019
Amended: April 2018
October 2007LR-3.1.2
[This paragraph was deleted in October 2007]
LR-3.1.3
References to applicant mean the proposed
licensee seeking authorisation. An applicant may appoint a representative — such as a law firm or professional consultancy — to prepare and submit the application. However, the applicant retains full responsibility for the accuracy and completeness of the application, and is required to certify the application form accordingly. The CBB also expects to be able to liaise directly with the applicant during the authorisation process, when seeking clarification of any issues.Added: April 2011LR-3.1.4
[This paragraph was deleted in October 2007]
LR-3.1.5
Unless otherwise directed by the CBB, the following documents must be provided together with the covering letter referred in LR-3.1.1 above in support of a license application:
(a) A duly completed Form 2 (Application for Authorisation of Controller) for each controller of the proposed licensee;(b) A duly completed Form 3 (Application for Approved Person status), for each proposed Director of the proposed licensee;(c) A comprehensive business plan for the application, addressing the matters described in LR-3.1.6;(d) For branches of foreign banks, a copy of the bank's current commercial registration or equivalent documentation;(e) Where the applicant is an existing institution, a copy of the applicant's commercial registration;(f) Any relevant Private Placement Memoranda or public offering documents (if funds are to be raised by external shareholders);(g) Where the applicant is a corporate body, a certified copy of a Board resolution of the applicant along with minutes of the concerned meeting, confirming the board's decision to seek a CBB Islamic bank license;(h) In the case of applicants that are part of a regulated group, a letter of non-objection to the proposed license application from the applicant'shome supervisor , together with confirmation that the group is in good regulatory standing and is in compliance with applicable supervisory requirements, including those relating to capital adequacy and solvency requirements;(i) In the case of branches of foreign banks applicants, a letter of non-objection to the proposed license application from the applicant's home supervisor, together with confirmation that the applicant is in good regulatory standing and is in compliance with applicable supervisory requirements, including those relating to capital adequacy requirements;(j) In the case of branch applicants, copies of the audited financial statements of the applicant (head office) for the three years immediately prior to the date of application;(k) In the case of applicants for a licence for a locally incorporated bank, copies of the audited financial statements of the applicant's major shareholder and/or group (as directed by the CBB), for the three years immediately prior to the date of application;(l) A duly completed Form 3 (Application for Approved Person status), for each individual, (other than for Directors covered in item (b) above) applying to undertake controlled functions in the applicant; and(m) A draft copy of the applicant's (and parent's where applicable) memorandum and articles of association, addressing the matters described in LR-3.1.7.Amended: July 2017
Amended: April 2011
Amended: January 2011
Amended October 2010
October 2007LR-3.1.5A
The CBB, in its complete discretion may ask for a guarantee from the applicant's controlling or major shareholders on a case by case basis as it deems appropriate/necessary as part of the required documents to be submitted as mentioned in Paragraph LR-3.1.5 above.
Adopted: January 2011LR-3.1.6
The business plan submitted in support of an application should explain:
(a) An outline of the history of the applicant and its shareholders;(b) The reasons for applying for a license, including the applicant's strategy and market objectives;(c) The proposed type of activities to be carried on by the applicant in/from the Kingdom of Bahrain;(d) The proposed Board and senior management of the applicant and the proposed organisational structure of the applicant;(e) An assessment of the risks that may be faced by the applicant, together with the proposed systems and controls framework to be put in place for addressing those risks and to be used for the main business functions; and(f) An opening balance sheet for the applicant, together with a three-year financial projection, with all assumptions clearly outlined, demonstrating that the applicant will be able to meet applicable capital adequacy and liquidity requirements.Amended October 2010
October 2007LR-3.1.7
The applicant’s (and where applicable, its parent’s) memorandum and articles of association must explicitly provide for it to undertake the activities proposed in the licensed application, and must preclude the applicant from undertaking other commercial activities, unless these arise out of its banking activities or are incidental to those.
October 2007LR-3.1.8
In the case of a new bank's capital being financed by a private placement, the Private Placement Memorandum must also be submitted to CBB for its approval as part of the Phase 2 documentation.
October 2007LR-3.1.9
The purpose of Rule LR-3.1.8 is to allow CBB to verify that the contents of the Private Placement Memorandum are consistent with other information supplied to CBB, notably in the business plan, and otherwise meets any applicable regulatory requirements with respect to PPM documents. The CBB's review of the PPM does not in any way constitute an approval or endorsement as to any claims it may contain as to the future value of the proposed bank.
October 2007LR-3.1.10
[This paragraph was deleted in October 2007]
LR-3.1.11
All documentation provided to the CBB as part of an application for a license must be in either the Arabic or English languages. Any documentation in a language other than English or Arabic must be accompanied by a certified English or Arabic translation thereof. Certification must be performed by an official of the concerned licensee (if already licensed), a lawyer, or a Government body such as an Embassy or Ministry. The certification must include the words “original sighted” together with a date and signature of the concerned authorised official (along with corporate stamp where applicable). The certifier's contact details should be clearly available (e.g. business card) with the certification.
Amended: October 2016
October 2007
LR-3.1.12
Any material changes or proposed changes to the information provided to the CBB in support of an authorisation application that occurs prior to authorisation must be reported to the CBB.
October 2007
LR-3.1.12A
Before the final approval is granted to a licensee, confirmation from a retail bank addressed to the CBB that the licensee's capital (injected funds) — as specified in the business plan submitted under Rule LR-3.1.5 — has been paid in must be provided to the CBB.
October 2010
LR-3.1.13
Failure to inform the CBB of the changes specified in LR-3.1.12 is likely to be viewed as a failure to provide full and open disclosure of information, and thus a failure to meet licensing condition LR-2.8.2.
October 2007
LR-3.1.14
As part of the application process, the CBB will provide a formal decision on a license application within 60 calendar days of all required documentation having been submitted in a form acceptable to the CBB, as specified in Article 44 (e) of the CBB Law. The applicant must submit within 6 months of the application date, all remaining requirements or otherwise has to submit a new application to the CBB. Applicants are encouraged to approach the CBB to discuss their application at an early stage, so that any specific questions can be dealt with prior to the finalisation of the application.
October 2007
LR-3.1.15
Within 6 months of the license being issued, the new licensee must provide to the CBB:
(a) A detailed action plan for establishing the operations and supporting infrastructure of the bank, such as the completion of written policies and procedures, and recruitment of remaining employees (having regard to the time limit set by Article 48 (c) of the CBB Law);(b) The registered office address and details of premises to be used to carry out the business of the proposed licensee;(c) The address in the Kingdom of Bahrain where full business records will be kept;(d) The licensee's contact details including telephone and fax number, e-mail address and website;(e) A description of the business continuity plan;(f) A description of the IT system that will be used, including details of how IT systems and other records will be backed up;(g) A copy of the auditor's acceptance to act as auditor for the applicant;(h) A copy of the applicant's notarised memorandum and articles of association, addressing the matters described in Paragraph LR-3.1.7;(i) A copy of the Ministry of Industry & Commerce commercial registration certificate in Arabic and in English;(j) A copy of the bank's business card and any written communication (including stationery, website, e-mail, business documentation, etc.) including a statement that the bank is licensed by the CBB specifying whether it is licensed either as an Islamic wholesale or Islamic retail bank; and(k) Other information as may be specified by the CBB.Amended October 2010
October 2007
LR-3.1.15A
With respect to the requirement under Subparagraph LR-3.1.15(j),
Islamic bank licensees must ensure that they comply with this Rule by 31st March 2011.October 2010
LR-3.1.16
Applicants issued new licenses by the CBB must start operations within 6 months of the license being issued, as per Article 48 (c) of the CBB Law. Failure to comply with this rule lead to enforcement action being taken against the licensee concerned, as specified in Article 128 of the CBB Law.
Islamic bank licensee must at all times keep an approved copy of the licence displayed in a visible place on the Licensee’s premises in the Kingdom, as per Article 47 (b) of the CBB Law.October 2007
LR-3.1.17
Applicants who are refused a license have a right of appeal under the provisions contained in Article 46 of the CBB Law, which shall not be less than thirty days from the date of the decision. The Central Bank will decide on the appeal made by the applicant and notify him of its decision within thirty days from the date of submission of the appeal.
October 2007
LR-3.1.18
Applicants may not publicise in any way the application for a licence for, or formation of a bank before the formal decision referred to in Paragraph LR-3.1.14 is provided to the applicant or the concerned agent.
Amended: July 2012
October 2007
LR-3.2 LR-3.2 Variations to a License
LR-3.2.1
As per Article 48 of the CBB Law of 2006,
Islamic bank licensees must seek prior CBB approval before undertaking newregulated Islamic banking services .October 2007LR-3.2.2
Failure to secure CBB approval prior to undertaking a new regulated activity may lead to enforcement action being taken against the licensee concerned.
October 2007LR-3.2.3
In addition to any other information requested by the CBB, and unless otherwise directed by the CBB, an
Islamic bank licensee requesting CBB approval to undertake a newregulated Islamic banking service must provide the following information:(a) A summary of the rationale for undertaking the proposed new activities;(b) A description of how the new business will be managed and controlled;(c) An analysis of the financial impact of the new activities; and(d) A summary of the due diligence undertaken by the Board and management of theIslamic bank licensee on the proposed new activities.Amended October 2010
October 2007LR-3.2.4
The CBB may amend or revoke a license in any of the following cases:
(a) If the licensee fails to satisfy any of the license conditions;(b) If the licensee violates the terms of this regulations or any of the Volume's directives;(c) If the licensee fails to start business within six months from the date of the licence;(d) If the licensee ceases to carry out the licensed activity in the Kingdom; and(e) The legitimate interests of the customers or creditors of a licensee required such amendment or cancellation.Amended: October 2019
Amended October 2010
October 2007LR-3.2.5
The CBB’s procedures for amending or revoking a license are outlined in detail in the Enforcement Module (EN).
October 2007
LR-3.3 LR-3.3 Withdrawal of a License or Closure of a Branch
Voluntary Surrender of a License or Closure of a Branch
LR-3.3.1
In accordance with Article 50 of the CBB Law, all requests for the voluntary surrender of a license or closure of a branch are subject to the CBB's prior written approval, before ceasing such activities. Such requests must be made in writing to the Executive Director of Banking Supervision, setting out in full the reasons for the request and how the voluntary surrender of the license or branch closure is to be carried out.
Amended: October 2011
October 2007LR-3.3.2
Islamic bank licensees must satisfy the CBB that theircustomers' interests are to be safeguarded during and after the proposed voluntary surrender or closure of the branch. The requirements contained in Chapter GR-7 regarding cessation of business must be satisfied.Amended: October 2011
October 2007LR-3.3.3
The CBB will only approve a voluntary surrender where it has no outstanding regulatory concerns and any relevant
customers ' interests would not be prejudiced. A voluntary surrender will not be accepted where it is aimed at pre-empting supervisory actions by the CBB. Also, a voluntary surrender will only take effect once the licensee, in the opinion of the CBB, has discharged all its regulatory responsibilities tocustomers .October 2007Cancellation of a License by the CBB
LR-3.3.3A
As provided for under Article 48 (c) of the CBB Law, the CBB may itself move to cancel a license. The CBB generally views the cancellation of a license as appropriate only in the most serious of circumstances, and generally tries to address supervisory concerns through other means beforehand. See also Chapter EN-9, regarding the cancellation or amendment of licenses, including the procedures used in such instances and the licensee's right to appeal the formal notice of cancellation issued by the CBB.
October 2011LR-3.3.4
Cancellation of a license requires the CBB to issue a formal notice of cancellation to the person concerned. The notice of cancellation describes the CBB's rationale for the proposed cancellation, as specified in Article 48 (d) of the CBB Law.
Amended: July 2012
Amended: October 2011
October 2007LR-3.3.5
[This Paragraph was deleted in October 2011.]
Deleted: October 2011LR-3.3.6
Where the cancellation of a license has been confirmed by the CBB, the CBB will only effect the cancellation once a licensee has discharged all its regulatory responsibilities to
customers . Until such time, the CBB will retain all its regulatory powers with regards to the licensee, and will direct the licensee such that no newregulated Islamic banking services may be undertaken whilst the licensee discharges its obligations tocustomers .Amended: July 2012
Amended: October 2011
October 2007
LR-3.4 LR-3.4 Publication of the Decision to Grant, Cancel or Amend a License
LR-3.4.1
In accordance with Articles 47 and 49 of the CBB Law, the CBB must publish its decision to grant, cancel or amend a license in the Official Gazette and in two local newspapers, one in Arabic and the other in English.
Amended: October 2019
Added: July 2017LR-3.4.2
For the purposes of Paragraph LR-3.4.1, the cost of publication must be borne by the Licensee.
Added: July 2017LR-3.4.3
The CBB may also publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.
Added: July 2017