Back Custom print Link Text Only Rich Text Print

  • CA-1 CA-1 Capital Adequacy Requirements

    • CA-1.1 CA-1.1 Bahraini Investment Firm Licensees

      • Obligation to Maintain Adequate Capital

        • CA-1.1.A

          Bahraini investment firm licensees must calculate their Regulatory Capital based on their shareholders' equity (and other eligible components of Regulatory Capital, as defined in Chapter CA-2).

          Adopted: January 2011

        • CA-1.1.1

          In accordance with Principle of Business 9 (cf. Section PB-1.9), investment firm licensees must maintain adequate human, financial and other resources sufficient to run their business in an orderly manner. This includes meeting the minimum capital requirements specified in Section CA-1.2 onwards and maintaining, at all times, a level of financial resources commensurate with the nature, size and complexity of their business.

          Amended: October 2019

        • CA-1.1.2

          In addition to the minimum capital requirements specified in Section CA-1.2 onwards, the CBB may, at its discretion, require investment firm licensees to hold additional capital, should this be necessary (in the CBB's view) to meet additional risks that are not sufficiently addressed in either the Risk-based Capital Requirement or the Minimum Capital Requirement.

          Amended: October 2009
          Amended: January 2007

        • CA-1.1.3

          The CBB would typically invoke Rule CA-1.1.2 in rare circumstances — for instance, where in its assessment a licensee was running high levels of operational risk because of a particularly weak controls environment.

          Amended: January 2007

        • CA-1.1.4

          Investment firm licensees are required to deposit the initial capital specified in Section AU-5.1.12K in a retail bank licensed to operate in the Kingdom of Bahrain. Assets equivalent to the minimum capital requirement are required to be maintained, at all times, free from any pledge or any other restriction.

          Amended: October 2019
          Adopted: October 2009

        • CA-1.1.5

          In the event that an investment firm licensee fails to meet any of the requirements specified in this Module, it must, on becoming aware that it has breached these requirements, immediately notify the CBB in writing. Unless otherwise directed, the licensee must in addition submit to CBB, within 30 calendar days of its notification, a plan demonstrating how it will achieve compliance with these requirements.

          Amended: October 2009
          Amended: January 2007

        • CA-1.1.5A

          Should the CBB direct an investment firm licensee to inject additional working capital in order to maintain the minimum capital requirements for its category of license, the investment firm licensee may inject cash in the form of a subordinated loan from the shareholders, subject to the CBB's prior approval. Such amount will be included as Tier 2 capital and must have a minimum original fixed term to maturity of more than 5 years (See Rule CA-2.1.8(h)).

          Amended: January 2016
          Amended: January 2013
          Adopted: January 2011

        • CA-1.1.5B

          Subject to the CBB's prior approval, an investment firm licenseemay settle a subordinated debt, partially or in full, prior to the end of its term.

          Added: January 2013

        • CA-1.1.5C

          Where Paragraph CA-1.1.5B applies, the CBB will take into consideration whether the investment firm licensee has received confirmation from its external auditor that the investment firm licensee's financial position has improved and its capability to repay the debt (see Paragraph BR-2.3.27B).

          Added: January 2013

        • CA-1.1.6

          Should an investment firm licensee fail to comply with the requirements of this Module, the CBB may impose enforcement measures, as described in Module EN.

          Amended: October 2009
          Amended: January 2007

        • CA-1.1.7

          [This Paragraph was deleted in July 2015.]

          Deleted: July 2015
          Amended: October 2009

        • CA-1.1.8

          [This Paragraph was deleted in July 2015.]

          Deleted: July 2015
          Amended: October 2009
          Amended: January 2007

      • [deleted]

        Deleted: January 2011

        • CA-1.1.9 [deleted]

          [This Paragraph was amended and moved to CA-1.2.11].

          Deleted: January 2011

        • CA-1.1.10 [deleted]

          [This Paragraph was amended and moved to CA-1.2.12].

          Deleted: January 2011

      • Booking of Assets and Liabilities

        • CA-1.1.9

          Bahraini investment firm licensees must not book any obligation/liabilities in their books, without booking the corresponding asset in Bahrain.

          Adopted: January 2011

    • CA-1.1A CA-1.1A Overseas Investment Firm Licensees

      • Obligation to Maintain Adequate Capital

        • CA-1.1A.1

          Overseas investment firm licensees must calculate their Regulatory Capital based on the audited net assets booked in the Bahrain branch, determined in accordance with accounting standards that would be applicable if they were a joint stock company incorporated in Bahrain. Overseas investment firm licensees must ensure that their Regulatory Capital meets the minimum capital requirements specified in Section CA-1.2 onwards.

          Adopted: January 2011

        • CA-1.1A.2

          While the capital adequacy requirements for Bahraini investment firm licensees and for overseas investment firm licensees are identical (and are defined in CA-1 and CA-3), the calculation of the licensee's regulatory capital varies, according to whether the investment firm licensee is locally incorporated or a branch operation.

          Adopted: January 2011

      • Booking of Assets and Liabilities

        • CA-1.1A.3

          Overseas investment firm licensees must book in Bahrain all assets pertaining to the operations of the Bahrain branch.

          Adopted: January 2011

        • CA-1.1A.4

          Overseas investment firm licensees must not book any obligation/liabilities in their Bahrain branch, without booking the corresponding asset in Bahrain.

          Adopted: January 2011

    • CA-1.2 CA-1.2 Initial and Risk-Based Capital Requirements

      • Key Requirements

        • CA-1.2.1

          Investment firm licensees must ensure that, at all times, their Regulatory Capital is in excess of their Regulatory Capital Requirement. They must monitor compliance with this requirement on an on-going basis.

        • CA-1.2.2

          For Category 1 and Category 2 investment firms, their Regulatory Capital Requirement is defined as the higher of their Risk-based Capital Requirement and their Minimum Capital Requirement.

          Amended: October 2009

        • CA-1.2.3

          For Category 3 investment firms, their Regulatory Capital Requirement is their Minimum Capital Requirement.

          Amended: October 2009

        • CA-1.2.4

          The above requirements reflect the different risk profiles of the 3 investment firm categories. Risk-based Capital Requirements vary according to the level of position and other risks undertaken, and the size of the firm (measured in terms of adjusted annual expenditure). For larger firms, or those exposed to relatively higher levels of risk, Risk-based Capital Requirements are therefore likely to exceed the relevant Minimum Capital Requirement. Because of the limited nature of their activities, which pose limited risks to counterparties or customers, Category 3 investment firms are not required to apply Risk-based Capital Requirements. They are only required to comply with their Minimum Capital Requirement.

          Amended: October 2009

      • Definitions

        • CA-1.2.5

          For Bahraini investment firm licensees, Regulatory Capital is capital held by the firm that satisfies the criteria set out in Chapter CA-2. For overseas investment firm licensees, Regulatory Capital is defined as audited net assets booked in the Bahrain branch, determined in accordance with accounting standards that would be applicable if they were a joint stock company incorporated in Bahrain.

          Amended: July 2007

        • CA-1.2.6

          See Section CA-B.1 above, regarding scope of application. Overseas investment firms are also required to provide information — and meet certain requirements — with respect to the capital adequacy of their parent entity and — where relevant — their wider group. See Module GS (Group Supervision).

        • CA-1.2.7

          Minimum Capital Requirements are:

          (a) Category 1 investment firms: BD 1,000,000;
          (b) Category 2 investment firms: BD 1,000,000 if undertaking the activity of safeguarding financial instruments (i.e. custodian), BD250,000 in all other cases; and
          (c) Category 3 investment firms: BD25,000.
          Amended: April 2023
          Amended: October 2009
          Amended: January 2007

        • CA-1.2.7A

          Category 3 investment firms must maintain adequate liquid funds representing 25% of operating expenses incurred in the preceding financial year at all times in the form of cash or liquid assets that can be converted to cash in the short-term to cover its operating expenses.

          Added: April 2023

        • CA-1.2.8

          The Risk-based Capital Requirement is the sum of a firm's Expenditure Requirement, Position Risk Requirement (PRR), Counterparty Risk requirement (CRR), and Foreign Exchange Risk Requirement (FER), as defined in Chapter CA-3.

      • Notification Requirements

        • CA-1.2.9

          Category 1 and 2 investment firms must notify the CBB if:

          (a) The ratio of Regulatory Capital to their Regulatory Capital Requirement falls below 110% (see Paragraph CA-1.1.5);
          (b) Any single probable contingency, financial commitment or large exposure exceeds 25% of their Regulatory Capital; and
          (c) Any instrument, transaction or situation does not appear to be catered for under Module CA.
          Amended: April 2011
          Amended: January 2007

        • CA-1.2.9A

          Investment firm licensees must submit to the CBB, within 30 calendar days of the event occurring, a plan demonstrating how it will:

          (a) Raise its regulatory capital to bring it to a level in excess of its regulatory capital requirement (refer to Paragraph CA-1.2.1); or
          (b) Reduce the single contingency, financial commitment or large exposure to below 25% of the regulatory capital.
          Amended: October 2012
          Added: April 2011

      • Group Risks

        • CA-1.2.10

          Investment firm licensees that are members of a wider group are also subject to additional requirements, aimed at addressing group risks: see Module GS (Group Supervision).

      • Firm Assessment

        • CA-1.2.11

          Investment firm licensees must regularly carry out their own assessment of their capital needs, appropriate to their risk profile, and maintain a process for monitoring and maintaining their actual capital in line with their assessment.

          Adopted: January 2011

        • CA-1.2.12

          Rule CA-1.2.12 is in addition to the other requirements in Module CA. If a firm's own assessment suggests its required capital is less than the regulatory minima specified in this Module, the latter must still be complied with. Where a firm's assessment suggests that a higher level of capital should be held, the CBB would expect firms to hold capital in line with their assessment. The CBB is not prescribing the detailed form such assessments should take, in order to give firms flexibility to develop their own approaches. Nonetheless, the CBB would expect the sophistication of such assessments to match the risk profile of the firm concerned.

          Adopted: January 2011