UG-A.1.1

The Central Bank of Bahrain ('the CBB'), in its capacity as the regulatory and supervisory authority for all financial institutions in Bahrain, issues regulatory instruments that licensees and other specified persons are legally obliged to comply with. These regulatory instruments are contained in the CBB Rulebook. Much of the Rulebook's substantive content was previously issued by the Bahrain Monetary Agency ('the BMA'), and was carried forward when the CBB replaced the BMA in September 2006.

UG-A.1.2

The Rulebook is divided into 7 Volumes, covering different areas of financial services activity. These Volumes are being progressively issued. Volumes 1 and 2, covering conventional bank licensees and Islamic bank licensees respectively, were issued in July 2004 and January 2005; Volume 3, covering insurance licensees, was issued in April 2005; Volume 4, covering investment firm licensees was issued in April 2006. This Volume, Volume 5 specialised licensees is issued in 2010. Volume 6 (capital markets) is gradually being issued. Volume 7 on collective investment undertakings (CIUs) was issued in May 2012.

UG-A.1.3

This User's Guide provides guidance on (i) the status and application of the Rulebook, with specific reference to Volume 5 (Specialised licensees); (ii) the structure and design of the Rulebook; and (iii) its maintenance and version control.

UG-A.1.4

Volume 5 (Specialised Licensees) covers specialised licensees, i.e. those CBB licensees that undertake regulated specialised activities that do not fall under any other Volume (1-4,6, 7) of the CBB Rulebook. It contains prudential requirements (such as rules on minimum capital and risk management); and conduct of business requirements (such as rules on the giving of advice and the treatment of customer money). Collectively, these requirements are aimed at ensuring the safety and soundness of CBB-licensed companies, and providing an appropriate level of protection to the customers of such companies.

UG-A.1.6

This Module contains the CBB's Directive (as amended from time to time) regarding the User's Guide for Volume 5 of the CBB Rulebook, and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to all specialised licensees (including their approved persons).

UG-A.1.7

For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.

UG-A.2.1

This Module was first issued in October 2010. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.

UG-A.2.2

A list of recent changes made to this Module is provided below:

UG-1.1.1

Volume 5 (Specialised Licensees) of the CBB Rulebook is issued by the CBB pursuant to the Central Bank of Bahrain and Financial Institutions Law 2006 ('the CBB Law'). The CBB Law provides for two formal rulemaking instruments: Regulations (made pursuant to Article 37) and Directives (made pursuant to Article 38). Other articles in the CBB Law also prescribe various specific requirements (for example, requirements relating to licensing (Articles 44 to 49), or the notification and approval of controllers of licensees (Articles 52 to 56)).

UG-1.1.2

The Purpose Section of each Module specifies in all cases the rulemaking instrument(s) used to issue the content of the Module in question, and the legal basis underpinning the Module's requirements.

UG-1.1.4

Regulations are made pursuant to Article 37 of the CBB Law. These instruments have general application throughout the Kingdom and bind all persons ordinarily affected by Bahraini legislative measures (i.e. residents and/or Bahraini persons wherever situated).

UG-1.1.5

Because Regulations have wide general application, they are subject to two important safeguards: (i) the CBB is under a duty to consult with interested parties and to review and consider their comments; and (ii) the finalised Regulations only become effective after they are published in the Official Gazette.

UG-1.1.6

Directives are made pursuant to Article 38 of the CBB Law. These instruments do not have general application in the Kingdom, but are rather addressed to specific licensees (or categories of licensees) or approved persons. Directives are binding on those to whom they are addressed.

UG-1.1.7

Unlike Regulations, there is no duty on the CBB to either consult with addressees or publicise a Directive by publishing it in the Official Gazette (save that an addressee must obviously have actual or constructive notice of a Directive). However, as a matter of general policy, the CBB also consults on Rulebook content issued by way of a Directive.

UG-1.1.8

All of the content of the CBB Rulebook has the legal status of at least a Directive, issued pursuant to Article 38 of the CBB Law. Certain of the requirements contained in the CBB Rulebook may also have the status of a Regulation, in which case they are also separately issued pursuant to Article 37 of the CBB Law and published in the Official Gazette. Where this is the case, then the Rulebook cross-refers to the Regulation in question and specifies the requirements concerned.

UG-1.1.9

In keeping with the nature of these regulatory instruments, Regulations are used to supplement the CBB Rulebook, either where explicitly required under the CBB Law, or where a particular requirement needs to have general applicability, in addition to being applied to licensees or approved persons.

UG-2.1.1

The Rulebook is divided into 7 Volumes, covering different areas of financial services activity, as follows:

Volume 1 Conventional Banks

Volume 2 Islamic Banks

Volume 3 Insurance

Volume 4 Investment Business

Volume 5 Specialised Licensees

Volume 6 Capital Markets

Volume 7 Collective Investment Undertakings

UG-2.1.2

Volume 5 (Specialised Licensees), covers money changers; financing companies; representative offices; administrators; trust service providers, micro-finance institutions and ancillary services providers.

UG-2.1.3

The material in Volume 5 is divided into common modules and specific modules. It is further organised by the type of the specialised licensee concerned, as outlined in the chart in UG-2.1.5 below. The contents of the common modules apply to all specialised licensees, while the content of the specific modules apply to one specific type of licensee (e.g. Capital Adequacy Module for Money Changers).

UG-2.1.4

Each Volume has its own appendix Volume containing relevant reporting and authorisation forms; a glossary; and any supplementary information. In all cases, the main Volume is called 'Part A' and the appendix Volume is called 'Part B'.

UG-2.1.5:

UG-2.2.1

Modules in Volume 5 are divided into Common and Specific Modules based on the nature of each specialised licensee. The contents of Common Modules apply to all specialised licensees, while the contents of Specific Modules apply to one specific type of licensee (e.g. Money Changers).

UG-2.2.2

Each Module in Volume 5 is referenced using a two-or three-letter code, which is usually a contraction or abbreviation of its title. For each Specific Module, in addition to the title, the type of licensee is mentioned. These codes are used for cross-referencing within the text.

UG-2.2.3

Each Module consists of Chapters, categorised into two types:

UG-2.2.4

The introductory Chapters summarise the purpose of the Module, its history (in terms of changes made to its contents) and, where relevant, lists previously issued circulars and regulations that were replaced by the Rulebook Module. A separate introductory Chapter also prescribes the scope of application of the Module's requirements.

UG-2.2.5

Chapters are further sub-divided into Sections: these extend the Chapter numbering (e.g. FC-1.1, FC-1.2, FC-1.3 etc). In turn, Sections are sub-divided into Paragraphs; these extend the Chapter and Section numbering (e.g. FC-1.1.1, FC-1.1.2, FC-1.1.3 etc.). Where appropriate, sub-Section headings may be used, to guide the reader through a Section; sub-Section headings are italicised and unnumbered, and act purely as an indicator (without limitation) as to the contents of the Paragraphs that follow.

UG-2.2.6

Each Volume's contents page lists all the Modules contained within it (Part A) and the information contained in the relevant appendix Volume (Part B).

UG-2.2.7

The contents page of each Module lists the Chapters and Sections it contains, and the latest version date of each Section in issue.

UG-2.3.1

The top of each page in the Rulebook identifies the Volume, Common or Specific Module and Chapter in question. Each Module is a separate document. New Chapters start on a fresh page.

UG-2.3.2

The bottom of each page in the Rulebook (on the left hand side) identifies the Module in question, its Section and page number. Page numbering starts afresh for each Section: the total number of pages in each Section is shown as well as the individual page number. The bottom right hand side shows an end-calendar quarter issue date. The contents page for each Module, and each Section in a Module, are each given their own issue date. In addition, the Module contents page lists the latest issue date for each Section in that Module. The contents page thus acts as a summary checklist of the current issue date in force for each Section. Further explanation is provided in Section UG-3.1 below.

UG-2.3.3

Defined terms used in the Rulebook are underlined. Each Volume has its own glossary listing defined terms and giving their meaning. Definitions of terms used apply only to the Volume in question. It is possible for the same term to be used in a different Volume with a different meaning.

UG-2.3.4

Any cross-references given in a text state the Module code, followed (where appropriate) by the numbering convention for any particular Chapter, Section or Paragraph being referred to. For example, the cross-reference FC-1.2.3 refers to the third Paragraph in the second Section of the first Chapter of the Financial Crime Module. Many references will be quite general, referring simply to a particular Module, Chapter or Section, rather than a specific Paragraph.

UG-2.3.5

Each Paragraph is assigned a complete reference to the Module, Chapter, and Section, as well as its own Paragraph number, as explained in Paragraph UG-2.3.4 above. The format of the Paragraph reference and text indicates its status as either a Rule or Guidance, as explained in Paragraph UG-1.2.4 above.

UG-2.3.6

When cross-referring to specific Paragraphs, and it is important to make clear the status of the Paragraph in question as a Rule or Guidance, then the words 'Rule' or 'Guidance' may be used instead of 'Paragraph', followed by the reference number (e.g. 'As required by Rule FC-1.1.1, licensees must...').

UG-3.1.1

Any changes to the Rulebook are generally made on a quarterly cycle (the only exception being when changes are urgently required), in early January, April, July and October. When changes are made to a Module, the amended Sections are given a new version date, in the bottom right-hand page.

UG-3.1.2

The contents page for each amended Module is also updated: the table of contents is changed to show the new version date for each amended Section (in the 'Date Last Changed' column), and the contents page itself is also given its own new version date in the bottom right-hand corner. The Module contents pages thus act as a checklist for hard-copy users to verify which are the current version dates for each Section in that Module.

UG-3.1.3

A summary of any changes made to a Module is included in the Module History Section of each Module. The table summarises the nature of the change made, the date of the change, and the Module components and relevant pages affected. The Module History can thus be used to identify which pages were updated within individual Sections.

UG-3.1.4

Hard-copy users of the CBB Rulebook can check that they have the latest copy of each Module's contents pages, by referring to the overall table of contents for each Volume. The Volume table of contents lists the date each Module was last changed; users can use this table to check the date showing in the bottom right-hand corner of each Module's contents page.

UG-3.1.5

The website version of the Rulebook acts at all times as the definitive version of the Rulebook. Any changes are automatically posted to the CBB website, together with a summary of those changes. Licensees are in addition e-mailed every quarter, to notify them of any changes (if any). Hard-copy users are invited to print off the updated pages from the website to incorporate in their Rulebook in order to keep it current.

UG-3.1.6

In order to limit the knock-on impact of inserting or deleting text on the numbering of text that follows the change, the following conventions apply:

UG-3.1.7

Where many such changes have built up over time, then the CBB may reissue the whole Section, Paragraph, Chapter or even Module concerned, consolidating all these changes.

UG-3.2.1

The Rulebook is available on the CBB website.

UG-3.2.2

Questions regarding the administration of the Rulebook (e.g. website availability, the updating of material etc) should be addressed to the Rulebook Section of the Regulatory Policy Unit:

Rulebook Section
Regulatory Policy Unit
Central Bank of Bahrain
P.O. Box 27
Manama
Kingdom of Bahrain

Tel: + 973 - 17 54 7413
E-mail: rulebook@cbb.gov.bh
Web: www.cbb.gov.bh

Questions regarding interpretation of the policy and requirements contained in the Rulebook should be addressed to the licensee's regular supervisory point of contact within the CBB.