• GR-5.3 GR-5.3 Suitability of Controllers

    • GR-5.3.1

      All new controllers or prospective controllers (as defined in Section GR-5.2) of a Bahraini specialised licensee must obtain the approval of the CBB. Any increases to existing controllers' holdings or voting control (as outlined under Paragraph GR-5.1.1) must also be approved by the CBB and are subject to the conditions outlined in this Section. Such changes in existing controllers (as defined in the Section GR-5.2) or new/prospective controllers of a licensee must satisfy the CBB of their suitability and appropriateness according to the criteria outlined in Paragraphs GR-5.3.2 to GR-5.3.5. The CBB will issue an approval notice or notice of refusal of a controller according to the approval process outlined in Section GR-5.4 and Paragraph GR-5.1.6.

      Amended: April 2012
      October 2010

    • GR-5.3.1A

      For those licensees authorised after 1st January 2011, at least one controller must be a regulated financial institution owning or controlling 20% or more of the voting capital.

      Added: April 2011

    • GR-5.3.2

      In assessing the suitability of controllers who are natural persons, the CBB has regard to their professional and personal conduct, including, but not limited to, the following:

      (a) The propriety of a person's conduct, whether or not such conduct resulted in conviction for a criminal offence, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;
      (b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;
      (c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud, misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;
      (d) Whether the person has been the subject of any disciplinary proceeding by any government authority, regulatory agency or professional body or association;
      (e) The contravention of any financial services legislation or regulation;
      (f) Whether the person has ever been refused a license, authorisation, registration or other authority;
      (g) Dismissal or a request to resign from any office or employment;
      (h) Disqualification by a court, regulator or other competent body, as a Director or as a manager of a corporation;
      (i) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners or managers have been declared bankrupt whilst the person was connected with that partnership or corporation;
      (j) The extent to which the person, has been truthful and open with regulators;
      (k) Whether the person has ever been adjudged bankrupt, entered into any arrangement with creditors in relation to the inability to pay due debts, or failed to satisfy a judgement debt under a court order or has defaulted on any debts;
      (l) The financial resources of the person and the likely stability of their shareholding, and their track record as a controller or significant investor in financial institutions;
      (m) Existing Directorships or ownership of more than 20% of the capital or voting rights of any financial institution in the Kingdom of Bahrain or elsewhere, and the potential for conflicts of interest that such Directorships or ownership may imply;
      (n) The legitimate interests of customers, creditors and shareholders (including minority shareholders) of the licensee;
      (o) Whether the approval of a controller is or could be detrimental to Bahrain's financial sector; and
      (p) Whether the person is able to deal with existing shareholders and the Board in a constructive and cooperative manner.
      October 2010

    • GR-5.3.3

      Natural persons who intend to take a stake of 20% or more in a licensee are subject to enhanced scrutiny. The level of scrutiny and the expected compliance with the above standards become more onerous as the level of proposed ownership increases.

      October 2010

    • GR-5.3.4

      Legal persons who intend to take a stake of 20% or more in a licensee are subject to enhanced scrutiny, given the CBB's position as home supervisor of such licensees. The level of scrutiny and of expected compliance with the above standards becomes more onerous as the level of proposed ownership increases. Regulated legal persons will normally only be approved to take majority control where — in addition to the above conditions — the resulting group would be subject to effective consolidated supervision in accordance with relevant international standards; and the home supervisor of the parent entity has agreed to the proposed acquisition, as well as to the sharing of relevant prudential information for supervisory purposes (expressed, if necessary, through the signing of a Memorandum of Understanding between the CBB and the home supervisor, setting out their respective supervisory responsibilities).

      October 2010

    • GR-5.3.5

      In assessing the suitability of controllers who are legal persons, CBB has regard to their financial standing, judicial and regulatory record, and standards of business practice and reputation, including, but not limited to, the following:

      (a) The financial strength of the controller, its parent(s) and other members of its group, its implications for the licensee and the likely stability of the controller's shareholding;
      (b) Whether the controller or members of its group has ever entered into any arrangement with creditors in relation to the inability to pay due debts;
      (c) The controller's jurisdiction of incorporation, location of Head Office, group structure, and the implications for the licensee as regards effective supervision of the licensee and potential conflicts of interest;
      (d) The controller's (and other group members') propriety and general standards of business conduct, including the contravention of any laws or regulations, or the institution of disciplinary proceedings by a government authority, regulatory agency or professional body;
      (e) Any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud, misfeasance or other misconduct;
      (f) Any criminal actions instigated against the controller or other members of its group, whether or not this resulted in an adverse finding;
      (g) The extent to which the controller or other members of its group have been truthful and open with regulators and supervisors;
      (h) Whether the person has ever been refused a license, authorisation, registration or other authority;
      (i) The person's track record as a controller or investor in financial institutions;
      (j) The legitimate interests of customers, creditors and shareholders of the licensee;
      (k) Whether their approval as a controller is or could be detrimental to Bahrain's financial sector; and
      (l) Whether the person is able to deal with existing shareholders and the Board in a constructive manner.
      October 2010

    • GR-5.3.6

      The CBB may contact references and supervisory bodies in connection with any information provided to support an application for controller. The CBB may also ask for further information, in addition to that provided in the Form 2, if required to satisfy itself as to the suitability of the applicant.

      October 2010