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  • AU-4 AU-4 Information Requirements and Processes

    • AU-4.1 AU-4.1 Licensing

      • Application Form and Documents

        • AU-4.1.1

          Applicants for a license must submit a duly completed Form 1 (Application for a License), under cover of a letter signed by an authorised signatory of the applicant marked for the attention of the Director, Licensing and Policy Directorate. The application letter must be accompanied by the documents listed in Paragraph AU-4.1.4, unless otherwise directed by the CBB.

          January 2013

        • AU-4.1.2

          Articles 44 to 47 of the CBB Law govern the licensing process. This prescribes a single stage process, with the CBB required to take a decision within 60 calendar days of an application being deemed complete (i.e. containing all required information and documents). See below, for further details on the licensing process and time-lines.

          January 2013

        • AU-4.1.3

          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.

          January 2013

        • AU-4.1.4

          Unless otherwise directed by the CBB, the following documents must be provided together with the covering letter referred in Paragraph AU-4.1.1 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 individual proposed to undertake controlled functions (as defined in Rule AU-1.2.2) in the proposed licensee;
          (c) A comprehensive business plan for the application, addressing the matters described in AU-4.1.6;
          (d) Where the applicant is an existing institution, a copy of the applicant's commercial registration;
          (e) Any relevant Private Placement Memoranda or public offering documents (if funds are to be raised by external shareholders);
          (f) 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 financing company license;
          (g) 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's home 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;
          (h) 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; and
          (i) A draft copy of the applicant's (and parent's where applicable) memorandum and articles of association, addressing the matters described in AU-4.1.7.
          January 2013

        • AU-4.1.5

          The CBB may require that an acceptably worded letter of guarantee be provided in support of the application for a license. Where the application for the license is for an incorporated entity, the CBB may seek a letter of guarantee from the major shareholder in control of the licensee.

          January 2013

        • AU-4.1.6

          The business plan submitted in support of an application should include:

          (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 independent 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 leverage and liquidity requirements.
          January 2013

        • AU-4.1.7

          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 financing activities or are incidental to those.

          January 2013

        • AU-4.1.8

          Where a new financing company's capital is being financed by a private placement, the CBB will verify that the contents of the Private Placement Memorandum (PPM) are consistent with other information supplied to the CBB, notably the business plan, and otherwise meet 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 licensee.

          January 2013

        • AU-4.1.9

          The CBB will not license applicants without a core group of sponsoring shareholders (who can demonstrate a strong business track record with relevant expertise), and where failure of the private placement to raise its targeted amount would leave the institution unable to comply with the CBB's minimum capital requirements. The CBB may, on a case-by-case basis, require that at least one shareholder is a regulated financial institution which holds 20% of the applicant's shares.

          January 2013

        • AU-4.1.10

          All documentation provided to the CBB as part of an application for a license must be in either Arabic or English language. Any documentation in a language other than English or Arabic must be accompanied by a certified English or Arabic translation thereof.

          January 2013

        • AU-4.1.11

          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 AU-4.1.4 — has been paid in, must be provided to the CBB.

          January 2013

        • AU-4.1.12

          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.

          January 2013

        • AU-4.1.13

          Failure to inform the CBB of the changes specified in AU-4.1.12 is likely to be viewed as a failure to provide full and open disclosure of information, and thus a failure to meet licensing condition AU-2.8.2.

          January 2013

      • Licensing Process and Timelines

        • AU-4.1.14

          By law, the 60-day time limit referred to in Paragraph AU-4.1.2 only applies once the application is complete and all required information (which may include any clarifications requested by the CBB) and documents have been provided. This means that all the items specified in Rule AU-4.1.4 have to be provided, before the CBB may issue a license.

          January 2013

        • AU-4.1.15

          The CBB recognises, however, that applicants may find it difficult to secure suitable senior management (refer AU-4.1.4(b) above) in the absence of preliminary assurances regarding the likelihood of obtaining a license.

          January 2013

        • AU-4.1.16

          Therefore, applicants may first submit an unsigned Form 1 in draft, together with as many as possible of the items specified in Rule AU-4.1.4. This draft application should contain at least items AU-4.1.4(a); AU-4.1.4(b), with respect to proposed Directors (but not necessarily senior management); AU-4.1.4(c); AU-4.1.4(d); and AU-4.1.4(f) to AU-4.1.4(i) inclusive.

          January 2013

        • AU-4.1.17

          On the basis of the information specified in Paragraph AU-4.1.16, the CBB may provide an initial 'in principle' confirmation that the applicant appears likely to meet the CBB's licensing requirements, subject to the remaining information and documents being assessed as satisfactory. The 'in principle' confirmation will also list all outstanding documents required before an application can be considered complete and subject to formal consideration.

          January 2013

        • AU-4.1.18

          An 'in principle' confirmation does not constitute a license approval, nor does it commit the CBB to issuing a license. However, it provides sufficient assurance for an applicant to complete certain practical steps, such as securing suitable executive staff that satisfy CBB's 'fit and proper' requirements. Once this has been done, the applicant may finalise its application, by submitting the remaining documents required under Rule AU-4.1.4 and, once assessed as complete by the CBB, a signed and dated final version of Form 1. However, a Bahrain company proposing to undertake financial services activities would not be able to obtain a commercial registration from the Ministry of Industry and Commerce unless they receive the final approval from the CBB.

          January 2013

        • AU-4.1.19

          Regardless of whether an applicant submits a draft application or not, all potential applicants are strongly encouraged to contact the CBB at an early stage to discuss their plans and associated requirements. The Licensing & Policy Directorate would normally expect to hold at least one pre-application meeting with an applicant, prior to receiving an application (either in draft or in final form).

          January 2013

        • AU-4.1.20

          Potential applicants should initiate pre-application meetings in writing, setting out a short summary of their proposed business and any issues or questions that they may have already identified, once they have a clear business proposition in mind and have undertaken their preliminary research. The CBB can then guide the applicant on the specific areas in the Rulebook that will apply to them and the relevant requirements that they must address in their application.

          January 2013

        • AU-4.1.21

          At no point should an applicant hold themselves out as having been licensed by the CBB, prior to receiving formal written notification of the fact in accordance with Rule AU-4.1.22 below. Failure to do so may constitute grounds for refusing an application and result in a contravention of Articles 40 and 41 of the CBB Law (which carries a maximum penalty of BD 1 million).

          January 2013

      • Granting or Refusal of License

        • AU-4.1.22

          To be granted a license, an applicant should demonstrate compliance with the applicable requirements of the CBB Law and this Module. Should a license be granted, the CBB will notify the applicant in writing of the fact; the CBB will also publish its decision to grant a license in the Official Gazette and in two local newspapers (one published in Arabic, the other in English). The license may be subject to such terms and conditions as the CBB deems necessary for the additional conditions being met.

          Amended: October 2019
          January 2013

        • AU-4.1.23

          The CBB may refuse to grant a license if in its opinion:

          (a) The requirements of the CBB Law or this Module are not met;
          (b) False or misleading information has been provided to the CBB, or information which should have been provided to the CBB has not been so provided; or
          (c) The CBB believes it necessary in order to safeguard the interests of potential customers.
          January 2013

        • AU-4.1.24

          Where the CBB proposes to refuse an application for a license, it will give the applicant a written notice to that effect. Applicants will be given a minimum of 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice; these procedures will comply with the provisions contained in Article 46 of the CBB Law.

          Amended: October 2019
          January 2013

      • Starting Operations

        • AU-4.1.25

          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 licensee, 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 external auditor's acceptance to act as an external auditor for the applicant;
          (h) A copy of the applicant's notarised memorandum and articles of association, addressing the matters described in Paragraph AU-4.1.6;
          (i) A copy of the Ministry of Industry & Commerce commercial registration certificate in Arabic and English languages;
          (j) An updated organisation chart showing the reporting lines, committees (if any) and including the names of the persons undertaking the controlled functions;
          (k) A copy of the licensee's business card and any written communication (including stationery, website, e-mail, business documentation, etc.) including a statement that the financing company is licensed by the CBB; and
          (l) Any other information as may be specified by the CBB.
          January 2013

        • AU-4.1.26

          New licensees must start their operations within 6 months of being granted a license by the CBB, failing which the CBB may cancel the license, as per the powers and procedures set out in Article 48 of the CBB Law.

          January 2013

        • AU-4.1.27

          The procedures for cancelling licenses are contained in Section AU-4.3.

          January 2013

    • AU-4.2 AU-4.2 Authorisation of a Branch or Subsidiary

      • AU-4.2.1

        Licensees may open branches or subsidiaries in the Kingdom of Bahrain or in foreign jurisdictions after obtaining the CBB's prior written approval.

        January 2013

      • Authorisation of a Branch

        • AU-4.2.2

          Unless otherwise directed by the CBB, the following documents must be provided to the CBB in support of an application to open a branch:

          (a) A business plan explaining:
          (i) The reasons for applying for a branch, including the applicant's strategy and market objectives; and
          (ii) A minimum of three-year financial projection, with all assumptions clearly outlined, demonstrating that the branch will be able to meet all liabilities and obligations;
          (b) The location of the proposed branch, including the full address; and
          (c) Confirmation from the external auditor that the licensee's capital adequacy is sufficient to support the operation of the branch, in addition to other existing branches (if applicable), at the time of filing the request.
          January 2013

      • Starting Operations of a Branch

        • AU-4.2.3

          Licensees must submit to the CBB confirmation that the authorised branch has commenced operations within 6 months of the authorisation letter.

          January 2013

      • Authorisation of a Subsidiary

        • AU-4.2.4

          Licensees wishing to establish a new subsidiary undertaking must submit to the CBB the following information as part of their request:

          (a) Proposed name of subsidiary;
          (b) Country of incorporation;
          (c) Legal structure;
          (d) Proposed issued capital;
          (e) Proposed shareholding structure;
          (f) Purpose of establishing the subsidiary;
          (g) Draft incorporation documents of the subsidiary;
          (h) Board resolution approving the establishment of the subsidiary; and
          (i) Any other information or documentation requested by the CBB.
          January 2013

        • AU-4.2.5

          Licensees wishing to acquire a new subsidiary undertaking must submit to the CBB the following information as part of their request:

          (a) Annual report, including audited financial statements of the subsidiary being acquired;
          (b) Purpose of acquiring the subsidiary;
          (c) Memorandum and Articles of Association of the subsidiary;
          (d) Board resolution approving the acquisition of the subsidiary; and
          (e) Any other information or documentation requested by the CBB.
          January 2013

        • AU-4.2.6

          Licensees should ensure adherence with Rules contained in:

          (a) Chapter CA-1 and in particular with the gearing ratio requirements contained in Paragraph CA-1.1.4;
          (b) The minimum liquidity requirements outlined in Chapter LM-1; and
          (c) The reporting requirements for close links contained in Paragraph GR-6.1.3

          when considering the impact of a subsidiary on these requirements.

          January 2013

    • AU-4.3 AU-4.3 Approved Persons

      • AU-4.3.1

        Licensees must obtain CBB's prior written approval before a person is formally appointed to a controlled function. The request for CBB approval must be made by submitting to the CBB a duly completed Form 3 (Application for Approved Person status) and Curriculum Vitae after verifying that all the information contained in the Form 3, including previous experience, is accurate. Form 3 is available under Volume 5 Part B Authorisation Forms of the CBB Rulebook.

        Amended: January 2016
        Amended: July 2015
        January 2013

      • AU-4.3.2

        When the request for approved person status forms part of a license application, the Form 3 must be marked for the attention of the Director, Licensing and Policy Directorate. When the submission to undertake a controlled function is in relation to an existing licensee, the Form 3, except if dealing with a MLRO and the Deputy MLRO, must be marked for the attention of the applicable Director, Banking Supervision Directorate responsible for the supervision of the licensee. In the case of the MLRO and Deputy MLRO, Form 3 should be marked for the attention of the Director, Compliance Directorate.

        January 2013

      • AU-4.3.3

        When submitting the Forms 3, licensees must ensure that the Form 3 is:

        (a) Submitted to the CBB with a covering letter signed by an authorised representative of the licensee, seeking approval for the proposed controlled function;
        (b) Submitted in original form;
        (c) Submitted with a certified copy of the applicant's passport, original or certified copies of educational and professional qualification certificates (and translation if not in Arabic or English) and the Curriculum Vitae; and
        (d) Is signed by an authorised representative of the licensee and all pages stamped with the licensee's seal.
        Amended: July 2015
        January 2013

      • AU-4.3.3A

        Licensees seeking to appoint Board Directors must seek CBB approval for all the candidates to be put forward for election/approval at a shareholders' meeting, in advance of the agenda being issued to shareholders. CBB approval of the candidates does not in any way limit shareholders' rights to refuse those put forward for election/approval.

        Added: July 2015

      • AU-4.3.4

        For existing licensees applying for the appointment of a Director or the Chief Executive/General Manager, the authorised representative should be the Chairman of the Board or a Director signing on behalf of the Board. For all other controlled functions, the authorised representative should be a Director or the Chief Executive/General Manager.

        Amended: July 2015
        January 2013

      • AU-4.3.5

        [This Paragraph was deleted in July 2015.]

        Deleted: July 2015

      • AU-4.3.6

        [This Paragraph was moved to Paragraph AU-4.3.3A in July 2015.]

        Amended: July 2015
        January 2013

      • Assessment of Application

        • AU-4.3.6A

          The CBB shall review and assess the application for approved person status to ensure that it satisfies all the conditions required in Paragraph AU-3.1.3 and the criteria outlined in Paragraph AU-3.1.5.

          Amended: January 2016
          Added: July 2015

        • AU-4.3.6B

          For purposes of Paragraph AU-4.3.6A, licensees should give the CBB a reasonable amount of notice in order for an application to be reviewed. The CBB shall respond within 15 business days from the date of meeting all regulatory requirements, including but not limited to receiving the application complete with all the required information and documents, as well as verifying references.

          Amended: January 2016
          Added: July 2015

        • AU-4.3.6C

          The CBB reserves the right to refuse an application for approved person status if it does not satisfy the conditions provided for in Paragraph AU-3.1.3 and does not satisfy the CBB criteria in Paragraph AU-3.1.5. A notice of such refusal is issued by registered mail to the licensee concerned, setting out the basis for the decision.

          Amended: January 2016
          Added: July 2015

        • AU-4.3.7

          [This Paragraph was deleted in January 2016.]

          Deleted: January 2016
          Amended: July 2015
          January 2013

      • Appeal Process

        • AU-4.3.7A

          Licensees or the nominated approved persons may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application for approved person status. The CBB shall decide on the appeal and notify the licensee of its decision within 30 calendar days from submitting the appeal.

          Added: July 2015

        • AU-4.3.7B

          Where notification of the CBB's decision to grant a person approved person status is not issued within 15 business days from the date of meeting all regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, licensees or the nominated approved persons may appeal to the concerned Executive Director, Banking Supervision of the CBB provided that the appeal is justified with supporting documents. The CBB shall decide on the appeal and notify the licensee of its decision within 30 calendar days from the date of submitting the appeal.

          Amended: January 2016
          Added: July 2015

      • Notification Requirements and Process

        • AU-4.3.8

          Licensees must immediately notify the CBB when an approved person ceases to hold a controlled function together with an explanation as to the reasons why (see Paragraph AU-4.5.7). In such cases, their approved person status is automatically withdrawn by the CBB.

          January 2013

        • AU-4.3.9

          Licensees must immediately notify the CBB in case of any material change to the information provided in a Form 3 submitted for an approved person.

          January 2013

        • AU-4.3.10

          Licensees must immediately notify the CBB when they become aware of any of the events listed in Paragraph EN-8.2.3, affecting one of their approved persons.

          January 2013

        • AU-4.3.10A

          Licensees must immediately notify the CBB should they become aware of information that could reasonably be viewed as calling into question an approved person’s compliance with CBB’s ‘fit and proper’ requirement (see AU3.1).

          Added: January 2021

      • Change in Controlled Function

        • AU-4.3.11

          Licensees must seek prior CBB approval before an approved person may move from one controlled function to another within the same licensee.

          January 2013

        • AU-4.3.12

          In such instances, a new Form 3 (Application for Approved Person status) should be completed and submitted to the CBB. Note that a person may be considered 'fit and proper' for one controlled function, but not for another, if for instance the new role requires a different set of skills and experience. Where an approved person is moving to a controlled function in another licensee, the first licensee should notify the CBB of that person's departure (see Rule AU-4.5.7), and the new licensee should submit a request for approval under Rule AU-1.2.1.

          January 2013

    • AU-4.4 AU-4.4 Variations to a License

      • AU-4.4.1

        As per Article 48 of the CBB Law, licensees must seek prior CBB approval before undertaking new regulated financing company services.

        January 2013

      • AU-4.4.2

        Failure to secure CBB approval prior to undertaking a new regulated activity may lead to enforcement action being taken against the concerned person. This is supported by Article 40 of the CBB law.

        January 2013

      • AU-4.4.3

        In addition to any other information requested by the CBB, and unless otherwise directed by the CBB, a licensee requesting CBB approval to undertake a new regulated financing company 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 the licensee on the proposed new activities.
        January 2013

      • AU-4.4.4

        The CBB may amend or revoke a licence 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 these rules 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; or
        (e) The legitimate interests of the customers or creditors of a licensee required such amendment or cancellation.
        January 2013

      • AU-4.4.5

        The CBB's procedures for amending or revoking a license is outlined in detail in the Enforcement Module (EN).

        January 2013

    • AU-4.5 AU-4.5 Withdrawal of a License or Closure of a Branch

      • Licenses

        • Voluntary Surrender of a License or Closure of a Branch

          • AU-4.5.1

            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 CBB approval. 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 or branch closure is to be carried out.

            January 2013

          • AU-4.5.2

            Licensees must satisfy CBB that their customers' interests are to be safeguarded during and after the proposed voluntary surrender or closure of the branch.

            January 2013

          • AU-4.5.3

            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 to customers.

            January 2013

        • Cancellation of a License by the CBB

          • AU-4.5.4

            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-7, 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.

            January 2013

          • AU-4.5.5

            Cancellation of a license requires CBB to issue a formal notice of cancellation to the person concerned. The notice of cancellation must describe the CBB's rationale for the proposed cancellation, as specified in Article 48(d) of the CBB Law.

            January 2013

          • AU-4.5.6

            Where cancellation of a license has been confirmed by CBB, the CBB will only effect the cancellation once a licensee has discharged all its regulatory responsibilities to customers. Until such time, CBB will retain all its regulatory powers with regards to the licensee, and will direct the licensee such that no new regulated financing activity may be undertaken whilst the licensee discharges its obligations to customers.

            January 2013

        • Cancellation of Approved Person Status

          • AU-4.5.7

            In accordance with Paragraph AU-4.3.8, licensees must promptly notify the CBB in writing, as soon as they become aware, when a person undertaking a controlled function will no longer be carrying out that function. If a controlled function falls vacant, the licensee must appoint a permanent replacement (after obtaining CBB approval), within 120 calendar days of the vacancy occurring. Pending the appointment of a permanent replacement, the licensee must make immediate interim arrangements to ensure continuity of the duties and responsibilities of the controlled function affected. These interim arrangements must be approved by the CBB.

            January 2013

          • AU-4.5.8

            The explanation given for any such changes should simply identify if the planned move was prompted by any concerns over the person concerned, or is due to a routine staff change, retirement or similar reason.

            January 2013

          • AU-4.5.9

            The CBB may also move to declare someone as not 'fit and proper', in response to significant compliance failures or other improper behaviour by that person: see Chapter EN-8 regarding the cancellation of 'fit and proper' approval.

            January 2013

    • AU-4.6 AU-4.6 Publication of the Decision to Grant, Cancel or Amend a License

      • AU-4.6.1

        In accordance with Articles 47 and 49 of the CBB Law, the CBB will 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 2017

      • AU-4.6.2

        For the purposes of Paragraph AU-4.6.1, the cost of publication must be borne by the Licensee.

        Added: July 2017

      • AU-4.6.3

        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