• GR-4.3 GR-4.3 Suitability of Controllers

    • GR-4.3.1

      All new controllers or prospective controllers (as defined in Section GR-4.2) of a licensee must obtain the approval of the CBB. Any increases to existing controllers' holdings or voting control (as outlined under Paragraph GR-4.1.1) 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-4.2) or new/prospective controllers of a licensee must satisfy the CBB of their suitability and appropriateness according to the criteria outlined in Paragraphs GR-4.3.6 to GR-4.3.8. The CBB will issue an approval notice or notice of refusal of a controller according to the approval process outlined in Section GR-4.4 and Paragraph GR-4.1.5.

      January 2013

    • GR-4.3.2

      All controllers or prospective controllers (whether natural or legal persons) of all licensees are subject to the approval of the CBB. Persons who intend to take ownership stakes of 10% or above of the voting capital of a licensee are subject to enhanced scrutiny, given the CBB's position as home supervisor of such licensees. The level of scrutiny and the criteria for approval become more onerous as the level of proposed ownership increases. Existing and prospective controllers should therefore take particular note of the requirements of Paragraphs GR-4.3.3 to GR-4.3.8 if they wish to take more substantial holdings or control.

      As a matter of policy, the CBB distinguishes between regulated legal persons (i.e. financial institutions) and unregulated legal persons and natural persons as controllers. Unregulated legal persons and natural persons are subject to greater due diligence and therefore have more stringent conditions to satisfy. Regulated legal persons must satisfy home country prudential requirements. The CBB may also contact their home regulators for information on their "fit & proper" status.

      January 2013

    • GR-4.3.3

      A natural person will not be allowed to own or control more than 15% of the voting capital of a licensee. Such person must satisfy the conditions in Paragraph GR-4.3.6 below.

      January 2013

    • GR-4.3.4

      An unregulated legal person (including companies, trusts, partnerships) will not be allowed to own or control more than 20% of the voting capital of a licensee. All such persons must satisfy the conditions in Paragraph GR-4.3.7 below.

      January 2013

    • GR-4.3.5

      The CBB will only permit financial institutions which are subject to effective consolidated supervision under a regulatory framework consistent with the Basel Core Principles, the IOSCO Principles or the IAIS Principles to become controllers with a holding of more than 20% of the voting capital of a licensee. Furthermore, the concerned regulated financial institution must satisfy the conditions in Paragraph GR-4.3.7 and also the specific conditions in Paragraph GR-4.3.8 below. A regulated financial institution will not be approved as a controller of a locally listed licensee if it wishes to acquire more than 40% of the voting capital. Subject to the discretion of the CBB, regulated financial institutions from reputable jurisdictions may be allowed to own or control holdings of voting capital of unlisted locally incorporated licensees in excess of the above mentioned 40% level.

      January 2013

    • GR-4.3.6

      In assessing the suitability and the appropriateness of new/prospective controllers (and existing controllers proposing to increase their shareholdings) who are natural persons, 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 person's track record as a controller of, or investor in financial institutions.
      (m) The financial resources of the person and the likely stability of their shareholding;
      (n) 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;
      (o) The legitimate interests of creditors and minority shareholders of the licensee;
      (p) If the approval of a person as a controller is or could be detrimental to the subject licensee, Bahrain's financial sector or the national interests of the Kingdom of Bahrain; and
      (q) Whether the person is able to deal with existing shareholders and the board in a constructive and co-operative manner.
      January 2013

    • GR-4.3.7

      In assessing the suitability and appropriateness of legal persons as controllers (wishing to increase their shareholding) or new/potential controllers, the 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 person, its parent(s) and other members of its group, its implications for the licensee and the likely stability of the person's shareholding;
      (b) Whether the person or members of its group have ever entered into any arrangement with creditors in relation to the inability to pay due debts;
      (c) The person's jurisdiction of incorporation, location of Head Office, group structure and connected counterparties and the implications for the licensee as regards effective supervision of the licensee and potential conflicts of interest;
      (d) The person's (and other group members') propriety and general standards of business conduct, including the contravention of any laws or regulations including financial services legislation on 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 person or other members of its group, whether or not this resulted in an adverse finding;
      (g) The extent to which the person or other members of its group have been truthful and open with regulators and supervisors;
      (h) Whether the person has ever been refused a licence, authorisation, registration or other authority;
      (i) The person's track record as a controller of, or investor in financial institutions;
      (j) The legitimate interests of creditors and shareholders of the licensee;
      (k) Whether the approval of a controller is or could be detrimental to the subject licensee, Bahrain's financial sector or the national interests of the Kingdom of Bahrain;
      (l) Whether the person is able to deal with existing shareholders and the board in a constructive manner; and
      (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.
      January 2013

    • GR-4.3.8

      Regulated financial institutions wishing to acquire more than 20% of the voting capital of a licensee must observe the following additional conditions:

      (a) The person must be subject to effective consolidated supervision by a supervisory authority which effectively implements the Basel Core Principles, the IOSCO Principles or the IAIS Principles as well as the FATF 40+9 Recommendations on Money Laundering and Terrorist Financing;
      (b) The home supervisor of the person must give its formal written prior approval for (or otherwise raise no objection to) the proposed acquisition of the licensee;
      (c) The home supervisor of the person must confirm to the CBB that it will require the person to consolidate the activities of the concerned licensee for regulatory and accounting purposes if the case so requires;
      (d) The home supervisor of the person must formally agree to the exchange of customer information between the person and its prospective Bahraini subsidiary/acquisition for AML/CFT purposes and for large exposures monitoring purposes;
      (e) The home supervisor of the person and the CBB must (if not al in place) conclude a Memorandum of Understanding in respect of supervisory responsibilities, exchange of information and mutual inspection visits;
      (f) The person must provide an acceptably worded letter of guarantee to the CBB in respect of its obligation to support the licensee; and
      (g) The licensee will be subject to the provisions of Chapter CM-5 in respect of exposures to its controller.
      January 2013