BR BR Microfinance Institutions CBB Reporting Requirements Module
BR-A BR-A Introduction
BR-A.1 BR-A.1 Purpose
Executive Summary
BR-A.1.1
This Module sets out requirements applicable to
microfinance institutions licensees regarding reporting to the CBB. These include the provision of financial information to the CBB by way of prudential returns, as well as notification to the CBB of certain specified events, some of which require prior CBB approval. This Module also outlines the methods used by the CBB in gathering information required in the supervision ofmicrofinance institutions licensees. January 2014BR-A.1.2
This Module provides support for certain other parts of the Rulebook, mainly:
(a) Principles of Business;(b) Public Disclosure;(c) Risk Management;(d) Financial Crime;(e) Capital Adequacy;(f) High-Level Controls;(g) Business Conduct; and(h) Auditors and Accounting Standards.January 2014BR-A.1.3
Unless otherwise stated, all reports referred to in this Module should be addressed to the director of the relevant supervision directorate of the CBB.
January 2014Legal Basis
BR-A.1.4
This Module contains the CBB's Directive relating to reporting requirements applicable to
microfinance institutions licensees 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').January 2014BR-A.1.5
For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.
January 2014BR-A.2 BR-A.2 Module History
Evolution of Module
BR-A.2.1
This Module was first issued in January 2014 by the CBB. All subsequent changes to this Module are annotated with the end-calendar quarter date in which the change was made. Chapter UG-3 provides further details on Rulebook maintenance and version control.
January 2014BR-A.2.2
A list of recent changes made to this Module is provided below:
Module Ref. Change Date Description of Changes BR-1.2.5 04/2014 Deleted semi-annual reporting requirements. BR-1.5 04/2017 Added a new Section on Onsite Inspection Reporting. BR-1.1.3 07/2017 Amended timeframe for the annual reporting requirements. BR-1.2.1 01/2020 Amended Paragraph. BR-2.3.10 01/2020 Amended Paragraph. BR-1.1.4 01/2022 Amended Paragraph on the submission of the Board and Committee annual meetings report. BR-1.2.2 01/2022 Amended Paragraph on the submission of the PIRMF form. BR-2.2.14 01/2023 Amended Paragraph removing reference to RM. BR-2.3.12 01/2023 Deleted Paragraph on CBB approval for outsourcing arrangements. BR-B BR-B Scope of Application
BR-B.1 BR-B.1 Scope of Application
BR-B.1.1
The content of this Module applies to all
microfinance institutions licensees authorised in the Kingdom (thereafter referred to in this Module aslicensees ).January 2014BR-1 BR-1 Prudential Reporting
BR-1.1 BR-1.1 Annual Requirements
BR-1.1.1
All
licensees are required to submit to the CBB their annual audited financial statements within 3 months of the financial year end.January 2014BR-1.1.2
In accordance with the provisions of Section AA-4.1, the audited financial statements and the annual reports of the
licensees must be in full compliance with:(a) The International Financial Reporting Standards (IFRS); or(b) AAOIFI Financial Accounting Standards for Sharia Compliantlicensees and for products and activities not covered by AAOIFI, International Financial Reporting Standards (IFRS)/International Accounting Standards (IAS) must be followed; and(c) The disclosure requirements set out under Section PD-1.3.January 2014BR-1.1.3
In addition to the statements required in Paragraph BR-1.1.1,
licensees are required to submit to the CBB the following information within 4 months of the financial year end:(a) The external auditor's management letter;(b) Audited financial statements of all subsidiaries along with their management letters;(c) Thelicensee's group structure and the internal organisation chart;(d) A list of non-performing and rescheduled credit facilities (including name of customer, country, amount outstanding, net interest income for the year attributed to profit & loss and the reasons for attributing interest/profit to income);(e) A reconciliation statement between the audited financial statements and the relevant prudential returns;(f) The report oncontrollers as required under Paragraph GR-4.1.10;(g) A report on thelicensee's close links as required under Paragraph GR-5.1.3; and(h) Any supplementary information as required by the CBB.Amended: July 2017
January 2014BR-1.1.4
In accordance with Paragraph HC-1.3.8, licensees must submit annually a report recording the board meetings held during the year. Such report must be submitted to the CBB, within 30 calendar days of the end of the reporting date, as an attachment to the year-end quarterly PIRMF. Reference should be made to Appendix BR-5, Board and Committee Meetings, under part B/Reporting Forms of Volume 5 for a sample of such report.
Amended: January 2022
Added: January 2014BR-1.2 BR-1.2 Quarterly Requirements
BR-1.2.1
All
licensees must complete the PIRMF form (see Appendix BR-1 under Part B of Volume 5 for microfinance institutions). This form is intended to be a financial report of thelicensee on a consolidated basis.Licensees must include all assets and liabilities of their head office and theirbranches in Bahrain (if any) and abroad (and subsidiaries, where applicable).Amended: January 2020
Added: January 2014BR-1.2.2
The PIRMF forms referred to under Paragraph BR-1.2.1 must be submitted to the CBB on a quarterly basis within 30 calendar days of the end of the reporting date.
Amended: January 2022
Added: January 2014BR-1.2.3
The CBB requires all
licensees to request their external auditor to conduct a review of the prudential return on a quarterly basis. The results of such review (in the form of an Agreed Upon Procedures report as shown in Appendix BR-3) must be submitted to the CBB's relevant supervision Directorate no later than 2 months from the end of the subject quarter. Alicensee may apply for exemption from this requirement provided that it meets the criteria set out under Paragraph BR-1.2.4.January 2014BR-1.2.4
Licensees which demonstrate to the satisfaction of the CBB that they have fulfilled all of the CBB's requirements with regard to Prudential Returns for at least two consecutive quarters may apply (in writing) to the CBB for an exemption from the review procedure set out in Paragraph BR-1.2.3.January 2014BR-1.2.5
[This Paragraph was deleted in April 2014.]
Deleted: April 2014
January 2014BR-1.3 BR-1.3 Monthly Requirements
BR-1.3.1
All
licensees which are listed on alicensed exchange in Bahrain must comply with the requirements of Volume 6 of the CBB Rulebook.January 2014BR-1.4 BR-1.4 IIS Reporting Requirements
Institutional Information System (IIS)
BR-1.4.1
All
licensees are required to complete online non-financial information related to their institution by accessing the CBB's institutional information system (IIS).Licensees must update the required information at least on a quarterly basis or when a significant change occurs in the non-financial information included in the IIS. If no information has changed during the quarter, thelicensee must still access the IIS quarterly and confirm the information contained in the IIS.January 2014BR-1.4.2
Licensees failing to comply with the requirements of Paragraph BR-1.4.1 or reporting inaccurate information are subject to financial penalties or other enforcement actions as outlined in Module (EN) Enforcement.January 2014BR-1.5 BR-1.5 Onsite Inspection Reporting
BR-1.5.1
For the purpose of onsite inspection by the CBB,
licensees must submit requested documents and completed questionnaires to the Inspection Directorate at the CBB three working days ahead of inspection team entry date.Added: April 2017BR-1.5.2
Licensees must review the contents of the draft Inspection Report and submit to the Inspection Directorate at the CBB a written assessment of the observations/issues raised within ten working days of receipt of such report. Evidentiary documents supporting management's comments must also be included in the response package.Added: April 2017BR-1.5.3
Licensees' board are required to review the contents of the Inspection Report and submit within one month, of the report issue date, a final response to such report along with an action plan addressing the issues raised within the stipulated timeline.Added: April 2017BR-2 BR-2 Notifications and Approvals
BR-2.1 BR-2.1 Introduction
BR-2.1.1
All notifications and requests for approvals required in this Chapter are to be submitted by
licensees in writing.January 2014BR-2.1.2
In this Chapter, the term 'in writing' includes electronic communications capable of being reproduced in paper form.
January 2014BR-2.1.3
Licensees are required to provide the CBB with a range of information to enable it to monitor thelicensee's compliance with Volume 5 of the CBB Rulebook. Some of this information is provided through regular reports, whereas others are in response to the occurrence of a particular event (such as a change in name or address). The following Sections list the commonly occurring reports for which alicensee will be required to notify the CBB or seek its approval.January 2014BR-2.2 BR-2.2 Notification Requirements
Matters Having a Serious Supervisory Impact
BR-2.2.1
A
licensee must notify the CBB if any of the following has occurred, may have occurred or may occur in the near future:(a) Thelicensee failing to satisfy one or more of the Principles of Business referred to in Module PB;(b) Any matter which could have a significant adverse impact on thelicensee's reputation;(c) Any matter which could affect thelicensee's ability to continue to provide adequate services to its customers and which could result in serious detriment to a customer of thelicensee ;(d) Any matter in respect of thelicensee that could result in material financial consequences to the financial system or to other licensees;(e) A breach of any provision of the Rulebook (including a Principle);(f) A breach of any requirement imposed by the relevant law or by regulations or an order made under any relevant law by the CBB;(g) If alicensee becomes aware, or has information that reasonably suggests that it has or may have provided the CBB with information that was or may have been false, misleading, incomplete or inaccurate, or has or may have changed in a material way, it must notify the CBB immediately (ref. BR-3.3.2); or(h) If thelicensee intends to suspend any or all the licensed regulated services or ceases business, setting out how it proposes to do so and, in particular, how it will treat any of its liabilities (ref GR-6.1.2).January 2014BR-2.2.2
The circumstances that may give rise to any of the events in Paragraph BR-2.2.1 are wide-ranging and the probability of any matter resulting in such an outcome, and the severity of the outcome, may be difficult to determine. However, the CBB expects
licensees to consider properly all potential consequences of events.January 2014BR-2.2.3
In determining whether an event that may occur in the near future should be notified to the CBB, a
licensee should consider both the probability of the event happening and the severity of the outcome should it happen. Matters having a supervisory impact could also include matters relating to acontroller that may indirectly have an effect on thelicensee .January 2014Legal, Professional, Administrative or other Proceedings against a Licensee
BR-2.2.4
A
licensee must notify the CBB immediately of any legal, professional or administrative or other proceedings instituted against thelicensee ,controller or aclose link of thelicensee that is known to thelicensee and is significant in relation to thelicensee's financial resources or its reputation.January 2014BR-2.2.5
A
licensee must notify the CBB of the bringing of a prosecution for, or conviction of, any offence under any relevant law against thelicensee that would prevent thelicensee from meeting the Principles of Business (Module PB) or any of itsapproved persons from meeting the fit and proper requirements of Module AU.January 2014Fraud, Errors and other Irregularities
BR-2.2.6
A
licensee must notify the CBB immediately if one of the following events arises:(a) It becomes aware that an employee may have committed a fraud against one of its customers;(b) It becomes aware that a person, whether or not employed by it, is acting with intent to commit fraud against it;(c) It identifies irregularities in its accounting or other records, whether or not there is evidence of fraud;(d) It suspects that one of its employees may be guilty of serious misconduct concerning his honesty or integrity and which is connected with thelicensee's regulated activities; or(e) Conflicts of interest.January 2014Insolvency, Bankruptcy and Winding Up
BR-2.2.7
Except in instances where the CBB has initiated the following actions, a
licensee must notify the CBB immediately of any of the following events:(a) The calling of a meeting to consider a resolution for winding up thelicensee , acontroller orclose link of thelicensee ;(b) An application to dissolve acontroller orclose link of thelicensee or to strike thelicensee off the register of microfinance institutions;(c) The presentation of a petition for the winding up of acontroller orclose link of thelicensee ;(d) The making of any proposals, or the making of, a composition or arrangement with any one or more of thelicensee's creditors, for material amounts of debt;(e) An application for the appointment of an administrator or trustee in bankruptcy to acontroller orclose link of thelicensee ;(f) The appointment of a receiver to acontroller orclose link of thelicensee (whether an administrative receiver or a receiver appointed over particular property); or(g) An application for an interim order against thelicensee , acontroller orclose link of thelicensee under the Bankruptcy and Composition Law, Decree Law No(11), 1987 or similar legislation in another jurisdiction.January 2014External Auditor
BR-2.2.8
A
licensee must notify the CBB of the following and the reason for the change:(a) Removal or resignation of auditor (ref. AA-1.2.1); or(b) Change in audit partner (ref. AA-1.3.3).January 2014Approved Persons
BR-2.2.9
A
licensee must notify the CBB of the termination of employment ofapproved persons , including particulars of reasons for the termination and arrangements with regard to replacement (ref. AU-4.3.8 and AU-4.4.8).January 2014Authorised Signatories
BR-2.2.10
At the time of authorisation (when the license is granted) or whenever a change occurs, in order to maintain an up-to-date record of authorised signatories of respective financial institutions, the CBB requires all
licensees to submit to it a list of specimen signatures of the officials authorised to sign on behalf of the concerned institution.January 2014Current Management and Changes thereto
BR-2.2.11
At the time of authorisation (when the license is granted) or whenever a change occurs, all
licensees must keep the CBB informed, in writing, of thecontrolled functions held byapproved persons . Such notification must include the following information:(a) Full name (and identity card for Bahrain resident management);(b) Contact details including address and emergency phone number;(c) Date of birth;(d) Place of birth (including town etc.);(e) Nationality;(f) Professional qualifications (by educational establishment and dates); and(g) Career details over the last ten years (with your institution or elsewhere).January 2014Breach of Capital Adequacy Requirements
BR-2.2.12
In the event that a
licensee fails to meet any of the requirements specified in Module CA (Capital Adequacy) it must, on becoming aware that it has breached the requirements, immediately notify the CBB in writing (ref. CA-1.1.9).January 2014BR-2.2.13
As specified in Article 58 of the CBB Law, a
licensee must notify the CBB immediately of any matter that may affect its financial position, currently or in the future, or limit its ability to meet its obligations.January 2014Outsourcing Arrangements
BR-2.2.14
Licensees must immediately inform their relevant supervisory contact at the CBB of any material problems or changes encountered with an outsourcing provider.Amended: January 2023
January 2014Controllers
BR-2.2.15
If, as a result of circumstances outside the
licensee's knowledge and/or control, one of the changes to theircontrollers specified in Paragraph GR-4.1.1 is triggered prior to CBB approval being sought or obtained, thelicensee must notify the CBB the earlier of:(a) When the change takes effect; and(b) When thecontroller becomes aware of the proposed change (ref. GR-4.1.7).January 2014BR-2.2.16
As specified in Article 52 of the CBB Law, a
licensee must notify the CBB of the following events:(a) If effective control over alicensee takes place indirectly whether by way of inheritance or otherwise;(b) Gaining control directly as a result of any action leading to it; or(c) The intention to take any of the actions that would lead to control.January 2014BR-2.3 BR-2.3 Approval Requirements
Branches or Subsidiaries
BR-2.3.1
In accordance with Rule AU-4.2.1, a
licensee should seek prior written approval from the CBB for opening a branch or a subsidiary.January 2014BR-2.3.2
Licensees wishing to cancel an authorisation for a branch or subsidiary must obtain the CBB's written approval, before ceasing the activities of the branch or subsidiary.January 2014Change in Name
BR-2.3.3
In accordance with Paragraph GR-2.1.1, a
licensee must seek prior written approval from the CBB and give reasonable advance notice of a change in:(a) Thelicensee's name (which is the registered name if thelicensee is a corporate body; or(b) Thelicensee's trade name.January 2014BR-2.3.4
The request under Paragraph BR-2.3.3 must include the details of the proposed new name and the date on which the
licensee intends to implement the change of name.January 2014Change of Address
BR-2.3.5
As specified in Article 51 of the CBB Law, a
licensee must seek prior written approval from the CBB and give reasonable advance notice of a change in the address of thelicensee's principal place of business in Bahrain, and that of its branches.January 2014BR-2.3.6
The request under Paragraph BR-2.3.5 must include the details of the proposed new address and the date on which the
licensee intends to implement the change of address.January 2014Change in Legal Status
BR-2.3.7
A
licensee must seek CBB prior written approval and give reasonable advance notice of a change in its legal status that may, in any way, affect its relationship with or limit its liability to its customers.January 2014Change in Paid-up or Issued Capital
BR-2.3.8
As specified in Article 57(3) of the CBB Law, a
licensee must seek CBB prior written approval before making any modification to its issued or paid-up capital.January 2014Controllers
BR-2.3.9
In accordance with Section GR-4.1,
licensees must seek CBB prior written approval and give reasonable advance notice of any of the following events concerning thelicensee :(a) A person acquiring control or ceasing to have control;(b) An existing controller acquiring an additional type of control (such as ownership or significant influence) or ceasing to have a type of control;(c) An existing controller increasing the percentage of shares or voting power beyond 10%, 20% or 40%; and(d) An existing controller becoming or ceasing to be a parent undertaking.January 2014Mergers, Acquisitions, Disposals and Establishment of New Subsidiaries
BR-2.3.10
A
licensee incorporated in Bahrain must seek CBB prior written approval and give reasonable advance notice of its intention to enter into a:(a) Merger with another undertaking; or(b) Proposed acquisition, disposal or establishment of a newsubsidiary undertaking .Amended: January 2020
Added: January 2014Write-offs
BR-2.3.11
Licensees must obtain the CBB's prior written approval before writing off any of the following exposures:
(a) To any present or formerdirector of thelicensee; (b) Which are guaranteed by adirector of thelicensee ;(c) To any business entity for which thelicensee or any of itsdirectors is an agent;(d) To any officer or employee of thelicensee , or any other person who receives remuneration from thelicensee ;(e) To any business entity in which thelicensee (or any of its directors, officers or other persons receiving remuneration from thelicensee ) has a material interest as a shareholder (i.e., 5% or more), or as adirector , manager, agent or guarantor; and(f) To any person who is adirector , manager or officer of anotherlicensee of the CBB.January 2014Outsourcing Arrangements
BR-2.3.12
[This Paragraph was deleted in January 2023].
Deleted: January 2023
January 2014Matters Having a Supervisory Impact
BR-2.3.13
A
licensee must seek prior approval from the CBB for any material changes or proposed changes to the information provided to the CBB in support of an authorisation application that occurs after authorisation has been granted.January 2014BR-2.3.14
Any
licensee that wishes, intends or has been requested to do anything that might contravene, in its reasonable opinion, the provisions of United Nations Security Council Resolution (UNSCR) 1373 (and in particular Article 1, Paragraphs c) and d) of UNSCR 1373) must seek, in writing, the prior written opinion of the CBB on the matter (ref. FC-8.2.2).January 2014BR-2.3.15
As specified in Article 57 of the CBB Law, a
licensee wishing to modify its Memorandum or Articles of Association, must obtain prior written approval from the CBB.January 2014BR-2.3.16
As specified in Article 57 of the CBB Law, a
licensee wishing to transfer all or a major part of its assets or liabilities inside or outside the Kingdom, must obtain prior written approval from the CBB.January 2014External Auditor
BR-2.3.17
A
licensee must seek prior written approval from the CBB for the appointment or re-appointment of its external auditor (ref. AU-2.7.1 and AA-1.1.1)January 2014Dividend Distribution
BR-2.3.18
Licensees , must obtain the CBB's prior written approval to any dividend proposed to be distributed to the shareholders, before announcing the proposed dividend by way of press announcement or any other means of communication, in accordance with Chapter GR-3.January 2014Approved Persons
BR-2.3.19
A
licensee must seek prior approval from the CBB for the appointment of persons undertaking acontrolled function (ref. Article 65 of the CBB Law, AU-1.4 and AU-4.3.1).January 2014BR-2.3.20
Licensees must seek prior CBB approval before anapproved person may move from onecontrolled function to another within the samelicensee (ref. AU-4.3.11).January 2014BR-2.3.21
If a
controlled function falls vacant, alicensee making immediate interim arrangements for thecontrolled function affected, must obtain approval from the CBB (ref. AU-4.4.9).January 2014Cessation of Business
BR-2.3.22
In accordance with Paragraph GR-6.1.1 and Article 50 of the CBB Law,
licensees must seek the CBB's prior approval should they wish to cease to provide or suspend any or all of the licensed regulated services of their operations and/or liquidate their business.January 2014BR-3 BR-3 Information Gathering by the CBB
BR-3.1 BR-3.1 Power to Request Information
BR-3.1.1
In accordance with Article 111 of the CBB Law,
licensees must provide all information that the CBB may reasonably request in order to discharge its regulatory obligations.January 2014Information Requested on Behalf of other Supervisors
BR-3.1.2
The CBB may ask
licensees to provide it with information at the request of or on behalf of other supervisors to enable them to discharge their functions properly. Those supervisors may include overseas supervisors or government agencies in Bahrain. The CBB may also, without notifying alicensee , pass on to those supervisors or agencies information that it already has in its possession.January 2014BR-3.2 BR-3.2 Access to Premises
BR-3.2.1
In accordance with Article 114 of the CBB Law, a
licensee must permit representatives of the CBB, orappointed experts for the purpose by the CBB to have access, with or without notice, during reasonable business hours to any of its business premises in relation to the discharge of the CBB's functions under the relevant law.January 2014BR-3.2.2
A
licensee must take reasonable steps to ensure that its agents and providers under outsourcing arrangements permit such access to their business premises, to the CBB.January 2014BR-3.2.3
A
licensee must take reasonable steps to ensure that each of its providers under material outsourcing arrangements deals in an open and cooperative way with the CBB in the discharge of its functions in relation to thelicensee .January 2014BR-3.2.4
The cooperation that
licensees are expected to procure from such providers is similar to that expected oflicensees themselves.January 2014BR-3.3 BR-3.3 Accuracy of Information
BR-3.3.1
Licensees must take reasonable steps to ensure that all information they give the CBB is:(a) Factually accurate or, in the case of estimates and judgements, fairly and properly based after appropriate enquiries have been made by thelicensee ; and(b) Complete, in that it should include anything of which the CBB would reasonably expect notice.January 2014BR-3.3.2
If a
licensee becomes aware, or has information that reasonably suggests that it has or may have provided the CBB with information that was or may have been false, misleading, incomplete or inaccurate, or has or may have changed in a material way, it must notify the CBB immediately. The notification must include:(a) Details of the information which is or may be false, misleading, incomplete or inaccurate, or has or may have changed;(b) An explanation why such information was or may have been provided; and(c) The correct information.January 2014BR-3.3.3
If the information in Paragraph BR-3.3.2 cannot be submitted with the notification (because it is not immediately available), it must instead be submitted as soon as possible afterwards.
January 2014BR-3.4 BR-3.4 Methods of Information Gathering
BR-3.4.1
The CBB uses various methods of information gathering on its own initiative which require the cooperation of
licensees :(a) Representatives of the CBB may make onsite visits at the premises of thelicensee . These visits may be made on a regular basis, on a sample basis, for special purposes such as theme visits (looking at a particular issue across a range oflicensees ), or when the CBB has a particular reason for visiting alicensee ;(b) Appointees of the CBB may also make onsite visits at the premises of thelicensee . Appointees of the CBB may include persons who are not CBB staff, but who have been appointed to undertake particular monitoring activities for the CBB, such as in the case ofAppointed Experts (refer to Chapter EN-2);(c) The CBB may request thelicensee to attend meetings at the CBB's premises or elsewhere;(d) The CBB may seek information or request documents by telephone, at meetings or in writing, including electronic communication; and(e) The CBB may requirelicensees to submit various documents or notifications, as per Chapter BR-2, in the ordinary course of their business such as financial reports or on the happening of a particular event in relation to thelicensee such as a change in control.January 2014BR-3.4.2
When seeking meetings with a
licensee or access to thelicensee's premises, the CBB or the CBB appointee needs to have access to alicensee's documents and personnel. Such requests will be made during reasonable business hours and with proper notice. There may be instances where the CBB may seek access to thelicensee's premises without prior notice. While such visits are not customary, the prospect of unannounced visits is intended to encouragelicensees to comply at all times with the requirements and standards imposed by the CBB as per legislation and Volume 5 of the CBB Rulebook.January 2014BR-3.4.3
The CBB considers that a
licensee should:(a) Make itself readily available for meetings with representatives or appointees of the CBB;(b) Give representatives or appointees of the CBB reasonable access to any records, files, tapes or computer systems, which are within thelicensee's possession or control, and provide any facilities which the representatives or appointees may reasonably request;(c) Produce to representatives or appointees of the CBB specified documents, files, tapes, computer data or other material in thelicensee's possession or control as reasonably requested;(d) Print information in thelicensee's possession or control which is held on computer or otherwise convert it into a readily legible document or any other record which the CBB may reasonably request;(e) Permit representatives or appointees of the CBB to copy documents of other material on the premises of thelicensee at thelicensee's expense and to remove copies and hold them elsewhere, or provide any copies, as reasonably requested; and(f) Answer truthfully, fully and promptly all questions which representatives or appointees of the CBB reasonably put to it.January 2014BR-3.4.4
The CBB considers that a
licensee should take reasonable steps to ensure that the following persons act in the manner set out in Paragraph BR-3.4.3:(a) Its employees; and(b) Any other members of its group, and their employees.January 2014BR-3.4.5
In gathering information to fulfill its supervisory duties, the CBB acts in a professional manner and with due regard to maintaining confidential information obtained during the course of its information gathering activities.
January 2014BR-3.5 BR-3.5 Role of the Appointed Expert
Introduction
BR-3.5.1
The content of this Chapter is applicable to all
licensees andappointed experts .January 2014BR-3.5.2
The purpose of the contents of this Chapter is to set out the roles and responsibilities of
appointed experts when appointed pursuant to Article 114 or 121 of the CBB Law (see EN-2.1.1). These Articles empower the CBB to assign some of its officials or others to inspect or conduct investigations oflicensees .January 2014BR-3.5.3
The CBB uses its own inspectors to undertake on-site examinations of
licensees as an integral part of its regular supervisory efforts. In addition, the CBB may commission reports on matters relating to the business oflicensees in order to help it assess their compliance with CBB requirements. Inspections may be carried out either by the CBB's own officials, by duly qualifiedappointed experts appointed for the purpose by the CBB, or a combination of the two.January 2014BR-3.5.4
The CBB will not, as a matter of general policy, publicise the appointment of an
appointed expert , although it reserves the right to do so where this would help achieve its supervisory objectives. Both theappointed expert and the CBB are bound to confidentiality provisions restricting the disclosure of confidential information with regards to any such information obtained in the course of the investigation.January 2014BR-3.5.5
Unless the CBB otherwise permits,
appointed experts should not be the same firm appointed as external auditor of thelicensee .January 2014BR-3.5.6
Appointed experts will be appointed in writing, through an appointment letter, by the CBB. In each case, the CBB will decide on the range, scope and frequency of work to be carried out byappointed experts .January 2014BR-3.5.7
All proposals to appoint
appointed experts require approval by an Executive Director or more senior official of the CBB. The appointment will be made in writing, and made directly with theappointed experts concerned. A separate letter is sent to thelicensee , notifying them of the appointment. At the CBB's discretion, atrilateral meeting may be held at any point, involving the CBB and representatives of thelicensee and theappointed experts , to discuss any aspect of the investigation.January 2014BR-3.5.8
Following the completion of the investigation, the CBB will normally provide feedback on the findings of the investigation to the
licensee .January 2014BR-3.5.9
Appointed experts will report directly to and be responsible to the CBB in this context and will specify in their report any limitations placed on them in completing their work (for example due to thelicensee's group structure). The report produced by theappointed experts is the property of the CBB (but is usually shared by the CBB with thelicensee concerned).January 2014BR-3.5.10
Compliance by
appointed experts with the contents of this Chapter will not, of itself, constitute a breach of any other duty owed by them to a particularlicensee (i.e. create aconflict of interest ).January 2014BR-3.5.11
The CBB may appoint one or more of its officials to work on the
appointed experts ' team for a particularlicensee .January 2014The Required Report
BR-3.5.12
The scope of the required report will be determined and detailed by the CBB in the appointment letter. Commissioned
appointed experts would normally be required to report on one or more of the following aspects of alicensee's business:(a) Accounting and other records;(b) Internal control systems;(c) Returns of information provided to the CBB;(d) Operations of certain departments; and/or(e) Other matters specified by the CBB.January 2014BR-3.5.13
Appointed experts will be required to form an opinion on whether, during the period examined, thelicensee is in compliance with the relevant provisions of the CBB Law and the CBB's relevant requirements, as well as other requirements of Bahrain Law and, where relevant, industry best practice locally and/or internationally.January 2014BR-3.5.14
The
appointed experts ' report should follow the format set out in Appendix BR-10, in part B of the CBB Rulebook.January 2014BR-3.5.15
Unless otherwise directed by the CBB or unless the circumstances described in Section BR-3.5.19 apply, the report must be discussed with the board of directors and/or
senior management in advance of it being sent to the CBB.January 2014BR-3.5.16
Where the report is
qualified by exception , the report must clearly set out the risks which thelicensee runs by not correcting the weakness, with an indication of the severity of the weakness should it not be corrected.Appointed experts will be expected to report on the type, nature and extent of any weaknesses found during their work, as well as the implications of a failure to address and resolve such weaknesses.January 2014BR-3.5.17
If the
appointed experts conclude, after discussing the matter with thelicensee , that they will give a negative opinion (as opposed to onequalified by exception ) or that the issue of the report will be delayed, they must immediately inform the CBB in writing giving an explanation in this regard.January 2014BR-3.5.18
The report must be completed, dated and submitted, together with any comments by directors or management (including any proposed timeframe within which the
licensee has committed to resolving any issues highlighted by the report), to the CBB within the timeframe applicable.January 2014Other Notifications to the CBB
BR-3.5.19
Appointed experts must communicate to the CBB, during the conduct of their duties, any reasonable belief or concern they may have that any of the requirements of the CBB, including the criteria for licensing alicensee (see Module AU), are not or have not been fulfilled, or that there has been a material loss or there exists a significant risk of material loss in the concernedlicensee , or that the interests of customers are at risk because of adverse changes in the financial position or in the management or other resources of alicensee . Notwithstanding the above, it is primarily thelicensee's responsibility to report such matters to the CBB.January 2014BR-3.5.20
The CBB recognises that
appointed experts cannot be expected to be aware of all circumstances which, had they known of them, would have led them to make a communication to the CBB as outlined above. It is only whenappointed experts , in carrying out their duties, become aware of such a circumstance that they should make detailed inquiries with the above specific duty in mind.January 2014BR-3.5.21
If
appointed experts decide to communicate directly with the CBB in the circumstances set out in Paragraph BR-3.5.19, they may wish to consider whether the matter should be reported at an appropriate senior level in thelicensee at the same time and whether an appropriate senior representative of thelicensee should be invited to attend the meeting with the CBB.January 2014Permitted Disclosure by the CBB
BR-3.5.22
Information which is confidential and has been obtained under, or for the purposes of, this chapter or the CBB Law may only be disclosed by the CBB in the circumstances permitted under the Law. This will allow the CBB to disclose information to
appointed experts to fulfil their duties. It should be noted, however, thatappointed experts must keep this information confidential and not divulge it to a third party except with the CBB's permission and/or unless required by Bahrain Law.January 2014Trilateral Meeting
BR-3.5.23
The CBB may, at its discretion, call for a
trilateral meeting (s) to be held between the CBB and representatives of the relevantlicensee and theappointed experts . This meeting will provide an opportunity to discuss theappointed experts ' examination of, and report on, thelicensee .January 2014