Chapter 1 Chapter 1 Establishment and Administration of the Central Bank
Article (2) Establishment of the Central Bank(a) A public corporate person called the "Central Bank of Bahrain" shall be established in accordance with the provisions of this law and shall be administratively and financially independent.(b) The Central Bank's headquarters shall be situated in the city of Manama, and it may open branches in Bahrain and abroad, establish subsidiaries and appoint agents and representatives, both inside and outside the Kingdom, in order to assist it achieve any of its objectives stated in this law.(c) The Central Bank shall have an independent budget, to be prepared on a commercial basis, and shall conduct its business according to commercial banking principles. It shall also perform its duties without being subject to the government administrative and financial regulations. The Central Bank shall not be subject to the provisions of any other law, which imposes prior controls on its business.(d) The role of the National Audit Court in auditing the activities and accounts of the Central Bank shall be limited to the audit of the accounts and the assets of the Central Bank, without any interference, in any form, in its activities or policies. The technical employee assigned by the National Audit court to audit the accounts of the Central Bank must be adequately qualified and specialized in the banking business.
Article (3) Objectives of the Central Bank
The Central Bank shall pursue the following objectives within the framework of the general economic policy of the Kingdom in a manner that enhances and develops the national economy:(1) set and implement the monetary, credit and other financial sector policies for the Kingdom.(2) provide effective central banking services to the Government and the financial sector of the Kingdom.(3) develop the financial sector and enhance confidence therein..(4) protect the interests of depositors and the customers of the financial institutions, and enhance the Kingdom's credibility as an international financial centre.
Article (4) Duties and Powers of the Central Bank
The Central Bank shall assume the following duties and powers:(1) issue currency in accordance with the provisions of this law.(2) liaise with the Ministry of Finance and other relevant official bodies for the purpose of drawing and implementing the appropriate monetary policies to achieve the Kingdom's general economic goals, maintain the stability of the Bahraini currency and the monetary system.(3) take appropriate measures to counter adverse local, regional or international economic conditions.(4) regulate, develop and license the Services stated in Article 39 of this law, and exercise regulatory control over institutions that provide such services;(5) act as banker to the Government within the limits set out in this law.(6) advice the Government on issues pertaining to financial and economic affairs.(7) manage the Government's reserves of gold and foreign currency.(8) to act, in coordination with the Ministry of Finance, as the financial agent for the Government at the International Monetary Fund and the International Bank for Reconstruction and Development as well as other Arab and international monetary institutions and funds, and perform all Government dealings with these organizations.(9) facilitate and encourage innovation in the financial services industry.(10) safeguard the legitimate interests of licensees' customers against the risks associated with the financial services industry.(11) perform any other duties as stipulated in this law.
Article (5) The Board of Directors(a) The Central Bank shall have a Board of Directors formed of seven members, including a representative of the Ministry of Finance. Members of the Board shall be appointed by a Royal Decree for a renewable term of four years. The Decree appointing the members shall name the Chairman and the Vice chairman of the Board.(b) The remunerations of the Chairman and the members of the Board shall be determined by a Decree.
Article (6) Conditions of Membership
A member of the Board shall satisfy the following conditions:(1) He shall be a Bahraini national.(2) He shall be entitled to fully exercise his civil and political rights.(3) He shall be experienced in the financial services industry.(4) He shall not have any conviction of a crime involving dishonesty.(5) He shall not be a holder of more than 5% of the capital of, or voting rights in, any Licencee.(6) He shall not hold a position with any Licencee.(7) He shall not have been declared bankrupt.
Article (7) Meetings and Proceedings of the Board(a) The Board shall meet at least four times every year by invitation from the Chairman. The Board meeting shall have a quorum of at least four members, including the Chairman or the Vice Chairman.(b) Resolutions of the Council shall be adopted by an absolute majority of votes of the members present. In case of a tie, the Chairman shall have the casting vote.(c) Any member who has a personal interest in any transaction of which the Central Bank is a party, shall declare such an interest and shall not attend the meeting in which such transaction is discussed.(d) The Board may seek the assistance of experts and shall invite to its meetings, for consultation without voting rights, any persons whose opinion it wishes to hear on a particular matter.
Article (8) The Powers of the Board
The Board shall supervise the affairs of the Central Bank, lay down its policies and shall exercise all powers necessary to achieve the objectives of the Central Bank as set out in the provisions of this law.
The Board shall, in particular, carry out the following:(1) Draw the Central Bank's monetary, credit and investment policies, and all other policies relating to the financial sector.(2) Oversee the business of the Central Bank and ensure that all duties stipulated in this law are carried out effectively.(3) Determine matters relating to the issue and recall of currency.(4) Approve government borrowing in exceptional circumstances according to the provisions of this law.(5) Approve the annual budget of the Central Bank and any amendments thereto.(6) Approve the final accounts of the Central Bank.(7) Approve the annual report of the Central Bank's activity.(8) Issue resolutions and regulations stipulated in this law.(9) Approve the internal regulations of the Central Bank.(10) Approve the financial and administrative regulations regarding the Central Bank's personnel. In doing so it shall not adhere to the rules of the civil service.(11) Deal with such other matters that may fall within the powers of the Board under this law.
Article (9) Termination of Board Membership(a) Membership of the Board shall terminate automatically upon the expiry of its specified term or upon the death or resignation of a member.(b) Membership may, upon recommendation of the Board, be terminated, prior to the expiry of the term thereof, if a member:1. has seriously neglected his duties,2. has violated any of the membership conditions,3. is no longer capable of performing his duties for any reason.4. failed to attend three consecutive Board meetings without a permission or an acceptable excuse.
Article (10) Governor and Deputy Governor(a) The Central Bank shall have a Governor, of ministerial rank, who shall be responsible for implementing its policies and assume the day-to-day management of its affairs. The Governor shall be directly accountable to the Board, who shall determine his monthly remunerations.(b) The Central Bank shall have one or more Deputy Governors, of undersecretary rank, to assist the Governor in the management of the Central Bank's affairs and assume responsibilities on a temporary basis if the Governor is absent or if his position becomes vacant. The Board shall determine the monthly remunerations of the Deputy Governor.(c) The Governor is appointed by a Royal Decree for a renewable 5-year term of office on the recommendation of the Board.(d) The Deputy Governor shall be appointed by a Royal Decree upon a recommendation of the Board.(e) The Governor shall be the legal representative of the Central Bank before the law and others, and shall have the power to sign all documents, contract and papers on its behalf. He shall be responsible for the implementation of this law, the Central Bank's regulations and the Board's resolutions.
The Governor may delegate, in writing, some of his powers to his Deputy or other senior staff.(f) The Governor shall assume the duties and powers of the Minister of Commerce stated in the Legislative Decree No. 3 of 1987 with respect to Compulsory Insurance for the Civil Liability of Car Accidents, amended by the Legislative Decree No. 7 of 1996, and such powers as stipulated in Article (197) of the Commercial Companies Law issued by Legislative Decree No. (21) of 2001, regarding the dissolution of the board of directors of licencees.(g) The Governor shall appoint the officials of the Central Bank in accordance with the financial and administrative regulations related to the staff of the Central Bank and shall observe the Bank's requirements of effective operation.(h) The Governor and the Deputy Governor shall devote their time to working at the Central Bank. None of them shall, during his tenure of office, be a board member of any licencee or take, with or without payment, any position or employment with others.
As an exception of the above, the Governor and the Deputy Governor may participate in committees and boards of directors of institutions and organizations formed or supervised by the Government or international financial institutions and organizations.