CBB Volume 2: Contents
LR-1.1 Islamic Bank Licensees
No person may:(a) undertake (or hold themselves out to undertake) regulated Islamic banking servicesG within or from the Kingdom of Bahrain unless duly licensed by the BMA; or(b) hold themselves out to be licensed by the BMA unless they have as a matter of fact been so licensed.
Only persons licensed to undertake regulated Islamic banking servicesG (or regulated banking servicesG ), may use the term 'bank' in their corporate or trading names, or otherwise hold themselves out to be a bank.
Licensees are not obliged to include the word 'bank' in their corporate or trading names; however, they may be required to make clear their regulatory status in their letter heads, customer communications, website and so on.
For the purposes of Rule LR-1.1.2, persons will be considered in breach of this requirement if they attempt to operate as, or incorporate a bank in Bahrain with a name containing the word "bank" (or the equivalents in any language), without holding the appropriate BMA license or obtaining the prior approval of the BMA.
Persons wishing to be licensed to undertake regulated Islamic banking servicesG within or from the Kingdom of Bahrain must apply in writing to the BMA.
An application for a license must be in the form prescribed by the BMA and must contain:(a) a business plan specifying the type of business to be conducted;(b) application forms for all controllersG ; and(c) application forms for all controlled functionsG .
The BMA will review the application and duly advise the applicant in writing when it has:(a) granted the application without conditions;(b) granted the application subject to conditions specified by the BMA; or(c) refused the application, stating the grounds on which the application has been refused and the process for appealing against that decision.
Detailed rules and guidance regarding information requirements and processes for license applications can be found in Section LR-3.1. As specified in Paragraph LR-3.1.14, BMA will provide a formal decision on a Phase 1 license application within 60 calendar days of all required documentation having been submitted in a form acceptable to BMA.
In granting new licenses, BMA will specify the specific types of regulated Islamic banking serviceG for which a license has been granted, and on what basis (i.e. Islamic retail bank licenseeG or Islamic wholesale bank licenseeG ).
All applicants for an Islamic bank licenseG must satisfy the BMA that they meet, by the date of their license, the minimum conditions for licensing, as specified in Chapter LR-2. Once licensed, Islamic bank licenseesG must maintain these criteria on an ongoing basis.
Islamic bank licenseesG must not carry on any commercial business in the Kingdom of Bahrain or elsewhere other than banking business and activities directly arising from or incidental to that business.
Rule LR-1.1.11 is intended to restrict bank licensees from undertaking any material non-financial business activities. The Rule does not prevent a bank undertaking commercial activities if these directly arise from their financial business: for instance, in the context of Islamic contracts, such as murabaha, ijara and musharaka, where the bank may hold the physical assets being financed or leased. Nor does it restrict a bank from undertaking commercial activities if, in the judgment of the BMA, they are incidental and do not detract from the financial nature of the bank's operations: for example, a bank may rent out spare office space in its own office building, and provide services associated with the rental (e.g. office security or cleaning).
Rule LR-1.1.11 applies to the legal entity holding the bank license. A bank may thus own subsidiaries that undertake non-financial activities, although the BMA generally does not support the development of significant commercial activities within a banking group. Capital invested in such subsidiaries by a bank would be deducted from the bank's capital base under the BMA's capital rules (see Module CA). In addition, the BMA may impose restrictions — such as dealings between the bank and its commercial subsidiaries — if it was felt necessary to limit the bank's exposure to non-financial risks.