Overview

The Central Bank of Bahrain ('CBB') is responsible for regulating and supervising the
whole of Bahrain's financial sector. Prior to the creation of the CBB in September
!!"# the Bahrain $onetar% &genc% ('B$&') had previousl% acted as the sole
regulator% authorit% for Bahrain's financial sector. (The B$& was responsible since
its establishment in '()* for regulating Bahrain's banking sector# and was
subse+uentl% given responsibilit% in &ugust !! for regulating Bahrain's insurance
sector and capital markets.)The CBB's duties include the licensing and supervision
of banks (both conventional and ,slamic)# providers of insurance services (including
insurance firms and brokers)# investment business licensees (including investment
firms# licensed e-changes# clearing houses and their member firms# mone% brokers
and investment advisors)# and other financial services providers (including mone%
changers# representative offices# finance companies and ancillar% service providers).
The CBB also regulates Bahrain.s licensed e-changes and clearing houses and acts
as the /isting &uthorit% for companies and financial instruments listed on the
e-changes. ,t is also responsible for regulating conduct in Bahrain's capital markets
Licensing & Registration
Licensing &rticle 0! of the Central Bank of Bahrain and 1inancial ,nstitutions /aw
!!" prescribes that no person ma% undertake a 2egulated Service in the 3ingdom
of Bahrain unless licensed b% the Central Bank. Persons wishing to undertake a
2egulated Service must therefore obtain a license from the Central Bank of Bahrain
('CBB') prior to undertaking such activit%.& summar% of the licensing process and
associated matters# such as CBB license fees# can be found in the CBB 4uide to
/icensing. Complete details of the CBB licensing process and re+uirements are
prescribed in the CBB 2ulebook. 5ach 6olume contains a $odule setting out the
CBB's licensing re+uirements# with respect to the sector covered b% the 6olume in
+uestion# including a full description of the relevant 2egulated Services. Registration
,n addition to the above licensing re+uirements# persons wishing to carr% on the
business of an insurance loss ad7uster or an actuar% must be registered b% the CBB
in order to do so.
& summar% of the registration process can be found in the CBB 4uide to
2egistration. The formal registration re+uirements are contained in the &uthorisation
$odule of 6olume * of the CBB 2ulebook# which covers the insurance sector.
http899www.cbb.gov.bh9page.php:p;licensing<registration
Supervision
Summary of CBB regulatory
requirements
The CBB supervises its licensees in accordance with relevant international
standards. 1or banks# insurance service providers# and investment business
service providers# this means that CBB re+uirements address the Core
Principles and other standards of the Basel Committee# the ,nternational
&ssociation of ,nsurance Supervisors and the ,nternational =rganisation of
Securities Commissions. Bahrain was last assessed against these standards
b% the ,$1 in !!>?!"# as part of a 1inancial Sector &ssessment Programme
review.
CBB re+uirements are risk focused and principles?based# as well as tailored to
different categories of licensee and the variable nature of supervisor% risks that
the% pose. CBB re+uirements cover both prudential standards as well as
conduct of business.
,n terms of capital re+uirements# The Basel ,,, re+uirements has been
implemented in phases from !'* onwards.
,nsurance companies are sub7ect to solvenc% margin re+uirements (similar to
e-isting 5@ re+uirements)# and investment firms are sub7ect to risk?based
capital re+uirements that include position# counterpart% and foreign e-change
risk# as well as an e-penditure re+uirement.
The CBB's re+uirements are contained in the CBB 2ulebook# which is
structured into different 6olumes# each addressing a particular categor% of
licensee or area of activit%8
6olume '8 banks (conventional)
6olume 8 banks (,slamic)
6olume *8 insurance
6olume 08 investment business
6olume >8 specialised licensees (under development)
6olume "8 capital markets (under development)
6olume )8 Collective investment undertaking
Summary of CBB supervisory
approach
The CBB's supervision of licensees is a mi-ture of onsite assessment
(including the +ualit% of s%stems and controls# and of books and records) and
offsite supervision (which focuses on the anal%sis of regulator% returns# as well
as of audited financial statements and other relevant public information).
=nsite e-aminations are undertaken b% the CBB's own e-aminers# as well as
b% e-perts appointed for the purpose b% the CBB (such as accountants and
actuaries). =ffsite supervision also includes regular prudential meetings with
licensees to review performance# strateg% and compliance matters (such as
capital ade+uac%# large e-posures and li+uidit%).
1or banks# a risk profiling s%stem has been developed to underpin the above
supervisor% efforts# b% providing a detailed framework for assessing the impact
and risk profile of individual licensees# and prioritising subse+uent supervisor%
efforts.
Ahere a licensee fails to satisf% the CBB's regulator% re+uirements# then the
measures outlined in the 5nforcement $odules of the applicable 6olumes of
the 2ulebook ma% be applied. 5nforcement measures include formal warnings#
directions (e.g. to cease or desist from an activit%)# formal re+uests for
information# adverse fit B proper findings# financial penalties or investigations.
5-treme violations of the CBB's regulator% re+uirements ma% entail
cancellation of a licence# administration or criminal sanctions.
http899www.cbb.gov.bh9page?p?supervision.htm
Capital Markets Supervision
The CBB's Capital $arkets Supervision Cirectorate ('C$SC') is mandated to
supervise and regulate the 3ingdom's capital marketsD its main ob7ective being
to maintain a transparent# fair and efficient capital market for ensuring investor
protection# thereb% protecting Bahrain's integrit% and reputation as the region's
leading financial centre.
,n pursuing its mandate# the C$SC strives to compl% with all relevant
international standards# in particular those of the ,nternational =rganiEation of
Securities Commissions (,=SC=). Bahrain was last reviewed for compliance
with ,=SC='s core principles in !!>?!"# b% the ,$1 and in !!F became a
signator% to the ,=SC= $$=@ concerning consultation and cooperation and
the e-change of information.
http899www.cbb.gov.bh9page?p?capital<markets<supervision.htm
&nti?$one% /aundering B Combating the 1inancing of Terrorism
The Central Bank of Bahrain views the fight against mone% laundering ('&$/')
and combating the financing of terrorism ('C1T') as a ke% priorit%. Bahrain is
part of the 1inancial &ction Task 1orce ('1&T1') through the full membership of
the 4ulf Cooperation Council in the 1&T1# and is committed to the
implementation of all international standards in this area. Bahrain is also a
founding member of the regional $5G&?1&T1# and hosts its secretariat.
,n order to ensure effective compliance with relevant standards and to preserve
Bahrain's strong reputation as a well?regulated financial centre# the CBB
maintains a Compliance Cirectorate# which is tasked with leading the CBB's
&$/9C1T efforts. The Compliance Cirectorate is also tasked with handling
complaints received from the public relating to CBB licensees# and for receiving
information on financial crimes# such as fraud attempts.
http899www.cbb.gov.bh9page?p?aml<cft.htm
Financial rust Law
The 1inancial Trust /aw was promulgated on '> &ugust !!" issued b% 2o%al
Cecree no. (*) of !!". ,t contains comprehensive regulations and rules to
govern the establishment and management of financial trusts.
The 1inancial Trust /aw is characterised b% offering high levels of
confidentialit% needed to conduct this t%pe of activit%. ,t will contribute in
increasing the scope of specialiEed services offered b% financial institutions and
the development of conventional and ,slamic investment products which can be
offered through trust mechanism# such as real?estate trusts and private
pension funds.
http899www.cbb.gov.bh9page?p?financial<trust<law.htm