Financial Crime World

Banking Regulations in Bahrain

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Overview

The Central Bank of Bahrain (CBB) regulates both the conduct of financial services business and the financial institutions providing those services. Bahrain has adopted the unitary approach to regulation.

Control over Banks

Definition of Control

  • Control refers to the control established over a licensee or taking any action that may lead to control.
  • If an individual or company acquires shares in breach of the provisions on control, they must carry out instructions from the CBB to transfer the shares or refrain from exercising voting rights.

Comparison with US and European Banking Regulations

Bahrain’s regulatory framework is more straightforward compared to the US, which has a dual banking system. The US has a labyrinthine regulatory framework with multiple agencies, whereas Bahrain’s CBB regulates both conduct and institutions.

Client Confidentiality and Banking Secrecy

  • Article 116 of the Financial Institutions Law defines confidential information as any information on private affairs of customers.
  • Confidential information must not be disclosed without unequivocal approval from the customer or by law.

Registration Time Scales

A license application is typically decided within 60 days from receiving a complete application. Registration of a change of ownership takes approximately 2 months, with reduced fees if completed within 60 days.

Special Rules on Banking Set-Off and Closure of Bank Accounts

There are no specific set-off rules or closure procedures mentioned in the text.

Cheque Issuing and Bounced Cheques

  • The Central Bank regulates cheque settlement and clearing systems.
  • No information is provided on bounced cheques.

Provision of Safe Deposits by Banks

Article 4 of the Financial Institutions Law includes safeguarding legitimate interests of customers as one of the duties of the CBB. Article 177 provides for protection of deposits and related rights, including compensation in cases where a licensee is unable to meet claims.

Letters of Credit, Promissory Notes, or Bills of Exchange

  • The Central Bank can sell, discount, and re-discount bills of exchange and promissory notes to other financial institutions.
  • The CBB maintains a foreign reserve that bears bills of exchange and promissory notes payable outside the Kingdom in convertible currencies.