CBB Issues new Clearing, Settlement and Central Depository Rules

Manama, Bahrain - 20 April 2009 - Pursuant to the Central Bank of Bahrain (CBB) Law issued in September 2006, the CBB has been pursuing a programme of enhancements to the Kingdom’s regulatory and supervisory framework that will facilitate the development of the financial sector, particularly the capital market, in order to further enhance its position as a regional and international financial centre.

As part of this programme, the CBB issued today the Clearing, Settlement and Central Depository Module as a part of the CBB Rulebook Volume 6, which seeks to introduce a comprehensive, effective and harmonized approach in licensing, regulating and supervising licensed clearing houses and securities depositories in the Kingdom of Bahrain, in order to achieve the CBB’s main objective of maintaining a transparent, fair, orderly and efficient capital market for enhancing investor confidence and ensuring investor protection.

The Clearing, Settlement and Central Depository Module sets out the CBB''s regulatory framework covering all the requirements related to such institutions and activities, including but not limited to the licensing requirements, ongoing obligations, and business rules, different functions of each institution and the obligations of such institutions towards the CBB in its capacity as a regulator.

Mr. Abdul Rahman Al-Baker, Executive Director of Financial Institutions at the CBB said: “The CBB is proud to issue today after consultation with the industry the Clearing, Settlement and Central Depository Module, which will allow the CBB to further open up Bahrain’s capital market and financial sector as a whole, and enhance the efficiency of Bahrain’s capital market service providers, thereby increasing the protection and services offered to investors”.

“The Module requires that the clearing houses and securities depositories to be independent joint stock companies and licensed as financial institutions, subject to the CBB Law and regulations, and facilitating the ongoing dematerialization of securities in the Kingdom” said Mr. Al-Baker.

“In line with the CBB Law, the Clearing, Settlement and Central Depository Module lays down the detailed regulatory requirements regarding licensing, ongoing obligations on licensed clearing houses and securities depositories, responsibility to maintain proper records, final accounts and auditing, finality of settlement, compliance issues, maintenance of confidentiality, business rules, business continuity plan and all other related activities and services that licensed clearing houses and securities depositories undertake”, Mr. Ali Salman Thamer, Director of the Capital Markets Supervision Directorate said.

The Director of the Capital Markets Supervision Directorate also stated that “The Module will provide more clarity on the role, powers and responsibilities of the CBB as a securities regulator, and role and responsibilities of licensed clearing houses and securities depositories and their interaction with the licensed exchanges, for ensuring the efficiency of Bahrain’s capital market”. In addition, the Module elaborates on the scope of application of the Module, licensing process and timeline, proceedings in respect of insolvency, content of business rules, administrative provisions, as well as the power of the CBB to impose conditions or issue directives.

The CBB, in pursuing its programme of enhancements of the Kingdom’s capital markets regulatory framework has already issued a number of Consultation Papers and look forward to the financial institutions comments in the finalization of the upcoming Modules dealing with Prohibition of Market Abuse and Manipulation, and Market Surveillance, Investigation and Enforcement. These and additional Modules of the CBB’s Rulebook Volume 6 are planned to be issued for consultation in the near future, to further develop and upgrade the capital market regulatory framework in compliance with all applicable international standards and best practices, particularly those standards issued by the International Organization of Securities Commissions (IOSCO).

For industry participants and other interested parties, the Clearing, Settlement and Central Depository Module can be downloaded from the CBB website at: www.cbb.gov.bh under Site Map; Publications and Data; CBB Rulebook; Volume 6/Capital Markets.