Articles 3 and 4 of the Central Bank of Bahrain and Financial Institutions Law 2006 (‘CBB Law’), lays down the Central Bank of Bahrain’s (‘CBB’) objectives, as well as duties: these include protecting the legitimate interests of customers of financial institutions.
In keeping with this objective, the CBB undertakes various activities, such as:
• Issuing consumer alerts, warning consumers how to protect themselves against financial crime;
• Disseminating consumer guides, containing general information and advice on using financial services and products;
• Monitoring consumer complaints with respect to licensed entities, including taking appropriate action where necessary; and
• Administering a deposit protection scheme.
The Central Bank of Bahrain (‘CBB’), as part of its consumer protection objective, works with the financial sector to develop codes of best practice, aimed at raising transparency and fairness in dealings between financial institutions and their retail clients.
The first such code, issued in July 2007, was a Code of Best Practice on Consumer Credit and Charging. It was prepared jointly by the Banker’s Society of Bahrain and the CBB. It sets out minimum standards for retail banks and financing companies to follow, when providing credit and other services on which fees and/or interest (or profit margins in the case of Shari’a compliant financing) are payable by personal customers in the Kingdom of Bahrain. These standards cover matters such as advertising, and the provision of clear and regular information to customers.
Deposits & Unrestricted Investment Accounts Protection Scheme
The Central Bank of Bahrain has issued on the 13th January 2011, Resolution No. (34) for the year 2010 with respect to promulgating a Regulation “Protecting Deposits and Unrestricted Investment Accounts” in accordance with the provisions of Article 177 of the Central Bank of Bahrain and Financial Institutions Law No. (64) for the year 2006. This is considered an amendment to the current scheme which is in accordance with the resolution No. (3) for the year 1993. The CBB has taken this initiative considering the need to develop the previous post-funded scheme and replace it with a new prefunded scheme to bring deposit protection more closely in line with international best practices, as most of those schemes in developed countries have turned to a prefunded schemes where funds being collected and paid in advance to compensate depositors.
The new scheme overcome the disadvantages of the previous scheme, most importantly to have funds available in its capacity instead of depending on commitments difficult to collect in a short time period without leaving a adverse effect on the banking and financial system. In order to maintain a level playing field and to encourage a healthy competitive environment between Conventional and Islamic banks, the new scheme provides protection to unrestricted investment accounts in Islamic banks vis-a-vis the deposits in conventional banks. The new scheme requires the establishment of two separate funds (Conventional fund and Islamic fund) which shall be maintained and administered by one board in which the funds are accumulated separately in advance based on regular contributions by the member banks. The two funds cover eligible accounts which include all types of deposits in conventional and Islamic banks in addition to the unrestricted investment accounts in Islamic banks.
The new scheme covers eligible account holders of individuals up to BD20,000 from the total amount of their eligible accounts compared with the previous scheme which covers the lower of 75% of total deposits or BD15,000.
Full details of the scheme are given in Modules CP, of Volume 1 (conventional banks) and 2 (Islamic Banks) of the CBB Rulebook. The Regulation is also published on the CBB website in both Arabic and English language under this link.
Making a Complaint
Customers of licensed financial institutions are expected to raise the matter first with the institution concerned, should they have a complaint about a service or product. Only when they have exhausted the institution’s own complaints procedures should they contact the Central Bank of Bahrain (‘CBB’), using the complaint form provided (see right, under ‘Related Topics’).
The Central Bank of Bahrain reviews complaints to see if there have been any breaches of its regulatory requirements. It also monitors complaints received to see if there are any noticeable trends.
Consumers should note that they are responsible for making sure they are clear up front about the contract terms of any products or services they obtain. They are unlikely to obtain redress, unless the financial institution concerned has broken these contract terms, has failed to disclose material information, or has otherwise acted in an unreasonable manner.
To make a complaint by telephone, please contact the Consumer Protection office on +973 17547789.
Complaints which relate to potential cases of contravention of the CBB Law, rules and regulations, or a self-regulatory organisation’s business rules in relation to the Capital Markets in the Kingdom of Bahrain may be logged using the Capital Markets Complaint Form provided (see right).