Bahrain: lending & credit regulation

Who regulates

• Central Bank of Bahrain

  Primary supervisor for banks, financing companies, and microfinance institutions; issues Rulebook modules governing credit risk and consumer credit.

  ^{[1][2][3][4][5][6][7][8][9][10][11][12][13][14][15][16]}

Core laws & rules

• CBB Rulebook (Module CM and Volume 5) (2012-2025 (ongoing revisions))

  The CBB Rulebook serves as the primary regulatory instrument, with Module CM governing credit risk management, classification, and provisioning for banks and financing companies. Volume 5 contains specific modules for Microfinance Institutions.

  ^{[9][10][15][16]}

• Proposed Buy Now Pay Later Module (2025)

  A new regulatory module establishing requirements for BNPL providers, including customer safeguards, marketing disclosures, and debt burden assessments.

  ^[1]

Licensing & registration

• Retail Banks and Financing Companies

  Entities must hold appropriate CBB licenses to conduct lending. They are subject to credit risk management rules, SME financing targets, and consumer protection standards.

  ^[6][4][5]

• Microfinance Institutions

  Licensed under Volume 5 modules, with specific capital maintenance and loan limit requirements.

• Investment Firms

  Category 1, 2, and 3 firms may arrange and advise on credit facilities under Module AU Volume 4.

  ^[7]

• BNPL Providers

  Newly regulated under the proposed BNPL Module, requiring specific licensing or authorization to offer short-term credit.

  ^[1]

Restrictions & warnings

• Retail banks must increase SME financing exposure to at least 20% of domestic portfolios by December 31, 2025.

  ^[6]

• Consumer finance facilities must be automatically restructured into a maximum ten-year tenor with customer acceptance via electronic means.

  ^[4]

• Specific insurance cover requirements apply to loans and financings under Module BC for both conventional and Islamic retail banks.

  ^[5]

• Prior written approval is required for major acquisitions or investments equivalent to at least ten percent of consolidated total capital.

  ^[12]

• Credit Reference Bureau data retention for non-performing facilities is limited to three years for retail customers and five years for corporate entities.

  ^[8]

Direction of travel

• The CBB is actively refining its regulatory framework, with ongoing consultations on capital adequacy, credit risk management, and the implementation of the BNPL module, indicating a trend towards enhanced consumer protection and risk-based supervision.

  ^[1][2][3]

Sources

1. Proposed Buy Now Pay Later Module · 2025-12-08
2. Proposed Amendments to the Credit Risk Management Module · 2025-04-17
3. Second Consultation on Capital Adequacy Module (CA) · 2024-09-01
4. Total Repayments Ratio and Maximum Tenor Limit · 2023-12-13
5. Insurance Costs on Loans and Financings · 2023-07-24
6. Proposed Requirements on Financing to Small and Medium Sized Enterprises (SMEs) · 2021-04-01
7. Proposed Amendments to Module AU – Volume 4 · 2020-10-14
8. Proposal to Reduce Retention Period of Non-Performing Facilities Data in Credit Reference Bureau Reports · 2020-03-10
9. Revised Credit Risk Management Module (Module CM) · 2019-03-07
10. Revised Credit Risk Management Module (Module CM) · 2019-03-07
11. Proposed Module CL Defined Terms for Conventional Bank Licensees' Client Money Module · 2017-04-16
12. Proposed Amendments to the Credit Risk Management Module (CM) for Banks · 2016-12-14
13. Proposed Changes to Section CM-7.1 and CM-6.1 Concerning CBB Prior Approval Requirements for Writing Off Exposures · 2016-09-04
14. Proposed Changes to CBB Prior Approval Requirements for Writing Off Exposures · 2015-11-05
15. Second Consultation on Proposed Changes to Module CM for the Credit Grading and Classification System · 2013-07-11
16. Proposed Changes to Module CM Concerning the Credit Grading and Classification System · 2012-03-15