The Central Bank of Bahrain (CBB) has announced a major move to enhance business practices of retail banks and financing firms.

Retail banks and financing firms offering consumer credit and other consumer products have adopted a code of conduct aimed at enhancing transparency and promoting a better understanding of consumer loans and other consumer products and services.

The code of best practice on consumer credit and charging, initiated by the CBB and developed in conjunction with the Bankers' Society of Bahrain, sets out minimum standards for retail banks and financing firms, both conventional and Islamic, to follow in their dealings with consumers.

CBB has worked closely with the industry, through a joint committee, over the past five months to develop this code, which obliges banks to enhance transparency and educate customers about their rights and responsibilities.

It covers a full range of retail banking relationships between the institutions and customers, from the sale of a product to ensuring dissemination of all relevant information.

'The development of the code is a major step by the banking industry in Bahrain to maintain high standards of ethics and best practices aimed at fostering consumer confidence,' said CBB executive director (banking supervision) Khalid Hamad.
 
'Financial services have a great economic and social impact and, as a regulator of financial firms, the CBB is committed to protecting consumers, as mandated by the CBB Law.'

Hamad said the new code will serve as an important complement to the CBB's regulatory framework governing retail banking.

The code applies to all CBB licensees who offer  individual customers loans, overdrafts; any other type of financial product creating a creditor-debtor relationship (including Shari'a compliant credit facilities); and any other financial service for which the CBB licensee charges a fee.

The code requires related CBB licencees to provide clear and written information and documentation about their products and services as well as all the terms and conditions, including interest/profit rates and a breakdown of all applicable charges (administration/arrangement fees, prepayment charges and default interest rates).

The concerned institutions are also required to inform customers of any changes in terms and conditions applicable to any product/service.

The code also requires retail banks and financing firms to establish a proper and formal mechanism, including a designated customer complaints officer, to address and monitor consumer complaints.

The code sets out the proper procedures for CBB licensees in registering and addressing consumer complaints. Consumers may also, as a last resort, refer their complaints to the CBB Compliance Directorate (Tel: 17547107).

The code's provisions also call for a more sympathetic approach towards customers facing genuine financial difficulties. 

Bankers Society of Bahrain chairman Dr Farid Al Mulla said that the word “sympathetic” means not to pursue legal action against the customer involved if the latter is in real financial trouble. The bank or financial institution should also try to help customer deal with the problem.

CBB director (Retail Banking Supervision) Yousif Hassan Yousif said the code has been necessitated by the developments in the consumer credit market.

He said the CBB was committed to promoting transparency in Bahrain’s financial markets and ensuring a fair deal for consumers.

Dr Al Mulla said the code should go a long way to improving transparency in the industry as well as bank-client relationships.

It also clearly demonstrates the commitment of the CBB and the banks to enhance banking standards in the country.

Copies of the code in Arabic and English, will be available at  all retail banks and financing firms. The code can als