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"The region's financial services industry is standing on the threshold of a new boom, which is being driven by unprecedented economic growth throughout the GCC and the wider Middle East region,"
said Mr. Abdul Rahman Al Baker, Director, Financial Institutions Supervision, at the CBB.
The CBB, ever cognizant of the evolving needs of the financial services industry, has been undertaking major development of the regulatory framework to facilitate the further advancement of financial institutions operating from Bahrain.
The 6-Volume CBB Rulebook, being issued progressively since 2004, provides the momentum for financial services providers to develop and offer a new generation of products to an increasingly sophisticated investor base.
In the area of asset management, Bahrain's first ever Trust Law, enacted in 2006, opens up a new mode of wealth preservation in a region which boasts the world's highest concentration of high net worth individuals and family businesses, with an estimated collective wealth of over US$1.3 trillion.
For financial institutions around the region, the trust mechanism offers an opportunity to offer a range of investment products new to the region, such as real estate investment trusts (REITs) and private saving schemes.
Similarly, a new regulatory framework for collective investment undertakings (CIUs), is expected to spawn a regional industry of hedge funds, derivatives and other alternative investment instruments.
"The new CIU regulations will significantly facilitate the development of products totally different from plain vanilla products and aimed at professional and expert investors, who are high net worth individuals or institutions," said Mr. Al Baker.
Currently, Middle East investors have to look overseas for such products. The CBB regulations, however, will enable regional access to such instruments.
The insurance industry, too, is set for exponential growth in the coming years. The introduction of CBB's Insurance Rulebook in 2005 has attracted a number of international giants to establish their Middle East hubs for Islamic insurance (takaful) in Bahrain.
"The entry into the takaful arena of global firms, such as American Insurance Group (AIG), Hannover Re, Allianz and ACE Group (UK), sets the stage for growth of the Islamic insurance sector," said Mr. Al Baker.
Another major development has been the licensing by the CBB of the Middle East region's first captive insurance company. The establishment of Tabreed Captive Insurance Company, by Tabreed, a UAE-based pioneer in district cooling, is a significant milestone in the development of the region's insurance industry.
In banking, Bahrain continues to maintain its three decade long leadership with a critical mass of 151 institutions boasting assets of US$190 billion. The Royal Bank of Scotland Plc (UK), Coutts & Co. (UK), European Islamic Investment Bank Plc (UK), Dexia Asset Management (Luxembourg), EFG International (Switzerland) and American Express Private Bank are among prominent new additions to Bahrain's banking community.
The CBB continues to further its regulatory leadership through ongoing work related to Basel II, the new international regimen on capital adequacy and risk management for banks.
In the area of Islamic banking, the CBB is spearheading significant market development initiatives and standardization and harmonization efforts.
Having established a lead early on through pioneering efforts in the area of Islamic banking regulation and Islamic debt issuance, the CBB is now providing valuable thought leadership in ensuring the sound and continued growth of the Islamic banking industry as well as the development of Islamic capital and money markets, through the Bahrain-based International Islamic Financial Market (IIFM). Among the projects currently being advanced are the development of a master agreement for Islamic derivatives, standardized contracts and documentation as well as market practices for Sukuk, a master agreement for Islamic Treasury Murabaha Contracts and an Islamic capital market platform.
"The CBB has a very strong commitment to the financial services industry," said Mr. Al Baker.
The industry plays a significant role in Bahrain's national economy, accounting for 27.6% of GDP in 2005, surpassing the oil sector, and creating over 1,500 jobs in 2006, representing a year-on-year increase of over 18%.
"The CBB will continue to nurture this growth by providing a strong, business-friendly regulatory framework, which complies with international best practice, and ensuring an environment conducive to product innovation," said Mr. Al Baker.
Posted by Anne-Birte Stensgaard, Senior News Editor
