CBB, Bahrain Financial Services Development showcase Bahrain as leading financial centre

Led by Mr. Rasheed Mohammed Al Maraj, Governor of the Central Bank of Bahrain, high level speakers from CBB and Bahrain Financial Services Development (BFSD) of the Economic Development Board (EDB) highlighted Bahrain's strengths and initiatives in Islamic finance to a high profile, focused group of potential investors and stakeholders.

The Bahrain Country Showcase was held today in Dubai, under the patronage of Mr. Al Maraj. It was organized and sponsored by the BFSD.

In his welcome address, Mr. Al Maraj said Bahrain enjoys a long history as a financial centre, including a global profile as a centre for Islamic finance. And, Bahrain continues to thrive as an international financial centre, despite regional competition.

Recent developments that add to Bahrain's attractiveness as a jurisdiction of choice for financial institutions include "dramatic" progress in terms of institutional reform and regulation, he said. These include the successful implementation of the single regulator system and the creation of the Central Bank of Bahrain, as the successor organization to the Bahrain Monetary Agency (BMA), a highly regarded banking regulator.

The regulatory front is also undergoing "unprecedented" development and consolidation, said Mr. Al Maraj.

A system of comprehensive Rulebooks is being progressively implemented since 2004, with Rulebooks for conventional banks, Islamic banks, insurance industry and investment firms already implemented. The CBB is now working on updating the rules for capital markets. The first element of this is new rules on collective investment undertakings, which will underpin Bahrain's position as the region's leading funds centre, by introducing - for the first time - regulations specifically geared for expert funds and other alternative asset classes, such as hedge funds.

"Collectively, these initiatives have aimed to ensure that Bahrain maintains its leading role as a financial centre, in terms of responding to evolving market demands," said Mr. Al Maraj.

Mr. Khalid Hamad, Executive Director, Banking Supervision, at the CBB, said while Bahrain's reputation as an international financial centre of excellence goes back three decades, the country's more recent emergence as the world's leading centre for Islamic finance, both banking and takaful (Islamic insurance) has been a significant milestone in Bahrain's evolution as the region's hub for financial services.

"Having recognized early on the Islamic finance opportunity, Bahrain has been playing a pivotal role in shaping and driving the industry forward," said Mr. Hamad.

As a result, Bahrain has notched up a number of firsts in Islamic finance. The Kingdom was the first to allow Islamic 'windows' by conventional banks. In 2001, Bahrain became the first country in the world to develop and implement regulations specific to the Islamic banking industry, followed in 2005, by the first-ever comprehensive regulatory framework specific to Islamic insurance and reinsurance (takaful and retakaful) companies.

The sukuk (Islamic bonds) was pioneered in Bahrain in 2001 when the BMA, the CBB's predecessor organization, became the first central bank in the world to develop and issue sukuk.

Bahrain is now taking the lead in implementing the new international regime on capital adequacy and risk management for banks, Basel II, for Islamic banks.

Bahrain also hosts a number of support institutions, necessary for the healthy development of the Islamic financial industry. The institutions are: the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), International Islamic Financial Market (IIFM), Liquidity Management Centre (LMC), Islamic International Rating Agency (IIRA), and the General Council for Islamic Banks and Financial Institutions (GCIBAFI).

Other recent developments have included the establishment of a world class center for Islamic finance education, training and research, under the umbrella of the Bahrain Institute of Banking & Finance (BIBF). The Centre for Islamic Finance Studies, which became operational in 2006, is intended to become a world leader in providing training, education and research in the Islamic banking and finance field, in order to better serve the global Islamic finance industry and further strengthen Bahrain's position as the world's Islamic finance hub.

This was followed, also in 2006, by the creation of a special fund to finance research, education and training in Islamic finance. The CBB has partnered with a number of leading Islamic banks in Bahrain in the establishment of the Waqf Fund, the first of its kind in the region, and aimed at financing and publishing research, studies and surveys; making available specialist training workshops and other educational opportunities; organizing discussions and debates on Islamic finance and Shari'a issues; and undertaking other activities that further the mission of the Fund.

Shaikh Mohammed bin Khalifa Al Khalifa, Senior Business Development Officer, at the BFSD, said Bahrain is one of the fastest-growing economies in the Middle East and is the most diversified economy in the Gulf. Only 11% of GDP comes from oil revenues and the country has a range of strong business sectors.

"Bahrain is known as the financial capital of the Middle East, being home to nearly 400 licensed financial institutions. However, Bahrain is also strong in tourism, in business services, in real estate and in aluminium and light industry," said Shaikh Mohammed.

With one of the world's most welcoming business environments for foreign investors, the Kingdom has been named the freest economy in the Arab world for each of the last 13 years, by the Heritage Foundation and the Wall Street Journal. With the most liberal tax regime in the Gulf, Bahrain allows full repatriation of profits. It also has trade agreements with 65 nations, including the Gulf's first free trade agreement with the United States.

"Bahrain is strategically located in the heart of the Gulf, with good road, air and shipping links with its neighbours. The King Fahd Causeway links Bahrain to the largest economy in the Gulf, Saudi Arabia, bringing in millions of visitors each year; and a similar causeway will be built to connect the Kingdom to Qatar," said Shaikh Mohammed.

Many new developments are taking shape across the country. The Bahrain Financial Harbour, officially opened earlier this month, together with the Bahrain World Trade Centre and other developments opening later this year, are transforming the skyline of Manama.

The Bahrain Country Showcase was held as part of the 4th Islamic Financial Services Board (IFSB) Summit, which is taking place on 15 & 16 May 2007, under the theme 'The Need for A Cross Sectoral Approach to the Supervision of Islamic Financial Services'.