Bahrain - Financial services

Bahrain - Financial services Last updated on Wednesday 14th April 2010

As the Middle East's pre-eminent financial hub, Bahrain is a key player in world financial and banking services. Its strategic location between east and west time zones and its advanced digital telecommunications systems enable it to communicate with all financial and business centres during the day.

As one senior banking officer says, "We can do business with both Tokyo and New York during a full working day."

The country is an international and regional wholesale interbank money market centreed on its offshore banking sector. First established in 1975, the offshore financial sector today has assets of some US$70 billion and the daily foreign exchange turnover of all Bahrain's financial institutions totals some US$4 billion.

International law firms, insurance companies, certified public accountants and management and public relations consultants, financial analysts and advisers are all represented in the well integrated services sector. This has of course stimulated the evolution of other related financial establishments including the Bahrain Stock Market, the money exchange sector, the real estate and construction business and other commercial enterprises.

Bahrain is home to some 90 commercial banks, investment houses and offshore banking units (OBUs). In addition, there are over 50 representative offices, money and foreign exchange brokers, and about 60 local, foreign and exempt insurance companies.

During 1993 many of the large Bahrain-based banks reported an improved profitability. Bahrain's economy is estimated to be growing at a rate close to 5% with financial services now accounting for some 18% of all economic activity. Banks are investing in major projects and lending at an ever-increasing pace to investors.

Arguably the region's best run supervisory body, the Bahrain Monetary Agency (BMA) is the force behind the moves to improve the already high reputation of Bahrain in banking circles.

The BMA maintains sound reporting and accounting arrangements which strictly adhere to the best international practice. It conforms with international standards in the area of supervision and focuses increasingly on the quality rather than the quantity of bank assets. Bahrain has never had to revoke a banking license and has avoided the severe losses which have occurred in some other financial centres.

Because no financial sector can ever be immune to external happenings, the BMA announced a Deposit Protection Scheme. Under this scheme, the commercial bank deposits of both residents and non-residents, in local or foreign currency, will be protected up to a prescribed level in the event of the liquidation of a bank operating in Bahrain.

The concept of protection was further enhanced by issuing a regulation relating to the licensing, regulation and supervision of advisers providing investment and other financial advice in or from Bahrain. This protects investors from the possibility of negligence or fraud.

Economic prosperity both in Bahrain and the Gulf is now firmly established as a fact. Private sector growth and its future potential has been augmented as the government's dominant role declines. Internationally, the investment community has become increasingly aware of the advantages of globalization and a sustained low inflationary growth. These factors will surely give a major impetus to the financial services sector and help Bahrain to sustain its place as the financial capital of the Middle East for many years to come.

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