Bahrain’s financial sector posts strong growth in 2005
Bahrain’s financial services industry continued to develop and expand during 2005, with 32 new licenses issued by the Bahrain Monetary Agency (BMA) to increase the total number of financial institutions licensed by BMA to 366 by 2005 –end.
“Bahrain remains the jurisdiction of first choice for financial institutions in the Middle East region,” said Mr. Ahmed Al Bassam, Director, Licensing & Policy, at the BMA.
In general, the region continues to offer tremendous growth prospects for financial services providers, particularly in the areas of asset management, private banking, life and medical Insurance, securitisation, Islamic banking, third party administration (TPA) services, leasing and banking services.
The implementation of the new single licensing framework during 2006, will greatly enhance flexibility for those wishing to do business in/from Bahrain. The single license framework focuses on the business activities to be undertaken rather than type of firm. This will greatly enhance the transparency and consistency of the licensing process, and would provide greater flexibility to financial institutions in carrying out multiple lines of business.
Of the new licenses issued during 2005, 24 were for banks and banking related institutions, 7 for insurance and insurance-related operations, and one for a capital market broker.
At end 2005, the total number of institutions licensed by the BMA stood at 366, comprising 202 banking institutions, 151 insurance and insurance-related operations firms and 13 capital markets brokers.
“We managed to attract a good mix of locally incorporated, regional and international institutions during 2005” said Mr. Al Bassam. “The business activities of the new institutions, which most of which are serving the Middle East market, will also add value to the Bahrain’s position as a financial center.”
Emaar Properties Company, a UAE based Company was granted a license during 2005 to establish Al Salam Bank as a "Retail bank" that is intended to provide financial services to the public according to Shari'ah principles. Al Salam bank will be one of the biggest Islamic retail banks in Bahrain in terms of capital size. In addition, a license has also been granted to Mashreq Bank (one of the largest banks in UAE) to provide retail banking. During 2005, the BMA also granted an OBU licenses to Vakifbank, Bank Al Habib Limited, and Fortis Bank.
On the other hand, the BMA granted an investment-banking license to Venture Capital Bank as a unique specialist Islamic investment bank to invest through funds in SMEs sector in the region. In addition, BMA granted license to Yazi Investment Bank with paid in capital of US $ 100 Million, which will offers investment services to investors in the Gulf region.
The BMA also granted a license to Arab Petroleum Investment Corporation (APICORP). APICORP is an inter-Arab joint stock company established in November 1975 in accordance with an international agreement signed and ratified by the governments of the ten Member States of the Organization of Arab Petroleum Exporting Countries (OAPEC).
In addition, BMA granted a license to Gulf One Investment Bank with paid in capital US $ 100 Million, which intends to offer investment related financial services, including Mergers and Acquisitions, Managed investment funds, investment advisory services and investments in development projects in petroleum, petrochemical and gas industries.
Furthermore, the BMA granted Representative Office licenses to Dexia Private Bank (Switzerland), Man Investment A.G, and LGT Bank of Liechtenstein to offer private banking services to high net worth individuals and institutional investors in the Gulf region.
In the area of insurance, New Hampshire Insurance Company (NHIC) owned by AIG, has been granted a license to open a branch in Bahrain. The Bahrain branch will provide reinsurance services in the Middle East.
Munich Re, the world's largest reinsurance company was also granted a license during 2005 to establish Med-Net Bahrain as a Third Party Administrator (TPA), to provide administration and management of health claims in the region.
In the area of Capital Markets, the BMA granted a license to Kuwait Middle East Financial Investment Company (KMEFIC), to offer stock brokerage services, and assets management in region and intentional securities.
British–based Dawnay Day & Co. Limited, commodity broking company, was granted a license to establish a broking company in Bahrain. The company will provide brokerage in instruments backed by commodity-based structures to maintain and meet the retail and wholesale liquidity management needs of Islamic banks in region.
As part of its efforts to facilitate and support the continuing development of Islamic banking, the BMA and the Tokyo Commodity Exchange (TOCOM), the world’s leading bullion and energy exchange, signed a Memorandum of Understanding (MoU) in September 2005. The purpose of the MOU is to further cooperation between the two institutions to develop an institutional framework to enable financial institutions, brokers and others in Bahrain to conduct transactions on the TOCOM that comply with the requirements of the Shari’a.
The BMA has also signed another MoU during 2005 with the Insurance and Pensions Authority (the “IPA’) of the Isle of Man aimed at mutual cooperation between the relevant supervisory authorities as a means of improving their effectiveness in administering and enforcing the insurance laws of their respective jurisdictions.
For its part, the BMA continues to undertake a number of regulatory and market development initiatives, to support the continued growth and advancement of the financial services industry. In 2005 the BMA lunched Volumes 2 and 3 of its Rulebook (alongside its initial Volume, which applies to conventional banks and was launched in 2004), which contain comprehensive supervisory rules for Islamic banks and Insurance companies, respectively. In addition, the BMA started working on drafting Volume 4 of the Rulebook, which applies to Investment business firms. Public consultation with the banks also began in 2005 as the first practical steps towards the completion of the Agency’s Basel II implementation project.
As part of its continued support to the training needs of Islamic banking, the BMA has worked in coordination with the Bahrain Institute of Banking & Finance (BIBF) on the establishment of the Center for Islamic Finance Studies.
“We welcome the continued interest from financial institutions and international groups in doing business from Bahrain” said Mr. Al Bassam. “It is a demonstration of the excellent reputation the Kingdom enjoys as an international financial center”.
In 2006, the BMA is continuing to receive a significant number of applications from leading international institutions as well as from institutions based in the region.
© 2006 Al Bawaba (www.albawaba.com)