Bahrain’s financial services industry continued to develop and expand during 2004, with 23 new licences issued by the Bahrain Monetary Agency (BMA). This brought to 367 the total number of financial institutions licensed by the BMA by 2004-end.
“Bahrain continues to remain the location of choice for financial institutions in the Middle East region,” said Mr. Ahmed Al Bassam, Director, Licensing & Policy, at the BMA.
On 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.
During 2005, the BMA will introduce a new licensing framework, which will provide for greater flexibility for those wishing to do business in or from Bahrain.
The single license framework, which focuses on the activities to be undertaken rather than types of firms, will merge and enhance the different existing frameworks applied in the banking, insurance and capital markets sectors.
The new framework, which is currently under consultation with the industry, will mark a significant improvement on the existing system, in terms of transparency and consistency of approach. “The new licensing framework takes into account the international trend towards financial convergence. The new system is intended to facilitate market innovation and provide greater flexibility to financial institutions in carrying out multiple lines of business. The new framework also reflects BMA’s role as single regulator for the financial services industry.
For the banking sector, the new framework will essentially represent a re-labelling rather than a fundamental change in how they operate. “However, for the insurance sector, particularly offshore firms, the new licensing framework, along with the new Insurance Rulebook, will require restructuring of operations. We expect this to result in a drop in offshore insurance licensees during 2005,” said Mr. Al Bassam.
Of the new licences issued during 2004, 17 were for banks and banking-related institutions and 6 for insurance and insurance-related operations. At 2004-end, the total number of institutions licensed by the BMA stood at 367, comprising 189 banking institutions, 165 insurance firms and 13 capital market brokers.
“We attracted a good mix of locally-incorporated, regional and international institutions during 2004,” said Mr. Al Bassam. “The business activities of the new institutions, many of which will serve the Middle East market, will also add value to Bahrain’s financial center.”
The year saw some merger and consolidation activity, with Bank Melli Iran and Bank Saderat Iran merging to form the Future Bank. The year also saw the licensing of the first Chinese bank in the Middle East, the Bahrain Representative Office of the Bank of China, as well as the licensing of India’s largest private bank, ICICI Bank.
Also licensed during the year was Travelex, the world’s largest retail foreign exchange operator.
In the area of insurance, global insurance broking and consulting giant, Aon Corporation established Aon Re Middle East, an insurance brokerage firm, in addition to its existing insurance consultancy operation in Bahrain, Aon Limited.
During December 2004, BMA granted licences to the Industrial Development Bank of Turkey (TSKB), UTI International, HC Securities & Investment (HCSI) and The Family Office (FO).
The TSKB will establish an offshore banking unit (OBU) in Bahrain, the bank’s first branch outside Turkey. TSKB, which is the first private investment and development bank in Turkey, was established in 1950 by the Government of Turkey and Central Bank of Turkey, in cooperation with leading Turkish commercial banks and international investment houses.
UTI International Limited (UTIIL) has been granted a licence to establish a Representative Office in Bahrain. UTIIL is 100% owned by UTI Asset Management Company Private Limited (UTI AMC), based in Mumbai, India.
UTI AMC is owned by the State Bank of India (SBI), Bank of Baroda, Punjab National Bank and Life Insurance Corporation of India (LIC).
The Bahrain office of UTI will market domestic funds of UTI AMC, as well as offshore and structured products of UTIIL, among high net worth individuals and institutional investors in the Gulf region.
HC Securities & Investment (HCSI) will establish a Representative Office in Bahrain, to offer investment services to high net worth individuals and institutional investors in the Gulf region.
Egypt-based HCSI is owned by Egypt’s HC Group and Morgan Stanley Middle East. The HC Group, which also includes HC Brokerage and HC Istanbul, specializes in investment banking, asset management and securities brokerage.
The Family Office is the first investment company in the Gulf region that specializes in multi-family wealth services with offices in Geneva and London.
“We welcome the continued interest from financial institutions and 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.” The BMA is processing a number of other applications from leading International institutions as well as from the region.