Regulation holds the key to the stability and soundness of a financial system as well as individual financial institutions, says H.E. Anwar Khalifa Al Sadah, Deputy Governor of the Central Bank of Bahrain (CBB).
He also urged investors to be more aware, to ensure their interests are protected and for the global implementation of standards issued by standard-setting bodies.
Mr. Al Sadah was speaking after he won The Industry Leadership Award 2006 for his Outstanding Contribution to Islamic Banking. The Award was announced on 10 December 2006 during a gala dinner and awards ceremony, held as part of the annual World Islamic Banking Conference in Bahrain.
The Award recognizes Mr. Al Sadah’s outstanding service to the regulatory environment through the CBB and its predecessor organization, the Bahrain Monetary Agency (BMA), and his spearheading of the development of the world’s first regulatory framework specific to the Islamic banking industry, which was well-received by international regulators and the global financial industry at large.
“I am gratified at having been selected for such an honour and feel particularly proud as the award affirms recognition of the CBB in a key segment of financial regulation and supervision,” he said.
Mr. Al Sadah has a long and distinguished central banking career. He has served in a number of positions at the CBB and its predecessor, the BMA, including as Director, Financial Institutions Supervision, with responsibility for supervising Islamic banks. During this tenure, Mr. Al Sadah spearheaded the development of a regulatory framework specific to the Islamic banking industry. The then-BMA was the first central bank in the world to implement such a regulatory framework, in 2001.
Mr. Al Sadah’s last appointment before becoming Deputy Governor in January 2006, was Executive Director, Financial Institutions Supervision, with responsibility for insurance, Islamic banks and non-banking institutions. During this time, the CBB undertook a major review and upgrade of regulations governing the insurance sector, which culminated in the issuance in 2005 of the Insurance Rulebook, which includes pioneering regulations specific to the Takaful (Islamic insurance) business.
“The area of regulation is highly dynamic due to the ever-changing nature of the financial services industry,” said Mr. Al Sadah. Regulators now have the added responsibility of focusing not only on capital risks but reputational risks as well.
“The last decade, in particular, has seen the emergence of conglomerates, operating across borders. For Islamic financial institutions, most of the revenues now come from the fiduciary streams, so regulators are having to focus on both balance sheet and off-balance sheet items,” he said.
“Appropriate regulation, thus, is critical for the safety and soundness of the financial sector as well as individual institutions.”
He stressed the need to implement standards set by such bodies as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB).
Mr. Al Sadah also urged investors to be more aware and to be more active in protecting their interests.
“At the CBB, we take our social responsibilities very seriously and we urge other regulators to not only regulate but to educate as well.”