The Kingdom of Bahrain is a major international financial center. The banking sector takes the 2nd place in the country’s economy and provides approximately 27% of GDP. Central Bank of Bahrain (CBB) is the main financial institution in the country since 2006, when it was proclaimed the new central bank. Today, it is responsible for control, inspection and licensing of the financial institutions. Its regulatory and monitoring framework plays an important role in relieving the international banks of limitations.
According to the report of CBB (30 September 2011) there were licensed 24 conventional banks (Retail), 56 conventional banks (wholesale), 26 Islamic banks, 27 locally incorporated insurance firms, 11overseas insurance firms, 48 investment firms, 33 insurance brokers, 3 insurance managers, 5 insurance consultants, 32 insurance firms (restricted to business outside Bahrain), 4 insurance brokers (restricted to business outside Bahrain), 2 insurance consultants (restricted to business outside Bahrain), 11 loss adjusters, 2 insurance pools and syndicates offices, 18 money changers, 4 administrators, 8 financing companies, 16 banking representative offices, 5 insurance representative offices, 11 investment firm representative offices, 2 microfinance institutions, 10 capital markets.
The total amount of banks and financial institutions licensed by CBB makes 408 (Central Bank of Bahrain).
There are over 180 banks in Bahrain. Banks are divided into wholesale and retail banks. Wholesale banks dominate in the region. The leading wholesale bank is ABC (Arab Banking Corporation). Leading foreign banks are: BNP Paribas Bahrain, HSBC Bahrain and Citi Bank. Wholesale banks made approximately 88 % of the total banking assets during the period 2003-2006.
The leading retail banks of Bahrain are: Ahli United Bank – assets US$ 29.0 billion (the second largest bank after CBB), National Bank of Bahrain (NBB), Bank of Bahrain and Kuwait (BBK), BMI Bank, Futurebank. Market investments of retail banks made only 12.3% of total assets.
The retail banks share in the market was within the limits of 11.8% – 12.3% for the same period. These statistics demonstrates that the growth of the banking assets was applied to all banks; it means that both retail and wholesale banks indicated approximately the same progress for the same period (Table 1, 2). A total value of assets in Bahrain banking sector is $199.4 billion.
Today Bahrain hosts more than 171 insurance companies from all over the world. They are both: conventional and Islamic, onshore and offshore institutions. Here is the list of the largest insurance companies in Bahrain according to the value of assets:
- Iran Insurance
- Gosi
- Bahrain National Insurance Company BSC (c) (BNI)
- Oryx Insurance
- Protection Insurance Services WLL
- Bahrain Kuwait Insurance Company
- Trust International Insurance Company
- Arab Insurance Group
- Fakhro Insurance Services
The creation of financial centers in Bahrain contributed to significant development of the insurance, reinsurance and brokerage business in the country. The branches of personal/family and motor insurance are the leading ones in Bahrain. Bahrain has long-term plans to increase the gross premiums of compulsory medical insurance to BD 190 million by 2015.”
The Islamic Insurance market (T’akaful and ReT’akaful) contributions as a percentage of Total Premiums written is estimated to increase to 31.2% by 2015; the highest increase in the Gulf States (source; Swiss Re)” (Rose 701). Bahrain attracts a large number of financial companies and world-famous resellers because of its obvious tax advantages, effective system of state regulation and ultra-modern infrastructure.
There are several great Bahrain companies: Arab Financial Services (provides card processing and electronic banking services), Bahrain Commercial Facilities Company (short, medium and long term consumer finance), Securities & Investment Company BSC (SICO), Bahrain Financing Company (foreign exchange and money transfer services).
Banks are interested in industries that supplying rapidly growing population of the region, such as pharmaceuticals, healthcare and education. The economies of the Gulf thrived, thanks to a fivefold increase of oil prices since 2002.
Considerable income to the treasury brings Bahrain Refinery Company, which is the second great company in the Middle East (after the Abadan refinery in Iran). In addition to the local oil the refinery processes crude oil that comes from an underwater pipeline from Saudi Arabia (more than 10 million tons annually). The second largest industrial facility in Bahrain is an aluminum-smelting plant “Aluminum Bahrain” (ALBA).
All financial institutions and services in this country must be licensed by the Central Bank of Bahrain. CBB licensing is composed of six major categories of licenses. “Some of the activities can be carried out only for specific types of licenses, and to qualify for a certain type of license, certain activities must be carried out” (Central Bank of Bahrain).
According to the Rulebook, CBB points out new basic license categories with license sub-categories: conventional banks (retail and wholesale banks); Islamic banks (retail and wholesale), insurance licensee (insurance and re-insurance firms and captive insurance companies), insurance actuaries and brokers (insurance consultants, insurance actuaries, loss adjusters, insurance managers, insurance brokers, insurance entities); specialized firms (financing firms (conventional and Islamic); leasing firms (conventional and Islamic); money exchange firms, representative offices of foreign companies which provide regulated services, ancillary services providers for the financial sector, portfolio management services providers, special-purpose company for issuance of bonds and sukuk, special purpose company for establishment of private retirement funds and savings funds and trustee.
Capital markets subdivided into securities exchanges and precious metal exchanges and mutual funds (Central Bank of Bahrain).
Table 1: Wholesale and retail – banking assets
Table 2: Consolidated Balance Sheet: Retail and Wholesale Banks
Works Cited
Central Bank of Bahrain. CBB Rulebook. Aug. 2006. Web.
Peter S. Rose, Sylvia C. Hudgins, Sylvia Hudgins. Bank Management & Financial Services W/S&P Bind-in Card. New York: McGraw-Hill Higher Education, 2009.