Bahrain says financial sector well-poised to weather crisis

Manama: Bahrain's banks and financial services industry have weathered the global financial crisis well and are poised to return to a strong growth trajectory this year, according to top government and central bank officials.

Speaking at a media event organised by BNP Paribas, on the sidelines of the Bahrain Grand Prix 2009, Shaikh Mohammad Bin Eisa Al Khalifa, CEO of the Bahrain Economic Development Board, said Bahrain always believed in gradual and steady development of its financial sector and thus its exposure to the global crisis was within manageable limits.

"We have always seen growth in the financial sector as something that should be gradual and steady.

"The Central Bank of Bahrain (CBB) has ensured that we take account of fundamentals and that the market is properly regulated. Thus we have weathered the storm better than most places," said Shaikh Mohammad.

Admitting that a few banks' portfolios were affected by the global financial turmoil, a top Bahrain Central Bank official said that the impact on the country's banking system was minimal and it did not warrant any bailout or massive capital injection as occurred in other countries in the region.

Out of a total of 410 licenced banks and financial institutions, Bahrain has not reported a single bank failure during the economic meltdown, according to Khalid Hamad, executive director of Banking Supervision at the Central Bank of Bahrain.

"Bahrain has not bailed out a single financial institution by injecting direct cash or support from the government.

"The economic turmoil has indeed hit us hard and in Bahrain we have been affected, but the magnitude of losses was very low, thanks to the outsourcing to risk management consultants. This has worked well and now it has paid off," he said.

The CBB has so far injected a relatively small sum of $150 million (Dh551.7 million) into the banking system in comparison to massive sums injected by other regional central banks and governments into their respective banking systems.

Commenting on the overall health of the banks in the country, Hamad said they have been proactive in strengthening their balance sheets and the worst is over for the sector.

Manama The global financial crisis has reminded us all that fundamentals matter in economics, said Shaikh Mohammad Bin Eisa Al Khalifa, CEO of the Bahrain Economic Development Board.

Speaking about the increasing competition faced by Bahrain from other regional financial centres, Shaikh Mohammad said the world is big enough for everyone to grow and the key lies in the purpose of each growth strategy.

"Growth must serve a purpose, it is not supply driven but demand led. It is about investment in human resources and people. If growth in the financial sector is not benefiting the Bahraini people, why bother with it in the first place," he said.

Currently, more than 70 per cent of people working in the kingdom's financial industry are Bahrainis. "Bahrain is not about being the biggest, the most glamorous or the most attractive. It's about steady growth and investing in the people of Bahrain. That is why we have the lowest inflation in the region and the steadiest growth."