Kingdom of Bahrain Recent Development in Islamic Finance Presented by: Iqbal Jusoh CIFP Bright Scholar Student, INCEIF

Presentation Outlines Country Background Recent Regulatory Framework Recent financial infrastructure Recent development in Islamic Banking and Finance Recent development in Islamic Capital Market Recent development in Takaful and Re-Takaful

Country Background

Recent Regulatory Framework

Recent financial infrastructure

Recent development in Islamic Banking and Finance

Recent development in Islamic Capital Market

Recent development in Takaful and Re-Takaful

The Country: Kingdom of Bahrain an island nation located in the Persian Gulf one of the fastest growing economies in the Middle East a prominent banking hub and leading centre for Islamic finance in the Middle East region hosts a number of international Islamic finance support institutions such as AAOIFI, GCIBFI, IIFM and IIRA Bahrain’s banking system is ranked on par with developed countries by FitchRatings

an island nation located in the Persian Gulf

one of the fastest growing economies in the Middle East

a prominent banking hub and leading centre for Islamic finance in the Middle East region

hosts a number of international Islamic finance support institutions such as AAOIFI, GCIBFI, IIFM and IIRA

Bahrain’s banking system is ranked on par with developed countries by FitchRatings

Recent Regulatory Framework : Establishment of CBB Prior to 7 September 2006, all financial activities in Bahrain are licensed and monitored by Bahrain Monetary Agency (BMA) After 7 September 2006, Central Bank of Bahrain (CBB) succeeded the role of BMA CBB is governed by the Central Bank of Bahrain and Financial Institutions Law (Legislative Decree No. 64 of 2006) (“CBB Law”) CBB Law is supplemented by CBB Rulebooks

Prior to 7 September 2006, all financial activities in Bahrain are licensed and monitored by Bahrain Monetary Agency (BMA)

After 7 September 2006, Central Bank of Bahrain (CBB) succeeded the role of BMA

CBB is governed by the Central Bank of Bahrain and Financial Institutions Law (Legislative Decree No. 64 of 2006) (“CBB Law”)

CBB Law is supplemented by CBB Rulebooks

Recent Regulatory Framework : Establishment of CBB CBB is responsible for maintaining monetary and financial stability in the Kingdom of Bahrain It implements the Kingdom's monetary and foreign exchange rate policies, manages the government's reserves and debt issuance, issues the national currency and oversees the country's payments and settlement systems also the sole regulator of Bahrain's financial sector, covering the full range of banking, insurance, investment business and capital markets activities

CBB is responsible for maintaining monetary and financial stability in the Kingdom of Bahrain

It implements the Kingdom's monetary and foreign exchange rate policies, manages the government's reserves and debt issuance, issues the national currency and oversees the country's payments and settlement systems

also the sole regulator of Bahrain's financial sector, covering the full range of banking, insurance, investment business and capital markets activities

Recent Regulatory Framework : Introduction of Trust Law Shortly prior to the establishment of CBB, BMA has introduced Trust Law in August 2006 which provides comprehensive guidance and lays down rules related to the creation and administration of financial trusts The law is aimed at providing a firm legal foundation for trust business It will also enable the Bahrain-based wealth management industry to develop and extend more innovative products and solutions It will also enhance the development of investment products, both conventional and Islamic, that could be offered using the trust mechanism, such as real estate investment trusts and private pension schemes

Shortly prior to the establishment of CBB, BMA has introduced Trust Law in August 2006 which provides comprehensive guidance and lays down rules related to the creation and administration of financial trusts

The law is aimed at providing a firm legal foundation for trust business

It will also enable the Bahrain-based wealth management industry to develop and extend more innovative products and solutions

It will also enhance the development of investment products, both conventional and Islamic, that could be offered using the trust mechanism, such as real estate investment trusts and private pension schemes

Recent Development in Islamic Banking and Finance Centre for Islamic Finance Studies - a world class learning centre under Bahrain Institute of Banking and Finance (BIBF) Waqf Fund - initial principal of USD$4.6 mil raised by CBB with 8 leading Islamic banks aiming at financing and publishing research in Islamic finance and Shariah issues Royal Bank of Scotland – established representative office in Bahrain with RBS focusing in wholesale banking and its investment arm, Coutts & Co. focusing in private banking - RBS group’s first on ground representation in MINA region - RBS intends to explore opportunities in project finance and Islamic banking

Centre for Islamic Finance Studies - a world class learning centre under Bahrain Institute of Banking and Finance (BIBF)

Waqf Fund - initial principal of USD$4.6 mil raised by CBB with 8 leading Islamic banks aiming at financing and publishing research in Islamic finance and Shariah issues

Royal Bank of Scotland

– established representative office in Bahrain with RBS focusing in wholesale banking and its investment arm, Coutts & Co. focusing in private banking

- RBS group’s first on ground representation in MINA region

- RBS intends to explore opportunities in project finance and Islamic banking

Bahrain Financial Harbour Recent financial infrastructure

Bahrain Financial Harbour USD$1.3 billion master planned development on prime seafront property in Manama aimed to be a complete financial city it places the Financial Centre at the heart of the harbour The Financial Centre, formally opened on 2 May 2007, consists of Financial Mall, Dual Tower and Harbour House Alongside the Financial Centre, Bahrain International Insurance Centre (BIIC) will be constructed

USD$1.3 billion master planned development on prime seafront property in Manama

aimed to be a complete financial city

it places the Financial Centre at the heart of the harbour

The Financial Centre, formally opened on 2 May 2007, consists of Financial Mall, Dual Tower and Harbour House

Alongside the Financial Centre, Bahrain International Insurance Centre (BIIC) will be constructed

Recent Development in Islamic Capital Market Dow Jones Citigroup Sukuk Index - in April 2006, Bahrain-based Citigroup developed with Dow Jones Indexes a benchmark for investors seeking exposure to Shariah compliant fixed-income investments The index will track the performance of 7 Sukuk issuances namely IDB Sukuk, Solidarity Trust Sukuk, BMA International Sukuk, Qatar Global Sukuk, Malaysia Global Sukuk, Sarawak Sukuk and Dubai Global Sukuk The Sukuk featured must comply with Shariah and AAOFI Standard for tradable Islamic Bonds

Dow Jones Citigroup Sukuk Index - in April 2006, Bahrain-based Citigroup developed with Dow Jones Indexes a benchmark for investors seeking exposure to Shariah compliant fixed-income investments

The index will track the performance of 7 Sukuk issuances namely IDB Sukuk, Solidarity Trust Sukuk, BMA International Sukuk, Qatar Global Sukuk, Malaysia Global Sukuk, Sarawak Sukuk and Dubai Global Sukuk

The Sukuk featured must comply with Shariah and AAOFI Standard for tradable Islamic Bonds

Recent Development in Takaful and Re Takaful Allianz Takaful - a new Bahrain-based takaful company set up by Allianz Group and will serve as the group’s global hub for Islamic insurance AIG Takaful – a new regional headquarters for AIG Group for takaful industry Hannover Re Takaful – a German’s company with paid up capital of USD$53 Mil - Hannover Re’s 1 st venture in Middle East region Solidarity Insurance – Bahrain-based biggest Islamic insurer in the world, increased paid up capital from USD$100 Mil to USD$275 mil, for operation enhancement and international expansion strategy

Allianz Takaful - a new Bahrain-based takaful company set up by Allianz Group and will serve as the group’s global hub for Islamic insurance

AIG Takaful – a new regional headquarters for AIG Group for takaful industry

Hannover Re Takaful

– a German’s company with paid up capital of USD$53 Mil

- Hannover Re’s 1 st venture in Middle East region

Solidarity Insurance – Bahrain-based biggest Islamic insurer in the world, increased paid up capital from USD$100 Mil to USD$275 mil, for operation enhancement and international expansion strategy

Conclusion Despite the small size of the Kingdom, Bahrain emerged as a premier international financial centre in the Middle East region due to various major initiatives taken by the Kingdom’s CBB (especially its predecessor BMA)

Despite the small size of the Kingdom, Bahrain emerged as a premier international financial centre in the Middle East region due to various major initiatives taken by the Kingdom’s CBB (especially its predecessor BMA)